Nifty and Bank Nifty Outlook Sep - Dec 2020

 Nifty and Bank Nifty Outlook

A cursory look at the comparative chart of Nifty and Bank Nifty shows a start difference in the growth pattern.  From this it looks quite difficult for the Banking Sector to grow at the same rate as of Nifty.  In spite of the bullish sentiments Bank Nifty is finding it hard to sustain above 23000 in the last few months.

A one year chart clearly indicates the under performance as most have not risen as fast as other scrips.

Why ?

1. Reliance Industries has higher weightage which has grown 100% + during the last 12 Months
2. IT stocks have grown rapidly post March slide to trade near year highs
3. Pharma sector has attracted maximum investments owing to the pandemic and increased focus on exports
4. Banks have overhang of NPAs and most of the banks are not likely to grow at a faster clip
5. All Banks have had QIPs raised substantial money from Institutional investors and hence they may not buy further stake in Banking stocks in the near term.

The graph clearly indicates the divergence and the widening gap between Nifty and Bank Nifty which is likely to be pronounced with the market focusing on other sectors while Financials will languish due to supply overhang.

Outlook :

Bank Nifty can go beyond 25000 post Q2 results and improved realizations and reduced NPAs as the economy will bounce back sharply in coming 4 months till Dec.

Nifty is looking set to capture 15000 and will do much better when compared to Bank Nifty.

Raghav

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Sesa Sterlite Merger - Buy Sterlite

Vedanta Resources PLC on 25 February 2012 announced the merger of all its key investments in India into a single company called 'Sesa Sterlite'. The new holding company will own controlling stakes in all of Vedanta's companies in India and would be a metals, mining and natural resources giant. The merged entity would be India’s natural resources company and is expected to be seventh largest global diversified natural resources major on EBITDA basis. By this exercise, the group structure has also been simplified and cross holdings have been eliminated, which is expected to benefit the group through superior capital structure, increased flexibility to allocate capital, broader access to capital markets and enhanced visibility of earnings and cash-flow. In addition to this, increased diversification is expected to reduce volatility of earnings through commodity cycles, lowering the cost of capital and enhancing value. As per the management, the transaction is expected to be completed in CY12 and the synergies are expected to generate cost savings of Rs10bn per annum.

Restructuring done to lighten up Vedanta Plc balance sheet
Indiainfoline believes that restructuring has been done largely to lighten the parent company’s balance sheet, bring in synergies between VAL and Sterlite Energy (SEL), use the accumulated losses at VAL and reduce the financing costs for the company. Vendanta Resources Plc, the parent company had taken loan to the tune of US$2.8bn to acquire stake in Cairn India, which was to be repaid over the next two years. In addition to this, the parent company had to infuse equity in its loss making subsidiary VAL to fund its capex. Sterlite, 29.5% stake holder, had invested more capital in VAL than its equity contribution over the last two years.

Sterlite to witness buying
The merger ratio would boost Sterlite’s stock in the near term as it is done at a premium to Friday’s closing of Rs119. On the other hand, we expect it to be negative for Sesa Goa as the debt of VAL would be shared on its books. Indiainfoline believes the deal is largely done in a fair way except the valuation of VAL. The merged company would be a must own entity as it would provide a large diversified portfolio under one roof. Indiainfoline values the merged entity ‘Sesa Sterlite’ on sum-of-the-parts method. They have used EV/EBIDTA method to value the metal assets, price/book for the power and a holding company discount to Cairn India. They derive a target price of Rs217 per share for Sesa Sterlite (and Sesa Goa) which on an implied basis (swap ratio of 0.6x as per deal) indicates a target price of Rs130 for Sterlite. Indiainfoline maintains their ‘Market Performer’ rating on Sesa Goa and our ‘BUY’ rating on Sterlite.

Restructuring exercise
The restructuring exercise includes merger of four companies viz Sterlite Industries, Sesa Goa, Vedanta Alumina and MALCO and transfer of Vedanta’s stake in Cairn India to the merged entity with an associated debt. The steps for the proposed transaction are:

1) Sterlite will merge into Sesa Goa to create Sesa Sterlite, through the issue of Sesa Goa shares to shareholders of Sterlite. Sterlite shareholders as of the record date are expected to receive 3 Sesa Goa shares for every 5 existing Sterlite shares. Sesa Goa also intends to establish an ADS facility comparable to Sterlite’s current ADS. This would allow holders of Sterlite’s ADS as of the record date to receive Sesa Goa ADS with appropriate adjustments to reflect the foregoing exchange ratio. Each Sterlite ADS currently represents four equity shares of Sterlite.

2) Consolidation of VAL, via the merger of Ekaterina Limited (a Mauritius holding company for Vedanta’s 70.5% shareholding in VAL) into Sesa Sterlite and the issue of 72.3mn Sesa Goa shares to Vedanta after obtaining all necessary approvals. Based on Sesa Goa’s closing price on 24 Feb 2012 of Rs227/share, the equity value of VAL equates to Rs23.32bn (US$473mn).

3) MALCO to merge into Sesa Sterlite, through the issue of 78.7mn Sesa Goa shares to shareholders of MALCO as of the record date. Based on Sesa Goa’s closing price on 24 Feb 2012 of Rs227/share the value of MALCO equates to Rs17.9bn (US$363mn) including the value of MALCO’s existing 3.6% shareholding in Sterlite. As part of the merger MALCO’s existing shareholding in Sterlite will be cancelled by Sesa Sterlite.

4) Post the merger of Sesa Goa and Sterlite, Sterlite Energy Limited and VAL’s Aluminium business will be merged into the consolidated Sesa Sterlite. As wholly-owned subsidiaries no shares will be issued in consideration of the mergers. 

5) Vedanta will transfer its 38.8% direct shareholding in Cairn India to a wholly-owned subsidiary of Sesa Goa at a nominal consideration of US$1, together with the associated acquisition debt of $5.9bn (coupon of 5.2%). The debt will continue to be guaranteed by Vedanta. This transfer is not inter-conditional on the merger of Sesa, Sterlite, MALCO and VAL.

Positives of the deal:
- Consolidated balance sheet to be stronger and would reduce the cost of funds for the companies.
- Increased diversification is expected to reduce volatility of earnings through commodity cycles, lowering the cost of capital and would enhance value.
- Accumulated loss of Rs15bn at VAL would reduce the tax out flow for the group.
- Overhang of merger of VAL with Sterlite is over.
- With the merger of SEL and VAL aluminium, the capex for VAL’s power plants would reduce.
- Shareholders of Cairn India and HZL would receive higher dividend over the next two years as the merged entity has high debt repayment.
- Positive for Sterlite shareholders in the near term as the deal is done at a premium to Friday’s closing price of Rs124.


Our Recommendation :


If you are presently holding Sesa Goa shares look to sell around 225 levels.  Long term investors should buy Sterlite Industries on all dips and hold for 2-3 years for a 100% return



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JSW Steel - Sell

JSW Steel came out with its Q3 numbers on Friday and they show a decent performance in terms of volumes that rose by 20 per cent YoY. In the September quarter of 2011 the volumes were up by 19 per cent on a YoY basis. However, the volume scenario compared to the previous quarter remains the same as it grew only by 1 per cent whereas in the previous quarter the QoQ growth was by 10 per cent to 1.88 tonnes.

The net sales of the company stood at Rs 7,859.62 crore, higher by 35 per cent as compared to the previous year’s same quarter due to higher sales volume and flat realisation levels. The steel prices during the quarter remained flat as compared to Q2FY12. However, the operating performance of the company was a little disappointing. Its EBITDA on a QoQ basis declined by 3.36 per cent and grew by 25.2 per cent on a YoY basis to Rs 1,252 crore.

Meanwhile, the EBITDA margin continued to decline by 130 bps to 15.9 per cent due to higher coking coal cost and raw material cost which was by up by 46 per cent and 47 per cent respectively. Coking coal’s Australian FOB prices came down from USD 300 per tonne in September 2011 to USD 235 in December 2011. The gains, though, were negated by the higher rupee depreciation against the dollar. 

About the present scenario the company has stated that the demand in India has remained modest in the last six months due to weak global demand coupled with higher interest rate and high inflation which led to delay in consumption and new capex plans. The world steel production fell significantly from a peak of 130 million tonnes in May 2011 to 115 million tonnes in November 2011. And in India the demand for steel grew by a mere 1.8 per cent from April to October. The company has further stated that the month of December has witnessed a rebound in demand.

Our Recommendation :

The scrip was hovering around Rs.560 levels on 9th January 2012 and has since jumped to Rs. 680 levels giving a decent return to existing shareholders.  Investors should exit at the current price and re-enter on steep declines to Rs.500 levels.

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BSE / NSE Weekly Review 2 Sept 2011

A deluge of buying interest throughout the holiday-truncated week resurrected the markets from the malaise of the previous month. Snapping the tumultuous five successive weeks of losses, the Sensex bounced back in style to surge by 972 points or 6.1% to 16,821 and ditto with the Nifty, which jumped 292 points or 6.1% to 5,040. The mid-cap index rose 4.8% at 6324 and small-cap index rose 3.2% at 7133. The metal index soared by 11.5% at 12,549, while the realty index jumped by 10% at 1,769 and banking index gained by 6.8% at 10,949.

The market got off to a flying start on Monday on receding fears of recession in the US following an optimistic assessment of the US economy by Fed chairman Ben Bernanke on August 26. The end of a standoff between the government and anti-corruption crusader Anna Hazare over the previous weekend also aided the positive sentiment.  The BSE Sensex jumped nearly 600 points and there was no looking back from thereon.
The strong Q1 June 2011 GDP growth data maintained the tempo on Tuesday; the Sensex jumped by another 260 points as the latest data showed that the economy expanded 7.7% in Q1 June 2011 from a year earlier, helped by strong growth in the services sector. The manufacturing sector grew an annual 7.2% in Q1 June 2011 and farm output rose an annual 3.9%, the data showed.

