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T
VOL. XXIV No.47
S
Pages.19 Rs.15
In the meanwhile, the markets would take cues from the forthcoming RBI policy, Rupee Dollar exchange rate, global
markets and crude prices.
Technically on the upside, the Sensex faces resistance at the 26730, 27131, 28100 and 28578 levels and seeks support at
the 24892, 24206, 22277 and 19963 levels. The resistance levels for the Nifty are placed at 7940, 8000, 8065, 8191,
8315, 8458 and 8525 while the support levels are placed at 7788, 7540, 7422and 7122.
BAZAR.COM
Mid-Cap and Small-Cap Funds: R Srinivasan of SBI Small and Mid-cap applies a bottoms-up approach to stock picking.
His selection of Atul, D Link, Relaxo, Techno Electric helped his fund return greater appreciation than his competitors.
Shreyas Devalkar of BNP Paribas identifies leaders and challengers in small sectors. Vatech Wabag, Welspun,
Ramakrishna Forgings made all the difference in his results.
Most Focused Midcap 30: Headed by Taher Badshah known in the market as automobile expert and the discoverer of
Hero Motocorp in its early days. His discovery of Amara Raja Batteries, Bajaj Finance, Max India, Ajanta Pharma helped
his fund outclass others in the same league.
TRADING ON TECHNICALS
Gap persists
By Hitendra Vasudeo
Last week, the
Sensex opened at
Last Close
26107.98,
attained a low of 25386.48 and moved to a high of 26339.48 before it finally closed the week at 25863.50 and thereby
showed a net fall of 355 points on a week-to-week basis.
A swing-bottom and a swing-top pattern were formed at 24833 and 26471 levels. The Sensex is likely to remain
range-bound between 24833-26471 levels.
The gap on the weekly chart in the higher range is at 26730-27131.
A pull-back is currently being witnessed, which could bring the Sensex back into the gap. For the time being, one can
expect a rise of the gap and can re-evaluate the scene later.
The pullback is likely to develop into a Wave x structure unless
a decisive breakout above the gap on weekly closing is
witnessed.
A pullback in the gap and a failure to sustain could result into
the opening of a new leg down of a-b-c.
Weekly Chart
Weekly resistance will be at 25863, 26339 and 26371, while
weekly support will be at 25386-24434. Volatility is likely to be
seen between 26471 and 24833. Directional movement on the
weekly chart may not be seen but a wild swing seen may be on
the daily chart on an alternate day basis.
BSE Mid-Cap
The BSE Mid-Cap index has support at lower band of 100009900. Overall, the Mid-Cap index will consolidate and move higher as long as 9900 is not violated.
An upside for the Index could be capped to 10930-11080. A rise in the Mid-Cap index will show stock-wise performance.
Strategy for the week
The gap of 26730-27131 is an opportunity to book profits, exit long and evaluate stocks in the portfolio.
Sensex
25863
Daily Trend
DOWN
DRV
26329
Weekly Trend
DOWN
WRV
26932
Monthly Trend
DOWN
MRV
26266
VARDHMAN TEXTILES
AARTI INDUSTRIES
Last
Close
Level
1
Level
2
Center
Point
Level
3
Level
4
Relative
Strength
Weekly
Reversal
Value
Up
Trend
Date
941.00
493.10
Weak
below
910.0
460.0
Demand
point
918.0
469.3
Demand
point
933.0
483.8
Supply
point
956.0
507.6
Supply
point
994.0
546.0
73.3
72.5
921.5
440.4
18-09-15
18-09-15
WABCO-TVS (INDIA)
CEAT
DIVI'S LABORATORIES
7056.15
1271.00
1121.00
6700.0
1188.0
1065.0
6813.1
1207.7
1078.3
6943.1
1251.3
1107.7
7186.1
1314.7
1150.3
7559.1
1421.7
1222.3
65.0
64.7
64.5
6900.5
1193.8
1100.8
11-09-15
11-09-15
18-09-15
Last
Close
COROMANDEL INTERNATI
TATA MOTORS
VIJAYA BANK
HINDALCO INDUSTRIES
JINDAL STEEL & POWER
Level
1
Level
2
Center
Point
Level
3
Level
4
Demand
point
Demand
point
Supply
point
Supply
point
Strong
above
145.3
259.4
32.4
61.4
48.7
155.5
292.2
33.8
68.9
56.8
161.7
313.5
34.6
73.8
61.8
165.7
325.0
35.2
76.4
64.9
168.0
334.8
35.4
78.7
66.9
159.40
303.65
34.40
71.55
59.80
Relative
Strength
Weekly
Reversal
Value
Down
Trend
Date
21.09
22.13
23.62
24.07
26.72
167.25
325.11
35.06
74.41
61.95
07-08-15
18-09-15
17-07-15
14-08-15
14-08-15
*Note: Up and Down Trend are based of set of moving averages as reference point to define a trend.
