panch-tattva talk…some food for thought

Friends,

The markets seem not to be bottom less but seems to be under some influence (of evil kind or evil design of
some quarters). The negative factors (without support of negative fact even at times) are played up and the positive factors (even with backing of positive facts) are ignored. Otherwise how can we justify the pattern of the same very stocks regaining values after they have been under bad publicity. Also it may be noticed that none of the stocks under bad light have breached their lowest level for months together inspite of the US and other markets remaining poorer. Moreover the otherwise reputable stocks are not being allowed to regain to right level of price and are pressed down with sudden supply (may be by those who mopped it when under wrong publicity).Why would one do so. The players with big money and out to get substantial quantities at low prices would do it. There have been a spate of positive developments in India and the markets will have to respond to them , today or tomorrow. I list them out below:

a) Interest rate reduction and CRR/Repo rate reduction (in a few instalments).

b) The expenditure by govt by raising deficit.

c) The lowering of excise duties and service tax (in a few strokes).

d) Easier foreign borrowing norms.

e) Govts readiness to do further such acts and some reliefs in stamp duties.

What these actions have resulted in to are:

a) The rupee getting cheaper and acting as support and shelter to Indian enterprises.

b)Inducing consumers for buying cars , houses etc.

c) Enabling banks to give loans due to money released by RBI under CRR.

e)The restoration of viability of infrastructure projects which had come under trouble due high interest.

f)Expansion of demand to give back the lost revenue on account of indirect tax cuts.

g)This has extended back the invitation to FII inflows which had reversed in past year and has taken away the need to get out for what remains still invested here.

i)This has blunted the edge of weapons in hands of panick-spreaders.

Apart from above , there is lesser supplu of paper and therefore less demand for savers rupee. The saved rupee can now buy greater number of stocks than it could buy an year earlier. The yields have become attractive and more so against the back-drop of low interest rate regime. The cost of operations has come down due to reduction of interest on working capital needs. Low inventry carrying cost are benefitting distributors. The udden blow to economy has deferred the new capacity addition hence lower supply prospects protecting present businesses. The growing inclusion of vast rural population in modern economic activity. The car sales of Maruti took high jump on rural demand. It is pushing up sales of FMCG and Pharma companies. The completed road and port projects have improved efficiencies along with increased telecome coverage. When these things happened USA saw a great thrust in its economic development while India was struggling with its ‘hindu rate of growth’. What I mean is that at the same time two diverse economies can well have different rate of progress and there is no big need to invite the western pessimism beyond the point that there may be lesser supply of funds from there and greater financing. Sources have to be found here itself. This would be a thing ensuring stability and the retention of benefit of investment here itself. Indian polity has matured and it is now a bipolar polictics more or less with third front getting decimated. So there would be no surprises after election and known devils are better than unknown friends in any case.

I can speak endlessly and you may lose patience hence I stop here and would like you to comment , positively or negatively.

I may give yet one more point and that is that gold prices rise first and then does the stock market.It happened after 2000-01 and ended in 2007-08. After running topsy turvy for some month the old pattern is going to emerge.

Excuse me for not telling you so far that the cheap oil prices have insulated Indian economy from crumbling. This has enable the govt to in fact give out big largess without demur. After a decade of high growth rate the need for the govt to find means for supporting poor families has also diminished. This will enable the govt carry on without much greater tas effort.

HariOm,
krsnaKhandelwal

panch-tattva talk…tatasteel Q3:cosolidated

Friends,

RIL proposes to merge RPL with it self which 70pc subsidery of RIL. This may be due to some tax advantages for the merged entity.

Tatasteel has announced results for on consolidated basis for Q3 and that is quite encouraging. The cosolidated profit for Q3 comes to Rs 1325 crs.The Q3 was one of the worst quarters for steel makers.The tatal sales have been of the order of Rs 33191 crs against Rs 31898 crs (YoY). Tatasteel had sold 1.1 M/T steel in Q3 and they plan to sell as much as 1.6 M/T in current qtr. This is some thing extraordinery. The OPM was down to 8pc against 12.13pc.The management has said that the Jamshedpur expansion will remain on track.

