Sensex

Saturday, November 05, 2011

Fw: ValueGuide: Signs of revival but a long haul ahead

 

 
Sharekhan ValueGuide
[November 05, 2011] 
 EQUITY FUNDAMENTALS
FROM SHAREKHAN'S DESK

Signs of revival but a long haul ahead

Did we not say that it is darkest before dawn? After the severe correction in September and the first week of October, the equity market did surprise positively with a smart rally globally. The sign of relief came after the European nations agreed on a much larger stabilisation fund and recapitalisation of the banks. Back home, the Reserve Bank of India (RBI) governor, who had reiterated his hawkish stance as recently as in September this year, finally hinted at a pause in the rate hike exercise last month, much to the market's relief. These two developments revived market sentiment. The market closed the month at 17706. That is a monthly gain of 1,251 points (7.6%), the highest in seven months!.  


SHAREKHAN TOP PICKS
  • Sharekhan top picks 

MARKET OUTLOOK
Key points
  • Signs of hope: As articulated in our last issue of the ValueGuide, titled "Darkest before Dawn'', we had pointed towards some potential positive developments on the domestic and global fronts that could provide some relief or hope for the equity markets. In the domestic scenario, the likely peaking of interest rates and the expected pause in policy rate hikes boosted market sentiment. On the global front, European leaders are finally taking some hard decisions and planning radical steps to address the issue of sovereign debt crisis engulfing the European fringe countries. The risk of a double-dip recession in the USA too has eased out. 
  • Domestically, RBI to take a pause in the interest rate hikes: After raising the key policy rates by 375 basis points since March 2010, the Reserve Bank of India (RBI) has indicated a pause in the policy rate hikes on account of the rising concerns over the domestic growth. Further, the inflation rate, which has been the main concern of the RBI, is expected to trend down due to the slowing of growth and a favourable base effect. While we do not expect any immediate reversal of the rate hikes, equity markets have led a reversal in interest rate cycle historically. However, the risk to the easing out of inflation emerges from the persistently high food inflation (despite record agriculture output); commodity prices are also volatile. 
  • Globally, finally some hard decisions in Europe; economic data in USA to remain mixed: The European Union is moving towards implementing a comprehensive rescue plan in Europe, broadly focusing on three points (larger European Financial Stability Facility [EFSF] of $1.4 trillion, recapitalisation of banks and a 50% haircut on Greek debt by lenders). Though the situation remains fluid and volatile, we take comfort from the fact that the yields are already factoring in the worst scenario of Greece's sovereign default. In the USA also, the gross domestic product (GDP) growth in Q3 was tepid but better than expected and hence the risk of a double-dip recession has lowered unless the situation in Europe worsens considerably. 
  • But concerns galore; key risks global contagion and rising probability of rating downgrade of India: In addition to a potential global event risk, the deterioration in the government's financial health poses the risk of the fiscal deficit overshooting the target of 4.6% set for FY2012 and is a threat to India's rating. Moreover, the lower than expected growth in revenues and higher subsidy burden could result in the crowding out of private investments and corporate earnings. 
  • Valuations supportive; policy reforms in winter session and inflation the key monitorables: As we had pointed out in our earlier strategy reports, the Indian economy has been facing mid-cycle blues that have been accentuated by global issues and policy paralysis at home. Though there are concerns galore, the valuations have turned supportive since we turned extremely cautious early this year. The Sensex trades at 13.8x one-year forward earnings as against the long-term average multiple of 15.0-15.5x now. Thus, we believe that the easing of macro concerns and some positive developments on the reforms front in the winter session of the Parliament could provide the required boost to the market and lead to relatively better market conditions by the end of the calendar year 2011. 

STOCK UPDATE
  • Axis Bank: Price target revised to Rs1,410
  • Bajaj Auto: Price target revised to Rs1,870
  • Bajaj Corp: Operating performance in-line with expectation
  • Bajaj FinServ: Growth in lending and insurance businesses propels earnings
  • Bank of Baroda: Strong performance
  • Bharat Electronics: Decent revenue performance, other income boosts bottom line
  • Deepak Fertilisers & Petrochemicals: Corporation Price target revised to Rs188
  • Federal Bank: Asset quality improves in Q2
  • GAIL India: Price target revised to Rs541 
  • Godrej Consumer Products: Price target revised to Rs516
  • Grasim Industries: Consolidated Q2 earnings up 29%, in line with expectation 
  • HCL Technologies: In line with expectations
  • HDFC Bank: Robust growth in earnings, margins take a dip
  • Housing Development Finance Corporation: Steady earnings growth
  • Infosys: Price target revised to Rs2,772
  • ITC: Results marginally ahead of expectations
  • Kewal Kiran Clothing: Strong all round performance, price target revised to Rs840 
  • Larsen & Toubro: Price target revised to Rs1,523
  • Mahindra Lifespace Developers: Price target revised to Rs400
  • Maruti Suzuki India: Confluence of negative events marred Q2 PAT
  • NIIT Technologies: Price target revised to Rs277
  • Polaris Software Lab: Earnings beat expectations, margins disappoint 
  • Reliance Industries: Q2 results in line with estimates though GRMs disappoint
  • Sintex Industries: Price target revised to Rs182
  • Tata Consultancy Services: Price target revised to Rs1,250
  • Tata Global Beverages: Lower interest cost fuelled bottom line growth
  • Torrent Pharmaceuticals: Upgraded to Buy
  • United Phosphorus: Price target revised to Rs210
  • Wipro: Upgraded to Hold with revised price target of Rs400
  • Yes Bank: Strong operating performance

THE STOCK IDEAS REPORT CARD


SECTOR UPDATE
  • Banking: RBI jumps the gun-deregulates savings deposit rates

VIEWPOINT
  • CMC: Extraordinaries pull down otherwise strong operating performance
  • Gateway Distriparks: Healthy performance

EARNINGS GUIDE
MUTUAL GAINS
  • Sharekhan's top mutual fund picks (equity)
 EQUITY TECHNICALS 
  • Sensex: Channelised move
 EQUITY DERIVATIVES 
  • Derivative view: Bears revive
 COMMODITY FUNDAMENTALS 
  • Macro-economy
  • Crude oil: Sell into rallies
  • Precious metals: Gold getting its safe heaven role
  • Base metals: Limited upside
  • Major economic events in November 2011 
 COMMODITY TECHNICALS 
  • Gold (London): Pull-back over
  • Silver: Retest likely 
  • Light sweet crude oil: Bulls are back
  • Zinc: Quiet accumulation
  • Lead: Inverse head-and-shoulders in making
  • Pepper NCDEX: Correction in its last phase
 CURRENCY FUNDAMENTALS 
  • USD-INR
  • EUR-INR
  • GBP-INR
  • JPY-INR
 CURRENCY TECHNICALS 
  • USD-INR: Correction unfolding
  • GBP-INR: Sliding down
  • EUR-INR: Channelised play 
  • JPY-INR: Forming retracement
 PMS DESK
Sharekhan PMS funds: Fund manager's view and product performance
  • ProPrime-Top Equity
  • ProPrime-Diversified Equity
  • ProTech-Nifty Thrifty
  • ProTech-Diversified
  • ProTech-Trailing Stops
 ADVISORY DESK 
Monthly performance of Advisory products
  • Smart Trades
  • Derivative Trades
  • MID Trades

Click here to read report: Sharekhan ValueGuide
     
 


Fw: Sharekhan Top Picks

 
Sharekhan Investor's Eye
 
Top Picks
[November 05, 2011] 
    Summary of Contents
 
SHAREKHAN TOP PICKS
Sharekhan Top Picks
The market surprised positively last month and the benchmark indices, Sensex and Nifty, registered gains of 6.8% and 7% respectively since our last revision in the Top Picks basket. The upsurge was more pronounced in the large caps with the CNX Midcap Index reporting a relatively lower gain of 3.2% for the same period. Given the mix of large-cap and mid-cap stocks in it our Top Picks basket performed better than the CNX Midcap Index with a gain of 4.4%. But it relatively underperformed the benchmark indices after outperforming them smartly for seven consecutive months.
In this month, we are making two changes in the Top Picks basket. We are introducing PTC India in place of CESC as part of the churn within the power sector. Despite being undervalued, PTC India was languishing due to concerns related to the health of the state electricity boards (SEBs), the buyers of electricity. These concerns could now get mitigated by the recent move by the SEBs to increase tariffs. Another change involves the replacement of Orient Paper and Industries with IL&FS Transportation Networks. Orient Paper and Industries reported strong quarterly results but the higher than expected pressure on its margins is a cause for concern and limits the upside in the near term. On the other hand, IL&FS Transportation Networks is our top pick in the infrastructure sector, which could see some improvement in sentiments due to a possible progress in execution accompanied by a pause in interest rate hikes.

