After yesterday's RBI powered rally, the markets settled down to consolidate. With traders jittery ahead of tonight's crucial US Fed meet, the markets slipped into the red. The Nifty closed at 5,166 down 30 points, while the Sensex shut shop at 17,287 down 91 points.
Dipan Mehta, Member, BSE & NSE, said the trend is still up. "But we may be seeing some amount of profit booking, and absence of institutional support at higher levels. What is most heartening is the news flow which remains quite positive on the earnings as well as the economy side, especially the Indian situation where the steps taken by RBI and the policy that they had announced yesterday were extremely positive for our markets. Our focus is on the news flow that is corporate as well as economic. We are quite happy and satisfied with it. There could be a correction of may be a few percentage points here or there, but by and large the market should be able to build on these gains," he added
He feels the markets could remain rangebound. "18,000-19,000 could prove to be a very strong barrier. We will see a lot of action which is stocks specific, where stocks prices are reacting to positive results and statements being made by the management. Wherever there has been fear on account of derivative losses or some one time losses, and as and when those losses are not been factored in or they don’t exist, we are seeing positive sentiment being built in those stocks, and lot of institutional and retail investors are getting into those companies. Over the next 2-3 months, the action will shift to small midcap stocks which have been battered on account of good corporate earnings. We are seeing there is good visibility and the price earnings multiples are quite attractive."
Anil Manghnani of Modern Shares & Stock Brokers said investors could buy on every fall right up to 50-week DMA. "I am getting conflicting views on the charts. A lot of moving averages have been crossed but unfortunately when I start looking at things like RSI or Elliot’s waves, I don’t see the same amount of conviction. Since the levels have been crossed, one has no choice but to play for the next level. One could do so with stop losses because in these bear phases that we have been through in the last couple of months, we do tend to get situations where one can have a false breakout and then after a couple of days it breaks down again. If one is a trend follower or position player, every fall right up to the 50-week moving average would be a buy with only a stop loss below that. So, for the time being that could come closer to 5,000 to 4,950 sorts of levels on the Nifty. Till that one would probably have buy on every fall."
Source: Moneycontrol.com
Wednesday, April 30, 2008
Worst not over; inflation remains a concern
Ramesh Damani, Member of BSE, said the recent rise is a rally within a bear market. The worst may not be over yet and markets would tend to be more circumspect. US technical analysts don't see Dow making new highs in 2008.
He adds that India may find it difficult to chart its own course. He is beginning to see impact of inflation in the US. He thinks inflation will be a big problem and will take time to tame.
Excerpts from CNBC-TV18's exclusive interview with Ramesh Damani:
Q: Do you follow technicals at all yourself or were you a skeptic on the technical side because you are a hardcore fundamentalist, you look at balance sheets and pick stocks, but do you use technicals at all in trading or in picking stocks?
A: You are right. Of course, price and value are the two big components that I have always looked at in my career and have done reasonably well in that. But yes, as a matter of fact, I do and I am very impressed with volumes, stocks breakout volumes, the particular chart patterns I have found that a stock breaking out with basing idea is very helpful to find. To give you good entry and exit point, sometimes a graph or picture is worth a 1,000 words. So yes, I do have a technical package in office and I would tend to look at it. I may not base my fundamental buying decision on how the chart looks, but on a trading position way of understanding of where the market is. I can then understand where the market might go, I would definitely look at charts and quite frequently especially in terms of these other indicators like sentiment, money flows all those are fairly valid technical indicators of the market.
Q: Technical analysis is sometimes coughed at in India, did you see or learn something new that said, maybe you need to look at technicals a little more carefully?
A: It has been coughed at in America too. For example, Ralph Acampora the guy who called 7,000-10,000 on the index had to actually fight when the Sarbanes-Oxley Act was being passed in the US Congress post 2000. There were two kinds of analysts on Wall Street, fundamentals and technicals, and both had a right to view. The Sarbanes-Oxley has said only fundamental point of view. Louise Yamada, one of the most story technical analyst in America was actually let go by a company, they closed down the technical department after 100s of years of research. Smith Barney, where she worked, had a very famous chart room where they kept charts of interest rates, rain fall, stocks, equities, indices for over 100 years, they just closed it down. So there is a lot of skepticism also on the street. But I think over periods of time people have come to understand that it is another tool with which you understand the market and there is a price discount, and it is very important for people to understand the price. It is not necessarily the only tool that he use, but it is one of many tools that analysts need to use.
Q: How do you look at technicals? There has been so much focus on the 200 DMA over which we have climbed for the first time since the Union Buget? Are you getting the sense that technically the worst is in place or it is premature like some experts mentioned?
A: It is a very difficult question and really I have been grappling with it like the other analysts on the street. As you are also well aware in your own series that the street is divided evenly between people who are saying that the worst is over and people who are saying that we are in a bear market. Unfortunately, I happened to be on the bearish side of the market at this time. I feel that we have made a significant top at 21,000 and the rally seen over the last six or eight weeks is very powerful in a bear market and typically this kind of rally is so strong that we will even seduce the non-believers back into the market.
Let me give you a case history as an example, if you go back and study the Nasdaq, it topped around March 10, 2000 and 5,000 level on the index, when the first leg of the fall happened it went to 3,000 and then it rallied and six months after March, sometime in September and October you could have sold Nasdaq at 4,250. Now over seven years our lights have been dimmed as to the extent of fall; we already remember 1,100 on the Nasdaq, but six months later you could have sold Nasdaq at 4,250.
Once it broke 4,250 decisively, it went back two-three times to that 4,200 level when almost the bottom fell off the Nasdaq. So I am not suggesting that the bottom will fall out, but I am saying that just because the market is showing a very powerful rally. It does not mean that the worst is over and because you broken a 200 DMA, it does not mean the worst is over or because you have made a higher top, it does not mean that the worst is over. History is full of examples of false breakouts, false moves and I think given generally the macroeconomic environment of the world, given the high excesses, valuations, the A group on the stock exchanges, I would still tend to be circumspect.
Q: One of your guests made the point that he didn’t see a big turnaround in Asian markets till it didn’t happen in the US; was that the sense you got that technically most people expect a lot of coupling for markets?
A: Dow remains the mother of all the markets we found out and my sense is that we had a global bull run in the equities in 2003, and if the global markets don’t revive, it’s hard to see India charting a course almost independently, and that is the view that I got from Wall Street.
Q: What are they saying about the Dow? Everybody in the world is surprised at the resilience and strength of that index, what did you get from the best technical experts there?
A: That’s actually funny because I kept asking them and there is a very famous truism on Wall Street that you can’t fight the Fed and given what the Fed has done, can you suggest the Dow making a new high in 2008, and almost universally everyone was aghast at the question. So surprisingly in their own domestic market, they are not optimistic and the kind of liquidity that the Fed has provided, it's providing an impetuous to the market.
But as I travelled across the States, I went to New York and Los Angeles, you could see the beginnings of recession, gas at USD 4 announced is hurting them. In a country like America, they are rationing rice and that has never happened in the 30 years I was going to America. Food inflation is high, a lunch which used to cost USD 5, is costing USD 7 and USD 8 now, so we are seeing the impact of an early recession in America. I think till the election is over and till the new President is elected, there would be no fresh economic stimulus coming other than the tax packets that Bush has already announced. So there is hurt on the street.
Q: What’s making you so circumspect that we haven’t seen the worst despite the pull back that we've had ?
A: Couple of things. One thing is that I have lived longer than most of the analyst have had their sneakers. They haven’t seen the period of 1980’s, late 70's-80’s in the world where you had huge global inflation in oil and in commodity prices and the kind of damage that it does to corporate balance sheets. I think we had benign conditions from 1982 to 2005, various global bull markets had gone first in bonds and then in equities.
So I think most analysts don’t go back to that time in history, when the corporate balance sheet was ravaged completely by inflation. If you look at oil for example at what price does the global community take care of oil? When I was in US, everyone would announce that oil hit a new high today, and then they would move on to the next piece of news. But oil at USD 120/bbl means a cash flow difference between the West and the Middle East was almost a USD 1 trillion and in the Western economy there was a marketcap of USD 14 trillion, so 6-7% of transference of wealth is taking place every year because of the oil prices. How long can that be sustainable? And if you look at food inflation, I don’t think that is going to go away in 2-3 months. You can’t increase the supply of food over the three months, may be one or two agricultural cycles can do that.
So I see a huge problem with inflation, which people think that can be fixed over the next 2-3 months. I think it will take longer than that and the variations are not cheap and if you look at the broad marketcap sales ratio, or P/E ratios, some of the A-group stocks and some of the market leaders in the last bull run, you think that there is plenty of room on the down side and this rally is a very powerful rally, which almost seduces you back into the market. My suggestion is still remain careful.
Q: It has been all about the commodities this year, not just crude. Agri commodities as well like you said rice, soya, wheat, all of it. Did you speak to some of your experts about what has been happening in the commodity universe and where that might be headed?
A: In terms of commodities, we spoke mainly about oil and gold because they are two good proxies for the commodity space and someone like Louise Yamada, technical analyst, whom I interviewed in the show when oil was at USD 30/bbl, she had predicted oil would go to USD 100/bbl and at USD 60/bbl she had predicted that oil would go to USD 200/bbl. If you really want to hear her extremely long range forecast, I think you would be scared but a lot of people were suggesting that oil is not going to go down and the technical targets for oil could cross USD 150/bbl easily. Now in between that, there will be volatility, oil could come back to USD 100/bbl, we have seen a correction take place even yesterday when we speak, but I think the long-term fundamentals and technicals of oil point to a higher price.
Source: Moneycontrol.com
He adds that India may find it difficult to chart its own course. He is beginning to see impact of inflation in the US. He thinks inflation will be a big problem and will take time to tame.
Excerpts from CNBC-TV18's exclusive interview with Ramesh Damani:
Q: Do you follow technicals at all yourself or were you a skeptic on the technical side because you are a hardcore fundamentalist, you look at balance sheets and pick stocks, but do you use technicals at all in trading or in picking stocks?
A: You are right. Of course, price and value are the two big components that I have always looked at in my career and have done reasonably well in that. But yes, as a matter of fact, I do and I am very impressed with volumes, stocks breakout volumes, the particular chart patterns I have found that a stock breaking out with basing idea is very helpful to find. To give you good entry and exit point, sometimes a graph or picture is worth a 1,000 words. So yes, I do have a technical package in office and I would tend to look at it. I may not base my fundamental buying decision on how the chart looks, but on a trading position way of understanding of where the market is. I can then understand where the market might go, I would definitely look at charts and quite frequently especially in terms of these other indicators like sentiment, money flows all those are fairly valid technical indicators of the market.
Q: Technical analysis is sometimes coughed at in India, did you see or learn something new that said, maybe you need to look at technicals a little more carefully?
A: It has been coughed at in America too. For example, Ralph Acampora the guy who called 7,000-10,000 on the index had to actually fight when the Sarbanes-Oxley Act was being passed in the US Congress post 2000. There were two kinds of analysts on Wall Street, fundamentals and technicals, and both had a right to view. The Sarbanes-Oxley has said only fundamental point of view. Louise Yamada, one of the most story technical analyst in America was actually let go by a company, they closed down the technical department after 100s of years of research. Smith Barney, where she worked, had a very famous chart room where they kept charts of interest rates, rain fall, stocks, equities, indices for over 100 years, they just closed it down. So there is a lot of skepticism also on the street. But I think over periods of time people have come to understand that it is another tool with which you understand the market and there is a price discount, and it is very important for people to understand the price. It is not necessarily the only tool that he use, but it is one of many tools that analysts need to use.
Q: How do you look at technicals? There has been so much focus on the 200 DMA over which we have climbed for the first time since the Union Buget? Are you getting the sense that technically the worst is in place or it is premature like some experts mentioned?
A: It is a very difficult question and really I have been grappling with it like the other analysts on the street. As you are also well aware in your own series that the street is divided evenly between people who are saying that the worst is over and people who are saying that we are in a bear market. Unfortunately, I happened to be on the bearish side of the market at this time. I feel that we have made a significant top at 21,000 and the rally seen over the last six or eight weeks is very powerful in a bear market and typically this kind of rally is so strong that we will even seduce the non-believers back into the market.
Let me give you a case history as an example, if you go back and study the Nasdaq, it topped around March 10, 2000 and 5,000 level on the index, when the first leg of the fall happened it went to 3,000 and then it rallied and six months after March, sometime in September and October you could have sold Nasdaq at 4,250. Now over seven years our lights have been dimmed as to the extent of fall; we already remember 1,100 on the Nasdaq, but six months later you could have sold Nasdaq at 4,250.
Once it broke 4,250 decisively, it went back two-three times to that 4,200 level when almost the bottom fell off the Nasdaq. So I am not suggesting that the bottom will fall out, but I am saying that just because the market is showing a very powerful rally. It does not mean that the worst is over and because you broken a 200 DMA, it does not mean the worst is over or because you have made a higher top, it does not mean that the worst is over. History is full of examples of false breakouts, false moves and I think given generally the macroeconomic environment of the world, given the high excesses, valuations, the A group on the stock exchanges, I would still tend to be circumspect.
Q: One of your guests made the point that he didn’t see a big turnaround in Asian markets till it didn’t happen in the US; was that the sense you got that technically most people expect a lot of coupling for markets?
A: Dow remains the mother of all the markets we found out and my sense is that we had a global bull run in the equities in 2003, and if the global markets don’t revive, it’s hard to see India charting a course almost independently, and that is the view that I got from Wall Street.
Q: What are they saying about the Dow? Everybody in the world is surprised at the resilience and strength of that index, what did you get from the best technical experts there?
A: That’s actually funny because I kept asking them and there is a very famous truism on Wall Street that you can’t fight the Fed and given what the Fed has done, can you suggest the Dow making a new high in 2008, and almost universally everyone was aghast at the question. So surprisingly in their own domestic market, they are not optimistic and the kind of liquidity that the Fed has provided, it's providing an impetuous to the market.
But as I travelled across the States, I went to New York and Los Angeles, you could see the beginnings of recession, gas at USD 4 announced is hurting them. In a country like America, they are rationing rice and that has never happened in the 30 years I was going to America. Food inflation is high, a lunch which used to cost USD 5, is costing USD 7 and USD 8 now, so we are seeing the impact of an early recession in America. I think till the election is over and till the new President is elected, there would be no fresh economic stimulus coming other than the tax packets that Bush has already announced. So there is hurt on the street.
Q: What’s making you so circumspect that we haven’t seen the worst despite the pull back that we've had ?
A: Couple of things. One thing is that I have lived longer than most of the analyst have had their sneakers. They haven’t seen the period of 1980’s, late 70's-80’s in the world where you had huge global inflation in oil and in commodity prices and the kind of damage that it does to corporate balance sheets. I think we had benign conditions from 1982 to 2005, various global bull markets had gone first in bonds and then in equities.
So I think most analysts don’t go back to that time in history, when the corporate balance sheet was ravaged completely by inflation. If you look at oil for example at what price does the global community take care of oil? When I was in US, everyone would announce that oil hit a new high today, and then they would move on to the next piece of news. But oil at USD 120/bbl means a cash flow difference between the West and the Middle East was almost a USD 1 trillion and in the Western economy there was a marketcap of USD 14 trillion, so 6-7% of transference of wealth is taking place every year because of the oil prices. How long can that be sustainable? And if you look at food inflation, I don’t think that is going to go away in 2-3 months. You can’t increase the supply of food over the three months, may be one or two agricultural cycles can do that.
So I see a huge problem with inflation, which people think that can be fixed over the next 2-3 months. I think it will take longer than that and the variations are not cheap and if you look at the broad marketcap sales ratio, or P/E ratios, some of the A-group stocks and some of the market leaders in the last bull run, you think that there is plenty of room on the down side and this rally is a very powerful rally, which almost seduces you back into the market. My suggestion is still remain careful.
Q: It has been all about the commodities this year, not just crude. Agri commodities as well like you said rice, soya, wheat, all of it. Did you speak to some of your experts about what has been happening in the commodity universe and where that might be headed?
A: In terms of commodities, we spoke mainly about oil and gold because they are two good proxies for the commodity space and someone like Louise Yamada, technical analyst, whom I interviewed in the show when oil was at USD 30/bbl, she had predicted oil would go to USD 100/bbl and at USD 60/bbl she had predicted that oil would go to USD 200/bbl. If you really want to hear her extremely long range forecast, I think you would be scared but a lot of people were suggesting that oil is not going to go down and the technical targets for oil could cross USD 150/bbl easily. Now in between that, there will be volatility, oil could come back to USD 100/bbl, we have seen a correction take place even yesterday when we speak, but I think the long-term fundamentals and technicals of oil point to a higher price.
Source: Moneycontrol.com
Market uptrend yet to resume
Atul Suri, Fund Manager, Rare Enterprises, said the market uptrend has not resumed. "It looks more like a bear market rally. We can see around 25% pullback from the lows of the correction. The correction was overdone and hence we are seeing a bounce back now. We are not in an uptrend until the Nifty goes above 5,400-5,500 levels.
