In what is probably the best cause of us investment bankers in this lackluster market for a lackluster Economy, Nomura Securities, took the sitting bull by the horns in an almost sleepy downgrade of Indianomics come Wednesday as markets opened to 57000 levels, positive inner rumblings in the Bank nifty and a new move in a new OTM opportunity in Infosys.
Almost seems like it was 2007 or 2008 once again depending on where you were and yes we are at the fag end of the India opportunity cycle where we have rid ourselves of all our lofty notions of infrastructure or credit growth and consumption is finally about to break down as job prospects are also at an all time low. capex however is not constrained as a lot of quality companies are growing their cash pile, not a shot in the dark but wrought on by the end of the downturn for many investment intensive businesses seen in this cycle and the Services sector dipping which has been the last port of call for the blues has been known to bounce back much better. For otherwise achieving Nomura’s new 5.5% target is going to be even more difficult. Bihar’s leaning to the uPA may provide stable government as well as a new cause for double digit economic improvements in the next edition of India Inc as we reach another anniversary of our independence.
Tata steel’s quarterly results are an even better segue way to India’s latest Morning trades. Th EBITDA has infact hit double digits and even after the corrections on the 90% profit improvement this quarter a 30% return on Domestic production of Steel in EBITDA is really creditable as the margins have indeed been saved on the year. You do see robustness returning to the sector as a whole with both Hindalco and Tata Steel not just surviving the sharp negative eigenvalues for the metals sector globally but showing that India can survive as the biggest players left in the huge resource industries which could otherwise be surmised to be left to India as the unwilling last man holding the Bowl in Steel and later in Shale, our last foreign forays.
Gold duties will have a desired effect as controls deliver immediate results to Indian policymakers in the amorphous International borders and that is perhaps an uncomfortable reminder to us to even consider a return to strong controls and slip out of the “liberalised” reforms on offer from on of the two largest nation states out there. we just have to keep Gold imports to 50 tonnes over each of the remaining 8 months to make the new Finance Ministers’ targets for the metal at 800 MT this year. Recovery in Global steel is likely to continue and Tata Steel is a very good investment with continuing margin safety in India, more capacities and better $50 EBITDA realisations in Europe as well, an unexpected Bonanza.
The coming move in Infosys will sign off on the creamy 10% extra in profits to it exporters after having absorbed inane inefficiencies and market volatility in the first round of depreciation of 10% in June as the rupee gets ready for another ride from 61.5 levels to 65 near the oil purchase date for India’s importers this month
Unfortunately after the great start at 895 for ICICi, 1150 for Axis and 313 for YES Bank, the secttoral index has again retreated to near 10k levels waiting for the inevitable jump but foregoing the move for today till another robust oportunity presents itself for a material move.
- Tata Steel Quarterly Profit Almost Doubles on Deferred Tax Gain – Bloomberg (bloomberg.com)
- Tata Steel eyes UK firm”s Indian assets (news.in.msn.com)
- TCS replaces Tata Steel as India’s most admired company: Fortune (profit.ndtv.com)