India Strategy - “Accumulate” India- 2012: Year of turning points:: Elara Securities

“Accumulate” India
[Elara Rating Guide: “Accumulate” indicates positive bias in
fundamentals with a five to 15% upside]
2012: Year of turning points
It was on January 10, 2008 that the Indian market hit its all-time high.
Today, 4 ½ years hence and potentially the longest bear market, we
see reason to turn mildly bullish on Indian equities. The cliché - ‘Wall of
Worries’ will get conquered this year and 2012 might well be the year
where the economic variables of the nation will see the maximum
turning points in Peak inflation, Interest rates, Fiscal deficit, Current
account deficit and the lows of GDP, IIP and INR, all of which will likely
turn favorable in 2013.

Time magazine has done PM a favour by calling him Underachiever: Karvy / Business Standard

ARE MAGAZINE COVER STORIES
CONTRARIAN INDICATORS?
Last week, TIME magazine had put Prime Minister Manmohan Singh on
its cover tagging him ‘THEUNDERACHIEVER’. Brokerage firm Karvy feels
these contrarian indicators could precede a reversal of fortunes for
India’s economy and markets. It supports its thesis by listing some
popular covers of leading global magazines over the past three decades

http://www.business-standard.com/content/general_pdf/071512_01.pdf

Technicals-VST Industries, IndiaBulls Financial, HDFC, Gujarat State Fertilizers, Unichem, Hyderabad Ind, :: Business Line

Portfolio for July 2012- ESA (Edelweiss style analysis)

Top 10 Long-Portfolio stocks
NSE Symbol
RELIANCE
HINDPETRO
SAIL
JPASSOCIAT
TATASTEEL
STER
MCDOWELL-N
NTPC
GRASIM
RELINFRA

Consider short strangle on IDFC :: Business Line

NMDC :Raise Our Target Price, But Maintain Hold --Nirmal Bang

Raise Our Target Price, But Maintain Hold

NMDC’s new pricing mechanism based on domestic demand-supply dynamics rather than export parity would partially help it to mitigate the effect of cyclical downturn in iron ore prices. Besides this, NMDC has commissioned its uniflow railway line system in June 2012, which gives us comfort about our FY13E volume estimate of 29mt, a growth of 6.2% YoY, despite being hit by the demage to slurry pipeline in Chhattisgarh. We revise our EBITDA estimates upward by 3% and 7% for FY13E and FY14E, respectively, on the back of improvement in expected realisation and higher volume. The stock price has risen 15% since our last update (“Performance in Line; We Upgrade Stock to Hold” dated 29 May 2012) as compared to a 7% rise in the benchmark Sensex in the same period. We retain our Hold rating on NMDC with a revised target price of Rs206 (up 21% from our earlier TP), which is 7% above the CMP

TATA CONSULTANCY SERVICES In line results with robust volume- Edelweiss,

Tata Consultancy Services (TCS) Q1FY13 revenue of USD2,728mn was in
line with our estimate (USD2,727mn) while earnings of INR32.8bn was
marginally above our estimates of INR32.1bn on the back of a higher
volume growth of 5.3% as against our expectation of 3.7%. Growth was
broad based with BFSI and telecom verticals growing by 5% and 6.1%
respectively. We maintain our 14.5% USD revenue growth for FY13E and
expect the momentum to be sustained thanks to its continued
investments in sales and marketing. Although, we believe that the
company has delivered consistently in last few quarters we maintain our
‘HOLD’ on the stock given the rich valuations.

Oil India - TP: INR565 Buy:Motilal Oswal Securities

Expect step jump in gas production in 2014
INR60b earmarked for acquisitions; 1QFY13P subsidy at USD56/bbl
 Expect 1QFY13 provisional subsidy at USD56/bbl which translates into upstream
sharing of 30% for the quarter.
 Delay in cash deployment is hurting return ratios; however, management indicated it
is likely to announce an acquisition soon and has earmarked INR60b for the same.
 Planned capex for FY13 is INR33.8b with a target to drill 40/37 exploratory/
development wells (v/s 16/22 in FY12).
 We continue to like Oil India due to its (a) high share of oil (58% in 1P and 64% in 2P)
in its reserves, and (b) RRR of >1 for last 8 years to deliver consistent production
growth. Maintain Buy with target price of INR565

INFOSYS Price decline mars volumes surprise....Edelweiss,

Infosys once again delivered disappointing numbers with Q1FY13
revenue dipping 1.1% in USD terms versus our and Street expectation of
0.5% QoQ growth. Further, the company also reduced FY13 revenue
growth guidance to atleast 5% from the earlier 8-10%. Pricing decline of
3.7% QoQ and one time reversal of USD15mn offset the surprisingly
strong 2.7% volume growth. It also did not issue next quarter guidance
citing uncertain macro environment and cited cross currency and pricing
decline reasons behind cut in yearly revenue guidance. Although we are
positively surprised by the strong volume guidance (9.5%), the sharp cut
in pricing has induced us to cut our growth and earnings estimates. We
remain cautious with an upward bias driven by attractive valuations at
12x FY14E earnings. Maintain ‘BUY’.

When not to go for SIPs :: Business Line

If not used judiciously, SIP as a tool can disappoint and sometimes end in you throwing good money after bad.

Systematic investment has been the mantra for investing in equities especially in the volatile markets of the last few years. Systematic investment plans (SIPs) allow you to invest small or large sums or invest in certain number of units/stocks, over regular intervals, thus averaging the cost of holding in an investment.

But if not used judiciously, SIP as a tool can disappoint and sometimes end in you throwing good money after bad. Here are instances where running an SIP can be risky.

Excel Crop Care (Rs 116.6): Buy :: Business Line

Five reasons why a drought in India won't matter :ET

Droughts are those creeping sorts of natural disasters that grab us unawares. Or are they? The south-west (June-September) monsoon, that gives almost 75% of India's annual rainfall, is erratic in one out of four years.
With wide variations in agro-climatic zones, drought is guaranteed somewhere in the country each year, affecting about 50 million people.

Changing weather patterns have accelerated drought attacks. There were six between 1900 and 1950 and 12 in the following 50 years. We have already faced three droughts between 2000 and 2009.

So, if this monsoon produces droughts in some areas - we are nowhere close to that possibility right now - do we have to worry? Not really. There are five reasons for this.

Bad monsoon? GDP impact to be no more than 0.25% ::ET

Shikhandi, Dhritarashtra, Ravana - in public discourse recently, people have dispensed names from history/mythology too freely. The ex-finance minister and Congress presidential candidate's budget speeches have also had references to Indra being kind.

Let's note, sacred texts have a rule. If a king rules badly and governance is unsatisfactory, rains will suffer and the country will be visited by famines/drought. (There are also exhortations to throw out such bad kings.)

Coming back to the mundane question of rains and the economy, the south-west (summer) monsoon is more important for India than the north-east (winter) one, and kharif more significant than rabi.

Airlines stressing out bank assets :: Business Line

Banks have burnt their fingers by lending to the aviation sector, which is under immense pressure due to rising fuel costs, mismanagement and predatory pricing.

The turmoil in the airline sector is beginning to affect the loan books of banks. Kingfisher Airlines is liquidating assets to meet its debt obligations.

Banks have burnt their fingers by lending to this sector, which is under immense pressure due to rising fuel costs, mismanagement and predatory pricing.

According to the Financial Stability Report released recently by the RBI, 10 banks (predominantly public sector banks) accounted for around 86 per cent of the credit to the airline sector.

This indicates the disproportionate share of loans to airlines in the books of few banks.

Air India and Kingfisher are the two major airlines which have seen their loans either restructured or categorised as NPAs.

Edelweiss -hEDGE The alternative insights monthly July

July view: Concerns take a backseat
Markets rally on expectations of economic reforms
Q1FY13 result preview: Not yet out of the woods
Liquidity blues; efforts to tame the dollar crunch
Crude: On the boil again
IT: Volume growth a key driver
Auto: Widespread slowdown

Niche e-commerce sites add edge to humdrum of 'click & shop; is customer clicking? Economic Times,

In 2004, Chris Anderson debuted the idea in a Wired article. He called it the Long Tail. The official website says: "The theory of the long tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of "hits" (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail." This is about the long tail. Okay, loosely.

Anderson makes a case for a "mass of niches", as the costs of production and distribution fall, especially online. "There is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly targeted goods and services can be as economically attractive as mainstream fare," is what he says. Maybe this explains the rise of the niche ecommerce sites. While bestylish.com offers only shoes, heavenandhome.com caters to your home furnishing needs and jewelsnext.com offers jewellery, to name a few.

Tata Consultancy Services (TCS) Flawless execution, but perfectly priced : Espirito Santo

TCS’ Q1FY13 results indicate flawless execution. The company has
been able to report growth across most verticals in a tough
environment. While revenue growth was in line with expectations,
EBIDTA margins were 100bp lower than our estimates and 50bp
lower than consensus. While revenue growth has been broad based,
we note that one mega deal won in November 2011 (effective March
2012) and one large telecom deal won last quarter contributed c.40%
of incremental revenues in Q1FY13. Management commentary was
positive indicating no change in stance v/s commentary of the past
six months. We continue to believe that current valuation does not
take into account client and vertical concentration risks. While we
don’t rule out a near term churn in favour of TCS from Infosys given
consistent underperformance by the latter, we find it increasingly
difficult to justify TCS’ valuation. Reiterate Neutral.

Coal India Ltd- More coal is the goal as FSA clarity emerges…Centrum

We expect Coal India Ltd (CIL) to turn the tide of flat production
growth during past three years and achieve higher coal production
and sales with a CAGR of 5% and 5.6% respectively during FY12-
15E. We believe that the market at present is not willing to factor in
CIL’s ability to increase production as well as prices and seems to
have remained overly concerned over issues related to FSA signing
and reduction in e-auction coal volumes. We expect this perception
to change going forward and expect net sales and EBITDA CAGR of
8.8% and 13.6% during FY12-15E. Valuations appear attractive to
us with a huge cash balance (~25% of market cap). We initiate BUY
with a target price of Rs395.

Number Crunch - In crisis, passenger traffic hit more than cargo :: Business Line

Infosys Are we still convinced? : Espirito Santo

Infosys has consistently disappointed the street for almost 6 quarters
now. By any stretch of the imagination that is a long wait for a
company like Infosys to deliver and it has tested investor’s patience
on the resumption of growth. However post Q1FY13 we are
incrementally convinced that growth will resume sooner rather than
later. Our core thesis has been that we are seeing Infosys become
more flexible on price and less averse to risk in the commoditized
area of the business, in an effort to drive volume growth and boost
utilization rates which are now close to historic lows. Q1FY13 results
build on our thesis with volume growth at 3% v/s street expectations
of flat volumes. The decline in pricing is largely like-for-like and
broad based which indicates that better volume growth and
improving utilization will follow. We reiterate BUY.

MCX stock exchange along with NSE and BSE to benefit investors ::ET

Securities and Exchange Board of India's (Sebi) green signal this week to MCX to start a stock exchange has elicited the standard response from experts that competition to the National Stock Exchange and Bombay Stock Exchange will mean downward pressure on brokerage rates and benefit investors.

A look at history suggests otherwise. Investors, especially institutional, which do the bulk of trades, are drawn to a bourse not by the desire to save a few pennies on brokerage but by its ability to provide a very deep market that can absorb big trades without it moving stock rates against them.

PL INDIA: Hindustan Zinc - Beaten down valuations and strong FCF sets the positive tone - Accumulate

PL INDIA 

Hindustan Zinc                   Accumulate             

Visit Update - Beaten down valuations and strong FCF sets the positive tone

We met the top management of Hindustan Zinc (HZL) to understand the status of underground (UG) projects in Rampura Agucha (RA) and Sindesar Khurd (SK) mines, guidance on capex and volumes. Following were the key highlights of the interaction:

52-week flop: Indraprastha Gas :: Business Line

Turbulence rocks Indian carriers :: Business Line

With or without Kingfisher, India’s aviation sector may continue to face headwinds.

The anticipated shakeout in the Indian aviation industry seems to be underway. High debt levels, large accumulated losses, costly fuel, and inability to raise fares adequately have contributed to the pain in the sector.

Palliative measures such as allowing foreign airlines to invest in Indian carriers are still work-in-progress and may come too late for those which need it urgently.

The most visible casualty could be Kingfisher Airlines. Its shrunken operations have relegated it from being the second largest player to the smallest airline in the domestic skies.

Lenders are tightening the screws and the company has resorted to some asset sales to ease the pressure. But many expect the airline to shut shop sooner than later.

15 July Pivotals - Reliance Industries, Tata Steel, Infosys, SBI :: Business Line

Reliance Industries (Rs 718.7)

After testing the upper boundary of the near-term sideways trading range between Rs 700 and Rs 742, the stock slipped 2 per cent last week. The stock is currently heading towards the lower boundary at Rs 700. Traders with short-term perspective should tread with caution as long as the stock trades in the aforementioned range. A fall below Rs 700 will alter the short-tem view downwards and the stock can decline to Rs 670 or even to Rs 650 in the medium-term.

But, a conclusive jump above Rs 742 will accelerate the stock upwards to Rs 772 or Rs 792 in the ensuing weeks. Significant medium-term resistance for the stock is at Rs 868.

Index Outlook: Stocks stumble slightly :: Business Line