Nifty likely to touch 8900 by end of this year: IDFC Sec

Following an above-average earnings report of corporate India in the last quarter of FY16, this fiscal year could see a growth of 20 percent in earnings, says Anish Damania, CEO and Head, Institutional Equities at IDFC Securities.

Upgrades are coming through in this quarter and we are seeing tangible signs of recovery, he said, speaking to CNBC-TV18.

He believes Nifty may touch 8900 levels by end of this year.

His stock picks include Larsen and Toubro   (L&T), which he believes will outperform in the next year or so.

As for ITC   , there could be more impact on the stock, as government looks to bring in more controls in the liquor and cigarette businesses.

Among midcaps, he prefers Adani Transmission   .

Q: What is your take? Let us talk about the big stock of the day, L&T. Has the bus been missed at around Rs 1,400 or do you think upside will be capped at around that Rs 1,500?

A: L&T has been a story — if you look at Q3, they had pretty much announced that their guidance for the year is going to be so much. So if they had back-calculated, probably these were the numbers, which would have come about in Q4.

However, what happened in the past three quarters was a lot of disappointments so analysts were little conservative and obviously because of that even the fund managers were very conservative. Now it is completely under-owned stock. I have been on road shows and L&T were a consensus sell in the fund management industry.

These numbers show that there is traction, execution is happening. So from that perspective we have seen a margin beat, we are seeing a sales beat, we have seen a profit beat. However, there is some disappointment on the order inflow but that is for the quarter.

Given that the guidance is now about 15 percent growth in order inflow and 12-15 percent growth in sales, I would say that we are at the start of that upgrade cycle in L&T and whether we are at the start of an upgrade cycle, I have found that the stocks keep on outperforming.

So my guess is that barring this move today, the stock will continue to outperform in next one year.

Q: So being under-owned — a lot of our retail public there are wondering whether they get it at Rs 1,350, should they dip in?

A: I will talk to my institutional investors and I will tell them that yes, this is the time to buy this stock.

Q: Let us talk about big heavyweight, ITC. That is something you have been fairly cautious on. You said that you don’t like it too much, the numbers look quite good for ITC, would you be relooking at that or do you believe that it is a completely avoid?

A: My sense is that now consumers have got into another category called consumers related and every state government, someday or the other comes and says liquor ban or cigarette not to be sold in this fashion or that fashion, taxes keep on going up on these things and there is no certainty on what is going to come about. So, it has become a budget play rather than a structural play in that sense.

We have seen over the last several years that cigarette volumes have declined. So now with these new regulations coming up, where you need to put big signs of smoking is injurious to health, maybe there could be some more impact coming through. So I am not so gung-ho on that.

Q: We have always been talking about private sector banks. We have Yes Bank today at around Rs 1,000. I have heard you talking about IndusInd Bank as well in the past. From the banking space, is there that temptation, go in there and just pull in one of those public sector undertaking (PSU) banking stocks into your banking portfolio?

A: Yes, of course there is this huge temptation because a lot of stocks have fallen. There has been a lot of kitchen sinking, which has happened, the Reserve Bank of India (RBI) has been extremely at the forefront of getting this sorted out. Government is working on the non-performing assets (NPA) issue on a massive scale and the banks have been asked to report and take all the skeletons out.

I would believe that the skeletons are out. It is there in that domain and now one needs to take a call as to whether a recovery will mean recovering some of those write-offs back. That is something which we still need to analyse.

I would say that one can go into bigger banks like a State Bank of India   (SBI). It has corrected quite a lot and we should start nibbling at those positions now. We have turned overweight on the financials in the last two months. SBI result is expected on May 27 so we are waiting for that. Let us see what SBI reports but I am sure a lot of kitchen sinking will be done and probably that is the time when you need to go into buying SBI.

Q: Let us talk about earnings growth then for FY17, what exactly is the earnings growth you are estimating this year. In the past you have said around 20 percent, you are sticking with that? Do you believe that there is some upside to that?

A: No, I think 20 percent is a  fairly robust target to give because we have not seen — over the last five years, the growth has been about one percent compounded annual growth rate (CAGR) and to talk about 20 percent means you are building in a lot more upside.

I am a lot more confident that it will happen because we are starting to see — except the financials where we saw a lot of kitchen sinking — upgrades come through. This is the first time when I am seeing in this quarter that upgrades are coming through. So, analysts had slashed their estimates quite a lot. We are seeing very tangible signs of recovery in the economy. So I would go more towards the fact that we would see 20 percent earnings growth.

Q: Year-end target for the Nifty and give our viewers a few midcap picks as well?

A: We are looking at a target of 8,900 and that stays right now for the time being. We will look at it as the earnings season progresses. If the earning season progresses over the next two quarters the way we are anticipating, maybe there is a chance for an upgrade in those targets as well.

In terms of midcaps, clearly, I am preferring to buy some beaten down midcaps where a lot of people would find — at this point of time I am not seeing anything but we are seeing that if this happens and it is already there in the price and if this happens, the stock could literally double.

So Nava Bharat Ventures   and Adani Transmission are the two stories, which I would go with. They are non-consensus and they are probably something which people would want to look into.

Govt mulls pushing back coal price pooling plan

The government is mulling pushing back its plan to pool coal prices as it fears a low turnout for e-auction. It may even tweak the Cabinet note on coal price pooling. Infact, the issue of price pooling was not taken up by the Cabinet last week.

The coal block e-auction process is likely to begin in December. The government will auction 72 coal blocks. The Supreme Court deallocated 204 coal blocks in December. This in turn impacted 68,650 MW power capacities.

The government believes if price pooling is done and some linkages are given to most of the plants for the 12th Plan which is more than 10000 MW, then there will be no takers for these coal blocks.

Hence, the government wants to keep an eye on 78,000 MW for which it has already signed fuel supply agreement (FSA) under Presidential directive. Over and above the 10,000 MW is something which does not have letter of assurance or linkage, the government may provide linkage to them.

More than 68000 MW capacity is impacted due to deallocation, of which 36,000 MW will come up in the 12th plan.

The government may not go in for coal price pooling as it will make the government more dependent on imported coal. Instead it will look at supplying coal from Coal India .

Under the pooling proposal, Coal India will have to buy imported coal and blend it with its own coal stock.

Bharti Airtel calls off Rs 700 cr deal to buy Loop Mobile

Telecom major  Bharti Airtel has called off its plans to acquire business and assets of Mumbai based Loop Mobile, for about Rs 700 crore, as the Department of Telecom is yet to clear the deal. “Loop Mobile and Bharti applied to DoT for approval of the business transfer in March 2014. The approval for the transaction is still awaited from the relevant authorities as a result of which Bharti Airtel has withdrawn from the proposed transaction causing huge loss to the company,” Loop Mobile spokesperson told PTI. DoT is yet to give clearance to the deal as it estimates that Loop Mobile and its sister concern Loop Telecom owe about Rs 808 crore in spectrum and other charges to the government. Loop Mobile’s permit in Mumbai is expiring on November 29 and the company did not purchase spectrum in February auction which was mandatory for continuing its operations. Airtel had signed a deal with Loop in February this year to buy business and assets of Loop Mobile in Mumbai under a strategic agreement for about Rs 700 crore. Under the agreement, Loop Mobile’s 3 million subscribers (at that time) in Mumbai were suppose to join Airtel’s over 4 million subscribers, making it largest network in the metropolitan city. Loop Mobile will not be able to migrate its subscribers to Airtel as originally envisaged. No immediate comments were received from Airtel. Private sector lender  Axis Bank has told the DoT that Rs 215-crore loan to Loop Mobile will be at risk if the deal of the Mumbai-based operator to sell its assets to Bharti Airtel is not approved. A consortium led by Axis Bank had given advanced loans of Rs 350 crore to Loop Mobile and the current outstanding stood at Rs 215 crore, according to a communication by the bank to DoT. Loop Mobile has applied to Telecom Regulatory Authority of India (TRAI) for release of additional porting codes for facilitating port-out (transfer) of all its subscribers. The company had over 17 lakh customer in August as per data released by TRAI. Bharti Airtel stock price On November 05, 2014, Bharti Airtel closed at Rs 385.30, down Rs 10.7, or 2.7 percent. The 52-week high of the share was Rs 419.90 and the 52-week low was Rs 282.10. The company’s trailing 12-month (TTM) EPS was at Rs 27.40 per share as per the quarter ended September 2014. The stock’s price-to-earnings (P/E) ratio was 14.06. The latest book value of the company is Rs 166.93 per share. At current value, the price-to-book value of the company is 2.31.