The GDP for Q3 is showing 5.3pc. For some it is pessimistic and for some it is optimistic. I think that the growth will improve in coming qtrs if the RBI does not falter in reducing the bench-mark rates and ratios.

Rupee is sliding every passing day and as I told you earlier it will help the exporters and protect commodity producers. The China keeps its currency under-valued as a policy for being able to export competitively. If our currency dilutes and gives us also an edge , I see no harm in it.

The Nifty was up down during the day and closed at 2763 (-22).

The westrn economies are not stabilising and Indian market remain under pressure for that. This is unnatural and when rebound happens it will be of substantial magnitude.

HariOm,
krsnaKhandelwal

panch-tattva talk…’nano’ gets launched on 23rd march

Friends,

The ‘nano’ launch will take place on 23rd March 09 and the Ratan will see his promise kept. This will also a shot in arm for ‘tatamotors’ as the booking will start from April 2,2009 . As has been seen in India earlier, the booking for much awaited vehicles get too attention and large booking nunbers are seen. Since the booking amount will be without interest or nominal interest, it will be a windfall gain for ‘tatamotor’ which is starved of capital just at present.

Govt employees have been given 6pc extra allowance on basic pay to cover cost of increased cost of living . This will entail a burden of Rs 6000 crs for the exchequer between now and Feb 2010. Elections ahead have prompted to announce this as the code of conduct is yet not applicable.

TCS is resorting to cut costs by reducing variable pays and increasing work hour per week from 40hrs to 45hrs.Employees/personnel costs are 54pc of TCS’s revenue. TCS has 130,000 employees on its rolls.

The inflation is at low of 3.36pc and raises hope for the interest rate cut by RBI.

The duty cut is direct gain for steel,cement and aluminium producers as the prices in open market have firmed up .

The Chinese and American economies are linked in a sense that while China exports a lot to USA , it also keeps its forex reserves in dollars. Any thing done in USA to protect economy will have repercussions for China. The same is happening too. Today Shanghai is down while DOW lost 3pc from its intraday peak yesterday. Other markets are behaving that way.

Rupee is weakest today against the dollar. This is some protection to commodity players and some gain to exporters.

HariOm,
krsnaKhandelwal

panch-tattva talk…a ULIP fund analysed

Friends,

The ULIPs (unit linked insurance plans) have gained popularity recently and have have given negative returns for the first time in past twelve months. Reason is not far to seek , the USA’s financial disorder has to do every thing with it and therefore it was something which the fund managers could not have controlled or assessed. I am also a insurance sales person attached with HDFC Standard Life Insurance Co (please visit www.panchtattvainsurance.blogspot.com) and have been advocating the need to stay invested in equities through ‘growth funds’ for some time. I decided to evaluate the ‘growth fund’ portfolio of HDFCSLIC. Their top holdings with more than 1pc investment of the gross amount with the fund is as under (CMP on 020209):

ASIAN PAINTS(2.66pc):Its book-value is 97/- against CMP of 778/- and EPS is Rs 37.10. Its 52W H/L happens to be 1314/778. This is good scrip and has good stability and brand image.It’s leadership is undisputed.It can be held for long term withiout fear as the management is top class.

BHEL(6.67pc):Its book-value is 153/- against CMP 1308/- and EPS of Rs59.3. The 52W H/L is 2366/984. This is company which has least worries on account of slowdown due to robust oerder-book. This is slated to give handsome returns over long period and is one of the best picks.
BHARTI AIRTEL (2.92pc):its BV is 106.3 and EPS is Rs 39.10. The CMP is 715/- and 52W H/L happens to be 950/484. This is a great company by all standards and is in a field that is growing by leaps and bounds. It has head start over other players in the field and should be one of the best bets at the time.

BLUE STAR (1.83pc): Its B//V is 29.30 and EPS is Rs 17.70 while CMP rules at 140/- against H/L of 500/122. This is an old player in air-conditioning and has very resonable price against EPS.

COLGATE (3.18pc): Its BV is 11.90 and EPS is Rs19.70 while the CMP is 415/- against 52W H/L of 460/341. This is one of the best managed companies and its brand value is tremendous. This should be a part of any good portfolio and for consistancy. FMCG sector is growing even in todays gloomy times.

CROMPTON (4.05pc): Its B/V is 25/- and EPS Rs 10/- and CMP rules at 130/- against 52W H/L of 336/106. A player in elecrical equipment sector and with good pedigree , this gives absolute comfort in a portfolio.

DISHMAN PHARMA (1.59)pc):Its BV is 58.2 and EPS Rs 10.8 while CMP rules at 112/- against 52W H/L of 350/97. This pharma comapny is discouted very favourably just now and carries value.

DIVI’s LAB (2pc): Its BV is 135 and EPS is Rs 63.50 while CMP rules at 862/- against 52W H/L of 1635/797. This also falls in same catagory as Dishman Pharma and has scope of appreciation.

EXIDE (2.90pc) : Its B/V is 12.40 and EPS Rs 3.50 while CMP rules at 40/- against H/L of 84/37. This is at reasonable level of price and has no risk of further slide.

GLAXO SMITHKLINE (1.69pc): Its B/V is 183.40 and EPS Rs 44.80 while CMP rules at 585/- against 52W H/L of 766/480. In packaged food business, this company has good track record and is good scrip to hold.

ICICI BANK (4.53pc) : Its B/V is 417.40 and EPS Rs 37/- while CMP rules at 385/- against H/L of 1245/282. This is a bank with great strides in expansion of business. It was under bad publicity but without substance, over time it gain old glory and will increase value of portfolio.

INFOSYS TECH (5.44pc) : Its BV is 235.60 and EPS Rs 94.90 while CMP rules at 1049/- against 52W H/L of 2017/1040. This company is known all over the world for right reasons and is a good addition to portfolio.

ITC (6.58pc) : Its BV is 31.80 and EPS Rs 8.40 while CMP rules at 132/- against 52W H/L of 232/178. A leader in all its field of operations and consistant growth in EPS this is best addition to portfolio.

L and T (4pc) : Its BV is 162.70 and EPS Rs41.30 while the CMP rules at 662/- against 52W H/L of 1937/611. This is under some cloud over investment in ’satyam’ but would soon regain glory. Its business is growing on compounding basis and would add good value to portfolio over time.

NESTLE (2.76pc) : Its EPS is Rs 70/- and CMP rules at 1477 against 52W H/L of 1520/1335. This is a company of high esteem and stable business and great brands. This would give stability to portfolio as also decent returns.

ONGC (4.21pc) : Its BV is 330.20 and EPS Rs 77.20 while the CMP rules at 639/- against 52W H/L of 1124/538. This is a company which may be called backbone of India. It global aquisitions have tremendous scope of giving profits. Its a ‘must-keep’ for any good portfolio.

RELIANCE (5.41pc) : Its BV is 608.20 and EPS Rs99.90 while CMP rules at 1278/- against 52W H/L of 2707/930. This company is capable of negotiating any rough patch without losing out. A very efficient refinery and oil exploration business make it a all time company. Should be improving performance in coming time.

SATYAM (2.30pc) : This would have been a dead investment but some how has been saved by the new team at work after being subjected to greatest fraud by its own executives.This may have been added due to more attractive ratios but due to concealed reasons. No further damage will be there on account of this investment.

SEIMENS (2.69pc) :Its BV is 61.30 and EPS Rs 21.40 while CMP rules at 201 against 52W H/L of 865/186. At current price and the capacity generate profits in future give is a special status.

STATE BANk (6.73pc) : Its BV is 772/- and EPS Rs 130/- while CMP rules at 1096/- against 52W H/L of 2310/991. This is pure value at current price. Would be star performer in coming time.

