RCOM...A BUY...????

Higher FCF to improve RCom balance sheet: Axis Capital| Published: Aug 29 2014, 02:24 ISTSUMMARYRecent QIP and warrants issue helped RCom raise Rs 6,100 crore (~15% of FY14 net debt).Recent QIP and warrants issue helped RCom raise Rs 6,100 crore (~15% of FY14 net debt). Funds are expected to be primarily utilised for repaying high-cost rupee debt (which was ~35% of total debt in FY14)More deleveraging initiatives expected to unfold. We value Globalcom at 5.5x FY16E EV/Ebitda (in line with average for global peers). It has leadership in carrier, enterprise, and voice businesses.We assume ~Rs 6,000 crore from securitisation of tower rentals (likely to accrue in H2CY14). Major assets include 135 acres at DAKC (Dhirubhai Ambani Knowledge Centre), Navi Mumbai, and 4 acres of prime property at Connaught Place, New Delhi. DTH has 4.8 million subscribers, valued at 20% discount to Dish TVHigher FCF generation to further improve balance sheet. Higher Ebitda and capex-light strategy to generate better cash flows. Going forward, Ebitda growth will be led by GSM outpacing CDMA (which has stabilised). RCcom has low regulatory payout at $441 million (considering absolute payments over 10 years). However, present value (PV) is just $255 million. Upfront payment in 2016 is likely to be $65 millionIf RJio opts for underlying network of RCom (2G intra-circle roaming arrangement for voice capability). Stable regulatory environment and consolidation among Top 5 telcos (may lead to better tariffs).Axis Capitalhttp://www.financialexpress.com/news/higher-fcf-to-improve-rcom-balance-sheet-axis-capital/1283403................TECHNICALLY THE STOCK SHALL NOT FALL BELOW 98-102 RANGE ON ANY GIVEN DAY...THE STRICT STOP LOSS SHALL BE AT 92 LEVEL.......THE STOCK IS IN THE CONSOLIDATION PHASE AND ONE SHALL ACQUIRE IN SMALL QUANTITIES FROM 104-98 AND WHEN BOUNCES ABOVE 118-120 THE LARGE CHUNK CAN BE ACQUIRED FOR LONG-TERM GAINS.......THE HIGH BETA STOCKS ARE ALWAYS RISKY WHEN THE MARKET FALLS....SO IS RCOM...........

GDP-GOING GOOD FOR NOW..!!!!

Between Q1 India GDP numbers: Green shoots and red flags

ENS Economic Bureau | New Delhi | Published: Aug 30 2014, 08:05 IST

Led by strong industrial activity and a better-than-expected agricultural performance, the economy grew at a rate of 5.7 per cent in the quarter ended June, its fastest pace in two-and-a-half years, according to government data released on Friday.

GDP growth was 4.7 per cent in the corresponding quarter a year ago. Economic growth has been largely subdued marked by sub-5 per cent growth for the last two fiscals, with growth during the fourth quarter of last fiscal (January-March 2014) coming in at 4.6 per cent.

Here are positives and negatives on the GDP growth surge:

GREEN SHOOTS

* Early signs of a cyclical uptick in the broader economy

* A better-than-expected agricultural performance

* Visible surge in export growth during June quarter

* Energy, civic sector output exhibited a sharp pick-up

RED FLAGS

* Surge aided by a favourable base effect, including for manufacturing, power

* Moderation in services, especially financial and community services

* Delay in kharif sowing could reflect in lower agricultural output in Q2FY15

* Slowdown in electricity expected in coming quarters due to coal shortage.

http://www.financialexpress.com/news/between-q1-india-gdp-numbers-green-shoots-and-red-flags/1283756

STEEL GOING IS GOOD...!!!

Over two-thirds of the total steel consumption is in the construction sector

Steel consumption in the country grew at a slower pace during April-July 2014 at 0.6 per cent, but a 30 per cent growth in exports helped swing the demand-supply balance in favour of demand.

Domestic consumption during the first four months of the fiscal 2014-15 stood at 25.72 million tonnes as compared to 25.57 million tonnes in the same quarter last year, data from the Joint Plant Committee, a wing of the Ministry of Steel, showed. In India, over two-thirds of the total consumption of the metal is in the construction sector.

While domestic demand grew slowly, demand for the metal produced at Indian blast furnaces was supported by the growth in exports. During April-July 2014, exports grew nearly 30 per cent to 1.84 million tonne as compared to 1.42 million tonne.

Steel production too kept pace with the consumption growth. During the four months, steel production grew 0.9 per cent to 27.39 million tonnes as compared to 27.15 million tonnes.

More than half of this production came from Steel Authority of India Ltd and Tata Steel’s plants. The two companies had over 15 million tonnes of production during the four months.

The improved market dynamics reflected on the financials. SAIL reported an 18 per cent increase in net profit to ₹529.88 crore for the first quarter of fiscal 2014-15 while JSW Steel reported a net profit of ₹801 crore, turning around a loss in the same quarter last year.

Tata Steel’s business from India also improved with the company’s net profit growing 67 per cent to ₹2,267 crore.

Credit rating agencies expect the performance of steel companies to improve further in the coming months.

“Fitch expects steel demand growth to start to improve from the second half of fiscal 2014-15, supported by a pick-up in consumption following rising consumer sentiments and an expected improvement in economic growth,” said Fitch Ratings in a statement.

Fitch added that the improving consumer sentiment is reflected in the passenger vehicle sales data compiled by SIAM which has shown sales volumes increasing in June and July 2014 as compared to a fall last year. “Steel demand was weak in the last fiscal due to slow growth in the key steel consuming industries of automobiles, infrastructure, construction and engineering,” Fitch stated. In fact, Fitch expects steelmakers to pass on the increased costs due to the hike in iron ore royalty rates to customers because of the improved demand environment. “The higher royalty rates will raise the input costs of Indian steel producers by $2-5 per tonne of steel produced, depending on the type and grade of iron ore used. Fitch expects steel producers to be able to pass on their higher costs to consumers because of a likely improvement in steel demand in India,” the rating agency stated.

Meanwhile, ICRA pointed to the lower international prices of coking coal aiding steel producers. Coking coal is almost entirely imported with very little domestic production. According to the rating agency, coking coal prices have declined by 16 per cent in the first quarter of 2014-15 as compared to the same quarter last year. This drop follows a 13 per cent decline in coking coal prices over the course of 2013-14 fiscal.

“We expect the domestic players producing steel through the blast furnace route to benefit from the continuing weakness in international coking coal prices, a trend which has already been observed in the financial results posted by a number of companies in the first quarter of 2014-15,” said ICRA in a research note.

India’s domestic consumption of steel in 2013-14 was 73.93 million tonnes. Global audit and consultancy firm Ernst & Young expects India’s steel consumption to grow to 83 million tonnes by the end of 2014-15.

(This article was published on August 26, 2014)

http://www.thehindubusinessline.com/economy/macro-economy/steel-industry-back-on-the-growth-path/article6354248.ece?homepage=true

COAL GOLD ILLEGAL ALLOTMENTS...!!!!!!!......??????

Coal scam: Anxious moment till judgement day

Some say coal blocks could be auctioned, while others say that existing users would be allowed to continue to operate after paying a fine

Shishir Asthana  |  Mumbai  

August 26, 2014 Last Updated at 18:19 IST

Metal stocks reacted sharply on the day Supreme Court declared all captive coal blocks allotted since 1993 as illegal. But after the dust settled, metal stocks recovered part of the lost ground the very next day.

 

So what changed overnight? Nothing except that market participants had more time in their hand minus the noise in the market to carefully go through the Supreme Court order. Experts commenting on the issue too helped in controlling the panic.

 

Panic was created when reports of Rs 2 lakh crore of investments will be hit because of the Supreme Court order were flashed. Investors hit the sell button on all those companies who were allocated coal mines not bothering to check the text of the Supreme Court judgement. No one even bothered to check before selling Tata Steel that the company has been allocated coal blocks before 1993.

 

Nowhere did the honorable Supreme Court say that they would be de-allocating the mines, at least not yet. Though the court said that allocations have been illegal and arbitrary but they have not been cancelled. Future course of action will be decided after further hearings.

 

Emkay Global Financial Services in their comment on the event have said that as per their discussion with lawyers engaged in the case a committee is likely to be set up to decide the future course of action on the coal blocks that have been declared illegal.

 

Harish Salve, Senior Advocate, Supreme Court has been quoted in CNBC saying “Unless something is brazenly unconstitutional, every illegality or every irregularity, every arbitrary action does not necessarily need the court to invalidate where invalidation of an individual action will be more productive  of public mischief, or cause public injury, greater than public good. That's a well established principle.”

 

Salve also said that the court is perfectly conscious of balancing the need of industrialization and added that in his interaction with the Judges he feels that there will be a committee to three retired judges that will be set up to inform the Supreme Court of the action plan ahead.

 

Vinayak Chatterjee, chairman, Feedback Infrastructure also in an interview to CNBC said that the SC is unlikely to disrupt operations. It is unlikely to do anything drastic that will affect production of the mines or its production to other sectors of the economy.

 

With some clarity that supplies will not be disturbed or alternate sources would be available for the companies the doomsday scenario has been substantially downplayed. Worst case scenario would be that profitability of the companies would be affected rather than the earlier premise of units having to shut down their operations.

 

As for the argument that Rs two lakh crore of investment would be jeopardized an article inScroll.in points out that the actual figure that would be affected is only Rs 4,000 crore. The article points out that only 39 of the 218 blocks allocated since 1993 have started production till December 2013. Government’s own numbers point out that Rs 8,777 crore of investment has gone in to 30 blocks which are in production and 17 which are nearing production.

 

Though some of the companies which were allotted mines have recovered banks and finance companies continue to be battered. Analysts expect that anxiety will continue till September 1, 2014 when the Court would hear the consequences of the illegality of the coal blocks. Chatterjee feels that there will be a transition from an old system of allocating coal to a new system that is more transparent etc and in the meanwhile steps will be taken to see that business does not suffer.

 

Broking firms are speculating on the options that the Supreme Court has in front of it. Blocks could be auctioned while others say that existing users would be allowed to continue to operate after paying a fine.

 

Emkay Global sums it up well by saying that till there is clarity on the part of the government and Supreme Court on future course of action, overhang might continue.

http://www.business-standard.com/article/economy-policy/coal-scam-anxious-moment-till-judgement-day-114082600946_1.html.

........................................

I PERSONALLY FEEL THAT THE SUPREME COURT WILL TAKE A PRAGMATIC STEP AND MAY FOLLOW THE GAS EXPLORATION MODEL WHERE REVENUE SHARE AND PROFIT SHARE TO LOCAL PANCHAYATS THE RETROSPECTIVE FINE OVER THE MINING WILL IMPACT THOSE WHO MADE THEIR WAY IN GARNERING THE EARLY OPPORTUNITY...!!!

THE ECONOMY NEEDS TO BE TAKEN CARE AND WILL ASK TO FILE CASES AGAINST THE MINISTERS AND BUREAUCRATS WHO MADE THEIR CHUNK....SO, NET NET THE ISSUE WILL CREATE LOT OF UNCERTAINTY IN THE MARKETS AND WILL CREATE CHAOS...

BE CAREFUL...ALL THE BIG CORPORATES MAY SEE SOME SCREENING.....

LONG TERM --ALL are dead STOCKS..!!!

THE STORY OF LONG-TERM NEEDS TO BE EXPLAINED....

DURING THE INFRA BOOM TIMES, SOME PERSON CLOSE TO ME BOUGHT 500 SHARES OF PUNJLLOYD AT 370 RANGE,100 SHARES OF ABB AT 1020-1040, ALSO 3500 SHARES OF IDEA AT 138-140 RANGE during 2008.

THIS WAS HAPPENED DURING 2008 BOOM TIMES WHEN INFRA STOCKS ARE SACRED AND THE 3-G CALLING.....

FRIDAY PRICE CLOSING: IDEA IS AT 156, PUNJ IS AT 38, ABB AT 1005. THEY ARE THE BEST IN THEIR SECTOR, BUT THE INVESTED AMOUNT WAS NOT REALLY REALISED. HAD THE DECISION BEEN TAKEN TO INVEST IN FIXED DEPOSIT, THE MONEY WOULD HAVE DOUBLED...
SO VISUALISE THE FUTURE EARNINGS AND CO-RELATE THE CURRENT PRICE, WHETHER FULLY PRICED IN ON YET TO CATCH-UP MARKET ATTENTION......THEN DECIDE. THERE ARE MULTI-BAGGERS OF 5-10 TIMES DURING THIS PERIOD..!! OTHER WISE....LONG TERM  STORY-A TALE OF-"ALL are dead STOCKS"..!!!

HOWEVER, THE INVESTORS TRIES TO KEEP WITH FALLING STOCKS BY FINDING UNWANTED REASON/WICKED EXPLANATION OF THE DECISION.

THE RULE IS VERY SIMPLE..RIDE THE RUNNING HORSE BUT NOT ON THE LAME....

MARKETS ARE ALWAYS SMART TO HANDOVER THE SICK/STICKY PAPER TO RETAIL INVESTORS WITH HIGH-PROJECTION RESEARCH REPORTS......

THE THEORY IS SIMPLE::::: BUY LOW AND SELL HEIGH.....WHO IDENTIFIES CORRECTLY AND EXECUTES ACCURATELY ARE THE WINNERS.....OF-COURSE..ALWAYS...!!!

INVESTORS RUINED.....THE IPO- KILL..!!!

Most IPO investors miss out on the party

BHAVANA ACHARYA

BL RESEARCH BUREAU

60% of the offers made between 2006 and 2008 are languishing below their offer price

August 24, 2014:  

The Sensex and the Nifty are up a good 26 per cent from the previous market highs of 2007-08.

But for investors who bought into the many initial public offerings (IPOs) during this period, this bull party hasn’t delivered any gains. Even as the bellwethers have zipped past their 2008 highs, several IPOs that hit the market in the heady days then are languishing below their offer price.

The period from January 2006 to 2008 marked an IPO boom, with 169 companies making their debut. Of these, 100 stocks, or roughly 60 per cent, still trade below their issue prices.

But for investors blessed by Lady Luck, 20 per cent of the issues gave returns in excess of 100 per cent.

Deep in the red

An analysis of returns on the IPO stocks, after adjusting for splits, bonuses and dividends, shows that just three in every 10 of the issues between 2006 and January 2008 have managed to deliver better-than-market returns.

OnMobile Global is 85 per cent below issue price, as is Parsvnath Developers. Everonn Education is 69 per cent below issue price.

A handful have fallen right off the radar, not registering any trades at all. Koutons Retail, Pyramid Saimira, and Shree Ashtavinayak have been suspended altogether. Yesteryear market darling BL Kashyap is now trading at less than ₹10 a share. Dhanus Technology’s stock price is less than ₹1.

The market mood was euphoric in 2007-08, with most companies posting strong double-digit growth in both revenues and profits. Select companies in fancied sectors, such as power, infrastructure, retail and realty, traded at stiff premiums to the market. Many unlisted companies took advantage of this to line up ambitious expansion plans that ultimately backfired. Issues were priced at high valuations, cases in point being Reliance Power, Hubtown (then Akruti Nirman), Koutons Retail and Vishal Retail.

Others such as C&C Constructions, DLF, Brigade Enterprises, CCCL, Hanung Toys and Mudra Lifestyle were unable to pull through the economic slowdown that followed.

As a result, these stocks could not join the party when the wilting stock market rebounded from September 2013.

But there were a few investors who hit the jackpot even in the 2007-08 IPO boom. Page Industries, Kaveri Seed Co., Astral Polytechnik, and Sadbhav Engineering have turned out to be gold mines. Page Industries, for example, is at ₹7,410 now, against an issue price of ₹360. Kaveri Seed is at ₹832 on an (adjusted) issue price of ₹34.

Better quality

With most of the older issues failing to deliver, it is not surprising that most IPOs made over the last couple of years have found it difficult to attract any investor interest.

The primary market did see brief activity in 2010, but this period was marked by several issues of questionable quality, such as Brooks Labs, RDB Rasayans, Bharatiya Global etc, prompting regulatory action.

Among recent IPOs, the ones delivering reasonable returns include Repco Home Finance, Just Dial, NBCC and the blockbuster, Wonderla Holidays.

(This article was published on August 24, 2014)

http://www.thehindubusinessline.com/markets/60-of-the-offers-made-

between-2006-and-2008-are-languishing-below-their-offer-

price/article6347380.ece

Power...STOCKS....shocks

Power up without shocks

MAULIK TEWARI

Stocks in the power sector have put up an electrifying performance. But there are only some that you can plug into

The Indian power sector has been short-circuited by many troubles. These range from inadequate and costly fuel for some players to un-remunerative tariffs, and high debt and large foreign exchange outgo for others. But, giving a go-by to these concerns, power sector stocks have put up an electrifying performance on the bourses. They have gained between 30 per cent and 94 per cent from the September 2013 lows to now, beating the Sensex’s gain of 36 per cent. The only exception has been NTPC, which gained a modest 8 per cent.

Why this euphoria? Hope that the Modi-led Government will fix the problem of coal shortage boosted sentiment. Recent orders by the central and state sector regulators permitting some companies to hike tariffs too has come as a relief, though the last word is not yet out on this.

Despite the problems ailing the sector, some companies are better placed than others and staying invested in them can reap rewards. So, what sets apart the men from the boys?

Fuelling worries

With fuel (coal and gas) costs accounting for up to 60 per cent of net sales for many power producers, access to an assured and viable fuel supply is critical. India’s largest power generator NTPC is best placed on this front. It sources 90 per cent of its coal requirement under fuel supply agreements entered into with Coal India, which ensure certain guaranteed supply. The rest is largely met through imports. Tariffs set by the Central Electricity Regulatory Commission (CERC) allow NTPC to fully pass-through increase in fuel costs through higher tariffs. This puts it on a better footing. Moreover, NTPC has been allocated 10 coal blocks with a production potential of 100 million tonnes per annum, which in due course can cater to about half its existing installed power capacity. Of these, the Chatti-Bariatu mine is expected to start production by the end of 2014-15.

While Reliance Power is largely fuel-secure, a change in Indonesian coal export regulations has affected the viability of its 3,960-MW imported coal-based Krishnapatnam project currently under development. It also awaits gas allocation for its yet-to-be-operational 2,400-MW Samalkot project. That apart, fuel linkages with Coal India, acquisition of captive coal mines in India and mining concessions in Indonesia for both operational and under-implementation projects, provide comfort.

On hot coals

Tata Power and Adani Power, on the other hand, have seen fuel woes affect their operations adversely. Their respective ultra-mega power plants in Mundra, Gujarat, were originally envisaged to be run on cheap imported coal. But consequent to a change in Indonesian regulations in 2011, coal imports from that country turned expensive, rendering operations at these plants unviable. With these plants accounting for half of the companies’ capacity, their consolidated numbers dipped into the red. Also, Adani Power’s 1,320 MW Kawai plant in Rajasthan, which is yet to receive supplies from Coal India, has been forced to rely on coal imports.

The recent nod from the Australian Government to Adani Enterprises for developing a 60-million-tonnes per annum coal mine there, can benefit Adani Power. But it will possibly be about three years before production commences. Also, the cost of coal will have to be watched out for.

JSW Energy too runs a substantial 65 per cent of its operational capacity on imported coal. That it sells a large part of its power in the volatile merchant market makes it all the more vulnerable to a spike in fuel costs.

Out on gas

Then, take Torrent Power which has seen nearly 80 per cent of its generation capacity of 2,100 MW turn inoperative over the last two years, consequent to the decline in gas production from Reliance Industries’ KG-D6 block.

With State distribution utilities refusing to purchase expensively produced power, using imported natural gas too has not been an option. Torrent Power has also been forced to buy power from outside sources to meet the requirement of its distribution business, significantly increasing its power purchasing costs. Consequently, its profit has taken a big hit in the past two years.

Tariff wars

The extent to which escalating costs can be passed on to consumers has thus emerged as a big differentiator in the power sector. Assured sales to customers at tariffs that are regularly revised to allow cost increases to be passed through, are therefore something to look out for.

Power plants of Tata Power and Adani Power have borne the brunt of sharply rising imported fuel costs that have surpassed the tariffs they charge. Following the companies’ petition for relief, the CERC allowed them to charge higher tariffs to recover costs.

Following an appeal from the state distribution utilities concerned, the Appellate Tribunal recently upheld (partly) the CERC order. With the distribution utilities likely to challenge this order too, the risk that it may be overturned remains.

But leaving aside the Mundra power plant, a large part of Tata Power’s operations (generation and distribution) are based on tariffs that allow it complete cost pass-through, plus an assured return on equity. Also, long-term power purchase agreements with state distribution utilities ensure guaranteed sales. On the other hand, Adani Power sells most of its power at levellised tariffs with no fuel escalation provisions.

Likewise, recent favourable orders from the Gujarat Electricity Regulatory Commission allowing Torrent Power’s distribution business to charge higher tariffs have come as a big relief for the company. But that alone may not suffice. An increase in gas availability is crucial for growth in power generation by the company.

But, it is the state-owned NTPC which stands out among all. It sells its entire power under long-term contracts and at CERC-determined tariffs that cushion it against rising costs and also provide an assured return.

In contrast, JSW Energy sells up to half its power in the volatile merchant market, exposing it to market-determined tariffs with no assured buyers.

Reliance Power has already tied up with buyers for both its operational and a much larger upcoming generation capacity.

While a part of its operational plants earn regulated tariffs, a large part of the upcoming projects are those that have been competitively bid for. But with factors such as a change in Indonesian coal export regulations implying an increase in future running costs of these plants, Reliance Power has already approached CERC with tariff revision petitions. These have not yet been decided upon.

Foreign exchange risk

The direction of the rupee too can play a big role in the fortunes of power generators. Adani Power and JSW Energy have significant outgoes in foreign exchange, exposing them to any sharp depreciation in the rupee.

Adani Power, for instance, spent ₹5,663 crore, comprising a third of its revenues, in forex during 2013-14. Likewise, in the year before, forex spending accounted for a large 60 per cent of the company’s sales. Ditto for JSW Energy which spent ₹3,110 crore, a large 35 per cent of its revenues, in forex during 2012-13. These expenses have largely been on fuel imports.

What’s in, what’s not

Overall, after weighing all the above, at the current market price of ₹138, the stock of NTPC trades at a reasonable 10 times its consolidated 2013-14 earnings. While NTPC’s earnings will take a hit (as they have in the June 2014 quarter) post the more stringent CERC tariff regulations announced in February, its fundamentals remain strong.

After the sharp rally, at the current market price of ₹74, JSW Energy trades at an expensive 16 times its consolidated 2013-14 earnings. Moreover, its large exposure to the merchant market makes it a risky investment that can well be avoided.

But for the loss-making Mundra plant, Tata Power’s operations are profitable. At the current market price of ₹92, the stock of Tata Power trades at a reasonable 1.6 times its consolidated book value for 2013-14.

A positive ruling on tariff hikes for the Mundra plant will give a big boost to earnings and is one reason for holding on to the stock.

While Adani Power too stands to gain from a favourable tariff order on its Mundra plant, investors could stay away given the other concerns affecting the company. Also, after the recent rally, the stock is trading expensive relative to better-off peers such as Tata Power.

Torrent Power, which is reasonably valued, has gained some succour from recently-passed favourable tariff orders. But an increase in gas availability is crucial, which may be possible only two-three years from now, if domestic gas supplies rise, once the pricing issue is settled.

The laggards

With a major part of hydro power producer NHPC’s planned capacities to be commissioned only after September 2016, revenue growth is likely to be muted over the next two years.

Moreover, given the company’s unimpressive track record in project implementation, investors could exit the stock. Indiabulls Power too, which commenced power generation for the first time last fiscal, has seen many of its project deadlines getting stretched.

While it has fuel supply and power purchase agreements in place for many of its projects, the delays have had a significant bearing on its earnings. It is precariously placed with interest coverage ratio of only 0.3 times.

Transmitting high returns

Do you find the current state of affairs in the power sector somewhat unsettling? If so, you can safely bet on stocks such as Power Grid Corporation of India (PowerGrid). At the current market price of ₹132, the stock trades at 14 times its consolidated earnings for 2013-14 — nearly the same as its five-year average valuation. It is, nonetheless, a decent buy given its growth potential.

Assured returns

PowerGrid has near monopoly on the country’s inter-state and inter-regional transmission network and therefore stands to benefit from the thrust on increasing the country’s power transmission capacity. It has set out a capital expenditure of ₹22,450 crore for the current fiscal and plans to expand its existing inter-regional transmission capacity of 36 GW by 7.3 GW during this period.

Tariffs set by the Central Electricity Regulatory Commission allow PowerGrid a complete cost pass-through plus an assured returnon its commissioned projects. The company’s growth prospects are thus primarily dependent on expansions in transmission capacity, something which it has delivered on. The same is reflected in its rising revenues and profits too. Besides, Power Grid’s foray into intra-state transmission is on track.

Gaining trade

You can also consider investing in PTC India, the country’s leading power trader as also the nodal agency for cross-border power trades. At the current market price of ₹80, the stock trades cheap at about seven times its consolidated earnings for 2013-14, less than half its five-year average valuation.

PTC India buys short-term power surpluses of state utilities, independent power producers and captive power plants and sells them to customers (mainly state utilities) that face a deficit. Besides, it enters into long-term agreements for assured power purchases and sales.

Volume game

Sales under short-term (less than one year) contracts account for close to 60 per cent of the volumes. With margins on short-term trades capped at 7 paise per unit and actual margins earned being even lower, volume growth holds the key to higher revenues.

For the nine-month period ended December 2013, PTC India traded 27,645 million units, up 30 per cent from the year-ago period. With a 30 per cent share in the short-term power market, PTC India is well placed to benefit from the power demand-supply imbalance in the country.

Healthy performance of the subsidiary PTC India Financial Services too provides strong support.

(This article was published on August 10, 2014)

http://www.thehindubusinessline.com/features/investment-world/power-upwithout-shocks/article6301355.ece?homepage=true

NIFTY Crucial at 7678-75 level, above 7720 Good..!!!

The markets in India gained by the Auto stocks and HDFC support but there is no short covering seen in the main counters and the OI kept raising...!!!. The BULL market may keep the bears trapped at selling 7660 level if they fail to cover at 7720-7740 range.

yesterday suggested to go short as SELL on Rise will go by a strict stop loss at 7740. any move above 7750 will take us to 7950 level with ease as the Bears couldn't put pressure on the Index to trade below 7550 level. The counters like LT, RIL and ONGC up tick may trigger sharp rise in Nifty level needs to be watched carefully.

The general trend in the Banking stocks is laggard as the BRIBE issues and NPAs weighing. The Bank Nifty may touch 15050 level but it has strength above 15150 level. the SBI above 2440 can easily take us to 2485-90 level and it may touch 2540 level due to short covering. The ICICI bank is the indicator, so long trades above 1442 is strong, good above 1469-72 level. The Bank Baroda shall not trade below 874 level to see 940-60.

The power stocks may get hammered more if the GAS price is HIKED.

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Rajan warns capital outflows will test Indian economy RBI governor expresses optimism that the central bank had ‘done enough’ to prepare for an imminent outflow of capital once interest rates rise abroadMumbai: Reserve Bank of India (RBI) governor Raghuram Rajan on Monday warned that India “will be tested” by capital outflows once interest rates “start picking up” in industrialized countries. Replying to a question after delivering the 20th Lalit Doshi memorial lecture, Rajan expressed hope the central bank had “done enough” to prepare for an imminent outflow of capital once rates rise abroad. “I have no doubt that when rates start picking up in industrialized countries, we will be tested by capital outflows. My hope is that we have done enough in terms of strengthening the macro-economic framework and building up reserves to buffer up the economy,” Rajan said. India’s foreign exchange reserves have climbed to near all-time highs of more than $320 billion, benefiting from huge dollar inflows this calendar year. Money and equity markets in developing countries are worrying over the consequences of the end of 0% interest rates in the US as growth, and hence inflation, there picks up in the next few months. Traders in India are particularly nervous because the last time US Federal Reserve indicated an end to its multi-billion dollar bond-buying programme in May 2013, the resulting outflows pulled the rupee down to a historic low of 68.85/dollar by August 2013. Rajan said that the way asset prices have been “boosted” by central banks in the last few years, a flight of capital from developing countries is likely. “Monetary policy is doing too much. Monetary authorities are boosting asset prices rather than the economy. Especially my colleagues in industrial countries are trying too hard,” he said, while suggesting that other parts of the developed countries’ economies should also contribute to reviving growth there. Rajan said he expects capital outflows from developing markets to resume because asset prices “have been blown up for a very long time”. “I was speaking with Ruchir Sharma (head of developing economies and macroeconomics at Morgan Stanley) and he was telling me that asset prices have risen at the fastest pace he has ever seen. There is clearly a disconnect,” he said. In his prepared speech, Rajan purposefully batted for direct cash transfers to the poor to improve public services. “Money liberates. Could we not give them cash to pay for their medicines and food, and command respect from the private service providers?” Rajan asked. He said the RBI will “nudge” banks to offer simple financial products to the poor at a low cost and, at the same time, be profitable. “Implementing cash transfers does not dismantle public services. It only means that they will pay (for services) and command respect. It is not a cure-all but will help people out of poverty,” Rajan said. He said the RBI will work with the government on its new financial inclusion plan to be announced on Independence Day, Friday. “We are already licensing payment banks and intend to move forward quickly. We have also released a paper on small banks which will be local in nature, serve local communities and employ local people,” Rajan said. Rajan said the debate about crony capitalism in the elections just gone by means that concerns about it are real for the people today. “Crony capitalism is harmful because it kills competition.... Our country suffers for the want of a few good men in politics.... Financial inclusion is important got for both the government and RBI in the coming years,” Rajan said.

