Posts Tagged ‘India Inc’

Global Market Outlook 2009 and 2010 :)

SMC Market Outlook

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With markets giving returns on investment more than 79% in 2009 and showing a strong sign of recovery from mid 2009 on the back of strong domestic demand, policy reforms and stimulus packages, 2009 calendar year emerged as the best year for investors since 2000.

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FII’s have once again proved to be the front runners in terms of the inflow, pumping more than Rs 82,000 crore in the Indian market this calendar.

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But 2010 promises to be another testing year as fiscal and monetary stimulus in many of the world’s major economies begins to wane.

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After being in consolidation for most of the month, in the week gone by the domestic markets suddenly jumped back to life and closed at their highest in 19 months as investors rushed to buy stocks on renewed optimism, after foreign direct investment into the nation jumped 60% in the first eight months of this fiscal year.

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The FM`s comments on GDP growth and encouraging cues from global markets also boosted the market.

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Both the indices, Sensex and Nifty made a new high for 2009 on the eve of Christmas, rekindling the festive spirit.

Bulls were in a mood of rejoice as Christmas took Nifty to a new high of 5,197.90.

The year ends with more than a spark of hope, and next year seems to be a stable and profitable one.

However, we believe that markets would continue to be volatile and hence it is important to manage risk in the coming year too.


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For the forthcoming week, markets may remain volatile as traders will roll their positions in the derivative segment from December 2009 series to January 2010 series ahead of the expiry of the near month December 2009 contracts on Thursday, 31 December 2009.

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On the flip side higher advance tax figures by India Inc which suggests better Q3 December 2009 results, may support the market.

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Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter.

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The global developments also need to be seen for any further directions.

Furthermore, food price index data for the year to 19 December 2009 will be closely watched which is going to release on Thursday, 31 December 2009.

The high food price inflation is a major worry for the policymakers as they contemplate a right approach to tame hike in inflation which seems to be more of a supply side issue.

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The next quarterly review of monetary policy is scheduled on 29 January 2010 which may also give some direction to the markets.

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On the global economic front, the US economy grew at a revised annual growth rate of 2.2% in the third quarter, much slower than initially projected.

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Japan’s unemployment rate rose to 5.2 percent from 5.1 percent in October, for the first time in four months in November, an indication job growth may not be strong enough to support the economy’s recovery from its deepest postwar recession.

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The world stock markets are not ready to react on the downside and after every consolidation they are moving up only.

4960 on nifty is strong support as was mentioned in last week magazine and the nifty touched there and moved up sharply.

Even the base metals and stocks are not reacting to the strong dollar.

Till the trend of stock markets is up, one should be playing from the long side of it.

Nifty has support between 5050-4970 and Sensex between 17100-16700 levels.

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New Year celebration may result in thin trading this week.It may impact domestic bourses as well.

Regarding outlook, dollar index will give next direction to precious metals. If it notices a pause in its rally then precious metals may trade in a range or vice a versa.

Base metals will remain volatile.

Gap between lead and zinc should shrink gradually.

Fresh buying in steel may keep nickel at higher side.

If US crude and other inventories continue to decline then fresh buying will stimulate in crude oil.

However, it already saw spiky moves hence upside is limited.

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Current Fiscal Witnessed Fund Raising of $16.7 Billion

The first eight months of the current fiscal witnessed fund raising of $16.7 billion (Rs 78,000 crore) through equity issues by India Inc due to the returning of the foreign investors and resuming of expansion activities by the companies.

However, the amount raised so far in this fiscal is still far below as compared to the corresponding period of 2007-08, a year that witnessed a boom for the stock markets. India Inc had raised Rs 125,526 crore for the period between April and November 2007.

The overall fund-raising through equity and equity convertible financial instruments in the period between April-November 2009 was backed by an increase in the overseas issues and a rush by the companies to issue fresh shares to institutional investors through qualified institutional placement (QIP).

The total funds raised through overseas issues, including equity and equity convertible bonds in the first eight months of the current fiscal stood at Rs 27,745 crore across 28 issues as against Rs 945 crore reported during the whole of 2008-09, data compiled by Prime Database show.

However, during the same period, QIP issues also touched an all-time high with firms across sectors raising Rs 31,292 crore as compared to Rs 188 crore reported during FY09. This surge in QIPs is linked to the rise in stock market valuations as institutional investors flush with liquidity returned to fund expansions and new ventures of companies.

The fund-raising by companies coming through public issues also surged eight times to Rs 15,981 crore through 16 initial public offer (IPO). However, despite a revival in the capital market, the IPO market has not taken off in direct proportion to the revival in the capital market, which was witnessed in 2007-08. So far this fiscal there have been 19 IPOs while the same was at 67 in 07-08.

Over 100 companies raised Rs 83,000 crore by issuing debt instruments like bonds and debentures during H1 of the current fiscal. However, on a period-on-period basis, the April-September period saw funds raised to the tune of Rs 83,961 crore, an increase of 25% over Rs 67,108 crore mobilized in the corresponding period of the previous year.