Suri said he would look at booking profits when the Nifty goes up to 5,300-5,400. "However, I would look at exiting only if we see less signs of strength."
Source: Moneycontrol.com
Suri said he would look at booking profits when the Nifty goes up to 5,300-5,400. "However, I would look at exiting only if we see less signs of strength."
Source: Moneycontrol.com
Tuesday, April 29, 2008
Markets cheer credit policy; how do experts rate it?
The markets are trading higher with hefty gains on account of Repo and Reverse Repo remained unchanged by RBI in the new Credit Policy. However, RBI has hiked CRR by 25 bps to 8.25%. Nifty has surged above 5,000 mark and is hovering around that level. On the sectoral front, IT, realty, banking, metal indices trading with hefty gains. The BSE mid-cap and small cap indices were trading with moderate gains, each up nearly 1%.
Jim Walker of CLSA is surprised by the RBI’s decision to raise the CRR. He is expecting another round of rate hike on the lending front. The RBI move is unlikely to restrict the economy, he told CNBC-TV18. He is looking at a GDP growth of 7.5-8.5% for FY09. The Indian banks are not much exposed to US-structured products, he feels.
Nilesh Shah, Deputy MD, ICICI Prudential said, “I think the RBI has probably kept as in a limbo. The CRR hike will certainly put pressure on the bank’s ability to price their lending’s and since they haven’t been revised for almost 75 bps hike probably there is a need to tinker around a little. However since the repo and the reverse repo have been kept unchanged maybe some banks will probably take a call based on their asset liability mismatch- that there is no need for revision. So it’s not going to be a consensus decision some banks may raise interest rates; some banks might decide not to raise interest rates.”
Shah added, “ On the equity side, my feeling is that because the markets have run up and there is retail participation which always comes in a rising market I think they will focus much more now on the results and the actual monsoon rather than the monetary policy or the interest rate movement. So from a stock market point of view the focus is more on the other factors rather than the monetary policy interest rates or tightening. I think that pressure will be away from the stock market.”
Commenting on the likely reaction from the markets, Walker said, "Sometimes markets don’t quite get it right. This is if anything, an even bigger tightening move by the RBI than if they had just moved the repo rate. There is really no need for banks to necessarily follow the repo rate higher. But when you remove liquidity directly form the system, it is almost inevitable that the buying will push up their lending rates and that’s certainly been the case over the last couple of years - as the cash reserve ratio has increased, the banks of almost in every occasion pushed the rates higher and I think we will see that again. The markets might be relieved but I think when they think about it, that relief will turn to a wee bit of dismay that the RBI continues to be the really watchdog of inflation in India.”
Tushar Poddar, Goldman Sachs feels that the RBI’s tightening bias will continue in the near term, possibly through further CRR hikes. The current CRR hike and prospects for more will be negative for banks as it would hurt their margins. He expects banks to increase lending rates gradually due to a cumulative 75-bp increase in the CRR. Poddar added that he expects FY09 growth to slow to 7.8% while inflation to be at an average of 6.5% over the next six months and gradually coming down to 5% by end-March 2009. He continues to expect the Indian Rupee to appreciate by 4% against the US Dollar in FY09.
Source: Moneycontrol.com
Jim Walker of CLSA is surprised by the RBI’s decision to raise the CRR. He is expecting another round of rate hike on the lending front. The RBI move is unlikely to restrict the economy, he told CNBC-TV18. He is looking at a GDP growth of 7.5-8.5% for FY09. The Indian banks are not much exposed to US-structured products, he feels.
Nilesh Shah, Deputy MD, ICICI Prudential said, “I think the RBI has probably kept as in a limbo. The CRR hike will certainly put pressure on the bank’s ability to price their lending’s and since they haven’t been revised for almost 75 bps hike probably there is a need to tinker around a little. However since the repo and the reverse repo have been kept unchanged maybe some banks will probably take a call based on their asset liability mismatch- that there is no need for revision. So it’s not going to be a consensus decision some banks may raise interest rates; some banks might decide not to raise interest rates.”
Shah added, “ On the equity side, my feeling is that because the markets have run up and there is retail participation which always comes in a rising market I think they will focus much more now on the results and the actual monsoon rather than the monetary policy or the interest rate movement. So from a stock market point of view the focus is more on the other factors rather than the monetary policy interest rates or tightening. I think that pressure will be away from the stock market.”
Commenting on the likely reaction from the markets, Walker said, "Sometimes markets don’t quite get it right. This is if anything, an even bigger tightening move by the RBI than if they had just moved the repo rate. There is really no need for banks to necessarily follow the repo rate higher. But when you remove liquidity directly form the system, it is almost inevitable that the buying will push up their lending rates and that’s certainly been the case over the last couple of years - as the cash reserve ratio has increased, the banks of almost in every occasion pushed the rates higher and I think we will see that again. The markets might be relieved but I think when they think about it, that relief will turn to a wee bit of dismay that the RBI continues to be the really watchdog of inflation in India.”
Tushar Poddar, Goldman Sachs feels that the RBI’s tightening bias will continue in the near term, possibly through further CRR hikes. The current CRR hike and prospects for more will be negative for banks as it would hurt their margins. He expects banks to increase lending rates gradually due to a cumulative 75-bp increase in the CRR. Poddar added that he expects FY09 growth to slow to 7.8% while inflation to be at an average of 6.5% over the next six months and gradually coming down to 5% by end-March 2009. He continues to expect the Indian Rupee to appreciate by 4% against the US Dollar in FY09.
Source: Moneycontrol.com
Saturday, April 26, 2008
Markets not out of woods yet
Devina Mehra of First Global said the markets are not out of the woods yet. "Global markets correct for 2-3 years after rallies. It is difficult to predict the short-term trend but we are not very positive for the long-term."
According to Mehra, all corporate results haven't been good. "Inflation is impacting margins. A lot of cost push across sectors, will results in margin compression."
Excerpts from CNBC-TV18’s exclusive interview with Devina Mehra:
Q: Is this just a relief rally or are we out of the woods?
A: I don’t think we are out of the woods simply on the weight of evidence. If one looks at the long-term history of practically every market in the world, once you have a good faraway trend compounding level of five years, in 99% of cases we have seen negative return for the next three years. India’s history is about the same. If one looks at 1987-92, where we had more than 50% compounding, we had negative returns for a long-time thereafter. We didn’t take out the 1992 highs for more than eight years. So, the weight of evidence is against us, if one looks at corporate earnings or outlook, it is not that we are going to blow out the lights on that front to justify an above trend compounding or for that matter a far above trend valuation ratio. So, it is extremely unlikely scenario that we would be completely out of it and resume our bull run from hereon.
Q: How much would you give in terms of an upside? We are at 17,000, do you think there is significant headroom left in this pullback then?
A: It’s not meaningful to try and come up with one exact number. The point is that we have to look at what is more likely trend in the medium- to long-term and that doesn’t look very exciting as of now.
Q: Have you seen anything change over the last one-one-and-a-half months either in terms of macros, earnings, or global news flow to sort of suggest that the market might be successful in putting a bottom in place?
A: All news, whatever little has come in the last one-one and half months, has not been positive. Depending on sectors, there has been some negative news on margins rather than on the positive side. If one look at the macro picture, inflation is a cause for worry for number of sectors and that’s in two ways. One is high consumer inflation and that’s not an India specific problem, that’s a problem virtually across the world. That problem is going to get you to a stage where discretionary spends for the household goes down.
Q: The one sector which pulled the market up on Friday was telecom. After a long time we have seen 10% kind of rallies in Bharti. Are you convinced that these stocks can rally substantially after the recent underperformance because you been quite circumspect on the sector overall?
A: The sector has been an underperformer overall. We think it’s an underperformer to a market performer sector. None of this means that you cannot see a trading rally. That’s a different phenomenon altogether. But over a period of time this is a sector which will see a valuation correction. A part of that happened over the last one year. There is some way to go further on that because this is a sector which does have finite growth span. We have studied closely other markets like Russia and China where you saw this kind of subscriber growth at one point and then after a point that does taper off and there has to be a particular way in which one value those. So, that still remains a concern.
What happens with stock like this is that the correction very often happens not necessarily through a price coming down substantially but the price remaining at a point or in a range for a very long period of time. From the mid-90s for about six years we have seen this phenomena in Ranbaxy and HDFC which were very loved stocks at that point in time with very high FII holdings. We did see earnings growth but the stock went nowhere for six-seven years. I don’t know whether the correction here would happen necessarily through price action, the way it happened in real estate. But over a period of time, we see valuations contracting.
Q: What did you make of the numbers in the capital goods sector after looking at BHEL and ABB?
A: I haven’t studied ABB numbers in details but BHEL numbers were quite disappointing. There is some input cost pressure as well, as the competition from international sources is increasing. So, those concerns plus the order book is not quite what it seems. That is why we are investigating more deeply because in case of a slowdown in the economy what happens is that a lot of orders get cancelled.
As far as the power sector is concerned, many times the orders are booked far in advance. There is a tendency to book in orders right at the beginning of a planned period, then they take long time to materializing, and often the planned targets are not met.
Q: What is your expectation from RBI and how are you positioning yourself in banks now?
A: Banking is a sector which we have not liked for the last few months. For the second half of 2007, we did like banks a lot but we think now there are a lot of fundamental changes happening. One is the slowdown in the economy in credit growth. With this whole derivatives issue you will see some problems in particular with banks. You will also see a general slowing down of non-interest income which has been a driver for profitability growth for a number of players. So, those are on one side.
On the interest rate side, we don’t see any softening. RBI is going to be a bit more hawkish because even when the inflation numbers were fairly benign they always had one eye there and they never really made any softening move. In such a scenario as it is today, where inflation is above 7% which is graver concern for RBI and looking at GDP growth rate falling to 7% because inflation is something that affects the common people much more directly, I would expect RBI to be reasonably hawkish.
Source: Moneycontrol.com
According to Mehra, all corporate results haven't been good. "Inflation is impacting margins. A lot of cost push across sectors, will results in margin compression."
Excerpts from CNBC-TV18’s exclusive interview with Devina Mehra:
Q: Is this just a relief rally or are we out of the woods?
A: I don’t think we are out of the woods simply on the weight of evidence. If one looks at the long-term history of practically every market in the world, once you have a good faraway trend compounding level of five years, in 99% of cases we have seen negative return for the next three years. India’s history is about the same. If one looks at 1987-92, where we had more than 50% compounding, we had negative returns for a long-time thereafter. We didn’t take out the 1992 highs for more than eight years. So, the weight of evidence is against us, if one looks at corporate earnings or outlook, it is not that we are going to blow out the lights on that front to justify an above trend compounding or for that matter a far above trend valuation ratio. So, it is extremely unlikely scenario that we would be completely out of it and resume our bull run from hereon.
Q: How much would you give in terms of an upside? We are at 17,000, do you think there is significant headroom left in this pullback then?
A: It’s not meaningful to try and come up with one exact number. The point is that we have to look at what is more likely trend in the medium- to long-term and that doesn’t look very exciting as of now.
Q: Have you seen anything change over the last one-one-and-a-half months either in terms of macros, earnings, or global news flow to sort of suggest that the market might be successful in putting a bottom in place?
A: All news, whatever little has come in the last one-one and half months, has not been positive. Depending on sectors, there has been some negative news on margins rather than on the positive side. If one look at the macro picture, inflation is a cause for worry for number of sectors and that’s in two ways. One is high consumer inflation and that’s not an India specific problem, that’s a problem virtually across the world. That problem is going to get you to a stage where discretionary spends for the household goes down.
Q: The one sector which pulled the market up on Friday was telecom. After a long time we have seen 10% kind of rallies in Bharti. Are you convinced that these stocks can rally substantially after the recent underperformance because you been quite circumspect on the sector overall?
A: The sector has been an underperformer overall. We think it’s an underperformer to a market performer sector. None of this means that you cannot see a trading rally. That’s a different phenomenon altogether. But over a period of time this is a sector which will see a valuation correction. A part of that happened over the last one year. There is some way to go further on that because this is a sector which does have finite growth span. We have studied closely other markets like Russia and China where you saw this kind of subscriber growth at one point and then after a point that does taper off and there has to be a particular way in which one value those. So, that still remains a concern.
What happens with stock like this is that the correction very often happens not necessarily through a price coming down substantially but the price remaining at a point or in a range for a very long period of time. From the mid-90s for about six years we have seen this phenomena in Ranbaxy and HDFC which were very loved stocks at that point in time with very high FII holdings. We did see earnings growth but the stock went nowhere for six-seven years. I don’t know whether the correction here would happen necessarily through price action, the way it happened in real estate. But over a period of time, we see valuations contracting.
Q: What did you make of the numbers in the capital goods sector after looking at BHEL and ABB?
A: I haven’t studied ABB numbers in details but BHEL numbers were quite disappointing. There is some input cost pressure as well, as the competition from international sources is increasing. So, those concerns plus the order book is not quite what it seems. That is why we are investigating more deeply because in case of a slowdown in the economy what happens is that a lot of orders get cancelled.
As far as the power sector is concerned, many times the orders are booked far in advance. There is a tendency to book in orders right at the beginning of a planned period, then they take long time to materializing, and often the planned targets are not met.
Q: What is your expectation from RBI and how are you positioning yourself in banks now?
A: Banking is a sector which we have not liked for the last few months. For the second half of 2007, we did like banks a lot but we think now there are a lot of fundamental changes happening. One is the slowdown in the economy in credit growth. With this whole derivatives issue you will see some problems in particular with banks. You will also see a general slowing down of non-interest income which has been a driver for profitability growth for a number of players. So, those are on one side.
On the interest rate side, we don’t see any softening. RBI is going to be a bit more hawkish because even when the inflation numbers were fairly benign they always had one eye there and they never really made any softening move. In such a scenario as it is today, where inflation is above 7% which is graver concern for RBI and looking at GDP growth rate falling to 7% because inflation is something that affects the common people much more directly, I would expect RBI to be reasonably hawkish.
Source: Moneycontrol.com
Markets can gain 4-5% from current levels in near-term
Jyotivardhan Jaipuria, Head of Research, DSP Merril Lynch, said we are seeing a relief rally in India and across the world. "The first round of bad news is over. The consensus had turned negative. A contrarian view has caused this rally. The markets can gain another 4-5% from current levels in the near-term. However, there is more likelihood that the market will go back to lows rather than earlier highs."
According to Jaipuria, CDS spreads are not as bad as last month. "We see some recovery in the credit market. There is some panic buying due to rally, but longer-term outlook not positive."
Excerpts from CNBC-TV18’s exclusive interview with Jyotivardhan Jaipuria:
Q: We went to sub-15,000 levels and have come back to 17,000. How are you characterising this move and how much would you give it on the upside from here?
A: This has been like a relief rally. There has been a relief rally not just in India but across the world because people were very worried about the credit crises. Now, they think the last of credit crises behind us. It’s not that more bad news won’t come. Second, markets everywhere had quite a sharp fall from the top so to that extent technically we had got things which are oversold.
Third, most people were very bullish at the beginning of the year, but the consensus turned negative over the last few weeks. To that extent, the contrarian indicators were that there were enough people who were negative. To that extent, we have seen a relief rally and we will get markets going back testing old lows over the course of the next three-four months.
Q: How much would you give in terms of an upside? We are at 17,000, do you think there is significant headroom left in this pullback then?
A: Rallies happen and my guess is that there maybe another 4-5% on the upside.
Q: What about global risk appetite? Are you seeing any resumption or any improvement there? We haven’t seen any great FII flows yet but can we expect to get some liquidity support in this upmove?
A: If we take something like the Credit Default Swap, or CDS, spreads as an example, things are not as bad as there were a couple of months back. To that extent, one can say credit markets are building in some sort of recovery. People are sitting on cash. They have been negative on the markets and are not deploying the cash. To that extent, what happens is when we suddenly get a relief rally which sustains for sometime, we do get some panic buying coming through. But otherwise the fundamental news in India will be negative. It is not going to be exciting. So, the bigger trend is down rather than up.
Q: What’s you base case over the next couple of months for the market? You go back and re-test the January lows, go lower or form a slightly higher bottom?
A: Go back and re-test the lows.
Q: What’s your take on telecom space after Bharati’s numbers?
A: We have been short-term bullish on this space simply because there have been more concerns in probably a lot of other sectors on interest rates and implementation issue. So, we like telecom just because it is safe; subscriber growth is coming, and near-term at least margins are coming. To that extent, it was good for us that the sector has done well.
Q: What your take about capital goods? You have seen the numbers from BHEL, ABB, and Siemens now. Would you remain overweight here or is this a sector going to cause a bit of pain this year?
A: The sector is over owned. To that extent, it was a consensus by most people who have overweighed it. It’s going to give pain as long as the markets are very edgy. One thing, which could probably help this sector, is if commodity prices starts coming down because that could probably ease some of the raw material concerns. Otherwise, it’s a sector which in the short-term could give you pain till some of these present downturns in the market go away.
Q: What do you expect from the RBI as that is going to be a critical trigger? How do you play banks in the light of those expectations?
A: RBI has taken some move by hiking the CRR already ahead of the policy. RBI prefers to take moves outside of the policy. To that extent, they may or may not do anything in this policy. There is chance that they may hike the repo rate but my guess is they will probably remain flatish, so no real change.
Source: Moneycontrol.com
According to Jaipuria, CDS spreads are not as bad as last month. "We see some recovery in the credit market. There is some panic buying due to rally, but longer-term outlook not positive."
Excerpts from CNBC-TV18’s exclusive interview with Jyotivardhan Jaipuria:
Q: We went to sub-15,000 levels and have come back to 17,000. How are you characterising this move and how much would you give it on the upside from here?
A: This has been like a relief rally. There has been a relief rally not just in India but across the world because people were very worried about the credit crises. Now, they think the last of credit crises behind us. It’s not that more bad news won’t come. Second, markets everywhere had quite a sharp fall from the top so to that extent technically we had got things which are oversold.
Third, most people were very bullish at the beginning of the year, but the consensus turned negative over the last few weeks. To that extent, the contrarian indicators were that there were enough people who were negative. To that extent, we have seen a relief rally and we will get markets going back testing old lows over the course of the next three-four months.
Q: How much would you give in terms of an upside? We are at 17,000, do you think there is significant headroom left in this pullback then?
A: Rallies happen and my guess is that there maybe another 4-5% on the upside.
Q: What about global risk appetite? Are you seeing any resumption or any improvement there? We haven’t seen any great FII flows yet but can we expect to get some liquidity support in this upmove?
A: If we take something like the Credit Default Swap, or CDS, spreads as an example, things are not as bad as there were a couple of months back. To that extent, one can say credit markets are building in some sort of recovery. People are sitting on cash. They have been negative on the markets and are not deploying the cash. To that extent, what happens is when we suddenly get a relief rally which sustains for sometime, we do get some panic buying coming through. But otherwise the fundamental news in India will be negative. It is not going to be exciting. So, the bigger trend is down rather than up.
Q: What’s you base case over the next couple of months for the market? You go back and re-test the January lows, go lower or form a slightly higher bottom?
A: Go back and re-test the lows.
Q: What’s your take on telecom space after Bharati’s numbers?
A: We have been short-term bullish on this space simply because there have been more concerns in probably a lot of other sectors on interest rates and implementation issue. So, we like telecom just because it is safe; subscriber growth is coming, and near-term at least margins are coming. To that extent, it was good for us that the sector has done well.
Q: What your take about capital goods? You have seen the numbers from BHEL, ABB, and Siemens now. Would you remain overweight here or is this a sector going to cause a bit of pain this year?
A: The sector is over owned. To that extent, it was a consensus by most people who have overweighed it. It’s going to give pain as long as the markets are very edgy. One thing, which could probably help this sector, is if commodity prices starts coming down because that could probably ease some of the raw material concerns. Otherwise, it’s a sector which in the short-term could give you pain till some of these present downturns in the market go away.
Q: What do you expect from the RBI as that is going to be a critical trigger? How do you play banks in the light of those expectations?
A: RBI has taken some move by hiking the CRR already ahead of the policy. RBI prefers to take moves outside of the policy. To that extent, they may or may not do anything in this policy. There is chance that they may hike the repo rate but my guess is they will probably remain flatish, so no real change.
Source: Moneycontrol.com
Thursday, April 24, 2008
Buy Axis Bank, target of Rs 1200
Emkay Research has maintained its buy rating on Axis Bank with a target price of Rs 1200 in its April 22, 2008 research report. "Axis Bank’s reported Rs 3.6 billion of net profit for Q4FY08, far ahead of our expectations. The robust performance has been driven by a strong advance growth supported with better NIMs. The bank continued exemplary performance on mobilizing low cost deposits as its CASA mix improved by 582 bps. The operating profit grew 82.1% yoy to Rs 7.2 billion led by robust growth in other income."
"We have upgraded our EPS estimates for FY09 and FY10 by 7% and 10% for better than expected performance for FY08. At the current valuations, the stock is quoting at 18.4x FY10E EPS and 2.7x FY10E ABV. We maintain our BUY recommendation on the stock with a price target of Rs 1200," says Emkay's research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
"We have upgraded our EPS estimates for FY09 and FY10 by 7% and 10% for better than expected performance for FY08. At the current valuations, the stock is quoting at 18.4x FY10E EPS and 2.7x FY10E ABV. We maintain our BUY recommendation on the stock with a price target of Rs 1200," says Emkay's research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Buy Reliance Industries, target of Rs 3344
Angel Broking has maintained its buy rating on Reliance Industries with a target Price of Rs 3344 in its April 22, 2008 research report. "RIL reported a good performance for 4QFY2008 surpassing our expectations with Refining once again driving growth. Net Sales jumped 35.8% yoy to Rs 37,286 crore (Rs 27,448 crore) backed by higher sales from the Refining and Oil and Gas segments."
"We believe that the Exploration and Production initiative to bear fruits from 2HFY2009 onwards and is expected to be the future growth driver. RIL stock is available at 18.7x FY2010E FDEPS of Rs 139.1. We remain positive on the growth prospects of RIL and maintain a Buy on the stock with a Target Price of Rs 3344," says Angel's research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
"We believe that the Exploration and Production initiative to bear fruits from 2HFY2009 onwards and is expected to be the future growth driver. RIL stock is available at 18.7x FY2010E FDEPS of Rs 139.1. We remain positive on the growth prospects of RIL and maintain a Buy on the stock with a Target Price of Rs 3344," says Angel's research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Wednesday, April 23, 2008
Next year to see better turnover
Motilal Oswal Financial Services has declared its numbers for the quarter ended March 2008. The company's income stood at Rs 186.6 crore versus Rs 108.1 crore on QoQ basis.
During the same quarter its net profit was at Rs 44.2 crore versus Rs 18.7 crore on QoQ basis and Rs 53.7 crore on YoY basis. OPM were at 38% versus 35%.
Motilal Oswal of MOST expects the next year's turnover to be better than this year. He said 60% of retail revenues come from franchisees and the brokerage business contributes to about 80% to overall revenues. He further informed that the i-Banking business was up 140% and contributed to about 10% to total revenues.
Excerpts from CNBC-TV18's exclusive interview with Motilal Oswal:
Q: First if you can clarify, there is a large booking of revenues and profits you have done on the Great Offshore deal which you closed and how much that would have specifically contributed?
A: I would not like to comment on that but whatever deals we have completed in last year, in all sense those avenues are booked. And I don’t see any kind of extraordinary trends in terms of booking profits, or any cost on QoQ basis as far as last year is concerned.
Q: It's been a difficult quarter for most of the broking industry - how are you negotiating that? Are your fixed cost beginning to bite, or have you taken any conscious measures as a management to try and trim some of the fixed costs?
A: If you see on QoQ basis, definitely the last quarter was very challenging. But I would say that the kind of business we are in, especially the brokerage business, which contributes majorly to our revenue, I think it is better if we look at YoY kind of growth. I’ll try to do some analysis for the last 10 years in terms of market turnover - in last 10 years, only one year in terms of the market turnover was down compared to the previous year. But we are seeing that trend on YoY basis. The market turnover is going up, and on that basis, definitely I would assume that even for next year, the turnover is definitely going to be better than what we have seen this year.
Coming back, I think the cost in terms of fixed and variable cost, you would know that it is definitely different from business to business, like in broking business which is very important and the bigger cost is the infrastructure cost and the second is people cost. I think in our case when we look at the broking revenue, people cost would be about 60% fix and 40% would be variable and that takes care to the larger extent in terms of volatility in the earnings.
Second thing which is very important and typical in our case is that about 60% of our retail revenue comes from the franchises network, where the cost are absolutely variable in terms of sharing, so we really need to look from that perspective.
Q: Can you just break up the performance on the bottomline between Investment-Banking (I-Banking) and Co-broking, and how much you see I-Banking contributing over the next 2 quarters?
A: I think if we look at last year, the I-banking was about 7% revenue and this year it will be about 10% revenue to the total revenue in terms of growth on YoY basis, while the broking revenues have grown by about 75% but investment banking revenue have gone up by about 140%.
Q: I believe you also have some outstanding dues this quarter from customers, what is that to the tune of and how much do you hope to recover?
A: Whatever you see on YoY basis, I think the debt is normal and last quarter because of the volatility provided for about 3.8 crore as debts.
Q: Do you see any hits coming in at all because of the turbulent phase that you went through in terms, of firstly the recoverable money or any kind of propriety account exposures that you may have had?
A: That’s what I said - on customers account we have provided for Rs 3.8 crore and we don’t see any kind of more significant money, which has to be provided for. So I think what is to be provided for, we have provided for and as far as the propriety trading is concerned, we don’t have any kind of propriety trading in our books.
Source: Moneycontrol.com
During the same quarter its net profit was at Rs 44.2 crore versus Rs 18.7 crore on QoQ basis and Rs 53.7 crore on YoY basis. OPM were at 38% versus 35%.
Motilal Oswal of MOST expects the next year's turnover to be better than this year. He said 60% of retail revenues come from franchisees and the brokerage business contributes to about 80% to overall revenues. He further informed that the i-Banking business was up 140% and contributed to about 10% to total revenues.
Excerpts from CNBC-TV18's exclusive interview with Motilal Oswal:
Q: First if you can clarify, there is a large booking of revenues and profits you have done on the Great Offshore deal which you closed and how much that would have specifically contributed?
A: I would not like to comment on that but whatever deals we have completed in last year, in all sense those avenues are booked. And I don’t see any kind of extraordinary trends in terms of booking profits, or any cost on QoQ basis as far as last year is concerned.
Q: It's been a difficult quarter for most of the broking industry - how are you negotiating that? Are your fixed cost beginning to bite, or have you taken any conscious measures as a management to try and trim some of the fixed costs?
A: If you see on QoQ basis, definitely the last quarter was very challenging. But I would say that the kind of business we are in, especially the brokerage business, which contributes majorly to our revenue, I think it is better if we look at YoY kind of growth. I’ll try to do some analysis for the last 10 years in terms of market turnover - in last 10 years, only one year in terms of the market turnover was down compared to the previous year. But we are seeing that trend on YoY basis. The market turnover is going up, and on that basis, definitely I would assume that even for next year, the turnover is definitely going to be better than what we have seen this year.
Coming back, I think the cost in terms of fixed and variable cost, you would know that it is definitely different from business to business, like in broking business which is very important and the bigger cost is the infrastructure cost and the second is people cost. I think in our case when we look at the broking revenue, people cost would be about 60% fix and 40% would be variable and that takes care to the larger extent in terms of volatility in the earnings.
Second thing which is very important and typical in our case is that about 60% of our retail revenue comes from the franchises network, where the cost are absolutely variable in terms of sharing, so we really need to look from that perspective.
Q: Can you just break up the performance on the bottomline between Investment-Banking (I-Banking) and Co-broking, and how much you see I-Banking contributing over the next 2 quarters?
A: I think if we look at last year, the I-banking was about 7% revenue and this year it will be about 10% revenue to the total revenue in terms of growth on YoY basis, while the broking revenues have grown by about 75% but investment banking revenue have gone up by about 140%.
Q: I believe you also have some outstanding dues this quarter from customers, what is that to the tune of and how much do you hope to recover?
A: Whatever you see on YoY basis, I think the debt is normal and last quarter because of the volatility provided for about 3.8 crore as debts.
Q: Do you see any hits coming in at all because of the turbulent phase that you went through in terms, of firstly the recoverable money or any kind of propriety account exposures that you may have had?
A: That’s what I said - on customers account we have provided for Rs 3.8 crore and we don’t see any kind of more significant money, which has to be provided for. So I think what is to be provided for, we have provided for and as far as the propriety trading is concerned, we don’t have any kind of propriety trading in our books.
Source: Moneycontrol.com
Stop waiting for the so-called 'bottom'
Samir Arora of Helios Capital feels that, the investors are giving too much importance to waiting, for the so-called ‘bottom’. He said that he has not changed his sector preferences in the portfolio from last year, nor is he worried about a further fall, The key, Arora said, is whether to buy or not.
He said that the odds are against the market correcting at around 50% from the peaks. The domestic institutions need to show some more conviction in market, Arora said. He believes that the FIIs are staying away due to the complete lack of domestic participation.
Excerpts from CNBC-TV18's exclusive interview with Samir Arora
Q: Is this indeed a bear market?
A: Catching a bottom is more of an ego trip than anything else, and investing is not about ego and saying that I have invested in the bottom. The question should be that if there is going to be a bottom in some days then how far we are from it and I don’t think anybody would be able to say, that we are very far from it in terms of percentage if we have not already crossed it.
Q: So you don’t agree with people who believe that there could be another 15%-20%, downside tot his market from say a rough 15,000-15,500 levels?
A : If that happens then it would mean that there are some major issues around the world which could take us there, and its very difficult to say like that, but the odds would say that that is not the case anymore and if it did happen then it would happen for extremely short period of time. As of now it is a bit unreasonable to think that the market should correct 50%, from the top and generally a 30% to 35% fall which we have seen not from year to date but from the highs of 8th to 10th January. It is not a fall after you start worrying about, whether there will be further declines or not, but whether you should buy or not is another question, not that it will be another 15%-20% but normally it doesn’t happen.
Q: What’s happening with the global money, its true that they haven’t pulled out a lot of money, but one would have expected that after a 30% fall for a market like ours, which people seem to like quite a bit till December, they would have bought a little bit more, what’s keeping them away you think?
A: What’s keeping them away is the complete lack of backbone of the Indian investors; we know that the HNI’s in India have been wiped out in January, but the way the mutual funds and the fund managers are behaving as if they also don’t have backbone left even. The foreign investors will be thoroughly de moralized looking at how the Indian mutual funds and the Indian institutions behave, foreign investors have a lot of interest in India, and even in the end of this month we will have some high quality names coming in to our front but the point is, there must be two sides to it, the Indian mutual fund guys, the Indian investors and institutors also have to show some commitment to their own market and not worry about outsmarting each other for the 8%-10% cash that they have.
Q: What’s yours sense of when we might sort of begin to get out of the woods when the market will not trade with such thin volumes, complete apathy, no flows, this kind of a situation might get arrested?
A: My feeling is, by the ways of more of retail driven analysis but I even try it on institutions and it works most of the times, is that if you look at the market its not for the institution but more for the retail. If you look at the market as a source of making money, it will not work because what happens in India, as the HNI says that I will invest so much money every year out of my options trading and futures trading, I want to make x% returns, but if you look at the market as an investment, that means you keep investing and over time you will make money, always does right Now the problem is that we are all now looking that we must invest only in the bottom not one week or one month before. You look at the worst of the views on India, from the bearish guys, they all say another 10%, and they don’t say that it is only 10%, so you might as well start, because you will not be able to invest everything on one day, they say there is another 10% or 5% or whatever percentage left on the bottom. Its been too precise, so it will turn when it turns, the market will go up when it stops going down. I can see in my limited fund, that I would have received at least 20 emails in the last 15-20 days, from institutions we had met 5-6 months and one year ago and to our mailing list and all, for our monthly letter saying we want to look at India, tell us what you have done and the market has done, what are the opportunities, some of them may and some of them may still not invest but it is on everybody’s radar.
Q: There is one feeling which has been bolstered by the moves of the last 3 months that maybe the underperformers of last year will do better this year as they have like, IT, FMCG, Pharmaceuticals, do you think that’s the way it will pan out, as the over-ownership unwinds or some of the good performing sectors of last year could bounce back?
A: We are not changing our sectors, IT we had a little bit in the end of December, and my theory is the India stories are the under penetration and shortage of infrastructure, financials, market share gains of private sector versus the public sector in different stories. India’s story cannot be a consumer which relies on growth into rural. India’s biggest long risk is that the Indian rural economy is not growing at the same rate as the urban and therefore the rural population is feeling bad, and feels that hey have been left out and the growth in agriculture is 2% and the growth in urban services and all is 9%, so how can stocks whose main growth avenue comes from expanding and the rural be good only because their earnings are a little less volatile and therefore in a sector rotation in a short period of time, they don’t fall and therefore they are viewed as the new sector, we are not changing our sectors, we are remaining in the sectors of last year but as I always said, we are not in real estate and that I think will not be a sector even in the following years but other sectors are all capital goods, infrastructure, financials and nothing wrong with any of them.
Source: Moneycontrol.com
He said that the odds are against the market correcting at around 50% from the peaks. The domestic institutions need to show some more conviction in market, Arora said. He believes that the FIIs are staying away due to the complete lack of domestic participation.
Excerpts from CNBC-TV18's exclusive interview with Samir Arora
Q: Is this indeed a bear market?
A: Catching a bottom is more of an ego trip than anything else, and investing is not about ego and saying that I have invested in the bottom. The question should be that if there is going to be a bottom in some days then how far we are from it and I don’t think anybody would be able to say, that we are very far from it in terms of percentage if we have not already crossed it.
Q: So you don’t agree with people who believe that there could be another 15%-20%, downside tot his market from say a rough 15,000-15,500 levels?
A : If that happens then it would mean that there are some major issues around the world which could take us there, and its very difficult to say like that, but the odds would say that that is not the case anymore and if it did happen then it would happen for extremely short period of time. As of now it is a bit unreasonable to think that the market should correct 50%, from the top and generally a 30% to 35% fall which we have seen not from year to date but from the highs of 8th to 10th January. It is not a fall after you start worrying about, whether there will be further declines or not, but whether you should buy or not is another question, not that it will be another 15%-20% but normally it doesn’t happen.
Q: What’s happening with the global money, its true that they haven’t pulled out a lot of money, but one would have expected that after a 30% fall for a market like ours, which people seem to like quite a bit till December, they would have bought a little bit more, what’s keeping them away you think?
A: What’s keeping them away is the complete lack of backbone of the Indian investors; we know that the HNI’s in India have been wiped out in January, but the way the mutual funds and the fund managers are behaving as if they also don’t have backbone left even. The foreign investors will be thoroughly de moralized looking at how the Indian mutual funds and the Indian institutions behave, foreign investors have a lot of interest in India, and even in the end of this month we will have some high quality names coming in to our front but the point is, there must be two sides to it, the Indian mutual fund guys, the Indian investors and institutors also have to show some commitment to their own market and not worry about outsmarting each other for the 8%-10% cash that they have.
Q: What’s yours sense of when we might sort of begin to get out of the woods when the market will not trade with such thin volumes, complete apathy, no flows, this kind of a situation might get arrested?
A: My feeling is, by the ways of more of retail driven analysis but I even try it on institutions and it works most of the times, is that if you look at the market its not for the institution but more for the retail. If you look at the market as a source of making money, it will not work because what happens in India, as the HNI says that I will invest so much money every year out of my options trading and futures trading, I want to make x% returns, but if you look at the market as an investment, that means you keep investing and over time you will make money, always does right Now the problem is that we are all now looking that we must invest only in the bottom not one week or one month before. You look at the worst of the views on India, from the bearish guys, they all say another 10%, and they don’t say that it is only 10%, so you might as well start, because you will not be able to invest everything on one day, they say there is another 10% or 5% or whatever percentage left on the bottom. Its been too precise, so it will turn when it turns, the market will go up when it stops going down. I can see in my limited fund, that I would have received at least 20 emails in the last 15-20 days, from institutions we had met 5-6 months and one year ago and to our mailing list and all, for our monthly letter saying we want to look at India, tell us what you have done and the market has done, what are the opportunities, some of them may and some of them may still not invest but it is on everybody’s radar.
Q: There is one feeling which has been bolstered by the moves of the last 3 months that maybe the underperformers of last year will do better this year as they have like, IT, FMCG, Pharmaceuticals, do you think that’s the way it will pan out, as the over-ownership unwinds or some of the good performing sectors of last year could bounce back?
A: We are not changing our sectors, IT we had a little bit in the end of December, and my theory is the India stories are the under penetration and shortage of infrastructure, financials, market share gains of private sector versus the public sector in different stories. India’s story cannot be a consumer which relies on growth into rural. India’s biggest long risk is that the Indian rural economy is not growing at the same rate as the urban and therefore the rural population is feeling bad, and feels that hey have been left out and the growth in agriculture is 2% and the growth in urban services and all is 9%, so how can stocks whose main growth avenue comes from expanding and the rural be good only because their earnings are a little less volatile and therefore in a sector rotation in a short period of time, they don’t fall and therefore they are viewed as the new sector, we are not changing our sectors, we are remaining in the sectors of last year but as I always said, we are not in real estate and that I think will not be a sector even in the following years but other sectors are all capital goods, infrastructure, financials and nothing wrong with any of them.
Source: Moneycontrol.com
Tuesday, April 22, 2008
Buy banking stocks
Rajesh Jain of SMC Global Securities is of the view that one can buy banking stocks.
Jain told CNBC-TV18, "If this market has to get past the 5,350 mark on the Nifty, banking will have a lot to do with it. What Axis Bank numbers have reveled is the tremendous traction in terms of business growth, the interest margin and even though there have been some losses that have got disclosed, what comes through very clearly is that its not going to be back breaking or create some major problems for the entire sector as a whole. So I would be a buyer on the entire banking space and like I said, it could be key driver in the road to 5,350."
Source: Moneycontrol.com
Jain told CNBC-TV18, "If this market has to get past the 5,350 mark on the Nifty, banking will have a lot to do with it. What Axis Bank numbers have reveled is the tremendous traction in terms of business growth, the interest margin and even though there have been some losses that have got disclosed, what comes through very clearly is that its not going to be back breaking or create some major problems for the entire sector as a whole. So I would be a buyer on the entire banking space and like I said, it could be key driver in the road to 5,350."
Source: Moneycontrol.com
Investment opportunity in DLF
Rahul Mohindar of Viratechindia is of the view that there is a investment opportunity in DLF.
Mohindar told CNBC-TV18, "DLF seems to be the one shaping up into a good uptrend. I see DLF going another 40-50% with a 6-8 month time frame, so I see a clear investment opportunity visible in DLF."
He further added, "In Unitech I am not convinced of a medium to long-term break out but in the short-term adding 10-15% in this stock would not be a problem and so I am upbeat on this space as well."
Disclosure: It is safe to assume that analyst & his clients may have an interest in the stocks or sectors discussed.
Source: Moneycontrol.com
Mohindar told CNBC-TV18, "DLF seems to be the one shaping up into a good uptrend. I see DLF going another 40-50% with a 6-8 month time frame, so I see a clear investment opportunity visible in DLF."
He further added, "In Unitech I am not convinced of a medium to long-term break out but in the short-term adding 10-15% in this stock would not be a problem and so I am upbeat on this space as well."
Disclosure: It is safe to assume that analyst & his clients may have an interest in the stocks or sectors discussed.
Source: Moneycontrol.com
Monday, April 21, 2008
Wait for a pullback to decide on long trade
Speaking to CNBC-TV18, Sushil Kedia, Head- Institutional Equities at K&A Securities said, “It is better to wait for a pullback and then decide whether a long trade makes sense. To go and buy into this strength in the morning is perhaps not looking as attractive.”
Q: What’s the Nifty chart looking like and what’s the best way to trade it?
A: Going forward if I have to take a call on whether to buy or sell right away, I think the opening upmove is perhaps done with. If a further breakout from the highs so far seen comes up by time studies there are potential reversal windows around 11 am today. So I think the opportunity to open a long trade was perhaps on Thursday, which was again difficult because of a long weekend or given that the lack of conviction or clarity on various markets existed.
I think it is better to wait for a pullback and then decide whether a long trade makes sense. To go and buy into this strength in the morning is perhaps not looking as attractive.
Q: So would you say you would open up a short beyond lets say the 50:50 mark or you would just wait and watch for what the market does by the end of trade today?
A: Wait and watch is a better choice for now. Given the fact that there are so many cues which are pointing to strength in prices. Individual charts, components that are making up the Nifty, are not really showing many pockets of weakness.
So if I am trying to draw conclusions from many types of evidences there is not enough to call for a short trade here. In terms of going for a long trade here the tolerance or pain might have to be 80-points or 100-points for the day.
Going forward further maybe Nifty can travel to as much as 5,240 on the upper side in the current upmove and to play for 5,240 one may have to be tolerant, the downside tolerance may need to be as low as 4,870 to begin with.
So I think only pullbacks are where you will need to evaluate whether a long trade makes sense or you need to give it a pass.
Q: A lot of people have been commenting on the strength of Reliance these past few sessions technically how is it looking to you?
A: If today or by tomorrow morning Rs 2,710 is taken out then it perhaps makes sense to participate in this strength or else a pullback to Rs 2,450 can’t be ruled out which might be equivalent on Nifty levels of almost 4,780. So let’s wait for a trigger on technicals.
Q: What does trade of the last two weeks suggested to you? Have you seen any kind of a trend reversal, do you think we have broken out of that trading band that we have been in or premature to say that?
A: The kind of noise or the kind of stretches that we have seen has not really given that sort of a conviction within the patterns that one sees on an intra-day timeframe added over a 15-20 day perspective that perhaps the final bottom has been made, it perhaps has been but it still leaves a much larger than a 50% probability that a retest of the low seen so far is pending. Before these lows are retested the market can go as much as 5,240 but perhaps no more from the patterns that we see now.
Q: What’s the best trade in this market then if we don’t have enough conviction on the Nifty do you have a high conviction trade that can be taken at this point?
A: Tata Steel, which had a potential short-term trading reversal today but it has broken past the stop loss level that one would have chosen before the market opened for a potential short, that becomes an extended upmove; Tata Steel can be bought in here, Steel Authority of India Ltd (SAIL) can be bought in here. Maybe Satyam is still good for getting into the strength here. You have a Sterlite and Hindalco also joining into reversal breakout strengths. There are a good number of names from the real estate sector also which are extremely oversold and perhaps the cash reserve ratio (CRR) hike is not really making an effect on them. So based on what ones lost tolerance level is and what has been prevailing last 10-12 days volatility on these one has to choose the stop losses and look for buy trade there.
Q: Is that the stronger stock from technology Satyam?
A: The strength has been fairly well in the last 7-8 days on Infosys, Tata Consultancy Services (TCS) as well as Satyam. But Satyam looks more attractive than the other two names for one reason that typically over the last four-four and a half years of this bull market Satyam has tended to lag on a cyclical pattern evolution vis-Ã -vis Infosys or a TCS and so perhaps Satyam is still behaving in terms of chart patterns to patterns in Infosys or Satyam that you saw nearly a year ago.
As in the long-term uptrend in Satyam is not really dented as much as Infosys and TCS are perhaps just rallies within the broad meandering corrections they have seen for the last one-year. In that sense Satyam appears mentally more attractive. But in the short-term trading strength have been equally distributed among all three
Q: For trading on the Nifty what kind of range are you working with right now in the short-term?
A: Ranges tend to give you good results in a certain market. But in the last two-three weeks there have been so many numbers and so many moving averages or trendlines or whatever methods people use to peg in levels, there is a large battery of levels from here to 5240 there is a decent number of layers from here down to the pullback to 4,780.
So more than numbers what my mind is switching over to is more for looking at momentum reversal studies and getting pegged on to a particular number is more risky here in choosing a trade rather wait for certain patterns that have given you good results in terms of grabbing a trade. In that sense 4,780 or 4,870 might be the area where a pullback comes and if it does not come and these markets keeps going to 5,240 maybe one will not take any trades on Nifty at this moment on the long side.
Q: What’s your general sense about the medium term outlook, do you think local and global markets are doing a relief rally kind of a number which is essentially a pull back from oversold ground and no more or do you think a consolidation which we saw around the last one month or so has put a floor in place and we are ready to move up?
A: I would be making certain guesses here, I can’t really see into the future with any sort of clarity more than 50%, but within the studied guess work, I will break this into 3 parts. The global markets vis-Ã -vis the local market study and the various components within the local market.
When it comes to the S&P and the Dow, there is an inverted head and shoulder that we spoke about on the Dow Transportations Index that has been very well validated and has broken past that and has perhaps clearly secures the bottom on the Dow Jones Transportations Index whereas the Dow Jones Industrial Index which is what is more commonly and more popularly tracked has a sort of inverted head and shoulder but is not the one because volume confirmation and such things which has not come by and it still looks like a rally emerging from the bottom with a re-test of the bottom clearly looking like pending.
On S&P futures, say perhaps the upside resistance number for the coming week is perhaps 1,439 which leaves around 2.5% 3% of an upside further from here But it is going to be too early to state that the January low is clearly the low, we might see 1% lower than that around there, and a re-test is clearly there. If we get out of the US markets and look at FTSE the picture is not very dissimilar from here and if we compare the peers in the emerging market space, Brazil continues to be around at its all time high, China really around last 2-3 years low, its still not showing any signs of bounce back, and Russia is somewhere in between, and India has perhaps been the second worst performer across all of these categories.
If you look at Hang Seng or Taiwan, or even the Nikkei, they sort of have given the first relief rally and retests are pending on them, they may not go back to the same old levels of January, maybe 5%-7% higher than those and I think its still early to say that the low is completely done with and a deep pull back in many names may not come.
When we look at sector wise, with India, on a medium term outlook, the sort of space fillers, where the Pharmaceuticals and the FMCG space, its time to pare down exposures there, if HUL goes lower than Rs 217, then you would here a lot of voices that its good for Rs 147 or Rs 145 maybe and ITC perhaps is making a cyclical top. If Ranbaxy is looking like one or one and half year rally of the broad 3 year correction perhaps getting over here, so maybe for all the fundamental news that may come out on that, Ranbaxy might be a sell at every rally from here, or a Dr Reddy’s is not going up further.
So Pharmaceuticals and FMCG perhaps were the space fillers which prevented Nifty from going beyond a 35% correction while Reliance Energy collapsed by 50% or more. Cement is not looking like going really anywhere. IT upmove is still looking like a rally of the one year corrections that they have produced and I think in the medium term, there is a lot more consolidation that perhaps the market is going to make between 4,400 to 5,300 levels
Disclosure: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Q: What’s the Nifty chart looking like and what’s the best way to trade it?
A: Going forward if I have to take a call on whether to buy or sell right away, I think the opening upmove is perhaps done with. If a further breakout from the highs so far seen comes up by time studies there are potential reversal windows around 11 am today. So I think the opportunity to open a long trade was perhaps on Thursday, which was again difficult because of a long weekend or given that the lack of conviction or clarity on various markets existed.
I think it is better to wait for a pullback and then decide whether a long trade makes sense. To go and buy into this strength in the morning is perhaps not looking as attractive.
Q: So would you say you would open up a short beyond lets say the 50:50 mark or you would just wait and watch for what the market does by the end of trade today?
A: Wait and watch is a better choice for now. Given the fact that there are so many cues which are pointing to strength in prices. Individual charts, components that are making up the Nifty, are not really showing many pockets of weakness.
So if I am trying to draw conclusions from many types of evidences there is not enough to call for a short trade here. In terms of going for a long trade here the tolerance or pain might have to be 80-points or 100-points for the day.
Going forward further maybe Nifty can travel to as much as 5,240 on the upper side in the current upmove and to play for 5,240 one may have to be tolerant, the downside tolerance may need to be as low as 4,870 to begin with.
So I think only pullbacks are where you will need to evaluate whether a long trade makes sense or you need to give it a pass.
Q: A lot of people have been commenting on the strength of Reliance these past few sessions technically how is it looking to you?
A: If today or by tomorrow morning Rs 2,710 is taken out then it perhaps makes sense to participate in this strength or else a pullback to Rs 2,450 can’t be ruled out which might be equivalent on Nifty levels of almost 4,780. So let’s wait for a trigger on technicals.
Q: What does trade of the last two weeks suggested to you? Have you seen any kind of a trend reversal, do you think we have broken out of that trading band that we have been in or premature to say that?
A: The kind of noise or the kind of stretches that we have seen has not really given that sort of a conviction within the patterns that one sees on an intra-day timeframe added over a 15-20 day perspective that perhaps the final bottom has been made, it perhaps has been but it still leaves a much larger than a 50% probability that a retest of the low seen so far is pending. Before these lows are retested the market can go as much as 5,240 but perhaps no more from the patterns that we see now.
Q: What’s the best trade in this market then if we don’t have enough conviction on the Nifty do you have a high conviction trade that can be taken at this point?
A: Tata Steel, which had a potential short-term trading reversal today but it has broken past the stop loss level that one would have chosen before the market opened for a potential short, that becomes an extended upmove; Tata Steel can be bought in here, Steel Authority of India Ltd (SAIL) can be bought in here. Maybe Satyam is still good for getting into the strength here. You have a Sterlite and Hindalco also joining into reversal breakout strengths. There are a good number of names from the real estate sector also which are extremely oversold and perhaps the cash reserve ratio (CRR) hike is not really making an effect on them. So based on what ones lost tolerance level is and what has been prevailing last 10-12 days volatility on these one has to choose the stop losses and look for buy trade there.
Q: Is that the stronger stock from technology Satyam?
A: The strength has been fairly well in the last 7-8 days on Infosys, Tata Consultancy Services (TCS) as well as Satyam. But Satyam looks more attractive than the other two names for one reason that typically over the last four-four and a half years of this bull market Satyam has tended to lag on a cyclical pattern evolution vis-Ã -vis Infosys or a TCS and so perhaps Satyam is still behaving in terms of chart patterns to patterns in Infosys or Satyam that you saw nearly a year ago.
As in the long-term uptrend in Satyam is not really dented as much as Infosys and TCS are perhaps just rallies within the broad meandering corrections they have seen for the last one-year. In that sense Satyam appears mentally more attractive. But in the short-term trading strength have been equally distributed among all three
Q: For trading on the Nifty what kind of range are you working with right now in the short-term?
A: Ranges tend to give you good results in a certain market. But in the last two-three weeks there have been so many numbers and so many moving averages or trendlines or whatever methods people use to peg in levels, there is a large battery of levels from here to 5240 there is a decent number of layers from here down to the pullback to 4,780.
So more than numbers what my mind is switching over to is more for looking at momentum reversal studies and getting pegged on to a particular number is more risky here in choosing a trade rather wait for certain patterns that have given you good results in terms of grabbing a trade. In that sense 4,780 or 4,870 might be the area where a pullback comes and if it does not come and these markets keeps going to 5,240 maybe one will not take any trades on Nifty at this moment on the long side.
Q: What’s your general sense about the medium term outlook, do you think local and global markets are doing a relief rally kind of a number which is essentially a pull back from oversold ground and no more or do you think a consolidation which we saw around the last one month or so has put a floor in place and we are ready to move up?
A: I would be making certain guesses here, I can’t really see into the future with any sort of clarity more than 50%, but within the studied guess work, I will break this into 3 parts. The global markets vis-Ã -vis the local market study and the various components within the local market.
When it comes to the S&P and the Dow, there is an inverted head and shoulder that we spoke about on the Dow Transportations Index that has been very well validated and has broken past that and has perhaps clearly secures the bottom on the Dow Jones Transportations Index whereas the Dow Jones Industrial Index which is what is more commonly and more popularly tracked has a sort of inverted head and shoulder but is not the one because volume confirmation and such things which has not come by and it still looks like a rally emerging from the bottom with a re-test of the bottom clearly looking like pending.
On S&P futures, say perhaps the upside resistance number for the coming week is perhaps 1,439 which leaves around 2.5% 3% of an upside further from here But it is going to be too early to state that the January low is clearly the low, we might see 1% lower than that around there, and a re-test is clearly there. If we get out of the US markets and look at FTSE the picture is not very dissimilar from here and if we compare the peers in the emerging market space, Brazil continues to be around at its all time high, China really around last 2-3 years low, its still not showing any signs of bounce back, and Russia is somewhere in between, and India has perhaps been the second worst performer across all of these categories.
If you look at Hang Seng or Taiwan, or even the Nikkei, they sort of have given the first relief rally and retests are pending on them, they may not go back to the same old levels of January, maybe 5%-7% higher than those and I think its still early to say that the low is completely done with and a deep pull back in many names may not come.
When we look at sector wise, with India, on a medium term outlook, the sort of space fillers, where the Pharmaceuticals and the FMCG space, its time to pare down exposures there, if HUL goes lower than Rs 217, then you would here a lot of voices that its good for Rs 147 or Rs 145 maybe and ITC perhaps is making a cyclical top. If Ranbaxy is looking like one or one and half year rally of the broad 3 year correction perhaps getting over here, so maybe for all the fundamental news that may come out on that, Ranbaxy might be a sell at every rally from here, or a Dr Reddy’s is not going up further.
So Pharmaceuticals and FMCG perhaps were the space fillers which prevented Nifty from going beyond a 35% correction while Reliance Energy collapsed by 50% or more. Cement is not looking like going really anywhere. IT upmove is still looking like a rally of the one year corrections that they have produced and I think in the medium term, there is a lot more consolidation that perhaps the market is going to make between 4,400 to 5,300 levels
Disclosure: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Buy SAIL, Tata Steel on declines
Technical Analyst, Ashwani Gujral advises to buy SAIL, Tata Steel on declines.
Gujral told CNBC-TV18, "Even last time when the CRR hike started that was the beginning of the interest rates sensitives bottoming out, and all of these news is priced in. So I don’t think there is a lot of downside on any of the interest rate sensitives, infact these are good prices to buy them and every week if inflation keeps coming down, you will see rallies in all of these stocks."
"SAIL, Tata Steel need to be bought on all declines and if you get inflation coming below 7%, you will see rallies on every Friday in these interest rate sensitives. So I think some sort of bottom has been reached even on the interest rate sensitives".
Source: Moneycontrol.com
Gujral told CNBC-TV18, "Even last time when the CRR hike started that was the beginning of the interest rates sensitives bottoming out, and all of these news is priced in. So I don’t think there is a lot of downside on any of the interest rate sensitives, infact these are good prices to buy them and every week if inflation keeps coming down, you will see rallies in all of these stocks."
"SAIL, Tata Steel need to be bought on all declines and if you get inflation coming below 7%, you will see rallies on every Friday in these interest rate sensitives. So I think some sort of bottom has been reached even on the interest rate sensitives".
Source: Moneycontrol.com
Rakesh Jhunjhunwala: Markets to see deep, long correction
The question bothering the markets still remains - is there more pain left and what is the road ahead? To find out answers to these questions, CNBC-TV18’s Stocks Editor, Udayan Mukherjee caught up with ace investor and market expert Rakesh Jhunjhunwala in a special series called ‘Hunt for the Bottom’.
Jhunjhunwala feels that the markets have seen a bull-run since April 2003 and one cannot have a bull market without corrections. The corrections would be testing the investors’ patience and their sheer belief in the markets, he said. ”All the corrections we have had in the last four years have had been deep but they have not been deep time-wise. I think the real patience and the real belief in the equity and in the market comes when the market tests you time-wise. So I think this is going to be one of the deepest and the longest corrections that we are going to have, in what I believe is going to be a very long bull market,” Jhunjhunwala said.
Excerpts from Udayan Mukherjee’s conversation with Rakesh Jhujhunwala:
Q: How do you distinguish between a long time wise correction and a cyclical bear market, we could have five good years then two really bad years and people might classify that as a bear market after a bull market?
Jhunjhunwala: My clarification is very simple. We are in a secular and structural bull market. In a secular and structural bull market, every high is higher than the last (previous) high and every low is also higher than the last (previous) one. So the last low we have on the Index was about 12,500, the last high we had was 21,000. As long as the index is above 12,500 and the new high if we make is above 21,000, I think we are very much in a structural secular market.
Q: How long according to you could this painful phase be?
Jhunjhunwala: I think we are not going to make a new high this year. Even if we make it, I do not think it will sustain. Maybe we have started it all in January; I think it would last from anywhere from nine months to eighteen months - I would not be surprised. Market is remaining in a range.
Q: Let me paint the bearish scenario - what the bears say that interest rates go up even from here-maybe not justified. But in our country sometimes we do things which are not justified -GDP growth slows to 7%-sub7%, earnings growth slows to 10%-12%; could we have then in that kind of situation a compressed one-two year kind of a bear phase, is that a likely a scenario or even a possible scenario in your eyes?
Jhunjhunwala: In my eyes, 4,100-4,200, which corresponds to 12,500-13,000 on the Index, I think this is a level, which we are not going to penetrate on the downward side very easily. At the same level, I think personally 5,300-5,400 on the upside in the Nifty is a level that we will not penetrate easily. So I think we could be in a range 4,200; maybe I think the range could be 4,500-5,300 instead of 4,200-5,300 - we could a pass a year or eighteen months.
Source: Moneycontrol.com
Jhunjhunwala feels that the markets have seen a bull-run since April 2003 and one cannot have a bull market without corrections. The corrections would be testing the investors’ patience and their sheer belief in the markets, he said. ”All the corrections we have had in the last four years have had been deep but they have not been deep time-wise. I think the real patience and the real belief in the equity and in the market comes when the market tests you time-wise. So I think this is going to be one of the deepest and the longest corrections that we are going to have, in what I believe is going to be a very long bull market,” Jhunjhunwala said.
Excerpts from Udayan Mukherjee’s conversation with Rakesh Jhujhunwala:
Q: How do you distinguish between a long time wise correction and a cyclical bear market, we could have five good years then two really bad years and people might classify that as a bear market after a bull market?
Jhunjhunwala: My clarification is very simple. We are in a secular and structural bull market. In a secular and structural bull market, every high is higher than the last (previous) high and every low is also higher than the last (previous) one. So the last low we have on the Index was about 12,500, the last high we had was 21,000. As long as the index is above 12,500 and the new high if we make is above 21,000, I think we are very much in a structural secular market.
Q: How long according to you could this painful phase be?
Jhunjhunwala: I think we are not going to make a new high this year. Even if we make it, I do not think it will sustain. Maybe we have started it all in January; I think it would last from anywhere from nine months to eighteen months - I would not be surprised. Market is remaining in a range.
Q: Let me paint the bearish scenario - what the bears say that interest rates go up even from here-maybe not justified. But in our country sometimes we do things which are not justified -GDP growth slows to 7%-sub7%, earnings growth slows to 10%-12%; could we have then in that kind of situation a compressed one-two year kind of a bear phase, is that a likely a scenario or even a possible scenario in your eyes?
Jhunjhunwala: In my eyes, 4,100-4,200, which corresponds to 12,500-13,000 on the Index, I think this is a level, which we are not going to penetrate on the downward side very easily. At the same level, I think personally 5,300-5,400 on the upside in the Nifty is a level that we will not penetrate easily. So I think we could be in a range 4,200; maybe I think the range could be 4,500-5,300 instead of 4,200-5,300 - we could a pass a year or eighteen months.
Source: Moneycontrol.com
Friday, April 18, 2008
How will stock Markets react on Monday?
The Reserve Bank of India, or RBI, has hiked CRR by 50 bps to 8% in two stages to contain inflation expectations, reports CNBC-TV18. The first 25 bps CRR hike will be effective April 26 while the second 25 bps hike will be effective May 10. The 50 bps hike would drain Rs 18,500 crore from the system.
So, how will the stock markets react on Monday?
Vallabh Bhansali, Chairman, Enam Financial Consultants, said the markets were not completely unaware of this. “It did not come as a complete shock. The hike was being mentioned in many circles, but the market will not like it all the same. The markets reaction to the CRR hike would be muted. The banks had a good run up in the last few sessions and this is a bit of a dampener. I see this as a continuous hawkish stance as it has come in between the policy. I am concerned about the force of inflation and the force with which the government and Reserve bank of India will both come down on it, so I would be cautious about the future.”
Nilesh Shah, Deputy Managing Director, ICICI Prudential Mutual Fund, said the markets have risen and should come off a little bit even without this event. "Even without the event, it probably would have come down. With the event, it will definitely come down."
Krishnamurthy Vijayan, Whole-time Director and CEO, JP Morgan, said equity markets have not really factored it in because it has been one of the strongest weeks for the markets. “I suspect that equity markets will now react to this, particularly the banking sector.”
Adrian Mowat, Chief Asian and Emerging Equity Strategist, JP Morgan, said the RBI move is unlikely to bring the market down, but will cap upsides.
Rajeev Malik, Asia Economic Research, JP Morgan Chase Bank, said equity markets are not likely to be very perturbed.
What do experts read into the rate hike?
MBN Rao, CMD, Canara Bank, said the CRR hike has been triggered by over 7% inflation. “The fact that RBI increased CRR as against increasing the repo rate is to control the money supply availability at the disposal of banks in terms of credit expansion. To that extent, we will take it as a hint that there should be a reallocation of credit to sectors. Banks will have to await RBI policy to review interest rates. This hike does not signal a rate hike,” he added.
ICICI Prudential's Nilesh Shah also shares Rao’s reactions. He feels inflation is a concern right now and probably RBI would like to manage liquidity rather than raise rates. “Somewhere, liquidity management will become key to manage inflation rather than just raising rates, which could be counterproductive with growth. Inflation is a bit driven by supply side limitations and you can only create capacity by lending money, not by restricting money. RBI would like to wait and see the impact of a CRR hike rather than raise rates during the Credit Policy.”
Shubhada Rao, Chief Economist, Yes Bank, said the fact that RBI brought it ahead of the Credit Policy carries some amount of surprise but elevation of inflation at over 7-7.5% is what has prompted it. “The impact of this would be felt a bit later. If one looks at the fiscal measures and CRR, one would tend to think that a repo rate hike possibility is now at abeyance. But I still would not rule out some additional measures on April 29. There could be a possible small hike in the repo rate but the probability has reduced clearly.
HDFC Chairman Deepak Parekh said a CRR hike was expected with this level of inflation. “Rs 18,500 crore mop up over a two-week period is not a very large bump up, the liquidity today in the market is reasonable. If this liquidity continues, we may not even increase interest rates, so it is too early to tell what the impact on interest rates is going to be.”
Parekh does not expect a further increase on April 29. “This will be the last of actions for the next few weeks to come in the foreseeable short future.”
However, Nitin Jain, Primary Dealers Section, ICICI Securities, feels conditions are ripe for a series of action by RBI. “This will be just a precursor to the rate hike in the policy.”
Does this hike imply a rise in deposit rates?
Chanda Kochhar, Joint MD, ICICI Bank, does not think so. She said one should not jump to conclusions that deposit rates would rise as there is currently liquidity in the system. “This measure is going to take away a large part of that liquidity. But it is still not creating a negative gap. We have to watch over the next one month as this becomes effective and how other parts of liquidity in the system moves."
However, Keki Mistry, MD, HDFC, feels deposit rates are not going to go up significantly though wholesale funding cost might go up a little bit. “The hike was expected. We need to see what kind of impact it has on change in costs of funds and deposits, i.e. the rate at which we raise funds. We will then take a call on lending rates."
Will loans get expensive now?
HN Daruwala, Chairperson, Central Bank of India, said the bank will take a holistic view after the April 29 Monetary Policy. “Inflation has to be curtailed and contained, then it goes without saying that we will have to go in for a higher lending rate. RBI Governor YV Reddy may increase interest or increase the repo rate. So, we will take a call on whether to raise rates after the Monetary Policy gets announced.”
The waiting game is also being played by HDFC Bank. Ashish Parthasarthy, Head-Treasury, HDFC Bank said the India’s second largest private sector bank would wait for the policy and take a appropriate decision thereafter.
How will bond markets react on Monday?
HDFC Bank’s Parthasarthy said bond yields would go up. “Though there was an expectation of monetary action now or at policy time, you will see bond yields moving up because of the action. Pure supply could also take the 10-year to 8.25%. However, if repo rates were to go up sometime if not immediately, you could see the 10-year anywhere between 8.25-8.5%. I don’t think it will go beyond that.”
Even ICICI Securities’ Nitin Jain sees the 10-year bond crossing 8.5% post policy. “The 10-year paper could go anywhere on Monday. It depends on how the market takes collectively all these measures and what view they form on Monday. Now, the talk is also of a reverse repo rate hike, not just a repo rate hike. RBI is reducing growth target to 7-7.5%. If that materializes, then the 10-year can cross even 8.5% after the policy.”
JP Morgan’s Krishnamurthy Vijayan said the hike is certainly going to effect investors who are thinking in terms of long-term bond funds. “After the last glorious year of equity, it was only now that people have started thinking in terms of asset allocation. That might affect sentiment a bit. Surprisingly, the bond markets had factored this in last week. Most bond fund managers have already built it into their strategy though NAVs may not be that drastically impacted there.”
Source: Moneycontrol.com
So, how will the stock markets react on Monday?
Vallabh Bhansali, Chairman, Enam Financial Consultants, said the markets were not completely unaware of this. “It did not come as a complete shock. The hike was being mentioned in many circles, but the market will not like it all the same. The markets reaction to the CRR hike would be muted. The banks had a good run up in the last few sessions and this is a bit of a dampener. I see this as a continuous hawkish stance as it has come in between the policy. I am concerned about the force of inflation and the force with which the government and Reserve bank of India will both come down on it, so I would be cautious about the future.”
Nilesh Shah, Deputy Managing Director, ICICI Prudential Mutual Fund, said the markets have risen and should come off a little bit even without this event. "Even without the event, it probably would have come down. With the event, it will definitely come down."
Krishnamurthy Vijayan, Whole-time Director and CEO, JP Morgan, said equity markets have not really factored it in because it has been one of the strongest weeks for the markets. “I suspect that equity markets will now react to this, particularly the banking sector.”
Adrian Mowat, Chief Asian and Emerging Equity Strategist, JP Morgan, said the RBI move is unlikely to bring the market down, but will cap upsides.
Rajeev Malik, Asia Economic Research, JP Morgan Chase Bank, said equity markets are not likely to be very perturbed.
What do experts read into the rate hike?
MBN Rao, CMD, Canara Bank, said the CRR hike has been triggered by over 7% inflation. “The fact that RBI increased CRR as against increasing the repo rate is to control the money supply availability at the disposal of banks in terms of credit expansion. To that extent, we will take it as a hint that there should be a reallocation of credit to sectors. Banks will have to await RBI policy to review interest rates. This hike does not signal a rate hike,” he added.
ICICI Prudential's Nilesh Shah also shares Rao’s reactions. He feels inflation is a concern right now and probably RBI would like to manage liquidity rather than raise rates. “Somewhere, liquidity management will become key to manage inflation rather than just raising rates, which could be counterproductive with growth. Inflation is a bit driven by supply side limitations and you can only create capacity by lending money, not by restricting money. RBI would like to wait and see the impact of a CRR hike rather than raise rates during the Credit Policy.”
Shubhada Rao, Chief Economist, Yes Bank, said the fact that RBI brought it ahead of the Credit Policy carries some amount of surprise but elevation of inflation at over 7-7.5% is what has prompted it. “The impact of this would be felt a bit later. If one looks at the fiscal measures and CRR, one would tend to think that a repo rate hike possibility is now at abeyance. But I still would not rule out some additional measures on April 29. There could be a possible small hike in the repo rate but the probability has reduced clearly.
HDFC Chairman Deepak Parekh said a CRR hike was expected with this level of inflation. “Rs 18,500 crore mop up over a two-week period is not a very large bump up, the liquidity today in the market is reasonable. If this liquidity continues, we may not even increase interest rates, so it is too early to tell what the impact on interest rates is going to be.”
Parekh does not expect a further increase on April 29. “This will be the last of actions for the next few weeks to come in the foreseeable short future.”
However, Nitin Jain, Primary Dealers Section, ICICI Securities, feels conditions are ripe for a series of action by RBI. “This will be just a precursor to the rate hike in the policy.”
Does this hike imply a rise in deposit rates?
Chanda Kochhar, Joint MD, ICICI Bank, does not think so. She said one should not jump to conclusions that deposit rates would rise as there is currently liquidity in the system. “This measure is going to take away a large part of that liquidity. But it is still not creating a negative gap. We have to watch over the next one month as this becomes effective and how other parts of liquidity in the system moves."
However, Keki Mistry, MD, HDFC, feels deposit rates are not going to go up significantly though wholesale funding cost might go up a little bit. “The hike was expected. We need to see what kind of impact it has on change in costs of funds and deposits, i.e. the rate at which we raise funds. We will then take a call on lending rates."
Will loans get expensive now?
HN Daruwala, Chairperson, Central Bank of India, said the bank will take a holistic view after the April 29 Monetary Policy. “Inflation has to be curtailed and contained, then it goes without saying that we will have to go in for a higher lending rate. RBI Governor YV Reddy may increase interest or increase the repo rate. So, we will take a call on whether to raise rates after the Monetary Policy gets announced.”
The waiting game is also being played by HDFC Bank. Ashish Parthasarthy, Head-Treasury, HDFC Bank said the India’s second largest private sector bank would wait for the policy and take a appropriate decision thereafter.
How will bond markets react on Monday?
HDFC Bank’s Parthasarthy said bond yields would go up. “Though there was an expectation of monetary action now or at policy time, you will see bond yields moving up because of the action. Pure supply could also take the 10-year to 8.25%. However, if repo rates were to go up sometime if not immediately, you could see the 10-year anywhere between 8.25-8.5%. I don’t think it will go beyond that.”
Even ICICI Securities’ Nitin Jain sees the 10-year bond crossing 8.5% post policy. “The 10-year paper could go anywhere on Monday. It depends on how the market takes collectively all these measures and what view they form on Monday. Now, the talk is also of a reverse repo rate hike, not just a repo rate hike. RBI is reducing growth target to 7-7.5%. If that materializes, then the 10-year can cross even 8.5% after the policy.”
JP Morgan’s Krishnamurthy Vijayan said the hike is certainly going to effect investors who are thinking in terms of long-term bond funds. “After the last glorious year of equity, it was only now that people have started thinking in terms of asset allocation. That might affect sentiment a bit. Surprisingly, the bond markets had factored this in last week. Most bond fund managers have already built it into their strategy though NAVs may not be that drastically impacted there.”
Source: Moneycontrol.com
Thursday, April 17, 2008
Stocks to watch: CESC, Sunil Hitech
The markets have closed the session on a strong note as decline in Inflation numbers boosted the markets sentiments and giving the positive signals to the government measures to control inflation. Positive global cues also fueled to the sentiments. The Sensex rose by 237.01 points or 1.46% to settle at 16481.20, and the Nifty up 71.10 points or 1.45% at 4958.40
This is how Phani Sekhar, Fund Manager of Angel Broking views stocks
On CESC:
CESC has been transforming itself off late into a conglomerate with interest in electrical utility, retailing and real estate. Tthe capacity addition targets in the power generation segment are pretty impressive at 1,850 mega watts; the company already has a capacity of 950 mega watts. So they are talking about tripling themselves over the next 4 years although a lot of that growth will be back ended.
But the real story is in retail, the Spencer retail arm of CESC is expected to add around 3 million square feet by FY09 and our estimate suggest that Spencer retail itself could be valued at around Rs 1,250-1,500 crore which is roughly around the 25-30% of the market cap of CESC. Now if you take out Spencer retail and even if you do not assign any tangible value to the real estate, adjusted for the retail segment the power utility business of the company is available at a price to book value of around 1-1.2, which is fair and its he cheapest among all its peers, and this 1-1.2 on an ROE of around 12% is also fair.
So we are positive about this company because the story according to us lies in sum of the parts, with Spencer retail probably being unlocked somewhere in the next 15-18 months. So we will be expecting an upside of around 30-35% conservatively on CESC.
On Sunil Hi-tech:
The company has aggressive growth plans, and it has been growing pretty well also, its an interesting midcap power capital goods company, with strong execution capabilities in the fabrication of steel super structures used in power and steel plants, at this point in time, the company is catering to power plants up to 500Mw and it has also forayed into, BoP contracts, where in it is scouting for partners to cater to power plants above 500Mw.
The real story lies in the aggressive growth and the orderbook that the company has, with 5 times the order book sales of FY07, the margins look strong, the ROEs are going up, and we do expect that the company will log in around 65% to 70% bottom line growth over the next 2 years that is FY08 to FY10, and on that basis, this stock is available at single digit PE multiples, so we think there is nothing to loose if you invest in this stock, again upside of a conservative basis of 30% to 35% is what we expect.
This is how Anil Manghnani, Modern Shares & Stock Brokers views stocks on board:
On Orchid Chemicals:
Very difficult call. I think it hit a 3-4 months highs at around Rs 326 yesterday and that’s why it is probably falling, but the move has been so veracious that any fall would be a buy. Where to buy is a very difficult to call, there is too much corporate action, too much rumours out there. But I think every time it comes closer to Rs 300-330, its going to see selling pressures because that’s being top end of the range in the last 6 months, and I think somebody buying the buy back should wait for deeper falls and not probably at these levels.
On Chambal Fertilizers and RNRL:
For Chambal definitely it is out performing Nagarjuna, it has crossed February 28 levels where after the disappointment of the Budget since there was not much for the fertilizer pack, it broke that day the highs of the Rs 67 and hit a major target of Rs 70-71 levels. So if it can trade above Rs 71, then next trading target is about Rs 79. Nagarjuna is probably doing a much smaller retracement, the all time high is closer to Rs 90 but even the February 28 high is around Rs 59, so it’s still way off there, Rs 48.50 is a major resistance out there. If it can cross Rs 48.50 then probably it is headed towards Rs 59 again.
RNRL is not one of my favourites, I think there is too much speculation in there Rs 112-113 is a major resistance, if it can cross that then probably Rs 123. But there is too much speculation out there, rather go for some of the large caps which are still much way of their highs and much more fundamentally attractive.
Source: Moneycontrol.com
This is how Phani Sekhar, Fund Manager of Angel Broking views stocks
On CESC:
CESC has been transforming itself off late into a conglomerate with interest in electrical utility, retailing and real estate. Tthe capacity addition targets in the power generation segment are pretty impressive at 1,850 mega watts; the company already has a capacity of 950 mega watts. So they are talking about tripling themselves over the next 4 years although a lot of that growth will be back ended.
But the real story is in retail, the Spencer retail arm of CESC is expected to add around 3 million square feet by FY09 and our estimate suggest that Spencer retail itself could be valued at around Rs 1,250-1,500 crore which is roughly around the 25-30% of the market cap of CESC. Now if you take out Spencer retail and even if you do not assign any tangible value to the real estate, adjusted for the retail segment the power utility business of the company is available at a price to book value of around 1-1.2, which is fair and its he cheapest among all its peers, and this 1-1.2 on an ROE of around 12% is also fair.
So we are positive about this company because the story according to us lies in sum of the parts, with Spencer retail probably being unlocked somewhere in the next 15-18 months. So we will be expecting an upside of around 30-35% conservatively on CESC.
On Sunil Hi-tech:
The company has aggressive growth plans, and it has been growing pretty well also, its an interesting midcap power capital goods company, with strong execution capabilities in the fabrication of steel super structures used in power and steel plants, at this point in time, the company is catering to power plants up to 500Mw and it has also forayed into, BoP contracts, where in it is scouting for partners to cater to power plants above 500Mw.
The real story lies in the aggressive growth and the orderbook that the company has, with 5 times the order book sales of FY07, the margins look strong, the ROEs are going up, and we do expect that the company will log in around 65% to 70% bottom line growth over the next 2 years that is FY08 to FY10, and on that basis, this stock is available at single digit PE multiples, so we think there is nothing to loose if you invest in this stock, again upside of a conservative basis of 30% to 35% is what we expect.
This is how Anil Manghnani, Modern Shares & Stock Brokers views stocks on board:
On Orchid Chemicals:
Very difficult call. I think it hit a 3-4 months highs at around Rs 326 yesterday and that’s why it is probably falling, but the move has been so veracious that any fall would be a buy. Where to buy is a very difficult to call, there is too much corporate action, too much rumours out there. But I think every time it comes closer to Rs 300-330, its going to see selling pressures because that’s being top end of the range in the last 6 months, and I think somebody buying the buy back should wait for deeper falls and not probably at these levels.
On Chambal Fertilizers and RNRL:
For Chambal definitely it is out performing Nagarjuna, it has crossed February 28 levels where after the disappointment of the Budget since there was not much for the fertilizer pack, it broke that day the highs of the Rs 67 and hit a major target of Rs 70-71 levels. So if it can trade above Rs 71, then next trading target is about Rs 79. Nagarjuna is probably doing a much smaller retracement, the all time high is closer to Rs 90 but even the February 28 high is around Rs 59, so it’s still way off there, Rs 48.50 is a major resistance out there. If it can cross Rs 48.50 then probably it is headed towards Rs 59 again.
RNRL is not one of my favourites, I think there is too much speculation in there Rs 112-113 is a major resistance, if it can cross that then probably Rs 123. But there is too much speculation out there, rather go for some of the large caps which are still much way of their highs and much more fundamentally attractive.
Source: Moneycontrol.com
Buy Orchid Chemicals on deeper falls
Anil Manghnani of Modern Shares & Stock Brokers is of the view that Orchid Chemicals should be bought on deeper falls.
Manghnani told CNBC-TV18, " Orchid Chemicals, very difficult one to call I think it hit a 3-4 months highs at around Rs 326 yesterday and that’s why its probably falling, but the move has been so veracious that any fall would be a buy. Where to buy is a very difficult to call, there is too much corporate action, too much rumours out there."
He further added, " But I think every time it comes closer to Rs 300-330, its going to see selling pressures because that’s being top end of the range in the last 6 months, and I think somebody buying the buy back should wait for deeper falls and not probably at these levels."
Disclosure: It is safe to assume that analyst and his clients may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Manghnani told CNBC-TV18, " Orchid Chemicals, very difficult one to call I think it hit a 3-4 months highs at around Rs 326 yesterday and that’s why its probably falling, but the move has been so veracious that any fall would be a buy. Where to buy is a very difficult to call, there is too much corporate action, too much rumours out there."
He further added, " But I think every time it comes closer to Rs 300-330, its going to see selling pressures because that’s being top end of the range in the last 6 months, and I think somebody buying the buy back should wait for deeper falls and not probably at these levels."
Disclosure: It is safe to assume that analyst and his clients may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Expect more uncertain news to hit markets
Tushar Pradhan, CIO of AIG Global expects more uncertain news to hit the market before coming to an end. He said that the foreign funds still believe that India is still expensive market in terms of P/E.The biggest risk in the market is the political uncertainty with some sectors, he said.
Excerpts from CNBC-TV18’s exclusive interview with Tushar Pradhan:
Q: What are you expecting to see over the next few weeks from the market, in an attempt to break the range or remain within it?
A: The market clearly is looking for some sort of interest from the foreigners - as you know a lot of free float in the Indian markets is owned by the foreigners and as a result, we find that it’s always interesting to see what they do at the margins. If at the margin they continue to put in money, you can see the market run up from here, simply for the fact that, the fundamentals have always looked very attractive. It's just a matter of time when the net negative inflows; we have seen close to USD 3 billion and if that happens, we should see the markets start doing jumps from here.
Q: What’s your own view, will we see that kind of money coming in, because the last few weeks, despite the markets sort of seeming stabilizing, we aren’t seeing too much by way of global interest or inflows?
A: One has to realize that the news coming out of the US, is still not very good, and a lot more news have to hit before all of this actually comes to a close. In terms of uncertainty, everybody agrees now that the housing market in the US is pretty much in decline, but how much of this now spreads to either consumer debt, credit cards and employment numbers - that’s something that everybody is apprehensive about. Unless in the global markets there is some sort of confidence, that we have seen the worst, this sort of nibbling away, or uncertain moves into other asset classes will continue and I don’t think it will be a strong trend. But once there is some sort of confidence in the US domestic markets - that look, things are over now, to the extent that we can imagine, that is when, I think you should see considerable surge of money into global emerging markets.
Q: What’s your call on this whole commodity rally, you launched the AIG World Gold fund, do you see this kind of pace of appreciation of gold, crude continuing together?
A: The interactions that we have had with our team in Zurich, which the fund runs, tells me that on an inflation adjusted basis, I can definitely say that gold has not really reached the peaks that it had reached in 1980 for example. Also the demand for gold, in the face of an international financial turmoil, as well as investment demand coupled with a fabrication demand in China and India, just points to the fact that there is so much more demand for this commodity versus the kind of supply that we have usually seen in the market which just indicates that the dynamics of demand and supply will indicate that the gold prices will go up.
Likewise, in oil, if the growth, as China surprised everybody with very strong GDP numbers yesterday, continues the demand for resources such as oil and all the other commodities don’t see any sign of abatement, and as we know, supply is as much incrementally across the world, which means that the price rise in commodities may continued.
Q: How have you read the pullback in technology, specifically some of the mid cap IT stocks do you think there is value there that could be tapped?
A: If you just look at absolute valuations, some of them have not reached double digits in terms of the estimate growth earnings; in terms of the next year, one has to take all of this with a pinch of salt and one has to realize that the pain may not be really uniform. For example, we clearly know that banks and financial companies in the US have taken a big beating, and IT budgets especially in this have need to be looked at carefully. So any company which has an undue concentration or business coming from this sector especially in the US, maybe a little bit under a cloud. But I think otherwise the dynamics of the business yet continue to remain pretty robust and in the long run, this business will pretty much sustain the decent growth rate that we have seen in the past and the future as well.
Q: What’s your own sense of how money is going to be approaching in this market by the time we have rapped up the earnings, we have been one of the bigger under performers across emerging markets, and do you think the money interest will come back if we remain range bound at best?
A: The money interest is dependant on two factors; one is the fundamental attractiveness of the market, and the second is the confidence that the foreigners place in emerging markets at any point of time. On the first count, there is a feeling across foreign investors that India has remained an expensive market. If you see, the other markets have corrected more than India and on a PE basis, India looks a little more expensive, the apprehension prevailent might be for that reason. As investors get a little more comfortable with the kind of growth sustenance that India will show, in earnings, possibly over the next 2-3 years, is when the confidence will come back. So I guess it’s probably only a matter of time when the earnings numbers, as they keep coming, in the quarters to come, will show the confidence that most of the investors today lack.
Q: How would you approach sectors like cement and steel in the light of the inflation scare and the targeting that these sectors are seeing from the policy makers?
A: That’s the biggest risk in the market - if it were up to a pure demand and supply of course it will be easier to figure out. But I believe that, the government has its own reasons to ensure that inflation remains very stable. Let me also remind you that having a very stable inflation environment is actually very good for the entire economy. So as much as it might be, there may be some short-term pain for these businesses in the industry where they will see input costs rise. But they will not be able to actually effect the price rise in the interim. I think, the smoothening out may not hurt everybody to the same extent, there are people and companies which have integration of their raw materials well into their own control which means that the margins will yet be sustainable. The pain is not going to be universal, it’s going to be in pockets and I believe that is the reality that most of these companies will have to live with, at least for the next few months.
Disclaimer: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Excerpts from CNBC-TV18’s exclusive interview with Tushar Pradhan:
Q: What are you expecting to see over the next few weeks from the market, in an attempt to break the range or remain within it?
A: The market clearly is looking for some sort of interest from the foreigners - as you know a lot of free float in the Indian markets is owned by the foreigners and as a result, we find that it’s always interesting to see what they do at the margins. If at the margin they continue to put in money, you can see the market run up from here, simply for the fact that, the fundamentals have always looked very attractive. It's just a matter of time when the net negative inflows; we have seen close to USD 3 billion and if that happens, we should see the markets start doing jumps from here.
Q: What’s your own view, will we see that kind of money coming in, because the last few weeks, despite the markets sort of seeming stabilizing, we aren’t seeing too much by way of global interest or inflows?
A: One has to realize that the news coming out of the US, is still not very good, and a lot more news have to hit before all of this actually comes to a close. In terms of uncertainty, everybody agrees now that the housing market in the US is pretty much in decline, but how much of this now spreads to either consumer debt, credit cards and employment numbers - that’s something that everybody is apprehensive about. Unless in the global markets there is some sort of confidence, that we have seen the worst, this sort of nibbling away, or uncertain moves into other asset classes will continue and I don’t think it will be a strong trend. But once there is some sort of confidence in the US domestic markets - that look, things are over now, to the extent that we can imagine, that is when, I think you should see considerable surge of money into global emerging markets.
Q: What’s your call on this whole commodity rally, you launched the AIG World Gold fund, do you see this kind of pace of appreciation of gold, crude continuing together?
A: The interactions that we have had with our team in Zurich, which the fund runs, tells me that on an inflation adjusted basis, I can definitely say that gold has not really reached the peaks that it had reached in 1980 for example. Also the demand for gold, in the face of an international financial turmoil, as well as investment demand coupled with a fabrication demand in China and India, just points to the fact that there is so much more demand for this commodity versus the kind of supply that we have usually seen in the market which just indicates that the dynamics of demand and supply will indicate that the gold prices will go up.
Likewise, in oil, if the growth, as China surprised everybody with very strong GDP numbers yesterday, continues the demand for resources such as oil and all the other commodities don’t see any sign of abatement, and as we know, supply is as much incrementally across the world, which means that the price rise in commodities may continued.
Q: How have you read the pullback in technology, specifically some of the mid cap IT stocks do you think there is value there that could be tapped?
A: If you just look at absolute valuations, some of them have not reached double digits in terms of the estimate growth earnings; in terms of the next year, one has to take all of this with a pinch of salt and one has to realize that the pain may not be really uniform. For example, we clearly know that banks and financial companies in the US have taken a big beating, and IT budgets especially in this have need to be looked at carefully. So any company which has an undue concentration or business coming from this sector especially in the US, maybe a little bit under a cloud. But I think otherwise the dynamics of the business yet continue to remain pretty robust and in the long run, this business will pretty much sustain the decent growth rate that we have seen in the past and the future as well.
Q: What’s your own sense of how money is going to be approaching in this market by the time we have rapped up the earnings, we have been one of the bigger under performers across emerging markets, and do you think the money interest will come back if we remain range bound at best?
A: The money interest is dependant on two factors; one is the fundamental attractiveness of the market, and the second is the confidence that the foreigners place in emerging markets at any point of time. On the first count, there is a feeling across foreign investors that India has remained an expensive market. If you see, the other markets have corrected more than India and on a PE basis, India looks a little more expensive, the apprehension prevailent might be for that reason. As investors get a little more comfortable with the kind of growth sustenance that India will show, in earnings, possibly over the next 2-3 years, is when the confidence will come back. So I guess it’s probably only a matter of time when the earnings numbers, as they keep coming, in the quarters to come, will show the confidence that most of the investors today lack.
Q: How would you approach sectors like cement and steel in the light of the inflation scare and the targeting that these sectors are seeing from the policy makers?
A: That’s the biggest risk in the market - if it were up to a pure demand and supply of course it will be easier to figure out. But I believe that, the government has its own reasons to ensure that inflation remains very stable. Let me also remind you that having a very stable inflation environment is actually very good for the entire economy. So as much as it might be, there may be some short-term pain for these businesses in the industry where they will see input costs rise. But they will not be able to actually effect the price rise in the interim. I think, the smoothening out may not hurt everybody to the same extent, there are people and companies which have integration of their raw materials well into their own control which means that the margins will yet be sustainable. The pain is not going to be universal, it’s going to be in pockets and I believe that is the reality that most of these companies will have to live with, at least for the next few months.
Disclaimer: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Wednesday, April 16, 2008
Book profits as markets consolidate
Ambareesh Baliga of Karvy Stock Broking sees resistance at 16,500 to 17,000 for Sensex. He also adds that the downside is quite limited as far as technology is concerned, whereas for the frontline stocks like Infosys, TCS, Satyam, Wipro, the upside is around 30-35% from here.
Excerpts from the exclusive interview with Ambareesh Baliga:
Q: Do you think the bulls are getting tired or you think in the near term we will scale 5,000 Nifty and stay above that?
A: At this point in time, the bulls are getting a bit tired, because we have seen 3 good days, so possibly at these levels, there is some amount of profit booking happening but no doubt over the next couple of weeks, we will see higher levels, but surely 16,500 to 17,000, you will have some amount of resistance.
Q: For somebody who was lucky enough to get long around 4,600-4,700, would you advice him to take profits now or hold on for more gains in the near term?
A: I would suggest that one should book some profits at this point in time, because especially if he is making 10%-15% in a particular stock, it is prudent to book some profits because this is surely not a fresh bull run start, we are infact in a consolidation range, so I don’t see the markets going too much more so again so when you have a crack or a correction, possibly to those 15,500 levels, you should again buy.
Q: Has the mood turned or changed on technology though?
A: I suppose so, infact we have been taking a contrarian call for the last 3-4 months seeing that things are not that bad in technology, and we are glad that we have been proved right especially after the Infosys results. So I suppose from here, the downside is quite limited as far as technology is concerned, whereas we feel that most of the frontline stocks like Infosys, TCS, Satyam, Wipro, the upside is around 30-35% from here. On a stock like Infosys we still have a target of around Rs 2,000-2,050.
Q: What did you make of the trading interest that is back in the market, Arvind Mills is up 9%, and fertilizer stocks are buzzing, Hotel Leela, Neville Lignite, we haven’t seen this kind of a gainers list in a long time?
A: That’s a basic instinct of any trader, and especially when the markets were going down every other day, most of these people are staying out but once they saw the markets consolidating and moving up, quite a few of them who had some cash left, are again back in the freight.
Q: What’s going on with Orchid, you think as a huge discount on the futures, cash market stock is running away at Rs 325, what are you picking up form the street?
A: I think it is madness in Orchid Chemicals at this point of time because I really don’t see the open offer level which is higher than these levels. I think it will be closer to around Rs 275-280 levels that’s the best possible level.
Q: What’s going on in the midcap IT space, and what would you buy here because a whole clutch of them have gone up 10%-15%, in a last couple of days?
A : At this point of time, possibly I may not buy in the midcap IT space, I surely buy on dips but whatever we have bought in the recent past, we have bought stocks like 3I Info-tech, Subex, Aztec. Aztec showed a decent movement today, and we booked some profits because this stock was quoting at around Rs 56 to Rs 60 levels just about a week or 10 days back, today when you are getting Rs 77 to Rs 78 levels, then you really make some sense in booking some profits and that’s exactly what we are doing today.
Q: Just a quick word on how this might go down with the trader community, Orchid is losing a little bit of strength now?
A: I don’t think it will go down well with the trader community, because any price above Rs 215 or Rs 220 or Rs 230, is fundamentally quite expensive for the market and it had moved up basically because of the expectations of an open offer which again couldn’t have been beyond that Rs 230 to Rs 270 range, so there was no reason for this stock to quote at the current levels, in fact the market was expecting that the original promoter will come back and buy at these levels fromRanbaxy. That was the feeling which was there in the market so that’s the reason why it has taken up so much, but I feel it will settle more towards that Rs 220 to Rs 230 levels.
Q: Is the worst over for the brokerage space you think, we have seen Geojit move up after the earnings, Motilal Oswal is moving ahead of the earnings, what do you think?
A: Not really, I think this is only a bounce back, which we are seeing that most of the brokerage houses are still going through that pain, because the volumes are still low which means that the brokerage levels are quite low and at the same time your expenses are mounting. So I don’t see the picture to be too rosy for the brokerage houses at least for the next 2-3 quarters, so I think people should book profits in this uptrend.
Q: What’s your favorite space in the midcap lot now, since some interest is visible, what are you recommending your clients to go out and buy?
A: Among the midcaps, we are buying across various sectors like IT, but we have stopped buying IT right now but we also buy into paper, in fact TNPL has been one of our favorite bets in the recent past, we have been buying like the auto space, we have bought Precol, we have been buying Lucas for a while, so it is across various sectors but at the same time we are avoiding sectors like Realty and Power.
Q: In the near-term how much upside do you see for the market, if the market were really to move up a little bit more, what’s the top end for you?
A: Like I said, 16,500-17,000 levels, is a level I think where you will see lot of resistance. Going beyond that at least for the next month and a half, two months seems a bit difficult. And on the lower side, I do see a lot of support happening at closer to around 15,300 to 15,500 levels. So our strategy has been quite clear and on days like these, we have been booking profits.
Q: Anything you have picked up on Aptech, the stock was up 16% by the time we closed up?
A: I am not tracking this stock so it’s a bit difficult for me to comment on Aptech.
Q: How are you looking at the last minute cooling off of gains of the markets in general, would you say that as we head into a long weekend, you could see more of correction tomorrow, or do you think this rally still has some headroom?
A: We could see some correction, assuming that the international markets don’t really fair well this evening and tomorrow morning, the Asian Markets, surely I think we will see a weaker day tomorrow, but at the same time, we should remember that it’s a shorter week, we have holidays ahead, and again the inflation figure is something which people will watch out for, because people are expecting the numbers to be lower this time especially with the action taken by the government, so people will look for the inflation number, so because of which, the markets would be a bit subdued and the last 3 sessions have been good so its quite natural that people would be booking profits
Source: Moneycontrol.com
Excerpts from the exclusive interview with Ambareesh Baliga:
Q: Do you think the bulls are getting tired or you think in the near term we will scale 5,000 Nifty and stay above that?
A: At this point in time, the bulls are getting a bit tired, because we have seen 3 good days, so possibly at these levels, there is some amount of profit booking happening but no doubt over the next couple of weeks, we will see higher levels, but surely 16,500 to 17,000, you will have some amount of resistance.
Q: For somebody who was lucky enough to get long around 4,600-4,700, would you advice him to take profits now or hold on for more gains in the near term?
A: I would suggest that one should book some profits at this point in time, because especially if he is making 10%-15% in a particular stock, it is prudent to book some profits because this is surely not a fresh bull run start, we are infact in a consolidation range, so I don’t see the markets going too much more so again so when you have a crack or a correction, possibly to those 15,500 levels, you should again buy.
Q: Has the mood turned or changed on technology though?
A: I suppose so, infact we have been taking a contrarian call for the last 3-4 months seeing that things are not that bad in technology, and we are glad that we have been proved right especially after the Infosys results. So I suppose from here, the downside is quite limited as far as technology is concerned, whereas we feel that most of the frontline stocks like Infosys, TCS, Satyam, Wipro, the upside is around 30-35% from here. On a stock like Infosys we still have a target of around Rs 2,000-2,050.
Q: What did you make of the trading interest that is back in the market, Arvind Mills is up 9%, and fertilizer stocks are buzzing, Hotel Leela, Neville Lignite, we haven’t seen this kind of a gainers list in a long time?
A: That’s a basic instinct of any trader, and especially when the markets were going down every other day, most of these people are staying out but once they saw the markets consolidating and moving up, quite a few of them who had some cash left, are again back in the freight.
Q: What’s going on with Orchid, you think as a huge discount on the futures, cash market stock is running away at Rs 325, what are you picking up form the street?
A: I think it is madness in Orchid Chemicals at this point of time because I really don’t see the open offer level which is higher than these levels. I think it will be closer to around Rs 275-280 levels that’s the best possible level.
Q: What’s going on in the midcap IT space, and what would you buy here because a whole clutch of them have gone up 10%-15%, in a last couple of days?
A : At this point of time, possibly I may not buy in the midcap IT space, I surely buy on dips but whatever we have bought in the recent past, we have bought stocks like 3I Info-tech, Subex, Aztec. Aztec showed a decent movement today, and we booked some profits because this stock was quoting at around Rs 56 to Rs 60 levels just about a week or 10 days back, today when you are getting Rs 77 to Rs 78 levels, then you really make some sense in booking some profits and that’s exactly what we are doing today.
Q: Just a quick word on how this might go down with the trader community, Orchid is losing a little bit of strength now?
A: I don’t think it will go down well with the trader community, because any price above Rs 215 or Rs 220 or Rs 230, is fundamentally quite expensive for the market and it had moved up basically because of the expectations of an open offer which again couldn’t have been beyond that Rs 230 to Rs 270 range, so there was no reason for this stock to quote at the current levels, in fact the market was expecting that the original promoter will come back and buy at these levels fromRanbaxy. That was the feeling which was there in the market so that’s the reason why it has taken up so much, but I feel it will settle more towards that Rs 220 to Rs 230 levels.
Q: Is the worst over for the brokerage space you think, we have seen Geojit move up after the earnings, Motilal Oswal is moving ahead of the earnings, what do you think?
A: Not really, I think this is only a bounce back, which we are seeing that most of the brokerage houses are still going through that pain, because the volumes are still low which means that the brokerage levels are quite low and at the same time your expenses are mounting. So I don’t see the picture to be too rosy for the brokerage houses at least for the next 2-3 quarters, so I think people should book profits in this uptrend.
Q: What’s your favorite space in the midcap lot now, since some interest is visible, what are you recommending your clients to go out and buy?
A: Among the midcaps, we are buying across various sectors like IT, but we have stopped buying IT right now but we also buy into paper, in fact TNPL has been one of our favorite bets in the recent past, we have been buying like the auto space, we have bought Precol, we have been buying Lucas for a while, so it is across various sectors but at the same time we are avoiding sectors like Realty and Power.
Q: In the near-term how much upside do you see for the market, if the market were really to move up a little bit more, what’s the top end for you?
A: Like I said, 16,500-17,000 levels, is a level I think where you will see lot of resistance. Going beyond that at least for the next month and a half, two months seems a bit difficult. And on the lower side, I do see a lot of support happening at closer to around 15,300 to 15,500 levels. So our strategy has been quite clear and on days like these, we have been booking profits.
Q: Anything you have picked up on Aptech, the stock was up 16% by the time we closed up?
A: I am not tracking this stock so it’s a bit difficult for me to comment on Aptech.
Q: How are you looking at the last minute cooling off of gains of the markets in general, would you say that as we head into a long weekend, you could see more of correction tomorrow, or do you think this rally still has some headroom?
A: We could see some correction, assuming that the international markets don’t really fair well this evening and tomorrow morning, the Asian Markets, surely I think we will see a weaker day tomorrow, but at the same time, we should remember that it’s a shorter week, we have holidays ahead, and again the inflation figure is something which people will watch out for, because people are expecting the numbers to be lower this time especially with the action taken by the government, so people will look for the inflation number, so because of which, the markets would be a bit subdued and the last 3 sessions have been good so its quite natural that people would be booking profits
Source: Moneycontrol.com
Get set for short selling on April 21
The Stock selling, lending, and borrowing mechanism kicks in on April 21 on both exchanges. All classes of investors would be allowed to short sell. Institutions will not be allowed to indulge in day trading, but they will have to come out and say whether they want to short sell or it’s a normal trade. Retail investors will have the option of disclosing their trades as short sell by the end of the day.
The entire stock lending and borrowing mechanism will be based on stocks, which are part of the F&O list, or around 250 stocks. To begin with, the stock lending and borrowing mechanism will happen in 250 stocks. The entire transaction would be completed on a T+1 basis and the lending or borrowing will be for a period of seven working days. So, if one borrows a stock today, the squaring up of that will happen after seven working days from the date of borrowing of the stock.
The margins and collaterals will be applied on an upfront basis. For some market participants, there are some position limits which have been placed at around 10% of the market-wide limit. Also, the market-wide limit for these stocks would be for 10% of free float.
But for individual clients, the position will be 1% of the market-wide limit. That’s the maximum, which a client can take there. On a taxation issue, there will not be any Security Transaction Tax, or STT, which will be charged for Securities Lending and Borrowing, or SLB. But on short selling, STT will be levied and will attract capital gains there.
On the whole, it would be April 21 is a day when we will have short selling and stock Securities Lending and Borrowing.
Source: Moneycontrol.com
The entire stock lending and borrowing mechanism will be based on stocks, which are part of the F&O list, or around 250 stocks. To begin with, the stock lending and borrowing mechanism will happen in 250 stocks. The entire transaction would be completed on a T+1 basis and the lending or borrowing will be for a period of seven working days. So, if one borrows a stock today, the squaring up of that will happen after seven working days from the date of borrowing of the stock.
The margins and collaterals will be applied on an upfront basis. For some market participants, there are some position limits which have been placed at around 10% of the market-wide limit. Also, the market-wide limit for these stocks would be for 10% of free float.
But for individual clients, the position will be 1% of the market-wide limit. That’s the maximum, which a client can take there. On a taxation issue, there will not be any Security Transaction Tax, or STT, which will be charged for Securities Lending and Borrowing, or SLB. But on short selling, STT will be levied and will attract capital gains there.
On the whole, it would be April 21 is a day when we will have short selling and stock Securities Lending and Borrowing.
Source: Moneycontrol.com
Tuesday, April 15, 2008
Buy tech stocks on dip
Technical Analyst, Sudarshan Sukhani advises to buy rtechnology stocks on dip.
