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Thursday, April 21, 2011

Earning Season-Sectors to Watch

As the quarterly and annual results of Corporate India await entry into the public domain,I presume this season will be fundamentally different from the last couple of years.

Investors have given the "go by" to the Cement sector along with Infrastructure which till last year was a "hot" investment segment.Comodity&raw material prices have risen by almost 30% and especially for India the hike in coal prices is a major infaltionary factor.As a contrarian I would be interested in investing in:-
  1. Cement
  2. Fertilizer stocks
  3. Agro based(excluding Sugar)
  4. Alcholic spirits
No 4 I have put on the list as every city i travel to I have seen ques in front of the so called expensive FL(Foreign Liquor) Official Shops!
When you invest, whether it's in stocks, bonds, gold or mutual funds, you're betting the value of the asset will be more in the future than what you paid for it.



Saturday, April 16, 2011

Investing in India

What triggered this blog is a question someone asked me on the issues they face in getting clients in India.I would like to point out the following major issues:
1.No 10,000 ft view-one cannot treat India as a country,its a Sub-Continent and you cannot analyse the  
   needs,products,pricing sitting in Manhattan,London or even Singapore.
   This was tried by the MNC broking outfits in 1998-2000 and led them to exit the market till 2004-05

2.Each zone-East,West,North and South is a heterogeneous market with distinctive tastes and preferences.
   Just one example;Rice is the main staple in East and South but least preferred in the North,someone selling
   in the North can probably sell 1 variety-basmati

3.India is still a conservative country and even the Corporates are still burning their fingers in IRS swaps and
   Currency hedging and these are supposed to be some of the best brains from the best Indian Colleges

4.The Urban and rural populations are again another division,just 1 company ITC with its E-Choupal
   initiative has been successful,products that constitute 80% of urban sales are negligible in villages-cosmetics

5.Bank fixed deposits comprise 76% of the savings,equity investing is 2% and total insurance coverage
   of the Indian population is 14%,Savings rate is approx 33% of GDP and one can do the maths as to
   the size of this market

6.The Southern States with their high literacy levels need a more planned approach whereas the more
   gung-ho Northern parts need a return based solution.East India has the highest number of day traders and
   15% of the derivatives trading volume in the NSE is from this region

As much as I would like to give statistics,its all about connecting at a more emotional level that will be called for.I would reccomend a "solution" based strategy rather than a pure "sales" approach.This article is in no way a detailed analysis....I am keeping some thoughts to myself for another time and another place...

Wednesday, April 13, 2011

Steady but not Spectacular-Tata Chemicals

Tata Chemical has never been one of those stocks the mere mention of which sent Traders pulse soaring.With average P/E 11.8x,dividend yield 2.5% and a PEG Ratio of .90% its been steady if not spectacular.
With its investment in Olam international's greenfield fertilizer project in Gabon,Africa its taken its products closer to the major markets of the US,LATAM countries and Europe.A good deepwater port and relative political stability are important factors.The Indian Governmentis likely to increase gas allocation for Fertlizer sector thereby increasing the bottomline by 100-150bips at least.

Its a BUY at current market price(CMP) Rs 354 and a TARGET price of Rs 430+ which is a 20% upside from current levels.Its a good investment for the midterm

Monday, April 4, 2011

In The Shadow of Big Deals

My analyst friends have gone to town about International Paper buying Andhra Paper,a 100 year old company of the Bangur family,before that we had Vedanta-Cairn,Reliance-BP etc

Here I am in a contrarian mindset and I feel that India as a market is still not a uniform economy where one swallow can make a summer!Each firm and sector has its own exigencies and USPs as well as bottleneck and unique strategies to overcome them.

Infrastructure is still stuck in the quagmire of bureaucratic redtape,project cost overuns,land acquisition factors that make this sunshine segment a very visible but overhyped area to invest in,unless someone has a 15+years horizon.

I see these problems happening all over the country and feel quite negative in the medium term as to the quantum of funding required and how efficiently those funds can be used.The building technology in India still remains outdated and a bit of a museum sideshow but have not seen many manufacturing firms taking up the challenge.Can anyone find me 3-4 such cos that produce equipment for construction in India?