MOSt Wealth January, 2011 issue

 

MOSt Wealth January issue

 

From the Desk of Raamdeo Agrawal

 

Dear Investor,

The Sensex grew by about 17.4% in 2010. Markets are rising due to expectations of Sensex earnings growth. If earnings are delivered, the markets are unlikely to fall much from current levels.

 

Growth in earnings is influenced by three or four trends, which we are seeing:

1. Prices of global commodities are strengthening relentlessly. Companies with resources such as Sterlite and Tisco are extremely well positioned to benefit from this trend.

2. A strong global recovery is leading to demand for high tech services, which fires up India's tech industry.

3. Domestic rural prosperity is widespread and is leading to demand for consumer goods and services. Sectors such as textiles, automobiles, FMCG, telecom and rural credit should benefit from this.

4. On the back of good business conditions, banks are doing exceptionally well in terms of volume and lower credit costs. We expect well managed banks to deliver solid profit in the years to come.

 

There are two big concerns impacting market sentiment:

1. Overall governance of India, implying issues such as corruption, implementation issues, licensing issues and lack of political determination.

2. High inflation, leading to tight liquidity and high cost of credit stifling the growth momentum.

 

Looking at it in totality, the world is recovering from the 2008 crisis and Indian corporates are likely to post 15-20% earnings growth in the next 12 months. This gives us confidence to say that the market has the potential to give us returns of about 15-20% in the next 12 months-broadly reasonable grounds for investing.

Happy investing!!

 

 

Pg 2 – MOSt Value

Ø      Research report - Tata Steel

Embarking on new earnings growth path; upgrade to Buy

Tata Steel will embark on a new earnings growth path, with its expansion of capacity from 6.8mtpa to 10mtpa at Jamshedpur, the start of coking coal production at its Benga project, Mozambique, and the start of iron ore production at DSO, Canada over 12-15 months.

The sale of Teesside Cast Products (TCP) slab plant for nearly US$500mn will help to de-leverage the balance sheet and reduce earnings volatility for Tata Steel's Europe operations.

After the acquisition of Corus and the financial crisis, Tata Steel made long-term strategic investments (US$3bn capex at Jamshedpur, Riversdale (RIV), New Millennium Capital (NML), Dhamra port, JV with Bluescope, JV with NYK) over the past 3 to 4 years. Over the next 12-15 months, some of the investments will start generating cash flows. The Jamshedpur expansion to 10mtpa will be completed by December 2011, and coking coal and iron ore production will start in 2HCY11.

 

Pg 3 – MOSt Value

Ø      India Strategy

2000-2010: India’s Dazzling Decade:

The 2000-2010 decade was a dazzling one for India. During this decade, India’s nominal GDP nearly trebled from less than US$0.5bn to US$1.3tn, and per capita GDP rose 2.5x from US$427 to US$1,058. Robust economic growth created a huge opportunity for the Indian corporate sector, and the decade saw the emergence of several Indian global-size companies and mid-size challengers across sectors. The stock markets too responded well, delivering 18% CAGR returns, the second best performing emerging market. Market cap expanded 14x over the decade, improving India’s global rank from 17 to 8.

 

2011: Hurdles to cross. . .

 

Pg 4 – MOSt Value

Ø      Mid cap Research

Bajaj Finance Ltd, Engineers India, Great Offshore, Godrej Industries Ltd and Nucleus Software Exports Ltd.

 

Pg 6 – MOSt Value

Ø      MOSt 3X3

Bharti Airtel, BHEL Sterlite Industries, Mahindra & Mahindra and State Bank of India

 

Pg 7 – MOSt Momentum

Ø      Market Outlook

Range - bound markets likely...

The Nifty started December with a weak rally that saw a short-term top at 6,070 points around the 50dma resistance on 6th December.The Nifty's failure to cross the 50dma resistance led to a sharp sell-off, resulting in a panic low of 5,721 points on 10th December. The December low of 5,721 points was marginally higher than the November low of 5,690 points. This double bottom formation around the 5,700 mark resulted in a slow recovery for the Nifty for the rest of December. The intermediate trend turned up on 29th December with a bullish crossover of the 50dma. The Nifty closed December on a strong note ending the month at 6,134 points, a gain of 272 points. The Nifty ended 2010 with a gain of 950 points, which was the second year of gains in this bull market. The Nifty has gained for 8 consecutive quarters since March 2009. The outperforming sectors in December were Metals, IT and Pharmaceuticals and the underperforming sectors were Realty, Banks and Capital Goods.

 

Going forward…

 

Pg 13 – MOSt Mutual

Ø      Fund Of the Month

Templeton India Short Term Income Plan

 

Pg 14 – MOSt Insurance

Ø      ICICI Pru LifeStage Wealth II

ICICI Pru LifeStage Wealth II, a unit linked insurance plan, offers you multiple choices packaged in a single product.

 

     Key benefits

• Choose between 3 Portfolio Strategies and 8 funds to manage your wealth

• Flexible premium payment options: You can either pay premium throughout the policy term or for a limited period

• Top up: Invest your surplus money over and above your regular premiums as and when you like

• Avail life Insurance cover to ensure protection for your family

• Loyalty Additions: Paid at the end of every policy years, starting from the 10th policy year, on payment of all due premiums

• Tax Benefits: On premiums paid and benefits received, as per prevailing Tax Laws

 

Pg 16 – MOSt PMS

Ø      Strategy Overview

 

Value Strategy: During the month there were no transactions in Value Strategy. Value Strategy has two per cent cash as of December 2010.

 

Bulls Eye Strategy: During the month, Bulls Eye Strategy reduced weightage to Bajaj Auto and has increased weightage of…

 

NTDOP Strategy: During the month, there were no transactions in NTDOP Strategy.NTDOP Strategy is fully invested as of December 2010

 

Optima Strategy: During the month, Optima Strategy reduced weightage to Page Industries and exited. .

 

Focused series III: During the month, Optima Strategy reduced weightage to Page Industries and exited. . .

 

Focused Series IV - Flexi Cap Strategy: During the month, this strategy reduced weightage of Bajaj Auto and Unichem and has increased weightage of BHEL. It has 1.26 %cash as of December 2010.

 

Focused Series - V Strategy- During the month, there were no transactions in this strategy...

 

Invest India Strategy - During the month, there were no transactions in Invest India Strategy. It is fully invested as of December 2010.

 

 

Pg 17-18 – MOSt Commodities

Ø      Technical Snapshot

Gold - Gold has been trading upwards since the last week. It is expected to continue this rally for next few weeks too. Support now lies at . . .

 

Copper - Copper prices have not been showing a clear trend. But the prices are expected to trade higher in coming weeks. It has been able to touch the highest level of 444.90 in December. The prices can still go up if they break the levels of 450/451 in near future.

 

Crude Oil - Crude prices have been showing a mixed tend for quite a few days now. They took support at 3,880/3,860. If they break the upper level of 4,260/4,270, they can be bullish in near future....

 

Pepper - Pepper prices have been in an uptrend since the past 4-5 months. They are expected to trade lower in coming weeks, due to profit booking. If they breach . . .

 

To read the complete articles click on the below link:

www.motilaloswal.com/mosl/uploadedFiles/MOSt_Wealth_Jan2011.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