DLF gets interim relief; allowed to redeem Rs 1806cr of MFs

In an interim relief against Sebi order, realty giant  DLF was today allowed by the Securities Appellate Tribunal to redeem mutual funds worth Rs 1,806 crore till next month. After hearing an appeal for interim relief by DLF, the Tribunal allowed the company to redeem mutual funds worth Rs 767 crore in the current month and further funds worth Rs 1,039 crore in December. DLF had sought permission to redeem funds locked in mutual funds after being slapped with the market regulator’s ban last month from accessing the capital market for 3 years. The Delhi-based developer had made the request through an affidavit submitted on Monday to the Securities Appellate Tribunal (SAT), which is hearing DLF’s appeal against the unprecedented ban imposed by the watchdog last month on the company and six of its top officials. The affidavit was filed following a direction from the tribunal last Thursday. The SAT, a quasi-judicial body, will begin its final hearing on December 10 on DLF’s main plea against Sebi order. At an earlier hearing on October 30, the SAT had asked DLF to specifically mention the time-frame, the requirements as well as the end use of the fund apart from till what time it needs the interim relief. The SAT has further asked Sebi to file its reply to the DLF petition by November 30 and directed the petitioner to submit its rejoinder by December 8 and posted the matter for final hearing on December 10. Last month, Sebi banned DLF and six of its senior-most officials, including founder-Chairman K P Singh, from capital markets for three years. The company challenged the ban in SAT and had sought an interim relief on October 22. The Sebi took action against DLF for not disclosing the details about three of its 353 subsidiaries/associate companies in its 2007 IPO filing. This was one of the rare orders by Sebi where it barred a blue-chip firm and its top promoter/executives from market. While promoters own 74.93 per cent stake in DLF, foreign institutional investors have close to 20 per cent and retail shareholders about 4 percent, among others. DLF stock price On November 05, 2014, DLF closed at Rs 126.65, down Rs 1.85, or 1.44 percent. The 52-week high of the share was Rs 242.80 and the 52-week low was Rs 100.00. The company’s trailing 12-month (TTM) EPS was at Rs 2.52 per share as per the quarter ended June 2014. The stock’s price-to-earnings (P/E) ratio was 50.26. The latest book value of the company is Rs 93.40 per share. At current value, the price-to-book value of the company is 1.36.

Bull phase intact; correction lurking: Jhunjhunwala

In May, four days before the election results were announced, super bull Rakesh Jhunjhunwala announced that India is witnessing the mother of all bull runs. Four months later, with a majority Modi government & falling crude prices, he is double bullish. ‘This is just the trailer he says…picture abhi baaki hai…promises the big bull.

Jhunjhunwala is a partner in his asset management firm, Rare Enterprises. A recent newspaper article said that over the last year or so, he had made close to Rs 35 lakh every hour. That is how successful he has been in this market over the last 12 months or so.

In an exclusive interview to CNBC-TV18, he ponders over things, global and domestic, that is transformational for Indian market and economy.

Q: I am going to ask you about two things I think that have changed dramatically between the time we last met which was May 12 and today. One is that we met a few days before counting since then of course the Bharatiya Janata Party (BJP) won, Mr Modi has become Prime Minister (PM) and that in itself has been a fairly transformational thing for the Indian economy. The second one is what has gone on with crude prices, which again has several layered impact on the Indian economy. First up how would you assess what you have seen the Modi government do so far?

A: First of all it is too short a period to assess. Second thing is my comment is that India has to undergo a change. We live in a democracy and change has to be slow. For everything that has to be changed, every decision has to be considered. So to think that Mr Modi and his government could show some miracle in six months would be childish. But I have no doubts that there will be miracles over a period of time and I will at least give a further period of 18-24 months; that’s when you will see the burst of all these actions taking place.

Also I would like to add that as far as crude prices go, in crude or commodities, what has happened, you have had one of the largest bull markets in commodities in the last 15-20 years. Now, I think it is not — people are saying that commodity prices have come down only because the consumption has gone down. I think consumption reduction is very marginal. What has happened is that there was so much super profits in commodities that investment was attracted. I think the super cycle on the commodities boom is over. Now we are going to go through a deep correction and maybe a bear market in commodities. I personally think oil prices will settle somewhere between USD 70 per barrel and USD 80 per barrel and will stay there for a long time maybe bottom at USD 75 per barrel or top at USD 85 per barrel that is what my expectation is.

Q: How does an investor play something like this?

A: I have not done a detailed analysis.

Q: One sector group of stocks or companies that will invest the most are oil sector, public sector companies because they have been strangled virtually by the lack of any kind of freedom in pricing?

A: There is a very big misnotion that Hindustan Petroleum Corporation Ltd ( HPCL ), Bharat Petroleum Corporation Ltd ( BPCL ) and Indian Oil Corporation ( IOC ) were not bearing any part of the subsidy and they were having market related prices including margins and profit.

