Global Economic and Political News and It's Impact:-
FII Investment increase in small cap:-
Over the past two years, small-cap stocks have rallied quite a lot more than large-caps. The CNX Smallcap index has returned 75% during the period compared with 46% return of the benchmark CNX Nifty. Foreign institutional investors (FIIs), who usually show interest only in larger companies, too, were keen to participate in the stupendous rally in small-caps.
FIIs have increased their holdings in at least seven small-cap companies in the past two years. Their stake in these companies has, in fact, increased in each of the three quarters to December 2014.
Here's a low-down on what makes these companies special and what to expect from them in future.
Wonderla Holidays
Promoted by the founders of V-Guard Industries, Wonderla Holidays is the only listed amusement park player in the country. In the last five years, the net sales of its parks in Kochi and Chennai have grown at a CAGR of 25% to Rs 153 crore in FY14; net profit has risen at a CAGR of 37.9% to Rs 39.8 crore. It has achieved this without straining its balance sheet as the company is debt-free. The amusement park business is capital-intensive and there are strict entry barriers. Right from securing land to obtaining clearances to construction of an amusement park, it takes over five years. Wonderla Holidays' amusement park at Hyderabad is expected to open by April next year. This should boost its revenues in the coming quarters.
Eveready Industries India
Battery manufacturers had lost pricing power in the past decade due to high competition. But with recent developments suggesting they can again command pricing power, the stock of Eveready has come under investor focus. The company is market leader in the battery space, with a market share of nearly 50%. After the new management took over, the company has aggressively increased product prices — cumulatively by 20% — in the past 20 months. It plans to be debtfree by FY18. The stock is trading at 16 times FY16 projected earnings, which is at significant discount to its peers.
Inox Leisure
With 365 screens, Inox Leisure is the second-biggest player in the multiplex space with 18.2% capacity of the total domestic screens. This gives it huge negotiating power in terms of revenue sharing with producers and distributors. The company plans to add 50-60 screens every year to take its screen count to 546. This should take at least four years. With an average ticket price of Rs 175 and footfalls of 11.6 million, this would enhance Inox's revenue. Inox trades at FY16 price-earnings multiple of 26.3, slightly higher than its peer PVR, which is trading at 24.9.
Speciality Restaurants
The only listed company in the fine-dining segment, Speciality Restaurants is an urban consumption story. It is known for its flagship Chinese food brand Mainland China. It has expanded its food offerings to Asian, Thai, Burmese and all-day dining under brands such Sigree Global Grill and Hoppipola. The focus on non-Indian cuisines helps it differentiate itself from other players. Speciality Restaurants will be one of the key beneficiaries of the growing tendency of Indian families to eat out. On valuation, it is trading at a PE of 21.4 for Fy16; Jubiliant Foodworks trades at 48.9.
Gulf Oil Lubricants India
The company has benefited from falling prices of crude oil, a key raw material for its base oil, which accounts for 65-75% of its raw material cost. Companies usually don't pass on the benefit of lower input costs to consumers to ensure margin expansion. A sharp recovery in sales volumes of medium and heavy commercial vehicles is expected to increase lubricant volume. Due to its focus on volume growth, the company's market share has increased to 6.9% in FY14 from 4.4% in FY07. The stock is trading at 22 times FY16 projected earnings; its peer Castrol India is trading at 38 times.
Mangalam Cement
Among small-sized cement companies, north Indiafocussed Mangalam Cement is one of the best suited to gain from sustained demand in the region. Unlike in the south and east, prices and demand in the north have been historically stable. By enhancing its capacity to 3MT, Mangalam Cement is poised to gain from an increase in cement demand in the next two years. Besides, 90% of its power requirement is met with a captive plant of 35MW, helping it save on power and fuel costs. It trades at EV per tonne of $59, far cheaper than most north-focussed cement companies.
Swaraj Engines
Swaraj Engines has been one of the best proxy plays to capture the growth in the tractor industry. It supplies tractor engines to Swaraj Tractors, a part of the farm equipment division of Mahindra & Mahindra. It is currently witnessing fall in volumes as tractor sales fall. But analysts believe the low volume trend will be over soon. Being debt-free, it is insulated from the vagaries of changing demand. It will be one of the few beneficiaries of a revival in tractor demand. Its stock is trading at 12 times FY16 projected earnings; auto ancillaries trade between 10 and 18 times.
Indian Economic and Political News and It's Impact:-
AAP likely to win Delhi Election:-
Shares of power distribution companies such as Tata Power and Reliance Infrastructure may come under severe selling pressure, after the exit polls suggested that the Aam Aadmi Party (AAP) may win Delhi elections with majority.
Analysts fear that Aam Aadmi Party's policies such as subsidies for electricity and inspection of books of power distribution companies will adversely impact investor sentiment.
"Power distribution companies such as Tata Power and Reliance Infra may come under severe selling pressure as the exit poll results were shocking, which suggested that AAP may win the Delhi elections with majority," said Rakesh Goyal, senior vice-president at Bonanza Portfolio.
AAP earlier during the election campaign had said audit of private power distribution companies books will be ordered if the party comes to power in Delhi.
Alleging monopoly of power distribution companies in Delhi, the party had said more competition will be encouraged among power suppliers so that consumers can benefit. The AAP government when it came to power for 49 days in December 2013 had earlier ordered a CAG audit.
"Power stocks that have operations in Delhi may see kneejerk reactions on Monday as exit poll results were disappointing," said P Phani Sekhar, fund manager, PMS, Karvy Stock Broking.
"The larger worry for investors is the likely audit of private power distributors by the new government.Though we believe that the audit may not find any meaningful evidence against power distribution companies, the element of uncertainty will continue to persist."
Tata Power and Reliance Infra stocks fell about 9% and 10%, respectively, in February from their highs. Both the stocks have underperformed the BSE Power Index, which fell 5.7% over the same period.
Power companies have come under selling pressure since the opinion polls were out in the beginning of February.
"High-beta socks such as Reliance Power can correct up to 8% and Tata Power can fall up to 5% while NTPC and Power Grid up to 3% on Monday," said Chandan Taparia, derivative analyst at Anand Rathi. "These power-related stocks have seen build-up of short positions as there was a lot of uncertainty related to outcome of Delhi election results. Traders' sentiment is expected to remain bearish as political parties, including AAP, have pushed for cheap electricity, which may be negative for power companies that operate in Delhi."
Tata Power derives one-fifth of its total revenue from power distribution business in Delhi. Last year, revenue from this business was Rs 6,521 crore of the total revenue of Rs 35,292 crore. Reliance Infra also derives a sizeable chunk of its revenues from the Delhi distribution business. "Power stocks may come under pressure as the broader markets display weakness. Having said that, we do not expect large negative movements in the stocks as most of news has already been priced in by the markets," said Sahil Kapoor, AVP-retail capital markets at Edelweiss Financial Services.
New Deals and It's Impact:-
Market Outlook:-
Market will remain bearish due to the uncertainty in the investor and delhi election exit poll result but for a short term.
Big Bulls Entry & Exit:-
FII Investment increase in small cap:-
Over the past two years, small-cap stocks have rallied quite a lot more than large-caps. The CNX Smallcap index has returned 75% during the period compared with 46% return of the benchmark CNX Nifty. Foreign institutional investors (FIIs), who usually show interest only in larger companies, too, were keen to participate in the stupendous rally in small-caps.
FIIs have increased their holdings in at least seven small-cap companies in the past two years. Their stake in these companies has, in fact, increased in each of the three quarters to December 2014.
Here's a low-down on what makes these companies special and what to expect from them in future.
Wonderla Holidays
Promoted by the founders of V-Guard Industries, Wonderla Holidays is the only listed amusement park player in the country. In the last five years, the net sales of its parks in Kochi and Chennai have grown at a CAGR of 25% to Rs 153 crore in FY14; net profit has risen at a CAGR of 37.9% to Rs 39.8 crore. It has achieved this without straining its balance sheet as the company is debt-free. The amusement park business is capital-intensive and there are strict entry barriers. Right from securing land to obtaining clearances to construction of an amusement park, it takes over five years. Wonderla Holidays' amusement park at Hyderabad is expected to open by April next year. This should boost its revenues in the coming quarters.
Eveready Industries India
Battery manufacturers had lost pricing power in the past decade due to high competition. But with recent developments suggesting they can again command pricing power, the stock of Eveready has come under investor focus. The company is market leader in the battery space, with a market share of nearly 50%. After the new management took over, the company has aggressively increased product prices — cumulatively by 20% — in the past 20 months. It plans to be debtfree by FY18. The stock is trading at 16 times FY16 projected earnings, which is at significant discount to its peers.
Inox Leisure
With 365 screens, Inox Leisure is the second-biggest player in the multiplex space with 18.2% capacity of the total domestic screens. This gives it huge negotiating power in terms of revenue sharing with producers and distributors. The company plans to add 50-60 screens every year to take its screen count to 546. This should take at least four years. With an average ticket price of Rs 175 and footfalls of 11.6 million, this would enhance Inox's revenue. Inox trades at FY16 price-earnings multiple of 26.3, slightly higher than its peer PVR, which is trading at 24.9.
Speciality Restaurants
The only listed company in the fine-dining segment, Speciality Restaurants is an urban consumption story. It is known for its flagship Chinese food brand Mainland China. It has expanded its food offerings to Asian, Thai, Burmese and all-day dining under brands such Sigree Global Grill and Hoppipola. The focus on non-Indian cuisines helps it differentiate itself from other players. Speciality Restaurants will be one of the key beneficiaries of the growing tendency of Indian families to eat out. On valuation, it is trading at a PE of 21.4 for Fy16; Jubiliant Foodworks trades at 48.9.
Gulf Oil Lubricants India
The company has benefited from falling prices of crude oil, a key raw material for its base oil, which accounts for 65-75% of its raw material cost. Companies usually don't pass on the benefit of lower input costs to consumers to ensure margin expansion. A sharp recovery in sales volumes of medium and heavy commercial vehicles is expected to increase lubricant volume. Due to its focus on volume growth, the company's market share has increased to 6.9% in FY14 from 4.4% in FY07. The stock is trading at 22 times FY16 projected earnings; its peer Castrol India is trading at 38 times.
Mangalam Cement
Among small-sized cement companies, north Indiafocussed Mangalam Cement is one of the best suited to gain from sustained demand in the region. Unlike in the south and east, prices and demand in the north have been historically stable. By enhancing its capacity to 3MT, Mangalam Cement is poised to gain from an increase in cement demand in the next two years. Besides, 90% of its power requirement is met with a captive plant of 35MW, helping it save on power and fuel costs. It trades at EV per tonne of $59, far cheaper than most north-focussed cement companies.
Swaraj Engines
Swaraj Engines has been one of the best proxy plays to capture the growth in the tractor industry. It supplies tractor engines to Swaraj Tractors, a part of the farm equipment division of Mahindra & Mahindra. It is currently witnessing fall in volumes as tractor sales fall. But analysts believe the low volume trend will be over soon. Being debt-free, it is insulated from the vagaries of changing demand. It will be one of the few beneficiaries of a revival in tractor demand. Its stock is trading at 12 times FY16 projected earnings; auto ancillaries trade between 10 and 18 times.
Indian Economic and Political News and It's Impact:-
AAP likely to win Delhi Election:-
Shares of power distribution companies such as Tata Power and Reliance Infrastructure may come under severe selling pressure, after the exit polls suggested that the Aam Aadmi Party (AAP) may win Delhi elections with majority.
Analysts fear that Aam Aadmi Party's policies such as subsidies for electricity and inspection of books of power distribution companies will adversely impact investor sentiment.
"Power distribution companies such as Tata Power and Reliance Infra may come under severe selling pressure as the exit poll results were shocking, which suggested that AAP may win the Delhi elections with majority," said Rakesh Goyal, senior vice-president at Bonanza Portfolio.
AAP earlier during the election campaign had said audit of private power distribution companies books will be ordered if the party comes to power in Delhi.
Alleging monopoly of power distribution companies in Delhi, the party had said more competition will be encouraged among power suppliers so that consumers can benefit. The AAP government when it came to power for 49 days in December 2013 had earlier ordered a CAG audit.
"Power stocks that have operations in Delhi may see kneejerk reactions on Monday as exit poll results were disappointing," said P Phani Sekhar, fund manager, PMS, Karvy Stock Broking.
"The larger worry for investors is the likely audit of private power distributors by the new government.Though we believe that the audit may not find any meaningful evidence against power distribution companies, the element of uncertainty will continue to persist."
Tata Power and Reliance Infra stocks fell about 9% and 10%, respectively, in February from their highs. Both the stocks have underperformed the BSE Power Index, which fell 5.7% over the same period.
Power companies have come under selling pressure since the opinion polls were out in the beginning of February.
"High-beta socks such as Reliance Power can correct up to 8% and Tata Power can fall up to 5% while NTPC and Power Grid up to 3% on Monday," said Chandan Taparia, derivative analyst at Anand Rathi. "These power-related stocks have seen build-up of short positions as there was a lot of uncertainty related to outcome of Delhi election results. Traders' sentiment is expected to remain bearish as political parties, including AAP, have pushed for cheap electricity, which may be negative for power companies that operate in Delhi."
Tata Power derives one-fifth of its total revenue from power distribution business in Delhi. Last year, revenue from this business was Rs 6,521 crore of the total revenue of Rs 35,292 crore. Reliance Infra also derives a sizeable chunk of its revenues from the Delhi distribution business. "Power stocks may come under pressure as the broader markets display weakness. Having said that, we do not expect large negative movements in the stocks as most of news has already been priced in by the markets," said Sahil Kapoor, AVP-retail capital markets at Edelweiss Financial Services.
New Deals and It's Impact:-
Market Outlook:-
Market will remain bearish due to the uncertainty in the investor and delhi election exit poll result but for a short term.
Big Bulls Entry & Exit:-
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