THE LIKELY RATE CUT.....!!!!!!!!!

THANKS TO ET FOR BOTH THE ARTICLES....
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Good time invest in rate sensitive stocks like Tata Motors, Mahindra & Mahindra, HDFC Bank, Bank of Baroda
http://economictimes.indiatimes.com/markets/analysis/good-time-invest-in-rate-sensitive-stocks-like-tata-motors-mahindra-mahindra-hdfc-bank-bank-of-baroda/articleshow/11401421.cms?curpg=1

Experts are almost unanimous in predicting the direction of interest rates for 2012. This is because of two major factors. First, barring unforeseen circumstances like a spike in the global crude oil prices, domestic inflation should come down. Second, economic growth has slowed drastically forcing the RBI to shift the focus from inflation to it. "The RBI will start cutting rates when inflation numbers improve to kickstart growth," says Sameer Kamdar, CEO & MD, ASK Investment Managers.

So, it might be a good time to invest in rate-sensitive sectors now, but don't do so blindly. "While rate-sensitive sectors should yield good 12-month results, they will face some tough times before they start reversal," says Kislay Kanth, senior director, research, MAPE Securities. This is because falling interest rates will reflect in the fundamentals of the company with a lag. For example, it takes a few quarters before the 'low interest rates' start reflecting as 'low interest costs' for the companies because the loans taken at higher interest rates need to be repriced.

So, investors should concentrate only on the stronger segments of the rate-sensitive sectors, which means avoiding infrastructure and real estate. Also, pick only large caps. This is because there are several other factors that will affect the market price of these stocks and falling rates is only one of them. For instance, the biggest worry facing the banking sector currently is the delinquency on its loan books, and these write-downs may continue for some more time even after the RBI starts reducing the rates. Here are our top picks.

Tata Motors 

Domestic interest rates will impact Tata Motors on two counts. First, it will help lessen the huge debt on its books. "With the rates coming down, Tata Motors will be able to refinance at a lower rate. This will help reduce its interest cost burden," says Kishor Ostwal, CMD, CNI Research. Second, the falling rates will boost its domestic sales. The company has already posted good sales for December, which went up by 47% compared to the same period last year. While its light commercial vehicles and diesel passenger cars are doing well, an economic pickup will boost its currently sluggish heavy commercial vehicles. The market is bullish on the firm more for its excellent performance on the Jaguar and Land Rover business, whose demand is up.

Mahindra & Mahindra 

M&M could show decent volume growth and report much better numbers when the rates go down. Its domestic passenger vehicle sales for December increased by 24% compared to the same period last year. Considering the buoyancy in demand, the company could pass on the impact of the falling rupee and rising input costs by increasing the price of its new car, XUV 500, by up to Rs 55,000 this month. Though the tractor segment may show lacklustre growth in the third quarter, it is expected to improve in the fourth quarter. This evergreen segment should continue at 10% annualised volume growth in the coming years.

HDFC Bank 

"The current sell-off in the banking sector has brought down the valuations. Investors should use this opportunity to buy good banks, such as HDFCBank, at current valuations," says Murali Gopal, banking analyst, BRICS Securities. The bank was able to sustain a high 30%-plus growth rate in its net profit despite the difficult operating environment. As the interest rates come down, the demand for corporate loans should improve further. Expanding reach, with the help of more branches, should help HDFC Bank to improve market share. More importantly, it is able to maintain its non-performing assets (NPAs) close to the 1% band and so, is relatively free from asset quality worries.

Bank of Baroda 

While Bank of Baroda can boast high asset quality and its gross and net NPAs are placed only at 1.4% and 0.47%, respectively, it is quoting at much lower valuations compared to private banks with similar asset quality. This is because the comparisons are usually done among the PSU banks where increased delinquencies are a major threat. However, analysts insist that Bank of Baroda is the best among public sector banks and should be treated separately. "Bank of Baroda has conservative accounting practices and we believe that it should report much less NPAs compared to other PSU banks," says Dinesh Shukla, banking analyst, Sharekhan. 

IT future, Rupee appreciation.....

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I am of the same view that the Software giants will see a serious decline in their Market Cap down the line despite some surge in 2012. The markets already discounted the mid cap and small cap IT stocks. I see the Rupee will appreciate to 42-45 level by 2014-15 level. I even shared my personal view that the IT bellwether Infy will trade at 1200-1000 range in future. this will happen over a period of time but for now the short term rise could benefit the Bulls and likely to touch 3050 level
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Serious reforms wiill see Rupee return to mid-40s level: Bill Belchere, Mirae AMC


In an interview with ET Now, Bill Belchere , Global Chief Economist, Mirae Asset , shares his outlook for emerging and developed markets. Excerpts: 


ET Now: What is your forecast as we start 2012 specifically for emerging markets versus developed markets? 


Bill Belchere: At this juncture, we are passing through a period of uncertainty where most of the world looks like it is slowing down. So, we are looking for economies that have greater policy flexibility and larger domestic demand which gives them a greater degree of control over their own destiny. In the developed markets, it looks like the US is decoupling from the rest of the world right now and is accelerating. 


