Sensex disappoints in FY 16 as many of the 30 constituents lose big value

FY 16 has been a mixed year for Stocks with Markets on a downward drift  with  Sensex closing 9.4% lower  at 25341

Sensex disappoints in FY 16 as many of the 30 constituents lose big value 

Interesting & Heartening to it’s Shareholders ,Reliance has been the biggest constituent gainer at @ 27% while at the other end BHEL has lost half it’s value at 51% !  ~ another 11 companies have lost between @ 19% to 30 % values

Domestic Concerns revolved around  second consecutive failure of monsoon in 2015 &  slow pace of Reforms  & Corporate Earnings Lethargy with growth in single digits despite boasts of GDP Growth of over 7% and lower Inflation and Oil Price falling 40%

Global Concerns revolved around  China’s Growth slowing down considerably & It’s Stock Markets losing a lot of it’s froth in panic falls, continuing recession in Europe & expectations of the US Fed raising rate

Consequently FPI Inflows which were a record US $ 17 b in FY 2015, reversed to outflows of US 2.1 b in FY 16.These outflows would have been higher if last month March 2016  had not seen a reversal back to FPI Inflows of US $ 3.2 b 

In the first three months of this Calendar Year 2016 , January &  February 2016 witnessed significant outflows of US 1.67 b & US $0.8 b respectively that dropped Sensex to 23000 levels.On the back of many countries like Japan,Switzerland and Sweden embarking on Negative Interest Rate Policy,the  US Fed send out dovish signals and has delayed Rate hikes.This saw FPI Equity Inflows smartly cross US $ 3 b in  March 2016  getting them back into the Green in 2016 & revive the Sensex back up @ 10% to 25500 levels or else FY 16 would have seen a Sensex drop of nearly 5000 points & @ 18%,double than what it actually did in the end

Here are some FY 16 Trend observations :

  1. Sensex closed down 9.4%.It was down @ 18 % just around a month ago but smartly pulled back on record US $ 3b FPI Inflows in March 2016
  2. Of the 30 Sensex Constituents,amusingly after a seven year itch perhaps 🙂  Reliance is the biggest gainer  at 27% taking it’s Market Cap to US $ 49 b,next only to top TCS  which  despite a flat year retains Top Market Cap of US $ 73b !
  3. Six Scrips,including all weather favourite TCS (Market Cap US $ 73b) have remained flat
  4. Of the Four Banks,only HDFC Bank stays in the Green just about,the rest have lost lot of value from one third to one fifth
  5. India Growth Proxy Larsen & Toubro has lost 26% Value
  6. Four Pharma Majors have also dropped significantly from 13% to 28%
  7.  Three IT Bellweathers saw Wipro down 10%,Infy up 10% and TCS  in between remaining flat
  8. Of the Five Auto Majors,the two 2-wheelers are both in the green,two ,Maruti & M & M are flat while Tata Motors has lost 30% value
  9.  Three eternal FMCG Favorites,ITC,Asian Paints & HUL have held up
  10.    After a Steel Sector Battering past few years,Tata Steel is now catching it’s breath
  11. All  Five  Non Bank PSUs continue to flounder ~ BHEL has lost half it’s Value follwed by ONGC down 30% ,Coal India down 19%,NTPC down 13% & Gail down 8%
  12. Housing Finance Leader HDFC too has taken a beating of @ 16%
  13. Controversial Adani Group’s Adani Ports is down 20%
  14. Telecom Leader Bharti Airtel is down 11% despite getting a 4G breather as Reliance’s Jio ,expected to be a sector disruptive force,launch continues to be delayed but should be fully operative by FY 17 year end

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Wow! A Full House NSE Training Fundamental Workshop !

Wow! A Full House NSE Training Fundamental Workshop yesterday !

Seems to get bigger & better every time !

Did the first one on August 8,2015 and had blogged on it  as linked below

Interesting Interaction at the NSE Equity Fundamental Training Workshop

Sunday, August 16th, 2015

Did this one too on “Interpretation of Financial Statements for Stock Analysis” under NSE’s Rapid Series at their NSE BKC Complex

@ 30 Participants,both genders aged 22 to 58 from leading Broking Firms,Corporates,Banks and even Individuals who had come on dot and stayed till 8 pm ! expecting to learn how to read financial statements and  market dynamics to assess risks and opportunities in Indian Equities

Common Question right from Manish Shah,who introduced himself  to me in the lift going up to the Class ” How are the Markets Looking “? ~ “Where will the Sensex & Nifty head in the short term”?

Had taken a Bull along ! really !…a smaller version of the Wall Street one….told the class I love four animals…Elephants (Lord Ganesha),Lions (My Zodiac Sign),Tortoise(Good Luck & of course Bulls (I’m always one!)….and you’ll always find them on my office desk !…in fact four bulls of various sizes !…and clients know my market view on simply seeing how the bulls are placed !…if facing them straight up  (↑)  as they sit across me,I’m very bullish…if slanted ( ⁄ )towards them,I’m bullish…slant inclination reveals how much !….if a horizontal view (↔ ) then indicates market will remain flat to rangebound and if the bulls face me vertically (↓ ) I’m bearish !….and slant facing me shows intensity of being bearish !

That got a few knowing laughs from the participants and set off the mood for the Workshop with humour being interspersed right through

Interacted on the Sensex Dynamics right from base year 1978 and in the last 20 years from November 1,1995 to October 30,2015 when despite nearly half of the @ 4850 trading days saw the Sensex close negatively the Sensex ran up over 650% !…but is that enough!…..the Opportunities & Threats that were clearly visible during the years right from 1991 when Modern Reforms set in to 2001 when Markets had bottomed  out on the ICE Age Melting to the Sharp drop in Interest rates from 14% to 7% in and around 2004 to post Lehman 2008 levels of 8000 in October 2008 and March 2009….showed them from current Sensex of 26657 how to assess fundamentally where we could be heading and the risks associated….discussed Passive Index Investing vs Active Investing and therefore the need for Fundamental Analysis and therefore the need to Interpret Financials & therefore the need to assess Value vs Price  & therefore this Workshop  !

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Cafe Coffee Anyone ! ? ~ Successful IPO at Rs 328 ~ Awaiting Listing

I’m sure most of us have had a Coffee at one of the Chain Outlets of Cafe Coffee Day (CCD)

It’s parent Company Coffee Day Enterprises Ltd (CDEL) just concluded a successful IPO and fixed the IPO price at the upper band of Rs 328

Most had recommended to avoid the Issue as the Pricing was very High

I  hold a contrary opinion and had recommended the Issue but not as a Stag as there does exist the risk of listing gains not being available

Here are some relevant extracts from the IPO note prepared by us

 

Subscribe but not as a Stag ~You Need Not Sit Out !

Sitting Outside a Cafe Coffee Day Outlet

Further Lowering of Debt will significantly transform the Financials Dynamics ~ Low Floating Stock ~ It’s Not an Offer For Sale ~ 16.73 % Equity Stake in listed Mindtree worth @ Rs 2000 crs currently
Immediate Risk : Listing Gains may not be available as IPO Pricing is perceived to be on the higher side

Five Positives in our View

1. Huge Brand Recall & therefore Significant Brand Value ~ CDEL,through its subsidiary, operates the popular Cafe Coffee Day Chain of 1538 stores across 219 cities with a 46% Market Share.It has been recognised as the second best Indian Brand.This Intangible Asset is not in the Books but clearly is in the Premium sought in the IPO Pricing of Rs 316 to Rs 328

2. CDEL has a 16.73 % (10.41 % directly and 6.32% through 88.97% owned subsidiary Coffee Day Trading Ltd) Non Promoter Equity Stake in the listed Software Company Mindtree which is worth @ Rs 2000 crs based on Share Price of Mindtree ~ if monetised it will make CDEL free of net debt instantly and add Rs 250 crs + to bottomline on interest saved=> that’s an incremental EPS of Rs 12 itself !.CDEL had a net consolidated debt of Rs 2864 crs at December 31,2014. Mindtree quoted @ Rs 1400 (FV Rs 10) with a Market Cap @ Rs 12000 crs has just declared a very good Q 2 FY 16 with a Networth as on September 30,2015 of Rs 2243 crs and Book of Rs 267 and Annualised EPS of Rs 70 giving a PBV & PE of 5.25 and 20 respectively.It has also declared a 40% Interim Dividend. Share Price of Mindtree has gained @ 20% thus far in 2015 and holds potential for more

3. The CDEL IPO of Rs 1150 crs is a full fresh issue of Equity Shares and there is no offer of sale from Promoters and other Shareholders.Have a look below at the Pedigree of Non Promoter Shareholders and their pre IPO holdings and cost in CDEL

4. The IPO of Rs 1150 crs has already attracted 17 well known Anchor Investors who have committed Rs 334 crs at Rs 322

5. The IPO comprises just over 17% of post IPO Equity Capital of Rs 206 crs and implies limited floating stock

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Interesting Interaction with Market Doyens Deenaben Mehta & Ramesh Damani

Last Evening interacted with Ramesh Damani ….glad to have caught up with him after awhile…..he presented historical evidence of Global Bull Runs where Indices have zoomed 5x and 6 x in as quick time as 5 years and the biggest of all being 21 x by Nikkei…. says we have commenced one in India from Sensex 17500 levels in August 2013

Rolling on his thought I asked him that at 28000 currently we are at only 0.6x two years down! so would he hazard a guess where we would be in a few years and would that then make even the passive Index Investing a good if not great Wealth Creation Approach for the next few years

In lighter vein he stated that he had said 50000! at a Phuket get together organised by Tata Mutual Fund and yes Index Investing would be wise too

I would say ~ Well look at it this way ! From 17500 to 28000 in two years is @ 25% CAGR on the Sensex and if we keep this up for the next three years we would have crossed 50000 by 2018…..Our Sensex has returned 17% CAGR since inception over 30 years ago though it’s performance has been lower  and erratic in lesser periods of 5 and 10 years.

Oh by the way Ramesh asserts that Direct Equity first and Index Funds next is the way to go and not Equity Schemes of  Mutual Funds….am completely in sync with him on this

His pet theme is Pharmaceuticals &  the Digital Story &  those who support E-Commerce Boom like Logistics Players….does not like PSU Banks even at Book or below…gives a thumbs up to Technology & FMCG going forward

Met Deenaben & Asitbhai Mehta too….she’s a pioneering lady in Indian Broking and  Asitbhai & her are a well respected couple in the field ….owe them at least a  great dinner now for Deenaben proclaiming among 50 present including Pradip Shah(IndAsia),Dilip Piramal(VIP) and Y Trivedi(Reliance)  that I should not be the one asking questions but instead be up there answering them on Wealth Creation through Indian Equities !

Deenaben you’re too sweet ! thank you for the lovely compliment ! hope you did not see me blush !

🙂 Her take on the Sensex going forward is quite straightforward and humorous ! “See BJP has 282 Lok Sabha Seats and multiply by 1000 we are at  28200 levels…NDA Coalition has 330 seats so I’m looking now at 33000!”….can’t argue with such funda logic !

😀 Definitely owe Deenaben & Asitbhai a lovely dinner  and before Sensex reaches 33000 !

Oh! almost forgot ! as we were leaving,a relatively young gentleman  walks up to me and says ” Sir,I’m a great fan of your blog.It’s one of the best !”…told him to interact through responses on blogposts as I could not recollect the name he gave as being one who has responded before

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Tata Chemicals soaring towards Rs 500 and beyond ~ Fertiliser Business Sale Fertilising!?

Tata Chemicals’ on the Roll ! up @ 18% this month ! including the 6%+ run up today on highest volumes this month

As this month of July began I was quoted by Economic Times on July 1,2015 itself in their headline story on Tata Chemicals

Quoted By Economic Times For My US $ One Billion Valuation Of Fertliser Business Of Tata Chemicals

The Share Price which was at Rs 415 -Rs 420 levels as June closed shot up past Rs 430 with heavy NSE Volumes of over 1 million shares before dropping back

But look at today’s NSE Volumes of over 2 Million shares,coming on the back of two consecutive days of over 0.6 million shares each day !

Share Price has zoomed to a high of Rs 495 before settling lower at Rs 487+

Have highlighted the abnormal Volume Days in Bold Green so far in July

Date

Close in Rs

Trade Volume

16-Jul-2015

487.60

20,96,459

15-Jul-2015

460.20

6,17,554

14-Jul-2015

449.25

6,06,401

13-Jul-2015

444.00

2,17,645

10-Jul-2015

442.05

1,51,916

09-Jul-2015

442.55

2,17,263

08-Jul-2015

437.95

3,43,375

07-Jul-2015

449.25

3,44,147

06-Jul-2015

441.30

3,00,353

03-Jul-2015

434.60

1,36,190

02-Jul-2015

434.00

2,07,201

01-Jul-2015

437.10

10,19,711

30-Jun-2015

420.90

2,00,767

It’s also quoted in the F & O Segment with a Contract Lot of 500 !

Clearly a lot seems to be fertilising on the fertiliser segment sale by Tata Chemicals ! and I’ve opined for a year now that they must sell this low returns business segment if they get a good Valuation and they will ! and the Share Price consequently can move up very strongly even from here !

Disclaimer : Tata Chemicals was recommended to clients in January 2015 as a SS 2 Select and we would have an interest in it

 

Unjustified High 52 Week Prices ?~ Relaxo xb at Rs 550 & Eveready at Rs 360

After a brilliant run up  and now at 52 week highs, both Relaxo Footwears at xb Rs 550 (FV Rs 1) levels & Eveready at Rs 360(FV Rs 2 )levels appear to be at unjustified high relative valuation at PE of over 60 and 50 respectively

Have been just asked for advice

Managed  Run Up !?

I would be wary as I’m not aware of any non linear growth coming up nor of a healthy CAGR on the bottomline in the next three years to justify paying such heavy premium

I don’t have any interest in either of them but happy for those who rode them brilliantly in the year…perhaps they should ask the Insiders rather than me on these!

“Gimme Red”  🙂