Wednesday, July 23, 2014

The New Dawn At The Dalal Street

The president of the world bank Mr Jim Yong Kim is scheduled to meet the Indian Premier as well as the Finmin soon just to understand the priorities and road map of development and thus unlock India's growth potential to its fullest .

The target is close to 60,000 crores of disinvestments by the finmin and this is to be achieved within the next ten months and the stakes on sale are coal India and ONGC  and hence the positive sentiments and the market capitalization is good and the investors are building long positions already in anticipation .This disinvestment is nothing new for example even last year there was a block deal for BHEL (Bharat Heavy Electricals Limited) and also cross holdings for Indian oil co (IOC)  But this case of coal India is a bit different and in the lines are Hindustan Aeronatics  Ltd and Rashtriya Ispat Nigam Ltd and (RINL)  and Vizag steel , For the stake sale is Hindustan Zinc Ltd (HZL), SAIL and Balco So the targeted ones are those where the government holdings are more than 75% and here the bankers will come into the picture as they will do valuations and thereafter the stakes will be sold either through FPO(Follow on public offer or OFS(offer for sale) which is to be decided by the cabinet approvals duly.A special fund NIF( National Investment Fund) has been has been created for this purpose and because these stakes are to be sold in the open markets so an assets management company is underway soon. Moreover certain companies are on its path of revival as the revival packages are announced.

The PSU Exchange Traded Fund (ETF)  in the Indian stock markets are not strong as it is stock related .The markets are looking good and the capitalization are just the signs of a healthy market which is out of the ICU at last ., This only further suggests that the Indian companies especially the ones engaged in infrastructure developments are now bucking up in sweeping cleanup their balance sheets and thereby trying to reduce some of their debt burdens , and now the debt-equity ratios have shown signs of improvements and so now the companies will be made clear to face up the consequences of borrowing loans beyond their capacities as the days of defaulters are long gone by and all because of these steps of debt easing up the re-rating of the banking sector is up on the cards .The indications of a strong revival in the Indian economy went down well with the lenders as well as the companies who get back to the financial health and thereby make timely repayments.
Even the de-leveraging of the corporate has played off well so far so good with ten billion worth of assets already sold out and close to 8 billion still to go .

Companies such as JP Associates ,Aban Offshore ,Reliance Communications GVK Power and Infrastructure ,IVCRL and Jet Airways have all been able to reduce their debts drastically by either through sales of their assets and stakes  or monetization of assets after the fallout of the fantabulous run  in the equities markets through capital raising’s 15,000/- crores has been raised by the  JP Associates by the sales of assets and Rs 1,500 crores through qualified institutional placements (QIPs).Moreover the infrastructure companies have a total debt of Rs70,000 crores. So after the equity offerings the debt -equity ratio has boiled down to 6 that is 6.8 times so also the Reliance communications debt ratio sank from 0.2 to 1.1 times ,GMR infrastructure by 1.1 to 4.9 times .All thanks to the projects completions and regulatory clearances which has boosted the overall outlook on cash flows from the overseas. 

Rhythm is back at the dalal street and is back on top gear after some cough post budget as in Nifty Futures and options the traders are building long positions and suggestive of bullish bets and the FIIs have bought $493 millions worth of Index options during the last week .This current trends by capital goods and the banking will continue to gallop. Now is the right time to build bullish bets on large cap and the midcaps. Markets will continue its accent improving corporate earnings and strong fund inflows. Must watch are the quarter results of HDFC, Idea cellular, Wipro ,Axis Bank ACC and Ambuja cement and close watch on the global indicators .So we can proudly say the that it’s the new renovated designer dressed  India .   

Monday, July 21, 2014

The Time of Mergers, Demergers and Acquisition

Although July has been pretty volatile for the BSE Sensex , this July month has seen its ups and downs and was effected in tits and bits by geo-political reasons ,profit bookings and the post budget effect and owing to this the BSE Sensex has just managed to gain 200 points so far that is just 1% .So lets wait the dust to settle down and we will see that the markets will sore to the newer highs of 30,000 and 10,000 respectively pretty soon.

The financial technologies India Ltd is all set to sell its 25% approx stake in power trading platform that is ( IEX) and they have appointed Axis capital to search for a buyer ,  and on the other FTIL is under watchful lens of the regulators as they were last year found to be guilty in the National Spot Exchange owned by it Now the company will divest its most of the stake because as per the new rules on shareholding in commodity exchanges bar an unfit shareholder from owing any stake in bourses .Now even telecom companies are to share spectrum within the circle which would lead to better services along with lower tariffs and thus would save on costs .News is dropping in that four companies zero in to buy stake in Viom Network which is controlled by Tata Teleservices and who reaches with the baton first among Malaysian telco Axiata ,Carlyle and providence , American tower company is to be seen .

