Any near-term rebound in investments or middle-income consumption is unlikely, predicts Credit Suisse Equity Research in its India Market Strategy report
Market sentiment on India of late has been the worst in recent memory. Six months back, consensus expected the economy to be bottoming out, and earnings upgrades to start.
Global investment bank Credit Suisse believed (and still does) that any near-term rebound in investments or middle-income consumption was unlikely, and that earnings had meaningful downside. But a surprisingly common view now is that the currency will drive a crisis, and that the economy is headed for a ‘meltdown’.” We believe a crisis is unlikely: this is an important difference of opinion, for it allows investors to select beaten-down good quality stocks,” says Credit Suisse Equity Research in its India Market Strategy report.
Market consensus has now veered towards extreme defensiveness, and phrases like “currency crisis” and ‘meltdown’ are being bandied about. Credit Suisse has been flagging the deepening and broadening slowdown for a while, and it does not expect any meaningful recovery in investment or middle-income consumption anytime soon. But the investment bank also believes a crisis is unlikely: bargain-hunting selectively makes sense.
The market may not look cheap enough on an absolute basis, with a mere 10% correction from the recent peak. But relative performance has been extraordinarily weak: (1) in local currency terms the market is 49th out of the top 50 markets year-to-date (YTD); (2) India has underperformed global markets for five consecutive months; and (3) relative market P/E for MSCI India is close to eight-year lows excluding the crisis.
Credit Suisse adds that the broader market doesn’t look attractive yet as FY14 earnings have around 10% downside, and large sectors such as financials can still correct meaningfully. The current correction though has been broader than those seen recently, and select stocks are starting to look attractive: Credit Suisse analysts have upgraded NTPC, Cairn India and Ambuja Cements. It is also upbeat on Reliance Industries, HCL Technologies and Sterlite Industries. This apart, it has added weights to energy, utilities and materials, and cut weights in Hindustan Unilever (HUL).
While in absolute terms the market is not in capitulation territory, it does show up in relative performance. The Indian market has underperformed global markets in each of the last five months in both dollar and local currency terms. This underperformance has continued in April as well, and the Indian market remains in bottom quartile.
This is now showing up in the forward P/E multiples on ex-ante consensus: on a relative basis MSCI India’s P/E against MSCI World is the lowest in eight years, excluding the financial crisis period. Against markets such as Brazil and Indonesia, the relative P/E is at decadal lows. Only against China is the market more bullish on India on P/E.
Credit Suisse adds that from the above charts it is clear that that the broader market is not due a bounce. It is that while the market seems to be holding up rather well on absolute terms, that reflects allocation of assets to equities globally: the weakening fundamentals domestically are better reflected in the relative performance and P/E charts.
The skewed performance seen over the past few years has continued into 2013. The current market correction has been more broad-based compared to the two previous corrections from near-term peaks, with outperformance restricted to fewer stocks. This reflects the broader economic slowdown, too. The best performing sectors continue to be defensives such as staples, healthcare and IT, and at the other end of the table are sectors like industrials and materials.
In some of the beaten down sectors some good quality stocks are now showing value:
Credit Suisse sector analysts have upgraded their ratings on NTPC, Cairn India and Ambuja Cement. In addition, in its earlier reports the investment bank flagged preference for stocks such as Tata Motors, Reliance Industries, Sterlite Industries and Bank of Baroda. It expects some upside to the broader market over the next 12 months, however, it may be range-bound in the near-term.
In its model portfolio Credit Suisse has added to weights in utilities (NTPC), energy (Cairn India) and materials (Ambuja Cement), and fund it through a cut in HUL (staples). It continues to expect the highest downside in financials and industrials.
Aggregated data from credit card purchases are increasingly being used to target ads, direct marketing, observes ConsumerAffairs.com
Consumers often get upset about being tracked around the Internet and being asked for their ZIP code at the check-out counter of a bricks-and-mortar store. Yet, MasterCard and American Express are stepping up their efforts to sell data on retail transactions to marketers, according to the editor of ConsumerAffairs.com, a consumer news and advocacy organization founded in 1998 by James R Hood, a veteran Washington, DC journalist and public affairs executive. Advertising Age recently revealed that the card issuers have been approaching advertising and marketing firms in an attempt to enlarge their client list.
According to ConsumerAffairs.com, MasterCard alone has data representing 80 billion consumer purchases. AmEx is slicing and dicing its data, making it easier for marketers to reach consumers who are big spenders in specific retail segments such as automotive, fashion and travel. Both companies insist that the data is aggregated and made anonymous so that individual consumers' names are not revealed.
“We have strict policies in place to protect cardmembers’ privacy,” Amelia T Woltering, American Express director of corporate affairs and communication, told ConsumerAffairs. “American Express does not provide any personally identifiable information or individual transaction information about its card members or a list of its card members to advertisers or business partners.” Further, Woltering said AmEx’s practices are not ‘secret’ and have always been fully explained in the company’s online privacy statement.
“We provide choices so that consumers and card members can opt out of targeted advertising or direct marketing.” Woltering said. “Card members can also opt out of sharing their non-personal information with our business partners for their own analysis, research, and marketing purposes.”
MasterCard also said it does not disclose personal information. “MasterCard is committed to protecting individuals’ privacy and uses only anonymous and aggregated information in producing information insights and other data analytic products and solutions,” Andrew Bowins, senior vice president of external communications, MasterCard Worldwide said. “Most importantly, MasterCard never collects, discloses or uses personally identifiable data, such cardholder name and address, in the creation of its information insights products.”
Increased collection of consumer data—both online and at bricks-and-mortar stores—is troubling to many privacy advocates, according to ConsumerAffairs.com.
“I think that individuals have a privacy interest in transparency and control regarding the use of their personal data for advertising,” David Jacobs, consumer protection counsel at the electronic privacy information center (EPIC), told ConsumerAffairs. “Unfortunately, there is currently a lack of transparency in the sale and aggregation of consumer information by data brokers and marketing companies.”
“The legislation hasn't been released yet, but the CPBR includes a comprehensive set of fair information practices such as control, transparency, and accountability that, if faithfully implemented, could improve consumer privacy and help address these practices,” Mr Jacobs said, reports ConsumerAffairs.com.
Read the original article by James Hood of ConsumerAffairs.com here: Mastercard, Amex step up data sales to marketers )
SEBI investigations have found that many of these schemes are being used for the purpose of money laundering and to channelize illicit funds into the financial system
Amid a countrywide proliferation of fraud investment schemes, the Securities and Exchange Board of India (SEBI) is joining forces with other agencies, including RBI, SFIO, Enforcement Directorate and state police departments, to tackle the menace.
A large number of fraudulent schemes have come to the fore in recent months, wherein gullible investors are promised huge returns of up to 100% in a year or two through “bizarre and innovative” methods, a senior official said.
The investors being taken for a ride include the poor daily-wage earners trying to save a few hundred rupees a month, the middle-class seeking to invest their hard-earned income for decent returns, as also the rich and sophisticated HNIs looking to grow their wealth by investing in property, artworks and the financial markets.
Investigations of SEBI have also found that many of these schemes are being used for the purpose of money laundering and to channelize illicit funds into the financial system, the official said.
Put together, all such schemes are estimated to have raised thousands of crores of rupees from investors across the country.
SEBI on its own lacks full-fledged powers to act against all kinds of “money-pooling” frauds, although a proposal to strengthen its arsenal is awaiting government’s clearance.
In the meantime, the regulator has decided to take a collaborative approach to bring to book perpetrators of these investment frauds, by seeking help from other regulatory and enforcement agencies.
SEBI is roping in other regulators and agencies depending on the needs and nature of the case, the official said, while adding that these entities include banking regulator Reserve Bank of India (RBI), Serious Fraud Investigation Office (SFIO), Insurance Regulatory and Development Authority (IRDA), Enforcement Directorate (ED) and the Economic Offence Wings (EOW) and other police departments in various states.
SEBI chairman UK Sinha had recently said that people are coming up with innovative and bizarre schemes to defraud investors, such as those promising huge returns through investments in goat-rearing and emu bird farming, among others.
Other cases that have come to the notice of the regulator include sale of plots in deserts as agricultural and property development land. It had recently initiated action against a scheme promising huge returns from potato investments.
Many cases have come up in the eastern states of West Bengal and Assam, wherein huge returns are being promised on real estate and hospitality investments. Besides, many such schemes are there in the northern states of Delhi, Rajasthan, Haryana and Himachal Pradesh.
Besides, SEBI last week came down heavily on a leading art fund for running a “collective investment schemes”, including the one wherein it had raised over Rs100 crore. The fund has been asked to wind up all such schemes and return to investors their money with 10% annual return.
A few other art funds are currently being investigated for possible defrauding of investors by violating norms.
While schemes like potato bonds, emu farming and goat rearing are primarily aimed at duping small gullible investors, sophisticated HNIs are targeted for pooling in money for investments in art works, paintings, antiques, real estate properties and other high-end assets.