Sector Picks for 2011

Pharma

Outperformer

Expiring patents of global pharma companies

Strong pipeline of drug applications

Rising competition in domestic market

Likely increase in licensing and supply deals

Outlook 2011

The Sensex was volatile in the first nine months of 2010 and threatened to violate the 16,000-support, twice in February and then in May. But such a breakdown was averted on both occasions and the mood turned gung-ho, once it broke past the 18,500-hurdle, to take it very close to its previous life-time high of 21,208.

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Gabriel India

Investors with a two-to-three-year perspective can buy the shares of Gabriel India, a manufacturer of ride control products for the auto industry. From a 52-week-high of Rs 74 in mid-November, broader market volatility has pulled the price down to Rs 53, providing an attractive entry point for investors. At this price, the stock trades at a PE of 13 times its annualised per share earnings for the April-September 2010 period. The company's market leadership position and diversified clientele in the backdrop of a strong demand for automobiles give good visibility to earnings growth over the near to medium term. Gabriel India manufactures shock absorbers, struts and front forks. About 45 per cent of its revenues comes from two and three-wheelers and 30 per cent from the passenger car segment. Commercial vehicles, supplies to replacement markets and exports make up the rest. The company is a tier I supplier to leading OEMs (original equipment manufacturers) such as Maruti, Tata Motors, Ford, Toyota, M&M, Ashok Leyland, Honda, Bajaj and TVS.

Silver sees largest yearly gain in at least 30 yrs

Silver scored an 80 per cent gain in 2010, its largest in at least 30 years, according to Friday's fixing, due to rising demand from investors seeking a cheaper safe-haven than gold and to tap into its exposure to the industrial growth cycle.

The silver price fixed at 3,063.00 US cents an ounce versus 3,070.00 cents at the last fixing on Thursday, showing an 80 per cent rise based on the fixings.

Aban Offshore climbs on positive broker comments

Shares of Aban Offshore Ltd. jumped on Thursday in a rising market after Kotak Institutional Equities upgraded the stock to "Buy", citing the recent correction in the stock and the spike in crude oil prices. Separately, Avendus India Equity Research came out with a positive report on the stock. "We would advise investors to capitalise on the recent correction in Aban’s stock price as we see the risk-reward balance favorable at the current juncture. We highlight that there has been no change in the business conditions to justify the underperformance over the past three months," Kotak said in its note. "Key risks stem from debt-repayment capability," Kotak added.

Citigroup India hit by Rs 4bn fraud

Citibank's Gurgaon branch stumbled upon a Rs 4bn fraud and forgery by a few of the employees at the retail banking unit. The US-based banking titan did not say how much money is involved, but reports suggest the transactions may involve between Rs 3bn and Rs 4bn. The alleged fraud was done by a person named Shiv Raj Puri, who has been working as a Relationship Manager for the past 7-8 years. The fraud was unearthed when the bank's Assistant Vice President Binu Soman noticed suspicious transactions in certain accounts at the Gurgaon branch. Citibank filed an FIR with the Gurgaon police after an internal probe revealed some suspicious transactions. Citibank has informed the RBI and SEBI about the fraud.

Oil companies will be adequately compensated: Govt

Public sector oil marketing companies (OMCs) would be adequately compensated by the Government for selling fuel products at a discount, Petroleum Secretary S. Sundareshan said. The revenue loss to the OMCs would be adequately and fully addressed, Sundareshan said today at a hurriedly called media conference in the capital. His remarks came a day after the Empowered Group of Ministers (EGoM) on fuel prices was postponed indefinitely. The panel was to take up an increase in diesel and LPG prices. The EGoM has been considering a price hike of Rs 2 per litre on diesel and Rs 30-40 per LPG cylinder. OMCs currently sell diesel at a loss of Rs 6.09 per litre and domestic LPG at Rs 272.19 per cylinder. Sundareshan refused to comment on the reason for the postponement of the EGoM.

Weekly Newsletter - Jan 2 2011

Well, the markets in India bid farewell to 2010 on a happy note. Overall, the last trading week of the year was pretty good, with the key indices posting solid gains. However, the advance came on low volumes, casting some doubts on the strength of the rally going forward. The start next week may be rangebound and choppy due to the New Year hangover. A few global markets may also remain shut for extended holiday.

But, the week will not be completely devoid of events. We will get the PMI data for both manufacturing as well as services from across the globe. Among the other important statistics to look for will be the monthly US jobs report, FOMC minutes, US factory orders, auto sales (India, US, Japan and China), US weekly jobless claims and Eurozone GDP data.

One should wait for a clear trend to emerge before taking a market-wide call early on in the new year. Keep an eye on the trend in FII fund flows and of course the overseas markets. Going forward in January, investors and traders will look forward to the latest quarterly earnings and the RBI's quarterly review. One should also keep an eye on the political developments ahead of the Budget session.

Food inflation spikes further...Fuel prices too rise

Annual rate of inflation in the sensitive Food Articles space increased anew in the third week of December, putting further pressure on policymakers to check the spiraling prices of essential food commodities. Inflation in the Food Articles group climbed to 14.44% in the week ended December 18 from 12.13% in the previous week, the Union Commerce & Industry said. This was the fourth instance of an increase in food inflation after easing for seven consecutive weeks. Inflation in the food articles space was at 21.29% in the year-ago period.

Yearly Newsletter - 2010

January 2010

Domestic News

Govt to miss April deadline on GST rollout

The UPA government’s proposed comprehensive indirect tax reform, goods and services tax (GST), will miss its scheduled rollout from April 1, 2010, a temporary setback to creation of a unified national market for goods and services in the country. "Because of the difficulties in passing the required constitutional amendment bill in the budget session , it will not be practical to introduce GST on April 1, 2010. New dates for GST implementation will be decided in April," Chairman of the Empowered Committee of State Finance Ministers and West Bengal finance minister Asim Dasgupta said. Dasgupta’s admission was a clear indication that the implementation of the new regime may be postponed by a year to April 1, 2011, as a number of states may not be willing for even a mid-year roll-out.