UNITED PHOSP. (3.99pc) : Its BV is 43.50 and EPS Rs 3.90 while CMP rules at 96/- against 52W H/L of 185/65. Catering to vast agri-sector of India , its a very effcient player in the field. Almost must for a good portfolio.

ZEE ENT. (3.64pc) : Its BV is 49.40 and EPS Rs 7.40 while CMP rules at 104/- against 52W H/L of 280/90. This has been picked for the sectoral preference. I have some reservations about the quality of corporate governance even though it may give good returns.

The above companies represent 82pc of the investible funds under ‘growth fund’. The rest comprises of small investments in a few equities and rest is in bonds etc. As you may have noticed that the investments are of two types ie where the business is ever growing and is not subject to recessionery conditions and where there is value. The value stocks have been choosen keeping in mind the line of business which is again less prone to recessionery conditions. This is a good strategy adopted by the fund managers. I have lloked into each of above stock and may say that given time and given normal conditions , each of above companies may see doubling of the share price. It is for this reason that I have been insisting on investors/policy-holders rermaining invested in ‘growth fund’. It could have been suggested that one remains partly invested in ‘growth fund’ but at such fantastic values which naturally ensure safety in long term , it is only advisable to remain invested 100pc. The bus may be missed by those try to time the market and mid-way it may be more risky to enter. I hope you appreciate what I say, for confirmation please wait with patience.

HariOm,
krsnaKhandelwal

panch-tattva talk…USA turns socialist

Friends,

Overnight USA has turned in to USSA (United States of Socialist America or more appropriately United States of Soberred America). Barak Obama addressed the joint session of American senators last night and gave the feeling that the capitalist excesses have turned the govt imperative to socialism as was the case with USSR but in reverse way where the socialistic excesses turned govt imperative to capitalism. It has all been played out in last two decades. Here our Indian model of mixed economy has been working fine albeit with some cosmatic changes here and there. Obama has committed to addressing  the recessionery conditions with full attention and is confident of overcoming it. His plank is to put money in middle class pockets to the tune of USD 2500 for each tax payer by cutting taxes. He has promised to improve health care , ensure schooling and higher studies beyond it for every deserving candidate and he would be doing every thing to develop renewable energy sources. He says that while USA was in the forefront of inventing technologies in this field but has been put behind in practicle applications of the same by other nations . He said that banks would be funded but they will not do what they please with money , it will rather be given out as loans for small businesses and for consumption by the ordinery people. By spurring demand he sees economy growing again.He was all for not giving any succour to the rich. He has shown dislike for the indulgence in luxuries at cost of share-holders and tax payers.

It seemed at times as if an Indian Primeminister is delivering the lecture but I must say that while our leaders talk much but deliver little , in USA what is being said would be put in practice to a great extent. Here the USA has an edge over most other nations. The markets have been cheerful last day in America. Obama said that he was aware of the implication of running large deficite but said this was necessary to let people have jobs . His plan is to create  3.5 million new jobs of which 90 % will be in private sector. He was serious about the job losses on account of out-sourcing them off-shore and wanted that the what is going to be consumed by American should also be produced in America. This is enough to give jitters to China.

 

Our market improved after the third package was announced but shed some gains to end about a percent up. I must say the reliefs in excise duties to the extent of six percent across the board in two attempts is some thing that has never happened here. Also the rate reduction ect one after the other by RBI is also unprecedented. There is going to be another such attem possibly and should prove to a direct dose adrenalin in the viens of Indian economy. If it will still not come into full play then it will only a case of patient who is terminally ill. If RBI ensures that the banks just do not sit on cash but go out to find the takers of money to put in to productive use or for consumption then the economic spurt is bound to take place.

 

HariOm,

krsnaKhandelwal

panch-tattva talk…govt act right

Friends,

The govt has acted rightly one more time. What did not come in interim budget has been given now. Pranab announced in parliament that the duty will be cut by 2pc on items attractin more than 8pc duty and has given rekief to bulk cement by reducing the duty to 8pc . He has boldly announced reduction of 2pc on service tax applicable which now will be 10pc. This together with what already was done in Dec 08 will go a long way. He has also ended uncertainity by announcing that the indirect tax relief will be immediately applicable and would be extended beyond 31st Mar 09.

Market enede flat but only after seeing loss of 59points and Nifty closed 2733 points.

The eagerly awaited RBI’s interest reduction may come shortly for which the ground is ready. When it happens too the Indian industry has reason to to be happy. The DOW has turned positive today and if it extends gains by a decent margin agaist 7166 just now , it will be result in good opening of Indian markets.

The govt is sacrificing Rs 300000crs of revenue in the above excercise.

Sugar shares went in to taispin on account of govt announcement about taking steps to see sugar prices subside. This in fact is not easy as any high release just now will make future price of sugar go up much more. After the crushing figures are known for the factoriies , it would be easy to know what may be the likely profit for sugar comapnies.

All in all , some would be skeptical even now but I have to be on the side of optimism.

HariOm,
krsnaKhandelwal

panch-tattva talk…LIC investments

Friends,

LIC of India has investment in equities to the tune of Rs 1.09 lac crs.Its stake in as many as 47 companies is more than 10pc of the paid up capital.As per IRDA rules LIC is not supposed to 10pc limit in one company. The norm has been relaxed for the time being but nore further additions will be allows where the holding exceeds 10pc.

The Indian Railways has had minimum operating ratio at 76.3pc (in FY 2008) and highest operating ratio was experienced @98.3pc (in FY 2001. This is the position since FY 1996. The FY 2009 operating raio is slated to be 88pc. Next year ie FY 2010 will see it inching up to 89.9pc. The Railways should be tightening belt now as aternative means of transpot will affect its capacity to raise fares and freight. I think that there is further requirement, equal to investments made so far, of investible fund. This is take care of renovating stations. There is need for better designed coaches as todays designs of coaches in not comfortable. The railway track require upgradation to carry trains faster. There is need to covert metre gauge line in to broad guage. There also a need to doubling lines on trunck routes . They have little time and these expenditures have to made to stay in forefront of transporting facility providers. Completed highways and multi-axel trucks will be a threat to them in freight market. The passanger facility has to compete with road and air travel alternatives.

DOW has touched a 12yr low point. This may give some tension in local markets today but as the values abound , it may be for a short time.

HariOm,
krsnaKhandelwal

panch-tattva talk…salary hike

Friends,

The salaries will be hiked by India Inc by 8.2pc this time as per survey conducted by Hewitt Associates (HR consulting firm). This would ,however, be lowest in six years. The US and China would be doing it at 3.2pc and 8pc. The sectors in forefront for salary hikes happen to be Pharma,Telecom,FMCG and Chemicals.

Govt’s economic adviser Mr Virmani is of the view that the tax sops given earlier during the year will have effect over time and economy will stabilise. He also said that the deficit is actually some thing that is resorted to in times like this and the govt borrowing will be no problem. Only thing is that the monetary strings should loosened by RBI. People had got worried that govt borrowing is putting pressure on availability of funds and interest rates are firming up even though the repo rates etc have been reduced.

Bid for ’satyam’ has been given a green signal. CLB has approved the plan and hiking of capital to Rs 280 crs. The bidders will be asked to submit competitive proposals for buying 26pc stake. I see this a loss to shareholders as their stake will get diluted while the lost money that may eventually be restored will be shared by the new comer. Until the time the accounts are restated and all knowable things are known , it is wrong to ask for bids. However, if at all any urgent action is to be taken it should seperating the business of ’satyam’ in a seperate entity owned by ’satyam’ and there the new partner should be invited as all the assets and going business trasferred will be a concrete thing. The gains and undeterminable losses of past will be for the present shareholders to share. But as I have been telling you that govt has poked nose in ’satyam’ for some considerations other than spelt out. When ‘kasab’ was iterrogated every bit of details was being made public, here a suspect who talked of wrong doing voluntarily and is being interrogated than why the details are not made public as to what came out of horse’s mouth. All mouthing is being done by the ones assuming charge and no trail has been found for impounding the scam money. Is it because the trail is going make some people very uncomfortable. The ‘maytas’ case also may be revealing a scam of similar order where banks have exposure to the tune Rs 6000 crs. If such things keep happenning than what use is of govt’s efforts at curbing money laundering etc. Economic and other intelligence wings of govt are only for name sake as is proved by cases of ’satyam’and ‘mumbai attack’.

