India needs to invest Rs.26 trillion on infrastructure: Study

[Editor: This move by the GOI is likely to perk up, demand for the building materials, such as steel, cement, glass, wood, aluminium, ceramics, etc. Moreover, the Chinese steel prices are seen hitting bottom in January, 2015. Therefore, the investors are suggested to buy the scrips from this space and keep holding]

Photo: Monnet Group

New Delhi: 8 Jan, 2015: India would need to invest Rs.26 trillion during the next five years for all its infrastructure projects to give a fillip to the 'Make in India' project and to achieve a growth trajectory of 7-8 percent, research paper said Thursday.

The investment requirement for all the infrastructure projects was revealed by a research paper brought out by industry lobby PHD Chamber of Commerce and Industry and Crisil Ratings.

"Of the estimated Rs.26 trillion amount for infrastructure projects, close to 80 percent will be needed for the power, roads and urban infrastructure," said Alok B. Shriram, president, PHD Chamber.

"In urban infrastructure, municipal bodies are likely to need significant investments for constructing urban roads, expanding transport and revamping water supply and sewerage infrastructure."

The paper pointed out that 70 percent of the projected investments for infrastructure would have to be funded through debt, banks remaining the largest source of finance.

External Commercial Borrowings (ECBs) is recommended as another source of funds by the paper. The research paper said that 14 percent of the projected fund requirement can come from the ECB route which works out to be Rs.2.5 lakh crore.

"The balance of Rs.7 lakh crore, which is about 40 percent of the projected requirement, is expected to come through bonds issuance, provided the bond market is further deepened with critical measures by RBI and SEBI," the paper said.

The paper admitted that banks might not be able to finance infrastructure sector on their own as it might pose a risk of assets liability mismatch.

The paper said that the mismatch may arise as infrastructure project loans have long tenures of 10 to 15 years, while bank deposits, the main source of funds, typically have a maturity period of less than three years.

The research paper added that as banks might not be able to finance the projects alone, there was a need for liberal investment norms that allow pension funds and insurance companies to use their corpus to finance infrastructure projects.

Courtesy: Webindia123

Domestic steel demand to improve gradually: ICRA

[Editor:  Though the domestic steel consumption growth remained nominal at 1.3% during the April-November period last year, but what is to be understood is that the government of India, is expected to spend around $1 trillion in the 12th five-year plan (2012-13 to 2016-17) on the infrastructure sector which will boost demand for the Building Materials, like Steel, Cement, Aluminum, etc. It is interesting to note that this massive infrastructure spending is equivalent to around 10% of GDP (being spent on infrastructure) which has never happened in the past. Therefore, buy the stocks from these sectors]

Photo: Daily Mail

Mumbai  January 6, 2015: The domestic steel uptake is expected to improve slowly as demand recovery from industry remains subdued, credit rating agency ICRA said.

Any significant pick up in domestic steel demand can at best be gradual as key end user industries remains fragile despite a growth in the automobile sector in the current year, ICRA said in its report here.

Domestic steel consumption growth remained nominal at 1.3% during the April-November period last year.

On the supply side, although steel production trend tracked declining consumption pattern, it still remained higher than demand growth at 2.5% during the first eight months of FY15.

"Moreover, the substantial discount at which imported steel is available in the country, led to a surge in imports of steel, which reported a growth rate of almost 49% during April-November 2014 as against a fall in steel export by around 5% during the same period.

"This has led to India becoming a net importer of the metal as against its status as a net exporter in FY14," the report said.

Higher production growth relative to consumption levels and rising imports also point towards an inventory build-up in the steel market, ICRA said.

Although pricing pressures from cheaper imports and supply shortages in iron ore are likely to stay in the near term, ICRA expects the profitability of domestic steel players to remain stable on the back of softer raw material prices, and a gradual recovery of demand in some of the end-user industries.

However, debt protection metrics are not expected to improve significantly due to high debt levels of companies, and the fact that interest rates would still remain at elevated levels in absolute terms, notwithstanding an expected moderation this year year. 

Courtesy: Business Standard

Latest rate cut signals turnaround of India’s economic cycle: Jayant Sinha, MoS, Finance

Jan 16, 2015: ET Now caught up with Jayant Sinha, MoS, Finance, for his views on the interest rate cut by the RBI. Excerpts: 

ET Now: Are you surprised by this out-of-turn rate cut by the RBI? 

Jayant Sinha: I am not surprised. I have said all along that the RBI is a very professional and competent institution. They are very data-driven. They have access to an understanding of both data as well as what is happening in a variety of markets — be it the Indian equity markets or the currency markets in Singapore. 

Having looked closely at all the data, they must have concluded that they were now in a position to see lower rates. Of late, all of us were seeing the data move in a certain direction. To that extent, I am not surprised at all. 

ET Now: In the press release, the RBI has said that once the monetary policy stance shifts, subsequent policy actions will follow. Going by this, should one assume that it is just the start of a rate cut cycle? 

Jayant Sinha: It is important to note that we are at an inflection point in the cycle. The RBI had tightened rates significantly by the time Governor Rajan came aboard. Thereafter the rates were held steady for quite a long period because it was important to gain control over inflation. 

The fact that they have now moved in the opposite direction would indicate that they are coming out of that phase. It shows they are entering an altogether different phase. That is why it would be an important inflection point. 

ET Now: How is the government going to incorporate this rate cut in the upcoming Budget? Do you think it will influence you in Budget decisions? 

Jayant Sinha: This rate cut signifies a very different economic growth trajectory. The UPA government had handed over to us a difficult regime — a story marked by high entrenched inflation, low growth, and high fiscal and current account deficit. Ever since we assumed the reins, we have been trying to turn around the negative macroeconomic indicators. 

In our efforts to bring the economy back to growth path, we have had to work through these challenges and problems. We have now got a grip on those challenges, and we have passed through the phase of consolidation and adjustment. Now we have entered a phase of accelerating growth. 

ET Now: Many people are of the view that even a rate cut is not going to help the investment cycle pick up. What is your sense on that? 

Jayant Sinha: To my mind, the rate cut at some level indicates the turn of the economic cycle. We are at a point where the economic momentum has turned quite positive. There is significant optimism about the future and new investments are beginning to come in. 

Given all this, my sense is that the latest rate is cut an indication of what is already happening on the ground.

Courtesy: The Times of India 

RBI rate cut decision 'turning point', will boost growth: Arun Jaitley

Photo: Galaxy

Jan 16, 2015: NEW DELHI: Finance minister Arun Jaitley on Friday described the decision of RBI to cut key policy rate by 0.25 per cent as an "important turning point" and hoped it would engender faster growth. "After two years that interest rates are going to move downwards and market reactions also have been much better. I think this will leave somewhat more money in the hands of consumers. Hopefully (it will) increase spendings, make loans cheaper," he said. 

Softer loans, Jaitley said, will encourage faster growth of consumers goods sector which has been witnessing relatively slower growth in the last two-three months. 

In a surprise move, the RBI on Thursday cut its policy rate by 0.25 per cent in the first reduction in 20 months and promised more, paving way for cheaper home and auto loans as also lower cost of funds for corporate borrowers. Within hours of the announcement, state-owned United Bank of India and Union Bank of India cut their lending rates by the same margin and other banks are likely to follow suit. 

"It's a welcome (decision)," Jaitley said while speaking at the Economic Times Global Business Summit, adding, "there can be various opinion to when the cuts are required and when they are not required. We had a debate on this. I am glad...it's an important turning point." 

Jaitley further said that the government would endeavour to strengthen RBI so that it can become more professional and grow as an institution. 

Admitting that tax issues were hampering flow of foreign investment, Jaitley said he was seized of the matter and was looking into the suggestions made by the investors. 

"One of the reasons (for reluctance of NRIs to return to India) ... is tax climate ... The issue is under serious examination," he said, while referring to his meeting with a group of entrepreneurs from Singapore. 

Responding to a query on the proposal to replace income tax with banking transaction tax, he said, it was not possible till the nation moves fully to plastic currency. 

He further said that government was seriously examining a proposal to incentivise use of debit card by providing marginal tax incentive. 

The Finance minister is currently engaged in preparation of his first full fledged budget to be presented in the Lok Sabha next month.

Courtesy: Th Times of India

RBI rate cut likely to benefit cyclicals & midcap stocks; retain Sensex target at 30k: HSBC 

NEW DELHI, 16 Jan, 2015: The Reserve Bank of India (RBI) in a surprise move on Thursday slashed the repo rate by 25 bps, which is likely to benefit cyclicals and midcap stocks more compared to large cap stocks, HSBC Global Research said in a note.

Although the market was building a rate cut scenario by the central bank in 2015, the RBI surprised the street on timing by cutting the repo rate by 25 basis points to 7.75% from 8%, a few weeks ahead of its 3 February policy meeting. 

Softness in global commodities and a more than 60 percent fall in global oil prices since June last year have led to a sharp decline in the Wholesale Price Index. The impact has been felt on G-Sec yields with the GOI 10-year easing by 150bps over the past 12 months.

HSBC Asia-Pacific Rates team expects credit costs to fall further to 6.0-6.5% within the next 2-3 years. Our India economist expects the RBI to cut rates by another 25bps after the end-February budget announcement, added the the HSBC report.

The global investment bank remains constructive on India with a Sensex target of 30,000 for the calendar year 2015 - implying 7% potential upside by the year-end. For mid-caps, they see better potential upside of 22 percent, with a BSE Mid-Cap target of 12,950 for the end of 2015. 

Falling cost of borrowing positive for mid-cap companies:

The cost of borrowing for the BSE-Sensex for FY14 stands at 6.2%. This magnifies to 7.6% for the BSE 100 (top 100 stock index) with the Nifty in between at 7.3% (top 50 stock index).

Interestingly, the average cost of interest for BSE 100 stocks excluding the BSE-Sensex (top 30 names) rises to 8.1%, reflecting the fact that large companies can usually obtain better terms for borrowing. 

The situation is similar for gearing levels. Large companies have lower levels of gearing (Sensex at 0.3x compared with BSE 100 ex Sensex at 0.6x) suggesting the impact of any decrease in borrowing costs would be more evident on the mid-cap universe. 

Lower interest rates positive for cyclicals

The lower interest rates will benefit cyclicals more than defensives as the leverage ratios of domestic cyclical companies are much higher than those in the defensive sectors. The net debt-to-equity ratio of domestic cyclical sectors has increased sharply over the past few years.

Defensive companies (mostly IT, healthcare and consumer staples) continue to hold high levels of cash and cash equivalents, resulting in net cash positions. Within HSBC covered universe, they are overweight on companies that could benefit from the loosening of monetary policy, which include name like IDFC, Tata Motors, Maruti Suzuki and Larsen & Toubro in large caps and Voltas in mid-caps. 

Apart from the above list, other midcap stocks which are likely to benefit from an uptick in utilisation, strong earnings momentum and business in transformation include names like Fortis Healthcare, Jubilant FoodWorks, Kaveri Seeds, Hathway Cable & Datacom Ltd. 

Courtesy: The Economic Times

Indian secondary steel sector input prices rally after cut in lending rates

Photo: Business Standard

Friday, 16 Jan 2015: Sentiment driven India’s input market for secondary steel sector saw some activity for a change after cut in lending rates by RBI by 25 basis points. 

Sponge iron prices gained INR 50 per tonne at Raigarh and INR 150 per tonne at Raipur & Rourkela on Thursday but remained unchanged at Bellary, Kolkata and Ludhiana 

Steel melting scrap prices also rallied at Hyderabad (+500), Kandla (+100), Kolkata (+200) and Mandi Gobindgarh (+150). 

In unison, benchmark pencil ingot prices at several locations – Durgapur (+150), Hyderabad (+400), Jaipur (+200), Kolkata (+140), Mandi Gobindgarh (+200), Muzzafarnagar (+350), Raigarh (+50) and Rourkela (+150)

Although the rate cut is not expected to have moving impact on the market demand, it certainly perked up the sagging sentiment. An anticipation of possible transactions borne out of more construction activity and demand for long products. 

Any remarkable change in demand and market sentiments is possible only after further investments happens in the construction and infrastructure sector which is likely to happen after more credit easing after the budget. 

