* Main index gains 0.9 pct on day, up 4.5 pct on week
* Banks, outsourcers lead gains on improving outlook
* Liquidity drives rally; foreign inflows $14.8 bln this year (Updates to close)
By Ami Shah
MUMBAI, Nov 13 (Reuters) - Indian shares climbed 0.9 percent on Friday led by banks and outsourcers and propelled the main index to its best weekly gain in 11 weeks, supported by rising foreign portfolio investment.
The 30-share BSE index .BSESN rose 4.5 percent on the week, taking gains this month to 6 percent after sliding 7.2 percent in October, which was its worst performance in a year.
"Ihe rally is driven by liquidity, which is fuelled by dollar weakness," said Manish Sonthalia, portfolio management services manager at Motilal Oswal.
Foreign funds have moved $14.8 billion into Indian stocks this year, lifting the BSE index nearly 75 percent. In 2008, they had pulled out more than $13 billion and the benchmark fell over half.
Private lenders ICICI Bank (ICBK.BO) and HDFC Bank (HDBK.BO) were among the gainers on hopes rising industrial activity will boost demand for loans and the long-term outlook.
"We expect bank credit growth to rise to 16 percent year-on-year by March 2010," Morgan Stanley said, adding it will accelerate to 22 percent by end-2010 as capital expenditure also begins to recover next year.
The BSE index closed up 0.92 percent, or 152.80 points, at 16,848.83. Twenty-five of its components advanced.
ICICI Bank and HDFC Bank rose 1.6 percent and 0.4 percent respectively while SBI gained 0.1 percent.
Export-focused software services companies climbed as the sector outlook was positive, with orders set to rise and hiring plans picking up, R. Ganesh, director of Systematix Shares, said.
Bellwether Infosys Technologies (INFY.BO) rose 1.5 percent to 2,358.80 rupees.
Sector leader Tata Consultancy (TCS.BO) added 2.5 percent to 670.20 rupees and Wipro (WIPR.BO) firmed 1.2 percent to 632.70 rupees.
State-run oil and gas producer Oil & Natural Gas Corp (ONGC.BO) rose 3.1 percent to 1,183.50 rupees on market talk the oil ministry had proposed a hike in gas prices. Continued...
Saturday, November 14, 2009
Friday, November 13, 2009
Gujarat broker opens window to global market
Ahmedabad, Nov. 12 Ahmedabad-based Vimal Stocks Ltd has announced a strategic alliance with UK-based Spread Co to give investors an opportunity to put money in global markets.
Vimal Stocks – founded in 2006 to provide brokerage, research and portfolio management – said its alliance with Spread Co has resulted in a new entity, Vimal Trade. The new company would help investors get access to global markets with local support, said Mr Darshan Shah, CEO, Vimal Stocks, at a press conference.
Vimal Trade would provide online trading platform with offices in London and Singapore. It would hold a conference for investors and traders here on November 14, after which the new facility would be made available.
Through its product Indian Premium Securities, Vimal Trade would also bring foreign exchange trading across world markets to investors. With this, high net worth investors would be able to trade in world markets from one online trading account. Vimal Trade will also help multiply the client's money through research-based investment, said Mr Devang Shah, Head of Sales and Marketing.
Investors would be able to trade as little as one share, one index unit and 5,000 units of currencies.
Markets will remain open for 24 hours, between 10 p.m. on Sunday evening (London time) and 10 p.m. on Friday evening (London time). The new entity intends to open its corporate office in Mumbai by March 2010 and plans to come out with an IPO by March 2012.
Vimal Stocks – founded in 2006 to provide brokerage, research and portfolio management – said its alliance with Spread Co has resulted in a new entity, Vimal Trade. The new company would help investors get access to global markets with local support, said Mr Darshan Shah, CEO, Vimal Stocks, at a press conference.
Vimal Trade would provide online trading platform with offices in London and Singapore. It would hold a conference for investors and traders here on November 14, after which the new facility would be made available.
Through its product Indian Premium Securities, Vimal Trade would also bring foreign exchange trading across world markets to investors. With this, high net worth investors would be able to trade in world markets from one online trading account. Vimal Trade will also help multiply the client's money through research-based investment, said Mr Devang Shah, Head of Sales and Marketing.
Investors would be able to trade as little as one share, one index unit and 5,000 units of currencies.
Markets will remain open for 24 hours, between 10 p.m. on Sunday evening (London time) and 10 p.m. on Friday evening (London time). The new entity intends to open its corporate office in Mumbai by March 2010 and plans to come out with an IPO by March 2012.
Thursday, November 12, 2009
No wall yet to hold capital flows: Fin secy
NEW DELHI: The government has ruled out any curbs on capital inflows even though the inflows in the initial months of the current fiscal are
almost on par with corresponding months of 2007-08, the year several measures to curb inflows were put in place as monetary management had become difficult.
“Flows are not a cause for concern...We are watching the situation... There is no need for specific action now,” finance secretary Ashok Chawla said on Wednesday told reporters on the sidelines on a seminar organised by economic think-tank ICRIER.
That government may still be concerned about capital inflows is evident in that it has said that there are no immediate plans to review the cap on foreign institutional investment (FII) limit in the corporate bonds from the current $15 billion.
Though officials refused to read too much into it. “A review is called for only if at least 80% of the cap is utilised and FII investment in corporate bonds was yet to reach that stage,” a finance ministry official said on the sidelines of the same seminar.
Mr Chawla pointed that rise in foreign inflows into the country was on the expected lines. “Perception was that as financial markets in industrial economies defreeze, money will move into countries considered attractive for investment,” he said adding that the government as well as market regulator Sebi and the central bank were keeping a watch on the situation.
India saw foreign investments inflows of $ 27.5 billion in April-August this year. At the current pace, inflows could cross the $61.6 billion for entire 2007-08, when the country undertook tough measures including imposing restrictions on participatory notes (PN) and external commercial borrowings.
PNs are derivatives issued against an underlying Indian security, which could be shares or derivatives, by foreign portfolio investors registered in India to overseas investors who want trade anonymously, without registering with the local authorities.
Net invisibles in April-June 2009 were also almost on par with corresponding quarter last year. Increase in foreign money inflow has led to over 8% appreciation the Indian rupee vis-a-vis the greenback.
The RBI has already expressed concerns over rising capital flows, which could further go up following monetary tightening which looks imperative in view of inflationary concerns. Higher interest rates in India compared to near zero in many countries could cause more funds to come flow.
Head of Prime Minister’s key advisory body — Prime Minister’s Economic Advisory Council, C Rangarajan on Wednesday also alluded to monetary tightening kicking in earlier if inflation pressures develop. The RBI has already hiked its inflation estimate to 6.5% by March 2009 from 5% earlier.
On a separate issue of developing the corporate bonds market, the official said that repos, or repurchase agreements, in corporate bonds may kick-in by next calendar
almost on par with corresponding months of 2007-08, the year several measures to curb inflows were put in place as monetary management had become difficult.
“Flows are not a cause for concern...We are watching the situation... There is no need for specific action now,” finance secretary Ashok Chawla said on Wednesday told reporters on the sidelines on a seminar organised by economic think-tank ICRIER.
That government may still be concerned about capital inflows is evident in that it has said that there are no immediate plans to review the cap on foreign institutional investment (FII) limit in the corporate bonds from the current $15 billion.
Though officials refused to read too much into it. “A review is called for only if at least 80% of the cap is utilised and FII investment in corporate bonds was yet to reach that stage,” a finance ministry official said on the sidelines of the same seminar.
Mr Chawla pointed that rise in foreign inflows into the country was on the expected lines. “Perception was that as financial markets in industrial economies defreeze, money will move into countries considered attractive for investment,” he said adding that the government as well as market regulator Sebi and the central bank were keeping a watch on the situation.
India saw foreign investments inflows of $ 27.5 billion in April-August this year. At the current pace, inflows could cross the $61.6 billion for entire 2007-08, when the country undertook tough measures including imposing restrictions on participatory notes (PN) and external commercial borrowings.
PNs are derivatives issued against an underlying Indian security, which could be shares or derivatives, by foreign portfolio investors registered in India to overseas investors who want trade anonymously, without registering with the local authorities.
Net invisibles in April-June 2009 were also almost on par with corresponding quarter last year. Increase in foreign money inflow has led to over 8% appreciation the Indian rupee vis-a-vis the greenback.
The RBI has already expressed concerns over rising capital flows, which could further go up following monetary tightening which looks imperative in view of inflationary concerns. Higher interest rates in India compared to near zero in many countries could cause more funds to come flow.
Head of Prime Minister’s key advisory body — Prime Minister’s Economic Advisory Council, C Rangarajan on Wednesday also alluded to monetary tightening kicking in earlier if inflation pressures develop. The RBI has already hiked its inflation estimate to 6.5% by March 2009 from 5% earlier.
On a separate issue of developing the corporate bonds market, the official said that repos, or repurchase agreements, in corporate bonds may kick-in by next calendar
Wednesday, November 11, 2009
Indian Shares End Lower; Telcos, Metals, Autos Drag
MUMBAI (Dow Jones)--Indian shares snapped a four-day winning streak to end slightly lower Tuesday as telecoms, some autos and metals fell.
The Bombay Stock Exchange's 30-stock Sensitive Index dropped 58.16 points, or 0.4%, to end at 16,440.56.
"This is just profit-booking. Investors are taking advantage of market volatility to make quick profits," said R.K. Gupta, managing director at Taurus Asset Management.
The benchmark Sensex, which had risen 7.1% in the past four sessions, swung between 16,371.66 and 16,677.53 during the day.
"This volatility may continue until fresh liquidity comes into the market," said Gupta.
On the National Stock Exchange, the 50-stock S&P CNX Nifty closed down 16.70 points, or 0.3%, at 4,881.70.
Manish Sonthalia, a portfolio manager at Motilal Oswal Financial Services, said a stronger U.S. dollar versus the rupee is also hurting sentiment.
But he has a positive outlook for the Sensex.
"Any decline in the index is an opportunity to buy," said Sonthalia, who expects the index to reach 18,000 points by March 2010.
Total traded volume on the BSE Tuesday rose to INR59.53 billion, from Monday's INR49.95 billion.
Decliners beat gainers 1,463 to 1,290, while 56 stocks remained unchanged.
Telecoms continued to remain weak. Bharti Airtel, the country's largest cellphone operator by subscribers, slumped 4.5% to end at INR293.75. Reliance Communications closed down 2.9% at INR169.05.
"We remain cautious on the (Indian telecom) sector, given the rapidly declining revenue per minute measure and a move by the entire sector to a per-second billing format, which, in our view, will be revenue-destructive," HSBC said in a note.
Metals were mostly weak as base metal prices on the London Metal Exchange were lower on a stronger U.S. dollar and ahead of China's October preliminary metal import data.
Aluminum producer Hindalco Industries slid 2.0% to INR126.95.
Consumer goods maker Hindustan Unilever dipped 2.3% to INR264.75.
Autos were mixed. Two-wheeler maker Hero Honda Motors slipped 3.3% to INR1,500.40, while Tata Motors, India's biggest auto maker by sales, rose 2.3% to INR593.75.
Reliance Industries gained 1.4% to INR2,052.60 on news that the energy giant has discovered oil in the Cambay basin in the western state of Gujarat.
State Bank of India, the country's largest lender by assets, closed 2.1% higher at INR2,368.10 on expectations of a positive outlook for banks and hopes that the company's recent move to cut deposit rates would help protect margins
The Bombay Stock Exchange's 30-stock Sensitive Index dropped 58.16 points, or 0.4%, to end at 16,440.56.
"This is just profit-booking. Investors are taking advantage of market volatility to make quick profits," said R.K. Gupta, managing director at Taurus Asset Management.
The benchmark Sensex, which had risen 7.1% in the past four sessions, swung between 16,371.66 and 16,677.53 during the day.
"This volatility may continue until fresh liquidity comes into the market," said Gupta.
On the National Stock Exchange, the 50-stock S&P CNX Nifty closed down 16.70 points, or 0.3%, at 4,881.70.
Manish Sonthalia, a portfolio manager at Motilal Oswal Financial Services, said a stronger U.S. dollar versus the rupee is also hurting sentiment.
But he has a positive outlook for the Sensex.
"Any decline in the index is an opportunity to buy," said Sonthalia, who expects the index to reach 18,000 points by March 2010.
Total traded volume on the BSE Tuesday rose to INR59.53 billion, from Monday's INR49.95 billion.
Decliners beat gainers 1,463 to 1,290, while 56 stocks remained unchanged.
