Analysis: Nomura report on Indian Companies
Tuesday, January 6, 2009
Japanese equity research firm, Nomura Securities, released “Titans- Heroes- Mortals” report on Asian Companies which will give an idea about the future growth prospects of the Indian Companies. Nomura picked 5 Titans and 6 Heroes among Indian Companies which will have better growth prospects. Blog readers should treat it as another aid in their research to pick good companies but not as an investment advice. In stock markets, entering at right price is also important along with picking a great stock. I am bullish on IVRCL Infra and Glenmark but am waiting for right price.
Research firm followed the Graham and Dodd approach of value investing in picking Titans and Heroes. Company released similar report on China (7 titans and 12 heroes), Korea (2 titans and 2 heroes only), Malaysia (2 titnas and 2 heroes), Singapore (7 titans and 3 heroes) and Taiwan (7 titans and 2 heroes) Companies.
Nomura views on economy and stocks:
1. Asia is in a best position than America but few companies tend to have control over their own destiny and equities will perform relatively badly against bonds.
2. There have been no signs of a turnaround during the past quarter in purchasing management indices or export orders to suggest that Asian equity markets will sustain a rally on the back of changing growth expectations. Companies appear to be locked in a classic inventory build-up, since the demand shock did not allow them to adjust their production schedules quickly enough. Moreover, working capital requirements have tightened and trade finance remains difficult to obtain for exporters.
3. We entered the second half of 2008 with an Overweight stance on China and India, since both countries had low export-to-GDP ratios and were prime beneficiaries of falling commodity prices.
4. We continue to have a bias in the short term toward value, since we can still find financial assets trading below intrinsic value or creditworthiness, such as convertible bonds. We would look to re-weight growth stocks as 4Q08F earnings are released and as companies guide down expectations further during 1Q09F.
5. Our favoured sector is infrastructure.
My view: India is in best position to take the leadership position in economy but lack of great political leadership and corruption are our main problems. India needs a visionary leader to steer us through the current troubled waters.
Titans-Heroes-Mortals report:
Titans: Best Indian Companies in their sectors and will use the current opportunity to strengthen their position in their segment.
1. Reliance Industries: I have some doubts over the company performance over short term.
2. Larsen and Toubro: I already said enough about this Company.
3. NTPC: Good stock but what about stock market returns.
4. Hindustan Unilever: Good sales but what about valuations.
5. Sun Pharma: Best Pharma stock and will continue to announce bumper results in the coming quarters. Is it falling in "Taro trap". Only time will tell.
Heroes: Future stars- favorite stocks for growth investors.
1. Tata Power: Positive growth prospects but I have some doubts on financial front.
2. Maruti Suzuki: More clarity is needed.
3. IVRCL Infra: Rare infra company which is not facing any financial troubles. IVRCL is a must buy when markets correct in the coming months.
4. Marico: Good Company but I always try to accumulate growth stars.
5. Piramal Healthcare: Company is making strategic moves but take time.
6. Glenmark: Company will outperform other Pharma stocks if market conditions improve. This is a must buy when market corrects to reasonable levels.
Mortals: Never become leaders
1. Unitech
2. TVS Motors
Stock market news:
1. Indraprastha Gas Limited (IGL) will continue to enjoy monopoly in the National Capital Region (NCR).
2. Cement stocks will be in limelight for some more days due to better than expected results estimates.
3. Tata Communications is the dark horse, according to many analysts.
4. Hats off to Narendra Modi for announcing new industrial policy for Gujarat. We need such concrete measures at centre to face current slow down.
5. I am positive on growth prospects of Mundra Port but current valuations are not sustainable.
6. Best auto companies by sales are Hyundai in 4-wheelers and Yamaha in 2-wheelers. Unfortunately, both Companies are not listed in the Indian stock markets.
7. NSE cautions investors on illiquid stocks and mutual funds.
India GDP Growth- Past-present-future:
In 2007-08: India achieved 9% GDP growth rate and analysts expected 10% growth rate at that time. Companies announced expansion plans to meet the rise in demand. Suddenly, there is a sudden drop in demand and inventories piled up at the factories. Great Comapny like Toyota announced 11-day holiday at Japan plant.
India's GDP growth rate Estimates:
In 2008-09 (Current financial year):
Goldman Sachs: 6.7%
Citi: 6.8%
JP Morgan: 6.2%
Standard Chartered: 6.3%
Prime Minister: 7%
Chidambaram: 8%. Wise man!
In 2009-10 (estimates for next year):
Goldman Sachs: 5.8%
Citi: 5.5%
JP Morgan: 5.5%
Standard Chartered: 5%
Prime Minister: 6%
Chidambaram: 9%. Most intelligent man in the world. Unfortunately, he was shifted to Home Ministry. Investors missed him a lot.
Fiscal deficit is expected to touch 6-8% of GDP in this financial year. Just imagine what will happen to our economy if the money from the stimulus packages will not be used in a proper way. Do you know why these politicians prefer real estate and infrastructure? Not to build India but to build their coffers in the election year which is very easy for them to do it in these 2 sectors? We need to pay price later on for their wrong doings.
Special mention: Hats off to Brokers for successfully creating a "feel good atmosphere" in a gloomy economy. Politicians need to learn some tricks from these stock brokers.
Special thanks to Mohit Singhania and Ramakrishna (NRIs).
