Saturday 30 May 2015

PNB: NPA Woes Picking----Nr. Term Range (140-200)








Technically, PNB (CMP:154) has some good support of around 151-149-147 zone & sustain below 147, that it may again fall to 141-138 zone, which is a strong positional support (demand zone). Consecutive closing below 138, it may further crashed to 134-131-128-117-104 zone in the worst bear market scenerio.

On the up side,  sustain above 151, immediate target may be 159-162-164. Consecutive closing above 162, PNB may target 172-180-200 in the short to medium term. In the long term, only sustaining above 200, it may scale 230-240 & 275 zone (FY:16-17) in the bull case scenerio.

Bottom Line : Positional Technical Trading Levels



SL</>2 FROM SLR







PNB CMP 154















T1 T2 T3 T4 T5 T6 T7 SLR
Strong > 151-149 156 159-162* 164-169 172-180* 186 197-200 214-231 <147
Weak < 147 144-141 138* 134 131 128 117 104 >151

Current & projected (FY:16-17) techno/funda valuation of PNB as par BG metrics: 165 & 195-220.


SCRIP EPS(TTM) BV(Act)  P/E(AVG) LONG TERM SHORT TERM MEDIAN VALUE 200-DEMA 10-DEMA
PNB 16.91 198.28 10 170.56 160.26 165.41 172.04 151.88

PNB 22.55 212.75 10 196.96 185.06 191.01 172.04 151.88

PNB 29.55 244.65 10 225.47 211.85 218.66 172.04 151.88


Recent Q4 result of PNB is well below street estimate owing to higher provisions (due to RBI March'15 provisioning factor), flat OP & lower NII but got some support from other income (Fee based non-interest income & trading profit) and tax gain.

Due to the higher provisioning factors for restructured loan portfolios from April'15 onwards, probably all PSU banks including PNB has shown significantly higher provision in the March'15 QTR (for PNB its 7800 Cr) in advance, which they might show in the subsequent quarters under normal course. So, in that sense this higher provisioning may be one time accounting adjustments on the part of PSB(s).

Going ahead, PNB management has indicated that no such big restructuring (CDR) in the near future and less fresh slippages. But as most of the CDR(s) are from steel, cement, power and construction segments for PSB(s), any significant improvement of earnings for them will highly depend on real pick up of overall economic & industrial activity or performance of core sector. Further PSB(s) has to address their own capital shortage due to severe amount of accumulated NPA(s) in the system (nearly 2.5-3 L Cr).  As of now, Govt is doing little for their recapitalization issues and market condition is also not in their favour for raising fresh capital. So, in the coming quarters, they are likely to focus more on their NPA recovery and corporate/industry credit growth is probably to be muted. Also due to lack of real uptick in overall economic recovery, there is not so much demand for fresh loans/funds from most of the industry either. Corporate/industry loan demand may recover only in the H2 of FY-16-17 after visible all round economic recovery, thanks to "Modinomics".

Thus all banks including PSB(s) & Privates and specially PNB is focusing more on retail loans at this point of time. In the mean time, possible further rate cut (0.25% in June & 0.25% in Dec) by RBI and its subsequent real transmission time gap by them will help their bottom line (NII & NIM) significantly. Also most of them may de-leverage their balance sheet by listing their insurance arms in the near future (like PNB Met Life).

Friday 29 May 2015

Nifty Fut (June) : Dovish or Hawkish RBI ? NF heading for 8510 or 8000 ?








Technically, for NF (CMP: 8318) has immediate good support of around 8276-8260 zone. Sustain below 8260, it may fall to 8199-8145-8045-8000-7940 zone. Consecutive closing below 7940, we may temporarily out of "Bull Market" and NF may head to 7800-7500 zone in the near term.

On the up side, NF  has to sustain above 8310 for an immediate target of 8365-8412. Consecutive closing above 8412, it may scale 8510 zone & sustain above that NF may zoom to 8594-8650-8792-8935 zone in the near term (Bull case scenerio).

Bottom Line: Technical Trading Levels




Gap Up/Dw (Indicative)




SGX NIFTY 8316 -2





NF-JUNE LTP 8318
SL (+/-) 10 POINTS FROM SLR
Intraday Swing  Trader
T1 T2 T3 T4 T5 SLR
Strong > 8280 8310-8365 8380-8412* 8430-8478 8510-8594* 8635-8650 <8260
Weak < 8260 8225-8199 8168-8145* 8107-8045 8000-7940* 7910-7860 >8280









FOR  Conservative Positional Trader













T1 T2 T3 T4 T5 SLR
Strong > 8280 8365 8412* 8510* 8594 8650-8792 <8260
Weak < 8260 8199 8145* 8045* 8000 7940-7800 >8280

In the last few weeks, NF was basically range bound for tepid corporate earnings, not so bad monsoon possibility, rate cut hopes & some MAT confusion. There was actually no major triggers for the market to break the range of 8000-8500 on either side.

Going ahead, its almost certain now that RBI will cut rate at least 0.25% (if not 0.50%) on June'2. Markets may have already discounted rate cut @0.25%  and may not sustain above 8510 zone, even after rate cut @0.25%. Only a dovish RBI (or rate cut @0.50%) may bring the NF to 8935 zone in the absence of any other major trigger.

In the absence of  any rate cut & hawkish RBI tone (most unlikely), NF may crash to 8000-7800 zone.

Slowly, the market is catching with the reality of actual earnings and this type of slow earnings growth may continue till some next quarters. Also there is visible slow down in passing key reform bills in the absence of RS majority for the Modi Govt. Hopefully, Govt is able to pass the GST & Land bills in the forthcoming Monsoon sessions of parliament (NF~9200). All eyes will also be on the state elections (Bihar*/Assam/WB) in the later half of the this year/next year. Also banks has to transmit the full rate cut effect to borrowers.



Thursday 28 May 2015

TECHM: Poor Q4 Result---Nr.Term Range (515-670) ?








Looking at the chart, TECHM (CMP: 549) has immediate positional support of around 539 & sustain below that it may fall to 528-515 zone. Consecutive closing below 515, it may further fall to 497-485-467-452-423-410-390 zone in the extreme bear case scenerio.

On the upside, TECHM need to sustain above 565-578 zone for an immediate to short term target of 600-623. Consecutive closing above 623, it may target 648-670-681 in the medium term. In the long term, only sustain above 681, it may scale 704-748 zone in the bullish market scenerio.

Bottom Line: Technical Trading Levels

 

SL</>5 FROM SLR





   


TECHM CMP 549



   









   



T1 T2 T3 T4 T5 T6 T7 SLR
Strong > 528   540* 565 578* 600 623 648 670-681 <515
                     
Weak < 515   497* 485 467* 452 423 410 390 >528
                     

Q4 result of  TECHM (published on last Tuesday, after market hours) is way below market expectations & subsequently the stock hammered yesterday by around 15%, its biggest one day fall since Feb'2009. The poor earnings is caused mainly by cross currency headwinds, higher employee cost (salary hikes, Visa costs) & one of the key telecom client's tepid revenue along with under performance of some of its acquisitions such as LCC.

Q4 is indeed a difficult quarter for may IT services companies and TECHM is also proved to be a no exception. Market is expecting this type of difficult situation (Margin pressure) till next some quarters.

Looking ahead, performance of TECHM will largely depend on execution & margin recovery along with integration of various acquisitions. They are also looking for innovative "Start ups" in different locations (overseas) in order to identify early & nature for future profitable venture. Also worst of telecom sector may be behind , we may see some sequential growth in the revenue front in the coming days (nearly 50% of its revenue come from this telecom/communication sector). Slow down in advance economies including US/EU may also be at the last stage/already over. This, along with concept of "Digital India" may help all IT companies including TECHM in the days ahead. But, they have also to manage/hedge their cross currency positions (volatility) more efficiently.

Present median valuation of TECHM by BG metrics may be around 600 and projected valuation may be 655-720 (FY:16-17) under the current market conditions.


SCRIP EPS(TTM) BV(Act)  P/E(AVG) LONG TERM SHORT TERM MEDIAN VALUE 200-DEMA 10-DEMA
TECHM 27.33 95.56 20.95 597.41 596.98 597.19 623.33 622.44

TECHM 32.8 124.25 20.95 654.47 654.00 654.23 623.33 622.44

TECHM 39.75 161.5 20.95 720.48 719.96 720.22 623.33 622.44

Wednesday 27 May 2015

TATA MOTORS: Q4 Result Below Expectations--Near Term Range:467-575 ?








Technically, TM (CMP:498) has immediate positional support of around 482 & sustain below that it may fall to 472-467 zone. Consecutive closing below 467, it may crash to 454-442-421-407 zone in the near term under bear market situation.

On the upside, TM has to sustain above 505 for an immediate to short term target of 515-525-532. Consecutive closing above 532, it may target 548-565-575-585 zone in the medium term. In the long term, only sustain above 585, TM could scale 601-630 & 700 zone (FY:17-18) under very bullish market scenerio.

Bottom Line: Technical Trading Levels



SL</>2 FROM SLR







TATA STEEL CMP 498















T1 T2 T3 T4 T5 T6 T7 SLR
Strong > 505 515 525 532* 548 565 575-585 601-612 <500
Weak < 500 493-482 472 467* 454 442 421 407-400 >505

Q4 result of TM published yesterday after market hours is much below market expectations amid higher depreciation, MTM unrealized losses on FX loan hedges (JLR), some other higher other expenses, weak sales of JLR in China & wider net loss in its India operations.

Looking ahead, the management is cautiously optimistic in slow down hit China, which accounted nearly 25% of its global sales. In India, TM is very hopeful as it sees demand  for MCV & HCV are rising and sales of domestic PV rose 19%, while LCV sales remain under pressure.

In the recent months, TM's growing sales of PV is being supported by introduction of some new models like Zest compact sedan & Bolt hatchback. The company is actively trying to build its image from a HCV company to a PV & CV  segment. Its recently launched an upgraded version of Nano (Automatic & Manual) , which may evoke good response in the coming days.Its also in the process to introduce new brands in PV & SUV segment to attract younger generations to TATA brand.

Apart from the PV segment, TM's sales of bigger trucks & buses are also recovering in line with economic expansion in our country sustained by growing demand from fleet operators, thanks to "Modinomics". Also in reality, China may not "slow down" too much as being feared, JLR sales may bounce back there also.

As par quick BG metrics of  TF model, current median valuation of TATA MOTORS is around 510 & projected valuation may be 560-620 (FY:16-17), under the current market conditions.



SCRIP EPS(TTM) BV(Act)  P/E(AVG) LONG TERM SHORT TERM MEDIAN VALUE 200-DEMA 10-DEMA
TATAMOTORS 47.67 203.82 10.5 507.61 505.48 506.55 514.78 510.48

 
TATAMOTORS 57.5 295.5 10.5 557.49 555.16 556.33 514.78 510.48

 
TATAMOTORS 71.5 724 10.5 621.67 619.07 620.37 514.78 510.48

Tuesday 26 May 2015

Tata Steel : Q4 Result Below Expectations---Near Term Range:310-385 ?








Technically, Tata Steel (CMP: 332) need to sustain over 335-340 zone to prevent any further fall. Sustain below 335, it may target 325-310 zone in the immediate to near term. Consecutive closing below 310, Tata Steel may crash to 290-280-266 zone in the bear market scenerio.

On the other hand, sustain above 340-345 zone, Tata Steel may target 355 immediately & sustain above that 366-380-385 zone may be the target in near term. Consecutive closing above 385, it may scale 398-423-435 in the medium term. In the long term, consecutive closing only above 435, it may target 580-625 (FY:17-18) in the extreme bullish market scenerio.

Bottom Line: Technical Trading Levels




SL</>2 FROM SLR





   


TATA STEEL CMP 332



   









   



T1 T2 T3 T4 T5 T6 T7 SLR
Strong > 345   350-355 366 371 385* 398 405 423-435 <340
                     
Weak < 340   334-325 319 314 310* 301 290 280-266 >345
                     


Q4 earnings of Tata Steel is well below market expectations. Its consolidated net loss of 5674.29 cr includes an exceptional impairment charges of 4811.20 cr. On stand alone basis, Tata Steel's net profit fell 59% (y-o-y) to 814.09 cr. This poor result is contributed to falling steel prices, cheap imports from China & CIS, poor demand and the huge write off as mentioned above in its UK (long products) and various other overseas raw material projects. Rising regulatory costs in India also affecting its profitability and any positive value accretion from its Orissa plant is being negated by poor steel price and incremental India cost.

It appears that after the financial crisis, Tata Steel's ambitious ill timed entry into EU/UK market has not yield any positive result, either on its P&L or Balance Sheet. The company sees another tough & challenging year (2016) in EU, but expecting some rebound back home (India) amid hopes of infrastructure boom and uptick in industrial activity. It might be in the process to clean or de-leverage some of its loss making assets in EU. Combination of China slowdown & devaluation of Russian Rouble led to a surge in cheaper steel products over the last few quarters, pressuring steel prices and also squeezing Tata Steel's margin amid lackluster steel demand. Add to this, in India, a string of mining restrictions or stoppages have led to a number of its iron ore mines being shut during the past year. New MMDR bill may also enhance its cost (one time) to a great extent.

But looking ahead, all the above bad news may be already priced in in the stock price to a large extent. Worst slow down in EU & China may be over. India may also be poised to grow over 7% in the next few years, thanks to "Modinomics" and all the regulatory uncertainties for this metal sector has been cleared. Present pain of this sector, including Tata Steel may yield good fruit/result in the coming years. 

As par quick BG metrics of TF model,current median valuation (stand alone basis) of Tata Steel is around 280 and projected median valuation is around 310-340 (FY:16-17) under the current market conditions (taking average PE of around 6). But, once the outlook for this metal sector improves, analysts may assign higher PE multiple of over 10-12.



