Jindal Saw Ltd: Screaming Buy

Jindal Saw Ltd, part of the O.P. Jindal Group, is the undisputed leader in India’s tubular market. Today, Jindal SAW is one of the largest pipe manufacturers with business interests catering to varied industries spanning across the globe. It competes with companies such as Welspun and Maharashtra Seamless.

With integrated facilities at multiple locations, Jindal SAW is rolling out Large Diameter Submerged Arc Welded Pipes and Spiral Pipes for the energy transportation sector; Ductile Iron (DI) Pipes for water and wastewater transportation; Carbon, Alloy and Stainless Steel Seamless Pipes and Tubes for industrial applications. Maintaining its edge, Jindal SAW provides value added products and services in different verticals of its business.

It is India’s most diversified manufacturer and supplier of Iron & Steel pipe products for the energy, water sector and other industrial applications. Its principal products include (a) Large Diameter SAW Pipes i.e. Longitudinal Submerged Arc Welded (LSAW) and Helically Submerged Arc Welded (Spiral/HSAW), (b) Seamless Tubes, and (c) Ductile Iron (DI) Pipes etc.

It is one of the largest global producers of DI pipes with manufacturing facilities in India, UAE and Europe. 

In FY 2011, the Company acquired iron ore mines in district Bhilwara, Rajasthan in India. These mines have iron ore which is low in Fe content and hence, needs to be first beneficiated and thereafter the iron ore concentrate is used for production of value added products like pellets and other Iron & steel products. The beneficiation and pellet plants are fully operational. Pellet plant is producing at its rated capacity of 1.20 MTPA. 

The Company had commenced operations in its captive iron ore mine and ramped up operations in this segment. Pellet plant has achieved 100% capacity utilization. Jindal Saw Ltd would continue to get benefits from its captive iron ore mine (the company  has already achieved 100% backward integration in iron ore) and pellet plant.

Jindal Saw’s most profitable segment – seamless pipes – is expected to see a revival in demand from North America and Europe, its primary market. However falling oil prices may have an adverse impact on the OCTG product demand. The company is focusing on enlarging product range which shall take care of the changing business environment. 

The scrip should be bought in intra-day dips, for a medium term target of Rs.110.

Market Mantra

Today MRPL Ltd touched Rs.57.90, and almost came near my first target of Rs.60. Those who do not want to take too much risk of the Oil and Gas sector can book profits and shift to Firstsource Solutions Ltd at around Rs.29.35. 

Today's call: Buy Jindal Saw Ltd at Rs.81.80 for a target of Rs.87-92.  The pipes are used in large quantities in Nuclear installations and any forward movement in the Indo-US nuclear deal is positive for the company. 
For the time being Nifty would meander along 8900-9000 mark, till it breaks up. However, the stock specific action would continue to rule the roost. 
Firstsource Solutions Ltd today touched Rs.30.30 and is  now trading at Rs.29.30. The investors should buy the stock  and keep holding.

Firstsource Solutions: Buy in Bulk

CMP: Rs.29.35

Firstsource Solutions Ltd is a global provider of customized BPO (Business Process Outsourcing) services to the Banking & Financial Services, Insurance, Telecommunications, Media and Publishing and Healthcare sectors. The company’s clients include Fortune 500, FTSE 100 & Nifty 50 companies. Firstsource has a “rightshore” delivery model with operations in India, Philippines, Sri Lanka, UK and U.S. 

Prime Triggers: 

(i) Firstsource Solutions’ wholly owned subsidiary - Firstsource

Please Click on the Photo to Expand

Group USA, Inc., has successfully made its seventh quarterly repayment of $11.25 million on its outstanding debt on December 31, 2014.

(ii) According to the latest shareholding pattern, the promoters' holding in the company stood at 56.25% (controlling stake), while ICICI Bank Ltd, the ace investor, Rakesh Jhunjhunwala and Goldman Sachs India Fund Ltd holds 4.85%, 3.76% and 1.27% respectively. FIIs hold 8.25% of the shares of the company. 
(iii) It is from the reputed RP-Sanjib Goenka group, who are also the promoters of CESC Ltd (Calcutta Electric Supply Corporation, the flagship company of the RP-Sanjiv Goenka Group). In 2012, the Kolkata-based CESC Ltd (RP-Sanjiv Goenka Group) agreed to pay around Rs.400 crore for a 49.5% holding in the ICICI-promoted BPO firm, paving the way for the partial exit of existing shareholders ICICI Bank, private equity firm Temasek and Metavante Investments. Now, Firstsource Solutions Ltd is a step-down subsidiary of CESC Ltd. It is pertinent to mention here that, Sanjiv Goenka's brother Harsh owns mid-sized IT services provider, the BSE and NSE listed Zensar Technologies Ltd.
(iv) India-based BPOs have been steadily moving up the value chain as low-value call centre operations move to locations such as the Philippines. In the immediate future, impending healthcare reforms in the US and Banking reforms in India, are likely to give BPOs like Firstsource a boost.
(v) In November, 2014, there were media reports that Anand Rathi, which has the stock among its high conviction ideas, believes with the interest-cost burden lightening because of debt repayments, and focus shifting to accelerating growth, return ratios could improve. 
(vi) Over the past two years, the company has been trying hard to go up the value chain by going beyond the low cost offerings. The company's revenue growth expected to gain momentum as the company concentrated on growing revenues and improving profitability by weeding out low cost contracts and undertaking price increases. The elevation of Rajesh Subramaniam — who was part of the founding team — as CEO and acquisition of majority stake by the Sanjeev Goenka group were seen as big positives.
(vii) On the back of improved margin Firstsource Soultions, the IT arm of  the R P Sanjiv Goenka group, reported a 36.8% rise in net profit at Rs.61.2 crore for the quarter ended September, 2014 compared to a net profit of Rs.44.8 crore during the corresponding period last year. The Business Process Management (BPM) services company’s net sales for the period declined 2.1 per cent to Rs.774 crore, against Rs.790 crore. “Our focus has entirely been on bottom-line growth. We have closed a number of loss making accounts, beside other cost cutting measure,” said Sanjiv Goenka, chairman, RP-Sanjiv Goenka Group.
(viii) The company has won deals worth $45 million in the September 2014 quarter, up from $36 million signed in the June 2014 quarter. Revenue from top clients also grew at a healthy pace of 4.8% Q-o-Q, while revenues from the top five clients declined marginally. With the large telecom client walking away, analysts have cut their forecasts for the current year. However, a strong deal pipeline will ensure better growth for the company in FY16. The company has indicated that it expects growth to pick up pace in FY16. Sharekhan says the company has  indicated that the topline would grow seven-eight per cent y-o-y in FY16, even as growth in FY15 would be impacted by vendor consolidation and client ramp downs.
(viii) Though the turnaround has been delayed, analysts believe that the growth in the coming years would be better than the last few years, as the company has strong capabilities in the telecom and healthcare vertical. Also, the company is looking at launching product platforms, which would improve revenue potential of the company. According to Sharekhan, which has a buy on the stock, the stock trades at a reasonable valuations.
(ix) In November, 2014, there were media reports which quoted, Mahantesh Sabarad, Deputy Head of Research at SBI Capital Securities who said, he is bullish on Firstsource Solutions. He said: "It  is a rare kind of IT stock which has debt on its book. We will see that increasingly as the business goes ahead and they have been signing good amounts of deal, for example this quarter gone by, they have signed deals worth USD 45 million, the quarter before it was somewhere around USD 31-33 million." "Increasing deal wins, good amount of cash flow coming in and deleveraging of balance sheet is the story on Firstsource and that is why we like the stock, Rs.55 is the price target in the stock," he said.
(x) The Hindu Business Line gave a buy on 8 September, 2014:

Firstsource Solutions (FSL) is a leading global provider of customised business process management (BPM) services to the healthcare, telecom and media and banking, financial services and insurance (BFSI). The company has over 100 global clients including 21 Fortune 500 and 9 FTSE 100 companies. After a difficult F10-12 period, the company has shown a resolute recovery over F13-F14 aided by a fresh lease of life from their new owners. We believe, the company can a) catapult itself to cover lost ground; b) set it on an elevated revenue growth path from 2HF15e onwards; c) flag down an improvement in margins; and d) recompense it with superior free cash flows (FCFs). All this while FSL would shrink its debt pile making a strong investment case in its favour.

Key risk: Impairment of goodwill from past acquisitions that exceeds networth, could impede valuation uptick.

Caution: The business process outsourcing (BPO) sector has been facing headwinds over recent years. The industry was faced with rising competitive intensity, on one hand, and pricing pressures on the other. Firstsource Solutions Ltd has been battling with these problems in the past couple of years and the ill-timed acquisition of Med Assist at $330 million in 2007. The company has been trying for a turnaround over the past two years, as revenues and margins fell to eight per cent and Ebit margin fell to four per cent in FY12. After the September quarter numbers, some analysts have cut the company's earnings estimates as the turnaround is expected to be delayed.
In the September quarter, Firstsource reported a sequential revenue growth of 2.4 per cent but a year-on-year decline of 2.1 per cent to Rs.774 crore. Analysts claim this is below estimates as a large client walked away. Along with disappointing revenue growth, EBIT margins too were below estimates at 10% and remained flat q-o-q sequentially. Emkay Global has cut its FY15/16 earnings per share estimates by eight to 10% to Rs.3.6/4.7, respectively, as the brokerage is factoring in lower revenue growth and operating margin assumptions for both years.
However, even at an EFY15, EPS of Rs.3.6-4.7 (worst case scenario), the share should be trading around Rs.40-45, against the CMP of Rs.29.35.

Conclusion: The shares of the company might have made a temporary bottom on the candle-stick chart. Q4 (March Quarter) is typically a high margin and a high revenue quarter for the BPO business and hence the investors are suggested to buy the scrip of Firstsource Solutions Ltd, in Bulk and keep holding for sometime; to get one of the best returns. The short term target for the scrip is Rs.34, while the SL is Rs.27.

Promoters cut pledged shares as stocks rally

Volumes fell in 39 companies and rose in 34 during Oct-Dec

Photo: The Indepndent

Mumbai, Jan 28 2015: Promoters of companies and business conglomerates, like Anil Ambani and the Jindals, have revoked large volumes of pl­edged shares following the sharp gain in stock prices over the past few months.

