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India Equity Research Reports, IPO and Stock News
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Strategy
Alpha Bet
One done, four to go. We are booking profits in one of our five Alpha Bet trades—
Long Punjab National Bank, Short Bank of India—with a gross return of 11.3% since its
inception on March 9, 2011. Currently all the trades are in the money with returns
averaging 4.4% for all the five trades. Exhibit 1 highlights the returns of the recent
Alpha Bet trades.
Booking profits for Long PNB, Short BOI
The trade has returned 11.3% since March 9, 2011. While PNB gained 13.1%, BOI remained
relatively subdued (up 1.9%) during the same period. The recent run-up for PNB comes after a
correction of almost 30% from the peak of ~Rs1,370 in November 2010 to the lows of ~Rs990 in
February 2011.
Long Crompton, Short Siemens; trade currently 3.6% in the money
While Crompton Greaves has gained 5.8% since initiation (outperforming the broader market),
Siemens has seen a gain of only 2.2%.
Long HDFC Bank, Short HDFC; trade open as liability franchise begins to outperform
HDFC Bank has outperformed HDFC 2.3% since initiation as HDFC Bank gained 6.1% compared
to a 3.8% rise for HDFC. We reiterate that HDFCB’s strong liability franchise will help protect NIMs
even as HDFC’s margins will likely face pressure from higher borrowing costs. Increasing
competition in the mortgage segment will also impact HDFC’s margins and market share.
Long ONGC, Short GAIL; market is yet to take cognizance of risks to GAIL’s earnings
ONGC and GAIL have both gained 4.1% each since initiation of the trade. We see downside risks
to GAIL’s earnings from (1) high crude oil prices, (2) unfavorable subsidy-sharing arrangement and
(3) lower-than-expected gas supply in India. GAIL’s earnings may also suffer from (1) a higher
subsidy burden due to a sharp increase in crude oil prices over the past 3-4 months and (2) decline
in LPG prices and modest increase in petrochemicals prices over the same period.
Long Ultratech, Short ACC; trade is open and has returned 4.9% since initiation
Ultratech has gained 12.3%, while ACC has relatively underperformed gaining 7.4% since March
9, 2011.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strategy
Alpha Bet
One done, four to go. We are booking profits in one of our five Alpha Bet trades—
Long Punjab National Bank, Short Bank of India—with a gross return of 11.3% since its
inception on March 9, 2011. Currently all the trades are in the money with returns
averaging 4.4% for all the five trades. Exhibit 1 highlights the returns of the recent
Alpha Bet trades.
Booking profits for Long PNB, Short BOI
The trade has returned 11.3% since March 9, 2011. While PNB gained 13.1%, BOI remained
relatively subdued (up 1.9%) during the same period. The recent run-up for PNB comes after a
correction of almost 30% from the peak of ~Rs1,370 in November 2010 to the lows of ~Rs990 in
February 2011.
Long Crompton, Short Siemens; trade currently 3.6% in the money
While Crompton Greaves has gained 5.8% since initiation (outperforming the broader market),
Siemens has seen a gain of only 2.2%.
Long HDFC Bank, Short HDFC; trade open as liability franchise begins to outperform
HDFC Bank has outperformed HDFC 2.3% since initiation as HDFC Bank gained 6.1% compared
to a 3.8% rise for HDFC. We reiterate that HDFCB’s strong liability franchise will help protect NIMs
even as HDFC’s margins will likely face pressure from higher borrowing costs. Increasing
competition in the mortgage segment will also impact HDFC’s margins and market share.
Long ONGC, Short GAIL; market is yet to take cognizance of risks to GAIL’s earnings
ONGC and GAIL have both gained 4.1% each since initiation of the trade. We see downside risks
to GAIL’s earnings from (1) high crude oil prices, (2) unfavorable subsidy-sharing arrangement and
(3) lower-than-expected gas supply in India. GAIL’s earnings may also suffer from (1) a higher
subsidy burden due to a sharp increase in crude oil prices over the past 3-4 months and (2) decline
in LPG prices and modest increase in petrochemicals prices over the same period.
Long Ultratech, Short ACC; trade is open and has returned 4.9% since initiation
Ultratech has gained 12.3%, while ACC has relatively underperformed gaining 7.4% since March
9, 2011.
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