Tuesday, June 14, 2005

Indian equity markets - Ideas

The BSE Sensex is at 6860 currently. Smith Barney issued a report today suggesting caution for H2. It is overweight Capital Goods, IT and banks. Automobiles has been cut to neutral. Underweight on Pharmaceuticals.

Auto stocks have gone down in the past few days, due to (a) Concerns over monsoons (b) high steel and oil prices, which depress margins (c) Maruti cut the price of Maruti 800 to compete with Hyundai, which had earlier lowered the prices on one of its models.

1) While Monsoons do have an impact on the automobile sector, it would be better if we could quantify the mix of cars sold between urban and rural centers.
2) Looking out 4 months ahead, when Diwali comes on, I guess there would be many financing schemes that should bode well for the automobile makers. So it might be a good time to position oneself in case stocks move down meaningfully on Monsoon concerns.

IT sector:
1) Strong dollar – augurs well for IT? Wipro says 1% appreciation in rupee hurts margins by 35-40 bps.
2)Infosys has appreciated YTD, but not TCS. Why? Residual reversion for TCS?

1) Pantaloon is overvalued, any other retail play in Indian retail market?

Coal shortage in India:
1) How to play it? Generator manufacturers, suppliers to infrastructure in Indian coal mines, shipping companies who ship coal to India? High oil prices might have a really big impact on India here. Who would be least impacted – services sector => IT? Maybe cost of power is going to go up, and if it can’t be passed on to consumers, Reliance Energy, NTPC might get hurt. If it can be, they are great stocks..

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