Meanwhile, the funds were raised by issuing through private placement debt instruments, including bonds, debentures and securitized papers, which have a tenor and put or call option of more than one year.

Record Fund Raising by India Inc,through QIPs, is on the Cards.

 

Record Fund Raising by India Inc,through QIPs, is on the Cards

Record Fund Raising by India Inc,through QIPs, is on the Cards

 

 

Indian companies are all set to  raise record fund through share sales to institutional investors in the next few months as they attempt to reduce debt accumulated during their takeovers.

Hindalco, Aban Offshore and Tech Mahindra, which bought the scandal-hit Satyam Computer, will lead this record fund raising by India Inc.

Indian companies have approvals from shareholders to raise as much as Rs 68,000 crore by selling shares to institutional investors under the so-called qualified institutional placement route.

This is in addition to around Rs 26,000 cr that has been raised by companies such as real estate developer Unitech and Suzlon Energy in the last six months, thanks to the signs of economic revival and  record stocks rally.

India Inc raised as much as Rs 26,430 cr in the last thirty-six QIP issues since March this year, according to the analysis.

These companies which raised funds in the last six months still have room to raise another Rs 23,000 cr based on the approvals shareholders have given them.

There are several companies which have received approval for QIPs between June and October with a potential to raise as much as Rs 44,000 crore, but are yet to hit the market.

Hindalco, which is saddled with debt after it acquired Canada’s Novellis, plans to raise Rs 2,900 crore and Tech Mahindra plans to raise to partly repay the loan it took to buy Satyam Computer.

Essar Oil which is negotiating to buy Shell’s refineries in the UK plans to raise around Rs 9,000 cr, whereas JSW Steel has a mandate raise Rs 4,853 cr.

Shareholders’ approval is valid for a year and most of these companies took approval after June this year.

“The issues that have come till now got strong interest from institutional investors, and predominantly from foreign buyers who bought over 90% of the QIP issues.  Given the current market conditions and the kind of interest that Investors displayed in the Indian growth story, the proposed issues should be subscribed successfully,” said Jagannadham Thunuguntla, equity head, SMC Capitals.

The fund raising gets bigger when one takes into account the potential IPOs and government share sales which may run into billions of dollars more.

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Bharti Airtel’s Scrip Fell 6% Down !

 

 

Bharti Airtel’s scrip Friday fell 6.38 percent

Bharti Airtel’s scrip Friday fell 6.38 percent lower at the Bombay Stock Exchange (BSE)

Telecom major Bharti Airtel’s scrip Friday fell 6.38 percent lower than its previous close at the Bombay Stock Exchange (BSE) as investors dumped the stock because of disappointing second quarter results.

The scrip, which had fallen to an intra-day low of Rs. 290.30 from Thursday’s closing figure of Rs. 312.05, ended the day at Rs. 292.15.

Bharti Airtel said its net profit, according to US accounting rules, increased 13.4 percent to Rs. 2,321 crore (495 million) for the quarter ended Sep 30 from Rs. 2,046 crore in the like quarter of previous fiscal.

This was, however, a decline of 8 percent over the previous quarter of current fiscal.

Revenues were up 9 percent to Rs. 9,846 crore from Rs. 9,020 crore reported a year earlier.

“The industry is seeing entry of many players and this is bound to have a bearing on the fortunes of existing companies,” said Jagannadham Thunuguntla, equities head of brokerage and capital markets consultancy SMC Capital.

“In the short term, the stock could see some more pressure, though it is coming within range of a good buy, at least for the long term investor,” Thunuguntla added.

The Bharti scrip has lost as much as 30.2 percent over October and at current levels is the lowest in seven  months.

Corporate India is Likely to Register 22.8% Growth

corporate India is likely to clock 22.8% growth in net profit in 2009-10

corporate India is likely to clock 22.8% growth in net profit in 2009-10

Corporate India is likely to register 22.8% growth in net profit in 2009-10 despite the slowdown in the global economy and bad monsoon.

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Centre for Monitoring Indian Economy (CMIE) in its latest report has attributed theimprovement in the margins..due to fall in input costs” as the major reason for the concerned growth of corporate India.

According to the report, the revenue of the companies will grow at much slower pace.

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The report said, “Corporate sales growth will average at a meagre 4.1% in 2009-10.

At the same time, profit after tax (PAT) will rise by a robust 22.8%.”

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The performance of the manufacturing sector, excluding petroleum sector, would be encouraging.

The report said the sectors PAT would manage to grow at 24.3% mainly on account of low raw material prices and soft interest rates.

PAT of the financial and nonfinancial services would rise by 32.2% and 20.4% respectively, the report projected.

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According to the report, corporate India took a hit on its sales due to the fall in commodity prices, drying up of export demand and postponement of purchases by the domestic consumer following the global liquidity crisis.

The report estimated that corporate profits have grown by 44% in the second quarter of 2009-10 due to the handsome profit likely to have been made by the petroleum products sector as against the losses incurred in the year ago quarter.