Click here to read report: 
Sharekhan Top Picks
     
Regards,
The Sharekhan Research Team
myaccount@sharekhan.com


Fw: Sharekhan Mutual Fund Finder

 

Sharekhan Investor's Eye
 
Sharekhan Mutual Fund Finder
[November 05, 2011] 
 
Sharekhan Mutual Fund Finder
We are happy to announce the roll-out of the latest product from Sharekhan Mutual Fund Research Desk, Sharekhan Mutual Fund Finder.
Mutual funds make an important part of any portfolio. Choosing the right funds for your portfolio is essential in investment planning. Sharekhan Mutual Fund Finder will help you to make the right investment decision that will bring you closer to realising your financial goals. The objective of this product is to give you the best selection of funds across categories along with the benefits of SIP and ELSS.
Sharekhan Mutual Fund Finder will be published every month and we hope you find the product useful.
 
Summary of Contents
  • Top equity picks
  • Top SIP picks
  • SIP calculator
  • Crorepati calculator
  • Fund of the month: Reliance Equity Opportunities Fund
  • Performance of debt funds and ETFs

Click here to read report: 
Mutual Fund Finder
     
Regards,
The Sharekhan Research Team
myaccount@sharekhan.com


Fw: Market Outlook: Winds of change



Sharekhan Investor's Eye
 
Market Outlook
[November 05, 2011] 
Summary of Contents
MARKET OUTLOOK
Winds of change
Key points
  • Signs of hope: As articulated in our last issue of the ValueGuide, titled "Darkest before Dawn'', we had pointed towards some potential positive developments on the domestic and global fronts that could provide some relief or hope for the equity markets. In the domestic scenario, the likely peaking of interest rates and the expected pause in policy rate hikes boosted market sentiment. On the global front, European leaders are finally taking some hard decisions and planning radical steps to address the issue of sovereign debt crisis engulfing the European fringe countries. The risk of a double-dip recession in the USA too has eased out.
  • Domestically, RBI to take a pause in the interest rate hikes: After raising the key policy rates by 375 basis points since March 2010, the Reserve Bank of India (RBI) has indicated a pause in the policy rate hikes on account of the rising concerns over the domestic growth. Further, the inflation rate, which has been the main concern of the RBI, is expected to trend down due to the slowing of growth and a favourable base effect. While we do not expect any immediate reversal of the rate hikes, equity markets have led a reversal in interest rate cycle historically. However, the risk to the easing out of inflation emerges from the persistently high food inflation (despite record agriculture output); commodity prices are also volatile.
  • Globally, finally some hard decisions in Europe; economic data in USA to remain mixed: The European Union is moving towards implementing a comprehensive rescue plan in Europe, broadly focusing on three points (larger European Financial Stability Facility [EFSF] of $1.4 trillion, recapitalisation of banks and a 50% haircut on Greek debt by lenders). Though the situation remains fluid and volatile, we take comfort from the fact that the yields are already factoring in the worst scenario of Greece's sovereign default. In the USA also, the gross domestic product (GDP) growth in Q3 was tepid but better than expected and hence the risk of a double-dip recession has lowered unless the situation in Europe worsens considerably.
  • But concerns galore; key risks global contagion and rising probability of rating downgrade of India: In addition to a potential global event risk, the deterioration in the government's financial health poses the risk of the fiscal deficit overshooting the target of 4.6% set for FY2012 and is a threat to India's rating. Moreover, the lower than expected growth in revenues and higher subsidy burden could result in the crowding out of private investments and corporate earnings.
  • Valuations supportive; policy reforms in winter session and inflation the key monitorables: As we had pointed out in our earlier strategy reports, the Indian economy has been facing mid-cycle blues that have been accentuated by global issues and policy paralysis at home. Though there are concerns galore, the valuations have turned supportive since we turned extremely cautious early this year. The Sensex trades at 13.8x one-year forward earnings as against the long-term average multiple of 15.0-15.5x now. Thus, we believe that the easing of macro concerns and some positive developments on the reforms front in the winter session of the Parliament could provide the required boost to the market and lead to relatively better market conditions by the end of the calendar year 2011.

Click here to read report: 
Market Outlook
       
Regards,
The Sharekhan Research Team
myaccount@sharekhan.com