HariOm,
krsnaKhandelwal

panch-tattva/post result…glaxo and others

GLAXO @1197 (180209) gets 1070 panch-tattva points and amy be bought for long term.

SKFINDIA @136 (180209) gets 1072 panch-tattva points and may be bought for medium term.

MICRO @111 (180209) gets 1129 panch-tattva points and be bought for medium term.

PATNI @109 (130209) gets 1275 panch-tattva points and may be bought for medium term and book partial profits on surges.

panch-tattva talk…inflation lower

Friends,

The inflation for the latest week is down to 3.92pc and the RBI chief has in a way committed to revise the interest rates down-wards and loosen up monetary policy further.Some analysts see inflation ciming down to 3pc.

Now I draw your attention to ‘hindalco’ which is trading at around 40/- per share. There was news about its adjusting losses through its own share premium account(due to some entry on account of good-will loss of ‘novelis’ accounted for in the latest quarter). There is however a much lower operating loss but an adjustment of Rs 7000 crs or so has unnerved market. Now see the paradox that while ’satyam’ was defrauded cash of the similar order its share is not any weaker than the it was on the day of disclosure by Raju but ‘hindalco’ suffers endlessly. It is to be noted that the paid up capital of ‘hindalco’ is 170.07 cr (Re 1 per share) and it is 134.70 crs (Re 2 per share). The book value of ‘handalco’ is Rs128.4 per share and ’satyam’s’ is almost none at present. Now the moot point is that market is capable of assessing any thing in any manner without any justification what so ever. Coming to business strengths , ‘hindalco’ is one of the most efficient producers of aluminium but ’satyam’s’ business future is in dole-drums. The ‘novelis’ aquisition is now a liability.and undoubtedly ‘hindalco’ suffers on account of it but it is not life threatening thing for ‘hindalco’ being just a subsidery of it. At best ‘hindalco’ may lose its entire investment in ‘novelis’ but it has raised fresh funds for the smae through the right issue at premium. The 52W high/low for ‘hindalco’ share is 191/38 and therefore is only superior to ’satyam’. What may therefore be done by the interested is to covert the holding in ’satyam’ (if there) in to ‘hindalco’ without thinking twice. Such decisions make you a lot of money in long term and are funded without any fresh cash commitment.

The DOW future is up 70 points and may be a signal for the rest of world to open up tomorrow.

BoJ has kept the benchmark rate at 0.10pc.

The january sales of diesel are up 2.2pc and this should be viewed as a positive for the basic economy.

The crude prices have improved to USD 38.39/bbl.

Pranab says it will be termed as recession when India posts lower performance over next two quarters.

Nifty closed up 13 points at 2790.

Unitech management says that it has pledged 49pc shares of Unitech for borrowing. This is not a negative factor. This suggests that the management is fighting the slow down without leaving any stone unturned. Those who think promoter’s pledgement of shares is a bad thing only are really the ones who may never be an enterpreneure. I may tell you an interesting story. When the young ‘tatasteel’ had sufferred loss and cash was needed , the late J.N. Tata did not approach other share holders and raised much needed Rs 30 lacs back in middle thirties by pledgeing his own family’s entire properties and jewellery. What you see as Tata ‘empire’ is result of that one courageous step.’ The earth belongs to brave’ is said not without reason.

HariOm,
krsnaKhandelwal