Neither the holidays bang in the middle of the week nor the double-digit food inflation numbers were enough to break the momentum. The markets were shut on August 31 on account of Ramzan and September 1 due to Ganesh Chaturthi. And food inflation touched the double-digit mark after a gap of over five months. It was at 10.05% for the week ended August 20, as onion, fruits, vegetables and protein-based items turned expensive. The prices of onion soared by 57.01% year-on-year, while that of potato rose by 13.31% during the week under review.

Taking from where they had left, the key benchmark indices logged gains for the third consecutive session on Friday as domestic bourses played a catch-up with their global peers to sign off what was the best week in the past two years.

India's largest real estate developer by market capitalisation DLF jumped 18.28% to Rs 208 to top the gainers list on the BSE on plans to sell its holding in the joint venture company which is undertaking the DLF IT Park, Noida project. Tata Steel gained by 15.6% at Rs 488 post its steep recent fall triggered by concerns the ongoing euro-zone debt crisis will impact its European operations. And index heavyweight RIL recovered from a 52-week low of Rs 713.55 touched on August 26 to advance 11.9% to Rs 805 after announcing the completion of BP's acquisition of a 30% stake in 21 oil and gas production sharing contracts that RIL operates in the country, including the KG D6 block.

In the midcap index, Manappuram Finance soared by 29% at Rs 56, Glodyne Technology raced ahead by 17.7% at Rs 321 and State Bank of Mysore added 17.4% at Rs 670. And the smallcap space saw the likes of Fineotex Chemicals jumping by 29.4% at Rs 328, ICSA India gaining 21.8% at Rs 77 and Man Industries adding 20% at Rs 149.

In the metals space, JSW Steel topped the gainers charts by adding a whopping 18.5% at Rs 720. Tata Steel gained 15.6% at Rs 488 and Jindal Steel added 13.6% at Rs 525. Sesa Goa, Hindustan Zinc and Hindalco added between 10% and 12% each. DLF soared by 18.2% at Rs 208 to take the realty space by storm. Among the other prominent gainers in this space, Parsvnath Developers gained by 17.4% at Rs 54 and Phoenix Mills added 10.4% at Rs 219. The banking space saw ICICI Bank jumping by 8.1% at Rs 887, Yes Bank gaining 7.5% at Rs 278 and HDFC Bank adding 7.4% at Rs 471.

In an indication of the buying fury that gripped the markets during the week gone by, ONGC was the only Sensex stock to end the week in the red, shedding 5% at Rs 263.

The next week would reveal whether the corrective rally still has some steam left on the upside. However, the developments on Wall Street on Friday do not augur well for Monday's market opening back home. US stocks tumbled 2% after data showing zero jobs growth in August brought investors face-to-face with the prospect of another recession. The Dow Jones sunk 253 points and Nasdaq Composite was down 65 points on the last day of the week. Moreover, the markets will also start factoring in the outcome of the next scheduled on September 16.  In the last policy meet, the central bank had hiked the repo and reverse repo rates by 50 bps each, more than market expectations.

Source : Business-Standard

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Titan Industries - Buy on declines

Titan: Golden opportunity Focus on high-end market likely to help the company boost margins. If there were an appropriate tagline for Titan on Wednesday, it would probably say: ‘We also make watches’. Even as the growth in its same-store watch sales continues to be in double digits, the company is fast evolving into a lifestyle company, with a sharp focus on premium accessories. While on the one hand it is planning to enter new categories in accessories like silver watches, on the other it plans to expand its existing footprint in the jewellery business with Tanishq However, a segment of analysts has reservations about the company’s ability to grow Tanishq sales, thanks to the sharp rise in gold prices. But Edelweiss Capital maintains that Titan has historically had a positive correlation with gold prices, primarily on account of a gradual increase in margins. Also, a gradual upside in gold has little impact on demand, it says. Having said this, it cannot be denied that jewellery volumes across retailers have slowed over the past two months. But analysts expect volume growth to inch up in the second half of 2011-12, thanks to the onset of the festive season and the recent correction in gold prices. What will help the company beat the demand scenario is its focus on the wedding market. So far, it has targeted the Rs 30,000-50,000 bracket; but now, with its large-format stores, Tanishq plans to increase its same-store sales through selling higher grammage per square foot that can increase to offset decline in gold prices, if any. Analysts maintain the company is targeting sales of Rs 3,500 crore from watches by 2014-15, which will be driven by network expansion, introduction of new designs, as well as a shift towards the branded segment. Titan aspires to expand the category in eyewear and accessories (currently 177 stores) by getting into new sub-categories. A report by Prabhudas Lilladher says: “The company is targeting FY13 breakeven and believes potential margins can be higher than in watches. It intends to enter new lifestyle categories in the medium to long term.” What analysts like is the company’s shift in focus to high-end studded and gold jewellery and prescription-driven eyewear, not merely sunglasses. So far, the big concern has been expensive valuation. However, in this uncertain market, defensives continue to rule. Titan continues to remain the top pick of most brokerages. The stock is trading at 32.1x FY12 and 24.9x FY13 earnings per share. Performance : The scrip has given a great returns during last 2 years and is likely to out perform going forward. Short term investors can avoid the scrip. Time Span Price Change %Change Today 205.70 0.05 0.02 Week 208.90 -3.25 -1.55 Month 228.40 -22.75 -9.96 Three Months 215.43 -9.78 -4.53 Six Months 172.45 33.20 19.25 One Year 149.93 55.72 37.16 Two Years 62.12 143.53 231.05 Our Recommendation : Long term investors should look to buy the scrip around Rs.180 levels and hold for a period 2-3 years for a return of more than 200% going forward. Though the scrip will move sideways owing to the higher liquidity (due to stock split and bonus given recently) After a period of consolidation the scrip will become ripe for next bull run after 6 months from now. Bought to you by Ingenious Investor Equity Research Division Ravina Consulting Pattamal Plaza 3rd Cross Kamanahalli BANGALORE 560084 For Free Stock Advise + Ideas sowmya@ravinaconsulting.com Talk / SMS 08105737966 Read - www.ingeniousinvestor.blogspot.com Follow us - www.twitter.com/smartinvestor Source Article for this post is from BusinessStandard.com

