TATAMOTORS: Need To Sustain Above 435-455 For Further Rally Despite Better Than Expected Q4FY16 Result Pushed By JLR

Trading Idea: TATAMOTORS

CMP: 421

Either sell around 440-450 OR 475-485;

TGT: 405*-385-375-360*-345-328-299-279-260*-240 (1-3/6M)

TSL> 460 OR  > 495

Note: Consecutive closing (3 days) above 495 for any reason, TM may further rally up to 515-535* and 560-595* & 615*-635 in the near to long term (alternative bullish case scenario).

For TATAMOTORS (Consolidated):

Q4FY16 EPS of TM reported as 15.33 which beat consensus EPS of 10.60 by around 45% (QOQ: 10.41; YOY: 8.43).

Q4FY16 TTM EPS: 32.70 (FY:16/Actual)

Earlier street estimate was at 34.15 (lagged by around 4.25%).

Projected FWD EPS: 37.75-43.45-49.95 (FY:17-19/Estimates)

Last 5 QTRS average EPS : 7.66

Last 5 YLY average EPS: 38.30 

Average PE: 15

As par BG metrics & current market volatility:

Present median valuation may be around: 440 (FY:16/TTM)

Projected fair valuation might be around: 475-510-545 (FY:17-19/FWD)

 

TATAMOTORS	EPS	BV	P/E	Low	High	Median	200-DEMA	10-DEMA
Q4FY16/TTM	32.7	215.28	15	434.50	441.28	437.89	384.89	397
FY17/FWD	37.75	244.45	15	466.84	474.13	470.49	384.89	397
FY18/FWD	43.45	277.55	15	500.85	508.67	504.76	384.89	397
FY19/FWD	49.95	314.95	15	537.01	545.39	541.20	384.89	397

Analytical Charts:

Bank Nifty (June): 17700-18000 Zone May Be A Big Hurdle Amid Controversy With RBI Gov & "Hawkish" Fed

Trading Idea: BNF (June)

LTP: 17495

Sell either around 17700-17800 OR on rise around 18000-18100;

TGT: 17275*-17140-17015-16850-16680-16470-16300*-16220-16099-15700 (5-15 days)

TSL> 17900 OR 18200

Note: Consecutive closing (3 days) above 18200 for any reason, BNF may further rally up to 18600* and 19200-19680-20150 zone in the near to short term (alternative bullish case scenario).

Apart from some "encouraging" results of banks and monsoon factor along with global cues, BNF rallied quite smartly for the past few days, may be there is strong speculation about the RBI Gov's next tenure uncertainty (as removal of Rajan may be negative for bonds and positive for stocks because it may open taps for further drastic rate cuts).

But, basically, if Rajan is removed amid all the political controversy, it may be also negative for stocks after some whipsaw because, with no Rajan, institutional investors may loose faith on Indian economy/INR and we may see massive bond market sell off and INR may also surge to 71+ level. In that scenario, equity market may be also sold off.

In other scenario, if Rajan is kept for another term with "remote control" of the Govt (being a "Yes man"), then hopes of drastic rate cut may reduce to a great extent and we may see only one 0.25% rate cut in Aug'16 meet as ultimately, by his own word----"I am Raghuram Rajan and I do what I want to do"-----he will not let the down the "independent" structure of the RBI.

Analytical Charts:

SBI: 205-215 Zone May Be A Big Hurdle; At Less Than 2% Recovery Of GNPA In March QTR, NPL May Be Likely To Surge Further

Trading Idea: SBI

CMP: 196

Either sell around 205-210 OR on rise around 220-225;

TGT: 190*-184-174-166*-159-151-145-140*-134-125 (1-3/6M)

TSL> 215 OR > 230

Note: Consecutive closing (3 days) above 230 for any reason, SBI may further rally up to 240*-250-260* and 275-295* & 305-325*-337 in the near to long term (alternative bullish case scenario).

For SBI (Standalone):

Q4FY16 TTM EPS: 12.98 (FY:16/Actual)

Projected FWD EPS: 15.05-17.50-19.95 (FY:17-19/Estimated)

Last five years average EPS is around 16.60.

Average PE: 12

As par BG metrics and current market volatility:

Present median valuation may be around: 175 (FY:16/TTM)

Projected fair value might be around: 190-202-215 (FY:17-19/FWD)

Present BVPS: 178.31

Average PB: 1.15

Present fair value: 205


 

SBIN	EPS	BV	P/E	Low	High	Median	200-DEMA	10-DEMA
Q4FY16/TTM	12.98	178.31	12	180.46	167.12	173.79	209.07	179.3
FY17/FWD	15.05	196.25	12	194.31	179.95	187.13	209.07	179.3
FY18/FWD	17.5	215.95	12	209.53	194.04	201.79	209.07	179.3
FY19/FWD	19.95	237.55	12	223.72	207.18	215.45	209.07	179.3

   

The above incremental growth in EPS is assumed keeping in mind that the stressed assets of SBI

may be at its peak at around 6.5% GNPA (Rs.98172.80) of total loan book of around Rs.1509500 cr.