On the contrary, there was a rise in share pledges by promoters of many midcap companies during the December quarter.

Share pledge is a popular and convenient fund raising option among company promoters, who mobilise credit from banks and other financial institutions by mortgaging part of their shareholdings.

There was a rise in share pledges in recent years as companies struggled to raise cash amid rising interest rates, credit squeeze in the banking system and a slowdown in businesses that curtailed cash flow.

But the quantum of shares pledged by various companies, especially lar­gecap firms, have come down sharply over the past few months as share prices moved up.

Anil Ambani group companies — Reliance Capital, Reliance Infrastructure, Reliance Communication and Reliance Power — have seen pledged share volumes drop substantially. 

In Reliance Infra and Reliance Communication, the entire volume of pledged shares was revoked during October-December. Reliance Infra had a 27.03 per cent stake on pledge, while Reliance Communication had 13.94 per cent at the end October 2014, data available on the BSE website shows.

In Reliance Capital, the volume of pledged shares has come down from 33.09 per cent in October, 2014 to 21.81 per cent at the end of December, 2014, while in case of Reliance Power, it has fallen to 8.91 per cent from 22.58 per cent.

Among others, Jindal Steel and JSW too have seen a drop in promoters’ pledged shares. Pledged share volumes declined in 39 companies and rose in about 34 others during the October-December period.

“Many promoters mortgaged their shares in the past few years to tide over liquidity crunch, raising pledged share volumes substantially,” said Harish HV, partner at Grant Thornton. So much so, at one point it had become a cause of concern, especially when the stocks were falling.

In more than 20 companies that are part of the BSE200 index, promoters’ pledged shares as a percentage of their total holdings was in excess of 70 per cent at one point, as promoters of many midcap companies pledged their entire holdings.

Since share prices have since gone up in most cases, the amount of shares needed to be kept as margins must have also come down, he pointed out.

Banks have a margin requirement of two-three times for loans extended against pledged shares, which means promoters are required to bring in additional shares when prices drop.

There have been concerns among the regulators over the increase in promoters’ share pledges, which they feel can pose a potential threat to the financial system.

Flagging the issue in the recent financial stability report, the Reserve Bank of India (RBI) said in view of the prevalence of promoters pledging substantial portions of their holdings, the leverage could be a concern not only for the shareholders but also for the health of the financial system,”

“This issue calls for a closer examination, especially in the current scenario of buoyancy in stock prices wherein the collateral in the form of pledged shares may appear to justify higher leverage,” it said.

Courtesy: Mydigitallife.com

Market Mantra

Reliance Capital Ltd recommended around Rs.474, today touched Rs.480.75 in the BSE, before some profit booking set in. In view of company's improved performance and being a share from Anil Ambani group, the investors are suggested to buy and hold the scrip for some good returns in the short term. 

Today's Call: Buy First Source Solutions Ltd at Rs.29-29.50, T -Rs.35, Sl--Rs.27. This is a buy and hold scrip. The ace investors, Rakesh Radheshyam Jhunjhunwala, Goldman Sachs India Fund Ltd and ICICI Bank Ltd holds 3.76%, 1.27% and 4.85% of the shares of the company, respectively. Recently, Mr.Jhunjhunwala has reportedly hiked his stake in Polaris Consulting & Services Ltd and this could be in his radar too........
MRPL Today touched Rs.53.60, intra-day and is now trading at Rs.53. Those who do not want to take high-risk of the oil and gas sector can book some profits in the counter.
The Nifty is expected to meander around the current ranges till the resistance zone of 8950-9000 is cleared. 

Why iron ore won’t rebound any time soon

Photo: Live Mint

[Editor: On the contrary I ask CNBC.Com's Leslie Shaffer (Yoga teacher); as why every analysis has to exclude India (and talk only of China, when it comes to steel), which is the fourth largest steel producer in the world? The Financial Portal, Live Mint writes on January, 04 2015:

India will import nearly 15 million tonnes of iron ore in 2015 as higher domestic prices amid a supply shortage push top steel makers to import more, said industry executives. Goutam Chakraborty, analyst with brokerage Emkay Global Financial Services, said the current price of 62% Fe grade iron ore is about Rs.4,000 per tonne in India; the same grade is available internationally at around Rs.3,500 per tonne. He added that the cost of iron ore is even higher in India in case of lumps and is close to Rs.4,200-4,500 per tonne for a 62% Fe grade. Seshagiri Rao, joint managing director and group chief financial officer of JSW Group, added that while international prices have fallen almost 40% since the beginning of the fiscal, in India, prices have actually risen.Bloomberg data says the price of 62% Fe grade iron ore fines imported into China has fallen from $110.1 per tonne as on 1 April 2014 to $66.4 per tonne as on 25 December 2014, a fall of almost 40% so far this fiscal. In contrast, ore price at e-auctions in India has risen from Rs.2,700 per tonne in April to Rs.3,140 per tonne in November. State-owned miner NMDC Ltd cut prices in December for the first time in 2014, said Chakraborty of Emkay in a 2 January report. Data on the quantum of the price cut was not available.

