It was a week of gains for the Markets after last weeks see saw ride. There was some trend of upside in the mid week helped by banking sector and also Infrastructure stocks which suddenly got fancy. The US markets were ranged though the worries of a weakish economy had the stocks in a bit of a yo yo. There is the talk about the CDO (collateralised Debt Obligations) where the worries still emanate. (Do read Economy: Taking stock ! for more here), There were a host of advance Tax indicated this week which created a ripple really. Advance taxes are paid in four instalments in a year. They are paid in June, September, December and March. The first instalment is is expected to be about 15% of the total advance tax to be paid in a year and hence there is not much to be drawn from this.
Markets started off weak because of the circular on treatment of capital gains by investors. The Tax authorities were given the discretion to decide on whether the tax payer was a speculator or Investor. An investor can divide his portfolio into capital assets and trading assets. Taxpayer can have both cap gains and biz income in share transactions. Post this, the Indian markets saw continued strength helped by banks in the face expected weaker inflation (base effect.. we have been saying for many weeks now). This number came in at around 4.28 % for week ended June 9th and fairly marks the stable level. There was strength in Cement. The big story was of course infrastructure this week. This is one sector which really does not get affected because of interest rates. Its the Government spending which will spur this on. BHEL rallied on PM exhorting it to work an extra shift and then Larsen which continues to announce orders and of course Mid caps as mentioned in our earlier notes. The end of the large Public issue uncertainty had the markets back on to rails to challenge the all time high. However we believe it will be a daunting task. Tech sector and textiles continue to reel under the Rupee onslaught. The autos is where the weakness is apparent and really its unlikely that relief will be quick to come unless the RBI signals lowering of interest rates. Crude hit almost $ 70 and thats really what will keep the RBI from cutting rates at least for now. Of course they will wait for more signals of slower growth.
Markets this week saw the Sensex up 2% (290 points); Nifty up 1.8% (76 points up); Mid caps up 3% ; Small caps up 2.2%; IT Index down 3%; Capital Goods up 4.8% up; Banking index up 4.8%.
Sugar stocks had a bad Friday. The only hopes.. the WTO talks have failed and that means that US and Europe will continue with farm subsidies. The markets of India Brazil will remain closed for access to goods and services for these developed economies. Bad news for sugar because EU was expected to turn net importer against being a net exporter. The long term story gets impacted negatively.. Sugar output in India, the world's second-largest sugar producer and biggest consumer, is expected to touch 280 lakh tonnes this season ending September while domestic consumption is likely to be 190 lakh tonnes. After including last year's carryover stock of 40 lakh tonnes, the country would have a total stock of 130 lakh tonnes this year. The Government intends to stock up another 3 mn tonnes in sugar buffer. The WTO Talks failure has made even the long term story bitter suddenly. Sugar stocks were badly down.
We had a note on Action construction: Action Construction is one company where the Management is gungho about growth. This is a company into Mobile cranes, Tower cranes. It has recently entered the Backhoe loaders which is earth moving equipment. The company has been growing aggressively and has an orderbook of about 400 machines. The macro business environment seems extremely exciting and the company has expanded as well. However its valuations where we have concerns. Also the competitive advantage against competition such as JCB, Escorts, BEML seems to be price. Thats what put us off. Valuations are not compelling.
We had a research note on Everest kanto cylinders. This company intends to triple capacity for high pressure cylinders which are used in Industry and more importantly with focus on pollution for LNG in the Commercial Vehicles. Started by a cylinder trader, its come a long way in 10 years. The claim to fame and its reason for success seems to be its relationship with Tenaris which gives it the value added seamless steel pipes for the manufacture of these cylinders. We remain surprised at the high ROEs the company manages, in a business which could be considered not so value add. What impressed us was the scope of the businesses. LNG is expected to be less expensive than normal fuels and more than that, less polluting. Iran and Pakistan are big markets for such cylinders as they all shift into retrofit LNG kits for their autos. The demand is expected to be robust and specially in China. This is where it is expanding. We are not as negative as before given there is more clarity on Demand. However, we realize that its Tenaris relationship which is the competitive advantage that this company enjoys. Should be good to have a look at Tenaris but we are not fond of Everest Kanto anymore. The large project implementation risk remains. Do read the report for more.