Read more at: http://www.livemint.com/Money/zi5eBPCY0VNb4nWQV2cZyH/Raghuram-Rajan-warns-of-capital-outflows-as-interest-rates-r.html?utm_source=copy

Vulture Funds..PREY on...No Pity...!!!!

All you wanted to know about: Vulture Funds

RADHIKA MERWIN

All you wanted to know about: Vulture Funds

A weekly column that puts the fun into learning
Recently, the Sensex and Nifty went through some wild gyrations after Standard and Poor’s Ratings Services declared Argentina a debt defaulter. The country had failed to pay $539 million in interest due to its creditors, not because it couldn’t afford to pay them, but because a US court order barred Argentina from settling these dues unless it coughed up the $1.3 billion it owed to the so-called ‘vulture funds’.

What is it?
A vulture fund is a private equity or hedge fund that buys up bonds issued by companies, countries or individuals in deep financial trouble at beaten down market prices. They then try to make big gains by suing the debtor for a much larger sum than they originally paid for buying the bonds. That makes it clear how vulture funds got their name; they ‘prey’ on companies and issuers who are in distress because they’ve taken on too much debt.
In the case of Argentina, after the country defaulted on its debt of close to $100 billion in the 2001 crisis, many vulture funds swooped in to pick up the country’s bonds from the secondary markets for a song. These were mainly US hedge funds spearheaded by billionaire Paul Singer’s NML Capital.
The country’s financial situation only worsened and, unable to make interest payments, it asked lenders to take a ‘haircut’, that is, waive their dues and settle for part payment.
While Argentina managed to restructure more than 90 per cent of its debt between 2005 and 2010, a few vulture funds held out and refused to take a haircut. They sued Argentina in a US court demanding full payment for their bonds. The court upheld their demand and asked Argentina to pay the vulture funds in full.

Why is it important?
The global financial system has seen quite a few nations either defaulting on debt or tottering on the brink after the credit crisis. Thanks to vulture funds, Argentina has been declared in default a good five years after the crisis, for the second time in 13 years.
While vulture funds make up a small portion of the country’s total creditors, the US court order has put Argentina between a rock and a hard place. Unless they pay the vulture funds, they will be unable to pay others, thus continuing to default.
While talks are on between Argentina and the US to find a compromise, the risk for Argentina may nevertheless escalate, if other bondholders were to wake up and sue as well. Argentina may find it difficult to raise money on the international debt markets due to a steep premium on its borrowing costs.

Why should I care?
Yes, India isn’t the same as Argentina, but try telling that to foreign investors who lump all emerging markets under a huge risky asset class. Debt troubles in any developing nation usually cause global investors to peg up the ‘risk premium’ they assign to all emerging market investments. Events like Argentina’s default make investors nervous and trigger outflows from emerging economies. Foreign investors pulled out close to $820 million from Indian debt markets last week, and the rupee tumbled to as low as 61.7, as if in sympathy with Argentina.

Bottomline
Vulture funds may seem evil, but they do put the fear of god into defaulters. Given the problems that Indian banks face with large corporate defaulters, maybe what we need are a few vulture funds to balance the scales.

http://www.thehindubusinessline.com/opinion/all-you-wanted-to-know-about-vulture-funds/article6305110.ece?homepage=true

SELL on RISE @NIFTY-7668-80

The Nifty which fell by 300 points from TOP can see some bounce due to the USA strong closing on FRIDAY. The strength of markets will be tested on Monday as the negative news at home turf is more than the Global one. If Nifty fails to trade and close above 7620 is a very negative sign to bulls. Nifty fell from 7840 to 7540 level, Bank Nifty fell from 15555 to 14709 level. The Bulls already started un-winding, 15 lakh Nifty OI in the last two days. The BankNifty added OI.

The Bullish counters like Axis, BoB, PNB and ICICI are in the un-winding mode than the Bank Nifty.  The interesting scenario is that majors like ICICI fell from 1512 level to 1411, PNB fell from 980 level to 898 level, Bank Baroda fell from 92 level to 855 level, Axis from 408 to 269 level. The Relinfra fell from 780 level to 715, Relcap from 622 level to 558 level. The strong selling came in Reliance when it touched 1043 level after results but succumbed to selling pressure to 970 level. The story is no different to L&T, fell from 1698 to 1440, a results victim. These counters gave some good results but they are already discounted.

There is very likely that we may see some news regarding AMBUJA CEMENT.

The Rel Power may react to CERC ruling that RPOWER may lose the new pricing offered to other UMPP. IDBI under CBI scanner due to KFA fiasco, may see some selling.

The positive results of Auro-Pharma, ADANI may find some buying interest. But the short covering may be intensified only when Nifty trades above 7720. Above 2440-42, SBI may rally to 2540 level with-out much resistance, where as the only resistance at 2468-72 to be watched closely. This week markets may see some recovery but not sustainable.
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Should Mukesh Ambani be unloved?

Ambani is under attack by the government of India, media, regulators such as Sebi & political parties such as Aam Aadmi party

Dev Chatterjee  |  Mumbai  

August 10, 2014 Last Updated at 19:12 IST

In a recent article "Unloved Billionaire", The Economist wrote about the paradox of why Mukesh Ambani, Chairman of India's most valuable company Reliance Industries, is so unloved in India. 

 

Ambani is under attack by the government of India, regulators such as the Sebi, media, political parties such as the Aam Aadmi party. And now, even the small shareholders are unhappy because they lost their wealth by 4% in the company's shares in the past five years. 

 

On Friday, market regulator Sebi fined Reliance of Rs 13 crore for violating disclosure norms.

 

As a keen observer of Ambani's progress in the past two decades, it's obvious to me why Ambani has lost the goodwill. The company is secretive, does not believe in transparency, and a bitter sibling war has destroyed the halo around the group. The fights with the oil ministry and the negative remarks by government auditor the Comptroller & Auditor General on its broadband licence are not helping the matters either. Many a time, journalists’ queries are either ignored or, when required, information is supplied in “off-record” briefings. 

 

Reliance has become an India-centric success story while its peers like Tata and Birla are now earning more than 50% of their revenues from overseas operations. Ambani’s plans to set up Special Economic Zones outside Mumbai never took off following agitation by locals over brazen land acquisition. Ambani had to beat a hasty retreat from a similar SEZ in Haryana, which the critics alleged, had become a real estate play.

 

But as far as business is concerned, no one can take the credit away from Ambani for thinking big. Ambani was instrumental in setting up not one but two world-class large oil refineries in Jamnagar, Gujarat. Ambani had the vision to set up retail chain across India and is now making money of it.

 

The 57-year-old billionaire is also investing a massive Rs 70,000 crore in the Indian wireless telephony where the Tata group has failed miserably. The telecom business, according to Ambani himself, will create 10,000 new  jobs. This is the second time Ambani is building a telecom empire after giving his earlier venture to his younger brother, Anil, as part of the family succession settlement. His ongoing $10 billion (Rs 60,000 crore) expansion in petrochemical business in Gujarat will add substantially to the economic growth.

 

India needs more entrepreneurs like Ambani who can take risk to set up new projects and create employment. Ambani may be unloved by many but as far as job creation and new projects are concerned, there is no doubt that he is number one. Reliance is loved, at least by new gen, young employees. If Ambani succeeds in creating new jobs, then no one who can stop him from earning goodwill from young India.

http://www.business-standard.com/article/companies/should-mukesh-ambani-be-unloved-114081000514_1.html

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BLOWING TRUMPET...SUCCESS TASTE...!!!

I MISSED MY NIGHT SLEEP (IN 1991-95, I USED TO STUDY THE HARD COPIES OF CAPITAL MARKETS AND DALAL STREET…UPTO 3 AM,ONE DAY UPTO 5 AM…., NOW  SIMILAR SLEEPLESS STUDY…, I NEVER STUDIED MY CLASS BOOKS LIKE THIS…) DUE TO A SERIOUS SEACH FOR TINY STOCKS THAT CAN FETCH 500-1000% RISE IN FUTURE. THE SEARCH AND RESEARCH IS ON………… THE STORY OF MULTIBAGGERS IS A EVER RISING NOVEL STORY IN STOCK MARKETS…ONLY THING WE NEED TO DO IS JUST TRUST WHAT YOU THOUGHT IS RIGHT AND BELIEVE IN WHAT YOU IDENTIFIED/STUDIED……..…….

A SATISFACTION BUILT DISAPPOINTMENT OF MISSING INDOCOUNT INDUSTRIES WHICH I IDENTIFIED AT 7-9 NOW AT 144 A 18 MONTH HOLDING PERIOD, A 1500-2000% RETURN IS A PHENOMENAL CASE TO “BLOW ONE’S OWN TRUMPET”.

AT A SIMILAR TIME FRAME IDENTIFIED MORARJEE TEXTILE AT SAME 7-8 RUPEES NOW AT 44. I IDENTIFIED PHARMA AT 3 NOW AT 35 A 10 TIMES RISE..NOT ENJOYED…

SIMILARLY FINDING AND  I ENJOYED 700% RISE IN KM SUGAR BOUGHT AT 1 AND 1.35, NO OTHE SUGAR STOCK GAVE SUCH PHENOMENAL RETURN. I DOUBLED MONEY IN RANA SUGARS.

I BOUGHT BIRLA ERICSSON AT 10-12, NOW AT 65 LEVELS, SUGGESTED ALL TELECOM OPTIC FIBRE CABLE COMPANIES, WHICH GAVE 300 TO 500% RISE, WITH SOME CLOSE FRIENDS, I EVEN FOUGHT FOR THEIR INVESTMENTS IN THESE STOCKS.

AS A MATTER OF FACT, THIS RALLY HAVE GIVEN LIFE TO MANY TINY STOCKS, DORMANT FOR YEARS. AT THE SAME TIME THERE ARE MANY STOCKS THAT ARE AT THE SAME PRICE OR EVEN LOWER THAN TWO YEARS AGO.

SO, JUST TURN AROUND STORY, LIKE ARVIND AT 44 FOUR YEARS AGO NOW AT 240, PARTICIPATED BUT NO GREAT WAITING….

……….

THE LESSON IS SO SIMPLE THAT FIND OUT…KEEP ON INVESTING……SIT TIGHT WITH OUT DISTURBING THE HOLDING AT LEAST FOR 5-10 TIMES RISE.

………

FOR DAY TRADING..ALWAYS LIVE IN THE CURRENT TREND.... 

EQUITIES...December sell-off..ON THE CARDS...????????

Warning! Be wary of a December sell-off

LOKESHWARRI SK/AARATI KRISHNAN

Global funds may cash out by year-end, preparing for the US to increase rates in the summer of 2015, says Geoff Lewis, Executive Director and Global Market Strategist, JP Morgan Asset Management
With the election and Budget behind us, global events such as Argentina’s debt default and the impending interest rate hike in the US are back on investors' radar. So we caught up with the forthright Geoff Lewis on his recent India trip to find out what is in store for global markets.
Lewis thinks India is in a Goldilocks situation and that equities, both from emerging markets and Europe, may outperform. But he also warns that bonds are best avoided.

