Budget 2010: Bridging Gap Between BHARAT & INDIA

The experts say that the FY10-11 budget is one of the best budgets the government has presented in the recent years which not only introduced reforms that would instigate growth, but also focused on the mounting deficit and laid a clear road map that ensured that the country is not on the path of becoming the next Greece.

I agree to all what the experts say that the budget did so many things that is good for the economy in the longer term it includes things like:

• Reducing the tax slabs that would empower the consumer
• Moving towards simplified tax reforms
• Only partial roll-back of stimulus
• Thrust on Power generation and infrastructure, etc.

I could go on and keep talking about these things, but one of the most important take aways which I believe is not receiving media attention is that the government is is working towards bridging the gap between BHARAT & INDIA.

This is the place I believe where the growth lies, the steps like

• Allocation Rs 66, 100 cr for rural development in FY10-11
• Increased spending on rural infrastructure
• Increasing agricultural productivity
• Increased spending on primary education at rural level
• Increase spending on rural employment and other social schemes
• Higher focus on power development in rural sector, etc

will definitely instigate the growth and bridge the long time gap and empower the masses that would lead to the higher inclusive growth.

Hence, as an analyst I believe that one theme that could be worked upon in the near term and which could have the potential of creating wealth in the long term is to invest in companies that is working in rural India or rural development.

Some examples could include pharma companies that focus mainly on rural medicines, rural infrastructure companies, food processing companies , etc.

I will start working on this theme and would let you all know what stocks could be invested on and would be great if you all could also share your views on whether this theme makes any sense or not and if yes than stocks you believe could be worked on.

Till then

Happy Investing.

Expecting A Lack Lustre Budget

For the first time in last so many years, the MEDIA has actually not as big a hype surrounding the union budget as was the trend in previous years.

The only thing in contention is that whether or not the government will withdraw the stimulus package all at once, or will phase out the exit. There is hardly any probability of any new perks for industries with which it would benefit.

Based on the railway budget, it seemed that the government is in a mood to go for more socialist causes, since despite a shrinking surplus for the Railways, Mamata di did not hiked any of the passenger fare or the freights. Hence, if Dada also goes for socialist causes the deficit situation would worsen and can cause a selling in the broader markets and banking in specific

The economic survey document released today highlights the three key issues:

• Growth coming back on track and will reach around 9% by FY12
• A "gradual rollback" of stimulus measures after assessing the impact on each sector
• Concern of high food price inflation and this spreading to general economic inflation

Thus, I believe this budget to be a non-event in general, however too much socialist expenditure to cheer the AAM ADMI or a higher than expected roll back of the excise duty and higher than 5.5% announcement of FY11 deficit could lead to a sell off in the markets.

You could use the LINK to download our research team's Consensus budget expectation report.

Happy investing.

Sprinting Economy Does Not Need Crutches

FACT:

In last 19 years, since 1991 the Indian Stock Markets have ended negative (down) on 15 ocassions in the month after the budget.

Indian Economic growth as the MEDIA says is back on track with the December IIP surging over a record 16%.

Despite the this record breaking IIP performance the stock markets did not performed the way it used to perform in the past. The key reason I believe is that the street by seeing the sprinting economy is factoring in that the government will withdraw the fiscal stimulus crutches it had given the country when it was on its knees.

Moreover, the government is facing an acute problem of rising fiscal deficit and thus it has to take stern actions to reduce the same. Hence, instead of providing any further perks that could help the corporates it will take back the ones which are already being provided.

Thus, I strongly believe that one should remain extremely cautious and should not go long now expecting a pre budget rally, since its just a MEDIA and BROKER's jargon to get retail investors into the market and distribute the stocks they are still holding. The rally may be there, just to entice the investors and should lead to a sell off after the actuals are out.

Happy Investing..!!

Green Shoots of Recovery are Still Fragile

There is one simple yet core principle behind any country's stock market success, that its ECONOMY has to perform. In, general markets takes clues form the economy and recovers, however last year the markets started recovering and then the economy started to follow.

The following I believe could be the recovery shape for the TOP global economies if the markets recovery has to sustain:

• The $14.4tn US economy, the growth might slowdown if the government starts withdrawing the stimulus, however the the confidence among the consumers is a key to the world's biggest consumption driven economy
• The $13.5tn Euro Area, is currently suffering from one of its biggest nightmare that is the sovereign default crisis. If nothing concrete and fast is undertaken shortly, this could lead to a total chaos in the financial markets and could lead EURO to slip further which could hurt the export dependent Europe and Germany
• The $4.9tn Japanese economy, is trapped in the classical liquidity trap since decades where the spiral of negative inflation and low interest rates is not letting it recover. The NPAs woes from the banking space and lack of consumption will continue to hinder the growth
• The great $4.32bn Chinese economy is expected to do well riding high on opportunities like high corporate profitability, buoyant consumer spending, loose fiscal policy and more scope for monetary and fiscal stimulus. The concerns are too much of liquidity creating a bubble, which thankfully the government has started to tackle and lack of mass participation in the growth

• $2.64 bn sized UK economy, the growth path is really sluggish on account of the fiscal restraint which will pose an obstacle to the country's growth for the next 4-5 years

• Our $1.2 tn Indian Economy, has also recovered given the huge government stimulus and rising industrial growth. However, the rising food price inflation which could lead to a hike in the interest rates and withdrawal of fiscal stimulus could take the shine away

Thus, even though most the economies are showing the Green shoots of recovery, it is still fragile and if not taken care well can change the party mood.

eGovernance Sector: Ready to Take Off

eGovernment sector in India is still in its nascent stage and we strongly believe that it has a very high growth potential. It would not be wrong to suggest a multifold growth in its size given the fact that the country still ranks 113th in the world on the eGovernance readiness index (2008).

