Caution at the current levels

The short-term rally is coming to an end. The medium-term uptrend is intact. Wait to buy at around 16,600

Last week, I had suggested that we expect the market to remain strong. Our suggested target for the Sensex was around 17,300-17,400. As it turned out, the Sensex hit a high of about 17,245 in the morning of Friday and struggled for the rest of the day to even stay above 17,200, the current lakshman rekha for the index. It ended the day at 17,127. It has been an intense struggle for the market to stay up and next week it will possibly give up some of the gains.

We are saying this despite the fact that the risky assets had a great week, helped by data confirming gradual US recovery. Investors’ fears were also calmed when Greece took austerity measures and its default risk blew over. Equity and commodity markets globally were firmer, with oil hitting the $83 per barrel mark in intraday trading and copper futures reaching $7,500 per tonne.

Separately, US surveys and payroll reports boosted hopes for an improving jobs market. The UK services survey was also strong. On Monday the US ISM manufacturing index for February fell to 56.5 from a five-year high of 58.4 reached in January. Service sector reports later in the week were also positive for the US and the UK. One of the more positive pieces of data was US payroll which on Friday showed only a small 36,000 decline in jobs in February—a  vast improvement from a 726,000 drop in February 2009. Improvement in hiring intentions also suggests employment growth will soon turn positive. However, as the recovery gathers steam, there would be worries of rising interest rates. In fact, last week, The Reserve Bank of Australia raised interest rates again by 25bp to 4%, to bring rates closer to ‘average levels’ amid continued recovery in the economy.

Last week, money flowed into emerging markets from global investors. Within that, Russian funds' net inflows reached 20-week highs while Chinese equity funds had net inflows of $31 million, only the second week when more money went in than out this year. India has also gained a lot from renewed interest of foreigners. The strong post-Budget rally has seen a net inflow from foreign institutional investors. FIIs have put in a hefty $2.02 billion in domestic stocks by 9th March.

On the domestic news front, industrial production grew by a robust 16.7% in January compared to just 1% in the same month a year ago, led by manufacturing, which has around 80% weight in IIP. Within manufacturing, capital goods surged by 56.2% in January against 15.9% in the same month last year. For December 2009, industrial production was higher at 17.6%, up from the provisional estimate of 16.8%.

However, don’t be carried away by a plethora of positive news. While the media is broadcasting these facts, the market is headed nowhere. It is time for the market to come down a bit. It will consolidate the rise and then push higher in late March-early April.
 

User

COMMENTS

shibaji dash

7 years ago

Difficult to disagree. Not that ' irrational exuberance ' captivates all and one. Nonetheless even the wise ones need timely counsel- almost timed to market.Thanx.

Kato Mancini

7 years ago

Nice article! Thanks for sharing.

vijay

7 years ago

a timely advise

‘Private participation in hydropower is not large enough’

Om Metals Infraprojects Ltd plans to expand its reach in domestic as well as overseas markets. Its executive director Vikas Kothari speaks to Moneylife’s Amritha Pillay on his expansion plans and order-book growth for the coming years

Amritha Pillay (ML): What kind of turnover does the company expect in this fiscal and in the years to come?
Vikas Kothari (VK):
Last year we did around Rs100 crore, this year we expect to reach more than Rs220 crore. In our engineering construction (segment), our current outstanding order book is Rs600 crore. These will be completed over the next two years. In FY11 we are expecting to do over Rs300 crore plus sales from the engineering segment alone. Going forward, it would be another Rs400 crore as we plan to add another Rs200 crore to our order book soon.

Real-estate revenue would be coming in. Revenue from Mumbai and Hyderabad will start by the next two to three financial years. Real estate would contribute 25% to 30% to our top-line contribution.

ML: Do you have any fund-raising plans for your expansions?
VK:
We do not have any fund-raising plans at the moment. It depends on what we decide to foray into. At the same time, we also have enough reserves of our own, so first we will have to utilise them.