 Is the global economy on the mend? What does that mean for investors?

 It has been quite a surprising first half of the year. Everybody expected US and global bond yields to move up. But they moved down. Year-to-date, the best performing asset class has been US REITs, followed by emerging market debt and commodities. If you asked anyone at the beginning of the year, they wouldn’t have expected this. So, the lesson from this is that investors should always be prepared for the unexpected; they should be diversified.
 If you talk of what has changed, we don’t think the economic prospects have changed very much.
The US economy is normalising and becoming healthier. Europe is restructuring and the Japanese economy is becoming better. If you put all that together, the world economy is on an improving trajectory. You won’t get that impression if you watch Bloomberg or CNBC or read the Financial Times. They’re still talking of the end of tapering, deflation and so on.
 It seems to us that the risks of a European collapse or US fiscal policy have been reduced. If you look at the Purchasing Managers Index (PMI) of all the leading economies, you find that they’re all getting much better.
One number can be misleading, but if all the PMIs are improving in tandem, that’s a strong signal.

Indians now have the option of investing in Asian, US or European stocks through mutual funds. So where would you put your money?

 The big change between 2014 and 2015 will be that Japan’s earnings may moderate, while Europe is expected to come up.
So far, you can’t see it in the data for European earnings. When the inflection point comes, we should see European stock markets perform better than the US market.
We are not by any means negative on the US. In the US, we still have moderate earnings growth, low interest rates, strong margins and an economy that’s more visibly growing than Europe and has less structural problems. The US equity market is not overvalued in my view.

Have global investors really changed their view on India because of politics?

 India had large outflows from its debt markets in line with other members of the Fragile Five. But the difference was that foreign participation in Indian debt markets was really low compared with the other markets, such as Taiwan.
There was a global risk-off. But if you notice, the money also came back pretty quickly. At the moment, I think it’s a Goldilocks situation, with $10 billion coming in last year and another $10 billion this year.
 The problem for many emerging markets (EMs) seems to be that it is either famine or feast. But India’s fundamentals now are better relative to China and relative to other EMs.
A lot of investors were telling us earlier, ‘we’d like to wait for the Budget and see if there are outflows.’ But my view is that the portfolio inflows into India tend to be persistent. That suggests that they’re looking at India as a long-term investment opportunity. This also shows they’re probably not looking at India as a manufacturing base for exports but as a good domestic story.
When large foreign investors look at EMs, they’re looking for scalability. A large domestic consumer market provides that; India, Indonesia, China, Brazil and Russia provide that and not really anybody else.
A large pension fund in the US cannot deploy its money in, say, the Philippines. It is looking for a large economy to absorb that money. 
Are foreign investors in Indian bonds short-term oriented compared with equity investors? That is the impression we got from outflows in 2013.
Yes and no. A lot of retail money has gone into emerging market debt mutual funds and ETFs. That is where the selling pressure came from. Retail investors in those funds tend to panic.
The institutional investors did not trigger the panic. Having said that, the Indian (bond) market appears fully valued. As we approach the first hike in interest rates in the US, there will be panic among investors.
Emerging market debt will prove to be a crowded space. You don’t want to be the last one left in the party.

So what will happen when US interest rates move up? Will we see another exodus from emerging markets?

It depends on how the rates are raised. If the US economy grows moderately, unemployment comes down gradually and the Fed raises on schedule, then everyone will be prepared and that is ok. If emerging market earnings also pick up, the positives will outweigh the gradual rate increase.
If rate increases happen with unemployment and wages increasing, inflation rising and investors think the Fed has left it too late, then there will be a global risk-off again. Money will move out of debt and equity and it will be painful for everybody.
My personal opinion is that nobody knows what will happen once interest rates start rising.
It is a watershed event. We have had seven years of easy monetary policy. This marks the end of that unconventional monetary policy in the US and elsewhere.

Will emerging market currencies be affected?

Financial markets tend to anticipate any event three to six months before it happens. And the weakness can continue for three months after that.
There will be a temporary sell-off in the equity market. It does not signal the end of the rally. They are hiking interest rates because economies are stronger and corporate profits are good. That is good for equities.
From January or February next year, the market will start factoring in the rate hike.
Many fund managers close their books in November or December. So the danger period is the closing months of this year and not opening months of next year. That said, there is very little value left in fixed income anywhere.
So you need to have quite a lot of cash instead of fixed income.
If there is a big correction in emerging markets, you can deploy some of that cash.
Gold technically looks as if it is due for a rebound. But it is a poor inflation hedge in the long run. As a portfolio diversifier, you can have 10 per cent in gold. Once interest rates start rising in real terms, it has normally been negative for gold.
Income is still growing strongly in India and China, where the gold demand does not go away.
Have you factored a weak monsoon into assessing India’s growth?
It is negative, but not a disaster.
A really bad monsoon, like 1992, does not seem likely. If you look back at data since 1848, El Ninos or the Southern oscillators have caused a poor monsoon only 50 per cent of the time. Most foreign investors would look at this as a short-term concern.

What’s your view of emerging markets as an investment?

Emerging markets had a very good recovery post-Lehman crisis, then they sort of rested on their laurels. There was really excessive credit growth in places such as Turkey.
Then we saw political risk play out in Thailand, Turkey, Brazil. But we have since seen the situation improve.
Current account deficits have improved across the board. Many of them have raised interest rates; here, India was much ahead of the others.
 We have a very simple view of emerging markets. We think the story about EMs decoupling is basically nonsense. They haven’t decoupled from the global economy in any way.
This is clear from the fact that exports and industrial production for EMs track each other very closely. The last two years have been the worst period for EM exports since 1997.
As the European economy contracted, this hit EMs really hard. Thus, EM earnings have been falling.
So we take the simple view that if Europe picks up, EM exports will pick up and, therefore, their economies, too, will follow suit.  
(This article was published on August 3, 2014)

http://www.thehindubusinessline.com/features/investment-world/warning-be-wary-of-a-december-selloff/article6277421.ece?homepage=true