Market Updates for 30/1/2015

Global Economic and Political News and It's Impact:-
1. FIIs pumped in close to Rs 21000 crore :-

While the RBI has begun the rate cut cycle, there is plenty of headroom for further cuts going forward, which would help in boosting growth and reviving the investment cycle in Asia's third largest economy.
India remains in a sweet spot as the macro-economic environment is expected to improve further, which will drive earnings and the Sensex higher in the near future.
"We might expect that the markets will track earnings growth, which is likely to be about 18% to 20% over the next couple of years," says Dhiraj Sachdev, Sr VP & Fund Manager-Equities, HSBC AM.
"So, our sense is that 18% to 20% is a reasonable kind of earnings growth that can be expected from next year onwards because of the fall in interest rates and the fall in raw material prices etc.," he adds.
With valuations looking reasonable, the Indian markets still have a long way to go and mid and small cap stocks are likely to outperform the markets in the year 2015.
Investors in top mid-cap mutual fund schemes have raked in big money in the past year as the sharp rally in smaller shares helped this category outperform others
Large-cap schemes have returned 49.81%, while diversified funds - which invest in both large and midcaps - fetched about 60%, ET reported.
Fund and wealth managers remain optimistic about the prospects of mid and small-cap stocks over the next three years, but do not rule out a breather for them in 2015.
Vineet Bhatnagar, MD, PhillipCapital, is of the view that the trend is likely to continue. "There will be lull periods, where midcap or quality midcaps with multi-bagger kind of potential will start doing well," he says.
But the key to get multibagger returns is how long you hold the stock. If an investor books profit at an early stage, he would not be able to reap benefits of multibaggerr returns which would happen over time.
Enduring multi-baggers are those companies whose wealth creation is long-lasting. Great businesses run by good managements purchased at huge 'margin of safety' will create enduring multi-baggers, says the Motilal Oswal report.

We have spoken to various analysts and here are their multibagger ideas:

Sun Pharma Advanced Research Ltd:

This is closest that you can get to a stock which is into something as risky and rewarding as oil exploration. The stock has already doubled investors' wealth so far in the month of January alone.
Even if one out of something like 27 molecules make it commercial, they would actually get rewarded for all that efforts. The best part is that the promoter has been funding the business from its own wealth consistently, because it needs money, wages to be paid out etc.
"Also, there is nothing much in infrastructure, but if you see the facility, it is a very small facility which moved out of Baroda when the group split itself and came to Andheri and they still operate out of the same place," says Prakash Diwan, Director, Altamount Capital Management.
"It was fascinating to see that there is nothing else except for just believing that they will get rewarded, and that started happening. This could continue to be a multibagger even many fold from here. So it is not like a limit," he adds.


PTC India Financial Services:

This stock, 'PFS', is one of the best among non-banking financial services (NBFC) names. The company saw healthy set of numbers last quarter, with disbursements rising to around 70 per cent. In addition, the renewable space in which the company is a master is growing at an excellent space.
The parent of this company, PTC, which is into short and long-term power trading, will ensure that its financing arm would tend to get a lot of new projects going forward. If the company's NIMs were at around 6.2 per cent, it has capital adequacy ratio of 26 per cent. The return ratios are fantastic.
"We expect 21 per cent return on equity (ROEs) by FY2016-17, and we feel that the stock is currently hugely undervalued. At Rs 87 per share, which is our target price, the stock would be somewhere around 2.5 times its price to book value," says Devang Mehta, senior VP & head of equities sales at Anand Rathi Financial Services.


Suven Life Sciences:

Suven Life Sciences is an excellent high-growth, high-margin business which operates out of the new chemical entity-based, contract research-manufacturing space.
Typically, it is a pharma stock which enjoys very high margins. In addition, it has a huge monetisation opportunity for one of its molecule - SUVN-502. The molecule is in the advance stage.
Other than this, the company has no working capital issues; it has superb balance sheet, and good return ratios.
"We feel that this stock can probably be a dark horse going forward. We have a very conservative price target of around Rs 336 for Suven Life Sciences," says Devang Mehta, senior VP & head of equities sales at Anand Rathi Financial Services.

Mayur Uniquoters Ltd:

Over the years, Mayur has successfully created its moat within a competitive industry and is working towards widening it. Mayur is a professionally-run company investing in R&D with a focus on value added products, while the other 5-6 organized players have languished much like the unorganized sector, Motilal Oswal said in the report
Over the last 4 years, Mayur has acquired clients such as Ford and Chrysler in the US and is currently in discussions with Mercedes, BMW, Toyota and GM. The top 6-7 auto OEMs in the US purchase synthetic leather worth INR5b each annually which translates into an addressable market of INR30b.
Given the robust revenue visibility with global OEM clients coming on board, improving realizations with rise in share of exports and visionary top management, Motilal Oswal believes that Mayur can sustain 25% CAGR in profits over FY14-17E and beyond along with core ROE of 30%.
They value the business at 25x FY17E EPS (PE/G of 1x) and recommend a BUY rating on the stock with a target price of INR600/share

Technocraft Industries Ltd:

Technocraft commands 36% market share of the Global (ex-China) steel drum closure industry having a size of INR 700 cr. With the largest player being Greif, having over 50% market share, the top two players together command over 86% of the global (ex-China) market share, thus making the industry a duopoly.
Given Technocraft's superior industry positioning in drum closures, incremental growth being driven by the scaffolding division and increasing contribution from the IT division, we believe Technocraft is available at attractive valuations of 4.7x FY17E EPS, Motilal Oswal said in a report.
"Our SOTP-based price target for Technocraft is at INR 300 providing for an upside of 54% over the next one year," added the report.

Indian Economic and Political News and It's Impact:-

1. Mining Sector Reform :-

When he took over the reins last year, Prime Minister Modi gave us two mantras — ‘minimum government, maximum governance’ and ‘Make in India’. His philosophy is to reduce inefficiencies and delays, put the economy on fast track and turn India into a global manufacturing hub. In the past seven months of his governance, several policy decisions taken by the government tells us that it really walks the talk.

In its last winter session, the Rajya Sabha came to a standstill and did not pass key bills such as the Insurance Laws (Amendment) Bill and the Coal Mines (Special Provisions) Bill, which were cleared by the Lok Sabha.

However, in accordance with the commitment to improve governance and enhance the overall investment and business environment, the government issued Ordinances to start coal auction and allow foreign direct investment in insurance, apart from promulgating an Ordinance on land acquisition.

Right direction

The Mines and Minerals (Development and Regulation) (MMDR) Amendment Ordinance, 2015, is another example of the government’s intent to ensure ease of business and encourage economic growth.In this respect Sesa Sterelite , 20 Microns could have been a good buy as they are trading in a very low PE.

While there is a debate on whether the ordinance route is valid or not, the MMDR Ordinance is an important step to ensure that the nation’s mineral reserves are used judiciously and safeguard investments already made by steel and cement industries.

With vast reserves of iron ore and other favourable economic factors, the steel industry is poised to become a leading global exporter. However, recent policy uncertainty and the delay by certain state governments in renewing mining leases led to the closure of many mines, impacting not only the industry reliant on domestic iron ore, but leaving state exchequers empty and leading to an increased reliance on iron ore import.

With the date of last renewal of mining leases extended to March 31, 2030 (for captive miners) or till March 31, 2020 (for merchant miners), the fate of mining leases is no longer uncertain.

The transition time of five or 15 years allowed for the present lessees is a positive move to ensure that the momentum of growth is sustained and allows both the industry and the government to prepare for auctions more adequately.

The Ordinance provides for a transparent, auction-based allocation mechanism, wherein mineral administration will be streamlined to feed the government’s vision of manufacturing-led growth.

Planning long-term

Steel plants are high investment projects with long gestation periods. It is, therefore, necessary to streamline the supply of raw material such as iron ore at competitive prices to maintain the economic viability of existing projects and incentivise investment in expansions.

Further, the life of capital-intensive steel plants is much longer than the 20 or 30-year lease periods for which captive mines are allocated. Hence, the government policies need to take a long-term view to support industry operations. The Ordinance has acknowledged this concern and has introduced 50-year leases for all mines.

It is estimated that 500,000 people are employed by the steel industry today, with a 3 mtpa (million tonne per annum) steel plant generating direct employment for nearly 3,000 workers and indirect employment for another 16-20 thousand people.

Mines supplying to these steel plants have also invested substantially towards developing sustainable mining practices along with the infrastructure, investing in skill development, education and medical interventions over the years.

Historical reasons

The Ordinance acknowledges these investments and offers a solution to the renewal issue that safeguards the investments incurred by these miners. There is a background and a rationale to this provision. In eastern India, end-use facilities for the steel industry were established decades ago in geographically challenging areas, on the basis of proximity to raw material sources as an effort to address logistics concerns at those times. The government has, accordingly, taken a decision with regard to the transition periods.

End use facilities were set up decades ago in India’s eastern region on the basis of proximity to raw material sources despite the logistical disadvantages and high freight cost due to the distance from the market as well as customer.

However, the relatively new players, especially those who established their end-use projects post liberalisation, did not face this disadvantage as they were able to establish their plants close to the ports as well as in close proximity to the customer and the market. Hence, these new players have been able to enjoy lower freight costs with respect to raw material procurement as well transportation of the finished products to customers.

