Treasury Notes to rise higher in 2010: Morgan Stanley

According to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York, yields on benchmark 10-year notes will climb about 40% to 5.5%, the biggest annual increase since 1999. The surge will push interest rates on 30-year fixed mortgages to 7.5% to 8%, almost the highest in a decade, Greenlaw said.

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Textile firms exhibit healthy growth, but stock prices remain low

Sales and profits of textile companies are running at a record high, even though stock prices are down. The markets seem to have missed this phenomenon

Textile stocks are not among the hottest shares. The sector is considered to be down in the dumps, especially since exports collapsed in 2008. Textile stocks languish on the bourses because they are perceived to be suffering from slow growth and low profitability. However, the fundamentals tell a different story.

A study by Moneylife has found out that the textile sector as a whole has recorded its highest sales and profits during the quarter to end-September, indicating a robust demand for its products. Sales for the 92 textile companies in the Moneylife sample were at Rs13,706.60 crore in the September quarter, while operating profits stood at Rs2,076.90 crore, exhibiting a healthy margin of 15%.
 
However, the markets seem to have missed this phenomenon. Textile stocks are still not in the investors’ radar at all. Valuation of the sector is at a lower range compared to what it was nine quarters ago. Is this an opportunity for ‘value investors’ to pick up textile stocks at a bargain price? The Moneylife sample of textile stocks is currently trading at market capitalisation (m-cap) of just 0.39 and 2.68 times its sales and operating profit respectively.

Here are some of the textile stocks with excellent performance. Banswara Syntex has posted a 13% and 71% growth in sales and operating profit respectively in the September quarter. Its average sales and operating profit growth are 21% and 58% respectively. Its m-cap is 0.2 and 1.39 times its sales and operating profit respectively. Siyaram Silk has posted an excellent performance in the September quarter as its sales and operating profit surged by 32% and 48%. Its five quarter sales and operating profit are 17% and 42%. Its m-cap is 0.24 and 2.67 times its sales and operating profit. Grabal Alok Impex posted 118% and 37% growth in sales and operating profit respectively in the September quarter. Its average sales and operating profit growth are 43% and 33%. Its market cap is 0.66 and 2.15 times its sales and operating profit.

Indeed, knowing that they can pass on the costs, readymade garment makers are planning to raise prices by 5% to 10%. Major apparel makers and leading brands like Nahar Group, Duke, Malwa Group and Rage are planning to raise prices of their garments by 5% to 10% in view of rising prices of cotton and yarn. At a time when the overall market is trading at record valuations, textile stocks offer a combination of high growth and low valuation.
 

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SEBI panel for recovering gains made by IPO scamsters

The Justice Wadhwa committee, set up by market regulator SEBI to investigate irregularities in IPOs floated during 2003-2005, has suggested the possibility of recovering the amounts and distributing it among the deprived applicants

Scamsters gained Rs 95.69 crore by rigging initial public offerings (IPOs) between 2003 and 2005, a regulatory panel has found. It has suggested recovering this amount and distributing it among affected investors.

The value of frozen shares of these scamsters in the depositories worked out to be Rs147.85 crore and the balance in their bank accounts frozen by the Central Bureau of Investigation (CBI) stands at Rs1.20 crore as on 31 October 2007, the Justice Wadhwa Committee said.

The committee, set up by market regulator Securities and Exchange Board of India (SEBI) to investigate irregularities in IPOs floated during 2003-2005, suggested the possibility of recovering this amount and distributing it among the deprived applicants.

"The quantum of unjust gains based on allotment to accounts is approximately Rs95.69 crore. The value of the holdings in the frozen demat accounts in both National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL) of the key operators and financiers as on 31 October 2007 works out to be about Rs17.85 crore. The balance in the bank accounts of operators/financiers frozen by CBI is Rs1.20 crore," said the report.

The scam in 21 IPOs, including Jet Airways, NTPC, IDFC, TCS, Yes Bank, Gokaldas Exports, ILFS Investsmart, Suzlon Energy and Shopper’s Stop, related to alleged cornering of the shares reserved for retail investors by scamsters through opening of fictitious accounts.

For the purpose of payment to the deprived retail applicants, the amount which is the difference of closing price of shares on the first day of listing/trading at NSE and the IPO issue price will be considered, said the committee.

"These applicants will not be entitled for the market price movements subsequent to the listing," said the report of the committee, headed by former Supreme Court Judge DP Wadhwa.

The committee recommended that those who did not get any shares should be reallocated money equally from the recovered amount, till they each receive the gains from minimum shares allotted to the lowest category in the IPO.

“Once that number is reached, any left-over money shall spill over" and reallocated to the partly successful applicants, the committee said.

Former finance minister P Chidambaram had assured the Lok Sabha that steps would be taken to reallocate shares to persons who had lost out on allocation of shares on account of the IPO scam.
 

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