The faint momentum is unlikely to sustain.

Courtesy: Steel Guru

FIIs were Net Buyers Today also

Now, since the FIIs have understood the future modus-operandi of the RBI, there would now be continuous flow of FII money, with the caveat that to get right harvest the crop has to be given due car and protection. 

Hence, what the government of India should do at the present moment, is to bring in positive schemes, for the equity market participants. We need to balance, the FII outflows from the Bond Market (in case there is some exodus) with that into Equity markets and through FDIs.  This is in view of the RBI choosing a reverse trajectory for the Repo rate or in other words, the rates the set to come down in the coming  months. 

Therefore, without fail, the NDA government should immediately take up steps to boost the Indian capital markets or else there could be another tug-of-war between INR and USD, as the FPIs pull out money, and look for better returns in the bond market, elsewhere. The time is running out for the NDA government to take decision. I feel it would not be an exaggeration to mention here that the UPA and its Finance Minister, Mr.P Chidambaram, had earlier milked the Indian Equity markets (during their tenure) to the hilt without giving much incentives to the market-players. 

WINNING STROKES: THINK DIFFERENT

Allied Digital Services Ltd today went in for another round of correction before closing at Rs.27.40 in the BSE. I hope most of you have booked profits in the counter. The scrip was repeatedly recommended in this blog for a short term target of Rs.31-32. 

Today Rohit Ferro Tech Ltd was recommended today at Rs.8.30, based on certain parameters: 

• Since the government has taken-up the cudgel to boost the infrastructure and economy, the demand for building materials like Steel, Cement, Glass, Ceramics, Wood, Aluminium, Plastics, etc are set to increase in the coming days. 
• The company is implementing a CDR package and hence there is already lot of sops for payment of loans, including waver of interest rate and easy payment options 
• The company will allot, subject to the approval of the shareholders, 7,12,05,000 (Seven Crores Twelve Lacs Five Thousand) Convertible Warrants of nominal value of Rs 10 each at a price of Rs.20 per Warrant (including a premium of Rs.0 per Warrant) in accordance with SEBI (ICDR) Regulations, 2009. This is much higher than the current market price of the scrip which is Rs.8.10 in the NSE and Rs.8.09 in the BSE. 
• The NDA government is also revamping the Indian Railways--this will also push up the demand for steel, especially the Ferro-alloys in the coming days. Rohit Ferro Tech, you know is a major producer of Ferro Alloys. 
• The Economic Times, writes on November, 14, 2014: Makers of ferrochrome, a key alloy used in making stainless steel, are planning expansion of their facilities to gear up for an expected increase in domestic demand instead of focusing mainly on exports to China that account for more than half of their annual production. The Narendra Modi-led NDA government's focus on building infrastructure and spurring domestic consumption holds promise of increased demand of stainless steel from consumer durables, auto, transport, water management and solar energy sectors.
• Bulk Ferro Alloys like H.C. Ferro Manganese, Silico Manganese, High Carbon Ferro Chrome are used for manufacturing different grades of steel depending on their characteristics and are in great demand. The Ferro Alloys produced by Rohit Ferro Teh Ltd are as per International / Indian Standard Specifications for manufacture of mild steel, alloy steel and stainless steel. About 90% of the High Carbon Ferro Chrome produced is used in the making of Stainless Steel, where chromium is the unique ingredient. UNique, beacuse it is Chromium that makes stainless steel 'stainless'. The additions of Ferro Chrome in low alloy steels contribute towards a range of improved properties, especially to achieve a balance of through-section hardness and toughness in Engineering Steels such as bearing, tool, high strength/low alloy and high speed steels, pumps, valves, pipes, rolls and wear plates. NC Mathur, president of Indian Stainless Steel Development Association (ISSDA) told Eonomic Times: "The steel industry grows at 1.2-1.3 times the GDP. With a strong Prime Minister and the new government's initiatives, the demand of stainless steel can be expected to grow around 8%. The industry is focusing on architecture, shopping complexes, institutional buildings, auto sector and railways for growth," 
• It is to be noted that Indian ferrochrome makers are currently dependent on China, the world's largest maker of stainless steel, which is also the biggest importer of Indian ferrochrome as it buys over half of the country's annual output of one million tonne. "All this is going to change in the next three-five years because stainless steel is starting to pick up significantly and in many commodities there is a lag before demand can be met. In ferrochrome industry, we are talking about adding capacity. We see production going up to 1.5 million tonnes in the next three-five years," said Subhrakant Panda, MD of Indian Metals & Ferro Alloys (IMFA). According to ISSDA president Mathur, the industry is not only banking on higher economic growth over the next five years but also on initiatives such as Swachh Bharat, 100 Smart cities and overseas investment as Modi sells the India growth story to the world.
• Meanwhile, the Chinese domestic ferrochrome market is expected to remain under pressure after the 1% import tax on ferrochrome with more than 4% carbon was scrapped. Exporters lauded Beijing's decision in December. The 1% import tax was factored into the selling prices quoted to Chinese buyers, they said previously. Removal of the 1% import tax will give sellers higher price realization, they added. This is positive for the domestic Ferro Chrome sector. 
• The recent government of India, initiatives, like bringing in the mining ordinance and trying to zero in on the mine renewal leases augurs well for the companies like Rohit Ferro Tech Ltd. 
• With the price of Crude Oil and Coal going down, we can expect good days ahead for the Ferro Alloys sector. High power costs and scarcity of raw materials for its ferro-alloys unit had in the past made operations difficult for this sector as increased Chinese stainless steel imports lowered capacity utilisation of the sector.
• PR Newsware writes on Dec. 24, 2014: Growth in construction and automobile industries is expected to boost the overall demand for steel. This, in turn, is anticipated to drive the global ferroalloy market between 2014 and 2020. Ferroalloys are iron alloys that contain chromium, manganese, silicon or other elements in varying proportions. Ferroalloys are primarily used by the steel industry. 
• Since, Ferro Alloys is a power intensive sector and hence, any effort to increase the captive power capacity would definitely boost the bottomline of the companies. For ferroalloys plants without captive power, the electricity bill alone accounts for about 35% of the overall production cost. The Company is in the process of setting up an additional Sub Merged Arc Furnace of 33MVA and a Captive Power Plant at its Jajpur Unit. The same were scheduled to be completed by September 30, 2014. The completion is delayed for the reason of non delivery of certain equipment from the vendors in time. The management expects to complete the same by March 31, 2015. Hence, we have around 2-months time. Meanwhile, the company is also talking of selling the Jajpur Unit in Orissa (Odisa). 
• The market for stainless steel in 2013-14 was at 2.5 million tonne of which flat products accounted for approx 2 million tonne. With a low per capita consumption of 2.1 kg (as against the world average of ~5 kgs) there lies a huge potential for future growth but slowdown in sectors such as infrastructure, railways, seaports, airports, highways, and bridges etc. had become impediments. We certainly need protection in terms of 'anti dumping duty'. The difference between raw material and finished products imports currently stands at 5% in India as against 10% in China. The Chinese government protects its local industry. However, the Indian companies, cannot import raw materials from China due to higher duty. So, we have to import finished products at the expense of the local industry. The government of India likely come up with similar duty protection to prevent units from closing down in the Union Budget-2015.
• The Book Value of the shares of the company is Rs.50.94 and the market cap is only Rs.92.04 Cr against FY14 income of Rs.2,494.52 Cr and H1FY15 income of Rs.963.32 Cr.  
• During FY14, the coking coal mine in Indonesia owned by M/s. PT Bara Prima Mandiri through the Subsidiary SKP Overseas Pte. Ltd., Singapore has started commercial production. The mine located in Central Kalimantan province of Indonesia has an estimated coking coal reserve of 10 MN Tonnes. The Company is also having 60% economic interest in a thermal coal mine in Indonesia owned by M/s PT Palopo Indah Raya through its aforesaid Subsidiary. The mine located in Central Kalimantan province of Indonesia has an estimated thermal coal reserves of 20 MN Tonnes.

With so many positives at place, you are getting the shares of Rohit Ferro Tech only at Rs.8.09 in the BSE and Rs.8.10 in the NSE. Just buy as much as you can and keep holding. I am sure by the end of March, 2015, you would get more than 40% return on your investments. 

Yesterday, the Premium Members were asked to average both Jaiprakash Power Ltd  at around Rs.11.80 and 26.30 respectively. Today, both the scrips gave a decent return with J P Power Ltd shooting to Rs.12.48 intra-day and J P Associates Ltd to Rs.27.20. With the direction of Interest rate now on the donward spiral, most of the companies with high debt, like Suzlon Energy Ltd (Rs.16.11), Jaiprakash Power Ltd (Rs.12.35), Jaiprakash Associates Ltd (Rs.26.80), etc are set to do well. 

Meanwhile, today another of my earlier recommended counter Jai Balaji Industries Ltd was asked to be averaged at around Rs.15-15.50 by those who still did not book profits in the counter, when the scrip to above Rs.30, during the whirl-wind rally post win of NDA. The scrip today closed at Rs.15.70 and would slowly move towards Rs.31-32 in the coming days. 
Today, Anant Raj Ltd touched Rs.47.75 (NSE), intra-day before cooling at Rs.46.05 in the BSE and Rs.46.15 in the NSE. Today many real estate counters came down, after shooting up yesterday and post initial rise of today. It is to be understood that, Anant Raj Ltd is  a class apart in the real estate space, having huge land bank, apart from having an exponential growth in the lease income. It also has low debt and is speaking of exiting from its non-core businesses. The scrip should touch Rs.70, in the coming days, as the interest rates continues in their downward spiral. 

Join my service or trade through my recommended brokerage house/s to get professional help during the market hours. In this kind of market, where you need to compete with CA, ICWAIs, MBA Finances, Harvard and Cambridge (and from DSE and LSE), apart from Highly Professional Traders and Brokers, the things are not that easy. You may succeed once or twice due to luck or otherwise, but to make money on a consistent basis, one has to be highly professional, due to reasons mentioned above. Therefore, if you do not have much time for the research but want to make money from this raging bull run, you definitely need to take the help of professionals. If you have lost money earlier, then try in a new way, with small funds. 

Rohit Ferro Tech Ltd: Buy

CMP: Rs.8.30 

Buy Rohit Ferro Tech Ltd at Rs.8.30, for a short term target of Rs.12-13.5.  The Company was brought under the Corporate Debt Restructuring (CDR) Scheme for nursing it to profitability. The management has adopted focused and aggressive business strategies and functions to improve the sales and profitability of the Company. Considering the present sign of improvement in overall business environment, the Company is expecting an increase in its revenue and profitability. 

The Management is confident of higher growth in the period to come.  Decrease in the administered price fuel and the gradual streamlining of the coal sector is expected to help the company shore up its bottomline. 

Moreover, the basic engineering and civil and structural work of Captive Power Plant of 67.5 MW & 33 MVA Furnace is completed. Due to delay in delivery of the some major equipment’s having long lead time the project is not completed in its schedule time. The Company expects to commence the commercial operation of the said projects by the end of March, 2015.  Hence, we have around 2-months time.

Also, the company will allot, subject to the approval of the shareholders, 7,12,05,000 (Seven Crores Twelve Lacs Five Thousand) Convertible Warrants of nominal value of Rs 10 each at a price of Rs. 20 per Warrant (including a premium of Rs.10 per Warrant) in accordance with SEBI (ICDR) Regulations, 2009, to the entities belonging to the promoter group and strategic investors belonging to non-promoter group on preferential basis.

The point is when there is a cut in the interest rates, then rate sensitive sector and its dependent sectors (Steel, Building Materials, Glass, etc) generally does well. Therefore, I would suggest you to stay put in these sectors. 

Achche din' for job seekers? Hiring may go up in 2015

[Editor: My "Dabba-wala" (Tiffin provider) last week asked me: "Sir Achche Din Kab Aane Wala Hai" (When will our conditions improve). I said: "It is all in your hands my brother: Dabba Ka Daam Half Kar Dijiye, Mere Liya Achcha Din Aa Jayega" (Reduce the price of my Food to half, for me good days will commence).........Huh!!]. 

Photo: Eye Opener

New Delhi, January 05, 2015: It may rain jobs in the country this year, as the government's policies for "achche din (good days)" and signs of an end to a long industrial downturn are likely to whip up an appetite to hire across several sectors in corporate India.

Headhunters, who spent at least three years in relative wilderness, are seeing a rosy mood as green shoots appear in manufacturing and services alike.

The Narendra Modi government's growth push is expected to boost hiring by at least 25% and it may go up to 40% in 2015 over the previous year, say recruitment industry executives.

The hot sectors for hiring are banks, financial services, insurance, defence, healthcare, information technology, media, hospitality, travel and professional services.

"Political and economic stability is going to have a very positive impact. There could be as high as 40% growth in hiring in some of these sectors," said Bhavishya Sharma, director of Athena Executive Search, an executive search firm.

"Also, insurance and defence sectors will see a rise in executive-level hiring with the introduction of new foreign direct investment (FDI) policies as we anticipate a large number of multinational organisations to start their India operations."

Other sectors that will be at the forefront are banking, financial services and core sectors where the increase in hiring would be more than 25%, followed by sectors like auto, software and information technology.

"This is based on the assumption that we will be able to meet the expected GDP (a measure of the value of goods and services produced in the country) growth rate of 6.5% in the 2015-16 fiscal.  And if GDP growth reaches 7-8% in coming 3-4 years, about 9-10 million jobs could be created," said Pankaj Bansal, chief executive officer of PeopleStrong, an HR consultancy firm.

The government has eased foreign direct investment norms in the insurance and defence sectors to 49%, while the RBI has granted licences to new private banks and is in the process of granting licences to "small payment banks".

According to Indian Staffing Federation, a body of private employment agencies, hirings would grow 12% in the first six months of 2015.

Recent surveys by various human resources firms echoed similar trends.

The Employment Outlook Survey by workforce solutions major ManpowerGroup says Indian employers are expecting a brisk hiring pace for the January-March period. The country has also emerged as one of the most optimistic nations in the world in terms of hiring plans for the next three months.

While the figures for December are still awaited, the Naukri Job Speak Index for November 2014 showed a 13% hiring growth on a year-on-year basis.

Also, the index has seen a significant rise in hiring activity since the beginning 2014, while momentum picked up significantly after May.

In addition, the emphasis of the government on the manufacturing sector is expected to create 100 million jobs in the next 10 years in the manufacturing, mining and infrastructure sectors.

Courtesy: Hindustan Times

Near zero inflation in December puts pressure on RBI to cut rates

Photo: Impact Design and Drafting

[Editor: The Investors should now flock towards the rate sensitive counters, especially the real estate / construction space. Also, they can invest in companies, who have high debt on the books, as any interest rate cut will be boon for them, provided the bank/s, transmits Repo Rate cut to the concerned company. Moreover, the fall in the crude oil prices is acting as a catalyst for the RBI to push Repo Rate cut button. "A cut in interest rates is round the corner, which should boost the demand for real estate. A government with the strong mandate has already initiated a series of reforms which should create a positive environment for growth" says VINEET RELIA, MD, SARE Homes]

New Delhi | January 14, 2015: Headline inflation for December rose marginally 0.11 per cent compared to a zero per cent growth during the previous month, as food price inflation rose 5.2 per cent as against 0.63 per cent growth in November.

According to the data released by the commerce and industry ministry, the wholesale price index (WPI)-based inflation was -0.28 per cent compared to 5.58 per cent during the same period a year ago.

However, the rate of price rise in manufactured products declined to 1.57 per cent compared to 2.04 per cent in November while that of fuel and power contracted 7.82 per cent compared to a contraction of 4.91 per cent during the previous month. Inflation in primary articles comprising food products, vegetables, cereals and protein-rich items rose to 2.17 per cent compared -0.98 per cent in November.

Earlier, retail inflation based on the consumer price index (CPI) rose marginally to 5 per cent during the month compared to 4.38 per cent in the previous month, though within the comfort zone of the Reserve bank of India, raising hopes that the central bank may soften its policy stance in the forthcoming monetary policy review in February.

 Notwithstanding the marginal rise in December inflation, India Inc today said low oil prices and measures undertaken by the government are likely to keep inflation under check, even as it reiterated the need for an interest rate cut by the RBI to kick start growth.

“Given the slow pace of global recovery and expectations of oil prices to remain at low levels going forward, inflation is expected to remain under control,” said Ficci President Jyotsna Suri.

“To give a boost to the capex cycle, there is an urgent need for lowering of lending rates. Since the inflation is largely under control, we urge the RBI to ease the monetary policy,” she added.

Reversing a six month declining trend, WPI inflation moved up marginally to 0.11 per cent in December mainly due to increase in prices of food items.

“Going forward, the moderation of global commodity prices and the measures taken by the government to contain the inflation would help rein in inflationary expectations and prevent inflation from making a comeback in a big way,” said CII Director General Chandrajit Banerjee said.

“We hope that the conducive inflationary situation would spur RBI to move away from its inflation-centric approach to policy making and focus on rejuvenating growth in the economy and industry, in its forthcoming monetary policy,” he added.

Inflation measured on Wholesale Price Index (WPI) was at zero in November.

“Policy makers need to cut the interest rates in order to induce the producers to augment the supply of goods and services on one hand and increase the domestic demand on the other,” Assocham Secretary General D S Rawat said.

“Inflation worries are behind us and current demand and supply dynamics indicate that inflation will consolidate at around 3 per cent (average) in 2015,” PHD Chamber President Alok B Shriram said.

India’s benign inflation data fuels rate cut calls

(Reuters) Plunging global oil markets helped India post slower-than-expected wholesale price inflation in December, raising hopes for an early cut in interest rates to help the economy out of its longest phase of sub-par growth since the 1980s.

The wholesale price index (WPI) rose 0.11 percent year-on-year compared with a 0.6 percent jump forecast by economists in a Reuters poll. Wholesale prices were unchanged in November.

Data released on Monday showed consumer price inflation quickened at a slower-than-expected pace of 5 percent in December, remaining well within the Reserve Bank of India’s (RBI) medium-term target of 6 percent.

With a near 60 percent fall in global oil prices since last June and food prices remaining in check despite poor monsoon rains last summer, some analysts expect the RBI to reduce its repo rate at a policy review on Feb. 3. The repo rate has stood at 8.0 percent for the past year.

“Falls in commodity prices have brought down WPI, CPI (consumer price index) alike,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

Wholesale fuel prices fell an annual 7.82 percent last month, their biggest fall since September 2009. Month-on-month, the prices were down 2.4 percent.

Similarly, food prices recorded a 1.9 percent fall in December from a month earlier. However, they were up 5.2 percent year-on-year compared with a 0.63 percent gain in November.

“All indicators now point that the RBI should cut rates by at least 25 basis points in its next policy meeting on Feb. 3,” said Srivastava.

However, some analysts say RBI Governor Raghuram Rajan may delay the rate cuts amid mounting concerns over the government’s fiscal health.

Sluggish revenue receipts have driven up the federal fiscal deficit to 99 percent of the full-year target in just the first eight months of the year that ends in March, casting doubts on Finance Minister Arun Jaitley’s ability to trim the shortfall to a seven-year low of 4.1 percent of gross domestic product (GDP).

Concerned over slow economic growth, some government aides are also pushing to row back on fiscal deficit targets when Jaitley announces the 2015/16 federal budget next month. They have advocated more spending on infrastructure projects that could lift growth.

Rajan, however, has set fiscal consolidation as a pre-condition for lowering rates.

“Given the uncertainties, the RBI might prefer to monitor the content of the end-February’s budget and credibility of fiscal targets before easing rates,” said Radhika Rao, an economist at DBS Bank in Singapore.

“This suggests rate cuts might begin April 2015 onwards, with a small probability of inter-meeting cut in March.”

Courtesy: The Financial Express

Winning Strokes: Think Different

The Nifty today closed just a tad above its support of 8270 at 8,277.55 with a minor loss of 21.85 points, though intra-day it dipped to 8236.65. In absence of any major happening, Nifty may trade within the range of 8250-8360, while the stock specific action will rule the roost. Most of the action would be concentrated in the mid and small cap counters. Today (14-Jan-2015), FII/FPI  net sold shares worth Rs.69.74 Cr while the DII sold shares worth Rs.223.98 Cr. Narendra Modi who stormed Delhi, elbowing past many senior leaders like Dr.M M Joshi, L K Advani, etc, after initial hype is turning out to be a FLOP MASTER, because he has no idea, which sector/s has/have to be treated more or given priority, at the present moment. There is a very popular saying in Bengali (Bangla): "Kholer Kaaj Bole Hoy Na", which means those things which require intelligence and knowledge cannot be solved using physical force. However, our Prime Minister is very good at giving lectures. 

Today Allied Digital Services Ltd touched Rs.30.40, just below my target of Rs.31 and closed at Rs.29. The scrip was repeatedly recommended in this blog and some of the blog reader even questioned the rationale!! This move has probably silenced those red faces. However, today mostly there was intra-day trading in the counter as the percentage of Deliverable Quantity to Traded Quantity was only 33.62%. Therefore, the traders should do well to book some profits in the counter, because it is near 52-week high price and anytime it could come down to its stable level of Rs.20-21. However the long term investors can hold the scrip with a SL of Rs.27.50 (exit), with a Caveat that there are management issues in the company (especially with the CMD, Mr.Nitin Shah) and it is not investor friendly. This is a high-risk-high-gain counter. 

Note: These days, I am too busy with some assignments apart from being not physically well. Hence, the blogs are not getting updated. Also, in the new location (where I am based now), there is regular internet problem. But I will soon recommend a company from the steel sector which has a story to tell. Therefore, keep the cash ready if you want to ride the train.

Who says interest rates are going up?

January 13, 2015: There has always been a lot of fanfare around the Reserve Bank of India’s policy action. But the sound and fury over its reluctance to cut rates is hard to understand. The truth is, a cut or hike in policy rates has not mattered much to borrowers. A study of the data put out by the RBI on banks’ lending rates since 2008 shows that banks have been tardy in passing on the RBI’s rate actions, be it hikes or cuts.

In all the exhortations for rate cuts in recent months, this aspect has gone unnoticed.

The mismatch

Between September 2013 and now, the RBI increased the repo rate by 75 basis points. But the lending rates of banks, that are meant to track the central bank’s policy action, have not moved up during this period. On the contrary, the weighted average lending rate actually fell by 20 basis points between September 2013 and September 2014.

Going by this data, the claim by India Inc and the government that high interest rates have led to lower growth and stalled fresh investments, hardly holds water.

But the recent anomaly in rates is not a singular event. Even in the past, banks have been tardy in passing on rate actions. This has been particularly true during an easy money policy.

Consider for instance, the period between September 2008 and September 2009. The RBI had slashed the repo rate by a tidy 425 basis points but what fell into the borrowers’ lap was a mere 120 basis points cut in lending rates. Or the period between March 2012 and June 2013, when the repo rate fell by 125 basis points. Only 40 basis points of this rate cut was passed on to borrowers. Why this discrepancy between the rate actions of the RBI and banks?

Banks’ dilemma

While the RBI’s primary tool for monetary signalling is the repo rate, and it helps set the direction for rates, banks decide their lending rates based on their base rates, which they are free to decide. Factors such as the cost of funds, administrative costs and profitability are taken into account. Ideally, when the RBI lowers its policy rate, it should translate into lower cost of borrowings for banks and reduced lending rates for borrowers.

But there are two main reasons why this doesn’t happen. One, banks source only a minuscule portion of their funds from the repo window. The amount has hovered at about 1 per cent of their total deposits. Banks’ dependence on deposits with maturities of less than one year has also been falling. Banks rely significantly on longer term deposits. With the bulk of the deposits unaffected by RBI’s rate action, banks are unable to tweak lending rates in a hurry.

The second reason for slow transmission is liquidity. In a tight liquidity scenario, banks may be reluctant to cut deposit rates. This was one of the main reasons for banks not cutting rates from April 2012 to May 2013. Banks had to raise deposit rates to woo depositors.

Tables turned

What prevented banks from cutting rates then is what triggered a fall during the last one year. Many banks started to cut rates across different term deposits, mainly due to ample liquidity. Banks flush with liquidity had enough headroom to lower deposit rates. As a result, banks’ costs of borrowings have come down by 30-40 basis points since January 2014. Banks have also not been able to deploy their funds due to slowing credit growth, and have shed high cost deposits to keep margins intact. With the cost of funds coming down, some of this benefit has been transmitted to borrowers in the form of lower lending rates.

An analysis of Capitaline data for CNX 500 companies reveals that, in the first half of 2014-15, while interest costs have gone up by 6 per cent (over last year), total debt has also risen by 10 per cent. This clearly indicates that companies have not paid higher interest (incrementally) on their loans, and the increase in interest payment is mainly due to higher leverage.

The good and bad

Banks have also been making the point that good borrowers have been able to source funds at attractive rates. This argument does have some merit after all. Having burnt their fingers with highly-leveraged companies and risky sectors, banks have turned wary, particularly over the last year or so.

Given this backdrop, it is safe to assume that the average lending rates disclosed by the RBI for fresh loans mostly reflect the rates at which corporates — the good ones — have been able to fund their additional need over the last one year. This data reveals that lending rates on fresh loans sanctioned have actually fallen by 44 basis points.

Top-rated companies have also been able to make hay in the secondary market. Yields on AAA-rated corporate bonds have fallen by 60-70 basis point in the last one year. More importantly, after hovering around 10 per cent (the lowest amongst banks) towards the end of 2013, rates on AAA bonds slipped to 8.6 per cent levels by the end of 2014 — way below bank borrowing rates.

AA-rated companies that rank a notch lower, still pay about 30-40 basis points more than top-rated companies to source funds from the secondary market.

Getting it right

Good or bad, all companies are now clamouring for lower rates. While some softening has already begun, it is clear that India Inc is awaiting the big move from the central bank. But aside from setting the direction, it is imperative that the RBI’s rate action is transmitted by banks to borrowers in its entirety.

In this context, the RBI’s decision to move away from the fixed repo to the term repo mechanism, in keeping with the recommendations of the Urjit Patel Committee, is welcome. Introduced in October 2013, term repos provide short-term funds at market-determined rates, with the RBI auctioning off such funds. By altering the amount it provides at each auction, the RBI can tweak short-term rates to suit its needs. Liquidity, cited as one of the reasons for not reducing lending rates in the past, can now be adjusted to ensure there is ample liquidity when the easing begins.

The RBI’s objective of bringing down banks’ SLR requirement will also ensure better transmission. This will do away with a captive market for government securities, and re-align the cost of borrowing to market determined rates. Every segment of the yield curve will move to market-determined rates.

From a longer term perspective, it is measures such as these that will ensure efficient working of the monetary policy framework. Borrowers will not feel shortchanged when the RBI slashes the policy rate.

Courtesy: The Hindu Business Line 

Controlled inflation, strong IIP raise hopes of rate cut by RBI

Photo: Babypips.com

January 13, 2015: A pick-up in manufacturing, mining and power sector activities pushed industrial production to a five-month high of 3.8 per cent in November, while retail inflation rose to 5 per cent in December, higher than 4.8 per cent in November, raising hopes for an interest cut by the Reserve Bank of India (RBI) in its forthcoming policy review on February 3.

According to the index of industrial production (IIP) data released by the ministry of statistics and programme implementation, manufacturing production — which comprises more than 75 per cent of the index — grew 3 per cent in November against a contraction of 7.6 per cent in October. Similarly, mining output also saw a growth of 3.4 per cent during the month, though at a slower pace compared with 5.2 per cent in October. Electricity generation grew by 10 per cent during the period compared with 13.3 per cent in the previous months.

Consumer price index-based (CPI) inflation, meanwhile, posted a slightly higher growth on account of high cost of food products including fruits and protein-rich items. While in November, retail inflation posted a growth of 4.38 per cent — lowest since the government started computing the new series of data in January 2012 — in December 2013, it stood at 9.87 per cent.

India Inc made a strong pitch for a cut in interest rates. However, experts said that they should be viewed in light of the base effect, encouraged by the twin data.

“I don’t think RBI will do away with the high policy rates. Global developments like Greek elections and the reaction on rupee has to be factored in. So we can say that the probability of a rate cut in February is relatively higher now than before,” Indranil Pan, chief economist, Kotak Mahindra Bank, said.

Economists added that the probability of a cut in interest rate is much higher after the government has presented the Budget 2015-16 next month.

Courtesy: Indian Express

WINNING STROKES: THINK DIFFERENT

The Nifty today closed flat at 8,299.40 or marginally down by 23.60 points--however below its crucial support of 8300. In my morning inputs to the Premium Members, it was mentioned that since the Bulls have managed to hold the crucial support of 8000 and the Nifty bounced back to 8332 from the low of 8065, it shows inherent strength in market. Also, the The BSE Mid-Cap index advanced 6.59 points or 0.06% to settle at 10,492.77, outperforming the Sensex.  This is what is mentioned in the morning note to the Premium Members: 

"The Nifty is now trading at around 8339.05 up 16.50 points. However, what is more interesting is to watch the mid-cap index, which is now up around 61.90 points".  

Meanwhile, the Index of Industrial Production (IIP) for the month of November was reported at 3.8% versus (-) 4.2% in October. Now, from where the buying could start in Nifty? Or should we focus more on the mid-cap stock? To get answers to these burning questions, trade through my recommended brokerage house/s or join my service. 

Allied Digital Services Ltd, today as expected hit the 20% buyer freeze in the late market trade at Rs.26.40 in the BSE and Rs.26.45 in the NSE. It also made a new 52-week high today. I had in the past repeatedly asked all not to sell the scrip in a hurry as its fundamentals are set to improve in future. I had also said several times that the scrip will now make new yearly highs. Those who have been accumulating the scrip in all declines, must be very happy. Tomorrow, it should open above Rs.30.

Anant Raj Ltd, which was given an exit yesterday, for the Premium Members (as it dipped below a crucial support zone), was given a re-entry today as it sustained above Rs.42. I feel most of them had bought the scrip in the morning at around Rs.42, where it hovered for a long time. The stock closed at Rs.42.70 in the BSE and Rs.42.80 in the NSE. The next upside targets comes to be Rs.45 and Rs.48. Moreover, a closer look at the CPI index number for December, at 144.9, shows that it has actually fallen from 145.5 in November 2014. The spike in the CPI inflation rate is thus purely a base effect, and has nothing to do with any imminent rise in inflation again. Therefore, this time the RBI governor has some room for Repo rate cut. Since it remains within the central bank's target of achieving 6 per cent retail inflation by January 2016, analysts expect the RBI could soon cut interest rates following a hefty reduction in the oil import bill. It is pertinent to mention here that the RBI has kept interest rates unchanged at 8 per cent over the past year, ignoring suggestions from the government and industry to ease monetary policy. Meanwhile, to accelerate the recovery in economy from its longest slowdown since the 1980s, the Prime Minister of India has pushed through a raft of economic reforms, mostly by executive orders. 

The crime of Mumbai is to be intellectually dead and pathetically helpless.

Recent protests against a glitch in Mumbai’s train services turned violent.
Photo: Praful Gangude/Hindustan Times

Mumbaikars again showed their spirit last week when their precious suburban train system was running late. They did what they have done before to make things better: Vandalize the railways, burn state property and attack train drivers to extort better services in future from the government. 

Of all the things one is inflicted on by that city’s residents, the most tiresome is that called the spirit of Mumbai. One day, 10 years ago, after Mumbai was flooded and swamped and incapacitated by clogged gutters, Shravan Garg, a friend who was then editing the Hindi daily Dainik Bhaskar, came visiting. He remarked on the front page of the paper I was then editing and said another paper had framed the real story better. Which was what? I asked. The spirit of Mumbai, he said. 

This spirit is best expressed by visuals of trains full of Mumbai residents going to work the day after a calamity. The spirit of Mumbai. I do not like this awful phrase. I find its essence revolting. It is a celebration of Indian selfishness: “Oh, look! I’ve survived and am off to work again.” 

Writing some years ago in The New Yorker after yet another bomb attack in the city, journalist Naresh Fernandes observed: 

“Vegetable vendors did a brisk trade in spinach and sour limes, and hundreds of commuters streamed past on their way to the nearby train station. The city’s ability to pick itself up and march right back to work in this way has, after previous attacks, routinely been hailed by politicians and society leaders as evidence of the indomitable ‘spirit of Mumbai’. Thursday morning, that cliché was notably absent in the newspapers and on TV. In fact, for the first time, Mumbai citizens were expressing an antipathy towards that phrase. Perhaps they were finally mindful that politicians who had praised the spirit of Mumbai had used this presumed resilience as an excuse to absolve themselves of the need to take the difficult decisions necessary to actually make the city safer and more livable.” 

But it will be back, of course, though we saw more of the true spirit of Mumbai last week and it is expressed as “get me to my office or I’ll be violent”. 

Mumbai should justly be convicted of greater crimes than selfishness. Flying out of the city to Bengaluru, the plane taking off goes over the waters, and then turns south. At this point passengers on the port side can see south Mumbai in full. It is dismayingly small. To those who have experienced landing at, say, Chicago, or London, the great island city of South Asia seems little more than a few grey and dusty neighbourhoods clumped together. “From its island body,” Aldous Huxley wrote in his 1926 book, Jesting Pilate, “Bombay radiates...suburban squalor into the land.” No different today of course and, in fact, worse. 

But all of that is not the real problem. The crime of Mumbai is to be intellectually dead and pathetically helpless.

I once took the bus tour around Dublin, a city of around 500,000 people. Showing us the sights, including the Irish city’s finest landmark (the Guinness brewery), the driver would every so often casually point out the homes of famous Dubliners. The list was impressive: George Bernard Shaw, W.B. Yeats, Bono, Samuel Beckett, Oscar Wilde, James Joyce, Jonathan Swift, the Duke of Wellington, George Berkeley, Bram Stoker, Francis Bacon and Bob Geldof. 

On and on it went. Every neighbourhood and every street of that small town had produced someone of global fame and genuine quality. This roll-call of names had a larger purpose. It showed off what the town’s culture was.

I thought about what such a tour would be like in Mumbai, where I then lived. What could be shown there? “Here’s Salman’s house. That’s the Ambani family’s tower. And look, there’s Kareena’s flat.” That’s how it would go. I was talking to the historian Ramachandra Guha a few days ago about this and he asked whether I liked being away from Mumbai. 

“There is no one in the place to have a conversation with,” I said to him grandly, “since Rafiq Zakaria died.” He thought about that and then said, “What about Naresh?” (ruining a perfectly good sweeping statement.)

Fair enough. Perhaps there are other people, but that doesn’t absolve Mumbai from being a place that is dull unless one is interested in the stock market or Bollywood, neither of which interest me. The stock market Gujaratis, and business folk generally, are not thrilling company. Bollywood and Versova are vacuous and pretentious. 

Mumbai’s suburbs are, each of them, built as little narrow-minded ghettos. Here the Tamilians, there the Marathi Brahmins. I was born in Vile Parle (East) and was outraged to know at the age of 8 that Mumbai (it was always Mumbai in Gujarati) was in Maharashtra and not in Gujarat. Everybody around me, from Dr Gandhi to the tailor Khimjibhai to the Irani hotel, spoke Gujarati even to strangers. I’m sure it’s the same today. Huxley writes of attending a meeting of Mumbai legislators where “the speeches, all but that of Mrs (Sarojini) Naidu, who gave us English eloquence, were in Gujarati, and for me,...no better than gibberish”. 

Elsewhere, the Punjabis have done to Lokhandwala what they would do to any place. There is a restaurant there called Sasural. More need not be said. The Sindhis made Powai’s Hiranandani Gardens. It is pretty, if one likes advertising shoot locations, and looks foreign. But it doesn’t have any character and isn’t a community, as Catholic Bandra or Parsi south Mumbai are. 

The whole city is overrated in every way. I am being overly cruel, yes, and with its film-making and money-making, it is not a horrible place. 

Having moved there from Surat, I thought Mumbai was great, and it is, but only because it is situated in an otherwise dreadful part of the world. By itself, there is little its residents have done to improve upon their British inheritance, and their spirit, forever helpless and beholden to the state and its services, is nothing to write home about.

Courtesy: Live Mint