Telecoms continued to remain weak. Bharti Airtel, the country's largest cellphone operator by subscribers, slumped 4.5% to end at INR293.75. Reliance Communications closed down 2.9% at INR169.05.
"We remain cautious on the (Indian telecom) sector, given the rapidly declining revenue per minute measure and a move by the entire sector to a per-second billing format, which, in our view, will be revenue-destructive," HSBC said in a note.
Metals were mostly weak as base metal prices on the London Metal Exchange were lower on a stronger U.S. dollar and ahead of China's October preliminary metal import data.
Aluminum producer Hindalco Industries slid 2.0% to INR126.95.
Consumer goods maker Hindustan Unilever dipped 2.3% to INR264.75.
Autos were mixed. Two-wheeler maker Hero Honda Motors slipped 3.3% to INR1,500.40, while Tata Motors, India's biggest auto maker by sales, rose 2.3% to INR593.75.
Reliance Industries gained 1.4% to INR2,052.60 on news that the energy giant has discovered oil in the Cambay basin in the western state of Gujarat.
State Bank of India, the country's largest lender by assets, closed 2.1% higher at INR2,368.10 on expectations of a positive outlook for banks and hopes that the company's recent move to cut deposit rates would help protect margins
Monday, November 9, 2009
Steel firms may face a dismal third quarter
uarterly results of companies engaged in the commodities business are bad crucibles in which forges a view of the future. But operators driven, as they are, by emotion and unconscious fantasy will see a fall in turnover and profits for a particular period, which signals to sell and book profits.
hat is why both Steel Authority of India (SAIL), the country’s largest producer of ferrous metal and Tata Steel, which has given shape to its global ambition by acquiring Corus and also some relatively small steel makers in south east Asia, came under some selling pressure on stock exchanges post announcement of their half yearly results.
While the market reaction to the paring of profits in both cases is on expected lines, astute observers would not fail to notice the significant improvement in house keeping mitigating the impact of steel price falls to a considerable extent. SAIL chairman Sushil Roongta estimates the “adverse impact” of the steep fall in steel prices from the high of corresponding period of last fiscal in the case of his company at around Rs 3,000 crore.
But Roongta, who has come to represent the cerebral face of the industry, responded to the challenge of a weak market by stepping up production of value added items, all round cost control and better fund management. It will be wrong to consider overall saving of Rs 1,000 crore resulting from the host of initiatives in the second quarter as a one off development.
In times like this, pressure builds up on all steel makers to become more efficient by improving techno economic parameters. To the extent this happened in the past quarter should become a permanent feature with SAIL. Net sales of the company slipped 21 per cent to Rs 13,544 crore and net profit by 17 per cent to Rs 1,663 crore in the second quarter on a year-on-year basis.
A combination of steel prices falling as much as Rs 10,100 a tonne to Rs 29,900 from last year’s “historic high” in the second quarter, a Rs 60,000 a tonne set back in realisation from ferro chrome sales, planned shutdown of some units and also accumulation of some slabs now being utilised will explain Tata Steel finishing the quarter with net profit nearly halved to Rs 903 crore.
Though not widely known, chrome concentrate and ferro alloys constitute an important portfolio for Tata Steel. Not only is Tata Steel the unquestioned leader in ferro chrome business here with a market share of around 36 per cent but for major part of last year when global producers were stretched to meet the soaring demand for the alloy, it claimed a 4 per cent share of the world market.
It will be begging the question to know the fate of others in the industry when SAIL and Tata Steel with the benefit of total sourcing of good quality iron ore from owned mines had to take a hit in profits. But then how did JSPL manage to raise net profit by Rs 791 crore to Rs 1,797 crore in the first half? Take a look at segment-wise results of JSPL for the answer. The company’s bottom line got the boost entirely from power business where profit before tax and interest rose to Rs 1,869 crore from Rs 741 crore. That JSPL’s profits from iron and steel segment saw a colossal fall then go without saying. Downturn in the commodity in line with other metals ate into profits of other steel makers too.
Don’t expect anything much better to happen to the steel industry’s profits in this third quarter. Hasn’t Roongta said that prices of long products have come under pressure because of comfortable domestic supply scene while the flats are going through price correction? What should, however, bring some relief to the industry is that long-term contracts for coking coal done at rates of around $300 a tonne have started ending. According to Tata Steel CFO Koushik Chatterjee, “The blended coal cost will fall to $160 a tonne in the December quarter.”
Profit erosion should not detract attention from the bigger picture of our steel consumption growing at least 9 per cent this year. At this stage of our economic development, growth in use of steel will remain some percentage points ahead of GDP growth rate.
Steel minister Virbhadra Singh is right that a whole new big market for steel will open up in Indian semi-urban and rur al areas provided the material becomes easily available and at “affordable rates.”
Singh is to the point that before a strategy to promote steel use in basically virgin areas is formulated we should get a comprehensive survey done. To make the survey broad based, the ministry’s consulting arm JPC will cover 300 districts and 1,500 villages.
hat is why both Steel Authority of India (SAIL), the country’s largest producer of ferrous metal and Tata Steel, which has given shape to its global ambition by acquiring Corus and also some relatively small steel makers in south east Asia, came under some selling pressure on stock exchanges post announcement of their half yearly results.
While the market reaction to the paring of profits in both cases is on expected lines, astute observers would not fail to notice the significant improvement in house keeping mitigating the impact of steel price falls to a considerable extent. SAIL chairman Sushil Roongta estimates the “adverse impact” of the steep fall in steel prices from the high of corresponding period of last fiscal in the case of his company at around Rs 3,000 crore.
But Roongta, who has come to represent the cerebral face of the industry, responded to the challenge of a weak market by stepping up production of value added items, all round cost control and better fund management. It will be wrong to consider overall saving of Rs 1,000 crore resulting from the host of initiatives in the second quarter as a one off development.
In times like this, pressure builds up on all steel makers to become more efficient by improving techno economic parameters. To the extent this happened in the past quarter should become a permanent feature with SAIL. Net sales of the company slipped 21 per cent to Rs 13,544 crore and net profit by 17 per cent to Rs 1,663 crore in the second quarter on a year-on-year basis.
A combination of steel prices falling as much as Rs 10,100 a tonne to Rs 29,900 from last year’s “historic high” in the second quarter, a Rs 60,000 a tonne set back in realisation from ferro chrome sales, planned shutdown of some units and also accumulation of some slabs now being utilised will explain Tata Steel finishing the quarter with net profit nearly halved to Rs 903 crore.
Though not widely known, chrome concentrate and ferro alloys constitute an important portfolio for Tata Steel. Not only is Tata Steel the unquestioned leader in ferro chrome business here with a market share of around 36 per cent but for major part of last year when global producers were stretched to meet the soaring demand for the alloy, it claimed a 4 per cent share of the world market.
It will be begging the question to know the fate of others in the industry when SAIL and Tata Steel with the benefit of total sourcing of good quality iron ore from owned mines had to take a hit in profits. But then how did JSPL manage to raise net profit by Rs 791 crore to Rs 1,797 crore in the first half? Take a look at segment-wise results of JSPL for the answer. The company’s bottom line got the boost entirely from power business where profit before tax and interest rose to Rs 1,869 crore from Rs 741 crore. That JSPL’s profits from iron and steel segment saw a colossal fall then go without saying. Downturn in the commodity in line with other metals ate into profits of other steel makers too.
Don’t expect anything much better to happen to the steel industry’s profits in this third quarter. Hasn’t Roongta said that prices of long products have come under pressure because of comfortable domestic supply scene while the flats are going through price correction? What should, however, bring some relief to the industry is that long-term contracts for coking coal done at rates of around $300 a tonne have started ending. According to Tata Steel CFO Koushik Chatterjee, “The blended coal cost will fall to $160 a tonne in the December quarter.”
Profit erosion should not detract attention from the bigger picture of our steel consumption growing at least 9 per cent this year. At this stage of our economic development, growth in use of steel will remain some percentage points ahead of GDP growth rate.
Steel minister Virbhadra Singh is right that a whole new big market for steel will open up in Indian semi-urban and rur al areas provided the material becomes easily available and at “affordable rates.”
Singh is to the point that before a strategy to promote steel use in basically virgin areas is formulated we should get a comprehensive survey done. To make the survey broad based, the ministry’s consulting arm JPC will cover 300 districts and 1,500 villages.
State Bank of India gains 5.2 per cent
he stock was the largest gainer among Sensex companies and rose 5.2 per cent to Rs 2,318.55, after the state-run bank entered into an agreement with T Rowe Price under which the bank will sell 6.5 per cent holding each in UTI Asset Management Company and UTI Trustee Company.
After the sale its holding would be reduced to 18.5 per cent. Last week, the bank announced reduction in interest rates on deposits by 25-50 basis points for a few maturities. The cut in deposit rates will bring down the cost of funds.
After the sale its holding would be reduced to 18.5 per cent. Last week, the bank announced reduction in interest rates on deposits by 25-50 basis points for a few maturities. The cut in deposit rates will bring down the cost of funds.
Thursday, November 5, 2009
A PRACTICAL APPROACH TO PORTFOLIO MANAGEMENT
Portfolio Management is used to select a portfolio of new product development projects to achieve th following goals:
- Maximize the profitability or value of the portfolio
- Provide balance
- Support the strategy of the enterprise
Portfolio Management is the responsibility of the senior management team of an organization or business unit. This team, which might be called the Product Committee, meets regularly to manage the product pipeline and make decisions about the product portfolio. Often, this is the same group that conducts the stage-gate reviews in the organization.
A logical starting point is to create a product strategy - markets, customers, products, strategy approach, competitive emphasis, etc. The second step is to understand the budget or resources available to balance the portfolio against. Third, each project must be assessed for profitability (rewards), investment requirements (resources), risks, and other appropriate factors.
The weighting of the goals in making decisions about products varies from company. But organizations must balance these goals: risk vs. profitability, new products vs. improvements, strategy fit vs. reward, market vs. product line, long-term vs. short-term. Several types of techniques have been used to support the portfolio management process:
- Heuristic models
- Scoring techniques
- Visual or mapping techniques
The earliest Portfolio Management techniques optimized projects' profitability or financial returns using heuristic or mathematical models. However, this approach paid little attention to balance or aligning the portfolio to the organization's strategy. Scoring techniques weight and score criteria to take into account investment requirements, profitability, risk and strategic alignment. The shortcoming with this approach can be an over emphasis on financial measures and an inability to optimize the mix of projects. Mapping techniques use graphical presentation to visualize a portfolio's balance. These are typically presented in the form of a two-dimensional graph that shows the trade-off's or balance between two factors such as risks vs. profitability, marketplace fit vs. product line coverage, financial return vs. probability of success, etc.
The chart shown above provides a graphical view of the project portfolio risk-reward balance. It is used to assure balance in the portfolio of projects - neither too risky or conservative and appropriate levels of reward for the risk involved. The horizontal axis is Net Present Value, the vertical axis is Probability of Success. The size of the bubble is proportional to the total revenue generated over the lifetime sales of the product.
While this visual presentation is useful, it can't prioritize projects. Therefore, some mix of these techniques is appropriate to support the Portfolio Management Process. This mix is often dependent upon the priority of the goals.
Our recommended approach is to start with the overall business plan that should define the planned level of R&:D investment, resources (e.g., headcount, etc.), and related sales expected from new products. With multiple business units, product lines or types of development, we recommend a strategic allocation process based on the business plan. This strategic allocation should apportion the planned R&D investment into business units, product lines, markets, geographic areas, etc. It may also breakdown the R&D investment into types of development, e.g., technology development, platform development, new products, and upgrades/enhancements/line extensions, etc.
Once this is done, then a portfolio listing can be developed including the relevant portfolio data. We favor use of the development productivity index (DPI) or scores from the scoring method. The development productivity index is calculated as follows: (Net Present Value x Probability of Success) / Development Cost Remaining. It factors the NPV by the probability of both technical and commercial success. By dividing this result by the development cost remaining, it places more weight on projects nearer completion and with lower uncommitted costs. The scoring method uses a set of criertia (potentially different for each stage of the project) as a basis for scoring or evaluating each project. An example of this scoring method is shown with the worksheet below.
Weighting factors can be set for each criteria. The evaluators on a Product Committee score projects (1 to 10, where 10 is best). The worksheet computes the average scores and applies the weighting factors to compute the overall score. The maximum weighted score for a project is 100.
This portfolio list can then be ranked by either the development priority index or the score. An example of the portfolio list is shown below and the second illustration shows the category summary for the scoring method.
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