Close below averages is defined as down trend. Close above averages is defined as up trend. Volatility
(Up/Down) within Down Trend can happen/ Volatility (Up/Down) within Up Trend can happen. Relative
Strength (RS) is statistical indicator. Weekly Reversal is the value of the average.
EXIT LIST
Last
Close
Supply
point
Supply
point
Supply
point
Strong
above
BHARAT FORGE
903.00
1001.20
1034.00
1066.80
1173.00
445.2
31.26
4852.95
5120.88
5220.00
5319.12
5640.00
3440.9
32.08
ADANI PORT
301.80
320.96
327.40
333.84
354.70
211.8
38.29
PIRAMAL ENTERPRISES
856.00
868.41
888.00
907.59
971.00
536.4
39.15
952.00
973.93
998.00
1022.07
1100.00
565.9
40.02
Scrip
Demand Monthly
point
RS
UNITED PHOSPHEROUS
466.55
487.99
500.02
512.06
551.00
284.1
40.31
EMAMI
1096.00
1143.44
1172.00
1200.56
1293.00
659.4
42.21
1176.00
1248.94
1279.50
1310.06
1409.00
730.9
43.01
BAYER (INDIA)
3717.00
3732.12
3761.50
3790.88
3886.00
3234.1
45.64
238.25
239.81
244.35
248.89
263.60
162.8
45.99
GLENMARK PHARMACEUTI
1007.00
1042.05
1064.00
1085.95
1157.00
670.1
47.23
3972.00
4028.66
4082.00
4135.34
4308.00
3124.7
47.51
ASHOKA BUILDCON
168.00
168.46
171.07
173.69
182.15
124.2
48.19
935.20
948.18
960.75
973.32
1014.00
735.2
48.33
HIND.PETR.CORP.(HPCL
777.00
782.53
793.50
804.47
840.00
596.5
48.92
ECLERX SERVICES
1591.80
1670.77
1700.35
1729.93
1825.70
1169.4
49
3855.00
3859.86
3925.00
3990.14
4201.00
2755.9
50.77
647.05
652.89
661.50
670.11
698.00
506.9
52.19
PC JEWELLER
345.55
357.61
368.38
379.14
414.00
175.1
53.07
BUY LIST
Scrip
Last
Close
441.80
Demand Demand
point
point
417.93
405.95
Weak
below
Supply
Point
Supply
Point
Risk
Reward
393.97
355.20
620.9
61.73
Monthly
RS
PUNTER'S PICKS
Note: Positional trade and exit at stop loss or target whichever is earlier. Not an intra-day trade. A delivery based
A Time Communications Publication
trade for a possible time frame of 1-7 trading days. Exit at first target or above.
Scrips
ARMAN
GUJARAT FOILS
SBL
BSE
Code
Last
Close
Demand
Point
Strong
above
Weak
below
Supply
point
Supply
point
Risk
Reward
538556
531410
538520
138.10
51.20
19.45
138.00
49.75
18.10
138.10
52.00
19.55
133.50
47.10
16.95
140.9
55.0
21.2
145.5
59.9
23.8
*Note: Up and Down Trend are based of set of moving averages as reference point to define a trend.
Close below averages is defined as down trend. Close above averages is defined as up trend. Volatility
(Up/Down) within Down Trend can happen/ Volatility (Up/Down) within Up Trend can happen.
! Note: Momentum breakout trend of stocks value (volume*close) between 10-80 lakhs.
TOWER TALK
Asian Paints plans to invest Rs.2300 crore on a greenfield plant at Mysore in Karnataka to meet its long-term
capacity requirements. This augurs well for its share price in the long-term.
Dishman Pharmaceuticals has been licensed by Johnson & Johnson, USA, to manufacture a TB drug raw material.
Very positive news for its share price.
REC to enhance its presence in Green energy financing such as Solar, Biomass and Wind power. With superb results
year after year, this gem should be held for the long-term.
GIC Housing Finance is continuing its onward march. The Company focuses on Tier-II and Tier-III cities with
preference to affordable housing sector. Scrip could rise 50% in a year.
TVS Motor Company is likely to repeat its spectacular performance over the next few quarters. At current prices,
the stock looks attractive for buying.
Around Rs.1112, Emami looks a lucrative bargain. Buy for quick gains. Remember the famous brand name ZANDU is
part of it.
Sterlite Technologies is doing well and has acquired global software company Elitecore Tech, a profit making
company for last 7 years for Rs.180 crore. Buy for one year for handsome gains.
Dengue and Malaria are becoming uncontrollable. Mangalam Drugs Organics should post handsome growth
especially with the backing of the Bill Clinton Foundation. The share has nearly doubled after Money Times
recommended it a few months back.
Uncertainty in the market is taking its toll. But L&T Finance Holdings has the strength to withstand the pressure.
Tide Water Oil (India) has made an open offer to buy back its shares. Andrew Yule, which holds 26% shares in it,
may rise.
Ajanta Pharma plans to launch a few more products and the working is excellent. But for a 20% uptick in about 3
months.
On lower-than-expected profits in Q1FY16, Ricoh India share prices fell sharply. But considering the rising sales
and digitalization it may post a 55-60% rise in revenue over the next two years. The share must be bought.
Glenmark Pharmaceuticals will be in focus, after the launch of its anti-diabetic pill Teneligliptin in Pune.
Current value of quoted securities held by Summit Securities has crossed Rs.3000 crore for the first time. But the
scrip trades @ 25% discount to its recent high of Rs.390. Short-term target is Rs.450.
An Ahmedabad based analyst recommends to buy Himachal Futuristic Communications, Visaka Industries & W
H Brady Company.
BEST BET
RPG Life Sciences Ltd (RPGLS) is a pharmaceutical company engaged in manufacturing and marketing of pharmaceutical
products. It operates through four business units, which include active pharmaceutical ingredients (API), Global
Generics, Global Formulation and Biotech. Its API product line offers a range of synthetic APIs in the general therapeutic
category to Europe, Latin America, Asia and the US markets. Its Global Generics division commercializes Finished Dosage
Forms in markets, such as North America, European Union and Australia. Its Global Formulation product line
manufactures and markets finished dosage formulation in domestic and other emerging markets. In the Biotechnology
space, the company offers oncology products through the fermentation route.
Over the last three years, RPGLSs promoters have considerably increased their stake in the company from 53.1% as at
31 March 2012 to 56.5% in March 2013, 61.4% in March 2014 and further up to 66.2% in March 2015. The promoters
bought another 0.6% in Q1FY16 through open market, increasing their stake to 66.8% as at 30 June 2015. The
continuous increase in the promoter stake shows their confidence in the companys future potential.
The company has a well-experienced management team led by Mr. C. T. Renganathan who joined the Board as Managing
Director in February 2015. He has 30 years of experience in the pharmaceutical industry and has previously worked
with leading companies like GlaxoSmithKline Pharma, Boston Scientific and Eli Lilly.
In 2013, the company sold its leasehold rights of 14,148 sq. metres of land in Navi Mumbai for Rs.76.91 crore to pay-off a
part of the companys debt and fund its expansion projects. RPGLS still holds about 34,483 sq. metres of land in that
location, which as per the old valuation deal in 2013 is worth over Rs.187 crore. This provides valuation comfort and
also serves as a trigger, in case the company decides to monetise the remaining land in the future.
Valuation: RPGLS posted improved results in the last 2 quarters. Its revenue grew 2.7% and 26.1% Y-o-Y in Q3FY15 and
Q4FY15 respectively. Its EBITDA margin also improved 10.7% and 12.7% in Q3FY15 and Q4FY15 respectively. Going
forward, new drug approvals, increase in exports and opportunities arising from patent expiries could benefit RPGLSs
business growth considerably. We advise a Buy on the stock with a price target of Rs.195.
Technical Outlook: The RPGLS share looks very good on the
FY12
FY13
FY14
FY15
daily chart for medium-term investment. The share is Particulars FY11
P/E
24.7
369.6
71.2
460.6
314.2
consolidating at 200 DMA support level. A close above Rs.180
P/BV
4.2
4.2
4.1
2.5
2.5
(which is 50 DMA) could take its share price to Rs.195+.
11
19.8
22.5
28
24.4
Start accumulating at this level of Rs.171 and on dips to EV/EBIDTA
EV/Sales
1.9
1.9
1.6
1.4
1.4
Rs.150 for medium-to-long-term investment and a possible
price target of Rs.195+ in the next 6 months.
STOCK ANALYSIS
Q1FY16
8462
6124
340
(Rs. in lakh)
Q1FY15
FY15
7567
30970
6799
27767
1
227
77
672
1589
1171
13.58
93
219
456
1171
3.90
357
983
1863
1171
11449
15.93
GURU SPEAK
The stock market lacks direction and is dictated by global cues. Punters, traders and investors are in a confused state of
mind and betting mindlessly on either side of the market without any conviction. They have no inclination of their own
nor do they derive any satisfaction after the stock prices hit a 9-month low.
This means that the market is nowhere bullish in calendar year 2015 as individual stock prices have
hit 52-week lows in some cases while a majority of them have crashed near to the 52-week low.
Only a few stocks tracked by a few entities are moving based on their inside information and
contacts at corporate levels.
Technical experts are placed in a very miserable position because whenever they turn bullish, a
storm is unleashed against their calls. Recently, they were carried over to bullish pastures when the
CNX Nifty inched towards the 8000 mark week before last ended Friday, 18 September 2015. No
sooner had they started issuing Buy calls at these levels, which were only marginally up due to the
US Federals decision to hold interest rates on 17 September 2019 and hopes pinned on the RBI
softening interest rates on 29 September 2015, the markets reacted badly on Tuesday, 22
By G. S. Roongta
September 2015.
This fall was triggered by global cues and both the Sensex and the Nifty lost all the gains that they had mustered in the
previous fortnight. The Nifty was back to 7700 and looked sinking deeper to 6800, which is a lower technical target and
also hinted by me in my last article.
This week the culprit was not China or its currency but hedge funds located abroad that sold heavily like basket sales but
did not find any big buyers to match them. The FIIs who had turned net buyers to the tune of Rs.768.30 crore on Friday,
18 September 2015 and worth Rs.154.87 crore on Monday, 21 September 2015, turned into aggressive sellers again on
Tuesday, 22 September 2015 with net sales of Rs.1052 crore, which was much higher than what they had bought
together on 18th and 21st.
The BSE Sensex pared 541 points despite the steady start by 100 points on Tuesday, 22 September 2015, but crashed in
the afternoon session on account of weak European markets and the impending expiry of the F&O segment scheduled on
Thursday, 24 September 2015, while Friday, 25 September 2015, was a market holiday on account of Bakri-Eid.
The benchmarks lost over 2% with the Sensex hitting an intra-day low of 25571 - a fall of 621.64 points but recovered
by way of short covering at closing bell to 25651.84 to close the day with a loss of 541.14 on a single day. This was
followed by the Nifty, which closed at 7812 with a loss of 165.10 points. This fall in the benchmarks dashed the hopes of
the technical experts who were hoping for a rally based on the RBI governors favorable pronouncement on Tuesday, 29
September 2015.
Although the Sensex recovered by 172 points to close at 25822.99 on Wednesday, 23 September 2015, followed by the
Nifty gaining 34 points at 7845.95, the gains were marginal in view of the F&O expiry of the September 2015 series,
which was anticipated to be volatile since the market is in the hands of bears.
Readers may recall my last article vividly focusing on several market issues, investors greed and fears, tempting
opportunities, role of FIIs and our markets being heavily leveraged leading them to volatility and excessive risks. Thus,
there is no smooth sailing whether you follow FIIs, punters, technical experts or fundamentals.
All the time, you will find yourself caught in so many woes and worries that are not easy to overcome. All this happens
quite suddenly and you cannot get out without paying a good price for your greed and try to make a fortune in the shortterm. This is exactly what is going on in the market. The unhappy state of affairs in the market whether on account of
FIIs turning net sellers or China slowing down and devaluing its currency or the refugee crisis in Europe or the crisis in
commodities and metals have all come together in calendar year 2015 as against phenomenal expectations of the
benchmark touching new lifetime highs.
If you recall, market pundits were talking of Sensex 32000 by Sept-Dec 2015 and 36K mark beyond March 2016. The big
bull in the market had even projected Nifty above the 1,25,000 mark beyond 2020. If the Sensex had to travel in such
geometric progression, then the sky is indeed the limit! Where have these fancy targets disappeared? None of the
analysts have come forward to explain how their fancy targets are proving elusive because we are in September and
December 2015 is not far away.
So while targets may keep on shifting, small investors who ventured into the F&O segment have burnt their fingers and
find themselves trapped financially. But this is not the first time as they find themselves at the receiving end of every
boom that goes bust. Whether it was the late Harshad Mehta led bull market on the liberalization of the Indian economy
or the Tech boom under Ketan Parekh or the Modi wave of 2014, the retail investor has been the ultimate sufferer.
Before that, retail investors were happy making investments based on company fundamentals and no other cues. Today,
it is all the other cues like FIIs, global markets, currency fluctuation, political intrigue, insider trading, price rigging,
rumors etc. that dominate while working fundamentals command the least weight. Is that not strange putting everything
upside down?
Under such structural changes anything can happen in the stock market as I mentioned in my last article you can target
Nifty 6800 or 9800.
Great Dhamaka Again!
Who knows? There
is
no
reliability
Roongtas Panchratna 7th Edition
which
one
will
happen first.
Buying prices are lower due to heavy market correction
Fundamentals, too,
Five Gems from five different sectors of Paper & Paper
have no meaning.
Products/IT/Petrochemicals/Finance/Textiles
You can get Rs.10
paid-up share with a
All Stocks are highly liquid
book value of Rs.600
All the five stocks have been beaten down heavily and bottomed out
for Rs.200 and you
Enough potential for growth
can get a Re.1 paidup
share
with
Possibility of giving 50 to 100% returns Y-o-Y
consistent losses in
Risk/Reward ratio of 1::4
the last 3-4 years at
Dont miss this issue!!!
Rs.120! There is no
pricing bar, no P/E
Have a look at the Panchratna performance given below:
ratio
benchmark
Issue
Date
Scrip Name
Recom.
High
% Gain
whether 6 times or
No.
Rate
achieved (Rs)
60, no book value
(Rs)
consideration
or
1
April 2014 Cheslind Textiles Ltd.
4.98
12.10
143%
merits
of
the
Katare Spinning Mills Ltd.
19.50
31.80
63%
promoters.
Trident Ltd.
18.80
49.50
163%
Investors
are,
Elecon Engineering Ltd.
36.75
97
164%
Essar Ports Ltd.
50.90
150.40
195%
therefore, at wits
2
July 2014
Hind Syntex Ltd.
14.01
18.75
34%
end not knowing
Suryaamba
Spinning
Mills
Ltd.
31.20
52.80
69%
what
to
follow,
Standard Industries Ltd.
20
30.60
53%
which has led to
Sarda Plywood & Industries Ltd.
18.85
70
271%
their
minimal
Dish TV India Ltd.
62.95
121.85
94%
participation from
3
Oct. 2014 Ashok Leyland Ltd.
41.10
99.50
142%
40-50%
in
the
Mangalore Refinery &
61.45
82.90
35%
eighties to just 8Petrochemicals Ltd.
10% nowadays. As
National Steel & Agro Ltd.
20.30
17.70
-13%
Landmark Property Development
5.24
4.99
-5%
such, this force is no
Company
Ltd.
major influence on
PVP Ventures Ltd.
8.32
7.84
-6%
the market today the
4
Jan. 2015
Mukand Engineers Ltd.
35.50
40.15
13%
market forces are
KEC International Ltd.
94.30
160.95
71%
distributed between
Modern Steels Ltd.
9.95
10.45
5%
promoters, FIIs, DIIs,
Suzlon Energy Ltd.
14.70
30.25
106%
Mutual Funds and
Jaiprakash Associates Ltd.
25.10
26.70
6%
HNIs. With just four
5
Apr. 2015 Stock A
88.05
148.30
68%
major participants,
Stock B
68.35
65.30
-4%
Stock C
56.30
61.40
9%
the market can run
Stock D
46.15
84.90
84%
with unreasonable
Stock E
54.30
74.60
37%
fluctuations in a
6
Jul. 2015
Stock F
61.05
85.40
40%
short time. What
Stock G
45.35
43.45
-4%
happened to Amtek
Stock H
8.15
6.64
-19%
Auto is an eye
Stock I
24.75
35.80
45%
opener as the stock
Stock J
35.40
37.90
7%
fell perpendicularly
In the current market, Panchratna stocks are a sure way to reap rich rewards.
from a high of Rs.260
The next issue of Panchratna will be released on 1st October 2015.
to Rs.42. Any retail
investor
holding
Subscription Rate: Rs.2500 per quarter, Rs.4000 for two quarters & Rs.7000 per annum.
such
stocks
in
You can contact us on 022-22616970, 22654805 or moneytimes.support@gmail.com
quantity
stands
A Time Communications Publication
ruined.
Earlier, wockhardt and now Metal stocks have been hit and eaten into investors wealth. Prior to that, the sugar industry
was ruined followed by the capital goods, hotels, fertilizers, infrastructure, power and textile all of which are in deep
trouble. On what basis is the Modi government boasting about the economy is improving when a vast percentage of the
population and employees attached to these co-industries are lamenting the situation?
Investors are, therefore, advised not to make a mad rush for stocks and be selective about fundamentally strong shares
without bothering about the short-term.
On Thursday, 24 September 2015 the markets ended weak with a cautious note. The F&O expiry in that day was settled
smoothly with no major impact on individual shares in the F&O section as the market fluctuated in a narrow range of
100 points. Roll-overs are reported to be 65% same as the past six months average. This gives the impression that both
the bulls and the bears have lightened their commitment since the market does not provide a definite direction.
