Category: Economy, Markets and Macro Views

India’s economic growth engine has not stayed the same for long in the past. Credit Suisse expects investments to no longer be the growth engine from now on. Exports, somewhat surprisingly, could be relatively the fastest growing economic sector for the next few quarters. But why does this Change frequently ? The cyclicality in the savings rate and the frequently recurring twin deficits and profit-oriented private sector are key reasons why India’s growth characteristics change constantly.

Because of the ongoing crisis and wealth destruction, investment-driven growth has been derailed, at least for the time being. (more…)

Dabur India acquired a 72.15% stake in Fem Care Pharma from the existing promoters for Rs2.04bn in an all cash deal. Overall contribution of skin care products to Dabur’s sales is less than 4% and this acquisition would help in nearly doubling it. Besides the well entrenched Fem brand this acquisition provides manufacturing base in Nasik and Baddi (enjoying tax benefits). It also has presence in GCC/Middle East markets which could be expanded. FEMC’s direct reach of 25,000 parlors will provide Dabur with a new distribution channel for its own products – the other channels should have some degree of overlap. (more…)

Merrill Lynch continues to be bearish on India mainly due to slowing economy hurting earnings and the uncertainty of general elections as we move towards the summer of 2009 [Q1-2009]. Economic news should continue to adverse through most of 2009, expect equity markets to recover in 2HCY09. Markets have typically given a over 30% return from its bottom and we could see such a rally start towards Q4CY09 led by – liquidity, lower inflation and fall in interest rates. This is the time when earnings downgrades will be behind us and the earnings revision ratio bottoming out.

Merrill Lynch expects the Sensex to hit 7000 levels in 1QCY09 as earnings get downgraded and drag valuations to historic lows of below 8x PE. Expect FY10 to see a flat to negative EPS growth which would bring Sensex EPS to the 850-900 levels. (more…)

Reliance ADAG Group stocks have been under a Free fall Mode ever since the correction started. LIC the God Father of Indian Stock market did what it could to support but it has likely given up. We guess that not many investors have the confidence in the younger scion of the Ambani family, not even the FIIs [Reliance ADAG Group Stocks are not in FIIs Top-15, while RIL is at Number One] who like flamboyant CEOs, but bottom line matters when it comes to Investing.

We decided to conduct the performance of Reliance ADAG stocks in the past 10 months and they have been performing terribly bad, but (more…)

We continue to receive reports everyday written by institutions who didn’t know that they would go bankrupt and it is difficult to filter as we study and only present the best content to readers out here. The US crisis is still far from the end if we look into the ground reality in resolving the issues. However, from past experience, a compromise and equilibrium will be reached.

Doesn’t matter, India in a way is fairly secluded and sometime within the next 12 months the de-coupling theory will come into existence and greed will follow. (more…)

Analysts are now making investment case for Cigarette and FMCG Major – ITC Ltd. ITC’s earnings growth has been remarkably stable despite tax increases and regulatory restrictions, reflecting its strong pricing power. ITC’s CAGR was 18.4% over the past decade and average variance was only 3ppts. The new smoking ban appears to have had little effect and we do not expect it to have much impact in the medium term.

Volume growth of approximately 20% in filter cigarettes in 1HFY09 is encouraging and expect a 15% Cagr in the cigarette business Ebit over FY08-11. (more…)