Rs 20,000-cr NPAs ...No takers --PLEASE...!!!

No takers for Rs 20,000-cr NPAs as banks, ARCs spar over valuationsShayan Ghosh | Mumbai | Updated: Sep 06 2014, 14:09 ISTClose to Rs 20,000 crore of non-performing assets (NPAs) that banks want asset reconstruction companies (ARCs) to pick up have found no takers as the two continue to spar over valuations. ARC senior executives that FE spoke to said that 25 banks have put assets on sale in the past month or so.The head of a large ARC said reconstruction companies were not ready to buy assets unless banks offered them loans at attractive reserve prices. “Lenders should realise that since we have to pay 15% upfront now compared with 5% earlier, the reserve price should be lower. However, banks appear to be unwilling to drop the value of the assets," he observed.Last month, Reserve Bank of India (RBI) had asked asset reconstruction companies (ARCs) to increase the mandatory upfront investment in security receipts (SRs) to 15% from the earlier 5% to ensure ARCs have 'more skin in the game'.Eshwar Karra, chief executive officer at Phoenix ARC, said he expected the prices of security receipts (SRs) that are issued when an NPA is 'sold' to come down. For their part, banks say they are not in a position to take a big hit in terms of lowering the value of the asset. “It may be true that the ARCs have to spend more upfront but we cannot reduce the price,” said an executive director at a public sector bank. ARCs, however, maintain the reserve prices should be more practical, considering the increase in their upfront payments.“Some banks have set their reserve price at a level equal to that of the size of the loan,” said Siby Antony, MD & CEO, Edelweiss ARC.Owing to a jump in NPAs, banks have of late been selling very aggressively to ARCs to clean up their books and this has prompted RBI to step in. “A spurt in the activities of asset reconstruction companies (ARCs) driven by banks’ efforts for cleaning up their balance sheets, calls for a closer look at the extant arrangements between ARCs and banks,” RBI said in its financial stability report.Though the ARC industry has been dominated by ARCIL, which was India's first ARC, other players like Edelweiss ARC and JM Financial ARC have become more aggressive of late.According to sources, Edelweiss issued SRs worth Rs 9,000 crore in FY14 whereas ARCIL had Rs 4,500-crore SRs in FY14 and JM Financial ARC had Rs 2,500 crore in their bag. In FY14,ARCs bought assets worth Rs 22,000 crore, sources said.Phoenix asset reconstruction company, sponsored by group companies of Kotak Mahindra group has receipts of Rs 1,750 crore in FY14, sources added.

http://www.financialexpress.com/news/no-takers-for-rs-20000cr-npas-as-banks-arcs-spar-over-valuations/1286062

INDIA ECONOMIC GROWTH UP-TICK- a “dead cat bounce”...?

FROM THE VIEWSROOMDead cat bounce

It is absurd to say that our economy has 

recovered 

September 5, 2014:  

The optimism over first quarter growth figures seems misplaced. The 5.7 per cent growth in April-June is a result of election spending rather than a pick-up in investment. The enhanced growth in construction, power, manufacturing, hotels and restaurants seems to bear this out. The demand generated in these labour-intensive sectors would have resulted in higher off-take of industrial goods. Besides, the election campaign would have generated its own demand for bulbs, gensets, fittings, vehicles and numerous other goods. Power generation is likely to have improved as a pre-election measure. (Strangely, the Q1 core sector growth of 4.1 per cent does not really bear this out.) At the same time, the deceleration in the financial sector, including realty, affirms an election trend — that funds might have been pulled out of real estate to fund poll campaigns.
In other words, we might be seeing what economist Nouriel Roubini in the context of the US economy earlier called “dead cat bounce”. An enduring revival would have been backed by a turnaround in investment.
Gross fixed capital formation has, in fact, dipped as a share of GDP from 28.7 per cent to 28.6 per cent. Government spending as a share of GDP has shown a sharp rise from 12.9 per cent to 13.4 per cent, perhaps a result of election spending on law and order. So, where is the pick-up in investment?
Strangely, economists predict a 6-6.5 per cent growth in 2014-15, against 4.7 per cent in 2013-14, despite our being in the midst of a monsoon-deficient year. Europe and the US continue to struggle. The Finance Minister seems serious about containing the fiscal deficit at 4.1 per cent of GDP with a view to keeping inflation and interest rates in check; this could peg back demand.
The policies of the new government, as well as the mysterious “confidence fairy” (to borrow Paul Krugman’s expression), could drive investment in asset classes such as equities and land. The wealth effect could give rise to little more than a demand for luxury goods.
Whether the liberalisation of land, environment and labour laws leads to greenfield investment over the next few years, in a climate of global recession, remains to be seen.
Deputy Editor
(This article was published on September 5, 2014)
http://www.thehindubusinessline.com/opinion/columns/dead-cat-
bounce/article6383866.ece?homepage=true

A SRINIVAS

Too much trading leads to mistakes...!!!

In volatile markets, too much trading leads to mistakes Santosh Kamath of Franklin Templeton Investments India talks about the debt market opportunity Lisa Pallavi Barbora 

First Published: Mon, Sep 01 2014. 05 51 PM IST

Santosh Kamath, managing director, local asset management, fixed income, Franklin Templeton Investments India, is unperturbed by the near-term volatility in yields and prefers to remain invested to see a view play out over a period of time. We caught up with him to talk about the debt market opportunity and the challenges that fund managers face. He is not too enthused about frequent trading in bonds. Investing in corporate bonds, he says, requires a lot of in-depth research by the fund management team which can help investors understand the credit risk better. 

Over the last year or so, bond yields have been volatile. Did you have to change your strategy accordingly? We don’t believe in too much trading and churning. When a market is too volatile, it may look easy to make returns by navigating the volatility through buying and selling; but you may end up making more mistakes. For example, last July, we were very negative on the currency. We didn’t know that it would go to the levels of Rs.68 per dollar. Nevertheless, we were sitting on low maturity (in our funds), and that stayed for a long time, till the benchmark yield went up to levels of 8.60-8.70%. We don’t think that strategy needs to be changed just because markets are volatile. We need to take a medium- to long-term view. As variables such as inflation, crude prices and fiscal deficit are turning positive now, we are long on bonds and will remain so for some time. We don’t want to move too much in the interim. Which parts of the market have opportunity today? We have to look at the yield basket. Clearly, the yield on corporate bonds is likely to be better than on government bonds. Depending on how much the spread is, it becomes more or less attractive. 

Typically, the “normal” level should be 70-80 basis points between an AA (rated) bond and a government bond. If the spread increases to 130-140 bps, it’s more attractive to own corporate bonds. (One basis point is one-hundredth of a percentage point.) This will happen when markets are volatile, since liquidity for corporate bonds is not high. When markets go through a volatile phase, spreads tend to widen. Secondly, during times of fear around economic growth and corporate earnings, the spreads can widen. Lastly, when there is selling by, say, mutual funds, even if everything is normal, the spreads can go up. At present, both corporate bonds and government securities (G-secs) are looking attractive. Till some time back, corporate bonds were looking much more attractive as spreads were high. But now that G-sec yield has moved up, the spread has narrowed, balancing both segments. What are the challenges of managing a portfolio that is predominantly focused on corporate bonds? The market itself is big. The entire credit space in the banking industry will be about Rs.50-60 lakh crore. 

Unfortunately, liquidity in the corporate bond space is not good. Hence, any negativity tends to impact yields sharply. So, you can run a fund in this space only if you get enough retail investors; with corporate investors you should be cautious playing this theme as they can be volatile. Credit risk can also have an impact. When the economy is doing better and the equity markets are doing well, companies are able to raise funds easily. When things are not good, even if companies have good assets, they would find it difficult to get good buyers. A year ago, the credit risk was high. But now it’s come down. The two big risks are liquidity and credit. Liquidity risk can be handled by encouraging more retail money in the fund, and credit risk by ensuring you lend to good quality companies. 

The good part is that most ratings typically move with a lag—credit rating normally goes up six to nine months after a company starts doing well. If you are an active investor and understand that a company’s fundamentals are going to change, you can actually lock in a higher yield. Over time, when the rating goes up, you can benefit. (But) it requires a lot of research and meeting company managements to identify good credit. When you talk to distributors and investors, how do you decide which product is suitable? There are two ways to tranche all debt schemes, on interest rate risk and credit risk. Interest rate risk means you have short, medium and long maturity. If you can take volatility and stay invested for long, you can look at long maturity products; else, stick to short and medium maturity funds. So the first question the investor has to answer is how long are you willing to wait and are you okay with the volatility. The second question is, whether you want a very high credit, AAA kind of portfolio, or if you are okay with AA exposure, too.

All our funds are mapped like this, and the investor can take her pick. Investors are beginning to understand the difference between benchmark yield and corporate bond yields. Over the past year, performance has been quite varied across categories, which has shown them that different funds can behave differently. When managing a large corpus, how do you personally bring discipline to your everyday life? It really depends on the person. However, a lot also depends on the organization you work for. If the organization believes in long-term fund management, then it is likely to give its portfolio managers extra time to implement their strategy. If the organization understands what you are trying to do, then life becomes easier. Some may want performance every month or every three months, then obviously things become harder to manage.

As a company, we understand investments and their long-term nature. For many asset management companies, what matters is the mad rush to increase assets under management (AUM). If the entire objective is to be the No.1 or No.2 in terms of AUM, the behaviour expected from the sales and the investment teams will be very different. So, the way an organization thinks can have a big impact on employees. First Published: Mon, Sep 01 2014. 05 51 PM IST

Read more at: http://www.livemint.com/Home-Page/Zhvq9olv5r1W81bP8gNdeJ/In-volatile-markets-too-much-trading-leads-to-mistakes.html?utm_source=copy

Purchasing Manager Index (PMI) and it stood at 50.6

Services sector slows for second month in a rowSHISHIR SINHA
Business expectations have deteriorated slightly: HSBC reportNEW DELHI, SEPT 3:  

What could be seen as reality check after above 5 per cent growth in the first three months, a survey by HSBC indicated a slowdown in the growth of services sector in India. But the good news is that index is still 50.Result of survey is known as HSBC India Service Purchasing Manager Index (PMI) and it stood at 50.6 in August as against 52.2 in July. The index is calculated on the basis of response received from 350 purchasing managers of private companies. These companies comprise hotels & restaurants, transport & storage, financial intermediation, renting & business activities, post & telecommunication and other services. Index above 50 reflects expansion while below 50 means contraction.

Since, it was announced on September 1 that manufacturing PMI (based on response from 500 companies) stood at 52.4 in August against 53 in July, it also affected composite output index. This came down to 51.3 in August from 53 in July. While this indicated a slowdown in output growth across the private sector, it remained consistent with a moderate expansion in activity.“Output growth weakened from July at both services and manufacturing companies, although manufacturing production increased at the second quickest pace since February, 2013,” a HSBC statement said. On services specifically, it mentioned that the latest PMI data indicated a slowdown in growth of Indian service sector activity in August, as new business expanded at a weaker pace. Employment remained stable, while future expectations regarding activity growth fell to the weakest level since September 2013.

Since, the index was above 50, it mean expansion for fourth consecutive months. Among various sectors, the Post & Telecom firms showed best growth, while Hotel & Restaurants reported reduction. However, both the sectors did not reduce the manpower, while other service sector did.

“Services activity is once again turning down following a swift post-election uptick suggesting that an improvement in reform momentum is needed to lift sentiments in the sector,” Frederic Neumann, Co-Head of Asian Economic Research at HSBC said while adding that, on positive side, weaker activity has softened inflation indicators within the survey.(This article was published on September 3, 2014)

http://www.thehindubusinessline.com/economy/hsbc-

services-sector-pmi-falls-to-506-in-

august/article6375769.ece?homepage=true

India's bright GDP

India's bright GDP growth just a small step in long road to sustained revival

Reuters | New Delhi | Updated: Sep 03 2014, 09:59 IST

Optimism that sunny growth figures herald an economic revival in India is probably misplaced - in fact there is little hard evidence to support the idea that Asia's third-largest economy is heading for a broader and sustained rebound anytime soon.

India's economy grew 5.7 percent in the June quarter compared with a year earlier, the strongest pace in 2-1/2 years, accelerating from 4.6 percent in the March quarter thanks to a rebound in industrial activity.

But the encouraging headline numbers masked the deeper malaise gripping the economy, which is being hobbled by slack consumption, weak business investment, creaking infrastructure and painfully slow structural reforms, economists say.

"The uptick in GDP growth was mainly driven by front-loading of government expenditure," says Izumi Devalier, an economist with HSBC in Hong Kong. "A curtailment in expenditure will make it challenging to sustain this pace of growth."

Prime Minister Narendra Modi, who won power in May's general election with a promise of "good times", trumpeted the growth data on a visit to Japan, saying it had "generated huge positive sentiment".

And economists at Citi declared after the GDP figures that the recovery was a matter of when, and not if: "While there is plenty of debate on pace and timing, India is on its way back to 7 per cent growth and 6 per cent inflation."

But there is a difference between sentiment and ground reality. Based on the evidence at hand, Modi's goal of scripting a broader, lasting upturn appears some way off.

Much of the growth in the last quarter came from robust government spending, the pace of which could slow down as Finance Minister Arun Jaitley seeks to stick to this year's ambitious fiscal deficit target of 4.1 percent of gross domestic product.

A pickup in private spending could help offset the slowdown in government spending. But stubborn inflation, which at nearly 8 percent is too high for the Reserve Bank of India to cut policy rates, and weak employment are hurting consumers.

The HSBC purchasing managers' index (PMI) for manufacturing in August showed no improvement in employment or inflation, clouding the consumer outlook.

A late monsoon and coal supply crunch that has depleted fuel supplies to just six days of forward cover at India's thermal power stations could undermined rural spending and constrain output at energy-intensive businesses.

CONSUMER CONFIDENCE

Consumers power nearly 60 percent of the economy, so getting them to spend more is essential for India to end its longest spell

of sub-5 percent growth in a quarter of a century.

It needs at least 8 percent annual growth to create enough jobs for the 200 million Indians who will be reaching working age over the next two decades, the largest youth bulge the world has ever seen.

However, without an overhaul of India's strained public finances, stringent land acquisition laws, chaotic tax regime and rigid labour rules, economists say, it will struggle to consistently grow beyond 7 percent.

Modi's record as a leader of Gujarat has fuelled hopes among investors he can carry out these changes. But in his first 100 days in office, the prime minister has shown little appetite for structural reforms and has focused more on cutting bureaucratic discretion and speeding up decision making.

Shilan Shah, an analyst at Capital Economics, says there is no alternative to more serious and deeper reform because piecemeal measures collectively do not amount to much.

A slowdown in infrastructure output growth in July and the manufacturing sector last month suggests further moderation in industrial activity, which could drag down economic growth for the current quarter.

Worryingly, capital investment, which barely grew in the past two years, has still to show tangible signs of an upturn. Although capital investment rose 7 percent in the last quarter over a year earlier, it fell 7.4 percent from the previous quarter.

In a poll by the Economic Times last week, 46 percent of the respondents in a poll of 50 chief executives said they were watching for improved economic conditions before making planned investments that would help revive growth.

Last year, bumper harvests boosted sales of tractors, motorbikes and other consumer goods in rural areas, helping to compensate for weaker urban demand.

In a sign of things to come, tractor sales at India's largest utility vehicle maker Mahindra and Mahindra fell 1 percent year-on-year between April and August compared with 22 percent growth during the same period a year ago.

"We think that Q2's (April-June quarter) pickup in growth might be as good as it gets for the Indian economy for some time," said Shah of Capital Economics.

http://www.financialexpress.com/news/indias-bright-gdp-growth-just-a-small-step-in-long-road-to-sustained-revival/1285139/2

Sensex could reach 45,000'...!!!!

'Projects worth $ 60 bn can be put back on track by govt; Sensex could reach 45,000'

PTI | New Delhi | Updated: Sep 02 2014, 20:59 IST

Government is expected to revive projects worth USD 60 billion, around 45 per cent of all the stalled projects, a move that could lead to a sustainable improvement in GDP and market rally, says a Societe Generale report.

In its optimistic scenario, a much higher rate of stalled project revival and faster than expected reform implementation, India's GDP growth rate could potentially reach 8.5-9 per cent in five years and the Sensex could potentially reach 45,000 by December 2016.

According to the global financial services major, concerns around the stalled projects have already peaked, indicating that the worst may be over.

"Our base case scenario is that the government will be able to revive projects worth USD 60 billion," the report said, adding that "this should lead to a sustainable improvement in GDP growth and corporate earnings and to a structural rally in the Sensex".

On the other hand, in a pessimistic scenario the GDP growth rate could stay close to current levels (around 5-5.5 per cent) over the next five years and the Sensex could potentially fall to 20,000 by December 2016.

The report further noted that if the government is able to revive the long-term investment cycle, the current bull run in Indian markets may well outlive the term of the current government in office (beyond 2019), and we can expect much higher GDP growth rates and Sensex targets.

The report noted that the biggest concern for India is also its biggest opportunity.

"We note that the biggest concern is about stalled projects which we identify as the biggest opportunity for the government to immediately kick start the investment cycle," the report said.

An analysis of all the projects announced since 2000 across India, where implementation has been stalled for various reasons shows that the total value of these projects stood at a staggering USD 134 billion, about 7 per cent of GDP.

http://www.financialexpress.com/news/projects-worth-60-bn-can-be-put-back-on-track-by-govt-sensex-could-reach-45000/1284956--------------------=================------------------------

EFFORTS TO PUT ECONOMY BACK ON TRACK IS A GOOD SIGN TO INDIA BUT THE MARKETS ARE DRIVEN BY THE FII INVESTMENTS AND SOME DRIVE MADE BY THE HNIs. THE RETAIL PARTICIPATION IS VERY LOW AND THE PUNTERS NOT ABLE TO OFFLOAD...SO THE NEWS AND RECOMMENDATIONS....THE MARKETS ARE POISED FOR GOOD TIMES BUT NOT NOW, THE PRICES ARE FULLY PRICED IN ...

WHO WILL GET WHAT IF SO BODY BUYS MARUTI AT THIS PRICE, LT, SUN PHARMA, CIPLA, AURO PHARMA....THE LIST IS LONG...PLS DON'T BUY NOW, THE NIFTY WILL TOUCH 6700-6900 RANGE COMFORTABLY, WITH OUT MUCH SUPPORT...

THE US QE-TAPERING, INTEREST RATE HIKES, GEO-POLITICAL UNCERTAINTIES AND OTHER NEGATIVE NEWS WILL EMERGE...IT IS JUST ON IT'S WAY,

US MARKETS SAW A SERIOUS SELL OFF  A WEEK BACK, SO IS THE OTHER MARKETS, IN INDIA ALSO, SERIOUS SELLING TOOK PLACE IN THE SECOND WEEK OF AUGUST, BUT TO COVER THE HAPPENINGS, THE MOVE IS CRAWLING....

THE HEADLINES WILL SEE THE STORIES OF OTHER HAPPENINGS....WAIT, WAIT WITH MONEY, OR TRADE AS OTHERS ARE DOING...NO INVESTMENTS AT THESE LEVELS...

Indian stock markets to double in 4 years

Indian stock markets to double in 4 yearsfe Bureau | Mumbai | Updated: Sep 02 2014, 06:04 ISTWhile the Nifty soared past the 8,000 mark on Monday and stocks hit lifetime highs on the back of encouraging economic data, experts believe there’s room for more upside, reports fe Bureau in Mumbai. A BofA-ML report said markets are likely to double from current levels in the next four years, tracking the trajectory of corporate earnings in the same period. India’s GDP growth for the three months to June came in at 5.7%, the fastest rise in 10 quarters, up from 4.6% in the January-March period.“Our bullishness is driven by our view that the earnings have turned the corner and we will see earnings doubling over the next four years. We think market returns could mirror earnings growth,” BofA-ML wrote on Monday.The brokerage believes that while market returns have outpaced earnings growth in the past, in the current rally earnings and markets will move in tandem on account of higher valuations. “In the four years from FY02-06, earnings more than doubled for the Indian markets and for the six years to FY08 earnings tripled. During the same period markets tripled between FY02-06 and went up 5x between FY02-08. In this cycle, market returns far exceeded earnings growth since we started with a low PE of 7x and hence saw the PE re-rating as well. We are presently at PE levels of 15x already and hence market returns to mirror earnings growth,” the report added.

http://www.financialexpress.com/news/indian-stock-markets-to-double-in-4-years/1284701

Nifty crosses the 8000 mark...be Cautious...!!!!

5 reasons to be worried about the bull run

Even as Nifty crosses the 8000 mark, a look at what could derail the bull run for investors

Shishir Asthana  |  Mumbai  

September 2, 2014 Last Updated at 10:29 IST

Nifty has crossed the 8000 mark on news of GDP growth touching 5.7 per cent, a number last seen nine quarters back. Market pundits are now talking of Nifty touching 10,000 by next year’s budget. Though there is a consensus on the direction of the market there are reasons to look out for in the short to medium term. The move ahead might not be as smooth as it was in the past.

Here are five reasons why an investor needs to be worried about the current bull run in the market.

1) There is little doubt that the direction of economic growth has changed but the same is yet to reflect in the numbers. Recently announced first quarter numbers are yet to reflect the buoyancy of the market. However, the management sentiment has clearly improved from dismal to hopeful. It is this sentiment rather than the numbers that are getting captured in stock prices. Analysts are not extremely bullish on the September quarter growth numbers. 

2) GDP numbers are not as good as they look. Though the broad GDP number has shown a growth of 5.7 per cent, the main reasons for the uptick is higher election and social spend as well as higher power production. During months leading to elections, state governments ensured lower power outages to score brownie points. Both social spending and government related electricity purchases are back to the long term average. It is highly unlikely that the 5.7 per cent growth will be repeated in the near future.

3) Reining in the fiscal deficit will prevent government spending going forward. This will affect growth and earnings of companies. Further, continued high inflation will prevent the central bank from reducing its interest rates thus adding to the headwinds.

4) The present growth rate has been without any support from the banking system. Non-food credit offtake has in fact shown a contraction. With the series of CBI raids on banking officials, lending from public sector banks have again slowed down. Public sector banks were the main lenders to the small and medium sector enterprises. Unless credit growth picks up, there is little scope for sustainable growth.   

5) The September quarter corporate numbers will be viewed more closely by the market to see for signs of growth. On the economic front too, the broad growth numbers will be compared to the June quarter growth numbers. However, September quarter will not have the benefit of government spending. As for electricity, the quarter will reflect the continued poor state of affairs on the coal front which are being tested on account of not so sufficient monsoon. July core sector growth at 2.7 per cent as compared to a 7.3 per cent growth in June shows the possibility of poor numbers in the current quarter.

To add to these problems will be the flow of liquidity, especially from FIIs, which can change direction if interest rates in the US rises, as is being expected in the near future.

http://www.business-standard.com/article/markets/five-reasons-to-be-worried-about-the-bull-run-114090200121_1.html

MONSOON MANTRA...GOOD..!!!

Kharif sowing down on poor monsoonPTINEW DELHI, AUG 29:  With sowing of kharif crops almost completed, the total area planted to all summer crops including rice and pulses remains lower at 96.62 million hectare from the year—ago due to poor monsoon.While sowing of pulses, oilseeds, coarse cereals, cotton, sugarcane and jute has completed, the planting of rice would end by next month.As per data released by the Agriculture Ministry, the total area under all kharif crops stands at 96.62 million hectare as of today, as compared to 99.9 million hectare in the kharif season last year.“Barring rice, sowing is almost completed in the kharif season. Rice and cotton area is higher than last year. The acreage under other crops is lower as compared to last year but still higher than normal area of last three years,” Agriculture Commissioner J S Sandhu told PTI.Some good spell of rains is required during vegetative and reproduction stage of these crops, he said, adding that rainfall deficit has affected sowing operations this season.Thanks to pick in up monsoon rains, area planted to rice has increased marginally to 35 million hectare from 34.97 million hectare, while cotton acreage has gone up to 12.25 million hectare from 11.16 million hectare in the review period.However, area sown to pulses remained lower at 9.54 million hectare, compared to 10 million hectare a year—ago.Oilseeds acreage is down at 17.22 million hectare from 18.67 million hectare in the same period.Lower acreage under pulses and oilseeds is a cause of concern as the country is heavily dependent on import of lentils and edible oils.As per the data, area planted to coarse cereals is also lower at 17 million hectare, as against 19 million hectare in the year—ago period.Sugarcane acreage is down at 4.71 million hectare from 5 million hectare in the review period.
(This article was published on August 29, 2014)http://www.thehindubusinessline.com/industry-and-economy/agri-biz/kharif-sowing-down-on-poor-monsoon/article6363090.ece.............THE CHALLENGE NOW IS TO MAINTAIN THE RAINFALL RATE IN SEP-OCTOBER...THE MARKETS ARE ENJOYING THE EXPORT SUPPORT OFFERED BY USA AND EUROPE...BUT THE EU SLOWDOWN AND DAX STEEP FALL FROM HIGHs CAN POSE SOME CHALLENGES GOING FORWARD...

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