The only thing was that government was paying them late. So they are biggest beneficiaries in terms of interest cost in normal terms of profit.

Q: But someone like an Oil and Natural Gas Corporation (ONGC) would benefit because the subsidy burden that ONGC had to bear as an upstream company hopefully will come down dramatically or reduce to zero technically if the diesel price deregulation persists?

A: Let me first of all say that I am long ONGC, I am very bullish. Please take advise from a financial adviser, I am extremely interested, I am long ONGC. I feel the biggest beneficiary of this will be ONGC and Oil India .

Last year ONGC’s realisation was USD 41 and my personal opinion maybe in 2016 or in the Budget after that, the government is going to abolish all this and the entire subsidy is going to be borne by government of India. That is what my judgement is, I deserve the right to be wrong. So the real beneficiary of this oil fall – it is a big dilemma that ONGC — if the government of India abolishes the subsidy — is the largest beneficiary in the world of falling oil prices.

Q: So there is a multifaceted set of benefits that India draws from that kind of price region for crude?

A: I think that is one of the small — that is a big benefit –but there are bigger benefit. In a meal, that is like a chutney, it is not the main vegetable and the main roti.

If you look at the world today, countries are facing two kinds of challenges. Some are facing structural problems which include the entire western world, Japan and China. Then there are countries which are facing cyclical problems where I include the developing world and there are countries which is on upturn both cyclically and structurally and India would fall in that category.

Q: I am saying what we expected on May 12. A Modi government is what you anticipated at that point in time. Yes of course this majority was unanticipated but we have got that and that bolsters your expectations. Did you expect crude prices to be at USD 80/barrel?

A: It bolsters the reality.

Q: But there is a double good whammy here because we have also had crude prices come down. Does this double whammy of good factors make you a double of a bull than you were in May is the question I was trying to get?

A: If you talk to me about India’s bullishness I cannot express how bullish I am. When I came to the market in 1985 the index was 150. I feel India as a country is at 150. People may call me anything, mad bull, big bull but these are my feelings. And when I think about the factors involved it is the thought I get. Because we are underestimating, we have a cyclical upturn, we have the best structural upturn in the world.

I envisage that post 2017-18 India will grow double digit I don’t know for how many years.

Q: I want to connect what you have said about the Modi majority if I may call it that, the bear market in commodities and what is going on in the rest of the world with regards to central bank policy because it has been most confusing in the last month, right?

A: Structurally the richest countries of the world have never faced the problem they are facing today. With commodity prices going down, inflation — people are talking of deflation— why should interest rates go up and even if they do, then by what measure? I am told deposit rates in Singapore are 20 bps. Suppose those deposit rates become 1 percent, what difference is it going to make? Are you coming to India to earn 1 percent? So all this is overhyped.

So I am of an opinion that what happens in the world could affect us may be for a week, 10-15 days or one month. But I don’t think interest rates will go up aggressively. I think they wont go up. Even if they go up, the quantum of rise will be one which is not going to affect sentiment towards India.

Second, India is going to be the best performing economy, I am not saying market, amongst the developed and developing world for a long period of time. Also there are a lot of investments waiting to come into India, which needed change in policy which is happening.

Q: All bull runs go through corrections at various points in time. We did see a lot of volatility in October. We also saw our markets come off their peaks by about 3 percent or so which was probably the mildest of corrections relative to how other markets did. Are we therefore in imminent danger of an impending correction over the next few months given how much we have run up?

A: We had a nonstop rise from 5200. In August 2013 the market bottomed. In August 2013 I said the mother of all bull markets is ahead of us. In December 2013 I said I believe the bull market has already started, in May 2014 I said this is the mother of all bull markets. This is just a trailer, you just watch the action movie. We had a rise from 5200 to 8200, a 3000 point rise. Correction can come anytime but I don’t think especially the last two days the screen is indicating any correction. And it is my feeling and opinion and I deserve the right to be wrong that if any serious correction will come, either it will come post December and finish before the Budget or it will come post Budget.

Q: When you say a very serious correction what would the depth of that correction be roughly?

A: It could be 33 percent of the rise. You go from 5200 to 9200, you always lose some points. I am not sure when it will start but corrections are part of market.

Q: So would it be fair for me to assume that you are still long on your trading portfolio?

A: I am bullish.

Q: Have you changed your trading strategy over the last month or so?

A: I do not make a strategy. I watch the screen, buy-sell, so there is no detailed planning, analysis.

Q: That is very self-effacing. I do not believe?

A: Want can I do if you don’t want to believe me. I have no conference with my people at 8:30. I come to the office at 11:00. I give orders at 9:15. I do not consult anybody.

Q: But your orders would be based on some analysis?

A: It is based on my intuition and my understanding which is not preplanned.

Q: I am curious to know because I know a lot of your followers would be keen to know how is it that Rakesh Jhunjhunwala pick stocks, does he do hours of financial analysis, does he talk to managements ahead of time before he puts his money into the stock to find out what the integrity of the management is, whether he agrees with their vision, their expectation. How do you pick stocks?

A: I am more a big picture investor rather than analysis and there are so many factors. Investing in a sense requires intuition of so many senses but I look at the big picture and when I am convinced I do not listen to anybody and I have been wrong, wrong, wrong many a time. I am luckier than I am smart, let me tell you that.

Q: Do you talk to managements of the companies before you invest in them to get a sense of what their vision is?

A: Sometime there is a value that when you invest don’t investigate later. I met the promoter of DHFL on the airport by chance. He told me I should look at his stock. It was at ridiculous valuation. When I saw it was at Rs 110. I told him that I will look at the stock and talk to you. I first bought those shares then I called him. Therefore, at certain valuation it’s now invest and not investigate later.

Q: But that is a chance meeting with the promoter of a company. Do you otherwise consciously try and call if a company looks interesting to you from financials or valuation point of view do you call the management?

A: I do not have much money to invest, whatever you think. I do not have trading income every year and that’s the only thing I can invest and I do not want to take debt beyond a point and I do not want to rotate my portfolio constantly. I want very little turnover in my portfolio. Therefore, I am not looking very minute eye and nowadays I do not want to invest in small companies.

Q: Why? Small companys means smallcaps, midcaps companies like what we traditionally know as smallcap, midcap?

A: It is difficult to buy, difficult to sell.

Q: Aren’t these what market call multibaggers?

A: Rather than a hunt for the multibaggers now if I get 21 percent return on my stock I will be a king. If I will get 24 percent, I will be an emperor.

Q: Why is it this that you moved away from aspiring to want to identify the next 10 baby multibaggers?

A: When I bought Titan first time, I thought the price will be Rs 200. I bought up to Rs 120. The price is Rs 8,000. So it’s not easy. Lot of people ask me give us the next Titan. If I will know it I will tell you.

Q: On May 12, you told me you were long software and pharmaceutical but that you have also started building big positions in cyclical. Do cyclical still look very appealing to you?

A: Depends on which one because there are lot of cyclical.

Q: You had mentioned a few stocks then I am taking the liberty to mention those stocks. You had said Dewan Housing Finance Corporation (DHFL) at that point, Escorts at that point – those were some of the stocks you spoke of.

A: With a time horizon of five-ten years, any Indian company with good corporate governance, good allocation of capital, good return on equity, unutilised capacity I am bullish on.

Q: Financials, industrials. A: Everything but these are – going to a sector also you look at the criteria of companies; what is the profile, what is the problem but one thing is there in cyclical the rewards are going to be very good but you have to have patience. Q: Have you been adding financial stocks to your portfolio?

A: I am adding financials.

Q: What is it within financials that appeals to you, are you looking at some of the more non banking financial companies (NBFCs) kind of companies or are you looking at private sector banks or public sector undertaking (PSU) banks. I am not asking you for specific names. I am asking you for larger areas that might interest you?

A: I am not looking at PSU banks and from investment angel I am not buying any PSU banks. According to me the public sector banks profitability will go up, there will be upturn but the problem is they need so much of equity. I keep selling every year, keep selling every year. Actually my request is for Government of India to decide for five years what is a disinvestment for three years and do not disinvest a company every year. If you sell Oil and Natural Gas Corporation ( ONGC ) today then make a pledge that for 24 to 36 months we will not sell ONGC. If you respect the equity, the market will respect your equity. So, India to get better valuation of public sector stocks whether banks or otherwise need to have a planned disinvestment programme for the next three years.

Q: In industrials are the specific areas that look interesting to you, more interesting or more promising because the last set of earnings that we went through last quarter, not this time, there were quite a few expectations that took a hard reality check or knock if I could say so on industrials.

A: For trading I sold all my cyclical, most of them and not all and my economy related immediate economy related stocks just one or two months into the rally in June-July because there are lot of expectation built in which is going to take time. If you want to buy, buy with a three-five year horizon.

Q: You sold and you rotated your money into what?

A: I am talking of trading positions. Q: I am talking of trading positions only? A: I won’t tell you what I bought.

Q: Not stocks but sectors?

A: I don’t want to talk companies; I do not want to talk sectors.

Q: In May, you had told me that Infosys was still some time away from a turnaround. Now with a change in leadership, do you believe that that company and therefore the stock by extension look more interesting?

A: This is the first quarter – I do not know, I am hopeful and it could be a very good turnaround. They have underperformed TCS and there is no doubt about it by leaps and bounds. So let us see what happens and I think they could and they could not, I do not know.

Q: We have seen USL go through a fairly rough patch over the last few quarters, a delay in announcing its earnings. There is a cleanup going on there. How confident do you feel about the USL story?

A: Over the next 15 years.

Q: Hopefully two-five years? Who has seen 15 years?

A: I have bought USL and at this moment I think that if I have 50-53 percent of India’s liquor market and I have Diageo’s skills and corporate governance; the short-term maybe a little cloudy but the long-term is – you cannot imagine. You have 50-53 percent India’s liquor market, you have the world’s largest company owning it, you have the highest corporate governance, you have the highest skills in running spirits business, I think it’s a lethal combination.

Q: What about e-commerce valuations? Is there some way you are looking at playing what is going on the e-commerce space?

A: I think it is crazy.

Q: I asked Ramesh the same question and he said I am approaching the proxy for me because most of these companies are unlisted are logistic players, supply chain players.

A: Do I have to participate in every party in the world. I want to ask you one thing, JustDial has got Rs 700 crore cash in the balance sheet.

Q: JustDial was one of your big investments

. A: I sold it. He is going to raise Rs 1,000 crore for what? What is he going to do with Rs 1700 crore cash in his balance sheet, how is he going to use? We will have inorganic opportunities, okay. So there is no respect for equity. Anyway, in the short-term, the price could be Rs 10,000 but I know entrepreneurs who give respect to equity, give returns to its investors.

Q: Do you think some of these start-ups like Flipkart etc have diluted way too much, way too quickly?

A: They could grow but how much the investors will earn, I have a doubt.

Q: I want to ask you one stock specific question. There are two – Your interest in MCX and your interest in GSFC .

A: I have a position in GSFC, it is a trade, it is not an investment.

Q: And MCX?

A: I made an investment in MCX and I am very bullish.

Q: On the exchange business?

A: No, the exchange business – because I think it is like in 1999 when I bought CRISIL , everybody wanted a play on the financials in the Indian market. I thought CRISIL is the best proxy for financials. It is unique. If I want to have an investment in India’s financials, MCX is best because unique. It is a play on the trading and the hedging and the liquidity and the growth of Indian markets. To establish a near monopoly with 85-90 percent market share in commodities, I think it is unassailable position.Q:

 

Q If your expectation is that we are set at the beginning of a bear market in commodities, do you expect that to play out in any fashion on trading volumes for an exchange like MCX?

A: Consumption is not going to go down and once all this trading, once you are habituated – in India, where is the hedging? Where is the development of the financial markets in the attitude?

Q: Is this five-year investment for you, ten-year investment for you?

A: Who knows.

Q: But it is an investment, it is not your trading portfolio? A: It is an investment. Q: GSFC?

A: I am bullish.

Q: Let me ask you what would your message to fellow investors in the Indian equity markets be on this auspicious occasion of Diwali?

A: I will say be bullish, ride for longer-term, there is a lot of money to be made in the stock markets but invest what you can afford or invest with an idea that there could be risk also. So invest what you can afford easily, don’t be cynical about India. It is going to be the greatest opportunity we ever had and the next – India is going to be a bull market, which will surprise you even five years later, ten years later, fifteen years later and twenty years later. I deserve the right to be wrong, believe in India, happy investing.

Axis Bank Q2 profit may jump 18%, assset quality key: Poll

Axis Bank , one of the largest private sector lenders, will announce its second quarter (July-September) earnings on Friday. Profit after tax is expected to grow by 18 percent to Rs 1,612 crore from Rs 1,362 crore on yearly basis, according to the average of estimates of analysts polled by CNBC-TV18.

Net interest income, the difference between interest earned and interest expended, may jump 14 percent to Rs 3,342 crore in the quarter ended September 2014 compared to Rs 2,937 crore in same quarter last year.

Key things to watch out for would be its asset quality as the management had said (after Q1 earnings) that it will review asset quality guidance post Q2FY15.