Leslie Shaffer, CNBC

Meanwhile, there were media reports that the domestic Iron Ore Production, which recorded a marginal growth to touch 140 million tonnes (mt) in 2014, is expected to touch 150-155 mt in 2015. This is possible as more mines would start operations in Karnataka, Goa and Odisha in the coming months. The domestic iron ore production is likely to see a modest 10 per cent growth this year. The mining industry is looking forward to some positive developments in 2015. The renewal of leases in Goa, formation of new government in Jharkhand, issuance of clearances and permits in Odisha and restarting of mines including auction of Category-C mines in Karnataka are expected in 2015. With the global prices of iron ore hitting their low in the recent months, the steel industry is likely to continue their imports in 2015. India is expected to produce up to 130 million tonnes per annum (mtpa) of iron ore as against a demand of 140 mtpa largely due to weaker output from Karnataka, Odisha and Jharkhand. Domestic output has fallen due to restrictions imposed by the Supreme Court to curb illegal mining.

So, on what basis,  Leslie Shaffer comes up with such blanket forecasting on Iron Ore? And when will these Western Analysts get over with their China-hangover?]

Photo: Business Standard

Economists may teach that low prices and declining demand encourage producers to decrease supply, but the iron ore industry appears to have skipped class that day.

"The combination of a further increase in global iron ore supply this year and only subdued demand growth suggests iron ore prices will continue to drift lower," said Caroline Bain, an analyst at Capital Economics, in a note Monday. She forecasts iron ore prices at $60 a tonne by year-end, with risks to the downside. Iron ore touched a more than five-year low Monday of around $63.30 a tonne, although some forward contracts are already pricing it under $60.

Output has picked up over the past few years, encouraged by expectations China demand would continue to post strong growth and by low production costs in Australia and Brazil, she said. She noted Rio Tinto and BHP Billiton put their average production cost in Pilbara, where most of Australia's iron-ore production is located, at around $25 a tonne, compared with 2010-13 average market prices at $145 a tonne. Even at current prices, these producers are still profitable, Bain noted. Australia is the world's second-largest iron-ore producer after China.

Despite 2014's around 50 percent decline in iron ore prices, the big four producers -- Vale, Rio Tinto, BHP Billiton and Fortescue – continue to expand production and other companies are also bringing projects on line this year, she said, forecasting Australian production will rise 6 percent this year, although that's down from 2014's 20 percent rise.

Don't count on China

At the same time, despite China producers' higher costs and lower ore grades, production there isn't likely to see much slowdown, especially as many steel plants have "vertically integrated" operations, owning mines nearby, Bain said. Closures on the mainland are likely to focus on less efficient operations, leading to a leaner and meaner industry there, she said.

 "The multinational producers will be only partially successful in their bid to oust higher-cost producers globally and oversupply will continue to weigh on prices," she said. At the same time, China's iron ore usage will stagnate at best, hit by a combination of high inventories and lower demand to use the metal as part of financing deals, she said.

Goldman Sachs also expects iron ore producers won't be able to count on China for growth, noting it's become a mature market.

"The decade-long love affair between China and iron ore is cooling. Chinese steel consumption has increased to unsustainable levels and is bound to decline," it said in a note Friday. "Significant overinvestment to date will ensure that the market is well supplied."

It expects a "long war of attrition" will be needed to balance the market, cutting its long-term price forecast by 25 percent to $60 a tonne.

The oil effect

Falling oil prices are also set to weigh on iron ore prices, as they result in "substantial cost reductions", and commodity prices are likely to fall to meet these new lower levels, Citigroup said in a note Monday.

It's also concerned about oil-fueled deflationary pressures affecting commodity demand. 

"Falling prices increase the real cost of debt repayments and could see increased defaults. This not only affects direct commodity demand, but also drives lower inventories and threatens commodity financing trade," it said, noting that falling commodity prices also leave companies with little incentive to build up inventories.

In a note earlier this month, the bank cut its 2015 iron ore price forecast to $58 a tonne from $65.

Courtesy: CNBC

China eliminates 31.1 million tonne of steel capacity in 2014

Photo: Business Spectator

27 Jan, 2015: BEIJING: China has eliminated 31.1 million tonnes of steel production capacity last year, higher than expected, a senior official of the industrial ministry said on Tuesday, as Beijing seeks to ease overcapacity and improve air quality. 

China has also removed 81 million tonnes of cement production capacity, Mao Weiming, vice minister of the Ministry of Industrial and Information Technology, told at a presser in Beijing. 

China, the world's largest steel producer, earlier set the target of 27 million tonnes for the steel sector. 

Separately, Hebei province, the country's biggest steel-making region, has closed as much as 15 million tonnes of steel production capacity last year, meeting its target, but aims to shut only 5 million tonnes this year. 

Courtesy: The Economic Times

Which Company Will You Choose From Below; For Investment Purpose??

Reliance Capital Ltd (Rs.475.45) has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, among others. Reliance Capital, a part of the Reliance Group, is one of India’s leading private sector financial services companies. It ranks amongst the top private sector financial services and banking groups, in terms of net worth. The Company is a constituent of CNX Nifty Junior and MSCI India.

Another Japanese financial services giant, Nippon Life, recently signed an agreement with Reliance Capital Asset Management, a part of Reliance Capital, to raise its stake in the company from 26% to 49% in two or more tranches over the next two years. Or in other words, Reliance Capital Ltd (Rs.475.45), financial services arm of industrialist Anil Ambani-led business conglomerate Reliance Group, is likely to soon divest more equity in its life insurance venture to its foreign partner Nippon Life. Nippon Life has a 26% stake in Reliance Life, the life insurance arm of Reliance Capital. 

