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Monday, November 3, 2008

Economic News & Results- Gujrat NRE COKE - IVRCL Infra

Positive economic news:

1. Finance ministry abolished customs duty on jet fuel. Oil PSUs decided to cut ATF prices. Will it add lifeline to the ailing industry? Slowdown in economic activity will continue to impact this industry.

2. Finance ministry withdrew export duty on pig iron and on some steel and iron products.

3. No job cuts in IT industry – Infosys mentor Narayan Murthy. My favourite leader is now talking like a politician in these days.

4. PTC India is looking at picking up stakes in power generation projects across the country.

5. US Stocks reported steepest weekly gain in 34 years. Investors will never learn from their mistakes. The Standard & Poor's 500 Index still finished October with its worst monthly drop since 1987

6. IDBI Bank cut home loan rates by 0.5%.

7. IPCA Labs will announce buyback plan on November 11th at board meeting. Ipca Labs reported 20% fall in net profit in this quarter.

8. ICICI Bank retired Rs 24,000 crore high cost deposits to reduce cost and improve profits. ICICI Bank CAR rose to 14.2% from 13.2%.

Negative financial news:

1. Maruti reported a 7% drop in October sales while Bajaj Auto reported 34% drop in sales. Festival atmosphere! TVS Motors announced 9% fall in sales.

2. Citigroup Inc lost $1.4 billion from packaging credit card loans into bonds in the third quarter.

3. SAIL, Essar Steel and JSW Steel announced price cuts while Tata Steel is steel watching. Why JSW Steel rose 33% on Friday?

4. Goan Government increased excise duty on low quality iron ore. This is a bad news for low quality iron ore producers but good news for high quality iron ore producers.


Recession news:

1. USA: Consumer spending declined by 0.3% in September. This is the biggest fall in 4 years. Consumer confidence suffered steepest monthly drop on record. US newspapers and magazines will announce 10% cut in workforce in this month to save companies.

2. Steel: ArcelorMittal stopped steel production in Cleveland unit due to drop in business. Extraordinary decisions – during extraordinary times!

3. Spain: GDP shrank 0.2% in the third quarter for the first time in 15 years. Spain is a sure recession candidate and will take years to recover from this real estate crisis.

4. Argentina: Debit ratings were cut by Standard and Poor to B- from B.

5. China: Manufacturing contracted due to lack of demand from developed countries. Inventories are piling up and factories are shutting down. China is now feeling the heat of global crisis. GDP growth rate may fell to 8% levels in the coming quarters.

6. Gulf: Investors are demanding Government to announce bailout package to protect stock markets.

7. Japan: Bank of Japan cut key interest rate from 0.5% to 0.3% - first time in 7 years.

8. Iran: Oil rich country cuts oil production by 2 lakh barrel per day.

9. Brazil: The world's second largest miner will cut its annual iron ore production by 30 million metric tons as demand for steel crumbles amid a global economic crisis. Steel companies across the globe have cut production by about 20% in 2008.

10. Germany and Russian Governments announced bailout packages.

Quarterly results analysis:

1. Gujarat NRE Coke:

Outstanding results. Company announced 480% increase in sales and 760% rise in net profit. Promoters raised stake by 4.8% while FII stake fell to 20% from 34%. I will continue to accumulate this scrip despite 20% fall in coke prices in the last quarter. Promoters are aggressively raising stake and voting rights through differential voting rights in order to overcome acquisition risk.

CMP: 30; P/E: 5; Book value: 25

2. XL Telecom and Energy:

Wonderful results. Solar Energy Company reported 70% increase in sales and 148% rise in net profit. This is a must have stock in any "Emerging portfolio". I am accumulating this scrip.

CMP: 62; P/E: 2.5; Book value: 105.

3. Hindustan Dorr-Oliver: Excellent results. IVRCL group Company announced 65% increase in sales and 72% rise in net profit.

CMP: 45.5; P/E: 6; Book value: 36.

4. IVRCL Infrastructure: Excellent results. Company announced more than 60% rise in both sales and net profit. IVRCL Group seems to be in good shape. But Company is sitting on huge debt.

CMP: 85; P/E: 4.8; Book value: 120

5. Hanung Toys: Good results and positive surprise. Battered company announced 40% rise in both sales and net profit. Will it continue its growth?

CMP: 72.3; P/E: 2.2; Book value: 100.

6. Ess Dee Aluminium: Good results. Comapny reported 60% rise in both sales and net profit.

7. Sathavahana Ispat: Outstanding results. Hyderabad based EPC Company reported 280% increase in sales and 490% rise in net profit. Huge debt is a concern.

CMP: 21; P/E: 1.4; Book value: 48.

8. McNally Bharat Engineering Company: Wonderful results. Company announced 75% increase in sales and 46% rise in net profit.

CMP: 48; P/E: 6; Book value: 45.

9. Simplex Infrastructure: Good results. Company announced 75% increase in sales and 45% rise in net profit. Huge debt is a burden.

CMP: 215;   P/E: 9.5;     Book value: 150.

10. Suven Life Sciences: Excellent results. This small cap Pharma Company announced 400% increase in net profit and 31% increase in net sales. But I am still concerned about this company due to high valuations. Hyderabad based Aurobindo Pharma once again disappointed investors.

CMP: 14.1; P/E: 20; Book value: 10

11. Petron Engineering: Good results. Company announced 80% rise in sales while net profit increased by 50%.

12. IOL Netcom: Turnaround story. Comapny reported a net profit of 0.7 crore Vs net loss of 1.8 crore. IOL Netcom announced 290% increase in sales.

13. GTL Infrastructure: Turnaround story. Company posted 85% growth in net profit while sales rose by 95%. Government rejected TRAI's request to collect licence fee on tower infrastructure companies. This decision is a huge boost to tower infrastructure companies. But Company is sitting on huge debt.

14. Visa Steel: Excellent results. Company reported 116% rise in sales and 480% rise in net profit. Huge debt is a big burden.

CMP: 21; P/E: 2.2; Book value: 32.

15. Essar Shipping announced wonderful results but gave cautious guidance.

Decent results:

Dredging Corporation of India, Pitti Laminations, IFB Agro Industries, Cambridge Technology, Mukta Arts, Horizon Infrastructure, Shree Ashtavinayak Cine Vision, Bombay Rayon Fashions, Procter and Gamble, MMTC, OnMobile Global, Hindalco Industries, Punjab national bank, Micro technologies, Bharat gears, Essar Oil, Nectar Lifescience, Astra Microwave products, Shriram City Finance, Berger Paints, Sakthi Sugars, Godfrey Phillips India, Lakshmi Energy Foods, Syndicate Bank, Mcleod Russel India, UCO Bank, Nestle India, Power Grid, Suprajit Engineering and Atlas Copco.

Poor results:

Northgate Technologies, DCB, Lanco Infra, Jindal Poly Films, Raj TV, Mid-Day Multimedia, IBN18 Broadcast, Suzlon Energy, Reliance Capital, Financial Technologies, Ranbaxy Laboratories, Bilpower, Birla Corporation, DLF, GMR Industries, Lloyd Electric, Uttam Galva Steels, Reliance Communications, Ispat Industries, Prime Securities, Kesoram industries, Fedders Lloyd Corporation, Plethico Pharma, Pyramid Saimira Theatre, ABG Shipyard, GVK Power and Infrastructure, Shriram EPC, Indo Rama Synthetics, Ipca Laboratories, Rohit Ferro Tech, Omaxe, Deccan Chronicle, Easun Reyrolle, SEL Manufacturing Company, Bharti Airtel, Indo Asian Fusegear, Kernex Microsystems, Gemini Communications, HPCL, Spice Mobiles, Tata Motors, Time Technoplast, Kotak Mahindra Bank, IOC, India Cements, IFB Industries, Elgi Equipments and Unitech.

Investment idea:

1. If BJP will come to power after the next Loksabha elections, we will aggressively promote disinvestment in Public Sector Companies as it is the only opportunity that is currently available for Government to raise money to spend on infrastructure– Former Finance Minister Yaswant Sinha.

Smart long term investors may sniff some investment opportunities in this statement. According to Sinha, Government should create job opportunities for people by spending on infrastructure projects as they did through "Golden Quadrilateral Project". UPA government failed miserably in this aspect. We have to see how Government will tackle foreign funds exodus and drop in exports. China and Japan are already feeling the heat in this aspect but they have huge cash reserves.

Financial measures should help economies to recover from the economic crisis. If these measures will fail to revive Indian economy, we will be in a serious trouble. Government should encourage disinvestment in PSUs and should spend huge money on infrastructure projects to create jobs and encourage consumption. Falling interest rates will improve margins of the some companies in the coming quarters.

Must read:

1. How global slowdown and deflation will impact economy?

2. Good article on pros and cons of "sit on cash" or "continue to invest in stocks".

Note: Use every big rally in bear market to book profits in bad companies and don't make fresh investments in rallies unless you are a long term investor. Stock markets will once again fall after reports on unemployment and manufacturing from USA will come out in this week. RBI measures will not change the business sentiment or confidence but help to change the stock market sentiment over short time. If RBI cuts repo rate by 2-3%, it may help to increase consumption in some sectors.
Article Source: Stock Market Guide

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