So, we are more favourable towards the US, but not theEU and not Japan. In the Asia space, we continue to like the big domestic economies and particularly China and Indonesia which we think will be announcing continue to reinforce policy easing. This will ultimately begin to show up in better economic performance and equity performance as the year progresses. 


ET Now: Dollar index is at 81 which is at a one year high and we know that is not the real value for the dollar index. So what is your view first on dollar and then the dollar index for rest of the year? 


Bill Belchere: For the first half of the year, the greenback is going to be very strong. The US is strengthening and accelerating in terms of economic growth compared to the rest of the world. However, Europe is going through the worst phase of their economic performance. This year we see the economy moving under recession. The central bank is adding a lot of liquidity. That tells us that the euro could fall to 115 to the US dollar in the first half of the year. So, we look for the dollar to continue strengthening. 


ET Now: Given that the European situation is getting a bit more complex as the data shows, are you worried about the status of the euro because a lot of economies in emerging markets are dependent and they derive export revenues from the region? 


Bill Belchere: Yes, we are a bit concerned about the euro area's fortune in the spill over to emerging markets and particularly Asia. The EU area is the biggest trade destination for Asian exports. Its banks also finance a lot of Asian activity. So, any hiccup or downturn in Europe is going to be felt fairly strongly in Asia. We do not think this causes Asia to slip into recession, but certainly it does present a headwind to economic growth and reduced economic prospects until the euro area clears up. 
ET Now: What about emerging markets? For the year gone by, emerging markets were down, developed markets were up. Do you think tables could reverse this year? 


Bill Belchere: There are a couple of things that look interesting to us, those that have policy flexibility and large domestic economies. That would include Brazil, we think China qualifies there, we see Indonesia is already off and running. Thailand is beginning to cut rates as well; we are looking for fiscal responses across the region and particularly Southeast Asia. However, those 4 economies look good. We would like to add India to that, but it still looks like India is struggling a bit and it is just a tad too soon. 


ET Now: India has seen quite a bit of pronounced weakness. So what is the view overall on India especially in terms of fund flows and the interest post state elections as well as the budget? 


Bill Belchere: That is certainly possible but precondition for that is India needs a serious reform effort. It has exhausted its easy growth at this without those serious reforms. We do not think growth will recover much above 7% and inflation will remain a persistent problem running well ahead of that over the rest of the world. This will create a lot of volatility and instability in this economy which is a detriment to funds flowing in or a challenge to encourage entice funds to flow in. 


ET Now: Indian rupee has depreciated and appreciated down about 20% in 2 quarters. For this year and for this quarter, are you bullish on rupee or are you neutral on Indian rupee? 


Bill Belchere: We are investors and we remain optimistic. Once India settles down, we will see the rupee begin to recover. We think it is awfully weak, which is very good for the exporters. A precondition to this is a sounder macro policies and particularly on the reform front. If we did get serious reforms, we could easily see the rupee return into the mid-40s and inflation fall fairly significantly. 


ET Now: We have the RBI credit policy which is around the corner and there are lots of expectations of rates being cut in India, perhaps in the first or the second quarter of FY13. Do you subscribe to that view and what is your year end projection for inflation? 


Bill Belchere: Our year end growth and inflation targets are for 7% growth and 7% inflation. We do think that interest rates will be cut in the first quarter of this year and at the end of March probably by 50 basis points. We would expect a total of 100 basis points at least over the course of this year.

Good economic outlook

The Nifty is finding support at every fall. The rebounded of stocks are more than the faring negative ones. This is a classical sign of bottoming of markets. It is evident that the Indian economy is not doing well when it compared to yester years but the fact is that when the world economy is in crisis we are talking about a growth rate around 7%. The India’s economy growth is contracted and stood at less than 7 % in July-Sep-11 but the other favourable indicators are started flooding in. The negative growth in inflation is a very positive sign and the RBI’s preparation for a rate cut any time soon will help the industries to cut the debt burden and the serviceability will be improved. The current challenge is due to FCCB conversion or payment and the higher load on companies’ equity due to rupee depreciation is a cause of concern.

The Central Govt lead by UPA is preparing to face the elections in Hindi heart land. Any favourable signs of improvement in their tally will boost the confidence to reforms. The RBI is willing to go for a rate cut in March-12. The study reports are giving encouraging results as the Indian economy is going to be 2.5 trillion by 2021. The Govt. is planning to spend and expecting at least one trillion on infra structure by 2017. In similar lines, the reports suggesting that the per capita income likely to grow by 900USD to 1800 USD by 2012. Reliance is not showing required strength to float above 729 is a cause of concern.

The banking and housing finance stocks did not fall as they are expected, is a good sign to bulls. The metal stocks like Tatasteel and SAIl alomost bottomed out. The TataMotors is out performing the market. The stock may not fall below 186-185 level even Nifty slide. The has stock has a potential to go above 225 and may touch 240-250 level in coming months. The other stock is M&M which is lagging the over all market. It has strong resistance at 693 level, once crossed likely to touch 740-750 level easily. The next fall that takes place in Nifty, M&M very likely to cut it's  yearly low but may not fall far below it"s yearly low. The SBI is taking two steps back ward and one step forward. The ICICI Bank managed to build its bottom at 685 level is a good support, fair chances are it may touch 620 level.