In Q4FY16, the total watch list (doubtful loans) is around Rs.61663 cr and as par the

management, 70-30% may be turned into future NPA, depending upon the actual economic recovery in India.

Even if, 50% of that turned sour, it may translate another GNPA of around Rs.30830 cr and total GNPA figure may touch around Rs.130000 cr in the coming quarters.

SBI reported a loan recovery of Rs.1724 cr (actual recovery 1627 cr & upgradation of  97 cr) in

March quarter despite all the efforts and its around 1.76% of GNPA amount.

On the other side, the bank added  around 4% of total loan book into fresh NPL/watch list; i.e. total stressed assets for SBI may stands now around 10.5% of the loan book.

As par various reports, PSBS may have around 15% stressed assets on an average (depending upon the size of the bank/loan book) and SBI may not be an exception.

Now the big question is pace of recovery of our economy and NPAS of the banking system. If there is uneven or tepid recovery in the real economy, then a substantial portion of the present "standard assets" may also fall into future NPAS.

Along with the recovery of economy, some more cuts of the repo rate to a competitive level with other advanced economies is necessary along with full rate cut transmission benefits to the borrowers, specially MSME & corporates. They should get fund from the Indian banking system at around 4-6% instead of present 10-12% and can compete with their global peers in a viable way.

As long as we do not have competitive global bank interest rate and our real rate of interest is high, doing business in India with Indian bank funds may not be viable and the present NPA mess may also be continued.

But for drastic cut in repo rate, current inflation trajectory may not be supportive (specially for food and FMCG and house rent/school fees etc affecting the common people) and structural reform by the Govt is necessary apart from RBI.

In Q4FY16, actual EPS of SBI was reported as 1.63 against street estimates of 2.47 (lagged by over 34%).

Although SBI has reported EBITDA/NII better than consensus, it came on the back of other income and its core banking operations is not very bright apart from retail banking.

  Analytical Charts:

       


 






 

Nifty Fut(June): 8125-8185 Zone Will Be Vital For This NAMO Inspired Rally To Continue (2-nd Anniversary)

Trading Idea: Nifty Fut (June)

SGX-NF: 8100 (CMP)

NSE-NF: 8070 (LTP)

Either sell around 8125-8165 OR on rise around 8210-8250;

TGT: 7999*-7905-7845-7775-7690*-7655-7585-7525*-7480-7440 (5-15 days)

TSL> 8185 OR > 8295

Note: Consecutive closing (3 days) above 8185-8295 zone for any reason, NF may further rally up to 8350-8405*-8520-8685 in the near term (alternative bullish case scenario from the present trading level).

NF made a smart rally from the vital positional support zone of 7700 almost in a T-20 style on the back of some global market "risk on", "upgrade" of Indian market from previous "downgrade" by some institutions (a gift to the nation amid NAMO-2-nd year anniversary ??), better monsoon prediction by Skymet (although delayed and probability of 87% of normal rain in June) and better than expected earnings by some of the blue chips.

Now going forward, immediate drivers of the market will be Fed & RBI stance and passage of GST in the forthcoming monsoon session along with recapitalization of the PSBS amid record NPA provisions.

Going by the current inflation trajectory, intensive drought situation in major parts of India and its effect on food inflation, RBI may not oblige for a 0.25% rate cut on 6-th June and may wait for actual Fed stance on 16-th June, Brexit vote outcome, actual progress & distribution of monsoon and may wait for August for any possible rate cut. It will be also very unusual for RBI to cut rates in two successive meets and instead it may focus more on the present liquidity situation and full transmission of  the previous 1.50% rate cuts (as only 0.60-0.75% was transmitted by the banks so far).

Although INC suffered a major set back in the recent state elections, BJP is also neither a major beneficiary of that except some consolation in Assam. BJP+ has got total seats of around 90 this time which was around 285 in the last 2014 Parliament election. Clearly, various regional political parties will influence more in the days ahead and that is also negative for the overall reform & its implementation process in our country.

As of now, it will be very difficult for the Govt to pass GST in the RS without Cong's support and even if there is vote on this, it will be also difficult to gather all the other "opposition" votes to defeat Cong in the RS. Even if, GST will pass in by FY-17, its actual implementation may happen only after 2019 election as it seems that BJP/RSS too are not sure about its inflationary effect on the economy/common people because of increase in service & some other taxes. If Govt is very serious about GST, it may pass that in the last year itself by calling joint session of parliament without seeking for Cong's help. In any way, a faulty & doubtful GST is not good for our economy too !!.

Regarding present ongoing Fed drama, all eyes will be on Yellen speech today & on 6-th June and Fed has a hard time to convince market that every meeting is "live" including June/July. Nobody is believing in Fed now and its credibility seems to be at stake.

China credit bubble may be another serious risk for the global market in the days ahead.

Analytical Charts: