CP | Dalal Street

Regulatory Impact of lifting trading margin caps

January 14, 20101 min read

India’s Central Electricity Regulatory Commission (CERC) has announced changes to power trading margins. CERC, the power regulator, allows trading margin to be raised by c75% to INR0.07/kwh if sale price exceeds INR3/kwh (c80% of short-term volume).

The margin cap increase is a short- to medium-term positive for power trading companies like PTC India, which now can charge a higher margin for short-term trades. As 80% of PTC’s short-term (ex-cross border) trading volume is above INR3/kWh, it will benefit.

But increased competition from peers and power exchanges should limit the benefit longer term, when the trading margin should be lower than the prescribed cap. Further expect competition to get more intense and margins to fall again, because a) the supply of shortterm power is expected to increase at a faster pace than demand, and b) the number of power traders is expected to increase to 50-55 from the current 44. More important, the power exchanges, which charge only INR0.01/kWh, will also likely emerge as a preferred platform for short-term trading and limit the ability to charge higher margins

Mutual Funds Review

How does the Mutual Fund Industry Look Like ?

January 9, 2010April 7, 20101 min read

Total AUM at INR 7.75 tn; assets worth INR 1.47 tn added in October with mere INR 1.92 tn Equity AUM; dipped INR 0.10 tn (down 5%) M-o-M. The ratio of large-cap AUMs to mid-cap AUMs was at 0.83 in October versus 0.85 in September.

Large-cap funds have increased exposure to banking, FMCG, (more…)

Equity Research

Sell the Rally in Tata Communications + MTNL – Goldman

January 7, 2010April 18, 20202 min read

Tata Communications has risen to an extent that it no more deserves the valuation it is trading at, while MTNL appears inexpensive but no visibility on potential re-rating and hence Goldman sachs has initiated coverage on the stock with a SELL Call. Aditionally, their weaker competitive positioning in the Indian telco space and Tata’s not coming with a blue print to merge Telecom operations is a cause of concern. (more…)

Economy, Markets and Macro Views

Nomura India Macro Strategy 2010

January 4, 2010February 1, 20102 min read

The markets is no mood to correct and Bulls have taken total control of the same. Here is Nomura’s Expectations from Indian Equities for 2010.

Growth: The 2H FY09 (fiscal year-ending 31 March, 2009) saw demand reeled in. Expect better growth in FY11F, underpinned by a turn in the investment cycle. Firm signs of a demand recovery are evident. Capacity shortages that had been masked by absent demand are now back to the fore, creating conditions for a capex revival. (more…)

Equity Research

TVS Motors- Ready to Ride the Auto Boom

January 4, 2010April 18, 20201 min read

South India based TVS Motor has started to invoice the 110cc commuter bike Jive. Given the positive expert reviews, and expectations of national ramp up in less than 3 months, we raise motorcycle growth assumptions to 25% in FY11 (earlier 15%). This would imply above industry average growth rate (estimated ~15%), likely given the company’s absence so far in the mid-priced commuter category i.e. ~55% of bike market.

Export sales (~11% of aggregate two wheeler sales) declined 28% YTD to ~93,000 units, due to recessionary conditions in key destinations, which led to (more…)