Sunday, July 13, 2014

Budget & Market Correction

Economy on the runway and ready to takeoff will soar to heights after couple of sorties. For some years the trend is to bet big on Nifty through F&O contracts in the run-up to the budget and on the other hand there are fewer derivative positions on the benchmark index this year. Because the participants are not sure as to how the indices will respond after the budget presentation .There is aggression seen on bets on shares through futures indicating clearly that they expect that specific stocks will move rather than the index. Just a day prior to the budget presentation the open interest in Nifty was 9.70 crores approximately and its the lowest before the budget day since 2010.Moreover the shares of the front-line midcap  companies like India cements ,JP Power, GMR Infra , Jindal steel and Unitec have fallen by 20% in a week’s trading sessions as Midacps and Smallcaps came under the selling pressure as both the indices tumbled BSE Midcap by  1.44%  and BSE Smallcap by 1.82% .

As this budget has failed to deliver the market has corrected further because in the past six months or so the mid and small caps have grown four times in anticipation of the radical reforms promising a boost in earnings and the investors have a gut feeling that the earning recovery may not be that fast and hence the correction at the speed of a Bullet train .But given a two years time mid as well as small cap stocks are definitely expected to do very well. 

This correction was also inevitable because both the mid-cap and the small-cap had soared 35% and 51% respectively, both these indices had outperformed the BSE Sensex which only performed 20% during the same period. It was just a sheep walk of buying these indices,but nothing to worry the mid-caps are bound to outperform the large-caps in the coming months because the mid-caps have higher beta so this clearly indicated that stock movements will be higher than the swings of the market .So lot is expected from the Finmin all we can cheer is -- Bhag Jaitley Bhag.

Wednesday, July 9, 2014

Budget 2014- Fresh Investment Opportunity

The positive sentiments about the economic recovery are making its presence felt in this June quarter earnings of CNX Nifty companies performances. The IT, metals , Infra , pharmaceuticals and exports will be very promising , Due to the moderation in commodity prices the pressures on profitability has eased off .Now there is an end to the slowdown and the business cycle is heading towards the upturn ,

The automobiles sector, IT, pharma, cement, air conditioning , beverages, ice cream ,FMCG and the power industries are the key beneficiaries .

Out of the various hot agendas like inflation, fiscal, Investments, economy and reforms. Much will be into consideration like corporate taxes, government expenditure and the interest out standings, a lot of fine tuning is too obvious. Right now as there is no alternate except India due to the excellent elections results outcome, where as the elections in Indonesia are just around the corner and depending on its outcome the investors may have another option after India being the only choice right now. Secondly Indian economy has already hit the rock bottom and so it has no other way to go except up scale and this is one of the best bull run on the go and the new political dawn is on , so no correction is on the cards either prior to the budget or post budget as even by the time the next budget is presented all the things will fall in place  and both the budgets will be very crucial as it will determine the pace our growth step by step 6% ,7% or 8% or more .

The quality of spending will hold the key for the growth as governments spending is about one seventh of the GDP is hardly impacting the countries growth as governments spending is at its new lows and the revenues have dried up . Now the disinvestments will give some boost. We have seen the Sensex rally from something 17000 to now 26000 is heading for 30000 !!!!!! Even now the market capital to the GDP ratio is not that expensive now as there is still ample room for expansions. The problems is the revenue area which will be taken care in due course of time as now there is improvement for the investment cycle. Moving savings into the financial assets because household savings have gone towards properties and gold.

Real rates have been either flat or towards the negative ,the banks are gaga because its spread are protected as the borrowers provide them the tax incentives if they repay the loans timely and although the borrower gets the higher rates in return and the banks are more than content too .The borrowers pays a higher rates of interest he gets concessions ,if the repayments of loans are done timely the banks do not mind because it does not has NPAs and its the win win situation for all the three -- the borrowers , banks as well as the government because the government saves as it has to infuse less capital into the banks through RBI -- repo .

As recently $2.5 billion have been injected through QIPs and most of the companies are in queue to raise funds through this route This government doing the right things , right changes , controls the expenses and contents inflation and boosts the revenue then voila we have the new business cycle going!!!!!!!!!  .And if the deposit growth is lifted so the banks can lend , the borrower does not has capacity to borrow and the banks do not have capacity to lend at the moment , so to start the new credit cycle going the credit deposit growth must boost up ,some deleveraging here and little disinvestments there and a bit of fine tuning here, as the real rates are positive ,deposit growth is going up deleveraging is trickling are indications of a new credit cycle around the next corner. Breaking up of PSUs, and break up of oil and gas complexes and metals and mining complexes and regrouping up of the banks will strengthen them all individually .Like the ONGC and oil the subsidy burden moves off if its deregulated as the diesel should also be price control free like petrol .
So the investors should act like PF or PPF or RDs  Instead of choosing of the two extreme choosing the middle path will be a more of a matured decision as the sensex is headed to triple in the next five years time The profit share of corporate India in GDP is 4,9%which was earlier 6.7% which will triple in the next five years .The domestic investors are of three broad categories retail , HNIs and the institutional  and the most reliable IPO which has returned good returns has mostly seen an increase in the retail investor base for example the PSU banks despite of all the issues the shareholder base has always kept on increasing as the stocks have delivered from their IPO prices , that’s what we suggest is for the retail investors that forget the bottom or the peak , but do invest regularly like in RD,FD or the PFs  this will be helpfully fruitful so its time to go for energy, autos, banks ,IT, materials consumptions ,and infra will do well .

The GDP will be close to 6% and the earnings growth at around 15% .and the next year it will be 8% and 20% respectively and sensex at 30000.

Whenever one tries to invest one feels that had he invested earlier it would have been more cheaper .So its bull run in the top gear and great investing times ..

Monday, July 7, 2014

Sensex zooms up to a new high

As Sensex soaring to the greater highs the promoters rejoice the rally as there is a handsome opportunity to promoters of the small companies which had issued warrants in the past 18 months and out of the 17 companies which had issued the warrants most of the companies are trading almost two times their warrant issue prices.Now this difference between the issue price initially and the present market prices may result in the promoters stake in their respective companies.

Some of the companies like Sequent Scientific , Arvind remedies , J.K.Tyres, Supreme infrastructure, Shakti pumps,, KEI industries, HCC to name a few whose present market prices are over 30% above their initial warrant issue price .

As a warrant permits the holder all the rights to purchase securities at the prices specified, SEBI clearly directs a warrant holder to pay 25% of the price at the time of the issue and the balance can be paid when the warrant is used as warrants can be exercised within 18 months anytime and if the promoters fail to do so within the stipulated date then they will not be eligible for any share or warrant purchases for the next 12 months .

However the investors are criticizing the warrant issues as it gives promoters to increase its share holdings at an attractive price in a bullish market and just avoid this abuse the regulation has come with the increase of upfront margin to 25% from the earlier 10% .But this warrant issue on the other hand is very good for those companies whose liquidity is very tight .Because when the investors are unwilling to infuse equity and debts are expensive the warrants issued thus benefits these companies and in the case of infrastructure companies this issue of warrants were too beneficial for them as it helped reducing some debt , It may however not be beneficial all the time for the shareholders , if the promoter is issued at the current market price or a little higher is fine but if the promoter is buying without any clue just upon sentiments that the prices will shoot up than it’s a bad practice .

However there are many more warrants issue in the horizon as the markets continue to be bullish overcast .

Saturday, July 5, 2014

Hedge Funds & Indian Power Sector

The overseas hedge funds and also the long term capital investors are jostling in to the Indian shores .The financial service providers and couple of telephony companies raised roughly more than 11000 crores in the past one month ,even the investment bankers are expecting another five billion dollars to be raised through qualified institutional placements with the public offers and the sale of stakes in the public sector companies the total funds raised could be around 12 billion dollars this fiscal year .Most of the companies are raising equity money either to DE-leverage or else to expand business .The companies like JP and GMR infra ,L&T ,Aban offshore , Jaypee group,Reliance group ,banking sector  are the companies to watch , bankers suggest that airports , roads and power , metal to mining the money is being generated through QIP (qualified institutional placements ) .Even the disinvestment  of the government stakes in the public sector will boost up the healthy pipeline ahead .

The power sector is all charged up and anxiously awaiting the government to take up strong measures which will give a boost in its arm with focus on coal and 12.5 crores worth of transmission projects acts as an sanjeevni ..the S&P BSE GAINED 5% in past ten days and gained more than 30% in the past quarter which had hit the dust by falling 20% .The large cap power stocks such as GMR ,GVK,Tata Power, Reliance Power ,JSW Energy,NTPC,Adani Power ,HDIL have gained between 5% to 15% in the past week .

Even the power and the power equipment stocks along with the coal linkages and commissioning is getting pumped up .Even the power minister has asked the performing PSUs help the power projects to finish up their projects in due time .Few  projects are stressed where as projects worth one lakh crore appox are in the final stages of completion.Its been expected that some relief will be like exemption on duties and taxes .On the radar are GMR Infra ,NTPC,Reliance Power, JSW Energy,Siemens, Adani Power,ABB India, Tata Power, Kalpatru Power and KEC International .

Wednesday, July 2, 2014

Weakening Rupee turns investors towards the defensive

The stocks back into the highlight are information tech and pharma owing to the weakening of rs thereby making investors to rely on these defensive stocks , the tensions of Iraq  and poor monsoon forecast looming large and not to forget the current account deficit (CAD) and fiscal deficits .As the great fortune of exporters in technology and pharma are directly proportionate to the momentum of the currency .IT index of BSE has increased by 8% while BSE pharma index has rallied 12% thereby outperforming the BSE sensex benchmark which was around 2.25 during the same time frame .The new govt is focusing on the heathcare and newer drugs to be launched with new mergers and acquisition around the corner ,So its a good sign to bet on .