The next figure for the market is the RBI policy on Tuesday, 29 September 2015, which is widely expected to result in 25
bps reduction interest rate and may provide some confidence to the market. If, however, Governor Raghuram Rajan
maintains a hawkish stand, then the market may go down by 300-500 Sensex points as most technical experts have
already calls for a downward in the near-term.
The BSE Sensex closed at 25863 up by 40 points and Nifty at 7668 was up 22 points while the bank Nifty was down at
17196. The Rupee was weak and Metal stocks weakened further.
STOCK WATCH
By Amit Kumar Gupta
10
Start accumulating at this level of Rs.26.65 and on dips to Rs.22 for medium-to-long-term investment and a possible
price target of Rs.35+ in the next 12 months.
*********
11
Start accumulating at this level of Rs.124 and on dips to Rs.110 for medium-to-long-term investment and a possible
price target of Rs.150 in the next 6 months.
STOCK SCAN
12
held by the investing public. At the CMP of Rs.636, the share is available at a Price to Book Value of close to 1.1 (Industry
Price to Book Value being 4.5 times) and the Market cap:sales ratio is 1.5 (Industry Average being 4.5 times).
In Q1FY16 the company posted YoY sales growth of 10%, while Net Profit jumped over 50% from Rs.13.3 crore to
Rs.20.35 crore, registering an EPS of Rs.26.88. Its OPM was 36.15% and NPM was 22%, the highest in the industry. ROE
& ROCE stood at 12.01% and 35.95% respectively.
With such blockbuster results, the company is now on the high growth path and going forward, it may post an EPS of
Rs.110 for FY16, which makes this stock one of the cheapest among media companies at only 6 times P/E at the CMP of
Rs.636. Its a great media stock. Investors can invest for long-term wealth creation.
MARKET REVIEW
13
The merchandise exports contracted for the third consecutive quarter and a worrying trend is that the magnitude of the
contraction has been increasing with each quarter. The report added.
On crude oil it said, Crude oil prices are likely to remain soft for remaining part of FY15-16 due to the sluggish global
recovery and demand-supply situation in the crude oil market. However, the flip side of softer oil prices has been that it
has impacted Indias export growth as well.
The Asian Development Bank (ADB) in its latest report Asian Development Outlook (ADO) marked lowered growth
projections for India for FY16 to 7.4% from the 7.8% due to the weak monsoon, poor external demand and the inability
of the government to push economic reforms in Parliament.
It retained the consumer inflation forecast for India at 4% (plus/minus 0.2%). Further, the agency cautioned that a
possible increase in crude oil prices in the international market could adversely affect the prices.
The report further said that because of a slowdown in the Indian and the Chinese economy, the GDP forecasts have been
revised down to 5.8% and 6% in FY15 and FY16 from the March estimate of 6.3% for both the years.
On the monsoon front, the Indian Meteorological Department (IMD) said, An enhanced activity of the southwest
monsoon brought good rainfall in several parts of the country last week till Friday, 25 September 2015, giving a breather
in many regions reeling under severe water deficiency.
Incidentally, a fresh round of enhanced monsoon activities has also stopped the withdrawal of the monsoon albeit for a
short period in the last week of September.
The monsoon rains which contributes to around 70% of Indias annual rainfall are crucial to the nations agriculture
sector and broader economy which accounts for 14% of the $2 trillion economy as half of the countrys farmland lacks
irrigation. Over 60% of the countrys farmland is rain-fed. The timing, the distribution and the quantity of rainfall are all
essential for the crops.
The Organization for Economic Cooperation and Development (OECD) has cut its world economic growth forecasts for
FY15 and FY16 due to a dramatic slowdown in Brazil and a global outlook clouded by uncertainty over China.
The OECD trimmed its world growth forecasts for FY15 to 3% and 3.6% for FY16.
The forecast for Brazil took the biggest hit by far in the latest OECD report. Suffering from a commodity price crash and
engulfed in recession like other emerging economies and with its debt downgraded by Standard & Poors (S&P) this
month to junk bond status, Brazil had its economic outlook for this year downgraded to a 2.8% contraction instead of
0.8%.
A worse than expected slowdown in China is sparking financial and economic turbulence that could be a significant drag
on advanced economies.
For recovery, additional stimulus may be needed. Also it should rely less on debt-financed infrastructure and
construction spending and more on expansion of social expenditures that will help support consumer spending and
adjustment towards a more balanced growth model, the OECD added.
The key indices edged lower on Monday, 21 September 2015 on fresh buying. The Sensex fell marginally 25.93 points (0.01%) to close at 26,192.98. The Nifty ended down by 4.80 points (-0.06%) to close at 7,977.10.