TCS - Fundamental Pick - Buy

The shares of the country's largest IT services firm have witnessed a sell-off recently due to fears of a possible double-dip recession in the US and Europe. However, these concerns seem to be overblown as the company has seen a healthy flow of deals from these regions.

In the previous quarter, the software giant clocked 10 new deals across geographies (led by US & Europe, followed by emerging markets) and registered a robust growth across verticals (hi-tech, telecom, retail, BFSI). The company management expects the demand environment and pricing to remain stable in the coming quarters. Given the volume growth, improvement in productivity and high utilisation levels, TCS is likely to outperform its peers in the industry for the rest of the year.

The management's positive growth outlook is also reflected in its hiring trend. After recruiting around 12,000 people in the first quarter of 2011-12, the company (largest private sector employer) is likely to meet its target of 60,000 people for the entire fiscal year. The company has also planned a capital expenditure of Rs 2,300 crore for 2011-12 to help increase its market share in Latin America, the Middle East and Asia.



Performance :

the stock has corrected sharply since the last 1 month and any recovery will depend on the signs of higher IT spend and US economy showing signs of buoyancy.

Time Span	Price	Change	%Change
Today	1,006.50	57.35	6.04
Week	929.80	19.35	2.08
Month	1,146.05	-196.90	-17.18
Three Months	1,141.45	-192.30	-16.84
Six Months	1,111.20	-162.05	-14.58
One Year	874.10	75.05	8.58

Keep away from this stock. Any sharp declines to the levels of Rs.800 should be taken as an opportunity to add to ones portfolio and hold for 2-3 years time frame for a target price of Rs.1500/-

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BHEL - Buy

This public-sector power equipment behemoth is currently facing some challenges. Apart from the high interest rates, the power sector has been hit by bottlenecks in the form of slow-paced reforms, difficulty in getting environmental clearances and establishing coal linkages. Increased competition from Chinese players also seems to be playing spoilsport for many power sector companies in India.

However, Bhel is well-placed to tide over these challenges and appears most attractive from the valuation perspective. With the sheer scale of its operations and high research and development (R&D) capabilities, Bhel is in a position to thwart any competitive pressures. It will also benefit from the recent government clause that prevents companies with no domestic manufacturing facilities from placing bids for super-critical equipment.

The comfortable debt on its books also ensures that it is not adversely impacted by high interest rates. Its impressive order book (around Rs1,640 billion at the end of 2010-11) provides a strong visibility on future earnings. Order inflows are expected to pick up further when the interest rates soften. Bhel is also planning to ramp up its capacity, with plans to increase its equipment manufacturing capacity from the current 15,000MW to 20,000 MW by the end of 2011-12.



Performance :

The scrip has under performed in line with the Capital Goods Index and is likely to move side ways in the near term.

Time Span	Price	Change	%Change
Today	1,746.20	9.70	0.55
Week	1,683.25	53.25	3.16
Month	1,824.90	-88.40	-4.84
Three Months	1,936.00	-199.50	-10.30
Six Months	1,975.00	-238.50	-12.07
One Year	2,478.50	-742.00	-29.93

Our Recommendation :
Buy on steep declines to around 1600 and hold for a period of 2-3 years for a decent returns, long term investors should hold the stock with a strict stop loss of 1600/-

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ONGC - Buy

Latest Quotes | News/Announcements | Quarterly Results | P&L |Price History The state-owned oil and gas major remains a safe bet in the current turbulent times, thanks to its robust balance sheet, inexpensive valuations and attractive dividend yield despite the compulsory subsidy sharing that's eroding profits. In the past one month, it has hardly fallen although the Sensex has lost 13.7%. If global oil prices fall due to another recession, ONGC stands to benefit as realisations will go up.

The stock has been under performing during the last 1 year as evidenced by the prices given below during the last 1 year

Time Span	Price	Change	%Change
Today	278.00	-4.20	-1.48
Week	275.75	6.45	2.33
Month	276.40	5.80	2.09
Three Months	283.00	-0.80	-0.28
Six Months	262.95	19.25	7.32
One Year	320.24	-38.04	-11.87

Investors with long term horizon should buy the stock on steep declines to Rs.250 levels and hold for a good return over a period of 1 year. With the fall in crude prices the scrip will gain and the reduction on subsidy burden on petrol and diesel will a positive trigger for the scrip.

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ITC - Buy on declines

An established cigarette major, 60% of ITC's revenues are contributed by other businesses such as FMCG, hotels, paper, stationery and agriculture. Nevertheless, ITC relies heavily on the cigarette business as it generates 80% of net profit. Consistent growth, strong cash flows and high dividend payout of more than 45% make the company a safe haven for investors in these uncertain times.

Time Span	Price	Change	%Change
Today	196.85	-5.50	-2.71
Week	198.85	3.50	1.76
Month	200.80	1.55	0.77
Three Months	189.10	13.25	7.00
Six Months	156.15	46.20	29.58
One Year	163.15	39.20	24.02

Our recommendation -

ITC is a defensive stock and will give a decent return over a long term. Investors should utilize any sharp correction to buy this stock and hold for a period of 18-24 months for a good return on investment. Buy around 180 levels on a weak day !

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BHEL - Portfolio Buy

Latest Quotes | News/Announcements | Quarterly Results | P&L |Price History The company's stock trades at a P/E of less than 14, the lowest since March 2005. The current price makes the stock an attractive buy, given its strong balance sheet and sound financials. It has been logging a double-digit revenue growth, consistently since the past five years. However, order inflows and growing competition from Chinese manufacturers are some near-term concerns.

The scrip gave negative returns in the past year

Time Span	Price	Change	%Change
Today	1,736.50	-15.10	-0.86
Week	1,683.25	68.35	4.06
Month	1,824.90	-73.30	-4.01
Three Months	1,936.00	-184.40	-9.52
Six Months	1,975.00	-223.40	-11.31
One Year	2,478.50	-726.90	-29.32

The scrip has under performed during the last 1 year and is likely to be subdued going forward. Long term portfolio investors can buy around Rs.1500 levels for a target price of Rs.2,500 holding period of 12-15 months.


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Bharti Airtel

Recent tariff hikes have put the telecom sector back on the investor's radar. And, of all players, Bharti Airtel looks to be the safest bet, considering its global presence. Apart from India, it is present in Sri Lanka, Bangladesh and 16 African nations. This insulates it from onemarket dependence. It is among the few players with more than 90% active user base, which should help new service launches. Time Span Price Change %Change Today 398.75 -3.05 -0.75 Week 383.50 18.30 4.77 Month 429.75 -27.95 -6.50 Three Months 372.25 29.55 7.93 Six Months 329.20 72.60 22.05 One Year 320.90 80.90 25.21 The scrip has been consolidating and investors should look at buying around Rs.375 levels for a target price of Rs.500 holding period of 1 year Bought to you by Ingenious Investor Equity Research Division Ravina Consulting Pattamal Plaza 3rd Cross Kamanahalli BANGALORE 560084 For Free Stock Advise + Ideas sowmya@ravinaconsulting.com Talk / SMS 08105737966 Read - www.ingeniousinvestor.blogspot.com Follow us - www.twitter.com/smartinvestor

Tata Motors - Buy on further declines

Investors with a long-term perspective can buy the Tata Motors stock. At the current market price of Rs 801 it trades at a PE of about 5.5 times its trailing twelve month consolidated earnings. Improved cost structure, product and market mix at JLR (Jaguar Land Rover), a low debt-to-equity ratio and focus on the less cyclical domestic LCV ( light commercial vehicle) market strengthen the case for investment. Unease about moderation in the domestic auto industry and a slowdown in JLR’s key markets of US and Europe coupled with broader market volatility has seen the stock hit its 52-week low of Rs 785 earlier this month. The first quarter results too have been sedate , with the consolidated year on year net profit growth at less than one percent.

With the steep correction in the stock price, the apprehensions seem to have been factored in. Moreover, JLR has continued to do well operationally with a top line growth of 20 per cent year on year and EBITDA margins, at around the same 15 per cent recorded in the June 2010 quarter. Retail sales grew by 7 per cent, in volume terms during this period. JLR’s 3 per cent year on year drop in profits has been due to an unfavorable revaluation of foreign currency denominated assets and liabilities and higher taxes. One-time costs such as expenses incurred on the issue of bonds and pre-payment charges on high-cost debt repaid have also capped profit growth.

Better product, market mix

Going forward, questions on the financial stability of some countries in Europe and concerns on the raising of the debt ceiling in the US might slowdown the volume growth for JLR in these regions. Both UK and Europe has seen demand soften in the first quarter While the first quarter volumes have been partly affected by the impending launch of the MY12 (model year 12) products and engine constraints for Jaguar, the company hopes to mitigate the risk of a slowdown by rebalancing its product and market mix. September 2011 would see the launch of the Range Rover Evoque, a compact SUV, and an entirely new segment for JLR. The Evoque already has about 18000 booking worldwide. The 2012 Jaguar XF will also be launched shortly along with other refreshed JLR products. In terms of markets, the company is focusing on emerging markets like Russia and China. Having grown at 55 per cent and 48 per cent respectively in the first quarter, these emerging markets currently bring in about 22 per cent of the total volumes. On the operating front too, the company is better equipped to handle a slowdown than last time having brought about variety reduction in materials, standardisation of parts across models and platforms, improved sourcing from low cost destinations (at over 20 per cent currently) and setting up assembly plants in countries like India . The consolidated net debt to equity in the core automotive business (excluding the finance arm) has also been brought down to 0.69 as on June 30.

