Stocks
Nifty Sensex headed higher – Monday closing report
We had mentioned in Friday’s closing report that Nifty, Sensex may rally a bit. The major indices of the Indian stock markets rallied strongly after last week’s poor performance. 
 
 
Healthy buying was observed in interest rate sensitive stocks like banks, auto and capital goods. In addition, investors' risk appetite was increased after a dismal US non-farm payrolls data reduced the potential for a June rate hike there. The US data for last month showed that the economy created 160,000 jobs, against 215,000 in March. A US rate hike could potentially lead to a pull-back of foreign funds from emerging economies like India. However, there was a catch in the strong rally. NSE turnover was only at 66.39 crore and hence the rally was on thin volumes.
 
Buyers started trickling in from the morning to various jewellery shops across the country on Monday to usher in good luck in their lives on the occasion of Akshaya Tritiya. Jewellers expect tepid surge in sales as the gold price has shot up in the last few weeks following global cues. "I am expecting only 10%-12% sales growth in value terms and not in volume terms as prices have shot up quite a bit in the last two months, and today it is hovering over Rs30,000 per 10 grams in the national capital," PC Jeweller managing director Balram Garg told IANS in Delhi. Akshaya Tritiya is a holy day for Hindus and the Jains and it is believed to bring good luck and success. It is considered to be an auspicious day to bring home gold.
 
Home prices have touched record high levels but a faster rise in disposable income has made house purchasing the most affordable ever, housing loan major HDFC has said in a report. According to latest data compiled by HDFC, the average property value of housing units have risen to an all-time high of over Rs50 lakh this year, while the annual income of an average homebuyer has also grown to record levels of over Rs12 lakh. A sharper increase in income levels compared to housing prices has brought down the affordability ratio to 4.1, making this the lowest in India's history and below the previous all-time low score of 4.3 posted in the year 2004. The ratio stood at 4.4 in 2015. A lower ratio indicates that house purchase has become more affordable now. The report said improved affordability has largely been driven by rising disposable income and affordable interest rates on home loans. The affordability ratio stood at a high of 22 in 1995, signifying that an average home buyer needed to pay 22 times of his/her annual income to purchase a house. HDFC shares closed at Rs1,204.00, up 3.12% on the BSE.
 
India's Insolvency and Bankruptcy Code is quite a positive reform for the financial sector, especially for state-run banks heavily burdened with stressed assets, as it will give creditors a legal path for recovering their dues in a time-bound way, Japanese financial services firm Nomura said in a report. "India currently ranks 136 in the World Bank's resolving insolvency ranking; it takes 4.3 years to resolve insolvency and the recovery rate (at 25.7 cents to a dollar) is very low. The Code will play a key role in improving the ease of doing business in India," said a Nomura research note. "Overall, the Code is a very positive financial sector reform, whose benefits will be visible in coming years. It should make lenders more confident in lending and borrowers more accountable," it said. In view of the multiple laws dealing with insolvency in India which lead to delays, the Code will consolidate the existing framework and create a new institutional structure, Nomura added. The report also said that if not in this session, the Code should be passed in the monsoon session of parliament that will follow a few months after the current Budget session ends on May 13. "Its full implementation is expected to take time as the entire institutional structure needs to be established," it said. The Bank Nifty surged 2.36% to close at 16,682.00.
 
Grasim Industries on Saturday reported a 37% rise in its consolidated net profit for the quarter ended March to Rs.696 crore from Rs.507 crore in the year ago period. Net sales and operating income for the company soared 13% to Rs.10,001 crore for the quarter under review from Rs.8,817 crore in the corresponding period. The Aditya Birla Group company reported EBITDA for the quarter at Rs.2,059 crore, up 24% from Rs.1,658 crore in the year ago period. "Firm's consolidated net profit rose 35 percent to Rs.2,359 crore in 2015-16, from Rs.1,744 crore," the company said in a BSE filing.  The company posted a 14% increase in its cement sales volumes, viscose staple fiber (VSF) sales volumes were up by 10% and caustic soda sales volumes went up 95% year-on-year in the quarter ended March 2016. The company plans to increase its caustic capacity to 1,048 kilo tonnes per annum (ktpa) from 804 ktpa including 144 ktpa brownfield expansions at Vilayat and 100 ktpa debottlenecking at various plants, the company said. Grasim shares closed at Rs4,144.20, up 1.07% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
 
The closing values of the major Asian indices are given in the table below:
 
 

User

Near-term headwinds for Bharat Forge
North American Free Trade Agreement (NAFTA) Class 8 Trucks recorded a whopping 40% year-on-year (y-o-y) decline in April 2016 to around 14,000 units, according to brokerage firm Edelweiss. The decline is also steep at 15% on a quarter-on-quarter (q-o-q) basis. Such trucks are critical for Bharat Forge as it derives 20% of its revenue from North America trucks segment. In November 2014, the NAFTA Class 8 trucks reported an extraordinary rise of nearly 100% y-o-y (Source: Bloomberg). Since then, there has been a decline in the growth rates. The trucks have reported negative growth on a y-o-y basis since March 2015. According to brokerage firm Edelweiss, commentaries Pacific Car and Foundry Company, Daimler and Volvo indicate a 20-25% decline in NAFTA class 8 market from 15% earlier. 
 
While Bharat Forge will get hit in the North America, it has established its presence in European market through a number of acquisitions; and Europe has shown positive signs by reporting 30% year to date (YTD) growth in heavy duty market, which is in contrast to the NAFTA Class 8 Trucks. Exports accounted for around 68% of Bharat Forge's revenues in FY14-15 based on consolidated numbers. Commercial vehicles are a significant contributor to export sales. They accounted for 59% of its export sales in FY14-15. 
 
 
The company has entered the US passenger vehicles market in order to open new revenue stream and diversify risk. Its plans include expanding into global aerospace segment. Recently, aircraft manufacturer Boeing, has awarded a contract to the company to procure titanium forgings for its Boeing 777 aircraft. Bharat Forge has been already supplying titanium flap-track forgings for the Boeing 737. The company will also supply forgings for the 737 MAX, scheduled to enter service in 2017. It has significant plans for investments into the defence space too. 
Bharat Forge is one of the largest commercial forgings company in the world. Its return on equity (RoE) stands at around 21% based on trailing 12 months earnings on a standalone basis. It trades at around 25 times its trailing 12 months standalone earnings. The debt equity ratio for as on 31 March 2015 stood at 0.74 based on consolidated results. 
 
The stock has had an extraordinary run for two years since August 2013, when it touched a low of Rs185. From then, it touched a high of Rs1,288 in August 2015, delivering stupendous returns of nearly 600%. The stock has been under pressure in the last eight months. During this period, it has declined by 40% from a price of Rs1,288 in mid-August to Rs780 currently. The company has informed the exchanges that that a meeting of the Board of Directors will be held on 17 May 2016, to consider the audited financial results of the Company for the quarter and year ended on March 31, 2016 and to consider recommendation of final dividend.
 
 

User

Shaily Engineering Plastics: Leap of Faith
There is a lot of excitement among a section of market-players, looking for the next multibagger, about a company called Shaily Engineering Plastics. Ace investor Ashish Kacholia has a 12.02% stake in it and the stock has had an extraordinary run in the past two years. From a low of Rs47 on 5 September 2014, the stock hit a high of Rs704 in mid-January 2016. After this whopping rise of 16...
Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MAS member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine)