FII holdings RISE IN HPCL,BPCL &IOC

FII holdings in oil PSUs hit multi-year high

In the December quarter FIIs hiked their stake in HPCL to 18.92%, in BPCL in 15.20% and in IOC to 2.61%

Deepak Korgaonkar  |  Mumbai  

January 12, 2015 Last Updated at 10:46 IST

Foreign institutional investors (FIIs) have remained bullish on the state-owned oil marketing companies (OMCs) raising their stake for the fourth straight quarter ended December 31, 2014.

Their holdings in Hindustan Petroleum Corp Ltd (HPCL), Bharat Petroleum Corp Ltd (BPCL) and Indian Oil Corporation (IOC) have hit multi-year highs in October-December, 2014 quarter (Q3FY15).

The overseas investor’s holdings in HPCL and BPCL have touched eight-year high, while their stake in IOC at highest level since March 2001.

A sharp fall in crude oil prices and complete de-regulation of diesel prices seem to have sparked a renewed interest in stocks of OMCs among the overseas investors.

The current fiscal witnessed a series of positive developments. A stable/growth oriented government, free fall in crude prices and diesel decontrol has totally changed the terrain.

In HPCL, FIIs increased their stake by nearly 5 percentage points to 18.92% in December quarter against 14.10% as on September 30, 2014. They held 10% stake in the company at the end of December 2013 quarter.

HPCL stock, the largest gainer among the pack, has outperformed the market by surging 22% from Rs 483 on September 30, 2014 to Rs 589 on BSE till yesterday. The benchmark index S&P BSE Sensex gained 3% during the period.

The top funds that have stepped up buying in HPCL include National Westminster Bank PLC as Trustee and Merrill Lynch Capital Markets Espana S.A., the latest shareholding pattern data shows.

In BPCL, the overseas investors hiked their holdings by 2.6 percentage points to 15.20% from 12.57%, while in IOC to 2.61% from 2.45% in the September 2014 quarter. They held 10.14% stake in BPCL and 2.13% in IOC at the end of December 2013 quarter.

Domestic institutional investors led by insurance giant Life Insurance Corporation of India have reduced their stake in these companies during the recently concluded quarter.

Quarter	FIIs stake in %			DIIs stake in %
ended	BPCL	HPCL	IOC	BPCL	HPCL	IOC
Dec'2013	10.14	9.99	2.13	17.63	22.64	4.41
March'2014	11.37	10.56	2.21	16.75	22.11	4.79
June'2014	12.23	12.50	2.41	15.90	20.46	4.58
Sep'2014	12.57	14.01	2.45	15.78	20.03	4.58
Dec'2014	15.20	18.92	2.61	13.96	16.56	4.41
Source : Shareholding pattern/BSE

Meanwhile, the OMCs are expected to report profits buoyed by lower interest costs which has been a drag on profitability for quite some time.

Analysts expect OMCs to record earnings for the three months to December. On average, analysts projected an aggregate net profit of Rs 1,230 crore n the third quarter ending December, according to data compiled by Bloomberg. These three companies had posted a combined net loss of Rs 4,198 crore in the same quarter of the previous year. They remain positive on state-run upstream companies as subsidy reforms get implemented on the back of an improvement in production outlook.

“Oil under-recovery (the genesis of all problems for OMCs) is likely to fall from Rs 140,000 crore in FY14 to Rs 40,000 crore in FY16/17 (assuming crude at $ 80/bbl and INR-USD at 63). As a result, OMCs’ total debt/interest will reduce from Rs 1,325/78 billion to Rs 766/45 billion”, said Satish Mishra, analyst at HDFC securities Institutional Research in a report.
 http://www.business-standard.com/article/markets/fiis-holdings-in-oil-psus-hit-multi-year-high-115011200186_1.html

MUTUAL FUNDS SITTING TIGHT....?????

Is your mutual fund sitting on your cash?

If it is for a prolonged period, check its performance vis-a-vis peers' as well as benchmark and then take a call

Tinesh Bhasin  |  Mumbai  

February 11, 2015 Last Updated at 22:35 IST

If your mutual fund scheme is sitting on 20 per cent cash, is it an underperformer? Not necessarily. ICICI Prudential Dynamic Plan has returned 37 per cent in 2014 against its benchmark – Nifty’s – return of 31 per cent. The scheme was sitting at cash levels of 19 per cent in December 2014.

Similarly, there are as many as 17 mutual fund schemes that are sitting on cash of 10 per cent in December. Of these,Quantum Long Term Equity Fund tops the list with cash levels of 32.49 per cent and two funds from Escorts had cash levels of 24 per cent. Two dynamic funds from HSBC and ICICI Prudential had cash of 23.92 per cent and 19 per cent, respectively.

ALSO READ: Equity mutual funds see inflow of Rs 56,000 cr

Explains I V Subramaniam, director, Quantum AMC: “Holding cash doesn’t mean we are timing the market. We booked profits on stocks when we thought the value was good. If you look at the corporate results, nothing has changed significantly. When we see valuation change irrespective of the index levels, we will invest.”

After the global financial meltdown in 2008, many equity funds kept a significant amount of portfolio in cash due to redemption pressure and market uncertainty. Those who did not deploy the cash sooner had a tough time recovering. “Even some good funds took two-three years to better the benchmark and give returns above the category average,” says Dhaval Kapadia, director investment advisory at Morningstar India.

According to Vidya Bala, head of mutual fund research at FundsIndia, mutual funds can hold high amount of cash in some situations. Mutual funds keep 20-25 per cent cash for a few weeks when markets are nose-diving like it happened in 2008. This helps them protect the downside risk.

“High cash holdings usually do not last over a quarter,” says Bala.

Some dynamic funds have a mandate to stop investing when they think the market has turned expensive. For example, HSBC Dynamic Fund and ICICI Prudential Dynamic Fund say upfront that they will move to cash when they perceive valuations to be high.

Mid- and small-cap funds follow this strategy often when the markets see a significant run-up. During a rising market, mid- and small-cap companies can become expensive and make the fund managers uncomfortable. These stocks are also not as liquid as say the 50 stocks in National Stock Exchange’s Nifty. “Funds book profit in such scenario and deploy the cash they received slowly in a phased manner,” said Kapadia.

From an investor’s perspective, it is important to see how long the scheme has held on to cash. If it is for a long time, say a year or so, there could be questions about the fund manager’s ability to pick stocks. On the other hand, if it is a tactical profit booking, then it is good for the scheme. Sometimes, the fund manager is forced to keep cash owing to redemption pressure. In such cases, compare the performance of the scheme with peers and benchmark. “If the scheme is holding 90 per cent in equities, investors really need not worry,” adds Bala
http://www.business-standard.com/article/pf/is-your-mutual-fund-sitting-on-your-cash-115021100379_1.html

SHIPPING COMPANY WOES...!!

 

Baltic index on crash course, at 28-year low

Coal, fertiliser importers to benefit but shipping firms in troubled waters

Aditi Divekar  |  Mumbai  

February 12, 2015 Last Updated at 00:57 IST

Commodity shipping costs are at a record low, with the Baltic Dry Index falling 30 per cent to 556 points, the lowest since 1986.

In the past two months, freight rates for major bulk commodities such as iron ore, coal and grain have dropped about 40 per cent, as slowing demand for coal from China, as well as weaker bookings, have compounded a fleet glut. This year, the Chinese economy, which buys about half the world’s coal and ore cargoes, is set to expand less than in 25 years, economists’ forecasts compiled by Bloomberg show.

While the fall in the index is proving beneficial to India’s coal and fertiliser importers such as NTPC, Adani Power, Tata Steel and Steel Authority of India, it is a drag for shipping companies, as lower freight rates hurt their revenue. For shipping companies to break even, the Baltic Dry Index has to be at 3,500, at the least.

“In the case of fertilisers such as di-ammonium phosphates, freight rates have declined 20-25 per cent in the past two months in the West Asia-India route,” said an executive of SIVA Bulk, the fourth-largest carrier of coal into India. “Coal freight has declined to $10 a tonne from $15 in the past two months, on the South Africa-India route,” said another company executive.

India primarily imports coal from Richards Bay in South Africa, Australia and Indonesia. Overall, coal freights have declined 25 per cent in the past two months, said the official. “There is a benefit for chartering companies, those that are on time charter, but the extent of the benefit depends on the nature of the contract they have signed for the import.”

Chartering companies are those that import or export cargo, either by hiring a vessel from shipping companies or appointing a shipbroker to deliver the cargo. With a fall in the Baltic Dry Index, those companies with spot contracts will benefit the most, compared to those running on long-term contracts (for about a year) or short-term deals (two-three months).

Exporters of rice and basmati will also benefit. For the year ended March 2014, India exported rice and wheat worth $9.6 billion.

Given trade troubles across the globe, especially the slowing coal imports from China and the approaching Lunar New Year, officials say freight rates will continue to remain low.

That will come as bad news for shipping companies. “2015 does not seem like a good year for the sector, in terms of freight rates. Even if China reopens after their New Year, the pick-up in trade will remain moderate, not rosy,” said Anoop Sharma, chief executive (sea transportation business), Essar Shipping.

“This is the lowest level we have seen ever. Apart from falling commodity and crude oil prices, the drop in the index is because of too many ships on water,” said an executive at JM Baxi & Sons, a leading shipping agent.

The low freight rates aren’t allowing companies to even recover operating costs, say executives. “The situation is getting worse for shipping companies. Forget debt servicing; companies are unable to recover even operating costs. As of now, we don’t see any light at the end of the tunnel. If the situation prevails, we might see companies shut down,” said an executive of Link Shipping & Management System.

“Though a 3,500 index level is broadly seen as break even point, a lot also depends on the fleet utilisation (both for spot and long-term contracts) by shipping companies,” said an analyst with a domestic brokerage firm. “The more the contract renewals at this juncture, the adverse will be the situation for a shipping company, as contracts will be locked at much lower rates,” he added.

For instance, Shipping Corporation of India is in a difficult position, as two of its 17 bulk vessels have signed mid-term (three-month) and 15 spot contracts. Essar Shipping has a 50:50 break-up between the two segments, with long-term contracts varying between two and five years.

SECTORS TO BENEFIT

COAL (IMPORT)

• India-South Africa route
• Freight: To $15 per tonne from $10 per tonne

FERTILISER (IMPORT)

• India-West Asia route (di-ammonium phosphate)
• Freight: To $8 per tonne from $12 per tonne

GRAINS (EXPORT)

• India-Iran route
• ..........................http://www.business-standard.com/article/companies/baltic-index-on-crash-course-at-28-year-low-115021101238_1.html...........===============

THE FALLING CRUDE PRICES HELPS OPERATIONAL EFFICIENCY AND SAVING BUT THE SENTIMENT GOT HURT. MOSTLY INVESTORS SHALL OFF LOAD 50-60% AND REENTER AGAIN AT LOWER LEVELS....THE BOTTOM FISHING IS ONE WAY OF INVESTMENT MODEL FOR LONGTERM GAINS FOR NEXT 1-2 YRS SPAN.

THE HEALTH OF SHIPPING COMPANIES DUE TO LOW FREIGHT INDEX WENT FOR A TOSS.