The key indices tanked on Tuesday, 22 September 2015 on profit booking by FIIs as commodity prices crashed. The
Sensex slumped 541.14 points (-2.07%) to close at 25,651.84. The Nifty fell 165.10 points (-2.07%) to close at 7,812.00.
The key indices climbed on Wednesday, 23 September 2015 on buying of stocks. The Sensex jumped 171.15 points
(+0.67%) to close at 25,822.99. The Nifty was up 33.95 points (+0.43%) to close at 7,845.95.
The key indices edged up on Thursday, 24 September 2015 on extended buying. The Sensex registered modest gains of
40.51 points (+0.16%) to close at 25,863.50. The Nifty was up 22.55 points (+0.29%) to close at 7,868.50.
The Indian stock market remained closed on Friday, 25 September 2015 on account of Bakri-Eid.
For future events, corporate earnings, national and global macro-economic figures and other global cues will dictate the
financial markets.
The Indian corporate firms will start declaring their Q2FY16 financial results from next month. Investors will closely
watch the management results which could cause a revision in the future earnings forecasts of companies for the
current year.
Market participants will keep a close track on RBIs monetary policy review which is scheduled on Tuesday, 29
September 2015.
14
EXPERT EYE
By Vihari
15
has recently obtained shareholders nod to raise up to Rs.42,000 crore, which in future will reduce the cost of
borrowings upon its deployment.
The Government of India (GoI) has permitted REC to issue tax-free bonds, raise foreign commercial borrowing up to
75% of its net worth without prior government approvals as well as provide funds from budgetary allocation and debt
guarantee. Fitch expects REC to continue receiving support from the GoI and harness all resources to capture an optimal
share of the funding business of the estimated Rs.7.7 lakh crore debt requirement for the 12 th Five Year Plan. REC strives
to sustain and maintain a consistent growth rate and surge ahead to attain greater heights of success and match its
stakeholders expectations despite some stresses.
According to the Planning Commissions estimates, REC is expected to fund around Rs.1.75 lakh crore worth of power
projects in the 12th Five Year Plan (2012-17) which translates into a 22% growth annually over this period. Apart from
the high demand for credit, the companys access to Section 54EC bonds and tax-free bonds for low-cost funding helps
REC to maintain its margins. Moreover, with a stable Central Government, Infrastructure bottlenecks are likely to be
eliminated, which is positive for growth and asset quality.
Amid the underlying stress in the power segment, REC has managed to generate a steady CAGR of over 20% over FY0915. While the RBIs recent move to grant regulatory forbiddance to banks for infrastructure lending can exert pressure
on profitability over the long-term, near-term growth and profitability is likely to remain healthy led by outstanding
sanctions of Rs.1.2 lakh crore (80% of outstanding loan book), a massive demand-supply mismatch and a delicate health
of SEBs (enables pricing power).
REC has maintained an almost equal share between Generation and Transmission & Distribution loans. Generation is
unlikely to be de-emphasized and in line with large capex requirements of the sector loan book will grow at a healthy
pace. The companys huge volume of business, its steady cost of funds and extension of mobilizing traditional sources of
fund at low costs through capital gain/other taxable bonds and banks/ECB routes and the huge investment lined up in
the power sector give strong visibility to RECs revenues and profitability in the coming years.
A lag impact of various actions taken by the government like a hike in tariff rates, automatic fuel pass through, coal
mining projects receiving forest clearances, focus on infrastructure (power in particular), attempts to resolve the fuel
linkage issues and timely tariff hikes by SEBs are the key drivers for the REC stock to escalate going forward.
Based on the ongoing trend in RECs profitability, it is likely to register an EPS of Rs.60 in FY16. At the CMP of Rs.268, the
share trades at a forward P/E multiple of just 4.4 on FY16E earnings. A conservative P/E of even 6.5 will take its share
price to Rs.390 in the medium-to-long-term. The 52-week high/low of the share is Rs.371.05/211.40.
*********
16
Earlier in FY14, UTCL had bought two Gujarat based cement units of Jaiprakash. The transaction of Rs.3800 crore had
valued the cement unit capacity at $124 per tonne (compared to $133 per tonne what Ambuja is paying to acquire ACC's
units), which was equal to the replacement cost of a similar plant. The acquisition of 4.8 MMTPA also gave UltraTech a
57.5 MW coal-based thermal power plant and limestone reserves for over 90 years at the current capacity and a captive
jetty. The company will also get 5,500 hectares of land with 500 MMT of limestone reserves.
UTCL is geared increasing capacities to meet the increasing demand. During Q2FY15, it commissioned a 1.4 MMTPA
cement mill in Karnataka, a 25 MW thermal power plant in Andhra Pradesh and a 0.4 MMTPA Wall care putty plant at
Katni. Thus, the companys total cement capacity in India stands at 60.4 MMTPA and the power capacity at 733 MW
meeting 80% of its power requirement.
In August 2015, the Company commissioned a bulk terminal with a 2 MTPA capacity in Pune, Maharashtra. It obtained
the Environment Ministry's clearance in December 2014 to expand the capacity of its Awarpur plant in Maharashtra at
an investment of Rs.248 crore. UTCL has proposed to raise the production of clinkers (a raw material for cement
manufacture), to 4.5 MMTPA from the existing 3.30 MMTPA and raise the cement output to 6 MMTPA from 4.48 MMTPA.
UTCL has been asked to earmark at least 5% of its total cost of the project towards enterprise social commitment and
prepare a detailed CSR plan every five years for the existing-cum-expansion project. The company has informed the
Ministry that the proposed expansion will be carried out within the existing plant area of 307.35 hectares. The
additional power required for the proposed expansion is 5.1 MW.
For FY15, consolidated net profit was Rs.2098 crore on net sales of Rs.24348 crore, with an EPS of Rs.76.5. In Q1FY16,
consolidated net profit fell 6% to Rs.591 crore on 6% higher sales of Rs.6432 crore, registering an EPS of Rs.21.5. With
an equity capital of Rs.274.4 crore and reserves of Rs.18767 crore, its share book value works out to Rs.687. With debts
of Rs.9829 crore, the DER works out to 0.51:1. In FY15, cash amounted to Rs.393 crore whereas investments in quoted
and unquoted securities stood at Rs.4500 crore. The promoters hold 61.7% of the equity capital, FIIs hold 20.6%, DIs
hold 6.7% and PCBs hold 4.5%, leaving 6.5% with the investing public.
UTCL is in talks to buy a 2.2 MTPA Jaiprakash facility in Bhilai (Chhattisgarh) for Rs.600 - Rs.700 crore ($106 million) as
per sources.
With projects underway, the companys capacity will rise to 70-71 MTPA by FY16. The proposed plans will fit into Mr.
Kumar Mangalam Birla's stated ambition of having a cement capacity of 100 MMTPA by 2020. Despite the prevailing
muted growth of the cement industry, we believe that the companys long-term fundamentals and growth prospects
remain intact. UTCL aims to add more capacities in the coming years.
UTCL has taken possession of the Bicharpur coal mines in Madhya Pradesh. The coal blocks provide fuel security for its
cement plants within the vicinity of the mines for a period of 30 years with its 29.12 MMT reserves of coal. The Company
expects production to commence in early FY18. In Q1FY16, UTCL also commissioned 15 MW Waste Heat Recovery Plant
taking the total power generation capacity from waste heat recovery to 48 MW.
On Ultratechs outlook, most analysts maintain that the company will consistently outperform the sector on growth as
well as quality of earnings led by timely addition and highly efficient operations. Although the current valuations at an
enterprise value of $156 per tonne at the FY16 estimated capacity might sound expensive, its strong volume growth and
dominant franchise could drive the stocks valuation to the peak-cycle level of $170 per tonne.
UTCL expects the demand for cement to pick-up from the second half of FY16 on the back of the governments focus on
infrastructure development with higher budgetary allocation for roads, dedicated freight corridor, irrigation, ports etc.
The, cement demand is also expected to rise from the 'Housing for all' initiative taken by the government. The cement
industry is also likely to benefit from the positive outcome of various government reform initiatives that have boosted
the overall business sentiment.
UTCL is expected to perform well going forward on account of the higher cement demand after the monsoons on the
back of economic recovery. The growing GDP, improved macro economic outlook and government initiatives will
provide further momentum. The industry utilisation levels have bottomed out at 70% in FY15 and the expect utilization
levels for the industry (excluding South India) are likely to improve to 85% by FY17 offering pricing power to cement
makers.
Ultratech Cement Ltd is likely to post an EPS of Rs.90 in FY16. At its CMP of Rs.2810.65, the share trades at a forward
P/E multiple of 31.2. In view of its strong fundamentals and quality management coupled with the bright prospects of
the cement industry going forward, the UltraTech share is recommended for long-term gains with a price target of
Rs.4000. The 52-week high/low of its share is Rs.3399/2299.55.
17
TECHNO FUNDA
By Nayan Patel
Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources that are deemed to
be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does not accept any liability for the use of
this column for the buying or selling of securities. Readers of this column who buy or sell securities based on the information in this column are
solely responsible for their actions. The author, his company or his acquaintances may/may not have positions in the above mentioned scrip.
18
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