ML: You started with irrigation projects, and then diversified into hydropower. What kind of opportunity do you envisage in the hydropower segment?
VK:
There was a plan of 50,000 megawatts (MW) of hydropower generation by the Indian government over the next two-five years. I think 2017 onwards we will be achieving only 25,000 MW of this. However, even this 25,000MW is a huge opportunity.

ML: Your major clients in hydro-mechanical equipment are state-run units. Is there any particular reason for this?
VK:
At present, private participation in the hydropower sector is not large enough. Despite the same being talked about, nothing is actually happening at the ground level. Thermal projects are easier to implement and the cost of building a hydropower (unit) is much more than a thermal power plant. Thus, we want to focus on the projects from state-run units.

ML: Any there any updates on your plans to acquire engineering, procurement and construction (EPC) companies in India?
VK:
We are looking at it in a two-fold manner—one, by entering into EPC through civil contracts or by supplying electro-mechanical equipment. In hydropower projects, there are three main components—civil construction, electro mechanical equipment, and hydro-mechanical equipment. Therefore, while we are addressing the need for hydro-mechanical equipment, we also plan to venture into the civil and mechanical segments. The second is using the existing hydro-mechanical manufacturing facilities to expand our product profile covering thermal power projects, marine projects and others, which would require the same infrastructure that we currently own. We have now grown to become the largest player in the hydro-mechanical business in India and in the world in terms of the size of order book, technical (requirements) and revenues. While we have achieved our leadership in this particular segment we also want to look at other avenues for growth.

ML: Aren’t you also planning to enter into a joint venture as one of the routes for expansion?
VK:
It depends on how we structure our expansion. We could look at acquisition opportunities as well as joint ventures. So we are quite flexible at this point of time, it could be in the form of acquisition and then (we could) grow thereon. If it is a joint venture, we will have set up a different company altogether. We will be doing this over the next one year.{break}

ML: Tell us more about the joint venture you plan with foreign companies?
VK:
For joint ventures, we are looking at some of the European players. There are two contributions that we expect the foreign player will bring in—technical expertise and a large overseas order book. We wish to balance our order book in terms of domestic and overseas orders. Any European company will have a global presence and will definitely help us. At present, our overseas presence is very marginal. This would be a strategic joint venture to increase our presence globally.

ML: Could you share with us more details on the greenfield project that you are planning?
VK:
Considering the growth that we are envisaging, we are looking at setting up this greenfield project in heavy engineering. Over the next one year, we intend to spend around Rs15 crore to Rs20 crore in this greenfield project. However, it depends on whether it is a joint venture or an acquisition. If it is a joint venture, it would be a greenfield project.

ML: How is your investment in real-estate faring?
VK:
We have investments that we have made across Delhi, Mumbai, Kota, Jaipur and Hyderabad. Our Kota residential project is being completed in this year. We are now in the process of signing a co-development agreement for our residential projects in Mumbai and Hyderabad.

ML: What is your vision on your other investment in the development of the Puducherry port?
VK:
We are expecting that it will take at least a year for financial closure. Currently the environmental study is being conducted. We have building a larger port at the existing one with six container terminals. It would be a phased development in the next five to six years along with the SEZ. We surely see the port contributing phenomenally after five years to our company topline.

ML: What is your take on the volumes expected at this port?
VK:
We are focussed on the container segment. The Chennai and Karaikal port are bulk based. The container cargo segment is increasing and has a huge future growth. With the congestion in Chennai city and other issues, we feel we will have enough business coming to our port from Chennai. We will be able to have enough volumes from the container segment alone.

User

Going down the tubes

A surfeit of channels, shoddy programming, clueless anchors and financials that would make a Greek cringe. Is the Indian television industry scripting its own epitaph?

Apni auqaat nahi bhoolna chahiye.” If you think that these are words lifted out of a very bad Hindi flick, circa 1964—when the village headman comes thundering down on the protagonist who has finally mustered up the courage (after copious amounts of alcohol, endless circumambulations around trees and other assorted inane activities) to ask Roop Kumar Narain Singh Thakur (or some such suitable name) for the hand of his daughter—you have another think coming.
According to a lawsuit filed by business channel Bloomberg-UTV, rival CNBC TV18 aired this sentence on 4 March 2010 during its ‘Bazaar’ segment.

Bloomberg alleges that its rival has accused it of “copying”, “cheating” and “lying” about its viewership ratings on the day of the announcement of the Union Budget.
Moneylife has in its possession a copy of the lawsuit which has been slapped on CNBC TV18 by Bloomberg-UTV. While the lengthy defamation notice goes on to describe—in great detail—about the alleged “accusations and representations” of CNBC TV18 against Bloomberg-UTV, our objective here is not to comment on the merits (or shortcomings) of the case, since the matter will eventually become sub-judice.

However, one cannot help wonder if this case is just part of a wider malaise that seems to have gripped the Indian television industry as a whole. Enough and more has been written on the no-holds-barred battles that are being fought between various TV channels—across genres—to grab viewership.

These skirmishes, somehow, don’t prevent the same talking heads from appearing on ‘live’ news capsules across various channels—one has to hand it these various spokespersons, they seem to flit in and out of various newsrooms in the span of a few minutes, (almost being in two places at the same time), mouthing the same platitudes, delivering the same slogans and flogging the same ideologies. And shouting down the same opponents. As far as the viewer is concerned, no, she is not spoilt for choice.

The financials of various broadcast houses are swimming in deep seas of red, as readers of Moneylife will know. But when will the wake-up call come about? Many viewers would agree that the battle for viewership has caused a steady deterioration in the quality of programming, across channels and cutting across all genres. So much so, people are fondly looking back on those days when we only had State-run programming—remember, there was no need for a remote control in the heady days of our ‘mixed’ economy? Even the latest Chinese remotes cannot keep up with the abuse that the ‘change channel(s)’ button is currently facing, as you read this, in a number of Indian households.

As far as ‘TV journalistic ethics’ go, this must be the biggest three-word oxymoron ever. News is not being reported, it is being manufactured. To call the soaps currently being aired ‘operas’ is surely not cricket.

When a smug anchor looks at you straight in the eye (or rather, camera) and proclaims, six hours in advance: “At 7.30pm, we’ll have ‘breaking news’ from our studio (or ‘journalist’) at (insert suitable Indian city/town/village/taluka/district/slum here),” one cannot but wonder if the world is actually more surreal than what our mystics make it out to be.

The great Indian television saga has been playing out for more than a quarter of a century now. Risking the taint of schadenfreude, one can only sit back and watch the drama unfolding before our eyes, and hope that the show picks up. Else, the audience will pack up and leave, with a poor score wailing in the background, even before the credits start flashing on the screen.  
 

User

COMMENTS

K B Patil

7 years ago

God save us from Hindi serials. All of them are destroying our eardrums with the loudest sounds and they call it background music. Colors channel shows a disclaimer before each serial stating that it's serials are a campaing against child marriage, female infanticide, violence against women blah blah blah. But these things are woven into each one of its serials. The channel seems to be catering to the basest instincts of men. All that the I & ministry can think of is banning FTV.

Kingshuk Mukherjee

7 years ago

Devarajan is absolutely right. The current "Mad Race" for TRP's by all these Business Channels is leading to nowhere. These business and other so-called " News Channels" have taken the “Dumbing Down " of “News” to new heights. Next time whenever you see any NEWS STORY or a very glorifying tribute to any Indian "Industrial or Corporate group understand this is a very carefully thought of PR, sponsored advertorial or ADVERTISING and MEDIA spin that is out to FOOL YOU and CHEAT and a make a " MOCKERY " of our DEMOCRACY. I can only pray to God to inject some SENSE into the people who run our electronic MEDIA groups.

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