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April 2012

Amused…Fake ‘West End’ Defence Deal gets a Bribery Conviction while in the Real ‘Bofors’ Deal the Corrupt get away !

Amused…Fake ‘WestEnd’ Defence Deal gets a Bribery Conviction while in the Real ‘Bofors’ Deal the Corrupt get away !

A Delhi Court today pronounced the Former BJP President ,Bangaru Laxman guilty for accepting a bribe of  Rs 100000 for a Fake ‘West End ‘Defence Deal…it was a Tehelka Sting Operation of 2001 by Aniruddha Bahal that exposed the murkiness in Indian Defence deals and the Bribery and Corruption involved….The Whole Defence Deal was  made up by the Tehelka team to sell Night Vision Binoculars to  the Indian Army…They created a fictitious British Company ‘West End International’ to expose the Defence Equipment Procurement Process and got Laxman accepting the Bribe on Camera

…while in the real ‘Bofors’ Deal,we have seen acquittals all the way and bank accounts being defrozen to facilitate overnight withdrawals of millions of dollars of commissions…check out Seema Mustafa’s column in today’s edition of DNA …interesting…wonder if the Investigation will be reopened  with the Swedish Investigating Officer Police Officer,Sten Lindstrom now revealing that Kickbacks were paid and that everybody was in the know but the Indians were unwilling to follow through fearlessly as powerful politicians and their friends and even a big NRI Indian Business Family were involved…Ottavio ‘Q’uattrocchi was allowed to leave India and it was ‘managed’ to acquit him with CBI stating it did not have evidence against him !

Now waiting to see what is the outcome of the ‘Tatra’ Truck Deal where retiring Army Chief V K Singh has accused a now retired General Tejinder Singh of visiting him and offering a bribe of  Rs 14 crs for allowing the deal to go through smoothly…another NRI, Ravi Rishi of Vectra was the facilitator for the Tatra Trucks…the deal actually did go through,although Army Chief,V K Singh refused the Bribe !…it is claimed the Tatra Trucks supplied are old models and not the latest

In the Meanwhile and predictably too the Congress and BJP continue to trade charges and question each others moral right to raise corruption issues !….sadly corruption issues will continue to be diverted and diluted

Mera Bharat Mahaan !

Overheard a Stock Market Conversation….”I’ve Lost Rs Two Lakhs in Stocks last year !”….”You’re lucky,I’ve drained Rs 10 lakhs !”

Overheard a Stock Market Conversation….”I’ve Lost Rs Two Lakhs in Stocks last year !”….”You’re lucky,I’ve drained Rs 10 lakhs !”

Both uttered with Straight faces…no chuckle !

They say Fee Based Income in Capital Markets is safer and less riskier than Fund Based…of course it will be !…it’s those who you advise and transact for that are losing Money !…not You !…on the Contrary,you are getting paid for it too !…and your ‘quacks’ are aired on Stock Channels too !

This Donald Duck Quack says it all !…Stop playing the markets daily !

How Stupid Can You Be to think it's a Challenge !....Stop Playing the Markets Daily !

Even God’s Pleading with You ” I’ve not Given you Birth to Feed the Brokers !”

…and remember that F & O means F..k Off !…with F..k being the most notorious four letter word in the English Dictionary..and you thought this was SEBI !

…and I’m using this hypothetical conversation below to reiterate this point

Wife : “And What Are You Going To Do Today !”

Husband : “Play The Markets “

Wife : “But You Did That Yesterday and Lost!”

Husband : ” Yes,But I wasn’t Finished !”

Now you Guys take your Pick...”Finished” as in “Finished !” or “Finished” as in “Being Stupid” 

Cheers !

Performance of the BSE Sector Indices in 2011/12 and to date is quite Interesting

Performance of the BSE Sector Indices in 2011/12  and to date is quite Interesting ….What provoked this post is Sameer’s counter argument in my earlier post…he is bullish in the short term,citing the favourable upmoves in the Pharma,Cement and Auto Sectors…I’m looking at the Bigger Picture and I’m not so excited really as Macros are clearly playing up and this Government is unlikely to push big ticket reforms…we need to await 2014 General Elections,which I fear may yet again through up a fractured verdict…but I hope with a more reform friendly and decisive coalition !

Have a Look at the Performance of the BSE Sector Indices in 2011/12 and to date…Quite Interesting…The Reds & Greens signal fall or rise/holding up from over a year ago  

The Alltime High & Low Columns are quite revealing

  • FMCG,Healthcare and Auto Indices  have registered All time Highs this Month…with consistent Wealth Creation in the 21st century in FMCG and Healthcare while a huge surge in the last four years in the Auto Sector
  • Quick and huge  wealth destruction in the IT sector in 2000/2001,the Metals and Power Sector inside Ten months in 2008 between January and October and in the Realty Sector between Jan 2008 and March 2009  

PERFORMANCE OF BSE SECTOR INDICES AS ON APRIL 26,2012

Sector

Valuation

Current Close

April 26,2012

A Month Ago

A Year Ago

52 Week

All Time

%

Mkt Cap

PE

PBV

Index

%

Index

%

High

Low

High

Low

IT

9

19.4

6

5509

6011

(8.4)

6244

(11.8)

6361

4639

8678

Feb 2000

835

Sept 2001

Teck

12.6

23.4

3.5

3239

3516

(7.9)

3764

(13.9)

3799

2982

4188

Oct 2007

547

Sept 2001

FMCG

7

35

14

4806

4386

9.6

3739

28.5

4834

3562

4834

April 2012

706

April 2003

Consumer Durables

0.7

20

2.7

6509

6377

2.1

6491

7097

5063

7370

Nov 2010

414

Sept 2001

Metals

9.4

14

2.4

10981

10978

16723

(34.3)

16723

9191

20495

Jan 2008

3807

Oct 2008

Oil & Gas

11.7

16.9

1.8

7896

7910

10093

(21.8)

10102

7495

14269

Jan 2008

2529

Aug 2004

Capital Goods

3.8

15.9

3.1

9424

9933

(5.1)

13710

(31.3)

14108

7807

21021

Nov 2007

481

Sept 2001

HealthCare

4.4

57

4.4

6747

6391

5.6

6191

9

6879

5757

6879

April 2012

985

April 2001

Bankex

9.8

13.3

2.1

11666

11571

13520

(13.7)

13501

8947

15108

Nov 2010

1614

June 2003

PSU

25.7

13.8

2

7160

7235

9169

(21.9)

9254

6204

11205

Jan 2008

734

Sept 2001

Auto

4.9

22

4.8

10745

9861

0.1

9678

11

10829

7814

10829

April 2012

2128

Dec 2008

Realty

1.2

20.9

1.4

1677

1726

(2.8)

2346

(28.5)

2311

1348

13848

Jan 2008

1298

March 2009

Power

7.2

15.3

2

1991

2082

(4.4)

2724

(26.9)

2714

1725

4929

Jan 2008

1275

Oct 2008

  • IT  shows a Drop,but TCS has outperformed Infosys ,which has slumped and the latter holds 48% weightage in the Index ! against just 29% by TCS !…this needs to be rectified by BSE rightaway…more so as the Market Cap of TCS is Rs 233301 crs against just Rs 135415 crs of Infosys !….The Index tracks the share price of  10 Companies with 88% weightage of just three …Infosys,TCS and Wipro …Other interesting constituents are Oracle Finance and Financial Technologies 
  •   Techk comprises of 30 IT,Telecom,Media and Communication Companies and has mirrored IT fall
  • FMCG has been the years Darling with ITC (55% weightage) and HUL (18% weightage) outperforming to allow the Index to hit Alltime Highs…11 Companies constitute this Index…Interesting ones are the two Kingfisher Group Companies,United Spirits and United Breweries…. and Tata Global (spotted this at Rs 80 late in 2011) and the huge 2010/2011 winner Jubilant Foods (Dominoes Pizza)
  •  Consumer Durables has heavyweight Titan with 51% weightage in the Index…It’s been a flat year
  • Metals has seen a bad year…In fact this Index has slumped the highest @ 35% over last year…75% Index weightage is in Five scrips led by Tata Steel with 22% followed by Coal India,Jindal Steel,Sterlite and Hindalco
  • Oil & Gas too has seen a bad year…Reliance with a 54% weightage and ONGC with a 22% weightage aggregate a skewed weightage of 76% in the Index
  • Capital Good Giants,India Proxy Larsen and Toubro and BHEL have a weightage of  54% and 16% respectively in the Index that monitors the share price of  17 companies,that also include Siemens,Suzlon,Havells,Thermax,ABB and Punj Lloyd…it’s been a shocking year for both,Larsen and BHEL on the bourses and the steep fall has unnerved even the aggressive Investors
  • Healthcare has held up well in 2011/12…19 Healthcare and Pharma Companies comprise the Index with Sun Pharma (18%),Dr Reddys (17%) and Cipla (12%) leading the weightages
  • 14 Banks comprise the Bankex with the top three weightages given to HDFC Bank (26%),ICICI Bank (25%) and State Bank of India (16%)…it’s been a very challenging year for the Banks given the slowdown in the Economy and high interest rates affecting credit offtake…the rising level of NPAs remains a threat
  •  PSU ~ The Index has 60 PSU Companies in it ! with Coal India and ONGC leading at 14% each in weightages followed by State Bank of India with 9% and NTPC with 8%…Interestingly these 60 Comnpanies have an aggregate  Market Cap of Rs 1561821 crs currently….and this smartly and significantly  constitute nearly 26%,that’s over one fourth of the Total Current Market Cap of BSE of Rs 6108734 crs 
  • The Auto Index covers 10 Companies across the sector spectrum of leading four HMV and LMV wheelers & Two Wheelers,Battery (Exide) & Engine (Cummins) Manufacturers and Tyres (Apollo)…Aggregate 86% weightage is given to top Five Vehicle Players led by Tata Motors with a 31% weightage .Interestingly and encouragingly too,this Index has held up well,largely due to outperformance by Tata Motors…However Index aggregate Market Cap is below 5% of total market cap 
  • Realty Index tracks the share price of 12 realty companies…DLF lead weightages with 33% followed by Unitech (17%),Oberoi (10%) and HDIL (10%)…Shobha,Godrej Properties,Phoenix,D B Realty are some others in this Index…it’s continued to be a sliding year for this sector that’s been saddled with huge crippling debt,huge inventories and delayed projects….but how much more lower can it go !…search for contrarion winners in this sector over the long term…had spotted Orbit at Rs 20 + late last year and early this year…Price has doubled to @ Rs 48 currently…and even Indiabulls Real Estate at Rs 45 + levels after demerger of Indiabulls Power….it surged to Rs 80 levels before reacting now to Rs 62 …But Both do not form part of this Index 
  • Power Sector is battling  Source Feed Supplies of Coal and Gas that’s crippling Operations and resulting in lower output and capacity underutilisation….Implementation of both,Public and Private Mega Projects too has been delayed for a host of reasons …This Index tracks 19 companies in the Sector that cover Generators,Transmitters and Distributors as also others that supply Equipment like BHEL which has the second largest weightage of 15% …NTPC with a 20%  leads the weightages….Incidentally Private Power Players like Reliance Power  and Adani Power have a weightage of 4% and 3%  respectively….Given the Challenges faced,the Year has been quite unkind to this Sector…the Index has slumped @ 27% in the past year…anyone for a Contrarion Bull Play here !? 
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    Dashing Through the Economy…Printing Currency all the Way !…Oh what Fun it is to ride on a one PIIGS Open Sleigh !… Hey ! Warning Bells ! Warning Bells ! Warning all the Way !…Santa Claus is not Coming riding on a Sleigh !

    Sing this to the Tune of Christmas Carol “Jingle Bells”

    “Dashing Through the Economy…Printing Currency all the Way !…Oh what Fun it is to ride on a one PIIGS Open Sleigh !… Hey ! Warning Bells ! Warning Bells ! Warning all the Way !…Santa Claus is not Coming riding on a Sleigh !”

    Have a Look at this chart below (moneyandmarkets.com)  and see the crazy percentage of  Central Bank Assets as a % of the GDP in that Country

    Central Banks of USA,Europe,England and Japan have printed more Currency in the past four years than in the whole of the past 50 years ,prior !….in an attempt to revive their Economies….and the result is simply not showing !…it is a matter of time that the currencies will lose their function as a ‘store of value’ 

    You want a figure ! ?..it’s over US $  10 Trillion worth of freshly printed Currency pumped into the Economies in the last four years 

    In 2008 USA’s FED  Assets to GDP ratio was just 6% …it’s now a record 20% !…England matches this !

    Both,Japan and Europe are even more precarious…the ratio here is an unbelievable 30% !

    Dangerous Levels of Printing Money to Fund Economy

    PIIGS ~ Europe

    Portugal,Ireland,Italy,Greece and Spain….currently the faltering Eurozone Economies…The Quantum in % of Sovereign Bonds of the Total Bonds Issued in the World stands at 40% according to S & P….In Spain the yields on Sovereign Bonds have climbed over 6% while the default hedge cost is now 5% ….The Unemployment rate is a stagerring 22% !….All PIIGS Nations have a dangerous level of Debt to GDP Ratios…Greece’s Debt is 160% of GDP…and all countries are battling recession and struggling to implement stringent austerity measures which is a prerequisite for bailout funding….social tension is the inevitable fallout….riots,strikes,demonstrations….and at an extreme can lead to anarchy…How Long can France and Germany continue to prop up the Eurozone !…they,themselves are answerable and have to counter increasing domestic challenges and arguments and debates to providing sustenance to others in the Eurozone…There is a growing fear of the Collapse of the Eurozone….inevitably countries like Greece and even Portugal may contemplate to exit the EuroZone and revert to their own or new currency and at a new exchange rate….the situation is tense and huge dollops of Bailout Funds are required over a sustained period of a few years…problem is where will such Funds come from !?….Printing Currency was the only Option left,perhaps !….Italy approached China for Funds by soliciting subscription to it’s sovereign bonds….China demanded Tangible Assets and stakeholdings in top Italian Companies !…as Bond Values can substantially be wiped off if economy continues to falter  ! read more

    S & P retains BBB – Rating for India but downgrades Outlook to Negative…I’m finding it difficult to counter as it echoes ground realities !

    S & P retains BBB – Rating for India but downgrades Outlook to Negative from Stable…indicating a possible down rating in the future….BBB- remains the lowest Investment grade Rating,just one notch above BB+ which is the highest Speculative Grade Rating….  I’m finding it difficult to counter as it echoes ground realities of high Current Account and Fiscal Deficits !

    Sensex dropped a percent on this news earlier today and has recovered  a bit  to 17150 levels as I blog this just after 3 pm

    Nearly Two years ago in May 2010 I had blogged how amusing it was that S & P continued to rate USA  as AAA…India at the time had the same rating of BBB-,as it does now, but with a stable outlook

    S & P’s Sovereign Rating of USA remains at Top ‘AAA’….Amusing!

    Friday, May 21st, 2010

    Here is a selected and grouped compilation of the latest Standard & Poor’s Sovereign Ratings sourced from www.standardandpoors.com…what is interesting is the relatively high ratings to Ireland,Italy and Spain among the PIIGS Nations in context of the recessionary ,high debts and deficits ,low liquidity and survival issues being currently faced in the EuroZone

    Selected Countries S & P Sovereign Ratings as on April 25,2012

     

    Country

    Local Currency Rating

    Foreign Currency Rating

    T & C Assessment

     

    India ~ Unsolicited

    BBB-

    BBB-

    BBB+

     

    BRIC Nations

    Brazil

    A-

    BBB

    A-

    Russia

    BBB+

    BBB

    BBB

    India

    BBB-

    BBB-

    BBB+

    China

    AA-

    AA-

    AA-

     

    PIIGS Nations ~ Europe

    Portugal

    BB

    BB

    AAA

    Italy

    BBB+

    BBB+

    AAA

    Ireland

    BBB+

    BBB+

    AAA

    Greece

    SD ~ Selective Default

    SD ~ Selective Default

    AAA

    Spain

    A

    A

    AAA

     

    Developed Nations

    USA ~ Unsolicited

    AA+

    AA+

    AAA

    UK ~ Unsolicited

    AAA

    AAA

    AAA

    Germany ~ Unsolicited

    AAA

    AAA

    AAA

    France ~ Unsolicited

    AA+

    AA+

    AAA

    Japan ~ Unsolicited

    AA-

    AA-

    AAA

    Australia ~ Unsolicited

    AAA

    AAA

    AAA

    New Zealand

    AA+

    AA

    AAA

    Canada

    AAA

    AAA

    AAA

    Netherlands ~ Unsolicited

    AAA

    AAA

    AAA

    Switzerland ~ Unsolicited

    AAA

    AAA

    AAA

     

    South & Central America

    Brazil

    A-

    BBB

    A-

    Mexico

    A-

    BBB

    A

    Argentina ~ Unsolicited

    B

    B

    B

    Chile

    AA

    A+

    AA

    Peru

    BBB+

    BBB

    A-

    Colombia

    BBB+

    BBB-

    BBB+

     

    Asia

    India

    BBB-

    BBB-

    BBB+

    China

    AA-

    AA-

    AA-

    Japan

    AA-

    AA-

    AAA

    Indonesia

    BB+

    BB+

    BBB-

    Thailand

    A-

    BBB+

    A

    Malaysia

    A

    A-

    A+

    South Korea

    A+

    A

    AA-

    Singapore ~ Unsolicited

    AAA

    AAA

    AAA

    Taiwan ~ Unsolicited

    AA-

    AA-

    AA+

    Phillipines

    BB+

    BB

    BB+

    Pakistan

    B-

    B-

    B-

    Sri Lanka

    B+

    B+

    B+

    Bangladesh

    BB-

    BB-

    BB-

    Turkey

    BBB-

    BB

    BBB-

     

    Africa

    Egypt

    B

    B

    B

    South Africa

    A

    BBB+

    A

    Nigeria

    B+

    B+

    B+

    Kenya

    B+

    B+

    BB-

    Uganda

    B+

    B+

    BB-

    Given such Macro Negatives can the Sensex hold above 17000 in the short term with even FII Inflows reversing as Government seeks to clarify on tax with a retrospective effect  but instead creates a Fear psychosis,anger,anxiety and frustration with GAAR Measures and it’s targeting Vodaphone ?…In the Jan-March 2012 quarter the FIIs had pumped in a record Rs 41000 crs moving the Sensex from December 2011 Close levels of 15500 to Highs of 18500,only to revert back towards 17000 now

    Furthermore,with the Rupee seeking to yet again depreciate further beyond Rs 53 to the US $ and thus keeping the pressure on Inflation and Interest rates, I for one,am finding it difficult to get excited or even remain spirited about macro trends in the  markets in the short term…I remain Hopeful and selective though !

    Cheers ! 

    Warm & Nostalgic Weekend….Daughter awarded prize for being the best allrounder of the school…@ 35 years ago,Wife and I had been awarded the Cadburys Award for this too

    Warm & Nostalgic Weekend….

    Began with a Lovely and Lively Friday Night Reception,Cocktails,Dinner  and Dance to celebrate the Wedding of the Son of Close Friends  

    …..and Saturday was nostalgic …@ 35 years ago,while in ICSE Std X in 1976 ~ me and in 1977 ~wife  were awarded the Cadburys Award for being the Best Allrounder of the school…yesterday,as proud parents, we witnessed our daughter following in this tradition when at her School’s Speech Day she was awarded the Alumni prize for the Best Allrounder of Senior School ICSE Std X and received this at the hands of the Chief Guest,Mrs Chanda Kochar,the MD and CEO of ICICI Bank…Daughter also found special inspiring mention in the Principal’s Address for brilliantly balancing Academics and Sports and for being the goldengirl in Football ~ she was Mahrashtra State u 19 Captain in the Schools Nationals in Port Blair,Andamans in December 2011 

    Early this morning,daughter has left for a week long Bhutan Trek as her Gold endeavour in the International Award for Young People (IAYP) Program ~ erstwhile Duke of Edinburgh Scheme 

    The Speech Day on Saturday saw a lot of inspiring speeches….in one ,by a Member of the Board of Governors,a Hindu Quote on Knowledge was narrated brilliantly ….it translated into Knowledge not being taxed as a wealth creator and the more it is shared the more it grows !…and such Wealth always stays with you ~ No One can take it away from you ! 

    Ms Kochar,spoke well too…complimented Teachers and Parents and Students for the Achievements…spoke of how 30% of India was under the age of 18 and it was this young generation who would be the Movers and Shakers of tomorrow….her address theme to students was ‘Making Excellence a Habit’….she had five pointers for this

    • Take your Destiny into your own hand
    • Set a Goal with the end in mind…for one year,three years or five years of where we want to be
    • Focus and be disciplined to achieve that Goal
    • Be Passionate in what you Chose to do
    • Be Open to Keep Learning….this process never stops 

    Analysing Reliance Results can wait !…as can the sombre effect on FDI Investments because the Government has clarified a Tax Issue with Retrospective Effect targeting Vodpahone to pay US $ 2.2 Billion in Tax

    Cheers !

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