Moreover, taking the clues from the developed nations, we think that if India has to maintain its growth trajectory then the public sector has to play a pivotal role and it is only possible if eGovernance is given prime importance, so that the reforms reaches out to the masses.

Thus, I strongly believe that one should add Tera Software, Vakrangee Softwares and ABM Knowledgeware to an investment portfolio with 3-5 year time horizon, or one can also start doing SIP form of investment in them with equal weight on the three stocks.

For further details regrading the sector or to know more about the companies recommended, please use the link to download the full report.

Happy Investing.!!

Gold Could See Further Selling...!!!

The shining GOLD is no more shining high. Last week it had one the biggest weekly fall on account of a strengthening US dollar, which is gaining strength because of a crisis in EURO zone.

This I believe is expected to continue further, because the four EU countries( Portugal, Spain, Greece and Italy) which are facing the maximum chances of a debt crisis holds most of there reserves in the form of Gold. Thus, prompted by the current crisis they could start liquidating there Gold reserves, which will further bring down the prices of Gold.

As Per the latest IMF data, as on 31st December 2009

• Portugal Holds around 75% of its reserves in Gold
• Greece around 70% of its reserves
• Italy around 60% and
• Spain around 40%

Thus, I strongly believe that the way this current crisis is unfolding, these countries will sell their gold reserves to avoid the chances of a Sovereign Default.

Hence, avoid buying GOLD on dips and if you are a trader then can go short on GOLD.

Bye Bye Fiscal Stimulus...!!

With the Indian economic growth back on track the ministry feels that the it is the time to withdraw the duty cuts offered last year. This could have a negative effect on industries across the board, especially the likes of Steel, Automobile and Cement because of a reduction in the demand owing to an increase in the excise duty.

Moreover an increase in the excise duty would also increase the general price level in the economy which would worsen the inflation situation.

Thus, this gives one more reason for one to remain cautious and not to take euphemistic long positions in the market based on the views of the SO called experts on TV, since they will only make money if they get advertisement revenue, which in turn depends on increased number of retailers watching the business channels and retailers only watch business channels in the time of a market boom and not in the adverse times.

One can still start SIP investment in the stocks I have already mentioned many a times: Hawkins, Crest Animation, Infoedge India and Zicom and avoid chasing the rate sensitives and completely ignore the BUY ON DIPS advice.

Happy Investing.

Crisis Farm From Over...?

Finally when the whole world, especially the great MEDIA is rejoicing over the fact that the worst is far away now and we are climbing a new ladder of growth, a new sovereign debt crisis is looming in Europe.

The chances of sovereign default of two of the prominent EU countries is increasing. Portugal and Greece have not grabbed much of the attention, probably because the MEDIA does not want to spoil the great recovery party. However, the probability of their governments not being able to pay of their debt has increase many folds and these is clearly reflected from the way their Credit Default Swaps (CDS) are behaving.

CDS on Portugal rose over the 200 level for the first time and the swaps on five-year Portugal debt rose 4.29 basis points to 200.51, and those for Greece rose 7.64 points to 405.05. This rise in CDS clearly highlights the fact that the things are not as good, as being proposed.

Thee, big problem with this continuing further is that:

• Firstly, this will put a downward pressure on the EURO which has already weakened below the crucial level of 1.4 and any further weakening will cause a sell of in commodities and other asset because of an unwinding of the dollar carry trade positions

• Most important implication could be a change in the sentiments, if a Dubai default can cause shimmers, the news of default of two EU countries can certainly cause earthquake.

Thus, I would advise one to remain cautious or the best is to invest in SIP and avoid investment on a lump sum basis on these dips.

Happy Investing.

Hawkins Post Stunning Q3 Results: Maintain BUY

Hawkins Cookers Limited came out with its Q3FY10 results on 29th January. The net sales stood at Rs 75.6 crore, up by around 22% (YoY) and net profit of Rs 11.68 crore, up by an whooping 245%. This is a third consecutive quarter where the company have posted a 3 digit earnings growth.

Result Highlights:

• EBITDA for Q3FY10 stood at Rs 17.84 crore vs Rs 5.58
• cr , a y-o-y increase of 220% while EBITDA margins
• stood at 23.60% an increase of over 1400 bps, YoY
• This was mainly on account of an outstanding operating performance, where the
• company witnessed a decline in its operating
• expenses in every vertical be it raw materials ,
• employee costs, other expenditure & traded goods
• The company managed to cut down its operating
• expenses even without any gain on its inventory which

Summary: