BIRDINFO Stock Rx

Sugar Matrix – UP mills have still not commenced crushing

October 22, 2008

Friends,

Sugar mills is UP have still not commenced crushing and are fighting the govt against raising of cane price to 140/- per qtl. An un-named executive of ‘Bajajhind’ says that it will add Rs 350 to 390 crs to the costs this year but he also confirms that the profitability can still be there due to higher sugar prices this year. Sugar production is estimated to be 22 M/Ts against 26.5 M/Ts last year.

At 9 pc recovery the sugar will cost mills at around Rs 1600/qtl (Rs 300 to 325 per qtl cost is recovered by sale of press-mud,molasses and co-generation power. All leading mills have distilleries and co-generation facilities. Maharashtra does not face cane pricing problems because there sugar co-operatives and farmers are owning the mills as members of Co-operative societies.

Softening of interest rates will be of benefit to sugar industry as it has to carry stock till sold through the monthly releases by govt. The levy portion is just 10 pc now and the mills make huge profits in years of high sugar prices. This happens to be such year only. The world sugar prices are sideways but costly dollar is good defence. Last year India exported 4.5 M/T sugar.

If the inflation would not have come down, the govt would have been very concerned about the rising sugar prices but this situation is narrowly saved for industry. Sugar industry profitability is complex due to volatility of sugar prices and interest rates and production variation adds further dimension to it. Mills do not have capacity to vary production because the cane in their procurement area has to be crushed by them. Every aspect of it can be made manageable but the politicians do not allow it and keep powers with them while a sugar board representing all sides who have interest may easily do the job and in a more amicable manner.

Sugar is a capital intensive industry. It has to be operating at the most optimum level of operation. Courts are already having to intervene in sugar related cases.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Posted in Sugar, Sugar Matrix | Leave a Comment »

Market Matrix – Nifty gained 112 points yesterday, the DOW lost good 230 points

October 22, 2008

Friends,

While Nifty gained 112 points yesterday, the DOW lost good 230 points. This morning is showing that all the Asian markets are weak. The point that has been in mind all the time while judging the markets here is whether the disconnect between the USA and Indian markets is finally there. I hope so. The July-Sept quarter results have been a mixed bag. This is due to the slow down had occurred much earlier and some industries were affected first than the rest. There is going to be coming out of slow down mode for some now and therefore in India’s case there would be balancing act in place, in no small measure on account of govt’s alertness and timely action. According to above logic and earlier strong points mentioned, there is no place but to becoming a share-holder yourself in India’s well managed companies,less profitable at the moment or not. Profitability is of little importance, the management quality is more important because if the management is not fair to minority share-holder why be a partner there. Haven’t you seen the more than expected melt down in case of companies under managements with poor image. The extra-ordinary movements may be due to their own ill designs also.

As I told you that the forces behind the attack on market to take it down below the reasonable level had to have some scheming at its back. The matter is out in the open. There has been lending of physical stocks by FIIs to some out side Indian space of regulation and which was pressed as sales in market. This activity is going to boomerang on the operators.

Let’s now enjoy the markets dance.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Posted in Dow, Market Matrix, Nifty, Nifty Stocks | Leave a Comment »

SAIL,MUKAND,ZEEL,JPASSOCIAT,MCDOWELL,CHENNPETRO,LICHSGFIN,MARICO

October 21, 2008

SAIL @ 105 (211008) gets 1149 pancha-tattva points and is good for long term investment.

MUKAND @ 34 (211008) gets 873 pancha-tattva points and should be sold off and bought on declines.

ZEEL @ 147 (211008) gets 1396 pancha-tattva points and should be bought for long term.

JPASSOCIAT @ 79 (211008) gets 1488 pancha-tattva points and should be bought for medium term.

MCDOWELL-N @ 755 (211008) gets 839 pancha-tattva points and may be accumulated on declines in a few strokes.

CHENNPETRO @ 147 (211008) gets 841 pancha-tattva points and should be sold off and bought back on declines.

LICHSGFIN @ 242 (211008) gets 1386 pancha-tattva points and should be bought for long term.

MARICO @ 55 (211008) gets 861 pancha-tattva points and should be bought in small quantities on days of declines for long term.

BIRDINFO Stock Rx – A prescription for stock market

Posted in CHENNPETRO, JPASSOCIAT, LICHSGFIN, MARICO, MCDOWELL, MUKAND, SAIL, ZEEL | Leave a Comment »

Market Matrix – China has shown GDP growth figures of 9 pc for the III qtr

October 21, 2008

Friends,

There is positive outlook around the world. After DOW closed up by over 400 points yesterday, the Asian markets have started to see reason to shed fears.

China has shown GDP growth figures of 9 pc for the III qtr. In fact US recession has more to do with China than with India excepting for the fact that India requires capital flows from there but China has surplus dollar pool and now does not need capital from outside as much as we do. China’s exports to US are major cause of its GDP growth and now it will have to raise domestic consumption which can come only when its leaders are ready for putting incomes in the hands of workers and labour. This can be done only by making the cost of production high and would further make it less competitive in international market place. So, what had to happen is happening. Indian corporates have been under pressure to raise salaries through out the boom period of last four/five years and would be able to contain wage bill this year. If you recall, I had mentioned that the year 2008 will put China under some kind of slow down.

It is good that we have a PM who is an economist too. While I objected to Reddy’s hawkish stance on every occasion when he tightened the supply of money for the fear of inflation going out of hand. My contention was that when the inflation is not due to local factors why put the productive machinery to do with lesser money supply and strangulate it. Luckily, he has been replaced with somebody who listens to govt head , PM has seen to it that the delay does not mar the industry. His timely intervention has done the needed repair to the damage done by Reddy.

Also, now, our PM is stronger PM because the lesser ones have thought it fit not to do anything by speaking absurd thing in this period of turmoil. Do we not see the Paswans and even PCs keeping cool and giving back leadership to PM. Our FM has understanding but likes to tease before he does some thing likable. He has to moderate the impact of STT and service tax which is making India loose business to Singapore like places as far as the security trading goes (Singapore now accounts for 40 pc trade in Nifty futures).

The PM has been so careful as to reassure that further steps would be taken as soon found needed. These words should be music to the ears of trade and industry. The matter is so simple, the money supply has to be at level where there is optimum production, inflation or no inflation. The simplest tactic to keep inflation off is by keeping the govt expenditure limited to revenue earned and let it be met by deficit financing, any attempt beyond this is bound to have ill effects on this side or that.

In my opinion it will be prudent to bring the repo rate down to 7 pc and CRR down to 5 pc and this is not some thing extra-ordinery to do, we had CRR of 4.5 pc and repo rate of 6 pc in the year 2004. The sole factor for the slow down in India will be a defective monetary policy and nothing else. This is needed also because the banks and financial institution have to be provided help that would make them stronger and look stronger too. This is in fact in everybody’s interest after seeing what happened in Western world.

I invite your views through comments columns, its so easy.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Posted in CRR, China, Chindia, Market Matrix, Repo rate | 1 Comment »