Recession news:
1. Sweden based Software company UIQ, jointly owned by Sony Ericsson and Motorola filed for bankruptcy.
2. U.S. jobless rolls reached a 26-year high in the week ended December 20. 20 lakh Americans lost jobs in 2008.
3. GM'a U.S. sales plunged to a 49-year low in 2008.
4. What will happen to economy?
5. Indian Companies are set to announce worst results in 6 years. ICICI Bank, Bajaj Auto, Tata Steel, DLF, Unitech, Tata Motors, Ranbaxy and ONGC are some of the companies that will announce poor results.
6. BPO Companies may create 1 lakh jobs in the next 3 months if Obama will not create any hurdles.
7. Indian IT companies will announce worst results in the recent years and they will be rated downwards due to poor outlook.
8. Germany set to announce grand stimulus package with tax cuts. US may soon follow.
9. Barack Obama is seeking Congress support to announce $800 billion bailout package with more stress on tax cuts ($300 billion) to improve the consumption power of people.
10. Madoff scam is worsening day by day.
11. Construction activity reached worst ever recorded levels in England.
12. What can happen to American Banking sector in 2009?
13. 10 best economic books of 2008.
14. Read about Satyam's troubles after Maytas controversy.
15. Congress Party in India is planning for Rs 1 trillion bailout package. Is it real or election statement?
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11 comments:
Dear Krishna,
You are really genius,one again thanks for the valuable information..
Dear Sir,
Last comment made by you"GMR is good for long term"...
should i hold or sell it now because iam going to buy more when the market bottom to oct low...
I bought 100@84.85 in july 2008....should i wait for few more weeks....for profit booking...
Dear Sir,
Iam really interested in FUNDAMENTAL ANALYSIS,i have taken the training from BSE,MUMBAI but it was a 2 day training and the fees were Rs 4950...
Iam not satisfied with the training so can you pls recommend some books on FUN ANALY....i work as a DBAORACLE ADMIN and also iam interested in FUN ANALY,i had gone through one book name "FUND ANALYS BY RAGHU PALAT"...good books but not much informative..
Thanks Dr.Krishna for being a 'sensible' index on the market dynamics :-)
Celestial Labs Ltd could be a multibagger stock..what do you think krishna...pls krishna we would like to know the MULTIBAGGER STOCKS...There are investors who would like to invest in the stock when the market fall and would like to stay invested for long term...
Krishna,
To be honest, I don’t believe most of the recommendations as they are from Lehman brother equity India (which are now part of Nomura).
I am surprised why banks stocks are so bullish.. any idea sir?
Mohan
There is nothing wrong in the bullishness about banking stocks. In the Q3 results, Banking stocks will occupy 30% of total earnings in the BSE 100. That is the impact. In one of the estimates, SBI alone accounts for 30% of Sensex earnings in the Q3. They will soon rise excessively and then fall due to fall in deposits and rising NPAs expecially ICICI Bank.
Nomura report is meant for just aid but not as a straight forward advice.
I don't look at speculative stocks like GMR Infra and JAI Corp. So, I don't give advice on them.
I don't know any thing about Indian authors and books on stock markets. I am requesting fellow readers to answer such questions.
Dear Dr.Krishna - Now Nifty earning is 228 and PE 14. What do you think will be earnings and PE of Nifty by 4th qtr results? It is a tug of war at high between kenesian and austrian economists. Is it a long recession or turning more into depression?
Mahesh asked good question. I do not track Nifty regularly, so I comment on Sensex.
My expected bottom (worst) for Sensex is around 6,000-6,500 which may happen in the next 6 months.
Sensex earnings will finally fall to 650-700 and command a valuation of 9-10 which gives us a bottom of 6,000-7,000 range. This is my calculation according to the current condition. It is good if situation impoves but things are pointing a btight picture.
I am expecting a long recession but not depression for developed economies and drastic slow down for China and India at around 6% and 5% GDP growth rates.
In 2007, Companies expected 10-11% GDP growth rates in 2009 and 2010 and builtup massive capacities.
In 2009, they are now unable to adjust to 6-5% growth rates (50% fall) which is almost 100% for developed economies.
That is why Tata Motors and Tata Steel which paid massive amount for acquisitions are now paying price. Just see what happened to Diachi who bought Ranbaxy.
We are living in a economy where World's richest are committing suicide (German who is at 92nd place on Forbes list just committed suicide by placing his head under train).
But I don't know when will stock markets react? I don't want to take any chances with hard earned money.
Copycats:
http://stocks-information.blogspot.com/2009/01/good-indian-stocks-to-buy-research.html
http://www.indianstocksnews.com/2009/01/good-indian-stocks-to-buy-research.html
Govt to inject Rs 100,000 cr to avoid recession: Congress
IANS
New Delhi, January 5, 2009
The Congress party on Monday said the government has decided to inject Rs. 100,000 crore in association with the private sector in the Indian economy to stimulate internal demand to insulate it from the effects of global recession.
"In the next 100 days, the United Progressive Alliance (UPA) government has decided to inject Rs. 1 trillion in the Indian economy to stimulate internal demand to keep it insulated from the world recession. This would be done in association with the private sector," Manish Tewari, Congress spokesperson, told reporters.
Tewari said the decision was taken on the advice of UPA chairperson Sonia Gandhi.
"UPA has taken the decision to provide stimulus to the Indian economy on the advice of Soniaji. This is to increase productivity, control inflation and increase employment opportunities," he said.
Tewari also said the UPA government has been successful in not letting the world recession impact the Indian economy.
"The UPA government has acted as a wall against the world economic recession and hasn't let it impact the Indian economy. We have been able to manage average growth rate of 8.9 per cent during the period of 2004-2009 against 5.8 per cent during the National Democratic Alliance regime (1999-2004)," Tewari said.
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