It had reported 20% rise in its second quarter net profit at Rs.217 crore, helped by robust growth in mutual fund, commercial finance and general insurance businesses. Total income rose by 12% to Rs.2,084 crore for the quarter ended 30 September. 

Besides, Reliance Capital also plans to rope in foreign partners for its health insurance and general insurance ventures. Taking an ordinance route, the government has permitted up to 49% foreign investment in insurance. 

As it awaits final Reserve Bank of India (RBI) guidelines to apply for a universal banking license, Reliance Capital has also roped in Sumitomo Mitsui Trust Bank of Japan as a long-term strategic partner. Very recently, the shareholders of Reliance Capital Ltd, approved the preferential allotment to Sumitomo Mitsui Trust Bank, Limited of Japan.

As part of the agreement, Sumitomo Mitsui Trust Bank will be taking an initial 2.77 per cent strategic stake in Reliance Capital amounting to Rs.371 crore (US$ 58.4 million) through preferential allotment, with a lock-in period of one year. The investment is being made at Rs.530 per share.

Sumitomo Mitsui Trust Group is the fourth largest bank in Japan (in terms of market capitalization and corporate loans) and Japan’s largest financial institution managing assets of US$ 682 billion with assets under custody of US$ 1.8 trillion as of September 2014.

U.S. crude oil inches higher after mixed data, API report ahead

[Editor: It was expected!! I have mentioned about that several times in my earlier posts and ridiculed those Hedge Fund Managers, who were speaking of crude oil, further nosediving. Meanwhile, what is interesting to note, is that The Wall Street Journal wrote on, 27 January, 2015: 

In the short term, a rebound in prices, which have fallen around 55% since last summer, seems unlikely, analysts say. The oil market looks fundamentally weak despite initial signs that oil prices may be stabilizing around $47 to $51 a barrel, analysts at Energy Aspects said. “Inventories are building and on top of a high base which will continue to weigh on the term structure of Brent and WTI,” Energy Aspects said.

The question is who are these analysts and on what basis, they are forecasting crude oil prices, based on apparent factors? I have seen most of these "so-called" are fickle and often go wrong.  This time also I believe they would be way off the mark. The crude oil is now trading at $46.08 up 2.06%. According to my assessment, the crude oil will now slowly move towards $60 in the coming days]

Jan 27, 2015:  West Texas Intermediate oil futures inched higher on Tuesday, as investors digested a mixed bag of U.S. economic data.

On the New York Mercantile Exchange, crude oil for delivery in March tacked on 28 cents, or 0.62%, to trade at $45.43 a barrel during U.S. morning hours. Prices held in a range between $44.82 and $45.69.

A day earlier, New York-traded oil futures hit a low of $44.35 a barrel, a level not seen since March 2009, before settling at $45.15, down 44 cents, or 0.97%.

The U.S. Commerce Department said new home sales climbed by 11.6% to a seasonally adjusted 481,000 units last month, above expectations for 450,000. 

On Monday, OPEC’s secretary-general, Abdalla Salem el-Badri, said that oil prices appear to have bottomed out and could be poised for a rebound. But Mr. el-Badri also said that OPEC intends to stick to its decision to keep output stable.

While some of the comments seem bearish, they may represent a change of tone, Simmons & Co. International said Tuesday in a research note. It is “tough to draw strong conclusions,” but this could be a sign that Saudi Arabia is at least willing to join a coordinated response with other producers, something it had adamantly opposed, it said.

“A lot more guys are saying these guys are going to capitulate soon. I don’t necessarily think that’s true,” said Kyle Cooper, managing director of research at IAF Advisors, a Houston consulting firm. “But there definitely is an internal battle going on.”

Estimating that the 93 million barrels a day global oil market is currently oversupplied by 1.3 million barrels a day, UBS cut its forecast for the average Brent price this year to $52.50 a barrel from $69.75, and for WTI to $49 a barrel from $64.75.

The bank expects prices to take as long as 60 months to recover to pre-collapse levels. As the “process of correction is clearly under way with significant cuts to capital expenditure already being announced,” the bank sees both contracts rebounding to over $60 a barrel next year, with Brent reaching an average price of $90 a barrel by 2018.

Nymex reformulated gasoline blendstock for February, the benchmark gasoline contract, fell 0.8% to $1.3061 a gallon.

February diesel lost 1.72 cents, or 1.1%, to $1.6226 a gallon.

Crude-oil prices have tumbled since midsummer and again in the fall after OPEC decided at its November meeting not to cut its output despite a combination of a global supply glut and lackluster demand.

Sources: 

(i) Investing.com

(ii) The Wall Street Journal

Reliance Capital expects turnaround in insurance business in 2015 

Firm will continue with its ongoing policy of exiting from the day-to-day operations of non-core businesses, says CEO

Reliance Capital is also likely to soon divest more equity in its life insurance venture to its foreign partner Nippon Life (which currently holds 26% stake). Photo: Abhijit Bhatlekar/Mint

Mumbai, January 04 2015: Confident about further growth in its mutual fund and securities market businesses, financial sector conglomerate Reliance Capital Ltd expects a turnaround in its life insurance business as well in 2015. 

Besides, the group should record a faster growth in its general insurance venture this year, Reliance Capital chief executive officer (CEO) Sam Ghosh said. He said the 2014 has been very good for Reliance Capital in areas like mutual funds and brokerage businesses, although growth was somewhat stagnant in the life insurance segment. 

I expect the growth trends to continue in the mutual fund and broking businesses, while life insurance should see an uptick. Besides, general insurance should also see faster growth in 2015,” Ghosh told PTI in an interview. 

Speaking about the business outlook for 2015, Ghosh said there is “a lot of positivity around and the same should result in good growth in commercial finance, SME finance and other businesses as well”. 

Ghosh also said Reliance Capital would continue with its ongoing policy of exiting from the day-to-day operations of non-core businesses and there could be more divestments of such assets in 2015. However, it may not be complete exits from such ventures and the group would rather focus on exiting the management of such ventures while retaining some as financial investments, he added. 

On the overall economy, Ghosh said the government is doing all the right things and therefore the economy should prosper and the same would reflect in the markets as well. “The services sector is already seeing an uptick and the manufacturing is also expected to grow going forward,” he said. 

Reliance Capital, financial services arm of industrialist Anil Ambani-led business conglomerate Reliance Group, is also likely to soon divest more equity in its life insurance venture to its foreign partner Nippon Life (which currently holds 26% stake). 

Besides, Reliance Capital also plans to rope in foreign partners for its health insurance and general insurance ventures. Taking an ordinance route, the government has permitted up to 49% foreign investment in insurance. 

Reliance Capital has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and commodities broking, among others. 

It had reported 20% rise in its second quarter net profit at Rs.217 crore, helped by robust growth in mutual fund, commercial finance and general insurance businesses. Total income rose by 12% to Rs.2,084 crore for the quarter ended 30 September. 

As it awaits final Reserve Bank of India (RBI) guidelines to apply for a universal banking license, Reliance Capital has also roped in Sumitomo Mitsui Trust Bank of Japan as a long-term strategic partner.

Courtesy: Live Mint

MARKET MANTRA

Nifty which opened today at 8871.35 made an intra-day low of 8825.45 and a high of 8878.20. After that Nifty is now trading in a tight range of 15-20 points and is currently trading at 8835.95 up marginally by 0.35 points. As long as Nifty is above 8600, the bulls do not  have to worry much. The focus has already shifted to good small and mid cap counters. 

Today's Call: Buy Reliance Capital Ltd at Rs.474, for a short term target of Rs.545. Recently, there were some media news that, Japan-based Sumitomo Mitsui Trust Bank (SMTB) has acquired a minority stake in the Anil Ambani-led Reliance Capital Ltd (RCL) – part of the Reliance Group – for Rs.371Cr. The investment is being made at Rs.530 per share, which is much higher than the CMP of Rs.474. Sumitomo Mitsui Trust Bank (SMTB) is the largest bank in Japan (in terms of market capitalisation and corporate loans) and largest financial institution in the country, managing assets of $682 billion with assets under custody of $1.8 trillion as of September 2014. Moreover, today Max India Ltd (Rs.487.55) is up more than 7%.Reliance Capital Ltd has interests in asset management and mutual funds, life and general insurance, commercial and home finance, stock-broking, wealth management services, distribution of financial products, asset reconstruction, proprietary investments and other activities in financial services.
Meanwhile, Jindal Saw Ltd is finding resistance to cross Rs.87. Therefore, the short term traders are suggested to book profits around Rs.86.50, in any intra-day bounce and wait for the stock to close above Rs.87.10, for taking fresh entry. However the long term investors can hold the scrip with a SL of Rs.81.70.
MRPL today touched Rs.53 and is now trading at Rs.51.40. The scrip should slowly move towards Rs.60-62, in the coming days. 
Use every rise in Suzlon Energy Ltd (Rs.15.60), to exit the counter, till the situation becomes more fluid. With so much debt on the books and then selling of profit making overseas subsidiary, does not augur well for the company. 
Accumulate Rohit Ferro Tech Ltd (Rs.7.80) on all declines for some super-duper returns in the short to medium term. Target: Rs.12.

Dumpwatch: Low Ruble Prices Bringing Russian Steel To India's Shores 

Jan. 26, 2015: First it was China, now India's steel makers face a similar "cheap imports" threat from a neighbor, this time Russia. The depreciation of the Russian ruble against the US dollar has started to have its effect felt in India's steel sector.

Since the last two months, even as steel majors have watched the developments from the sidelines, the steady decline in the ruble's value has led to local players increasingly importing Russian alloy. It is Russia as the flavor of the month, much to the consternation of Indian steel companies, and the situation is not going to improve anytime soon.

To combat the trend, India's steel ministry has proposed an immediate upward revision of import duties on steel products such as long products and hot-rolled coil. The logic is "to safeguard the TMT/rebar industry."

The minister has told the finance ministry to increase import duties on non-alloy long products, HR/CR coil and stainless steel products would face a hike to 10%. The ministry's logic is that excess steel capacity in China and Russia, among other importers, is leading to dumping in India.

A report by Bloomberg quoted JSW Steel's Mumbai-based Senior Vice President, Sharad Mahendra, as saying deals for steel imports from Russia have been struck in the past month and "such purchases will only increase," since Russian companies are able to offer heavy discounts on hot-rolled steel prices.

All of this has raised a question mark about India's domestic steel output. Steel companies have already raised output targets for the year ending March 31, thanks to the government's Make In India campaign. All of that could change now, with such cheap imports coming into the country, analysts say.

Already, in an effort to counter cheap imports, major steel producers have reduced prices on finished products by about 4% in January as metal prices across the world continued to trend downward.

The move is aimed at countering cheaper imports from China and Russia and to arrest a demand slump in the domestic market, industry sources said.

What is now worrying Indian producers is that cheap Russian imports were also threatening to take over a portion of India's traditional export markets in the Middle East such as Iran.

Courtesy: Seeking Alpha

Hedge Funds Bet Oil Will Fall Further

[Editor: The time has come for some of these Hedge Funds to go Bust, if they still think that the Crude Oil ($ 46.87 per barrel) will touch $30 per barrel. As mentioned in my earlier write-up, I feel the price of Crude Oil has more or less bottomed out  and a slow rise is in the offing; especially  when after a long time EUR/USD is  at 1.1264 up 1.06%. The point to be noted is that: when the EU is going for QE and there are talks of Indian Growth Story (much rosier than  China), the fall in Crude Oil is just an aberration, which will soon get corrected. Once the Crude starts to tread north, most of the other commodities might also follow the vector....] 

Jan 27, 2015: Hedge funds boosted bearish wagers on oil to a four-year high as U.S. supplies grew the most since 2001.

Money managers increased short positions in West Texas Intermediate crude to the highest level since September 2010 in the week ended Jan. 20, U.S. Commodity Futures Trading Commission data show. Net-long positions slipped for the first time in three weeks.

U.S. crude supplies rose by 10.1 million barrels to 397.9 million in the week ended Jan. 16 and the country will pump the most oil since 1972 this year, the Energy Information Administration says. Saudi Arabia’s King Salman, the new ruler of the world’s biggest oil exporter, said he will maintain the production policy of his predecessor despite a 58 percent drop in prices since June.

“There’s been a rush to call a bottom,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Jan. 23. “The fundamentals are still stacked against a rebound.”

WTI rose 50 cents, or 1.1 percent, to $46.39 a barrel on the New York Mercantile Exchange during the CFTC report period. The U.S. benchmark fell 44 cents, or 1 percent, to $45.15, the lowest settlement since March 11, 2009. Brent slipped 63 cents, or 1.3 percent, to end the session at $48.16.

Salman Bin Abdulaziz Al Saud ascended to the throne after King Abdullah died last week. The kingdom pumped 9.5 million barrels a day in December as members of the Organization of Petroleum Exporting Countries exceeded their 30 million-barrel daily target for a seventh month.

U.S. Production

“I don’t see any major catalyst from either the supply or demand side that will send prices higher this year,” Stewart Glickman, an equity analyst at S&P Capital IQ in New York, said by phone Jan 23. “It looks like $50 crude is the new reality that we’ll have to get used to.”

Production in the U.S. will be slow to decline as improvements in drilling technology boost well output even as companies drill less. Oil production per rig from new wells in the Bakken in February will be double what it was three years ago, the EIA said Jan. 12.

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

Drillers idled 49 U.S. oil rigs last week, bringing the total to 1,317, the lowest level in two years, Baker Hughes Inc. (BHI) said on its website Jan. 23. It was the seventh weekly decline.

Short Options

“The fundamentals are terrible,” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone Jan. 23. “The drop in the rig count will have a limited impact. We’re going to see huge builds during the first quarter worldwide.”

Short positions in WTI increased by 6,262 contracts to 94,203 futures and options in the week ended Jan. 20, CFTC data show. Long positions dropped 0.3 percent. Net-long positions fell 3.3 percent to 216,704. Producers increased net-short positions by 7,623 to 132,143 contracts, the most since December 2011.

In other markets, bullish bets on gasoline advanced 5.8 percent to 39,418 contracts, the first gain in five weeks. Futures increased 3.5 percent to $1.3128 a gallon on Nymex in the reporting period.

Pump Prices

Retail gasoline, averaged nationwide, slid to $2.033 a gallon Jan. 25, the lowest since March 2009, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.

Bearish wagers on U.S. ultra low sulfur diesel increased 2.3 percent to 29,943 contracts, the most since the period ended Nov. 4. The fuel slipped 0.4 percent to $1.6266 a gallon in the report week.

Net-short wagers on U.S. natural gas decreased 32 percent to 11,967 lots. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract.

Nymex natural gas dropped 3.8 percent to $2.831 per million British thermal units during the report week.

“We’ve been here before,” said Wittner. “There have been points when it looked like it was stabilizing only to then take another leg lower.”

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

Courtesy: Bloomberg.com 

RBI rate cut effect: FIIs pump Rs.21,000 Cr into Indian Markets in January

Photo: IBN Live

January 26, 2015: Overseas investors have pumped in a staggering over Rs 21,000 crore in Indian capital markets since the beginning of the month owing to easing inflation and rate cut by the Reserve Bank of India (RBI).

Foreign institutional investors (FIIs) have bought shares worth Rs 5,992 crore ($977 million) until January 23, while bought debt worth Rs 15,336 crore ($2.5 billion) taking the total investment to Rs 21,328 crore ($3.45 billion), latest data with Central Depository Services Ltd (CDSL) showed.

These investors got re-christened as FPIs or foreign portfolio investors last year under a new regulatory regime that promises to make it easier for them to invest in India.

Market analysts attributed the huge inflow to low inflation levels and rate cut by the RBI. The central bank on January 14 surprised market participants with a 25 basis point rate cut.

Besides, foreign investors are betting on Indian capital markets on expectations of more rate cuts by the apex bank.

In 2014, the net investment by overseas investors into the debt markets was Rs 1.16 lakh crore, while in the equities it stood at Rs 98,150 crore. Overall, net investment by foreign investors stood at Rs 2.58 lakh crore in 2014.

Courtesy: First Post

Reserve Bank of India may ease rates further: Chief Economic Advisor Arvind Subramanian

Photo: Business Standard

DAVOS, 26 Jan, 2015:  Lauding RBI's role in helping bring down inflation, Chief Economic Advisor Arvind Subramanian said the central bank may further ease the interest rates as improvement on price front has opened the space for monetary easing. 

"The way I view is that RBI has a mandate to bring down inflation and keep it low and given the inflation has been coming down, that opened up the space for monetary policy easing and RBI has begun that," said Subramanian, who was here to attend the World Economic Forum Annual Meeting. 

"The RBI's own statement says that this is not just a change in rate, but a shift in its monetary policy stance provided inflation remains low and there could be more easing," Subramanian told the media in an interview at the WEF summit that ended this weekend. 

A number of business leaders and bankers, including ICICI Bank's Chanda Kochhar and Kotak Group's Uday Kotak, also said at the WEF that the RBI may look at further easing of rates as inflation appears to be under control. 

Subramanian also said the government is committed to making sure that the taxation is not an extra burden for foreign investments of all kinds. 

On ease of doing business, he said, "There are also issues like land laws, labour laws and reforms have been happening on those fronts. 

"We will have to wait for the World Bank to measure how these efforts have helped in terms of ranking. Besides, the real measure will be seen in terms of actual investments that would flow in." 

On January 15, the RBI had cut the policy rate by 25 bps a few weeks ahead of its regular monetary policy meeting, which is scheduled to be held on February 3. 

RBI Governor Raghuram Rajan lowered the benchmark repurchase rate to 7.75 per cent from 8 per cent, the first reduction since May 2013. 

The RBI rate cut follows decline in inflation as well as the commitment of the government to stick to the fiscal deficit target of 4.1 per cent of the GDP in the current financial year. 

Courtesy: The Economic Times

Oil Wobbles on OPEC Comment

Secretary-General of OPEC Says Prices May Have Hit a Bottom

An idle pump in Illinois, U.S. With oil prices near a 51/2-year low, oil companies are beginning to slow drilling operations in the country. PHOTO: GETTY IMAGES

Jan. 26, 2015:  Oil prices wavered between gains and losses Monday as traders weighed potentially bullish comments from the Organization of the Petroleum Exporting Countries against ongoing concerns that the market is oversupplied.

Oil prices have plunged more than 55% since mid-June on concerns about ample supplies and tepid demand. OPEC decided in November not to lower its output quota, sending prices tumbling lower on the expectation that without intervention from OPEC, it could take months or years for the global glut of oil to shrink.

OPEC Secretary-General Abdalla Salem el-Badri said in an interview with Reuters on Monday that with prices between $45 and $55 a barrel, “I think maybe they reached the bottom and will see some rebound very soon.”

Prices, which had been trading in the red overnight, turned positive on the news.

U.S. oil for March delivery rose as high as $46.11 a barrel, up from $45 a barrel earlier in the day, on the New York Mercantile Exchange.

Prices recently traded down 21 cents, or 0.5%, at $45.38 a barrel.

Brent, the global benchmark, rose from $48 a barrel to $49.29 a barrel after the interview was released. Prices recently fell 37 cents, or 0.8%, to $48.42 a barrel on ICE Futures Europe.

At lower prices, Mr. Badri said, producers won’t invest in new output and supplies will shrink.

“Maybe we will go to $200 if there is a real shortage of supply because of the lack of investment,” Mr. Badri told Reuters.

However, he said, “it will take another 4-5 months” before OPEC members talk about a change in policy.

“We will see how the market behaves at the end of the first half of 2015,” he said.

Mr. Badri’s comments “suggest that OPEC will continue to monitor the oil markets and adjust strategy as the market evolves, but do not necessarily imply any action is imminent,” said Simmons & Co. International in a note.

Earlier Monday, prices fell to fresh lows on concerns that the outcome of the Greek election would increase uncertainty for Europe’s economy. Saudi Arabia, OPEC’s top producer, also reaffirmed that its new king won’t alter the country’s policy on maintaining its oil output, weighing on prices.

Gasoline futures recently traded down 1.55 cents, or 1.2%, at $1.3324 a gallon.

Diesel futures rose 1.03 cents, or 0.6%, to $1.6570 a gallon.

Courtesy: The Wall Street Journal