The new generation end-use projects did have an opportunity to own and operate captive mines at the time they set up their plants. However, as the cost of raw material was low at the time, there appeared no competitive advantage of owning these mines. Owning and operating captive mines also included the challenge of higher logistic costs, development of remote areas including the creation of infrastructure in and around mines, civic amenities and dealing with trade unions. Thus, at that point in time, the decision to purchase raw material appeared rationale.

It was only at the start of the 21st century, when the prices of raw materials such as coal and iron ore saw a significant rise as a result of the exponential growth of China, that most end-use companies realised the importance and need for owning and operating captive mines.

A level-playing field

The Ordinance has drawn a perfect balance between investments already made and the ones that are yet to be made, creating a level playing field. The provision to establish a District Mineral Foundation (DMF) in the interest of affected communities is another positive from the ordinance. Industry must support the development of mineral rich districts and should widely welcome the clarity in the Ordinance, which specifies that the DMF contribution will now not exceed a third of the royalty rate in the respective minerals.

Overall, the MMDR Ordinance looks at boosting transparency in mining while streamlining the delivery development mechanism, which have been the biggest issues with the sector in the past. It paves the way for an effective and efficient framework with regard to the grant and renewal of mining leases. But it can succeed only if it is widely supported by state governments and industries

 New Deals and It's Impact:-

Market Outlook:-

Big Bulls Entry & Exit:-

29th January 2015, Rakesh Jhunjhunwala bought a chunk of stock in a small cap company called “Man Infraconstruction”. The Badshah bought 30,00,000 shares at Rs. 36 each, making an investment of Rs. 10.80 crore. 

Man Infra Q2FY15 Results
Particulars (Rs cr)	Sep 2014	Sep 2013	%Chg
Net Sales	66.63	88.53	-24.74
Other Income	33.5	10.87	208.19
Total Income	100.12	99.41	0.71
Total Expenses	62.13	83.78	-25.84
Operating Profit	37.99	15.63	143.06
Net Profit	23.16	7.7	200.78
Equity Capital	49.5	49.5	–

The unique aspect of Man Infra is that it is involved in both activities, real estate and contracting. It is an integrated EPC (Engineering, Procurement and Construction) company with strong focus on Road, Port, Residential, Commercial and Industrial construction segments.
In the real estate segment, the Company has a number of on-going projects, including one for Tata Housing of 8 towers at Mulund, Mumbai. There are a couple of other residential and commercials building projects being executed.
In the contracting segment, Man Infra appears to have only one on-going BOT project, which is the Hadapasar-Saswad road in Pune. The length of the road is 41 km and the estimated cost of the project is Rs. 424 crore.
The other remarkable aspect of Man Infra is that it is a near zero debt Company with cash and cash equivalent of Rs. 111 crore as on March 31, 2014.
The future prospects for Man Infra appear to be bright if you bear in mind the fact that the entire construction and road space will open up. It is expected that there will be Rs. 600 billion investments in new ports and airports, power projects, waterways, urban and rural infrastructure and road building. Another area of opportunity is that of redevelopment of old buildings. According to a report in the DNA, about 17,000 old buildings in South Mumbai alone are going in for redevelopment. There are thousands of other buildings all over the city which can be candidates for redevelopment.
One indication that Man Infra is on a strong footing comes from its Q2FY15 results.
Of course, the unanswered question is why Rakesh Jhunjhunwala would be interested in Man Infra given its small size. The amount invested by him in the Company is not even equal to petty cash by the Badshah’s standards. Even if the stock triples or quadruples, it won’t “move the needle” for Rakesh Jhunjhunwala.

Market Updates for 29/1/2015

Global Economic and Political News and It's Impact:-

1. Barclays slashed its 2015 Brent crude oil price forecast to $44 a barrel from $72 :-

India's economy will save US$45 billion/year if Brent crude stays at US$65/bbl due to the fall in oil prices. It can only stimulate growth if savings are reinvested in productive activities, Credit Suisse said in a report.
By sharply hiking taxes, the government now gets to keep more than half of the gains - US $24 billion or 1.2% of GDP. Further, when the new GDP series will be announced on 31 January 2015, the global brokerage firm expects the nominal GDP to rise by more than 10 per cent, added the report.
With the same fiscal deficit ratio, the government can now spend 0.4% more of GDP. A further 0.5% of GDP can come from pushing out the Fiscal Responsibility and Budget Management (FRBM) target of 3.6% in FY16 by one year.
On the downside the 14th Finance Commission is likely to raise states' share of central taxes substantially starting FY16, but Credit Suisse believes that the Centre can retain its fiscal room by cuts to other transfers to states.
The general market view is dominated by the dire fiscal situation in FY15, as the FY deficit target of 4.1% was hit in the first eight months. But looking forward, with spectrum auctions, disinvestments, duty hikes and expenditure cuts, the FY15 target could be met.
Given historically high fiscal deficits in India, there is no precedence of the government priming the economy. In fact, recent fiscal policy has been disappointingly pro-cyclical.
However, studies of fiscal multipliers suggest that the immediate impact of prudent government spending (i.e., on non-defence capital expenditure) on FY16E GDP growth could be 0.75-1.00 pp, added the report.
Credit Suisse is of the view that national highways, railways, rural roads, rural housing and urban housing are the most likely areas where the government may spend.
The budget may also include import heavy spending (e.g., defense, renewable energy) or tax sops for local manufacturing. These would only have medium to longer-term implications.

Indian Economic and Political News and It's Impact:-

1. Budget 2015 Expectation :- 

Unlike normal budgets, which are attempts to match largely non-discretionary spending with cyclical revenues, Credit Suisse is of the view that this time there are several promising moving parts in the upcoming FY16 budget. 

The global investment bank is of the view that national highways, railways, rural roads, rural housing and urban housing are the most likely areas where the government may spend. 

The budget may also include import-heavy spending (e.g., defense, renewable energy) or tax sops for local manufacturing. These would only have medium- to longer-term implications. 

Studies of fiscal multipliers suggest that the immediate impact of prudent government spending (i.e., on non-defence capital expenditure) on FY16E GDP growth could be 0.75-1.00 pp. 

A pick-up in growth should boost the broader Indian market. In addition to a boost to earnings growth, Credit Suisse expects India's P/E premium to global equities to expand.

"So far, despite the strong market rally over the past year, this premium has barely moved up to 13%, vs 40% in 2010 and 80% in 2007," added the report 

Credit Suisse expects construction GDP to pick up from very low levels. This is because the construction share of GDP is at decade lows as impaired balance sheets and regulatory issues have slowed private sector capex. 

With the government clearing regulatory roadblocks and also issuing EPC contracts, not only does construction activity pick up, balance sheets of contractors are likely to improve as well. 

Also, cement demand growth in India has been anaemic despite very low per capita consumption levels. Government spending on roads and housing is likely to drive a pick-up in cement demand. 

Stocks like Ultratech, which has expanded capacity by 50% in the last two years through organic and inorganic expansion and is likely to reach a 24% market share post consolidation of cement assets of the BK Birla group, is the best proxy to play the cement upcycle. Among the mid-cap names we continue to like JK Cement. 

While theoretically a fiscal expansion is negative for banks (crowding out), even in the most aggressive scenario, i.e., the government providing a 2% stimulus, bond issuance is likely to rise by Rs1 tn. 

Improved housing construction should also drive a pick-up in paint demand. Growth has slowed to low double digits over the past two years, and should pick up going forward to the mid-teens. 

Credit Suisse also expects consumer discretionary demand in particular autos to pick up because post elections the demand acceleration has been short-lived. As the government shifts gears from a sharp slowdown in plan expenditure in FY15E to an equally sharp pick-up in FY16E, discretionary demand is likely to pick up 

New Deals and It's Impact:-

Market Outlook:-

Big Bulls Entry & Exit:-

Market Updates for 28/1/2015

Global Economic and Political News and It's Impact:-
1. US India Nuclear Deal
Ending the log jam after six long years, President Barack Obama and PM Narendra Modi announced a breakthrough in the nuclear deal on Sunday. The inability to move ahead on this had been the major irritant in the ties.
The two countries had in 2008 signed a landmark deal giving India access to civilian nuclear technology, but it has been held up by US concerns over India's strict laws on liability in the event of a nuclear accident.
While there were no immediate details on how the impasse had been broken, India will set up an insurance pool -- led by General Insurance Co and four other insurance companies of a total amount of Rs 750 crore -- to indemnify companies that build reactors in the country against liabilities in case of a nuclear accident, ET reported.
The remaining Rs 750 crore of the total Rs 1,500 crore to offset liabilities will be provided by the government of India. This will address the US concerns over clause 17 of the Indian liability Act, added the report.
"The culmination of the contentious Nuclear Deal with US would once again send a signal to offshore investors that the new regime, led by Prime Minister Narendra Modi, means business and is on the right path to unleash reforms," says Aviral Gupta, Independent Investment Strategist.
"More so, the new government is very keen to iron out contentious issues which have been hampering the progress of our country," he adds.

Antique Stock Broking Ltd identifies nine stocks which are likely to benefit more from the Indo-US ties: 

NTPC: The company had formed a joint venture with Nuclear Power Corporation of India. It was looking at setting up a 2000 MW nuclear plant and was in talks with GE Energy for technology and fuel in 2012. However, the project is put on the back-burner. Post the deal, one can expect revival of the project.

BHEL: BHEL has manufactured and supplied certain Nuclear Reactor components like steam generators, reactor headers, and end shields to NPCIL for their 220 MWe and 540 MWe reactors based on Pressurized Heavy Water Reactor (PHWR) Technology.

It is looking for a tie-up for manufacturing equipment of up to 700 MW & 1500 MW. It has an existing tie-up with Siemens for nuclear technology.

L&T: L&T has signed four agreements with foreign nuclear power reactor vendors. The first, with Westinghouse, sets up L&T to produce component modules for Westinghouse's AP1000 reactor. The second agreement was with Atomic Energy of Canada Ltd (AECL) "to develop a competitive cost/scope model for the ACR-1000."

It had also signed an agreement with Atomstroyexport primarily focused on components for the next four VVER reactors at Kudankulam, but extending beyond that to other Russian VVER plants in India and internationally. Then signed an agreement with GE Hitachi to produce major components for ABWRs. The two companies hope to utilize indigenous Indian capabilities for the complete construction of nuclear power plants, including the supply of reactor equipment and systems, valves, electrical and instrumentation products for ABWR plants to be built in India.

Alstom India: Alstom India, which is now majorly owned by General Electric, can benefit from possible demand of turbine-generators (TG) used in nuclear power plants, given that GE is likely to be an active player in the field.

HCC: HCC has constructed four nuclear power projects in India. It is an EPC contractor for nuclear projects.

ABB: ABB makes components for power projects. Its parent company's exposure includes new nuclear power plants, systems and components. The parent company's exposure includes fuel services, waste management and decommissioning.

Siemens: Siemens has been involved in setting up high voltage switchyards at nuclear power plants.

Walchandnagar Industries: It makes critical equipment for India's nuclear power facilities.

KSB Pumps: Has supplied pumps to Nuclear Power Corporation and continues to be a preferred supplier.

2. Greece elections
As Syriza is likely to win the election it will any day strengthening the possibility of Greece exit and therefore the burden on Euro which anybody can predict that this zone will be affected specially country like Germany,Portugal,Italy etc.

Indian Economic and Political News and It's Impact:-

In the past four financial years, India has imported from China bulk drugs and active pharmaceutical ingredients (APIs) worth about Rs 38,186 crore. Most of these have gone into making essential drugs.

TOI had reported in November 2014 that national security adviser Ajit Doval had warned the government about over-dependence on China.

If submissions to the government by the department of pharmaceuticals are any indication, there is significant dependence on imports in the case of 12 essential drugs. "Approximately 80-90% of these (essential drugs) imports are from China," the department has said. "The decision is based on economic considerations."

The 12 drugs are: paracetamol, metformin, ranitidine, amoxicillin, ciprofloxacin, cefixime, acetyl salicylic acid, ascorbic acid, ofloxacin, ibuprofen, metronidazole and ampicillin. Eight of these are on WHO's Model List of Essential Medicines.

Documents of the department of pharmaceuticals show there has been a consistent growth in the import of drugs and APIs from China. In 2011-12, Rs 8,798 crore worth of bulk drugs and APIs were imported from China. This was Rs 11,000 crore in 2012-13, Rs 11,865 crore in 2013-14, and Rs 6,521 crore during April-September in 2014-15.

Sudhansh Pant, joint secretary, department of pharmaceuticals, told TOI from Delhi: "China out-prices India when it comes to APIs and bulk drugs. There is a need to see how to change this situation. A committee of secretaries under Dr VM Katoch (secretary, department of health research) is looking into the matter."

India is mulling a separate policy for APIs so as to create an environment for production of the same within the country. A lot of this policy will be derived from the Katoch committee's recommendations.

But India may to have find another way to reduce dependence before the policy bears fruit.

At the outset, I agree that heavy dependence on one vendor or a single country for active pharmaceutical ingredients (APIs) and bulk drugs can affect the public health system. There could be issues related to quality, among other things.

Take Paracetamol for instance. Thousands of people, especially children, take it every day; it's used for fever and other ailments. One must be wary of the quality of products that come in, and depending on a single vendor for essential drugs may not be good.

Take the circumstances which has led to this dependency. There have been considerable discussions on this matter, but one must understand that in India, there is a cap on pricing for pharmaceutical products. If the manufacturer cannot sell a pharmaceutical product above a certain prescribed rate and has to also (it goes without the need for emphasis) meet quality requirements, it is natural for one to look at procuring APIs at cheaper costs.

At a seminar in Delhi last month, there was a detailed discussion on the matter and some interesting presentations were made. It is important to study how China is able to deliver these products at costs cheaper than those in India and other places.

