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Tuesday, May 31, 2011
Monday, May 30, 2011
Thursday, May 26, 2011
Goldman Sachs
India Research
It is a GS contention that FY12 earnings for Sensex companies have been over-estimated by as much as 22 per cent by consensus street analysts. If FY12 Sensex earnings come a cropper at just about Rs 1050-1100 then a very shaky base case for the Sensex would be 15000-16000.
Construction, Real Estate, Infrastructure and Cement will be the biggest sufferers in a stagflation scenario. Top sells will include SBI, BOI and ACC.
Scenario to 7.5% and 6.9% GDP growth
We have run two scenarios for our coverage in India. The first assumes a further 75bps hike to rates, oil prices of $115/bbl and GDP growth of 7.5% in FY2012. The second, more aggressive scenario, assumes a further 150bps hike to rates, oil prices of $130/bbl and GDP growth of 6.9% in FY2012. Under the first scenario, we conclude that our average earnings would be cut by 6.4% (taking them 16% below current consensus) and under the second scenario, our earnings would be cut by 12.4% (going to 22% below consensus).
GS forecasting 7.5% inflation in FY 2012
Our ECS team has increased their forecast for inflation from 6.7% to 7.5% for FY12. In this note, we explore how inflation has impacted corporate profitability and valuations in previous cycles and seek to identify companies that could be shielded in a difficult macro environment.
High inflation a harbinger of lower growth, lower margins and compressed multiples
Previous periods of high inflation in India have led to a 200bps compression in EBIT margins, 250-300bps compression in net margins and a 15% contraction to earnings multiples. Against this backdrop, we note that consensus is forecasting a 70bps improvement to EBIT margins and a 30bps improvement to net margins in CY2011E. Our earnings forecasts for our coverage group are 10% below consensus in FY 2012.
We expect consensus earnings to decline in the months ahead. In this note we seek to identify companies that are relatively insulated from a dynamic of decelerating growth, as well as those particularly exposed to the same.
India Research
It is a GS contention that FY12 earnings for Sensex companies have been over-estimated by as much as 22 per cent by consensus street analysts. If FY12 Sensex earnings come a cropper at just about Rs 1050-1100 then a very shaky base case for the Sensex would be 15000-16000.
Construction, Real Estate, Infrastructure and Cement will be the biggest sufferers in a stagflation scenario. Top sells will include SBI, BOI and ACC.
Scenario to 7.5% and 6.9% GDP growth
We have run two scenarios for our coverage in India. The first assumes a further 75bps hike to rates, oil prices of $115/bbl and GDP growth of 7.5% in FY2012. The second, more aggressive scenario, assumes a further 150bps hike to rates, oil prices of $130/bbl and GDP growth of 6.9% in FY2012. Under the first scenario, we conclude that our average earnings would be cut by 6.4% (taking them 16% below current consensus) and under the second scenario, our earnings would be cut by 12.4% (going to 22% below consensus).
GS forecasting 7.5% inflation in FY 2012
Our ECS team has increased their forecast for inflation from 6.7% to 7.5% for FY12. In this note, we explore how inflation has impacted corporate profitability and valuations in previous cycles and seek to identify companies that could be shielded in a difficult macro environment.
High inflation a harbinger of lower growth, lower margins and compressed multiples
Previous periods of high inflation in India have led to a 200bps compression in EBIT margins, 250-300bps compression in net margins and a 15% contraction to earnings multiples. Against this backdrop, we note that consensus is forecasting a 70bps improvement to EBIT margins and a 30bps improvement to net margins in CY2011E. Our earnings forecasts for our coverage group are 10% below consensus in FY 2012.
We expect consensus earnings to decline in the months ahead. In this note we seek to identify companies that are relatively insulated from a dynamic of decelerating growth, as well as those particularly exposed to the same.
Wednesday, May 18, 2011
Thursday, May 12, 2011
Nifty
Last close: 5,565
Target: 5,200
The Nifty has been moving sideways for the last three trading days, and was unable to even test its upside resistance so far. The overall trend continues to remain bearish, and the weekly MACD has also now turned negative which is a further bearish sign. So on the upside, one can expect resistance around 5,640-5,720. A close below 5,430 will accentuate the fall, with a potential downside target of 5,200.
Grasim
Last close: Rs 2,360
Target: Rs 2,430
Grasim has logged a higher high for the third straight day. The stock is likely to get considerable support around Rs 2,330 on the downside, while it can target Rs 2,420 on the upside.
Hero Honda
Last close: Rs 1,773
Target: Rs 1,860
Hero Honda has bounced back sharply from its recent low of Rs 1,575-odd levels, around the medium-term (50-days) DMA, in the last six trading days. The stock has now once again closed above the 200-DMA. The stock is likely to find near term support around Rs 1,735, and on the upside can target Rs 1,860.
Hindalco
Last close: Rs 204
Target: Rs 220
Hindalco seems to have found support around the weekly medium-term moving average around Rs 197-odd levels. The stock may now face some resistance around Rs 207, above which it is likely to rally up to Rs 220.
Hindustan Petroleum
Last close: Rs 387
Target: Rs 350
Hindustan Petroleum (HPCL) is testing its crucial support around Rs 376-odd levels for the last two trading days. However, the MACD is on the verge of turning negative, hence one needs to watch the Rs 376-level closely. A close below the same, could trigger a fresh fall with a downside target of Rs 350-odd levels.
Last close: 5,565
Target: 5,200
The Nifty has been moving sideways for the last three trading days, and was unable to even test its upside resistance so far. The overall trend continues to remain bearish, and the weekly MACD has also now turned negative which is a further bearish sign. So on the upside, one can expect resistance around 5,640-5,720. A close below 5,430 will accentuate the fall, with a potential downside target of 5,200.
Grasim
Last close: Rs 2,360
Target: Rs 2,430
Grasim has logged a higher high for the third straight day. The stock is likely to get considerable support around Rs 2,330 on the downside, while it can target Rs 2,420 on the upside.
Hero Honda
Last close: Rs 1,773
Target: Rs 1,860
Hero Honda has bounced back sharply from its recent low of Rs 1,575-odd levels, around the medium-term (50-days) DMA, in the last six trading days. The stock has now once again closed above the 200-DMA. The stock is likely to find near term support around Rs 1,735, and on the upside can target Rs 1,860.
Hindalco
Last close: Rs 204
Target: Rs 220
Hindalco seems to have found support around the weekly medium-term moving average around Rs 197-odd levels. The stock may now face some resistance around Rs 207, above which it is likely to rally up to Rs 220.
Hindustan Petroleum
Last close: Rs 387
Target: Rs 350
Hindustan Petroleum (HPCL) is testing its crucial support around Rs 376-odd levels for the last two trading days. However, the MACD is on the verge of turning negative, hence one needs to watch the Rs 376-level closely. A close below the same, could trigger a fresh fall with a downside target of Rs 350-odd levels.
Wednesday, May 11, 2011
Technical View :
Nifty
Last close: 5,541
The markets rallied in the first half of the day, but re-treated from much-below the resistance zone on the Nifty. The NSE benchmark index touched a high of 5,593, as against crucial resistance around 5,630-odd levels. Tuesday's movement reinforces, the strength of the bears, and the 5,630-odd level will continue to remain the short-term hurdle for now. On the other hand, the index looks like consolidating within the 5,450-5,650 range for some time now. Most of the momentum oscillators continue to remain in sell mode, hence traders and investors should exercise caution on the long side of the trade.
Crompton Greaves
Last close: Rs 241
Target: Rs 255
The stock is trading in fairly oversold zones, and the Stochastic Slow has given a positive cue. Look the buy the stock, with a strict stop of Rs 235, and on the upside the stock can jump to Rs 255, with a potential target of Rs 270-odd levels on the higher side.
Essar Oil
Last close: Rs 131
Target: Rs 140
Essar Oil has been consolidating around its long-term (200-day) DMA for the last four trading days. Select momentum indicators have turned positive for the stock, and it can spurt to Rs 134-odd levels. For further strength, the stock needs to close above Rs 134, and then possibly target Rs 140.
TCS
Last close: Rs 1,139
Target: Rs 1,225
After a brief consolidation, TCS seems ready for a fresh pull-back. The recent low of Rs 1,120-odd levels can be looked as a reference point for fresh longs. The bulls with have the upper hand, above Rs 1,145, with a first target of Rs 1,170, and thereafter a rally up to Rs 1,225 can be expected.
Last close: 5,541
The markets rallied in the first half of the day, but re-treated from much-below the resistance zone on the Nifty. The NSE benchmark index touched a high of 5,593, as against crucial resistance around 5,630-odd levels. Tuesday's movement reinforces, the strength of the bears, and the 5,630-odd level will continue to remain the short-term hurdle for now. On the other hand, the index looks like consolidating within the 5,450-5,650 range for some time now. Most of the momentum oscillators continue to remain in sell mode, hence traders and investors should exercise caution on the long side of the trade.
Crompton Greaves
Last close: Rs 241
Target: Rs 255
The stock is trading in fairly oversold zones, and the Stochastic Slow has given a positive cue. Look the buy the stock, with a strict stop of Rs 235, and on the upside the stock can jump to Rs 255, with a potential target of Rs 270-odd levels on the higher side.
Essar Oil
Last close: Rs 131
Target: Rs 140
Essar Oil has been consolidating around its long-term (200-day) DMA for the last four trading days. Select momentum indicators have turned positive for the stock, and it can spurt to Rs 134-odd levels. For further strength, the stock needs to close above Rs 134, and then possibly target Rs 140.
TCS
Last close: Rs 1,139
Target: Rs 1,225
After a brief consolidation, TCS seems ready for a fresh pull-back. The recent low of Rs 1,120-odd levels can be looked as a reference point for fresh longs. The bulls with have the upper hand, above Rs 1,145, with a first target of Rs 1,170, and thereafter a rally up to Rs 1,225 can be expected.
Tuesday, May 10, 2011
Technical view :
(NIFTY)
The overall bearish outlook remains the same, with the short-term (20-day) daily moving average also now dipping below the long-term (200-day) daily moving average. Currently, since we are closer to oversold zones, there could be some sort of consolidation before the next move on the downside. The first hurdle on the way up is placed at 5,633, above which the index will have to counter the all-importance resistance around 5,750. On the downside, the index can be expected to get support around 5,470-5,450. A close below, the 5,450 could spell fresh trouble for the markets, with odd side targets of closer to 5,200-odd levels.
Century Textiles
Last close: Rs 342
Target: Rs 360
Century Textiles moved above its lower end of the Bollinger Band, with a 3 per cent gain. The stock is attempting to make a higher low. The downside support for the stock exists at Rs 325, a break of Rs 342, could trigger fresh buying with an upside target of Rs 360 in the short-term.
Last close: Rs 342
Target: Rs 360
Century Textiles moved above its lower end of the Bollinger Band, with a 3 per cent gain. The stock is attempting to make a higher low. The downside support for the stock exists at Rs 325, a break of Rs 342, could trigger fresh buying with an upside target of Rs 360 in the short-term.
JSW Steel
Last close: Rs 897
Target: Rs 960
JSW Steel, too, seems to be in a bounce back mode. One can place a stop loss at Rs 870, and look to go long at the counter in case of a dip. On the upside the stock can rally to Rs 960-odd levels in the coming days.
Last close: Rs 897
Target: Rs 960
JSW Steel, too, seems to be in a bounce back mode. One can place a stop loss at Rs 870, and look to go long at the counter in case of a dip. On the upside the stock can rally to Rs 960-odd levels in the coming days.
Monday, May 9, 2011
Market News :
The Tube Investments of India Ltd (TII), part of the $3.03 billion Murugappa group, is planning greenfield facilities to manufacture bicycles, tubes and chains. The company has said it would invest around Rs 600 crore to set up these facilities
Reliance Industries (RIL) has debunked charges that KG-D6 gas field output fell due to non-drilling of an adequate number of wells, saying the phenomenon was a result of reservoir complexity and indiscriminate drilling would have lead to infructous
Kolkata-based Shree Ganesh Jewellery House Ltd (SGJHL) is looking for acquisitions of brands abroad. According to a top official, the company is already in talks with some European brands and the size of the acquisition would be about $50 million
Power Grid, the country’s largest transmission firm, is expected to finalise a contract for leasing out its tower infrastructure for telecommunication by the end of May
NIFTY Technical :
After a range-bound April, we saw a nervous start to May as the markets broke below the long-term (200-day) Daily Moving Average (DMA), precisely 19,160 on the Sensex.
The BSE benchmark index plunged almost 1,100 points in intra-week deals, to a low of 18,160, and then recovered partially to end the week with a loss of 617 points (3.2 per cent) at 18,519. Selling pressure from foreign investors coupled with some disappointment on the earnings front were couple of reasons for the weakness.
The Sensex after a nervous start has broken all its crucial support on the moving averages and also on the monthly Fibonacci chart. According to the chart pattern, the Sensex is likely to face stiff resistance around 18,770-19,150. On the other hand, monthly Fibonacci chart indicate considerable resistance around 18,820-18,950. So, all-in-all, it seems a difficult road on the upside.
On the downside, the index has taken support precisely at 18,160 which happens to be a key support according to the quarterly Fibonacci chart. If the index were to break 18,160 then we could see further downside targets of 17,780 and 17,125 in the coming weeks.
A look at the NSE chart, too, indicate a similar picture. With more than three closes below the 200-day DMA, we are back in the so-called bear market, which means the late March and early April rally for an exit opportunity for those who were stuck in the sudden fall.
The short-term (20-day) DMA is on the verge of slipping below the long-term DMA, which will re-enforce the strength of the bears. According to the daily chart, an upside for the Nifty seems to be capped around 5,750 for now.
The weekly charts indicate there could be some sideways movement with the index range-bound within 5,350-5,750 band. The knock-out punch may come from the monthly charts, which indicate that a close below 5,420, can trigger a massive fall up to 4,700-odd levels.
Saturday, May 7, 2011
Market News :
Bhushan Steel said on Saturday its board had approved raising up to $1 billion through an issue of securities
Indian financial services firm Religare Enterprises has filed for regulatory approval to raise up to Rs 800 crore ($179 million) through a rights share issue, the company said in an exchange filing late on Friday
Tube Investments of India Ltd (TII), part of $3-billion Murugappa group, is planning to set up green field facilities to manufacture bicycles, tubes and chains. The company has said it would invest around Rs 600 crore in these facilities
Piramal Healthcare Ltd (PHL), owned by Ajay Piramal, has entered into the financial services sector by announcing plans to launch two non-banking finance companies (NBFCs)
Jaguar Land Rover, owned by the Tata Group, is investing £5 billion ($8.2 billion) in product development and new equipment over the next five years, according to a media report
Lupin: Mumbai-based company looks for a second acquisition in Japan for $50-100 million
Life Insurance Corporation (LIC) has acquired additional over 2% stake in power equipment maker BHEL from the market for Rs 2,205 crore to become the second-largest shareholder in the PSU after the government
Amrutanjan Health Care today said it has fixed Rs 900 per share as the price for its buyback offer for equity shares
IT company Educomp said it has joined hands with Great Lakes Institute of Management to provide e-learning education and the two partners will invest Rs 150 crore in the venture in next five years
Friday, May 6, 2011
Dated MAY 6, 2011
Technical view (NIFTY):
With the Nifty testing its downside support of 5,450, and down for the ninth straight day on Thursday, the index seems now overdue for a bounce back. As per Fibonacci, in most cases any particular trend tends to reverse on the 4-8-10th trading day. Friday is the tenth trading day in the current down trend. Also, if one were to draw a trend line support from the twin-lows of February, which were 5,178 and 5,232, on February 11 and February 25, respectively, then it gives us support of 5,440 or so, which is precisely the low on Thursday. Hence, it now becomes more crucial for the markets to bounce from current levels, or we could slip further down towards 5,350 - the March 21 lows. Select momentum indicators are just about hitting oversold zone, but worry on the negative side, is that the Nifty continues to drift below its lower end of the Bollinger Band. In other words, the index needs to close above 5,530 on Friday, for a sustained bounce to follow
Sunday, May 1, 2011
Dated MAY 1, 2011
Sock Idea : STERLITE INDUSTRIES
Sterlite's 1,200 MW Jharsuguda plant to go on stream by Sept
Vedanta Group firm Sterlite Energy today said its 1,200 MW thermal power plant at Jharsuguda in Orissa will go on stream by September.
The commissioning will take Sterlite Energy's generation capacity to 2,400 MW in the same location.
"The Vedanta Group is engaged in commissioning 2,400 MW from the location; some 1,200 MW is already commissioned and the remaining is expected to go on stream by September 2011," a source said.
The two power plants along with another 1,215 MW plant, owned by Sterlite Energy's sister firm Vedanta Aluminium for captive use, will turn Jharsuguda into one of the single largest power generation locations in the country.
While Sterlite Energy's plants are independent power producers, Vedanta Aluminium's power plant is meant for firing its smelter.
Vedanta is setting up a 1.75 million tonne per annum smelter at Jharsuguda.
"Huge coal reserves and abundant water make Jharsuguda an attractive destination for power generation. This apart, it is also well-connected with railways and roads," the source said justifying Vedanta Group firms' investment in the locality.
There are various medium to large scale aluminium, iron and steel units in the vicinity increases the power demand, he said, adding that the cost of capital in the region for putting up a power plant is also lower compared to the benchmark of $45-50 million per mega watt (MW).
Sterlite's 1,200 MW Jharsuguda plant to go on stream by Sept
Vedanta Group firm Sterlite Energy today said its 1,200 MW thermal power plant at Jharsuguda in Orissa will go on stream by September.
The commissioning will take Sterlite Energy's generation capacity to 2,400 MW in the same location.
"The Vedanta Group is engaged in commissioning 2,400 MW from the location; some 1,200 MW is already commissioned and the remaining is expected to go on stream by September 2011," a source said.
The two power plants along with another 1,215 MW plant, owned by Sterlite Energy's sister firm Vedanta Aluminium for captive use, will turn Jharsuguda into one of the single largest power generation locations in the country.
While Sterlite Energy's plants are independent power producers, Vedanta Aluminium's power plant is meant for firing its smelter.
Vedanta is setting up a 1.75 million tonne per annum smelter at Jharsuguda.
"Huge coal reserves and abundant water make Jharsuguda an attractive destination for power generation. This apart, it is also well-connected with railways and roads," the source said justifying Vedanta Group firms' investment in the locality.
There are various medium to large scale aluminium, iron and steel units in the vicinity increases the power demand, he said, adding that the cost of capital in the region for putting up a power plant is also lower compared to the benchmark of $45-50 million per mega watt (MW).
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