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On Slack: Ominous Ashiana Conf Call, Saudi Oil Battle, Indirect Taxes and More…

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The Slack Discussions

The Slack group at Capital Mind Premium has been extremely active and if you haven’t been there, pop us a note by replying to this email. (If you’re a trial member this probably sound like Greek to you; it will be available when you sign up!)

Awesome discussions again!

A brief summary of some of the interesting things discussed there in the last few days:

Saudi Arabia may go broke before the US oil industry buckles (Click here) 

• OPEC faces the prospect of surging US output whenever oil prices rise.

• Their bankruptcy will increase shale supply.

• Banks and investors lose on the debt, so they sell the shale assets cheap.

• Next buyer has lower debt overhang, leading to an even lower cost of development.

Why won’t this work in India?

• India does not have a bankruptcy law.

• The debt will never ever be forgiven and banks will always want to recover against promoter’s future income or even against the assets themselves like they do with arcs.

• The promoter never gets the bank off his/her back, which reduces their potential in the future.

• And if the ARC earns a profit selling the asset, they have to share with the bank.

• Banks prefer the arc route than attempting to actually sell and get the assets out of the system at lower prices because many of them own stakes in the very arcs they sell to.

FII ownership in Indian stocks ~20pct, still near record high; domestic MFs’ ownership spiked higher in Q2

• Insurance Companies offloading to MFs in Bull Market.

• FIIs too selling to MFs, but pretty flat.

FII investors

 

MACD has two ways to indicate change in momentum: divergence and histogram reading: 

How to read the MACD: 

https://www.capitalmind.in/2015/06/learn-ta-the-macd-indicator-and-how-we-use-it/  

Head and Shoulders pattern: 

Head and Shoulders pattern is the most common pattern that is easy to spot and any pattern that is easy to spot, doesn’t work everytime; in fact, a shampoo failure causes a strong move in the other direction; e.g. Nifty from 8000 to 8600 after triggering a H&S pattern briefly. 

Patterns Success Ratio: http://thepatternsite.com/hst.html 

Sun Pharma Bounced off from Trendline Six years in the making:

Sunpharma

 

 

Is slowdown in Chinese textile industry affecting Ambika’s revenues? 

The special yarn is sent to China for fabric then to Vietnam for stitching and then to Japan as shirts in top notch premium stores. This year yarn export to China gone down substantially and situation may remain like this for year or two. 

Ambika cotton results out:  http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/CC45C6C8_A7E1_46CE_BDF7_1451D2F3B368_143013.pdf

“When wading through the predictions of financial doom and gloom ahead, keep in mind one key component of human nature.” 

Further Reading: http://fundreference.com/articles/2015/1000555/the-clowns-of-wall-street/ 

“Results from Mayur Uniquoters May Trigger a Breakout” 

Mayur has been trading in a range Rs.400-500 since Jul 2014. Q4-2015 results were flat with no growth in top or bottom line. I don’t expect growth in topline, but the profits may improve due to fall in input prices.

Mayur

 

Deepak’s View for Long, Medium, Short Term: 

Long term: The story will be a churn into the next set of sectors. From Banks, Pharma, IT Services and Commodities, the movement will be seen in more of the Industrials (due to cheaper raw materials) and domestic consumption ( auto, some FMCG, retailers, apparel). 

Medium term: In 1 year we’ll be depending on election results in some key states, and how the Rajya sabha shapes up. If key bills cannot be passed, our move will have to be entirely private sector led, and the private sector is currently very leveraged. 

Short term: US interest rate hike will tell us where we will go. In general don’t see it as bearish, but our current valuations are too high on the index.

If you were looking at bearish posts, “India Loses The Sheen of Instant Market Gratification 

https://www.capitalmind.in/2015/08/india-loses-the-sheen-of-instant-market-gratification-but-midcaps-have-saved-us-till-now/ 

China turns out Worse Than Expected

China Announces Largest Devaluation in Two Decades

http://www.theage.com.au/business/markets/currencies/australian-dollar-falls-as-chinese-yuan-devalued-20150811-giwco8 

More reading on the Currency War: http://www.zerohedge.com/news/2015-08-11/not-drill-india-russia-and-thailand-prepare-currency-war 

Major Impact on Yields of China depreciation?

Not yet..but FPIs piling on. 86% of all limits taken.

More Reading: http://economictimes.indiatimes.com/markets/stocks/news/fpis-infuse-rs-2200-crore-in-just-5-trading-sessions/articleshow/48411869.cms 

“When the news reports say China is devaluing Yuan. How do they do it exactly?”

• The People’s Bank of China just decides the level around which yuan can be traded.

• They decide the value of currency and have a small band around which movement is allowed.

More Reading: http://www.ft.com/intl/cms/s/2/b94b1178-3ffa-11e5-9abe-5b335da3a90e.html#axzz3iaFUS5c0 

“It seems clear that momentum investing isn’t a cerebral approach to investing.”–>

Is Momentum Misunderstood? 

Coal India down for last few trading sessions?

• It is on a downtrend because of a  government stake sale.

• Government liquidating 10% of their holdings for about 25k crore.

More Reading: http://economictimes.indiatimes.com/news/economy/policy/cabinet-may-consider-coal-india-stake-sale-proposal-tomorrow/articleshow/48444180.cms 

Twister in the Maggi Case 

US health regulator, USFDA, have found the lead level in the popular instant food within acceptable levels for US consumers. The government is seeking Rs. 640 cr in damages for unfair trade practices.

More Reading:http://www.outlookindia.com/news/article/lead-in-maggi-within-acceptable-levels-usfda/909715 

Ashiana Housing Conference Call

• Ashiana down by 13%

• Summary of Conference Call:

• Booking down by 50+% this quarter; Management says, sharp decline in booking is due to adverse market condition. Apparently with 50%+ decline, they are doing better than market average.

• Enquiry dip by 25%; site visit dip by x%.

• Management cannot meet sales guideline this year.

• Indicated “cash-flow” will be an issue in FY16. Though they will be able to execute current projects.

• New bookings are down 70% in terms of area and value booked. 

More Reading: https://www.ashianahousing.com/pdfs/Investor-Update-June-15.pdf

Ashiana

Patanjali reported a PAT of Rs 316.60 crore in FY15 and increase of nearly 71% over FY14

Note: Patanjali isn’t listed.

More Reading: http://wap.business-standard.com/article/companies/ramdev-turns-his-ayurved-enterprise-into-an-fmcg-empire-11506
2800143_1.html
 

Returns of Rs. 100 Investment

100 in diff

“Indirect tax collections, which account for ~ 45% of India’s total tax revenue, grows 37.6% YoY during Apr-Jul FY16”

Indirect Tax

More Reading: http://www.business-standard.com/article/economy-policy/indirect-collections-up-39-in-july-115081100963_1.html

• This is largely due to the Rs. 6,000 cr. extra that the government gets in taxes from fuels (we consume 1,000 cr. liters of diesel and petrol in total, on which excise duty has been increased by about Rs. 6 each)

• There’s also the hike in Service Tax from 12.36% to 14% from June onwards. 

Stock Updates:

• Bharat Forge, Britannia, Strides and IDFC dividends are in

• Vaibhav Global loses 66% in EPS again

• Marksans Pharma results out: http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/8E838226_D7DE_4EEE_8373_BFC2098CE0FB_140755.pdf

• PFS results out = revenue +31%, PAT +18%, NIM  6.47% (4.58% q1-15), no new NPA

• Sagar Cements. Trades at PE of 2.4: http://www.sagarcements.in/about.html

• HPCL Q1: Q1 AVERAGE GRM $8.56/BBL v.s. $2.04/BBL YOY,NET SALES AT ₹51,720 CR v.s. ₹59,173 CR YOY, PAT AT ₹1,590 CR v.s. ₹46.04 CR YOY

• SunPharma has demonstrated scale large acquisitions; Replacement of top management at Ranbaxy means things may get under control

• 50% up on EPS on Garware; profits up from 9.7 cr to 14.6 cr: http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/DFC9E405_187A_45D7_B563_08E9AAE7F9F6_175257.pdf

• Chennai Petroleum Results: http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/A5A3D113_2ABD_4CA4_8412_FC861545FF41_143510.pdf

• Poddar results out: http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/E772D73D_F3E0_4DCA_9A6D_E10E0DD25A88_174409.pdf

• Aegis logistics had great results: 50% up on NP and EPS.

And to end, a Course:

For those amateur trader, find out how modern electronic markets work, why stock prices change in the ways they do, and how computation can help our understanding of them!

https://www.coursera.org/course/compinvesting1

Thanks for reading!

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Disclaimer

Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion. 

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

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