Aggregate PAT of the rest of the manufacturing sector is also estimated to have risen by a modest 4.5% in the second quarter, the report said.

CMIE estimated the PAT of the financial and non-financial services to have risen by 26%-29%.

Sales, however, is estimated to have fallen by 5.3%, it said.

The fall in sale realization is also because of sharp fall in the prices of the commodities.

The report said that non-financial services chose to keep their employees cost and other expenses on a tight leash and enjoyed benefit of fall in interest rates.

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Corporate India Mobilized Rs 21k crore through Share Sale :)

India Inc has mobilised over Rs 21,000 crore through share sale to institutional investors in the past six months

India Inc has mobilised over Rs 21,000 crore through share sale to institutional investors in the past six months

India Inc has mobilized over Rs 21,000 crore through share sale to institutional investors in the past six months, which is nearly half the amount proposed to be raised by these companies.

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According to data compiled by SMC Capital, during the period starting March 2009, Indian corporates raised about Rs 21,377 crore through 29 Qualified Institutional Placement (QIP) issuances.

“The companies are preparing for a second round of institutional placement.

The firms which have not raised the amount they had proposed initially is most likely to launch another QIP issue,” SMC Capital Equity Head Jagannadham Thunuguntla said.

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Despite the fact that Indian corporates were quite aggressive in QIP fund raising in the past six months, on an average they raised only 48.63 per cent of the amount approved by their board or shareholders, he said.

Early this year, India Inc announced intentions for raising funds through QIP, as all possible sources of fund raising dried up.

Of the total fund raised thorough the QIP route in the past six months, over Rs 10,300 crore, comprising nearly half of the total amount raised, has been mobilised by the cash-starved real estate companies, including DLF, Unitech and Indiabulls Real estate.

Economic Indicators Part 2 :)

Hello Friends, just an extension of our yesterday’s blog on economic indicators where we talked about the categories of Economic indicators and relationship between various indicators.

ECONOMIC INDICATORS WITH A FOCUS ON STOCK MARKETS AS A LEADING INDICATOR

ECONOMIC INDICATORS WITH A FOCUS ON STOCK MARKETS AS A LEADING INDICATOR

Now in this Blog, we would look upon issues like what current economic indicators reflect about the state of Indian and global economy in coming months, factors that impact the degree of correlation and general effects of the stock maket indices(economic indicators) on the economic performance of the country.

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For Indian Markets, we can refer collected data for sensex growth, GDP growth and IIP index growth for 40 quarters over the last decade i.e FY99-FY09.

On the basis of the observation, it is analyzed that there is a correlation between the indicators; however, there is a time lag of at least 3 months between the sensex performance and economic indicators performance.

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Out of the 40 time periods being observed, the time lag and the correlation has been reflected in 80% of the cases.

Therefore, on the basis of the study, we can conclude that Indian economy might witness a revival over the next 3 to 6 months.

However, the Indian stock market indices are not only the reflection of the expectation of India Inc performance; the Indian markets are highly influenced by FII inflow too.

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Thus, Indian markets not only indicate the future economic conditions of the country but the global liquidity conditions too.

Therefore, if the stock market improvements that started towards the end of the first quarter of 2009 can be further sustained, it may be an indication that economic activity levels might start to improve towards the end of 2009 / beginning of 2010 backed by the correlation theory and time lag of 6 months to 1 year.

The Leading effect of the stock maket indices on the economic performance of the country can be rationalized on the following basis:

1) Futuristic approach of stock prices

Current stock prices reflect the expected operational performance of industry. The price of a stock equals the present value of future dividends.

Hence, stock prices should rise because of higher expected corporate profits, giving the rate of return used by investors to discount future earnings.

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Since investor’s expectations about corporate profits depend on expectations about the prospective state of the economy, then stock prices should rise or fall before the actual rise or fall of general economic activity and corporate earnings.

Thus, the stock market is forward-looking, and current prices reflect the future earnings potential, or profitability, of companies.

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Since stock prices reflect expectations about profitability and since profitability is directly linked to economic activity, fluctuations in stock prices are thought to lead the direction of the economy.

If the economy is expected to enter into a recession, for example, the stock market will anticipate this by bidding down the prices of stocks.

2) Wealth Creation Effect

The “wealth effect” is also regarded as support for the stock market’s predictive ability.

Since fluctuations in stock prices have a direct effect on aggregate spending, the economy can be predicted from the stock market.

When the stock market is rising, investors’ wealth increase and they spend more.

As a result, the economy expands.

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On the contrary, if stock prices are declining, investors experience a decrease in wealth levels and spend less.

This results in slower economic growth.

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However, the factors that impact the degree of correlation are:

the variability in interest rate,

the money supply,

the rate of inflation and

the degree of confidence of market participants regarding the state of the economy.

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Thus, although the stock market is relatively reliable as a predictor, it should be used with caution and in conjunction with other leading indicators in forecasting the turning points of business cycle.

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We can also rationalize the view of 97% economists that U.S economy will be out of recession by end of CY2009.

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