New Deals and It's Impact:-

Market Outlook:-
Idea Cellular Ltd: Idea Cellular Ltd posted a 64 percent rise in quarterly profit as it added more subscribers than rivals did, boosting data and talk time usage

Gati Ltd: Gati Limited, a city-based express distribution and supply chain solutions provider, said its Board of Directors has decided to raise up to Rs 120 crore for expansion of e-commerce business.

Tata Motors Ltd: Tata Motors, India's biggest auto maker by revenue, will launch its biggest ever rights issue and the country's third biggest to pay for expansion and retire debt.

SBI: State Bank of India on Tuesday said its committee of directors on capital has permitted it to raise up to Rs 15,000 crore in a share sale, setting the stage for other staterun peers to raise capital in a market that is at a new high on hopes of economic recovery and speedy reforms.

L&T Ltd: Larsen & Toubro hopes to build nuclear reactors in partnership with Westinghouse Electric Company and is exploring other partnerships after India and the US cleared the way for implementing a bilateral agreement signed in 2008.

GMR Infrastructure Ltd: GMR Infra-controlled Delhi International Airport (DIAL) on Tuesday raised $289 million through a considerably oversubscribed bond issue, also the first high-yield paper in Asia this year, in a sign that global investors are now taking a fresh positive look at Indian infrastructure.

Yes Bank Ltd: Yes Bank singed a pact with OPIC, an arm of the US government's development finance institution, for $220 million (about Rs 1,350 crore) loan for on-lending to micro, small and medium enterprises.

Persistent Systems Ltd: A digital technology-focused IT company, has created an M&A team as it looks for acquisitions to push it past the $1-billion revenue mark. Pune-based Persistent is currently at the $320 million in revenue-a-year level, and the company is looking to more than treble its topline in the next three to five years.

Bajaj Hindusthan Ltd: The company has announced that the members of the Company will consider to approve the resolutions by way of Postal Ballot. The company is seeking Seeks shareholders nod for debt restructuring package.

Karnataka Bank: The bank has reported a flat growth in its net profit at Rs 106.94 crore for third quarter ended December 2014-15. Bank's net profit in the corresponding (October-December) quarter of 2013-14 stood at Rs 106.70 crore.

Titan Company Ltd: Tata group firm Titan Company Ltd today reported 15.19 per cent increase in standalone net profit at Rs 190.73 crore for the third quarter ended December 31, 2014.


Amara Raja Batteries: The company posted 7.71 per cent increase in its net profit at Rs 102.34 crore for the third quarter ended December 31, 2014. It ad posted a net profit of Rs 95.01 crore for the third quarter ended December 31, 2013.

Godrej Properties Ltd: The real estate arm of Godrej Group, today reported a 26.44 per cent increase in consolidated net profit at Rs 47.24 crore for the quarter ended December 31, 2014 mainly on the back of higher sales.

Big Bulls Entry & Exit:-

Ashish Kacholia & Rakesh Jhunjhunwala has bought Zen Technologies.
Zen Technologies is a micro-cap with a market capitalisation of only Rs. 427 crore. It is engaged exclusively in manufacturing weapon and defense simulators. These simulators are used by the armed forces, para military, police forces etc.

Zen Technologies’ USP is that because it has been dealing with the Defense & Police forces for nearly 21 years, it is familiar with the complicated procurement process followed by the Forces. Foreign companies seeking to bid for Indian defense contracts can take advantage of Zen’s expertise with the procurement process so as to reduce the cost of production, customize the product for Indian requirements, ensure compliance with technical requirements and increase the chance of winning the bid

The other opportunity for Zen comes from the requirement of the Government that foreign contractors must sub-contract a part of their contract (above Rs. 300 crore) to Indian companies. Zen has the expertise and technology to fulfill a part of that requirement of indigenous production.

However, there are also several drawbacks to dealing in such a specialized line of activity.

The first is there is huge expenditure on R&D which may or may not be productive. What compounds this is the fact that the Defense Forces insist on a fully functional trial without a purchase commitment. This means that large sums have to be invested in giving the trial without any orders being awarded.

The second drawback is that one is competing with deep-pocketed foreign suppliers who can sell the same or even a superior product at lower costs. Given the Government’s penchant for awarding contracts to the lowest bidder, this can wipe out small players without the financial muscle to hold on.

Yet another drawback is that the award and execution of Defense projects, and receiving fees for it, can be spread over several years. This means that the revenues are lumpy.

One can see an example of this from FY 2011-12 where the total income and PAT was Rs. 102 crore and Rs. 31.62 crore respectively. However, in FY 2012-13, the corresponding figures plunged to Rs. 37.11 crore and Rs. 4.70 crore respectively. In FY 2013-14, the PAT plunged further to a paltry Rs. 9 lakh.

The other big risk is that of warranty claims and performance guarantee. One really cannot argue with the Government or the Defense Forces because there is a risk of being black-listed as a contractor and being debarred from future contracts.

In fact, the volatility and unpredictably of earnings may have caused Rakesh Jhunjhunwala to sell off his holding in Zen Technologies. Whether Ashish Kacholia fares better requires to be seen.

Market Updates for 26/1/2015

Global Economic and Political News and It's Impact:-
1. US President Barack Obama’s visit
The Indian investment community & markets have pinned high hopes on the upcoming India visit by US President Barack Obama. Many companies in sectors as diverse as defense, pharmaceuticals, software, nuclear energy & infrastructure are expecting a solid push from the deliberations between him & Prime Minister Modi.
 1.1. Defence :- India's defence sector offers an unbounded opportunity for the two countries to scale up their engagement. India has already imported arms worth $10 billion from the US over the last few years in government-to-government contracts. Indian corporates are looking forward to deepen their engagements with the powerful military-industrial complex in the US by ensuring that large scale manufacturing is done in India with transfer of technology.
 1.2. Pharma :- Indian pharma companies are alarmed by the fierce lobbying unleashed by the Big Pharma in the US that has sought to queer the pitch on lack of IPR or spotty IPR protections accorded to patents in India, when in fact India is in full compliance with the WTO rules. There is a dark foreboding that some of the Indian generic drug manufacturers are being sought to be systematically hounded over the last couple of years by the US FDA at the behest of the Big Pharma interests.
 1.3. Software :- Indian software companies are rightly worried about the rise in alarmism and hostility across the political spectrum in the US and indeed in the mainstream discourse against outsourcing of jobs. India is keen to sign a totalization agreement between India and the US as Indian workers are losing around $3 billion annually, in what he termed as foreign aid.
 1.4. Nuclear Energy :- Indian workers are paying the US government by way of social security contributions that India can never recover & the Indian aid is involuntary. Ironing out the issues develling the nuclear liability clauses is the key to the US companies setting up nuclear reactors in the two sites offered by the Indian government to them in Gujarat and Andhra Pradesh.
 1.5. Infrastructure :- In view of massive investments needed in building 100 smart cities, investments in various industrial corridors, building of ports, airports, power plants, India would be looking to the US corporates to actively participate. Japan & China have already committed to invest billions of dollars in helping build these long-term, capital-investive infrastructure projects.

2. Saudi king's death
Oil prices traded narrowly mixed on Friday after the death of the king of Saudi Arabia, OPEC's largest oil producer, and on concerns about unrest in Yemen.Though I do not expect any significant change in the oil policy of Saudi Arabia and I expect and hope that they will continue to be a stabilization factor in the oil markets but Brent, the European benchmark, had risen on increased turmoil in oil-producer Yemen, where the president resigned Thursday amid a deadly standoff with Shiite militia controlling the capital. Still any improvement is oil price will directly benefit upstream oil companies like Crain India,GAIL etc.

Indian Economic and Political News and It's Impact:-
1. Budget is on the card
 The Budget is one event that the Indian market always looks forward to. From the beginning of the year, traders and investors start studying market conditions and building positions based on their expectations from the Budget.
Data since 1992 show that 15 out of 22 times, the market had rallied from the beginning of the year to the Budget day. Of these 15, in as many as 11 times, the Sensex at the end of the year had closed higher than at the beginning of the year.
More recent data - since 2005 - showed that in each of the years when the Sensex gained from the beginning of the year until the Budget, it continued to gain through the year (see table). This year, the Sensex has already added 5.5%.
In the previous bull run - in 2004, 2005 and 2006 - the Sensex gained from January 1 until the Budget day, by between 0.5% and 10.4%, and continued the uptrend through the years. In fact, the post-Budget gains were sharper.
On seven occasions since 1992, the market had corrected before the Budget. Most of these had been during bearish times, and the market had continued the downtrend until the end of the years. For instance, in 2008, the Sensex fell 13% from the beginning of the year until Budget and then corrected by another 45% by December-end. A similar trend was observed in 2011.
The year that closely resembled the current situation was 2005. The UPA 1 was unveiling its second Budget and the bull market had begun around a year earlier.
The Sensex rose 0.5% from the beginning of the year until the Budget and gained another 40% from the Budget day till the year-end.
Expectations from the current BJP government are high. The Sensex has gained 5.5% year to date and if one has to believe market observers, the index should continue its momentum.

New Deals and It's Impact:-

Market Outlook:-
Market will remain bullish with FMCG,Pharma,Auto to go up.

Big Bulls Entry & Exit:-

How to Analyze Financial aspect of a Company

Many investor have different ratios to look at the time of analyzing a companies financial stability,growth and risk here I will explain which ratios and other indicator to look at while analyzing this and what they actually mean.

Revenue :- The first and foremost and to me perhaps been the most important parameter to look at while investing is a company's revenue and it's growth rate. In our analysis we directly throwout a company which loose  it's revenue.

Sales :- The second parameter to look at is on it's sales both in terms of value and volume and aggregated of the two. Along with it check the sales growth rate. We throw out the stocks which is unable to increase it's sales or maintain it growth rate.

Income :- The next parameter is to look at it's income both Operating income and Net income and their growth rate. We generally put caution if the operating income goes down and try to analyze the reason[like inventory cost adjustment, buying of new business or investment etc] though not directly remove this stocks from our portfolio unless there are other factors and then we check net income if it is improving with other growth rate then then very fine but if it decline then we will analyze the reason[ like Tax rate, Accounting policy change, Asset depreciation etc.] but not directly throw it out.
On the contrary if it increase due to sale of investment,tax rate,inventory cost adjustment etc then we might put a caution on the same.[For in depth explanation click here.]

Debt :- Then next parameter to look at is debt . Well this is a factor we must look with very care if a company has increasing debt it might be operating at risk (check the financial leverage at this case) but if the company has a tendency of repaying it's debt and continuously reducing debt to equity ratio with incremental EPS growth then it might be a good bet.

EPS :- The next parameter to look at is the EPS growth rate which is prima facie parameter for any investor to look at and a healthy growth rate is always appreciable.

ROCE :- The next parameter to look at is the ROCE and it's growth. A higher ROCE indicates more efficient use of capital. ROCE should be higher than the company’s capital cost; otherwise it indicates that the company is not employing its capital effectively and is not generating shareholder value. [ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed]

Profit Margin :- Tough Profit Margin could have been two type Operating Profit Margin and Net Profit Margin but we mainly check Operating Profit Margin & it should grow along with other i.e. % growth should be more than it's past average[3,5,10 year] and will be at par with PAT/Net Income growth and ROCE growth. Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. For example, if a company has an operating margin of 12%, this means that it makes $0.12 (before interest and taxes) for every dollar of sales.
[Operating Margin= Earnings Before Interest and Tax (EBIT) / Net Sales]

Free Cash Flow :- Free cash flow and it's growth rate also an important aspect as having free cash in hand means an effective investment option for future or dividend payout or repayment of loan on the other hand negative cash flow means possibility of dilution of share or taking new loan.

PE :- Check out if PE is too high or not compare to it's Forward PE or Industry PE. A low PE is always good.

PEG :- Check out the PEG to be under 1 or not. [P/E ratio ÷ Annual EPS Growth]

Other Factor :-  Other factors like pledge shares needs to be avoided as I always consider them as nothing but a bad debt.

Market Updates for 17/1/2015

Global Economic and Political News and It's Impact:-
1. Crash in crude oil price will impact the sector 
   1.1. Refiners and Oil marketing companies like RIL should not be affected by the fall in crude oil prices because what matters for them is the gross refining margin (GRM). GRM is measured as the margin they generate for refining one barrel of oil. Since crude oil prices and the product prices move in tandem, the GRM remains stable.
However, thing may change because of the entry of the US into the oil export market. This is because the US exports will hit the global market in the form of oil distillates and not as pure crude. And any fall in GRM is bad news for oil majors like Reliance. The situation is similar for oil marketing companies (OMCs). Matters are more complicated in India because the public sector OMCs are still hamstrung by government interference.
    1.2.  Upstream oil companies like Crain India,GAIL have reacted negatively to the fall in international crude oil prices.So should you jump into buy them now? Most experts feel it is too early to get into bottom fishing and investors need to be on the sidelines for the time being. This is because the equities have a multiplier effect and therefore, the losses of commodity stocks are usually higher than the actual cut in commodity prices. However, the cut in Indian upstream oil companies, as of now, are less compared to the cut in international crude oil prices.
    1.3. Downstream companies like Paints(Asian,Barger),Petrolium FMCG(HUL,Supreme,Astral) will suffer some inventory loss due to lower crude oil price but in long term it's profit margin will grow. Hence good time to buy this stocks looking at the inventory turnover ratio.

Indian Economic and Political News and It's Impact:-
1. RBI Rate Cut
As we all know RBI has cut the repo rate by 25 bps i.e. not it will br 7.25% though it is too little and too late hence we can expect more rate cut in near future supported by strong economic growth and specially depend on budget of 28th feb. Though market has already enjoyed this and companies like HDIL,India bulls in real est, GIC,Gruh,Canfin in Home Finance,DCB,ICICI,SBI,HDFC in Banks are really bullish as of now.

New Deals and It's Impact:-

Market Outlook:-
Market will remain bullish backed by RBI rate cut and upcoming quarterly reports from some good companies [Supreme,Tata Elxsi]in this week.

Big Bulls Entry & Exit:-