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Photo: Ieefa.org

Key benchmark indices ended with small losses on Thursday. While private banks dragged the indices lower, IT shares provided the necessary support; though the market was volatile due to expiry of weekly index options on the NSE.

The S&P BSE Sensex, was down 106.11 points or 0.26% at 41,459.79. The Nifty 50 index lost 26.55 points or 0.22% at 12,174.65.

The sentiment was affected by weak domestic economic data and equally poor global cues.  

Meanwhile, the death toll from the coronavirus in mainland China spiked 23% on Wednesday amid new counting methods adopted by Chinese health officials.

However, the BSE Mid-Cap index fell 0.01% and the BSE Small-Cap index rose 0.07%. The market breadth was negative. On the BSE, 1057 shares rose and 1432 shares fell. A total of 157 shares were unchanged.

In an interesting development, the ratings agency S&P Global on Thursday reaffirmed India's long-term rating at 'BBB-' with a stable outlook, saying the country's growth will be strong. The rating agency further added that over the next two years, India will maintain its sound net external position, and its fiscal deficits will remain elevated but broadly in line within forecasts.

S&P expects that Indian economy will continue to outperform peers at a similar level of income, despite a recent slowdown in real GDP growth. It also said that the supportive monetary, fiscal, and cyclical factors should support economic recovery, with real GDP growth averaging 7.1% in fiscals 2020-2024.

India's Industrial Production (IIP) shrank 0.3% to 133.5 in December 2019 over December 2018. Manufacturing sector output declined by 1.2%. Electricity generation also dipped 0.1%. Mining sector output grew by 5.4% compared with December 2018.

Consumer price inflation in January rose to 7.59%, holding around six-year top. CPI rural inflation rose to 7.73% versus 7.23% in December. January core inflation also surged to 4.8% versus 3.7% in December.

This when translated means that Narendra Modi government has put us into Stagflation. It is unfortunate that the RSS is still banking on him,  even though people of India have already lost five and half years of their lives running after the mirage of "Aachche Din"; after voting this unholy NDA government to power -- make no mistake, this rogue government has no similarity, with the A V Vajpayee led NDA at the center. It is one of the historical mistakes of the RSS, which I believe, the leadership will repent later. India is being operated by a doctor, who has no idea on the subject. It is like firing 50 bullets on the hope that at least one will hit the target. 

#The scrip of HSIL recommend at around Rs.53 in this week,  today made an intraday high of Rs.64.90, before closing at Rs.61.25 in the NSE. You can book complete profits and both the targwts Rs. 61/65 has almost been achieved. You can again enter around Rs.54/58, for the targets of Rs.71/72.

#The subscription charge for lifetime membership has been hiked to Rs.1 Lakh for non F&O and Rs.1.30 lakhs with F&O.

Also, the corpus of my profit sharing scheme has been increased to Rs. 5 lakhs and above. 

#The scrip of P C Jewelers Ltd made an intraday high of Rs.22.90, before giving a close at Rs.20.55. We booked profits near Rs.22. It needs to close above Rs. 22, to warrant fresh buying.  Jewelry sector comes under the comsumption category. 

#The correction is probably over in the scrip of National Fertiliser Ltd (Rs.24.25), as it bounced back from the immediate support levels. 

Meanwhile,  you must be aware that Natural Gas is a key raw material for the manufacturing of urea and comprises nearly 70% of the total cost of production. 
According to an estimate,  the cost of production of urea falls by around Rs.1,600-1,700 per tonne for each USD 1 per mmbtu fall in the gas price. So,  the softening gas prices, is credit positive for urea producing sector.

Moreover, the global natural gas price witnessed correction in the recent months and the outlook for the same remaining benign, pulling down the cost of production of Urea and in turn lowering the working capital funding requirements.

Also,  the Asian spot LNG prices have declined precipitously from USD 9-10 per million metric British thermal units (mmbtu) in December 2018 to about USD 4 per mmbtu now, owing to a supply glut and milder winter.

Now,  while the decline in pooled gas prices will reduce the energy savings for the efficient players, it will also improve their contribution on production above the cut-off quantity, for which they receive realisation linked to the import parity price of urea.

Besides, coronavirus outbreak could choke the exports from China,  giving a price rise of fertilizers (basically non urea) in the international markets; apart from an expected increase in demand due to an excellent Ravi sowing season, ahead. 

I hope you also know that, the Centre has revised domestic natural gas prices as per the New Domestic Gas Policy 2014. The revised price will remain operational from October 1, 2019 till March 31, 2020, ie, H2-FY20.

The gas price for locally-produced fields has been revised to $3.23/mmBtu from $3.69/mmBtu, resulting in a 12.50% decrease, and the ceiling price for gas to be produced from difficult fields has also fallen to $8.43/mmBtu from $9.32/mmBtu, resulting in a 9.50% decrease. However, rates for gas produced from difficult fields such as Reliance Industries under-development fields in KG-D6 block will remain at almost the same level.

This is positive for fertilizer and petrochemical companies,  who use gas for production. The cut in fertilizer subsidy will be applicable from the next fiscal i. e. from FY21, and hence it will not have any effect in FY20 or till 31st March, 2020.

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Yesterday, (Wednesday) the Indian markets were

Photo: Moneycontrol.com

totally under the control of the bulls.  The BSE Sensex closed at 41,565.90 up 349.76 points (+0.85%), while the Nifty ended at 12,201.20 up 93.30 points (+0.77%). 

However, the market breadth was in favour of bears, indicating caution ahead of IIP and CPI data announced later in the day (Wednesday).

The retail inflation in January rose to 7.59% against 7.35% in December, while industrial output contracted 0.30% in December, against a growth of 1.80% in November. This means, the unrealistic run which is continuing in some of the FMCG counters at ridiculous P/Es, is likely to end soon. And money, from these over valued FMCG stocks would soon enter,  the other beaten down counters from sundry sectors. 

#Now coming back to the budget once again, we saw fiscal stimulus to our economy in the form of  allocating more funds towards rural India, reducing taxes, and abolishing Dividend Distribution Tax (DDT) to boost growth.

Against the backdrop of stagnating Agri income and rural demand shrinkage, the government has provided Rs.1.3 lakh crore for agriculture and farmers’ welfare, which includes an allocation of Rs.615 bn to rural employment scheme (NREGS), of Rs.195 bn to rural roads (PMGSY) and Rs.275 bn towards rural housing (PMAY-G). 

Moreover, while the NDA government has elevated the Food subsidy budget for FY21 by 6%, the Fertilizer subsidy budget for FY21 has been reduced by 11%, which is likely to cause some working capital stress for fertiliser companies; as the NDA government never delivers the subsidy on time to the fertilizer companies, adding to the problems. Besides,  the price of urea has not been raised since more than a decade,  compounding the owes of the fertiliser manufacturers. 

Anyway,  the sectors which are likely to a get positive effect due to government's rural push are: tractors and other Agri equipments, agrochemicals, NBFCs and FMCG companies focussed more on the rural space, select consumer discretionary companies having a rural presence, home appliances, and consumer durables.

This year’s superb Rabi output coupled with good farm prices should help improve rural income and boost rural consumption; kicking up the overall GDP.  I'm positive on the markets in the short term. However,  having said that, I feel there are chances that, spiking up of inflation and a shrinking IIP could spoil the Bull party.

#Yesterday, the stock of HSIL (Rs.58.15), which was recommended in this blog, around a couple of days back at around Rs.53, made an intraday high of Rs.58.60. You can book some profits, and hold the rest with a SL at Rs.57.

#Yesterday,  I bought two shares for my portfolio investors. One of them is one of my old favorites, P C Jewelers Ltd, which touched Rs.21.45 intraday on Wednesday, before closing at Rs.20.95, up 17.04%. The name of the other share will also be disclosed soon in this blog.

#In another development, I have decided to manage those Demat accounts of investors/traders, which have a portfolio size of more than Rs.5 (five) lakhs. 
From, Saturday, this week I will discontinue the earlier Rs.3/5 Lakh profit sharing scheme; as I'm unable to look after too many of them, at the same time. However,  existing ones will be there.. It is regarding fresh offer from clients.
Also,  those investors who are ready to take a little risk in exchange of good future returns, should send me mails. Others, can either try on their own or look for bank FDs. Those are not willing to risk capital erosion of their portfolios in case of a mishap, should invest only in debt schemes -- equity is not for them. The profit sharing ratio is 70:30 in general casis,  between you and me. 

#Two BTST shares recommended to the Premium members were:

1. BTST - Buy Adani Enterprise Ltd at around  Rs.249.60, T: Rs.255 - 262, Rs. 244.70.
2. BTST - Buy IGL at Rs.521, T: Rs.528 - 537, SL: Rs.512.90.

#Today,  there is a report in ET,  that the beleaguered private sector bank, Yes Bank Ltd (Rs.35.20) which is engaged in fundraising exercise, said it has received non-binding expressions of interest (EOI) from investors including JC Flowers, Tilden Park Capital, OHA UK and Silver Point Capital.
So,  this could give rise to speculative buying in the scrip on Thursday, taking it near Rs.37. However,  if you know the art to swiftly enter and exit a countert, then only you can play; otherwise avoid. I caution you because we have seen such repeated announcements by now defunct, Reliance Communications Ltd (Re.0.70). 

#Yesterday, the capital goods giant BHEL broke the immediate support and made an intraday low of Rs.35.80 (52 - week low),  before closing at Rs.36.35, in the NSE; after it came out with a disappointing set of numbers for the December quarter. If you remember, I asked all to exit the scrip of Bharat Heavy Electricals Ltd,  when it hit the SL. 

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#The Indian markets as expected has once again

Photo: Investor place

became Bull Heavy.  The BSE Sensex is now trading at 41,302.86 up 323.24 points (+0.79%), while the Nifty is now seen at 12,131.80 up 100.30 points (+0.83%). As long as Nifty holds 12,000/12,100, the Bulls need not have to worry much. The action would now slowly shift towards small and mid cap counters. 

#The scrip of National Fertilisers Ltd (NCL)

Source: www.bseindia.com

today moved to Rs.25.15 after bouncing from Rs.24.80/24.90 ranges. It a mini Ratna PSU and has a dividend yield of around Rs.7.47% at the CMP of Rs.24.90 and cash EPS of around Rs.5.33 and FY20 Expected EPS of around Rs.6/7. Another thing, Yesterday,  the percentage of Deliverable Quantity to Traded Quantity was a whooping 83.97%.
The medium and long term investors should have this scrip in their portfolios. I am sure over a term, patient investors would definitely get good returns. 

#This market is chasing Growth Vs valuation,  which I believe is not likely to succeed too long. As there is a limitation, of buying high P/E scrips on the hope of near miracle growth. Therefore,  buy the shares of companies which have value in them in any form: say high dividend yield, low debt, debt supported by receivables, solid business model, expansion about to complete, balance sheet improvement, better ROI, etc. Therefore, buy value instead of high P/E companies.

#The scrip of Wockhardt Ltd (Rs.406) which was repeatedly recommended in this blog starting from Rs.237 has today made an intraday high of Rs.411.65. Those who are still holding the scrip should book some profits.

#Today's purely chart based call: Buy the shares of RBL Bank Ltd at the CMP of Rs.341.85, for short term targets of Rs.353/367. SL: Rs.326.
The stock seems to be on the verge of breaking out of long consolidation phase. It has managed to clear both the 50D and 21D  EMAs.

#The scrip of Reliance Capital Ltd (Rs. 7.45) today hit another lower circuit.  Also, the share of Reliance Infra (Rs.20.40) is  also likely to make a new 52 - week, LOW.  I would therefore, suggest you to not to enter any ADA Group Company share at the present moment. Stay away from ADA Group.

#Yesterday's recommended scrip HSIL (Rs.54.80) around Rs. 53, today made an intraday high of Rs. 55.40 before cooling down a bit.  You can hold the scrip,  with the stop loss mentioned earlier. 

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#The Nifty went for a mild correction today, taking help of the global cues.

Photo: Live Mint

Though the Sensex closed below 41000 at 40,979.62 down 162.23 points (-0.39%), the Nifty managed to hold 12,000 levels, to close at 12,031.50 down 66.85 points (-0.55%) on the fear of the rise on death toll due to coronavirus. But China, which is actually the event HORIZON of Cornovirus, the indices there rose for the fifth day in a row as investors risk sentiments underpinned on reports that many people returned to work and businesses resumed operations.
At close, the benchmark Shanghai Composite Index added 1.72%, or 48.42 points, to 2,866.51. The Shenzhen Composite Index, which tracks stocks on China's second exchange, also rose 2.9%, or 48.60 points, to 1,727.24. The blue-chip CSI300 index was up 1.86%, or 71.25 points, to 3,899.78.

The death toll in mainland China rose to 908 as of Sunday, the National Health Commission (NHC) reported on Monday. Meanwhile Beijing said it will continue to shore up economic growth with policy support, including with infrastructure spending, to cushion the pressure from the coronavirus outbreak. 

I feel the  Indian markets have corrected enough due to speculate fear of the spread of coronavirus and from tomorrow the bulls will start to take the upper hand. If you are having 12, 000 Nifty calls, then try to exit in the morning or opening hours, as I believe the Europe will also open in the green, tomorrow. 

#Unusual selling activities have been observed in the scrip of National Fertilisers Ltd (Rs.24.95) with not much apparent negative clue to warrant such a move at this price. With a delivery volume of about 58.54% in the BSE, it is surprising to see large scale selling in the counter. I would therefore, request the SEBI to look into the issue and if necessary take suitable action,  so that the small investors are saved from predators. 

Moreover,  there is a YouTube video which speaks of the debt of the company as of 31st March, 2019 to be around Rs.6401.73 crores, but what it doesn't say is that the company has started to receive money,  against the subsidies due, to the tune of more than Rs.5000 crore. This has brought down the debt substantially during the FY20. Even the BSE website (www.bseindia.com) mentioned that the score of the company has improved from -18 to -3, a remarkable achievement isn't? 

Moreover,  the CEPS of the company as per BSE website is Rs.5.33 and the price to book value is 0.57. With the reduction of debt and with such improved figures, the scrip of NFL should trade above Rs.40, isn't? 

Besides,  NFL reported a 3% increase in its consolidated net profit at Rs.107.11 crore for the quarter ended December, 2019. During the nine months (April -December 2019) of current financial year, the total fertilizers sale rose by 25%  to 43.73 lakh tonnes.

NFL, currently operates five natural gas based urea Plants, located at Nangal, Bathinda in Punjab, Panipat in Haryana and two plants at Vijaipur in Madhya Pradesh.

Therefore, it would be an irony if people lose money investing in this Mini Ratna PSU,  at this price (Rs.24.95), especially when there is hardly much negative news in the fertilizer sector. I hope the scrip to sprint towards Rs.31/32, in the short term. You should continue accumulating the share of National Fertilizers Ltd in market declines, under the watchful eyes of the stock market regulator. 

#There was a block deal in the HSIL (Rs.52.90) counter at Rs.52.85. A buy was given in the scrip today during the trading hours by me, at around Rs.53, for short term targets of Rs.62/65.

#BHEL, Ballarpur Industries, Atlanta, Arvind Fashions, Chamak Holdings, Cochin Shipyard, D B Realty, Greenply, GNFC, Gic Housing Finance and IDBI are among the companies that will release their December quarter earnings on February 11. I had earlier asked all of you to exit BHEL (Rs.38.25),  when nothing much came for the capital goods sector in the Union Budget. After the Q3FY20 results,  we will be able to take decision whether to take fresh entry in the counter or not.

#The stock of Reliance Capital today hit the LC at Rs.7.80. If you remember I had given an exit call in the counter on my last write up, for those who were still holding the scrip after my 1st exit call. With Anil Ambani saying that his net worth is almost zero,  we should be careful in future, before entering ADA group shares.

#Yes Bank Ltd (Rs.37.55) is still under the F&O ban, for February 11. Securities in the ban period under the F&O segment include companies in which the security has crossed 95% of the market-wide position limit. If you remember I had asked all to book profits when it was trading around Rs.38/39.

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#The Nifty Futures were trading at a slight

premium (12010) to the Nifty at around 1.30 pm. Nifty is now trading at 12,014.40 down 79.60 points (-0.69%). The markets were down taking overall global clues. However the Shanghai Composite is marginally up by 14.53 points to 

2,890.49. I feel the Nifty is likely to take support at around 1200/11800 levels. Fundamentally,  strong counters should be accumulated in market dips. While the Nifty is likely to trade in between 11800/12500, the action is expected to shift to beaten down mid and small cap counters. 

#Ashoka Buildcon Ltd (Rs.109 35) came out with satisfactory set of numbers for the Q3FY20. On consolidated basis, the construction major reported a consolidated net profit of Rs.32.41 crore in Q3 December 2019 as against a consolidated net loss of Rs.15.72 crore posted in Q3 December 2018. Net sales declined 6.3% YoY to Rs.1280.36 crore in Q3FY20. The stock can be accumulates near the support of Rs.109/110.

#The government plans on reviving the agricultural sector and doubling the income of farmers. The Indian agriculture sector has been experiencing a slowdown since the last couple of years.  To overcome this, Finance Minister N. Sitharaman, proposed a 16 point action plan, which included an allotment of Rs.2.83 lakh crore to the agriculture sector and irrigation for FY21.
The FM further said, farmers will be encouraged to make a balanced use of all types of fertilizers to change the ‘incentive regime’ which currently encourages the use of chemical fertilizers. The two fertiliser stocks: GNFC is up by 9.56% to Rs.199.45, while UPL is now trading at Rs.571.85 up by 5.29%.

#HSIL (Face Value: Rs.2), a leader in sanitary ware and which is now into  manufacturing of building/consumer products and packaging products, after the denerger of its retail division is up today by 7.60% to Rs. 53 80. The traders can buy the scrip at Rs.53, for short term targets of Rs.62/65. SL: Rs. 47.

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#Reliance Capital Ltd (Rs. 8.24) is now basically an insurance company which will face tough problem in securing business, after the withdrawal of exemptions. If you are still holding the shares of the company you should exit out of it in market rises,  as I see it falling below Rs.5.

#National Fertiliser Company Ltd (Rs.25.55) is a Mni Ratna PSU and hence I believe there will not be much problem with working capital requirements. The government has spoken of doubling of farmers' income by 2022 and this is not possible without the use of both artificial and bio fertilizers.
The FM has spoken of "Zero Budget Farming" in FY20 (last year) also.  If I may quote a report published in India Today,  on 5 July,  2019:

The finance minister announced a proposal of zero budget farming, which she said is like "going back to basics." Sitharaman said zero budget farming will help doubling the farming income in days to come. Zero budget farming is a set of farming methods that involve zero credit for growing agricultural produce and no use of chemical fertilizers.

After, that the sales of major fertiliser producers have not been affected much.
Let me quote another news clipping from Down-to-earth.org:

Union finance minister Nirmala Sitharaman had mentioned zero-budget natural farming (ZBNF) in Union budget 2019-20. Since then it has grabbed media attention and generated heated debate. This led to discussions among stakeholders and some new announcement related to natural farming was expected in Budget 2020-21.

Prime Minister Narendra Modi talked about ZBNF at various forums including the United Nations Convention to Combat Desertification’s fourteenth conference of parties in India in 2019. On the occasion of Independence Day 2019 too he appealed to farmers to reduce using chemical usage in farming.
Niti Aayog also supported the promotion of natural farming and asked various states to adopt ZBNF. The government think tank’s vice-chairperson Rajiv Kumar tweeted recently about Modi’s direction to make chemical-free agriculture a mass movement in the country and promote Indian natural farming systems at a mass scale.
Therefore, it was speculated that the Modi government might make some big announcement related to organic or natural farming in the budget poposed on February 1, 2020. But, despite the statements and support for promotion of natural farming and reduction of chemicals, the allocation for organic farming was miniscule and negligible.
India promotes organic and natural farming mainly through schemes like Paramparagat Krishi Vikas Yojana (PKVY), Organic Value Chain Development for North East Region and National Project on Organic Farming.
PKVY promotes organic farming through the adoption of organic village by cluster approach and a participatory guarantee system of certification. Its definition of ‘organic’ comprises all types of chemical-free farming, including ZBNF.

 The bottomline: This rhetoric of the FM and NARENDRA Modi has failed to provoke any positive response from the farming community and therefore can be junked like his other method of of removing black money,  through demonetisation. Accumulate the scrip of NFL in dips.

#The Nifty spot is now near 12100 and is trying to to conquer the 20D SMA and 50D SMA. On the daily candle chart a black candle has formed, however, on weekly charts we have witnessed a Bullish Piercing Line pattern with very long lower shadow, giving more ammunition to the Bulls @- a close above 12170 can take Nifty to new highs. 

However,  fall bellow 12046 could reverse the trend and the action would shift towards small and mid cap counters. 

Interestingly Mid-Cap and Small-Cap have started to outperform the Indices consistently in every fall and every rise -- MidCap100 and MidCap50 Indices are now within striking distance from their recent highs.
One should therefore, use every decline to buy good quality Mid and Smallcap counters. 
Any government that fails to deliver at least 7% growth in GDP on a sustainable basis for the next 10 years would be considered failing on the economic front. The economic credibility of the NaMo -- II government is at stake on this issue. 

Tit - bits

The scrip of National Fertilisers Ltd (NFL) yesterday,  closed almost flat at Rs.25.55. The Budget is positive for the company as it is also into Bio Fertilizers.

If we look at the past data then we will find that in case of Chemical Fertilisers, NPK Consumption per Hectare on all India basis stood at 128.020 kg/ha in Mar 2018. This records an increase from the previous number of 123.410 kg/ha for Mar 2017. Hence,  India's chemical fertiliser demand has been on rise.

While the present requirement of urea is 320 lakh metric tonne per annum, the current production is 240 lakh metric tonne. Currently, India is importing 80 lakh metric tonne of urea -- hence there will be an import component, till 5 new plants get commissioned, when government is expecting the country to self reliant as far as urea production is concerned.  

Also, to ensure balanced use of fertiliser and reduce the consumption of urea, the NDA government has made it mandatory for all domestic and imported urea to be neem coated. That apart, the companies have been asked to sell urea in a 45-kg bag instead of 50-kg. 

Besides, the government is trying to promote judicious use of fertilisers with schemes like Soil Health Card and National Mission for Sustainable Agriculture. 

If you remember that in August,  2019, Non-urea fertiliser subsidy  was hiked to Rs.22,875 crore. In 2010, the government had launched the nutrient-based subsidy (NBS) programme. Hence,  this concept of the use of balanced fertilizers, which the FM pointed out in the budget is nothing new. 

Moreover, the downward revision in the budgetary allocation for the fertiliser subsidy for FY2020-21 (BE) to Rs.71,309 crore, as against the revised estimate of Rs.`79,998 crore for FY2019-20, will not have much negative effect for the fertiliser industry, as the amount is too small to have a major impact on the fertilizer sector. 

But, even if it did create some headwinds,  it will be in the next fiscal or FY21, hence at the present moment there is  no cause of worry. 

Chartically speaking, the scrip of NFL is in highly oversold zone (both the fast and slow oscillators), hence a bounce is expected on Monday. Above Rs.29.30, the stock is expected to gain good momentum. With an expected FY20, EPS of Rs.6/7, the stock should cross Rs.60/70 by Q1FY21. It is an investment grade share and should be accumulated in dips. 

#The stock of Yes Bank Ltd yesterday touched Rs.39.95 before closing at Rs.38.70. Profit booking was suggested with a hold on the unsold part, with a SL of Rs.37. This is no longer an investment grade counter and he be careful with your SLs. 

Zero Budget Farming and NFL

Photo: India Mart

Synthetic Fertilizers enrich soil with nitrogen, phosphorous and potassium; the three primary nutrients necessary for plant growth.

Post union budget for FY21, there has been a spate of copy cat versions of media reports that seemed to suggest that Zero budget farming is anti-fertilizer, anti-pesticides, and anti-chemical move; as it emphasizes largely on traditional methods of farming. 

However,  the reality is different. It is actually a theory that calls for the attention of the farmers towards using natural farming practices to cultivate crops. Without pesticides, the crop yield would come down drastically.

But that is actually not the issue here. We need to look at this from budget speech angle,  when  I believe the FM, Nirmala Sitaraman actually meant of a balanced use of fertilizers because a number of studies have shown that excess use of Urea is not only hindering crop yield but is also a cause of soil pollution. This is fine and we need to support the FM on this noble issue. 

However, even if this is the case then the Fertilizer companies, especially those who are heavy on Urea,  need not have to worry much as India has a deficit in Urea production of around 6/7 million Metric Tones and a reduction in import will help the government in balancing BOP.  And at the same time check on the borrowings. "

2ndly, we need to understand that organic farming though has been romanticized like imparting education through Sanskrit Medium,  cannot in toto, replace the synthetic fertilizers. 

Mainly, because of logistic problems and our traditions or customs. Tell me how many farmers would like to use Pig excreta or Chicken excreta or bone meal (organic manure from crushes boner of animals) in their fields,  especially those who are traditionally vegetarians? 

2ndly, like we know the specific locations for getting inorganic manure,  most of us are not aware from where or from which source, Phosphate and Potash or Calcium come. Right? 

So, in the immediate future or in the next 2/3 the fertilizer companies who are only into the production of inorganic manure need not worry.

Now against this backdrop,  let us see what is the investment rationale of buying the scrip of National Fertilisers Ltd or NFL (Rs.25.55):

• NFL has a market cap of only Rs.1260.79 crore,  P/E of  8.44 against the Industry P/E of 12.17. A liberal P/E of 10 for this PSU mini Ratna, can take this scrip to above Rs.30.
• Its FY20, expected EPS should be around Rs.6/7. Which gives the natural target of around Rs.45/50.
• The book value of the shares of the company is Rs.45.23. This is a disinvestment Candidate and hence book value is very important, for QIP or for strategic sell. 
• It is constantly paying dividend during the last 5 years and at the current price of Rs.25.55, the dividend yield comes at 7.24%, which is more than one year saving bank interest rate. 
• NFL reported a 3% increase in its consolidated net profit at Rs.107.11 crore for the quarter ended December as against Rs.103.59 crore in Q3FY19. During the nine months (April -December 2019) of current financial year, the total fertilizers sale rose by 25% to 43.73 lakh tonnes. Hence, it has sound financials and do give us much ammunition for large investments in the shares of this company. 
• NFL, currently operates five natural gas based urea Plants, located at Nangal, Bathinda in Punjab, Panipat in Haryana and two plants at Vijaipur in Madhya Pradesh.
• Apart from making urea,  it is also into Bio Fertilizers, which means it is going to be positively affected by the FM's new initiative of "Going Green".
• The company's Chairman Mr.Mishra, in a YouTube video has said that the company would like to import the products which it doesn't manufacture and trade in India, through various channels. It is also implementing various energy saving devices in their plants according  to Mr. Mishra. 

Introduction:

NFL, a Schedule ‘A’ & a Mini Ratna (Category-I) Company, having its registered office at New Delhi was incorporated on 23^rd August 1974. Its Corporate Office is at NOIDA (U.P). It has an authorized capital of Rs. 1000 crore and a paid up capital of
Rs. 490.58 crore out of which Government of India’s share is 74.71 % and 25.29 % is held by financial institutions & others.

Manufacturing Plants:

NFL has five gas based Ammonia-Urea plants viz. Nangal & Bathinda plants in Punjab, Panipat plant in Haryana and two plants at Vijaipur at District Guna, in Madhya Pradesh.
The Panipat, Bathinda & Nangal plants were revamped for feed stock conversion from Fuel Oil to Natural Gas, an eco-friendly fuel during 2012-13 / 2013-14.
Vijaipur plants of the company were also revamped for energy savings & capacity enhancement during 2012-13, thus increasing its total annual capacity from 20.66 LMT from 17.29 LMT, an increase of 20%. The company currently has a total annual installed capacity of 35.68 LMT (Re-assessed capacity of 32.31 LMT) & is the 2^nd largest producer of Urea in the country with a share of about 16% of total Urea production in the country.

Company has a Bio-Fertilizers Plant at Vijaipur with a capacity of 600 tonnes of solid & liquid Bio-Fertilizers to produce three strains of Bio-Fertilizers viz. PSB, Rhizobium and Azotobacter are produced.

Products:

NFL is engaged in manufacturing and marketing of Neem Coated Urea, three strains of Bio-Fertilizers (solid & liquid) and other allied Industrial products like Ammonia, Nitric Acid, Ammonium Nitrate, Sodium Nitrite and Sodium Nitrate. The brand name of the company is popularly known in the market as ‘KISAN’.

The company has also started production of certified seeds under its Seeds Multiplication Program for sale under its own brand name as Kisan Beej.

Imports & Trading:

Apart from manufacturing business, the company is also expanding its business, in a consistent & phased manner, by way of imports and trading of various agro-inputs like Non-Urea Fertilizers, certified seeds, Agrochemicals, Bentonite Sulphur, City compost through its existing PAN India dealer’s network under single window concept.

Marketing setup:

NFL Marketing Network comprises of Central Marketing Office at NOIDA, three Zonal Offices at Bhopal, Lucknow & Chandigarh, 16 State & 2 UT Offices and 35 Area offices spread across the marketing territory of NFL.

The company has 10 Soil testing laboratories (6 Static & 4 Mobile) with annual capacity of testing around 65000 samples for Macro Nutrients and 10000 samples for Micro Nutrients and are fully dedicated to the testing of soil health helping farmers to facilitate balanced fertilization.

Research Centers

The company has a R&D set up at each Manufacturing Unit i.e. at Nangal, Panipat, Bathinda and Vijaipur as well as at Corporate Office (Noida) which are primarily focused and undertakes various innovation studies to develop new, efficient & safer processes, value added products and suggest implementation of energy saving schemes.

Implementation of Energy Saving Schemes:

The company has recently implemented various energy saving schemes such as Purge gas recovery plant at Vijaipur-II, hooking up of old redundant Ammonia Synthesis Converter (S-200) with New Converter (S-300) at Panipat & Bathinda Units and additional 2 nos. cooling tower cells in Urea Plant at Vijaipur-II. The company has also commissioned two roof top solar plants of 100 KW & 90 KW at Corporate Office, Noida and Bathinda Unit.

Further, in order to meet the strict energy norms fixed by GoI under New Urea Policy 2015 w.e.f. 01-04-2018, though the investment is economically unviable without suitable dispensation as sought by NFL from GoI, the company is in the process of implementing energy saving schemes i.e. Installation of Gas Turbine Generator along with Heat Recovery Steam Generation Unit at Panipat, Bathinda & Nangal Units with an estimated cost of Rs. 700 crore.

The company is also going to implement energy saving schemes at Vijaipur-I & II to further bring down the energy consumption.

New Investments:

  Bentonite Sulphur Plant of 25000 MTPA capacity at Panipat Unit with a cost of Rs. 44 crore has been commissioned on 20th December 2017  Setting up Di-nitrogen Tetroxide (N2O4) plant at Vijaipur Unit on Built Own Operate & Supply basis (BOOS) for ISRO  R&D initiative with M/s IARI, New Delhi to design & develop an applicator & logistic arrangement for application of Urea Ammonia Nitrate (UAN) which is envisaged to be manufactured at Nangal Unit.

Besides above, the company is also envisaging the following investments:

  Construction of Natural draft prilling towers at Panipat & Bathinda Units to improve Urea prill size with estimated cost of Rs. 90 crore (Rs. 45 crore each for Panipat & Bathinda Unit).  Agro Chemical plant at Bathinda for production of farm insecticides  Di-Ammonium Phosphate (DAP) plant of 10 LMT per annum along with Phosphoric Acid Plant in Algeria under buy back arrangement & in Joint Venture mode with GSFC, RCF and NMDC.   Seed processing plants at Indore, Bathinda and Panipat.

Joint venture

NFL in collaboration with M/s EIL and M/s FCIL has formed a Joint Venture (JV) Company as Ramagundam Fertilizers & Chemicals Limited (RFCL) to revive the old FCIL plant at Ramagundam. The equity participation in the joint venture is 26% each by NFL & EIL, 11% by FCIL and 11% by State Government of Telangana. This plant shall have the annual Urea capacity of 12.71 LMT. The zero date of the project is 25th September 2015 and is targeted to be completed by end of December 2018. The project is in progress.

Conclusion: National Fertilizers Limited (NFL) is a massive company and it is surprising how the shares are triaded at almost the half of Book Value. 

Buy the shares of the company for short and medium term targets of Rs. 32/41/47. There is no need to keep SL as it is an investment grade scrip. 

Disinvestment of better run companies

The disinvestment department is learnt to have drawn up a list of relatively better performing CPSEs including bluechips like Nalco, NMDC, NTPC, and Coal India to go for offer for sale.

The blue chip PSUs like National Aluminium Co Ltd, Coal India Ltd, NTPC Ltd, NMDC Ltd, NBCC (India) Ltd, Bharat Electronics Ltd, National Fertilisers Ltd and Hindustan Copper Ltd, are also on the list of probables for OFS where the government's shareholding in these companies is in the range of 52-82%.

The market offering will be subject to the nod from the Prime Minister's Office and good market conditions to fetch high value of stake sale, said sources.

Photo: Business Standard

In the current fiscal, the government had announced there could be strategic disinvestments where the undertaking is still to be retained in government control, to go below 51% to an appropriate level, on a case to case basis. 

It has also decided to modify the present policy of retaining 51% government stake inclusive of the stake of government-controlled institutions as Finance Minister Nirmala Sitharaman had said in her Budget speech.

Source: Live Mint (Edited)

Abolition of Dividend Distribution Tax

We know BHEL (Rs.40) and National Fertilisers Ltd (Rs.25.65) are high dividend paying companies of India Inc. The dividend yield of the shares of NFL at the CMP of Rs.25.65 is 7.22%. Hence, you should buy and pocket the dividend every year, and at the same time see some capital gains on the stock price. 

Let us see what Moneycontrol.com wrote on it:

Photo: Economic Times

Foregoing Rs.25,000 crore, the FM accepted the industry’s ask to remove the tax on distributed dividends and to tax them in the hands of recipients at their applicable rate. To remove the cascading effect, a deduction will be allowed for the dividend received by holding company from its subsidiary. 

Reverting to the classical system of taxing dividends will be particularly advantageous to foreign investors as they can claim treaty benefit of lower rate of tax, usually at 10 percent to 15 percent, instead of 20 percent. 

Also, they can now claim a foreign tax credit in their home country for tax paid on dividend in India. Shareholders in high tax brackets may have to bear a higher tax burden on the dividend income received. 

However, this is justified in the interest of equitous and progressive taxation. The government is confident of its advanced tracking systems to ensure that there no tax avoidance.

However, there is a need to review the dividends provisions in terms of their impact on REITs / Infratructure Investment Trusts, more so when the government is looking at monetising its assets through REITs. 

Till now, dividend received by REIT/InvIT from 100 percent SPV was not liable to DDT and not taxable either in the hands of REIT/InvIT or investors.

This was based on rationale that SPV paid tax on rental and other incomes earned and hence there is a single point of taxation. But as per the Budget proposal, the unitholders will need to pay tax on dividend income from SPV, received and distributed by REIT/InvIT, leading to double taxation in the hands of SPV and unitholders. This will adversely impact return in the hands of unitholders.

National Fertilisers Ltd: 

For the fiscal year ending March 2019 National Fertilizers Ltd declared an equity dividend of 18.60% amounting to Rs.1.86 per share.

At the current share price of Rs 25.65 this gives a dividend yield of 7.22%; which almost at Par with one year bank interest rates.

The company has a good dividend track record and has consistently declared dividends for the last 5 years.

The company is offering a wide range of products like Kisan Urea, Neem Coated Urea, Bio-Fertilizers (organic fertiliser), Industrial Products (Chemicals) and traded products. It is one of the top 10 agro fertilizers companies in India.

While presenting the Union budget 2020-2021 on February 1, 2020 finance minister Nirmala Sitharaman emphasised that the central government would encourage balanced use of all types of fertilisers, including traditional organic and other innovative varieties to bring about a change in the prevailing regime that encourages excessive use of chemical fertilisers.

Do you remember Non-urea fertiliser subsidy was hiked to Rs.22,875 crore in FY20? NFL (Rs.25.65) also makes organic fertilisers. This move is positive for National Fertilisers Ltd. 

Tit - bits

#The key support level for Nifty is placed at

11,999 followed by 11,902. With most of world market trading in the green, the domestic indices are expected to open gap up, tomorrow. On the upside tbe important resistance levels are 12,141 and 12,192.

#Yesterday,  the shares of Yes Bank Ltd moved to Rs. 39 70, before closing at Rs.37.60. 

However,  there is a disturbing news report which goes as: Former Yes Bank independent director Uttam Prakash Agarwal has demanded appropriate action against the lender's CEO and MD Ravneet Gill for allegedly violating various regulatory norms. In a letter to RBI Governor Shaktikanta Das, Mr.Agarwal alleged breach of governance, non-compliance, undue influence and control on the majority members of the board by Gill through quid pro quo.

The letter dated January 30, 2020, also alleged siphoning off funds through paymet of unreasonable fee of Rs.21.28 crore for raising capital of Rs.1,930 crore in August by way of Qualified Institutional Placement.

In such circumstances I would suggest the traders to book complete profits around Rs.38.50/39 and maintain wait and watch policy. 

#Those who have added the shares of National Fertilizer Ltd (NFL) at around the CMP of Rs. 26, should look for better days ahead. 

The NDA government had allocated Rs. 2.83 lakh crore for agriculture and allied activities, irrigation and rural development in 2020 FY21 budget.

The NDA government has sought to keep capital expenditure growth high to support the economy. While the total expenditure is budgeted to grow at 12.70% in FY21, capex is budgeted to increase by 18%, higher than the 13% growth in the FY20.

With schemes like PM-KISAN already operative, providing direct benefit to farmers and the poorest may be a smarter alternative to the Agri subsidies.
Moreover, Ramagundam Fertilizers & Chemicals Limited (RFCL), a Joint Venture of National Fertilizers Limited (NFL), EIL & FCIL is tentative to start production from next month.

The agricultural sector has been in a slow down for a past couple of years now. To overcome this, Finance Minister N. Sitharaman through this budget tried to change this situation. The finance minister proposed a 16 point action plan in her speech while presenting the budget so as to improve the condition of the agricultural sector and to double the income of the farmers in the next two years.
The downward revision in the budgetary allocation for the fertiliser subsidy for FY2020-21 (BE) to Rs.71,309 crore, as against the revised estimate of Rs.79,998 crore for FY2019-20, will have negligible effect on the fertiliser industry; as the amount is too small.
National Fertilisers imited (NFL) has reported a 3% increase in its consolidated net profit at Rs.107.11 crore for the quarter ended December. Its net profit stood at Rs.103.59 crore in the year-ago period, the company said in a regulatory filing.
During the nine months (April -December 2019) of current financial year, the total fertilizers sale rose by 25 per cent to 43.73 lakh tonnes.
NFL, currently operates five natural gas based urea Plants, located at Nangal, Bathinda in Punjab, Panipat in Haryana and two plants at Vijaipur in Madhya Pradesh.
Also,  NFL is a high dividend paying, disinvestment candidate.
The scrip of NFL is likely to see Rs.31/32, within a fortnight.

#Another important development is that,  the equity market rally became broad-based in January. Small caps significantly outperformed large caps with the Nifty Small Cap 100 rising 6.70% for the month versus a 1.70% fall in the Nifty. Similarly, Nifty Mid Cap 100 rose 5.30% outperforming the Nifty by 7%.
Therefore,  focus on beaten down stocks from this space.

Tit - bits

#Today as expected Nifty is showing positive

momentum and it has already conquered 12000. 

The BSE Sensex is seen at 41,120.81 up 331.43 points (+0.81%) while Nifty50 is trading at 12,076.45 up 96.80 points (+0.81%).

However,  the Nifty is likely to consolidate around the current ranges while the action is expected to shift towards Small and mid cap space. 

#Buy the shares of National Fertilisers Ltd at around Rs.26, for short term targets of Rs.37/41. The dividend distribution tax story and Nirmala Sitaraman's Agri/Rural push will give it the necessary upward push. There is no need of keeping any SL,  as it is an investment grade scrip.
The union budget stated government's intent to rationalise fertilizer subsidy by encouraging balanced use of fertilizers including traditional organic ones as against incentivised use of chemical fertilizers. Budgeted subsidy for 2020-21 is Rs 71,345 crore.
The farm and rural sectors were allocated Rs.2.83 trillion while the agriculture credit target for next year is set at Rs.15 trillion.

#Today my recommended Yes Bank Ltd made an intraday high of Rs. 39.70 and is now trading at Rs.37.50. You should book some profits and hold the rest with a SL at Rs.37.
Fundamentals of the company at the current ranges is fine - - only problem seems to be that Morgan Stanley has given sell with a price target of Rs.25. Hence,  we need to be cautious. 

Tit - bits

Key domestic benchmarks equity indices closed with robust gains on Tuesday, propped up by steep slide in crude oil prices and positive global clues.  

Market sentiment also got a positive vibe from sudden jump in manufacturing PMI. The IHS Markit India Manufacturing Purchasing Managers' Index (PMI) jumped from 52.7 in December to 55.3 in January, its highest level in just under eight years. 

The BSE S&P Sensex rallied 917.07 points or 2.30% to end at 40,789.38, its highest closing level since 30 January 2020.

The Nifty 50 index soared 271.75 points or 2.32% to 11,979.65, its highest closing level since 30 January 2020. 

In the wider  market, the BSE Mid-Cap index rose 1.37% and the BSE Small-Cap index rose 1.29%. Both these indices underperformed the Sensex. 

The market breadth was very strong. On the BSE, 1618 shares rose and 885 shares fell. A total of 181 shares were unchanged.

According to Moneycontrol.com, the key support level for Nifty is placed at 11,846.67, followed by 11,713.63. If the index continues to move up, key resistance levels will be 12,049.47 and 12,119.23. 

Now,  with the US markets closing in the positive territory and the whole of Asia is green,  except Taiwan, we can expect a positive start for Nifty and then going for a consolidation phase for a couple of days. Buy good stocks in dips.

#The scrip of my Yes Bank Ltd (Rs.34.95), surprisingly closed in the red yesterday,  when the whole market was in jubilant mood. This I feel is due to delay in capital rasing. However, I feel the investors missed two very important points:

• The stock is highly sold in daily, which naturally calls for a BOUNCE before the BOD meeting on 7 February, to get shareholders approval for fund raising. 
• Yes Bank, pursuant to invocation of pledge of shares, acquired 127,321,500 equity shares having face value of Rs.10 per share constituting approx. 29.97% of the post issued paid up share capital of Rosa Power Supply, a wholly owned subsidiary of Reliance Power. It is pertinent to mention here that 1,200 megawatt (MW) Rosa thermal power project at Shahjahanpur in Uttar Pradesh became fully operational after it commissioned the fourth and the last 300 MW unit on March 31, 2012. It was set up by Reliance Power at an estimated cost of around Rs.6000, whose current enterprise value, after 7/8 years, shouldn't be less than Rs.10,000 crores. So,  30% of it means Rs.3000 crores in the kitty of Yes Bank. The Rosa Thermal plant (1,200 MW) at Shahjahanpur in Uttar Pradesh, owned by the RPSCL generated 4,341 million units for the year ended March 31, 2019. During the first six months of FY20, RPSCL achieved strong operating performance with a plant availability of 98.5 percent and plant load factor of 78 percent, the company noted in a press release.
• Yes Bank Ltd (Rs.34.95), also has 5.49% holding in Sical Logistics Ltd. SICAL Logistics is engaged in providing dredging and retail supply chain logistics solutions.

Great News: NDA govt's Rs.2.10 Lakh Cr booster to kick start consumption

The NDA government on Monday said the Non - Performing Assets (NPAs) of Public Sector Banks (PSBs) has DIPPED to  ₹7.27 lakh crore as on September 30, 2019.

Photo: Moneycontrol.com

The gross NPAs of PSBs, as per RBI data on global operations, rose from ₹2,79,016 crore as on March 31, 2015, to ₹6,84,732 crore as on March 31, 2017 and ₹8,95,601 crore as on March 31, 2018 but have since then declined by ₹1,68,305 crore to ₹7,27,296 crore as on September 30, 2019.

Moreover, for increasing consumption, apart from the measures to be undertaken by the government  to raise farmer incomes, there are a lot of tax proposals, that would result in higher disposable income in the hands of the consumers.

It includes an effective reduction in the individual tax rates by revising the tax slabs (option to shift to the revised tax slab subject to not claiming any exemptions/deductions), abolishing Dividend Distribution Tax reducing the effective tax rate on dividends, etc.

The 16-point action plan spelled out by the FM and the ₹ ₹2.83 trillion outlay focused on agriculture and allied activities would bolster rural infrastructure, increase farmers’ produce realisation and drive rural consumption.

This growth agenda will obviously include the micro, small, and medium enterprises (MSMEs), too, who will be playing a significant role in generating job opportunities.

Further, there are additional reforms proposed for startups around deferment of taxability of ESOPs, an increase in threshold limit from Rs.25 crore to Rs.100 crore to qualify as an eligible start-up, etc.

However, the Dividend Distribution Tax might probably increase the tax incidence for all people who are earning above Rs.15 lakh, mainly because they will have to pay tax at the marginal rate.

Also, the deferment of tax on employee stock ownership plans (ESOPs) for five years, or until startup employees leave the company, would assist the startup ecosystems, retain and add talent, generating significant employment and in the process boosting the consumption.

The Finance Minister (FM) has given relief to the individual taxpayer, which will create a revenue loss of Rs.40,000 crores. Reductions in Minimum Alternate Tax and other taxes payable by corporations will lead to a further loss of Rs.25,000 crores.

The FM has proposed to cover this loss of Rs.65,000 crores with increased borrowings that will increase the fiscal deficit from present about 3.40% to 3.80% in the coming financial year.

I have always supported an increased fiscal deficit for jumpstarting growth.

The NDA Government has already given Rs.1,45,000 crores booster dose to the Indian economy through the reduction in the Corporate Income Tax, last September.

Therefore, the total liquidity infusion by the FM, Nirmala Sitaraman comes at a whopping amount of Rs.2,10,000 lakh crores in FY20, which will definitely give a push to consumption. 

Though the brrowings will increase the burden of interest to be paid in the future, but at the moment we don't have to worry much about, as the inflation is within RBI's tolerance levels.

According to a report released in Aditya Birla Capital: India’s per capita GDP will soon cross $2,000.  Historically this has been the trigger point for acceleration in consumer spending for several countries such as Singapore, South Korea China and Russia etc

The changing demographics of India is pushing consumerism – namely increasing number of young generation contributing to a growing workforce, urbanisation and a quantum increase in average household income

Increase in comsumption means positive trigger for FMCG,  Media,  Bank, etc, stocks. 

The Indian Markets should Cheer this  encouraging development today (4 February,  2020).

Tit - bits

#The Nifty50 is likely to consolidate near the

Photo: Economic Times 

current level of around 11700 before taking a further move, on the either direction. However some sectors like banks,  especially the Private Bank space is likely to do well. The correction of around 1000 points in Sensex has removed the fat it had accumulated during the last one week, due the pre budget rally. 

#The Private Banks would get a sentimental push due to recent developments in the Union Budget. The higher deposit insurance could assuage depositors following the recent collapse of PMC Bank. The Union budget has proposed to raise deposit insurance to ₹5 lakh per depositor from the existing ₹1 lakh. 

Buy the shares of Yes Bank Ltd at around Rs.36, for short term targets of Rs.42/45; SL: Rs.32. It is the only Private Sector Bank which is trading below its book value. If the steel and cement sectors are performing well, as is seen today,  then we can remain optimistic on the banking sector. 
The shares of Yes Bank Ltd (Rs.36) fell today in the cash market by as high as 5.01% on a report from IDBI Capital Markets & Securities that it is a probable candidate for exclusion from Nifty50, during the next review of the Nifty 50 Index; which will be carried out on March 31, 2020.
But that is a too long time to go and much water will flow through the river Gnga by that time -- we haven't even entered the "Teen - February".
It is pertinent to mention here Yes Bank Ltd is a significant player in the market with an almost $40 billion (Rs. 2.84 lakh crore, approx) balance sheet.
Meanwhile, on January 10, 2020, the board of YES Bank Ltd had approved fund raising of up to Rs.10,000 crore in one or more tranches, on such terms and conditions as it may deem fit, by way of issuance of securities includitung but not limited through Qualified institutional placement (QIP)/ Global Depository Receipts (GDRs)/ American Depository Receipts (ADRs)/ Foreign Currency Convertible Bonds (FCCBs)/ or any other methods on private placement basis.
YES Bank has called extraordinary general meeting (EGM) of the Bank Friday, February 07, 2020 to take shareholders' approval for the proposed fund raising.
The bank said that, its overall Capital Adequacy Ratio is comfortably above regulatory requirements and all efforts are being made to financially strengthen the Bank even further.
Earlier, in August 2019, YES Bank had raised Rs.1,930 crore through the QIP route. The Bank allotted 231 million equity shares to eligible qualified institutional buyers (QIBs) at Rs.83.55 per equity share, as per Sebi pricing formula. Thie QIP price of its share,  is more than double the CMP of Yes Bank Ltd (Rs.36).

Tit - bits

The scrip of Titan Company Ltd is up 1.29% to 1194.50. Soon this rally is expected to spread to

Photo: Financial Express

other counters in the same space. 

It is pertinent to mention here that Indian jewellery demand during Q2FY20 was at 101.6 tonnes, almost a third lower, YoY due to weaker consumer sentiments. There was a decline of nearly 51% in Indian bullion imports on QoQ basis -- a clear case of a cut in Gold import duty to around 6 - 8% from the current 12.50%.

While, the commerce minister, Piyush Goel has been requesting the FMO since some time, to cut the gold import duty to 6%, the jewelry association wants it be 5%.

If Nirmala Sitaraman, considers their cases, then we will see a huge rally in the Jewellery stocks.

My favourites: Titan Co Ltd (Rs.1179.25), TBZ Ltd (Rs. 36.50) and PC Jewelers Ltd (Rs.22.35).

P C Jewelers Ltd (Rs.22.35):-
At the end of FY19, 4,000 designs (15,000+ products) from 60 showrooms across 15 states, were made available online, under same day shipping facility. This has helped the company to reach out to a wider audience.
Company is engaged in the business of manufacturing, sale and trading of gold jewellery, diamond studded jewellery and silver items and operates in different geographical areas i.e. domestic sales and export sales.
As part of its consolidation / rationalisation process and to gain operational efficiency, the Company has closed / shifted / merged some of its existing showrooms during the year.
As on March 31, 2019, the Company has 86 showrooms including 14 franchisee showrooms. The Company is also having in-house designer’s team and manufacturing units.
During the fiscal year FY19, the Company rolled out India’s first Augmented Reality Jewellery buying experience on a dynamic and real time basis as well as Online-Offline Integration across its showrooms in Delhi-NCR.
The Company has also launched many new jewellery designs and collections like I heart, Expresso, Swarna Dharohar, Inayat, Mirosa etc. Recently, the Company for the first time in India launched silver and gold medallions to commemorate ICC Cricket World Cup 2019.

#The scrip of Bharat Heavy Electricals Ltd is consolidating around the current ranges of Rs.43 - 45, before giving the ultimate break out for targets of Around Rs.91/111.
In October last year, State-owned Bharat Heavy Electricals Ltd (BHEL) zoomed to Rs.61.30 apiece on after global brokerage firm CLSA upgraded the stock to 'Buy' from 'Sell' owing to the benefits that the company could reap due to government's stake sale.

#The Budget and IT limits:-
The Broking firm, Sharekhan believes the NDA government government might increase the basic income-tax exemption limit to Rs.5 lakh from Rs.2.5 lakh for all, thus eliminating the 5% tax slab for income of Rs.2.5 lakh to 5 lakh.
"It may replace the 20% tax rate for the Rs.5-10 lakh slab with 10%; add a 20% slab for incomes of Rs.10-20 lakh and 30% slab for income above Rs.20 lakh per annum," it said.
A likely reduction in personal income-tax rates should improve sentiments of auto and white goods makers; besides small-ticket discretionary consumption plays such as Jewelry and Apparel (Textile) players.

#A report in ET on 28 January,  2020 says,  an investor or a trader can get benefited if he/she use dips in the pre budget days to accumulate good stocks.  According to ET:

Those who can brave the current market depression due to the coronavirus outbreak might be in for big rewards post Budget.
In last 10 Union Budgets, (excluding the interim ones), Sensex and Nifty have fallen six times in the pre-Budget week and remained flat in one. Only thrice did they offer positive returns.

Except in  of 2017 and 2012, when the indices gained 2-3%, the benchmark indices have traditionally performed poorly in the pre-Budget week.

#Positive tinkering with the dividend distribution tax should benefit good dividend paying companies such as BHEL (Rs.42.65), NFL (Rs. 28.75), etc.
Abolishing Dividend Distribution Tax (DDT) which is presently levied on the companies declaring dividends or taxing dividends in the hands of shareholders is one of the things people are expecting from Budget 2020. Any such positive move will benefit the foreign investors/companies who can claim a credit of the taxes paid on dividend in India in their respective countries.(as per the relevant treaty provisions).
It will not be an exaggeration to mention here that the domestic   equitiy markets have witnessed a complete exemption on long-term capital gains (LTCG) and its replacement with the security transaction tax (STT) to the return of the LTCG alongside STT.  After that came the worse, higher dividend distribution tax (DDT) as well as the income-tax surcharge. The market hopes the that the current Finance Minister would show some courage to rationalise this structure, ushering in a rally in the bourses.
On the economic front, the NDA government has an uphill task to take care of fiscal deficit, dipping GDP and reduced consumption levels and provide a much-needed boost to the economy focused on growth, increasing job opportunities and consumer spending.

Tit - bits

The domestic benchmark indices trimmed losses

Photo: The Street 

after hitting fresh intraday low in afternoon trade. The NSE Nifty50 was seen trading at 12,036.25 down 101.35 points (-0.77%), after the rise of deaths due to coronavirus (SERS and/or MERS) and Kerala reporting the 1st confirmed case.
However, if we do a bit of internet search then we would find that this is somewhat common in China and Middle East -- the new name Coronavirus seems to have created the confusion and hence the obnoxious commotion, surrounding its name.. The traders are suggested to not to panic before the union budget to be presented on 1 February 2020.
The Nifty is likely to recover from the current levels -- bullish outlook to continue especially after Federation of Indian Chamber of Commerce and Industry (FICCI) projected India's FY20 GDP Growth Rate at 5%. FICCI on Wednesday said that its Economic Outlook Survey has projected the country's annual GDP growth rate at 5%. The projection made is in line with projections made by the National Statistical Organization (NSO). 

#The uncertainty due to outbreak of Coronavirus, has given a forward push to the gold prices. But it is surprising why the scrip of Titan Company Ltd (Rs.1178.50) is getting sold down even though the ace investor,  Rakesh Jhunjhuwala has increased his stake by buying 16 lakh shares of the company, in September - December quarter. The FM Nirmala Sitaraman is expected to give some positive doses to the sector in the ensuring budget. 

Also,  a rise in gold price indirectly soars up the share price of a company, by giving more valuation to inventory. Hence,  whether sale gets affected or not due CAA protests,  if Gold price rises, the share of a Jewelry company should rise by logic.
Besides,  the Indian Jewelry exporters are having around 15% cushion against China, as far as US exports are concerned. 
Moreover,  the commerce minister Piyush Goel has requested the FMO, to go for a duty cut in the gold imports; which augurs well for all the Jewelry companies and stores (P C Jewellers Ltd; CMP: Rs. 22.40).

#The scrip of BHEL (Rs.44) came down to Rs.43.20, intraday due to panic selling, before recovering. The company is the largest maker of power equipments (It is a capital goods company)  in India, having a huge order book and has NO relationship with the Panic gripping Dalal Street news on Coronavirus. The investors are suggested to buy in bulk the shares of the company, as the government of India has decided to go in for strategic investment of the shares of the company,  which in other words means the government wants to rope in a strategic investor to give more legs to the fundamentals of the company.
Moreover,  its book  value of Rs.90.18 and dividend yield of around 4.50% (at Par with savings bank rate per year), will be one of the deciding factors, to find the strategic investment price of the shares. Therefore,  this stock should be in your portfolio, like NFL (Rs. 29.40).

Tit - bits

The US Stocks soared on Tuesday post the

PCJ showroom in Varanasi 

market's biggest sell-off in more than three months, as investors grapple with lingering fears over a possible coronavirus epidemic. 

Dow Jones Industrial Average jumped 187.05 points, or 0.7%, to 28,722.85, snapping a five-day losing streak. The S&P 500 climbed 1% to 3,276.24 while the Nasdaq Composite advanced 1.4% to 9,269.68. At its peak of the day, the Dow was up more than 280 points. 

I had mentioned in my earlier post that it would be humorous to think that markets will go for a prolonged bouts of selling,  following the news of coronavirus outbreak. 

Most of the major European markets also closed in the green yesterday. Today,  Nifty is expected a gap up opening of at least 20 points. 

#Those who have bought the shares of P C

Photo: Live Mint

Jewelers Ltd (Rs.22.85), the 2nd largest listed Jewelry company in India, should continue to do the same. I'm of the opinion that the FM,  Nirmala Sitaraman would go for some cuts in the gold import duty, to boost up the gems and jewellery sector. 
2019 was also a difficult year for real estate and stock markets, and some jewellers believe this could see gold jewellery, in particular, emerge as a favourable investment option in 2020. 

Despite what the coming Union Budget may hold for the Gems and Jewellery sector, the volume growth for players is expected to increase on the back of reintroduction of low-cost gold metal loans and likely stabilisation of gold prices at lower levels. 
Gold jewellery exports grew 21% from November 2018 to November 2019, according to Gem & Jewellery Export Promotion Council (GJEPC) data.

Moreover, the price rise in gold has already increase the inventory valuations of the company. The stock of P C Jewelers Ltd is available at dirt cheap price. 

#Those who have bought the shares of BHEL (Rs.43.30) at around Rs.45 and have not exited at the stop loss has nothing much to worry, because with the rise in rural income the capital goods sector,  will soon pick up steam. Moreover,  the NDA government is contemplating to sell the stake of this company through strategic partner route,  instead of plain vanilla way of getting things done through stock exchanges. This is expected to give better valuations of the shares of Bharat Heavy Electricals Ltd (BHEL). 
The government is expected to push up the number of MSMEs in India on a sustainable basis through various schemes and programmes. Further, to combat the slowdown and to boost demand for local products, import substitution and a strong focus on exports are likely to pave the way ahead.

Keep adding the shares of BHEL on declines with price targets of Rs.71/77.

#The scrip of Ujjivan Financial Services Ltd was recommended on last Friday at Rs.368, T: Rs.380  - 402, SL: Rs.355.90. The stock rose to Rs.379, yesterday,  where Premium Members and also my brokerage clients were asked for profit booking. 

#Those Who are still holding the shares of Wockhardt Ltd (Rs.343.85) from Rs.237 and Rs.249, where it was recommended, should keep SL at Rs.335 and keep holding for targets of Rs.366/371.