Domestic initiatives

Back home, the company has grown better than the industry in both the Medium Heavy Commercial Vehicles (MHCVs) and the S&LCV ( Small and Light Commercial Vehicles) segments in the first quarter, growing by 5.5 per cent and 19 per cent. Considering the high interest rates, slow industrial output and the flat freight rates, a further moderation in the CV industry is on the cards. But infrastructure spending and the catching on of the hub and spoke model may keep demand for tippers and trailers going. It is also banking on the strong demand for the less cyclical SCVs to bring in volumes. Capacity expansions for Ace/Magic, and the ramp up of Ace Zip and Magic IRIS is expected to provide further impetus to growth. Competitive pressures on the passenger car segment, however, remain. The company hopes regain lost market share by expanding dealer networks to semi-urban/rural areas, by more focused promotion efforts and through launches such as the Aria two-wheel drive, Vista refresh, new Safari and Manza limited edition. The softening of commodity prices also indicates

The company gave negative returns for the last 1 year and is likely to perform better from here on.

Time Span	Price	Change	%Change
Today	801.10	-44.50	-5.26
Week	889.50	-43.90	-4.93
Month	1,043.65	-198.05	-18.97
Three Months	1,210.90	-365.30	-30.16
Six Months	1,144.65	-299.05	-26.12
One Year	1,024.00	-178.40	-17.42

Investors with long term horizon should start accumulate the scrip from Rs.750 levels and hold for a period 2-3 years for a super gains and target price of Rs.1500

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Polaris Software - Buy

JRG Securities is bullish on Polaris Software Lab and has recommended buy rating on the stock with a target of Rs 228 in its August 4, 2011 research report.

�Polaris registered strong revenue performance during the June quarter as Operating Income jumped up by 25% YoY and 3% QoQ to Rs 450 Crore (Q1, 12). In Dollar Terms, the Revenue growth was further better at 28% increase YoY to $101 Mln (Q1, 12) from $79 Mln last year. Under this, Software Development Services division contributed almost 99% of the OI and increased by 26% YoY and 3% QoQ to Rs 447 Crore (Q1, 12).�

�The Overseas business in the Software Dev division rose by 26% YoY to Rs 403 Crore (Q1, 12) while growth on the Domestic front too remain healthy at 28% to Rs 44 Crore (Q1, 12). With respect to the geographical balance, America contributed 47%, Europe 25%, IMEA 12% and Asia Pacific contributed 17%. The management has also enhanced its revenue guidance for FY 12 to $430-440 Mln as against $425-435 Mln earlier led by increase in size and number of deals.�

�Polaris is persistently enhancing its product basket (specifically through IntellectTM) in almost all forms of banking and financial operations and has gained acceptance amongst leading financial institutions across the globe. At the Trailing market price of Rs 172, the stock is trading at 8.3X and 7.3X its FY 12E and FY 13E earnings which offers good upside potential in the Medium to Long-term. Moreover, the company is almost debt-free and carries a Cash chest of over Rs 400 Crore (Jun quarter) aiding further support to our valuations. We maintain our Rating and the target price of Rs 228 on the stock,� says JRG Securities research report.

Our Recommendation :

The scrip has corrected quite sharply post melt down in both CNX IT index as well as BSE IT index.

Time Span	Price	Change	%Change
Today	129.05	-10.90	-7.78
Week	163.10	-23.15	-14.19
Month	174.85	-34.90	-19.95
Three Months	201.85	-61.90	-30.66
Six Months	184.80	-44.85	-24.26
One Year	175.05	-35.10	-20.05

Buy if the scrip falls to Rs.100 levels and hold for a target price of Rs.180 holding period is 9-12 Months.

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Jaiprakash Associates - Buy on steep falls !

In Q4FY2011, Jaiprakash Associates Ltd (JAL) on a standalone basis posted a net profit of Rs302 crore (increased by 23.8% on a year-on-year [y-o-y] basis), which is below our expectation on account of a lower than expected profitability in the construction and real estate division. However, the performance of its cement division was in line with our estimates and partially negated the impact of the poor performance of the construction division.

JAL’s revenues grew by 21.4%y-o-y to Rs 3,982 crore in Q4FY2011 which is ahead of our estimates. The impressive revenue growth has been largely driven by a strong revenue growth posted by its cement division (of 28.8%; supported by volume growth) and the stupendous revenue growth in its real estate division (of 379.8%). However, the performance of the construction division suffered during the quarter and declined by 10.8% y-o-y to Rs1,761 crore due to the completion of the Karcham Wangtoo project and on slow execution of the Yamuna Expressway project, both of which are key projects for the company.

The operating profit margin (OPM) contracted by 267 basis points y-o-y to 21.4% in Q4FY2011 on account of a sharp decline in the construction divisions earnings before interest and tax (EBIT) margin (declined by 8 percentage points to 12.4%) which was due to the completion of the relatively high margin Karcham Wangtoo project. Further, the profitability of the cement division also contracted by around 10 percentage pointsy-o-y to 14%. However, a sharp increase in the EBIT of the real estate division to 47.9% in the current quarter as compared to 31.2% in Q4FY2010 has restricted the overall OPM contraction to 267 basis points. Consequently the operating profit grew by 7.9% (as compared to a 21.4% growth in the revenue) to Rs 851 crore.

The interest and depreciation outgo were higher by 35.4% and 13.1% respectively on a y-o-y basis on account of capacity addition in the cement division and installation of captive power plants. However, on account of the higher than expected other income (increased by 18.5% y-o-y) due to dividend received by Jaypee Infratech and lower than expected effective tax rate of 22.1% as compared to 43.7% in Q4FY2010, the company managed to register a 23.8% earnings growth.

For the full year FY2011 the company has delivered a net sales growth of 28.5% to Rs 12,966 crore. However, on account of margin contraction and a surge in the interest and depreciation charges, the adjusted standalone earnings of the company have declined by 7.5% to Rs 653 crore.

We have re-visited our earnings estimates for FY2012 and FY2013 mainly to factor in the delay in the execution of the Yamuna Expressway project and the overall margin pressure. Consequently the revised earning per share (EPS) estimate for FY2012 and FY2013 works out to Rs 4.4 and Rs 5.7 respectively.

We continue to like JP Associates due to its diversified business model and aggressive expansion plan. In terms of valuation, we continue to value the stock using the sum-of-the parts (SOTP) valuation methodology and arrive at a value of Rs130 per share. We maintain our BUY recommendation on the stock with a revised price target of Rs130. At the current market price, the stock is trading at a price earning (PE) of 18.7x FY2012E and 14.6x FY2013E earnings.

Our Recommendation :

The way the scrip has been falling looks like it will reach Rs.50 levels sooner than later. The following chart shows results of this scrip for the last 1 year.

Time Span	Price	Change	%Change
Today	63.85	2.45	3.99
Week	64.45	-3.05	-4.73
Month	79.65	-18.25	-22.91
Three Months	86.85	-25.45	-29.30
Six Months	76.15	-14.75	-19.36
One Year	118.40	-57.00	-48.14
Two Years	145.44	-84.04	-84.04
Three Years	122.34	-60.94	-49.81

Our Recommendation :

Long term investors should look to buy the scrip around Rs.50 levels and hold for a period of 2-3 years for a target price of Rs.90 giving a bumper profit of 80% on investment. A staggered buying strategy should bring down the acquisition costs in this high beta stock which can swing wildly both on the up and down sides !

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OnMobile Global - Buy on dips

IIFL is bullish on OnMobile Global and has recommended buy rating on the stock with a target of Rs 136 in its June 7, 2011 research report.

“OnMobile Global has deployed its infrastructure to supports 3G products like video on demand & IVVR on several operator networks. However, the initial 3G revenues consists of charges for mobile broadband and operators are yet to cover pan-India, which implies product usage (& hence revenues) would take some time to fructify for OnMobile. Moreover, telcos have diverted a sizable chunk of ad spends towards creating awareness on 3G services which has had an impact on VAS promotional activity. Company has indicated such a phenomenon has a temporary dampening effect on revenues, but is unlikely to lead to any long-term structural shift away from VAS.”

“OnMobile is now live in 6 Latin American countries, as part of its Telefonica deployment and covers 80-85% of population. It has achieved ~1.5% penetration rate in large markets like Brazil, Mexico & Argentina; encouragingly, Lat-Am RBT ARPUs are ~2-3x that for India. International revenues have also risen from 25% to 32% in the past 4 quarters, which helps diversify what is hitherto an India-centric business. Q4 FY11 domestic revenue fell 12% qoq due to a change in the contractual scope whereby content management was removed from its responsibilities at a major telco, leading to a ~10% qoq contraction in topline; Ex-such change, sequential revenue is flat-company attributed this to a seasonally lean period for capex orders at its European units and newly acquired Dilithium (video products) business as well as weakness in European economy. We believe Q4 results do not form part of broader trend and expect growth momentum to resume as international revs ramp up led by Telefonica deployments.”

“OnMobile is set to report increased traction in revenues driven by leadership in domestic business and upsides from Telefonica and Vodafone deals. It has guided for Rs600-800mn in capex in the current fiscal, comfortably supported by ~Rs1.9bn in operating CF in FY12. Stock trades at 9.8x FY13 PER which provides an attractive entry point, in our view; maintain Buy for a target price of Rs 136,” says IIFL research report.

Our Recommendation :

The stock gave negative results in the last 1 year (Co gave a bonus of 1:1 ratio)

Time Span Price Change %Change

Today 74.25 -13.15 -15.04

Week 91.80 -4.40 -4.79

Month 109.15 -21.75 -19.92

Three Months 112.20 -24.80 -22.10

Six Months 112.10 -24.70 -22.03

One Year 143.93 -56.53 -39.27

The performance for the quarter is below market expectations and has seen huge sell off resulting the stock hitting 52 week low of Rs.72. Investors can look to buy the stcok in case of further correction to Rs. 50 levels as the outlook for the services of the company remain robust.

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BHEL - Sell

More competition, falling new orders should keep things tight in the medium term.

The impact of rising competition and the slow pace of new power projects has started to reflect on Bharat Heavy Electricals’ (BHEL) financials, judging by its results for the June quarter. Revenue growth reported by BHEL, big daddy of the Indian power equipment industry, was the lowest in the past 13 quarters. Order inflows dived 75 per cent year-on-year to Rs 2,500 crore — again, the lowest ever, amid subdued activity in the power sector and industrial capex.

While the order book is still robust at Rs 1,59,600 crore or four times the company’s 2010-11 sales, it has slipped marginally by three per cent sequentially; year-on-year growth at eight per cent touched a new four-year low.

Not surprisingly, the stock fell close to nine per cent in the past two trading sessions and could correct further, as the outlook appears subdued. Analysts believe order inflows, order book, sales growth and margins are on the way down.

MUTED GROWTH
Rs crore	FY11	Q1FY12
Total operating income	42,496	7,271
% chg y-o-y	27.0	10.0
Operating profit	8,963	1,113
% chg y-o-y	43.0	15.4
OPM (%)	21.0	15.3
Chg y-o-y (bps)	245	69
Net profit	6,011	816
% chg y-o-y	39.4	22.2
NPM (%)	14.1	11.2
Chg y-o-y (bps)	130	110
Source: Company

Say Arun Kumar Singh and Murtuza Zakiuddin, analysts, HSBC Global Research, in their July 27 report, “Earnings growth should be flat in FY13-14 versus a CAGR (compounded annual growth rate) of 30 per cent in the past five years." Analysts at Emkay Global expect BHEL’s earnings growth to range five to nine per cent in FY12 and FY13. Most analysts believe the risk-reward equation is currently not favourable, despite the stock’s underperformance in recent months.

OTHER INCOME BOOST
BHEL’s revenues, or total operating income, grew just 10 per cent year-on-year in the quarter, half the pace as compared to analysts’ expectations. Execution was weak due to delay in clearances at the ports (thereby impacting the company’s plant commissioning) in particular and delays in progress of power projects in general. The company’s power segment, which accounts for 80 per cent of total sales, reported a mere eight per cent growth in top line.

On the other hand, BHEL’s industry division did better than expected, wherein profits jumped 120 per cent. This and operating leverage helped the company maintain its operating profit margin at around 15 per cent. Net profit margin improved despite a higher base and a surge in depreciation, thanks to the 52 per cent jump in other income (to Rs 249 crore).

MUTED OUTLOOK
In 2011-12, the company expects growth in revenues and order inflows to be 15-20 per cent and 10 per cent (Rs 66,000 crore or 1,600 Mw), respectively. Says B P Rao, chairman and managing director of the company, “We expect execution to pick up in coming quarters and thus maintain our revenue booking target of Rs 50,000 crore in FY12."

However, analysts expect things to remain tight in the medium term. They believe the impact of competitive pressures will become increasingly visible. Ordering activity is likely to be muted, as 90 per cent of 12th Plan projects have been awarded and Chinese players have already garnered a sizeable share (above 50 per cent). Analysts expect the order book to remain flat in the current financial year after a 26 per cent CAGR between 2006-11. This will affect sales growth beyond 2012-13.

Margins, which peaked in 2010-11, are also expected to eventually come off the current levels due to competition and higher imported components for super-critical equipments initially. Emkay’s analysts, in their July 26 report, estimate BHEL to report Ebitda (earnings before interest, taxes, depreciation and amortisation) margins of 19.7 per cent in 2011-12 and 18.6 per cent in 2012-13, as compared to 21 per cent in 2010-11l. Consequently, the return profile will deteriorate.

The stock currently trades at Rs 1,825 levels. Even after correcting 25 per cent in the past year, touching a 52-week low in June, and trading at five-year trough valuation of 14 times 2011-12 estimated earnings (below industry multiple of 16), analysts feel BHEL’s stock will de-rate further, given the weak fundamental outlook of the power equipment sector.

Says Misal Singh of Religare Institutional Research in a July 6 report, “Valuation multiples are likely to trend lower, as the growth profile normalises beyond FY12." The upcoming follow-on public offer is also likely to put pressure on the stock.

The stock has been a big under performer over a 1 year horizon. The following details give the kind of returns the scrip gave

Time Span	Price	Change	%Change
Today	1,716.00	-72.05	-4.02
Week	1,838.35	-50.30	-2.73
Month	1,952.40	-164.35	-8.41
Three Months	2,057.70	-269.65	-13.10
Six Months	2,188.10	-400.05	-18.28
One Year	2,517.40	-729.35	-28.97

Our Recommendation :

Sell on every rise. For portfolio investors start buying the scrip around Rs.1200 levels on a deep corrections, only after Jan 2012. the out look for the next 6 months is dismal and it could drop further from current levels.

Bought to you by

Ingenious Investor
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