From the Desk of Rikesh Parikh
Dear Investor,
The new financial year started with a bang. In
On the economic front the old problems persisted. Inflation continued to be deaf to prognostications of the RBI and the pious hopes of the finance ministry. The year end WPI inflation index was 8.98% above the corresponding level a year ago. Brent crude touched a recent high of $126 per barrel. This led to enhanced fears of higher than expected fiscal deficit. Precious metals shone as never before and touched all time highs. The rise in gold prices drew funds from equities to physical gold and the spate of gold ETFs launched in recent times. The Dow Jones index has been steadily rising and is inching towards all time highs. This growth in the developed markets has retarded fund flows to the emerging markets. FIIs and DIIs had invested over Rs.9000 cr in March this year turned away in April.
All this impacted the Sensex and it lost 2% in April as against a gain of nearly 10% in March. The results season saw InfoTech stocks perform to expectation, while being guarded in their guidance for the ensuing couple of quarters. Auto stocks performed excellently, but, there are already signs of tapering growth rates. Increasing interest rates and fuel prices are having their impact on demand. This could be a case of a sector that has a great recent past and a cloudy near future. Increase in interest rates to rein in inflation are bound to retard growth rates with the inevitable impact on stock prices. Higher interest rates could impede growth in the first half. The larger Indian growth story is intact and one could expect an 8% growth of GDP in the current year. There could, however, be some pain before we hit the growth target by the year end.
The market, however, has a mind of its own. Investors would do well recall the very relevant quote of the same stock market guru. They should continue to buy wisely on the way even though the market could move in a trading range. Fundamentally sound stocks that should be bought while the market is range bound e.g. Mahindra and Mahindra, ITC, Bharti, Tata Steel, Infosys and ICICI Bank.
Happy investing!!!
Pg 2 – MOSt Value
Ø Midcap Research
Tecpro Systems and Eicher Motors
Pg 4 – MOSt Value
Ø Research Update- Yes Bank
Yes Bank's 4QFY11 PAT grew 45% YoY to Rs.2bn, in line with our estimate. NII grew 43% YoY to Rs.3.5bn, 5% higher than our estimate, driven by stable margin QoQ against our expectation of 10bp decline. The bank has passed an enabling resolution to raise US$500m through equity; however, according to the management, equity raising is unlikely in the near term.
Valuation and view:
Despite tight liquidity conditions and sharp increase in bulk deposit rates, Yes Bank has been able to maintain margins at ~3% in FY11. We are impressed by this performance and believe that this demonstrates the soundness of its asset liability management. Incremental trend in core fee income (transaction banking and retail fees) is also encouraging. The stock trades at 12x FY12E EPS and 10x FY13E EPS, and at 2.5x
Pg 5 – MOSt Value
Ø Research Update- Petronet LNG
Petronet LNG reported lower than estimated 4QFY11 EBITDA at Rs.3.5bn (v/s estimate of Rs.3.7bn) primarily due to higher other expenditure (Rs.35mn for jetty maintenance at Dahej and Rs.40mn road-related expenses at
Valuation and view:
We are increasing our FY12 EPS estimate by 8% to Rs.10.6, led by higher volume assumptions. The stock trades at 12.1x FY13E EPS of Rs.11.3. We value Petronet LNG at Rs.150/share, the average of two valuation methodologies (1) P/E (13x FY13E EPS, Rs.147/share), and (2) DCF (Rs.153/share). Maintain BUY.
Pg 6 – MOSt Value
Ø MOSt 3X3
BHEL, ICICI Bank, JP Associates, State Bank of
Pg 7 – MOSt Momentum
Ø Market Outlook
In our last month's MOSt momentum we mentioned there was strong resistance at 5,925-5,950 and the markets made a high of 5,945 during the month. Markets traded in a narrow range of 5,750 to 5,950 with lower tops and lower bottoms. Large-cap stocks moved in March and mid-cap stocks outperformed in April with the CNX mid-cap gaining 2% and the Nifty losing 1.5 % during the month. Defensive sectors like FMCG and Healthcare gained 4% while Realty and IT Services corrected 6% due to softer guidance by Infosys for FY12
.Going forward…
Pg 13 – MOSt Mutual
Ø Fund of the Month- Birla Sun Life Gold ETF
Pg 14 – MOSt Insurance
Ø ICICI Pru Pinnacle Super
Key Benefits
• Option to get 110% of highest NAV of the highest NAV Fund B in the first 7 years, guaranteed at T&C maturity
• You can also manage your portfolio yourself by choosing from nine funds as per your risk appetite.
• Choose between paying premiums only once or for a limited period of 5 years.
• Get rewarded for staying long-term - enjoy loyalty addition of 2% of the fund value at maturity at the prevailing NAV.
• Get tax benefits on premiums paid and benefits received, as per the prevailing tax laws
Pg 17 – MOSt PMS
Ø Strategy Overview
Value Strategy: Value Strategy reduced the weight of IOC. The strategy was on 1% cash as of April 2011
Bulls Eye Strategy: Bulls Eye Strategy exited BHEL and Allahabad Bank and introduced Axis Bank, increased the weight of Bharti and Infosys. . .
NTDOP Strategy: NTDOP Strategy exited CEAT and JSPL and increased the weight of…
Optima Strategy During the month, Optima Strategy has exited SAIL & IOC and increased the weightage of Infosys. Optima Strategy was on 1% cash as of April
Focused Series III: There was no transaction in Focus III Strategy, which remains fully invested as of April 2011.
Focused Series IV - Flexi Cap Strategy - There was no transaction in Focus IV Strategy, which was fully invested as of April 2011.
Focused Series - V Strategy- Strategy has booked partial profit in Dish TV. Focus V was on 2.7% cash as of April 2011.
Invest
Pg 18-19 – MOSt Commodities
Ø Technical Snapshot
Gold - MCX gold rallied this month. Prices have strong support at 0,800/20,770. Prices have risen successfully gone up by almost, 350 in the past month. This has been gold's biggest gain over the past 6-7 months. As long as the 20,770 support holds, gold prices are likely to trend upwards for an initial target of Rs.23,980. Fall below 20,500/20,360 will dent this bullish view.
Copper - Copper started its downtrend in March. In April, copper prices raided on a lower note. Strong resistance is at 427/429. In May, we expect some pullback, but later prices will fall. Any move above 430 will dent this bearish view on copper.
Crude Oil - Crude prices look to take support at 47, 50/46, 90. Prices were n the bullish zone. Although we can expect a correction, buying n dips is advisable. The trend is strong and intact.
Pepper - Pepper started the month on a bullish note. The prices saw movement of almost Rs.5,000. Strong support is seen at 24,520/ 4,480. Resistance lies at 29,240/29,295. Prices are likely to trend upwards as long as support at 24,520 holds.
To read the complete articles click on the below link:
http://www.motilaloswal.com/mosl/uploadedFiles/MOSt_Wealth_May_2011.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
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