SCRIP EPS(TTM) BV(Act)  P/E(AVG) LONG TERM SHORT TERM MEDIAN VALUE 200-DEMA 10-DEMA
TATASTEEL 33.02 695.9 6.35 287.66 272.31 279.99 394.66 353.66

TATASTEEL 39.5 751.5 6.35 314.63 297.84 306.23 394.66 353.66

TATASTEEL 47.5 811.6 6.35 345.02 326.61 335.81 394.66 353.66


Sunday 24 May 2015

ITC: Smoking is injurious to health---will it be the same for your portfolio ? (Near Term Range:315-362)








Looking at the chart, ITC (CMP: 329) has critical support of around 325 & sustain below that it could fall to 315-312 area. Consecutive closing below 312, ITC may further fall to 307-298-290-285 zone under the bear market scenerio.

On the up side, ITC has to sustain over 330-337 zone for an immediate target of 346-352 & 365 in the short term. Consecutive closing above 365, ITC may target 373-390-410 in the medium term. In the long term, sustain above 410, ITC may scale 438-445 zone (FY:16-17) in the bullish case scenerio.

Bottom Line: Technical Trading Levels



SL</>2 FROM SLR





   


ITC CMP 329



   









   



T1 T2 T3 T4 T5 T6 T7 SLR
Strong > 330   337 346 352* 365 373 390 410 <325
                     
Weak < 325   319 315 312* 307 298 290 285 >330
                     

Q4 result of  ITC is well below market expectations (published after market hours on last Friday) primarily on account of poor volume in cigarette business amid high Govt. taxation and increase in cost on manpower & brand promotional/advertisements expenses, although raw materials input costs decline. Its agri commodity export & paper business also showed lack luster performance. Only silver linings appears to be in FMCG & Hotel business, where it showed some decent growth. In fact, FMCG division has started decent positive EBIT for the last two quarters for the first time since its launch.

Going ahead, the full impact of price hikes in cigarette business may be reflected in AMJ'15 QTR and absolute volume may not be so bad as being presumed. Due to excessive price hikes, loose cigarettes are being sold repeatedly to the same customer who earlier bought the full packet at the first instance. But, definitely number of middle aged active smokers are on the downside. Thus there may be some uptick in volume of cigarette business in next quarter. We should not forget that nearly 80% of cigarette market in India is controlled by ITC.

Over the last ten years, the prudent management of ITC has successfully reduced the dependance of cigarette business to less than 50% of its overall revenue, sensing the risk of  the same due to growing health consciousness & change of life style of Indian demography and sequentially higher taxes by the Govt. to discourage sale. ITC built its high margin FMCG business organically (comprising foods, premium life style, personal care to education & stationery, safety matches & agarbattis) quite convincingly on the strength of its super strong cigarette distribution network along with its "cash & carry" model. In fact, FMCG might be the core business in the next 5-10 years in the overall scale of ITC's revenue and it may be a "Desi HUL", considering the brand image & distribution network of ITC. Some of its super high recall brands are "Aashirvaad, Sunfeast, Vivel, Bingo, Classmate & Yippee, Dark Fantasy". Its also actively planning to enter "milk dairy" sector shortly, which is now dominated by Amul & Nestle. IRCTC (Indian Rail) is also planning to add "ready to eat" food to its menu, which may be also helpful for ITC.

But, at the end of the day, net earnings (EPS) is the last word for a stock valuation. While there might be a revival & uptick in cigarette business (??) and sequentially higher growth in FMCG, Agri, Paper & Hotel divisions in the days ahead, growing regulatory overhang on cigarettes & sluggish export market could keep the stock price in a range in the near term. Also, its premium FMCG brands are meant for urban market & moderate to satisfactory monsoon this year may not affect adversely overall rural other FMCG products. Don't forget, the stock price is already got corrected for more than 20% from its March high.

Also, ITC has strong balance sheet with considerable cash & cash equivalents and with professional management, it could grow or diversify gradually in a organic or inorganic way in the coming days to make up for possible fall in cigarette business. 

As par BG metrics of quick TF model, current median valuation of ITC might be around 360 and its projected median value may be around 395-430 (FY:16-17) under the current market conditions.


SCRIP EPS(TTM) BV(Act)  P/E(AVG) LONG TERM SHORT TERM MEDIAN VALUE 200-DEMA 10-DEMA
ITC 11.99 32.8 31.6 363.78 353.30 358.54 349.28 329.44

ITC 14.5 38.7 31.6 400.05 388.52 394.29 349.28 329.44

ITC 17.25 45.7 31.6 436.34 423.77 430.05 349.28 329.44