MOSt Wealth December issue

MOSt Wealth December issue

 

From the Desk of Manish Shah – Associate Director, Head Equities

 

Dear Investor,

"The stock market is like a beauty contest run by a newspaper. The winner is not the candidate that is the most beautiful, by any set standard; but the candidate that most people think is the most beautiful." - John Maynard Keynes

India was in that sweet spot in September 2010. Not only did it have the looks (growing economy), but the votes (foreign fund flows) as well. It had a stable growth story without fears of the economy over-heating as in the case of China. Hence sights were set on the Sensex hitting an all-time high of 21,206 points (6,357), last reached in January 2008. This time, it reached a high of 21,108 points (6,338) on Diwali day, only to plunge to a low of 18,954 points (5,690) in November, correcting by over 10%.

What happened? Has the concept of beauty changed? Not quite. Since September 2010 markets moved up by 18% due to FII buying. This buying eased to US$2.2bn in November from US$4.7bn in September. DIIs, however, sold equities worth over Rs.21, 000cr. Besides, when corrections come, they come with accompanying reasons such as global market turmoil, geo-political tensions (North Korea firing missiles at South Korea), and last but not the least, the disclosures of scams in some NBFCs and banks and their nexus with some real estate companies.

Although the disclosure of scams is a short term negative, it is good for the financial system's long term health. Indian stock markets have been the biggest beneficiaries of scam disclosures in the past. Through such disclosures transparency increased thereby building trust. The more positive story is that the growth momentum in the Indian economy continues. In the second quarter of the current financial year, GDP grew 8.9% against 8.5% in the first quarter. The refreshing change is the sharp improvement in the agriculture sector. This caps the downside of the market, but the upside remains a concern. At 21,000 points, the Sensex touched 20 times the current year's earnings estimate. FY12 estimates are 1,259, and 20 times the FY12 earnings estimate gives a target of 25,000 points. However, the most important criterion is, the FY12 performance should justify valuations. Hence we can see consolidation between 18,500 and 22,000 points from now until March 2011, just as there was consolidation between 17,400 (5,200) and 18,500 (5,500) points from October 2009 to August 2010. The recent fall throws up good stock-specific opportunities such as Central Bank, which is trading at less than Rs. 200, and several other mid-caps.

Happy investing

 

 

Pg 2 – MOSt Value

Ø      Research report- Shree Renuka Sugars

Sweetening the world

Shree Renuka Sugars (SRS) is one of the top 10 sugar producers in the world. It is the only sugar company to have significant operations in Brazil, the largest sugar exporter, and in India, the largest sugar consumer. Besides, its integrated, diversified and flexible business model makes it relatively more resilient to cyclical downsides.

 

Emerging global giant:

SRS is the only sugar/ethanol producer in the world with almost year-long cane crushing operations as it has operations in Brazil and India, which have complimentary cane crushing seasons. This allows it to maximize/plan inventory, benefit from price arbitrage between sugar/ethanol, raw/white sugar and play price arbitrage between India's regulated sugar industry and liquid global markets. It also allows SRS to leverage on synergies, minimize risks and offer steady returns despite the cyclical nature of the industry.

 

Pg 3 – MOSt Value

Ø      Research report- BGR Energy

BoP orders worth Rs.22bn for 2 x 660MW project:

BGR Energy recently received an order worth Rs.68bn for BoP works for a 2 x 660MW super-critical project in Andhra Pradesh. This contract was awarded by Gayatri Projects (Andhra Pradesh) and Sembcorp (Singapore) consortium to BGR Energy. BGR's scope of work in the project includes the complete design/EPC for the balance of plant of 2 x 660MW projects in Krishnapatnam, Andhra Pradesh. The project includes (i) construction of one of the largest coal handling plants, and (ii) sea water based RO systems and intake water systems for the make-up water to the plant. It is the single largest BoP contract awarded to BGR.

 

Pg 4 – MOSt Value

Ø      Mid cap Research

Sundram Fasteners, Siyaram Silk Mills, ZF Steering Gear (India) and Setco Automotive

 

Pg 6 – MOSt Value

Ø      MOSt 3X3

Anant Raj Industries, Bharti Airtel, BHEL, Mahindra & Mahindra, State Bank of India & Hindalco

 

Pg 7 – MOSt Momentum

Ø      Market Outlook

The Nifty started off in November with a strong rally, which saw a new all-time closing high of 6,312 points on 5th November 2010. The November high of 6,338 points was marginally higher than the October high of 6,284 points. For the second successive month the historic high of 2008 (6,357 points) was not crossed, even though the Nifty recorded an all-time closing high of 6,312 points. This resulted in selling pressure and the Nifty witnessed a continuous downtrend culminating in a panic low of 5,690 points on 26th November 2010. The Nifty closed November at 5,863 points, a loss of 155 points. The outperforming sectors were Health Care, Automobiles and IT and the underperforming sectors were Realty, Metals and Oil and Gas.

 

Going forward…

 

Pg 13 – MOSt Mutual

Ø      Fund Of the Month

MOSt Shares M50 ETF -now it comes with an SIP

 

Pg 14 – MOSt Insurance

Ø      ICICI Pru LifeLink Wealth SP

ICICI Pru LifeLink Wealth SP lets you reap the benefits of the policy for a long term by paying just one premium. Besides, you can enjoy market linked returns on your savings by choosing from a range of fund options.

Key benefits of ICICI Pru LifeLink Wealth SP…

 

Pg 16 – MOSt PMS

Ø      Strategy Overview

 

Value Strategy: We introduced Coal India and the strategy was fully invested as of November 2010.

 

Bulls Eye Strategy: We booked profits in Tata Motors and IFCI and introduced ICICI Bank and Shree Renuka Sugar. The strategy was…

 

NTDOP Strategy: We booked profits in Nestle and introduced Godrej Industries and Dabur India. The strategy was fully invested as of November 2010.

 

Optima Strategy: In November there were no transactions. The strategy was fully invested as of November 2010.

 

Focused series III: We booked partial profits in BHEL, SBI and. . . .

 

Focused Series IV - Flexi Cap Strategy: We exited Anant Raj Industries and made a partial profit booking in Unichem. The strategy introduced Wockhardt and PFC.

 

Focused Series - V Strategy- There were no transactions in November. The strategy was fully invested as of November 2010.

 

Invest India Strategy - We booked profits in Nestle and GE Shipping. The strategy introduced HUL and Shree Renuka Sugars and was fully invested as of November 2010.

 

Pg 20 – MOSt Commodities

Ø       Technical Snapshot

Gold - Gold has been trending upwards since last week. It is expected to continue this rally over the next few days. Support lies. . .

 

Copper - Copper prices have been showing a mixed trend. After touching high of 358, it went down to a low of 284. But overall, the trend s bullish. Support lies at 375/373 and resistance is seen at…

 

Crude Oil - Crude has been following a range-bound pattern. It has been riding in the 3,817-3,555 range. The current trend looks bullish or crude. It may take support at. .

 

Pepper - Pepper has seen a mixed trend. It touched a low of 18,500 only go beyond 22,130. At present, it does not look so strong. It will be strong above 22,170, and has good support at. . .

 

 

To read the complete articles click on the below link:

http://www.motilaloswal.com/mosl/uploadedFiles/MOSt_Wealth_December10.pdf

 

 

You can also visit http://www.motilaloswal.com/Research to read the research reports. 

 

 

 

 

Regards,  

 

Retail Product Team  
Motilal Oswal Securities Limited
Johnson Dye Compound
Plot: 6&7,Ramchandra Lane,
Kanchpada, Malad
Mumbai-400064
Tel:- 22 30896600