Archive for September 2011



BSE GETS SEBI APPROVAL FOR SME EXCHANGE.

Written by HARIKRISHNAN.T
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Finally the Bombay Stock Exchange received approval from the Securities and Exchange Board of India for its proposed SME (Small and Medium Enterprise) Exchange.

The BSE applied for permission for an SME Exchange in July 2010, and the final approval from SEBI came after 1year after studying all the aspects of SME Exchange.

The SME Exchange will now start receiving the offer documents from the merchant bankers for companies wishing to list on the exchange platform.

The CEO, BSE SME Exchange Mr. Laxman Gugulothu said that many companies already approached them and among these about 30-40 percent were very serious about getting listed on the SME Exchange.

He added that " Of the 70-80 who have approached us on the web site, 15-20 are very serious. Apart from these, 50 other companies have shown an interest in our exchange. Of these 50, around 25 have filed a mandate with merchant bankers"

The National Stock Exchange also waiting for the final approval from the SEBI for its SME Exchange.

For any company to get listed on an exchange, the company has first to file a draft RHP prospectus with SEBI. It then needs in-principle approval from both SEBI and the exchanges. This is followed by a one-month notification to the public.

This has been done away with for companies proposing to list on SME Exchange. An SME needs to only submit the offer documents and on receiving the exchange's approval alone can enter the capital market.

The only criteria for the SMEs to qualify the listing is that the promoter share holding to be diluted has to amount to a minimum of Rs. 25 crore. That is at a face value of Rs. 10 per share, the total number of shares on offer should be 2.5 crore. (2.5 crore * 10 = 25 crore)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



OPERATION TWIST.

Written by HARIKRISHNAN.T
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Federal Reserve announced the recovery policy called 'Operation Twist' in order to solve the US Debt crisis.

The main objective of this policy is to decrease the interest rates. What will happen if interest rates became low..??? 

When interest rates became weak, more people will borrow money and thus more capital flow will be pumped into the economy. As a result of this the overall growth of the economy will take place, the corporate profits will be increased, more and more opportunities will flow into the system and thus the unemployment issue in the US will overcome.

When we consider the following figures of US, we will get a clear picture.

GDP:                   1.60 percent
Interest rates:    0.25 percent
Inflation rate:    3.60 percent
Jobless rate:       9.10 percent

Here the GDP rate of US is too low compared to EMEs like India and China. For India GDP on YoY basis is 7.80 percent and for China it is 9.70 percent. Also the jobless rate for US is also high.

But the positive note for US is their inflation rate. Their inflation rate is much lower compared to India and China.

In US, the interest rate for 10 year treasuries is 1.95 percent.  This figure seems pretty interesting. This is lower than the inflation rate.

So what they are trying to do with the Operation Twist..?? This can be explained like this.

The Fed already owns $1 trillion bonds. They purchased this in the fast few years in order to bring down the medium and long term interest rates.

Among these, a lot of bonds especially medium term bonds will become expire in the coming years.

When we observe the interest rates of these bonds, they are almost Zero.

So the Fed will sell some of these medium term bonds and they will buy longer term bonds, such as 10 year to 30 year treasuries.

This is the main idea behind the Operation Twist.

The main objective of this strategy is to lower the interest rates further and thus boosting the economy by pumping more capital in to the system.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "






RUPEE CRASHES.

Written by HARIKRISHNAN.T
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The rupee went into a free fall on Thursday, declining 2.5 percent (or Rs. 1.23) against the USD. This is one of the sharpest single day drops in recent times.

When we observe the stock market movement and the Rupee movement, we can see that both the things are inter connected with each other. This is mainly because the Foreign Institutional Investors (FIIs) are the major key players in the markets and their buying as well as selling has a great influence in domestic stock prices.

First of all lets look what are the main reasons for rupee depreciation. The main reason for the weakening of rupee is the flight of foreign funds from the Indian Market, also the demand for Indian rupee is getting low.

Lets see how rupee depreciation affect the economy.

First lets look the positive sides. The weakening of rupees is good when we are talking in terms of exports. Since we get more amount of money equivalent to USD, the exporters will get more profit. For example IT giants such as Infosys, TCS etc. About 60 percent of their revenue comes from US itself. So their profit will substantially increase.

But there are some negative sides also.

The cost for importing goods and services will definitely increase because of this.

For example India Inc. importing 70 percent of the required crude oil from the foreign countries. So they have to pay a higher amount for the crude oil. This will result in the price hike in petrol and diesel and that will negatively affect the Inflation rate. I think if rupee is weakening like this, inflation will touch 2 digits soon.

Also raw materials cost will increase. So the production cost will increase. When the production cost increases the companies have to raise their cost and this will decrease the demand and eventually the net profit will go down.

I think the rupee can correct to 50.30 per dollar in the short term. It will be in the range 48.50 - 50.30 in the coming weeks.

Regards Hari " लोका समस्ता सुखिनो भवन्तु " 



IS FACEBOOK IPO COMING......??????

Written by HARIKRISHNAN.T
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Founder of social networking site Facebook, Mr. Mark Zuckerberg, at the company's headquarters in Palo Alto, California.

Facebook Inc. has set the later part of 2012 as the time for its much-anticipated Initial Public Offering of stock, the Financial Times reported on Wednesday.

The IPO, expected to be one of the world's biggest with a possible valuation of up to $100 billion, had been expected by April 2012.

Some investors and analysts speculating that it could even come this year.

But reliable sources told Financial Times that the Chief Executive, Mr. Mark Zuckerburg, wants to wait until next September or later.

This is because the Facebook's employees will remain focused on product development rather than an IPO payout.

So the picture will be clear within a few months.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



DISAPPOINTING IIP DATA.

Written by HARIKRISHNAN.T
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Weak factory output numbers and negative global cues sent the equity market into a tailspin on Monday.

On August 12, when the June 2011 IIP was 8.8 percent, the Sensex was down 1.3 percent. At 3.3 percent, the Sensex has again seen a 2 percent drop today.

The IIP number for July 2011 at 3.3 percent was much lower than the market expectation of 6.2 percent.

The rupee fell to levels last seen 14 months ago on fears of the debt crisis in Euro zone.

The 3.3 percent YoY increase in the official IIP - the lowest since the 2.3 percent of October 2009 - has come mainly from capital goods. The output of capital goods dipped 15.2 percent.

The detailed IIP data is given below.

IIP YoY % GROWTH RATES (2004-05 base)




Regards Hari " लोका समस्ता सुखिनो भवन्तु "



TVS MOTORS - BUY

Written by HARIKRISHNAN.T
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Rising inflation, interest rates and fuel prices have moderated domestic auto industry growth in recent times.

However, given the lower dependence on financed purchases and improved rural incomes, two-wheelers have continued to grow at a brisk pace.

In the April-August 2011 period, two-wheeler sales outpaced the industry, growing 16 percent. The upcoming festival season, a favorable demographic profile and greater urbanisation would continue to drive two-wheeler sales.

In this scenario, an investment in the TVS MOTOR stock is recommended with a perspective of one or two years.

At Rs.60 range, the stock trades at a PE of about 11 times its estimated FY12 earnings.

Although the company faces stiff competition in the motor cycle segment, TVS has managed to improve its market share marginally, by 50 basis points to 7 percent in FY11.

In 2010-11, the company strengthened its line-up by launching the Apache RTR-180 ABS in the premium segment and the Max 4R and Jive in the executive segment.

Another favorable trend is the improving share of scooters in total two-wheeler industry sales.

From about 14 percent in 2007-08, scooters now account for 17.5 percent of all two-wheelers sold.

This is good for TVS because it is the second largest player and has a wide variety of products from 60 cc to 110 cc.

Another supporting factor is TVS's diversification into three wheelers, which bring higher margins, and also have good export potential. The company is already exporting three-wheelers to Sri Lanka and Bangladesh and added Egypt to the list recently.

A withdrawal of the DEPB incentive for exports may impact earnings in the near term. But the company plans to pass it on gradually to customers.

For the quarter ended June 2011, net sales grew 25 percent YoY to Rs.1, 707 crore and net profits 45 percent to Rs.59 crore. Operating margins remained stable at 6.8 percent.

So in medium term I found a bullish forecast on the stock.

(This recommendation is based on fundamental analysis. There is a risk of loss in trading.)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



ONGC FPO

Written by HARIKRISHNAN.T
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ONGC's (Oil and Natural Gas Corporation) follow-on-offer (FPO) may open on September 20 or 27.
ONGC Logo

The Red herring prospectus (RHP) for the FPO could be filed on September 5. The Government is offloading five percent of its stake in ONGC and plans to raise Rs.12, 000 crore through the issue.

With the FPO, the government's stake in the company will come down to 69.14 percent from the current 74.14 percent.

The road show for the issue is likely to start from September 6 from New York.

ONGC chairman and Managing director Mr. A.K.Haziraka said " our board approved the RHP on August 29, which will be filed as per the instructions of the government. We are ready to file in 24 hours time. "

" Keeping the strong fundamentals of ONGC in view, we are confident that the response from the investors will be overwhelming" He added.

The FPO was originally planned in the 2010-11 fiscal, but was deferred as the company did not have an adequate number of independent directors on its board to meet SEBI's listing norms. Further it delayed due to adverse market conditions.

In January, Citigroup, Nomura Holdings, Bank of America Corp, HSBC Holdings, JM Financial services and Morgan Stanley were appointed to manage ONGC's share sale.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "