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 "