In Q1, asset quality surprised positively with stressed assets went down 22 percent Q-o-Q to Rs 1,100 crore. The bank had maintained its stressed assets guidance at Rs 6,500 crore for FY15 as against Rs 5,700 crore in FY14.

Also restructuring may be keenly watched. In Q1FY15, fresh Restructuring was down by 57 percent sequentially to Rs 480 crore.

Net interest margin of the bank is expected to remain stable. Analysts expect that in 3.7-3.9 percent range for the quarter.

Loan growth is estimated to be healthy during the quarter at 19 percent Y-o-Y while deposit growth is likely to be modest at 10 percent.

Fee income may moderate in July-September quarter, feel analysts. According to the poll, estimate is around 8-10 percent on yearly basis.

 

Arvind Subramanian named India’s new Chief Economic Advisor

The government today appointed Arvind Subramanian as India’s next Chief Economic Advisor. Arvind Mayaram will be handing over the baton to Subramanian who will hold the post for the next three years.

Subramanian whose work experience includes working with the International Monetary Fund (IMF) has also taught at the Harvard and John Hopkins University.

Subramanian’s impressive and long career includes working for the World Bank, World Trade Organisation and UNCTAD.

Soon after he was appointed to the post, Subramaniam told the media that his focus will be on growth, employment generation, investments and providing equitable growth for all Indians.

Economic experts say Subramanian is the right man for the job. C Rangarajan, former chairman, Economic Advisory Council to the Prime Minister, who has also taught Subramanian, says this appointment has been an excellent one. “

Subramanian has had an outstanding work experience. He is an expert on China and on the problems of globalization. The best thing is that he is familiar with the problems faced by economy,” says Rangarajan.

S Narayan, former finance secretary says, “Subramaian is a very pro-growth person. He will give fresh direction to Indian economic development.”

 

Sebi fines Glaxo for failing to make regulatory disclosures Penal

Capital market watchdog Sebi today slapped a fine of Rs 25 lakh on Glaxo Group Ltd, a promoter entity of drug maker Glaxo Smithkline Pharmaceuticals , for failing to make timely disclosures about its aggregate shareholding to the company and the stock exchanges.  Glaxo Group “neglected the duty of making timely disclosures” to the stock exchanges the BSE and the NSE, on various occasions, the Securities and Exchange Board of India (Sebi) said in its order.

Sebi came across the violations by Glaxo Group while examining the draft letter of offer filed by Glaxo Smithkline Pharmaceuticals along with UK-based Glaxo Smithkline plc and Glaxo Group, to acquire 24.33 per cent stake in the India-listed group entity. As on quarter ending September, 2014, Glaxo Group held 35.99 percent stake in Glaxo Smithkline Pharmaceuticals as the largest promoter shareholder. Penalties, totalling to Rs 25 lakh which needs to be paid within 45 days, have been imposed by the capital market regulator for violating various provisions of Sebi’s Takeover Regulations.

Under these norms, a promoter of a listed company has to, disclose, together with persons acting in concert with him, their aggregate shareholding and voting rights as on March 31, in the firm, within a prescribed time period, to the relevant stock exchanges as well as the company. Sebi found that Galxo Group, as a promoter group entity, was under an obligation to disclose the aggregate shareholdings to the BSE and NSE as well as to Glaxo Smithkline Pharmaceuticals India for the year 2007.

However, the said disclosures were admittedly made by the entity with an aggregate delay of 60 days. The market watchdog also noted that Glaxo Group was to disclose its shareholdings for the year 2012 and 2013, but made the same with an aggregate delay of 158 days.

GlaxoSmithKline stock price

On October 14, 2014, GlaxoSmithKline Pharmaceuticals closed at Rs 2747.30, up Rs 13.25, or 0.48 percent. The 52-week high of the share was Rs 3054.40 and the 52-week low was Rs 2351.60.

The company’s trailing 12-month (TTM) EPS was at Rs 48.72 per share as per the quarter ended June 2014. The stock’s price-to-earnings (P/E) ratio was 56.39. The latest book value of the company is Rs 238.15 per share. At current value, the price-to-book value of the company is 11.54.

 

Sept WPI eases at 2.38%, food inflation cools to 33-mth low

Inflation data based on Wholesale Price Index (WPI) for September eased to 5-year low at 2.38 percent against 3.74 percent on a month-on-month basis on lower food and fuel prices.

Food inflation, which came in at 33-month low, stood at 3.52 percent against 5.15 percent, while the fuel and power group inflation came in at 1.33 percent against 4.54 percent on a month-on-month basis. Manufactured products inflation came in at 2.84 percent against 3.45 percent. The July WPI inflation has been revised to 5.41 percent from 5.19 percent.

A CNBC-TV18 poll had estimated WPI to come in at 3.1 percent on a lower primary and fuel inflation.

Even the consumer price inflation data for the month of September, which was released yesterday, cooled off to its all-time low of 6.46 percent, the lowest since India started computing consumer price index (CPI) in January 2012, led by lower food prices and fuel costs.

Reacting to the data, finance minister Arun Jaitley said that the fall in inflation data is heartening and that the food inflation is now under control. “Today’s data release for WPI for September at 2.38 percent shows that inflation fell significantly dipping to a five-year low.  Data for consumer price inflation for September at 6.46 percent released yesterday had also shown a decline, he said.

He further added that the government is committed to continuing reforms in food markets that will improve supply responses and keep inflation low and stable. “Growth in vegetable and protein prices that have been contributing to the recent increase in inflation rates have shrunk thanks to the steps taken by the government. Fiscal consolidation and a new monetary policy framework will help bring down inflationary expectations. We are confident that soon we will be achieving a low and stable inflation rate,” he said.

Elated by the double cheer brought in by CPI and WPI, Aditi Nayar, Senior Economist at ICRA, said falling crude, commodity prices coupled with softening food, have helped in bringing down the inflation numbers. Nayar had expected WPI number at around 3-3.1 percent, and says 2.38 percent is definitely positive news.

“The good news at this point in time is that we haven’t seen the impact of diesel cuts yet. That would bring some more softening going ahead and something to look forward to. However, we should still remain little bit cautious as far as other food prices are concerned other than the vegetable reversals,” she told CNBC-TV18.

According to ICRA’s immediate term trajectory expectations, CPI will fall below 6 percent by November and then rise up to around 7 percent in December-March. After that it will be back on Monsoon watch from April onwards.

Nayar expects commodity prices to stay low for a long period but feels the effect will go away. “This year fuel and light has shown a downtrend also because electricity tariff has not been hiked in large number of states. Next year possibly we are going to see fairly steep increases across quite a number of states and that’s something that will bring in a new factor that will firm up inflation, which doesn’t exist at this point in time,” she said. Nayar expects the first rate cut at around June 2015.

According to Samiran Chakraborty, Head of Research at Standard Chartered Bank, the numbers reflect the decline in global commodity prices as it is WPI that picks up the metal, chemical and fuel price declines faster than CPI. He expects the core inflation to come in lower than 3 percent (better than 3.5 percent seen last month).

“So in conjunction with the food price decline which is reflected in both CPI and WPI, the WPI move looks spectacular. Therefore, very good news that on both WPI and CPI we are now getting confirmation that the inflation numbers are low,” he said.

Though Chakraborty agrees the projected inflation trajectory should shift downwards by about 70 bps, he feels it is better to rather wait for couple of more months to check the sustainability of the current momentum change.

“If we simply look at this 70 bps downward shift in the trajectory then we are still probably looking at something like 6.5-7 percent inflation by September next year and in that situation, we might not see an immediate rate cut coming in. But if there is also a momentum shift then even the rate cut could also be on the table,” he said.

Discussing the yield trajectory, Vivek Rajpal, Rates Strategist at Nomura India, said it has been quite favourable for sometime, “but will still be gradual decline”. He expects levels of 8.20-8.25 percent in this fiscal year by January.

And how is the 10-year likely to look one year down the line? Rajpal expects it to be closer or slightly below the repo rate. “I wouldn’t be surprised given the inflation the way it is behaving. Before we get the actual rate cut from Reserve Bank of India (RBI), the 10-year bond should trade below 8,” he added.

 

BSE to remain shut on Oct 15 due to Maharashtra elections

The Bombay Stock Exchange will remain shut on October 15 on account of elections in Maharashtra. In a circular to traders, BSE said on account of Assembly Elections in Maharashtra, the exchange will remain closed on Wednesday and there will be no trading on that day in equity segment. This trading holiday was not included in the previous 2014 trading holidays list.

A compulsory holiday will have to be observed by all organisations in the jurisdiction where election is to be held.

Other trading segments such as mutual fund segment, currency derivatives, equity derivatives segment and other traded segments will also remain shut for the day.

Other exchanges such as NSE, MCX and NCDEX are also expected to remain shut though no formal announcement to the effect has been made yet

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