Sukhani told CNBC-TV18, "Technology stocks were earlier also buy on dips candidates and that fact remains. The technology sector itself suggests that a fairly large bottoming out process has been concluded. They are on to their bull markets. The pace maybe slow because the broad market is not supporting them but that sector itself suggests an upside."
He further added, "How much upside will come is a different matter, every dip remains a buying opportunity not just in the big ones but also in the smaller ones starting from the lowest of them Polaris, all of them are suggesting buying."
Disclosures: It is safe to assume that analyst & his clients may have an interest in the stocks/sectors discussed above.
Source: Moneycontrol.com
Sukhani told CNBC-TV18, "Technology stocks were earlier also buy on dips candidates and that fact remains. The technology sector itself suggests that a fairly large bottoming out process has been concluded. They are on to their bull markets. The pace maybe slow because the broad market is not supporting them but that sector itself suggests an upside."
He further added, "How much upside will come is a different matter, every dip remains a buying opportunity not just in the big ones but also in the smaller ones starting from the lowest of them Polaris, all of them are suggesting buying."
Disclosures: It is safe to assume that analyst & his clients may have an interest in the stocks/sectors discussed above.
Source: Moneycontrol.com
Ranbaxy can double from current level
Technical Analyst, Sudarshan Sukhani expects Ranbaxy to witness a doubling of prices from current levels.
Sukhani told CNBC-TV18, "Ranbaxy is in an uptrend, it is in a bull market of its own. The idea should be that every dip whenever the market corrects and the stock corrects it should be a buying opportunity. We are going to see a doubling of prices from current levels. A time is of course a factor but it is a quite strong probability."
Source: Moneycontrol.com
Sukhani told CNBC-TV18, "Ranbaxy is in an uptrend, it is in a bull market of its own. The idea should be that every dip whenever the market corrects and the stock corrects it should be a buying opportunity. We are going to see a doubling of prices from current levels. A time is of course a factor but it is a quite strong probability."
Source: Moneycontrol.com
Stocks to watch: Kalindee Rail, ABG Shipyard, Essar Oil
The markets closed near day's high after a sluggish start. Technology stocks bucked the treand with IT major coming positive set of numbers inline with street expectations. IT index gained a whopping 6% with Infosys, TCS, Wipro, HCL Tech among the top gainers on the bourses. The broader markets also closed higher with breadth is in the favour of advances. Oil, pharma, realty and power sectors also ended higher.
Sensex closed up 346.02 points or 2.19% at 16153.66, and the Nifty up 101.85 points or 2.13% at 4879.65.
Vikas Sethi, MD, Sethi Finmart Private, is bullish on Kalindee Rail Nirman, and ABG Shipyard from the midcap space.
On Kalindee Rail Nirman:
It is engineering and construction company mainly specializing and executing rail projects. The company is likely to be a major beneficiary of the investment projects announced in the Railway Budget like construction of new tracks, modernization of platforms, and commencement of work on dedicated freight corridors. The company already has a very strong order book of around Rs 500 crore and is likely to get another Rs 200-300 crore worth of orders in the next few months. It came out with fantastic results for the last December quarter with net profits nearly doubling at around Rs 6.2 crore. The expected EPS for FY09 would be Rs 29. It is thus available at multiple of 10 times FY09 earnings. I expect the company to achieve a target of Rs 550 in the next 12 months.
On ABG Shipyard:
The company came out with excellent results for the last quarter with its net profits rising around 60% to Rs 47 crore from Rs 29 crore during the previous year’s quarters. The company is actually expected to report an EPS of Rs 56 for FY09 and Rs 76 for FY10. It is thus available at a reasonable valuation today. The company had also recently made a preferential allotment of around 40 lakh convertible warrants to its promoters at the price of Rs 797 per warrant which is significantly higher than the current market price. So, attractive valuations, strong order book, and higher margins compared to its peers would make it s buy with a target price of Rs 1,100 in about 12 months.
Sudarshan Sukhani, Technical Trends feels that Ranbaxy may see doubling of prices from current levels. He is also upbeat on Essar Oils.
On Ranbaxy:
Ranbaxy is in an uptrend, it is in a bull market of its own. The idea should be that every dip whenever the market corrects and the stock corrects, it should be a buying opportunity. This stock-the target from the charts tell us that we are going to see a doubling of prices from current levels. A time is of course a factor but it is a quite strong probability.
On Essar Oil & Balrampur Chini:
Essar Oil belongs to that oil and gas group that is primarily going to lead this market whenever it goes up. So I am pretty upbeat on that.
Balrampur Chini is bouncing up and down; it is still in a trading range. So at this point, I am not very upbeat on sugar as such. I think it probably needs much more time to consolidate before we can say okay sugar is on. But at some point sugar will resume its upward move that point may not have come.
On Reliance Industries:
It has broken out of all the resistance levels, which the Nifty has still not done. At least Nifty has broken only minor resistance today. But Reliance did that last week even the major ones. So clearly there is something going on in Reliance and if at all somebody wants to take a speculative futures position then Reliance is the safest of the bets on the long side and a simple pattern target is more than 3,000 and it is not easy to say it will reach there or cross it but that is what the charts suggest that the trend is very clearly up.
On Gujarat NRE Coke:
Gujarat NRE Coke is a buying opportunity for investors at any point of time. Ideally you have to buy it when it is going through a small dip or correction and when the markets are correcting and not necessarily you do not buy today but the stock itself is worth buying and putting in your portfolio. One should have a little patience I think it will pay off.
Vikas Sethi's Disclosures: I do not hold any of these stocks but would have recommended them to my clients.
Sudarshan Sukhani's Disclosures: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Sensex closed up 346.02 points or 2.19% at 16153.66, and the Nifty up 101.85 points or 2.13% at 4879.65.
Vikas Sethi, MD, Sethi Finmart Private, is bullish on Kalindee Rail Nirman, and ABG Shipyard from the midcap space.
On Kalindee Rail Nirman:
It is engineering and construction company mainly specializing and executing rail projects. The company is likely to be a major beneficiary of the investment projects announced in the Railway Budget like construction of new tracks, modernization of platforms, and commencement of work on dedicated freight corridors. The company already has a very strong order book of around Rs 500 crore and is likely to get another Rs 200-300 crore worth of orders in the next few months. It came out with fantastic results for the last December quarter with net profits nearly doubling at around Rs 6.2 crore. The expected EPS for FY09 would be Rs 29. It is thus available at multiple of 10 times FY09 earnings. I expect the company to achieve a target of Rs 550 in the next 12 months.
On ABG Shipyard:
The company came out with excellent results for the last quarter with its net profits rising around 60% to Rs 47 crore from Rs 29 crore during the previous year’s quarters. The company is actually expected to report an EPS of Rs 56 for FY09 and Rs 76 for FY10. It is thus available at a reasonable valuation today. The company had also recently made a preferential allotment of around 40 lakh convertible warrants to its promoters at the price of Rs 797 per warrant which is significantly higher than the current market price. So, attractive valuations, strong order book, and higher margins compared to its peers would make it s buy with a target price of Rs 1,100 in about 12 months.
Sudarshan Sukhani, Technical Trends feels that Ranbaxy may see doubling of prices from current levels. He is also upbeat on Essar Oils.
On Ranbaxy:
Ranbaxy is in an uptrend, it is in a bull market of its own. The idea should be that every dip whenever the market corrects and the stock corrects, it should be a buying opportunity. This stock-the target from the charts tell us that we are going to see a doubling of prices from current levels. A time is of course a factor but it is a quite strong probability.
On Essar Oil & Balrampur Chini:
Essar Oil belongs to that oil and gas group that is primarily going to lead this market whenever it goes up. So I am pretty upbeat on that.
Balrampur Chini is bouncing up and down; it is still in a trading range. So at this point, I am not very upbeat on sugar as such. I think it probably needs much more time to consolidate before we can say okay sugar is on. But at some point sugar will resume its upward move that point may not have come.
On Reliance Industries:
It has broken out of all the resistance levels, which the Nifty has still not done. At least Nifty has broken only minor resistance today. But Reliance did that last week even the major ones. So clearly there is something going on in Reliance and if at all somebody wants to take a speculative futures position then Reliance is the safest of the bets on the long side and a simple pattern target is more than 3,000 and it is not easy to say it will reach there or cross it but that is what the charts suggest that the trend is very clearly up.
On Gujarat NRE Coke:
Gujarat NRE Coke is a buying opportunity for investors at any point of time. Ideally you have to buy it when it is going through a small dip or correction and when the markets are correcting and not necessarily you do not buy today but the stock itself is worth buying and putting in your portfolio. One should have a little patience I think it will pay off.
Vikas Sethi's Disclosures: I do not hold any of these stocks but would have recommended them to my clients.
Sudarshan Sukhani's Disclosures: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Markets to remain in a range for next 3-4 months
Speaking to CNBC-TV18 Nilesh Shah of Envision Capital says the market is going to find it extremely difficult to move out of a trading range for the next three-four months. It is only going to be during the second half of this financial year before which the market is meaningfully able to trade above the trading range at which it is hovering right now.
With regards toInfosys numbers, he says one has to give credit to Infosys for at least giving a guidance which is broadly not below expectations. In this kind of an environment a 15% guidance is pretty good
Excerpts from CNBC-TV18's exclusive interview with Nilesh Shah:
Q: What do you think; you have heard of the Infosys guidance now between Rs 92.3-93.9 how do you see the stock reacting?
A: The stock could probably open up slightly positively. But I guess I will probably remain very flattish. I don’t expect this guidance to basically drive the market up or drive up the stock price significantly barring a short lift 4-5% trading move. However the medium-term trend of the stock will really get determined when basically numbers from the old economy or numbers from the manufacturing companies come out. The broader expectations for the largecap companies are 15-20%.
Now Infosys has given guidance around 15%, it remains to see what really the rest of the companies do. If they kind of give a guidance of 17-20% then my sense is that the case for a further re-rating of Infosys may not be there or re-rating for the tech sector may not be there. On decline or sharp corrections liquidity may still flow into the non-technology side.
However if the manufacturing companies or the non-technology companies deliver earnings growth less than 15% then you will probably see a case for liquidity to flow into technology on the back of a PE re-rating.
Q: What would you do with a technology as a space right now if you had to do allocation by way of portfolio and with the kind of concerns there are on earnings for the old economy like you indicated? How much would you want to allocate to technology?
A: At this stage it’s best to remain neutral and I am referring this from a medium-term perspective obviously in the short-term it has the potential to give some amount of a trading rally. In addition to that globally most people expect the dollar to be relatively strong given the weak performance that the dollars had. So I think these two would be the triggers, which would give some trading gains.
But for an institutional investor I guess at this stage it’s best to be neutral to the sector. So if you are following a particular benchmark and it has a particular weight I guess you need to align the technology weight along with what the weight in the benchmark is. However the medium-term view will really get decided upon what the rest of the companies do and that would actually become a more of a relative call rather than an absolute call.
Q: What is your own sense by the time we are done with earnings and those two policy meetings -one our own and one from the Fed what do you think the market will be doing?
A: It’s unlikely that this market will be able to come out of a trading range because I think while we would be broadly through with the two policy announcements but we would still have to grapple with the weekly inflation data and by and large most economists and most analysts do expect inflation to go up a little higher though it might peak out sometime in April but whether inflation is going to sufficiently come out during May and June I am not too sure. Secondly it’s going to be a while before we are through with the earnings season because most of the non-technology companies will come out with their numbers early sometime in May and June.
In addition to that I am not too sure whether this market is going to be liberal enough to kind of give the benefit of doubt and not wait for the Q1 numbers which will unfold only in July and in addition to that is of course we are going to be kind of toeing with the forecast and the monsoons etc.
It’s unlikely or the market is going to find it extremely difficult to move out of a trading range for the next three-four months. Our own sense is that probably it’s only going to be during the second half of this calendar year or the second half of this financial year before which this market is able to meaningfully be able to trade above that trading range which it is right now hovering in.
Q: How important is earnings for the market right now or do you think its just struggling against too many other cues to focus on specific earning performances?
A:The earnings are definitely very important especially for all bellwether companies and clearly Infosys over the last several years has held its own relevance and importance for the market and on several occasions has basically turned around the sentiment but that’s been on occasion when they have given a much stronger guidance, when it has been a lot more euphoric or when the guidance has been ahead of the street expectations, so in that kind of an environment, it definitely has its relevance.
One has to give credit to Infosys for at least giving a guidance which is broadly not below expectations. In this kind of an environment a 15% guidance is pretty good. However it’s by and large there in the price and the market will want to wait for 1or 2 quarters or at least for the next one quarter, before it really seeks to re-rate Infosys.
In addition to that as I was mentioning even earlier, that its also kind of a relative game where you are really trying to see what are the other sectors going to be doing and if the other sectors don’t give good enough guidance than obviously Infosys and the entire technology sector will again kind of spring back to prominence but if that really is not the case then Infosys will be an important stock but will not be the market leader or will not change the sentiment or the direction of the market.
Source: Moneycontrol.com
With regards toInfosys numbers, he says one has to give credit to Infosys for at least giving a guidance which is broadly not below expectations. In this kind of an environment a 15% guidance is pretty good
Excerpts from CNBC-TV18's exclusive interview with Nilesh Shah:
Q: What do you think; you have heard of the Infosys guidance now between Rs 92.3-93.9 how do you see the stock reacting?
A: The stock could probably open up slightly positively. But I guess I will probably remain very flattish. I don’t expect this guidance to basically drive the market up or drive up the stock price significantly barring a short lift 4-5% trading move. However the medium-term trend of the stock will really get determined when basically numbers from the old economy or numbers from the manufacturing companies come out. The broader expectations for the largecap companies are 15-20%.
Now Infosys has given guidance around 15%, it remains to see what really the rest of the companies do. If they kind of give a guidance of 17-20% then my sense is that the case for a further re-rating of Infosys may not be there or re-rating for the tech sector may not be there. On decline or sharp corrections liquidity may still flow into the non-technology side.
However if the manufacturing companies or the non-technology companies deliver earnings growth less than 15% then you will probably see a case for liquidity to flow into technology on the back of a PE re-rating.
Q: What would you do with a technology as a space right now if you had to do allocation by way of portfolio and with the kind of concerns there are on earnings for the old economy like you indicated? How much would you want to allocate to technology?
A: At this stage it’s best to remain neutral and I am referring this from a medium-term perspective obviously in the short-term it has the potential to give some amount of a trading rally. In addition to that globally most people expect the dollar to be relatively strong given the weak performance that the dollars had. So I think these two would be the triggers, which would give some trading gains.
But for an institutional investor I guess at this stage it’s best to be neutral to the sector. So if you are following a particular benchmark and it has a particular weight I guess you need to align the technology weight along with what the weight in the benchmark is. However the medium-term view will really get decided upon what the rest of the companies do and that would actually become a more of a relative call rather than an absolute call.
Q: What is your own sense by the time we are done with earnings and those two policy meetings -one our own and one from the Fed what do you think the market will be doing?
A: It’s unlikely that this market will be able to come out of a trading range because I think while we would be broadly through with the two policy announcements but we would still have to grapple with the weekly inflation data and by and large most economists and most analysts do expect inflation to go up a little higher though it might peak out sometime in April but whether inflation is going to sufficiently come out during May and June I am not too sure. Secondly it’s going to be a while before we are through with the earnings season because most of the non-technology companies will come out with their numbers early sometime in May and June.
In addition to that I am not too sure whether this market is going to be liberal enough to kind of give the benefit of doubt and not wait for the Q1 numbers which will unfold only in July and in addition to that is of course we are going to be kind of toeing with the forecast and the monsoons etc.
It’s unlikely or the market is going to find it extremely difficult to move out of a trading range for the next three-four months. Our own sense is that probably it’s only going to be during the second half of this calendar year or the second half of this financial year before which this market is able to meaningfully be able to trade above that trading range which it is right now hovering in.
Q: How important is earnings for the market right now or do you think its just struggling against too many other cues to focus on specific earning performances?
A:The earnings are definitely very important especially for all bellwether companies and clearly Infosys over the last several years has held its own relevance and importance for the market and on several occasions has basically turned around the sentiment but that’s been on occasion when they have given a much stronger guidance, when it has been a lot more euphoric or when the guidance has been ahead of the street expectations, so in that kind of an environment, it definitely has its relevance.
One has to give credit to Infosys for at least giving a guidance which is broadly not below expectations. In this kind of an environment a 15% guidance is pretty good. However it’s by and large there in the price and the market will want to wait for 1or 2 quarters or at least for the next one quarter, before it really seeks to re-rate Infosys.
In addition to that as I was mentioning even earlier, that its also kind of a relative game where you are really trying to see what are the other sectors going to be doing and if the other sectors don’t give good enough guidance than obviously Infosys and the entire technology sector will again kind of spring back to prominence but if that really is not the case then Infosys will be an important stock but will not be the market leader or will not change the sentiment or the direction of the market.
Source: Moneycontrol.com
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