Absolute Return Letter Oct 2012

In this month's Absolute Return Letter we pick up the baton from last month. How does the current crisis actually affect financial markets? How do you overcome the low returns? What can you do to protect the downside risk in a high correlation environment? We argue that career concerns often lead to irrational decisions by professional money managers and that this provides opportunities for those who can afford to deviate from the norm.
Enjoy the read.

http://www.arpllp.com/core_files/The_Absolute_Return_Letter_1012.pdf

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2Q Preview - Motilal Oswal

INDIA STRATEGY: Fired up?

Policy engine revives| Next challenge: Investment cycle | New earnings cycle?

2QFY13 highlights: Non-cyclicals have a field day in muted quarter

2QFY13 is likely to be a muted quarter in terms of India's corporate sector performance.

-      PAT growth of 9% YoY: We expect MOSL Universe (ex RMs, oil refining and marketing companies) to report PAT growth of 9% YoY. This is the lowest 2Q PAT growth in the last 7 years, barring the Lehman-crisis quarter of September 2009.

-      Expect Technology, Financials, Healthcare and Consumer to positively dominate the quarter's performance. On the other hand, global commodities (mainly, Oil & Gas and Metals) will pull down aggregate profits.

-      Sensex PAT growth is even more muted at just 2% (ex ONGC, the growth is 9%). Six global cyclicals are major drags, ex which Sensex PAT should be up 15%.

-      Top five Sensex companies by PAT growth: TCS (+42% YoY), SBI (+31%), HDFC Bank (+30%), Sun Pharma (+29%), and Infosys (+26%).

-      Bottom five Sensex companies by PAT growth: Tata Steel (-63% YoY), Maruti Suzuki (-51%), Bharti (-36%), Tata Power (-30%) and Hero MotoCorp (-27%).

Strategy - From vicious to virtuous cycle :: Edel

Government back in action, RBI to reciprocate….

·         The government finally broke out of the policy logjam by initiating politically sensitive steps (e.g., FDI in retail and fuel price hike); sent out favourable signals to investors, businesses and RBI

…and western central banks’ actions have reduced tail risks in global system

·         At the same time, aggressive monetary actions by ECB (also Fed) have reduced risks in the global financial system. This improves capital flows (and hence BoP) scenario for India

Rashtriya Ispat Nigam Limited - IPO Details

Please find below mentioned the details of the forthcoming IPO ofRashtriya Ispat Nigam Limited 

  
BRLM:                                                        UBS Securities (I) Private Limited, Deutsche Equities (I) Private Limited
                                                                     

Syndicate Member                                      SMC Global Securities Ltd,Karvy Stock Broking Limited, 

Issue Opens:                                                October 15, 2012 

Issue closes 

For QIB Bidders:                                        October 17, 2012 

For Retail/Non Institutional and 
Eligible Employee Bidders:                         October 18, 2012 


Price Band:                                                  Will be announced within two working days prior to the issue Opening Date

Angel Broking -Derivatives Report - 08.10.2012

Derivatives Report

Angel Broking - Market Outlook - 08.10.2012

Market Outlook

Angel Broking - Technical Report- 08.10.2012

Technical Report

Angel Broking - Market Summary - 08.10.2012

Market Summary

FII & DII trading activity across NSE and BSE 08-10-2012

		BUY	SELL	NET
		VALUE	VALUE	VALUE
FII		2979.06	2415.22	563.84
DII		820.42	1599.03	-778.61

 

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Maharashtra Seamless Ltd. ::microsec_research

We rate Maharashtra Seamless Ltd. (MSL) a BUY. Our rating underpins the company’s robust business model complimented with increasing exports and other strong client base. MSL is one of the flagship company of D.P. Jindal Group specializes in providing a whole range of high-class, customizable & innovative seamless pipes and tubes. It also diversifies its foray into ERW and coated pipes.

 At the CMP of INR336.00, the stock is trading at 6.20x its FY14E EPS of INR54.20. We assigned a P/E multiple of 8.00x for FY14E arrived at a target price of INR433.60 which shows an upside potential of ~29percent hence making the scrip an attractive buy.

Regards,

Team Microsec Research

TAX SAVING under 80(c) with the BEST MUTUAL FUNDs

Equity Linked Savings Schemes (ELSS) are equity oriented mutual fund schemes where investors are given tax benefits to encourage them to invest in equity markets. Investors in these schemes get the dual benefits of tax savings and an opportunity to earn higher returns. ELSS funds power pack these benefits with a lock-in period as low as 3 years. They also provide substantially higher returns than traditional tax saving products like NSC and PPF. As per Section 80C of the Income Tax Act, investments upto Rs 1 lakh in ELSS is eligible for deduction from an individual’s taxable income. Investors in the highest tax bracket can save upto Rs.30,900 every year by investing in these schemes. 

FII DERIVATIVES STATISTICS FOR 08-Oct-2012

FII DERIVATIVES STATISTICS FOR 08-Oct-2012
	BUY		SELL		OPEN INTEREST AT THE END OF THE DAY
	No. of contracts	Amt in Crores	No. of contracts	Amt in Crores	No. of contracts	Amt in Crores
INDEX FUTURES	39633	1088.65	30845	859.90	588247	16223.05	228.74
INDEX OPTIONS	308702	8772.94	307025	8764.25	1655475	46982.98	8.69
STOCK FUTURES	31681	929.41	43464	1363.35	1009879	29719.97	-433.95
STOCK OPTIONS	42129	1320.73	43006	1355.89	59533	1853.84	-35.17
						Total	-231.68

 

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Pharmaceuticals - Supreme Court order advocates cost base pricing; sector update :: Edelweiss PDF link

The recent Supreme Court order advocates use of the existing cost-based pricing (government has proposed market-based) mechanism to determine prices of all essential medicines under NLEM 2011. We have analysed the impact on our coverage universe by using market price of a least cost brand as ceiling price. We believe that lowest cost brand would make ~50% gross realisation and thus will be equivalent to ceiling price on cost plus basis. Our analysis concludes that cost-based pricing will steeply impact future earnings. However, we strongly believe that the government has final authority to decide upon the pricing mechanism.

Three reforms for investors :: Business Line

It is raining reforms, with the Government announcing a clutch of new measures towards the weekend. Here is our take on what some of these measures could mean for you — the investor.

PUSH FOR PENSIONS

Tucked away in the latest reform measures is the amended PFRDA (Pension Funds Regulatory and Development Authority) Bill 2011, which will now be put to Parliament for vote. This Bill, which has been hanging fire since 2005 when the New Pension System was first operationalised, seeks to vest the pensions regulator — PFRDA — with statutory powers.

It is also the passage of this Bill which will provide legal sanction to the New Pension System (NPS) which has managed the pension contributions of new government employees and voluntary private contributors since 2004. This is good news for 37.4 lakh NPS subscribers who have invested Rs 20,535 crore.

 If the Bill goes through, the NPS, which has been in a sort of limbo since its introduction, may gain greater traction, with more options, more fund managers and some serious marketing effort. The NPS is supposed to be the answer to the problem of severely under-funded pensions in India.

 Open to all, the NPS offers to actively manage sums contributed by employees to generate a market-linked return on their corpus, to be used at the time of retirement. It currently offers three different equity:debt combinations to choose from. The amended Bill proposes to include an ‘assured return’ option too. The pension fund managers are today a mix of public and private sector asset managers. If 26 per cent FDI is allowed, more joint ventures featuring Indian and foreign players may join the fray.

Larsen & Toubro (LT) So far so good. :: Kotak Sec,

Larsen & Toubro (LT)
Industrials
So far so good. While L&T inches closer to Rs200 bn inflows/quarter run-rate in 2Q also,
note that 45% of this was from real estate with attendant concentration risks. Several
headwinds remain pertinent to (1) replacing in-house inflows (15% of total) with reluctance
to commit fresh capital, (2) sweet spot in real estate has helped but PSU/Govt tendering
(about 50%) is quite competitive with L&T win rate being quite low (0-35%, 5-7 bidders),
(3) valuations at 15.5X one-year forward P/E (adjusted standalone) seem full considering
slower earnings growth (10-14% vs 30% CAGR till FY2012). Retain REDUCE (TP: Rs1,515).
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05102012oo.pdf

Strategy: Sentiments drive alpha in CYTD12 even as value flourishes in September ::Kotak Sec

Strategy
India Quantitative
Sentiments drive alpha in CYTD12 even as value flourishes in September. While
value-based investing continues to exhibit a high risk-reward profile, sentiment as an
investment style has flourished in CYTD12 yielding 14% during the period. Three out of
the five companies in the sentiment-based portfolio for October 2012 are from the
Cement sector.  



http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05102012oo.pdf

Glenmark Pharma: Buy :: Business Line

Aurobindo Pharma - Better growth visibility; visit note; upgrade to Buy :: Edelweiss PDF link

Aurobindo Pharma (ARBP IN, INR 144, upgrade to Buy)

We met Aurobindo (ARBP) management. ARBP sees higher growth visibility from incremental approvals in US, which along with potential FDA resolution would aid higher margins. ARBP has received 8 approvals that would aid growth in the US. Moreover, post FDA approval of Unit-IV/VI, there is a good visibility of 4-5 product launches in injectibles space. We revise up FY13E-14E earnings by 12-13% and upgrade to ‘BUY’.

Automobiles: 2QFY13 results preview ::Kotak Sec

Automobiles
India
2QFY13 results preview. We expect a weak quarter for auto companies despite strong
revenue growth due to pressure on EBITDA margins, largely because of currency
headwinds and weaker product mix. Revenues are expected to rise by 18% yoy for the
companies under our coverage universe driven by M&M and Tata Motors. We expect
M&M to outperform peers while Hero and Maruti will have a tough quarter.


http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05102012oo.pdf

Metals & Mining: 2QFY13E preview - metal stocks stare at weak operational quarter ::Kotak Sec

Metals & Mining
India
2QFY13E preview—metal stocks stare at weak operational quarter. We expect a
weak operational quarter for Indian metal and mining names due to (1) a decline in
commodity prices—1-3% in non-ferrous and 9-13% in the steel segment, and (2)
increase in conversion costs. Reported net profit may however appear better on forex
gains on unhedged FX borrowings. JSPL would be the only company to report yoy and
qoq growth in earnings. We retain our Cautious coverage view on the sector.



http://www.kotaksecurities.com/pdf/indiadaily/indiadaily05102012oo.pdf

Dissector: Light crude oil under pressure :: Business Line

IT - Q2FY13 result preview - Moderate quarter, but prospects bright :: Edelweiss PDF link

A seasonally strong quarter coupled with increasing visibility on US markets and traction in upcoming verticals like retail induce us to forecast a moderate growth of 1-4% for Top 4 IT players in Q2FY13; TCS and HCL Tech will lead the pack with ~4% growth and Infosys’ growth may come a tad closer to ~3%. We expect margins to decline slightly for Wipro and HCL Tech led by wage hike impact, and marginally for TCS due to investments in new initiatives. Infosys is likely to maintain its full year guidance of 5% (organic basis) in CC with a positive bias.

BGR Energy Systems (Rs 293.2): BUY ::Business Line

Coromandel International - Sowing seeds of rich harvest; visit note; Buy :: Edelweiss PDF link

Coromandel International (CRIN IN, INR 296, Buy)

We recently met the Coromandel International (Coromandel) management. While fertilizer volume during FY13 is likely to be subdued on account of delayed monsoon and excessive inventory in the system, however non subsidy business is gaining momentum. Commissioning of new fertilizer and TIFERT facility in November 2012, Sabero’s turnaround and strong growth in non-subsidy business will be key growth drivers during FY14. We maintain ‘BUY’ with target price of INR383.

Stock Strategy: Narrow lane ahead for Tata Motors DVR ::Business Line

Companies Bill 2011 - Change on the anvil :: Edel

The Union Cabinet on October 4, 2012 approved the Companies Bill, 2011, after considering the recommendations of the Standing Committee on Finance. The proposed bill will now be introduced in Parliament for final approval. The Companies Bill, 2011, will bring about major changes to address the public concern over corporate accountability besides laying stress on transparency and investor protection.

8 Oct: Morning News (click on link to read article) : IFCI Financial Services Limited

Morning News (click on link to read article)

Economic Times		Business Standard
Ø  Mkts to track IIP data, Sept quarter earnings: Experts Ø  RIL refuses Oil Ministry order to swap KG-D6 gas with Andhra firm Ø  Tata Power subsidiary bids for discoms in Nigeria Ø  Indian Oil Corp to move bulk LPG from Chennai import facility Ø  IMG to decide fate of coal mines with PSUs by Oct 20 Ø  M-Cap of top eight Sensex firms surges Rs 30,510 crore Ø  Naveen Jindal's co files FIR against Zee Business		Ø  New insurance norms can be a double-edged sword Ø  EGoM may decide today on charging incumbent telcos Ø  RIL raises $ 1.5 bn with third bond issue in overseas mkts Ø  Investors to get daily trade alerts through SMS, email Ø  FIIs pump over Rs 3,300 cr in stocks in Oct so far Ø  Vedanta ties up funds for $4.1bn debt maturing in FY13 Ø  Software service cos may post muted growth in Jul-Sept: experts
Business Line		Mint
Ø  ONGC Tripura Power's first unit to go on stream soon Ø  Changes in regulatory norms will help power exchanges expand Ø  Sideways movement seen ahead of Infosys results Ø  P-notes on equity derivatives touch a five-year high Ø  Retail investors have turned over a new leaf		Ø  Essar Ports to refinance debt to cut interest costs Ø  Wipro not to sell water treatment business Ø  Banks willing to help Kingfisher if salaries are paid soon Ø  Skill shortage threat to hotel industry growth Ø  Honda to recall 268,000 SUVs in US: report
Financial Express		DNA
Ø  Forex reserves jump by $ 838 mn Ø  'India Inc's biz confidence has improved' Ø  Govt hikes duty drawback rates Ø  'Slowdown hurting developing countries' Ø  Mutual Funds' mobilise Rs 1.5 tn in FY12 Ø  Open offers worth Rs 2,460 cr: Sebi		Ø  25% public float or face action, SEBI warns cos Ø  SEBI, NSE to take appropriate actions: Chidambaram on Nifty crash Ø  NSE crash: Rs3 lakh crore gone in 15 mins Ø  US facing 'prolonged' economic uncertainty: Ex-Indian envoy Ø  Lemon Tree arm in talks with international luxury brands

(Click on link to view article)

Thanks and Regards

IFIN: IFCI Financial Services Limited

Services drive trillion-dollar economy ::Business Line