Markets started off weak because of the circular on treatment of capital gains by investors. The Tax authorities were given the discretion to decide on whether the tax payer was a speculator or Investor. An investor can divide his portfolio into capital assets and trading assets. Taxpayer can have both cap gains and biz income in share transactions. Post this, the Indian markets saw continued strength helped by banks in the face expected weaker inflation (base effect.. we have been saying for many weeks now). This number came in at around 4.28 % for week ended June 9th and fairly marks the stable level. There was strength in Cement. The big story was of course infrastructure this week. This is one sector which really does not get affected because of interest rates. Its the Government spending which will spur this on. BHEL rallied on PM exhorting it to work an extra shift and then Larsen which continues to announce orders and of course Mid caps as mentioned in our earlier notes. The end of the large Public issue uncertainty had the markets back on to rails to challenge the all time high. However we believe it will be a daunting task. Tech sector and textiles continue to reel under the Rupee onslaught. The autos is where the weakness is apparent and really its unlikely that relief will be quick to come unless the RBI signals lowering of interest rates. Crude hit almost $ 70 and thats really what will keep the RBI from cutting rates at least for now. Of course they will wait for more signals of slower growth.
Markets this week saw the Sensex up 2% (290 points); Nifty up 1.8% (76 points up); Mid caps up 3% ; Small caps up 2.2%; IT Index down 3%; Capital Goods up 4.8% up; Banking index up 4.8%.
Sugar stocks had a bad Friday. The only hopes.. the WTO talks have failed and that means that US and Europe will continue with farm subsidies. The markets of India Brazil will remain closed for access to goods and services for these developed economies. Bad news for sugar because EU was expected to turn net importer against being a net exporter. The long term story gets impacted negatively.. Sugar output in India, the world's second-largest sugar producer and biggest consumer, is expected to touch 280 lakh tonnes this season ending September while domestic consumption is likely to be 190 lakh tonnes. After including last year's carryover stock of 40 lakh tonnes, the country would have a total stock of 130 lakh tonnes this year. The Government intends to stock up another 3 mn tonnes in sugar buffer. The WTO Talks failure has made even the long term story bitter suddenly. Sugar stocks were badly down.
We had a note on Action construction: Action Construction is one company where the Management is gungho about growth. This is a company into Mobile cranes, Tower cranes. It has recently entered the Backhoe loaders which is earth moving equipment. The company has been growing aggressively and has an orderbook of about 400 machines. The macro business environment seems extremely exciting and the company has expanded as well. However its valuations where we have concerns. Also the competitive advantage against competition such as JCB, Escorts, BEML seems to be price. Thats what put us off. Valuations are not compelling.
We had a research note on Everest kanto cylinders. This company intends to triple capacity for high pressure cylinders which are used in Industry and more importantly with focus on pollution for LNG in the Commercial Vehicles. Started by a cylinder trader, its come a long way in 10 years. The claim to fame and its reason for success seems to be its relationship with Tenaris which gives it the value added seamless steel pipes for the manufacture of these cylinders. We remain surprised at the high ROEs the company manages, in a business which could be considered not so value add. What impressed us was the scope of the businesses. LNG is expected to be less expensive than normal fuels and more than that, less polluting. Iran and Pakistan are big markets for such cylinders as they all shift into retrofit LNG kits for their autos. The demand is expected to be robust and specially in China. This is where it is expanding. We are not as negative as before given there is more clarity on Demand. However, we realize that its Tenaris relationship which is the competitive advantage that this company enjoys. Should be good to have a look at Tenaris but we are not fond of Everest Kanto anymore. The large project implementation risk remains. Do read the report for more.
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