Dalal Street :: India Equity Research, Investment Analysis

Equity Outlook by HDFC AMC

March 24, 20091 min read

Here is the outlook for Equity by HDFC’s CIO and Sr. Fund Manager Mr. Jain.

Current valuations are cheap even assuming NIL earnings growth in FY10. Sensex FY09e EPS-Rs.876, FY10e EPS-885. Equities on current yield are cheaper than bonds – Equities yield: 10.0%, Bond Yield: 6.5%. This points to extreme pessimism and significant under valuation.

Fall in oil price has reduced risks for India and has improved longer term economic outlook. Over next 3 years, potentially, HDFC AMC expects approximately 30% earnings growth (assuming nil growth in FY10 and 15% CAGR thereafter) which will lead to approximately 50-80% P/E expansion.

How Small Investors Lose Money ?
According to AMFI data, Equity Investments in Mutual Funds FY 2008 at the Peak was INR +49,360 cr. Between October – January 2009 Bottoming INR -1,072 cr. So they have invested at the Peak and Exited at the Bottom 🙂

Isn’t it easy to say BUY Cheap and SELL HIGH ? Then why aren’t you guys BUYING cheap now ? At least small amounts of SIP.

Equity Research

Respite for Ranbaxy – US Still a concern

March 24, 20092 min read

Corporate FreePress of India broke the news that, Ranbaxy’s Paonta Sahib plant has received GMP certifications from MHRA, UK and TGA, Australia. Certifications have been issued following a joint audit conducted in October 2008. The MHRA certification is valid for three years, and covers product filings across the EU, while the TGA certification is valid for two years.

Europe remains a key market for Ranbaxy, accounting for 20% of total sales in CY08 US$328m), while Australia accounted for c.1%-2% of overall revenues. These now appear secure, at least from a regulatory standpoint. (more…)

Breaking Corporate India Earnings News

Life insurance premium growth slowing down faster than expected

March 23, 20091 min read

As per IRDA, new business premium collection (individual non-single premium and 10% of individual single premium) for the industry declined 8.4% in April-January 2009.

LIC has shown degrowth of about 26.3% in individual new business premium collections for the period April 2008-January 2009 against about 10.9% yoy new business growth posted by the private sector.

Among stocks under our coverage, HDFC Standard Life has posted muted growth of 13% for the April-January 2009 period compared to our estimate of 35% growth for FY09. ICICI Prudential posted degrowth of about 14.7% for the same period compared to our expectation of 20% for FY09. SBI Life Insurance posted about 28% growth for April- January 2009 compared to 50% yoy growth estimated for FY09. However, note that our growth estimates are on weighted premiums (including individual premiums).

Historically, the life insurance business is back-loaded in the January-March quarter and we can thereby expect a reasonable firming of growth rates. However, given the slowdown witnessed in industry due to the steep decline in the sale of equity market linked products, we expect the growth rates to come at below our estimates.

Economy, Markets and Macro Views

5.5% GDP Forecast for 2009-10 – ICRIER

March 21, 20092 min read

The first working paper by the newly established Macro Unit in ICRIER – Indian Council for Research on International Economic Relations released yesterday forecast the Indian GDP growth for FY 2009-10 at 5.5% [Moderated].

The scenario with “no shock” which is considered as a case that would have been possible in the absence of the financial crisis, provides a growth of 8.4 per cent, which implies a recovery that would have been possible in the absence of the external crisis. (more…)

Economy, Markets and Macro Views

Gems + Jewellery – Negative in Medium Term – Fitch

March 20, 20092 min read

The Indian gems & jewellery industry is going through a difficult phase on the back of softer demand from key markets. This has resulted in significant inventory build‐up and a major postponement/cancellation of orders across the sector, and in turn has impacted liquidity.

Inventory Pileup:
Lower demand was evident in Christmas orders from the US and Europe, although the decline started towards the beginning of H208. Several developed markets – including the US, the UK, Japan and EU, which are India’s major export destinations – are in recession, clearly resulting in poor retailer sales. The Indian domestic industry has mostly stopped fresh purchases of rough diamonds and cut back on ongoing production, and many diamond and jewellery units have closed down production for a period anywhere from 15‐40 days. (more…)

Breaking Corporate India Earnings News

Near Term Steel + Cement Demand

March 20, 20091 min read

The near-term steel and cement demand is likely to be firm due to: restocking, government funded projects, rural demand, and prices (of steel) likely having bottomed out. However, most are not convinced of its sustainability, except for on-going government projects.

As segmental drivers differ, there is a low correlation in their growth rates. Risk to steel demand comes from general engineering, urban housing, and auto. Risks for cement come from urban housing and the commercial sector. Medium term infrastructure growth should help steel and cement.

Provisional domestic despatch growth of 7.8% YoY in February 2009 was in line with expectations, but lower than the 12-13% YoY growth in November – December 2008.

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