China May Convert Upto $1 Tn of FX Reserves Into Gold...Bloomberg Newswire

In an otherwise quiet article on central banks today, Bloomberg quoted an analyst who says China may use up to a third of their $3 trillion in foreign reserves to purchase gold. China has been moving away from the dollar, and into alternative stores of wealth for years now. But $1 trillion in gold? If it plays out, such a move would further threaten the dollar's status as reserve currency. It would provide further buying pressure in gold for years to come, as the dollar crumples into a pitiful heap on the floor.

 

China’s Gold Reserves

China, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, [Michael Pento of Euro Pacific Capital] said. “China wants to be an international player, and they need to own more gold than they currently have.” ...“China is out to have more gold than America, and Russia is aspiring to the same,” [Robert] McEwen, [the chief executive officer of producer U.S. Gold Corp] said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the U.S.”

...China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.

 

This is a big reason why gold and silver are heading higher. Occasional dips are inevitable, of course. When they happen bears will declare the bubble popped (after a one-week correction). Then the uptrend will continue, intact. And they'll say, "bubble! bubble bubble bubble bubble, bubble!", again. And gold bugs will be laughing all the way to the vault.

 

That's how I see it, anyway. Could be wrong, it's happened before. But, I did say the same thing when gold was $1140 inWhy I'm Buying the Gold Dips in December 2009:

 

"The bottom line is that Bernanke and crew actually want inflation. It's easier than the alternatives: raising taxes or slashing spending. And it will help erase debts. It will also wipe out the savers and reward the borrowers — but that seems to be the path we're on, like it or not. 

Besides, do you really think they will allow America's debt to be paid off with dollars worth more rather than less? Of course not. Devaluing our currency and printing money are part of a strategy. A reckless and morally hazardous one, but still a strategy.

So that's why I still am bullish on precious metals. I'm hoping for a nice pullback in gold and silver. It'll be a great buying opportunity. Once everyone realizes that the Fed's printing presses are just getting warmed up, it'll be off to the races again."

 

The time will eventually (and sadly) come to sell significant amounts of precious metals, but I just don't see us being close to that point yet. Inning 4 or 5, if this were a ballgame, perhaps? " Lots more printing ahead, though it's hard to say how much. My view has been that we see at least QE5 (possibly under a different name) and $3,500 gold and $150 silver before things top out.

 

It all depends on how much inflation the public will take before it declares shenanigans; forcing spending cuts and a tightening of monetary policy. Then - after a (hopefully brief) adjustment period - America and the world will be on a path to sustainable growth. A time to move from being overweight in metals, and shift into stocks and real estate.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

China May Convert Upto $1 Tn of FX Reserves Into Gold...Bloomberg Newswire

In an otherwise quiet article on central banks today, Bloomberg quoted an analyst who says China may use up to a third of their $3 trillion in foreign reserves to purchase gold. China has been moving away from the dollar, and into alternative stores of wealth for years now. But $1 trillion in gold? If it plays out, such a move would further threaten the dollar's status as reserve currency. It would provide further buying pressure in gold for years to come, as the dollar crumples into a pitiful heap on the floor.

 

China’s Gold Reserves

China, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, [Michael Pento of Euro Pacific Capital] said. “China wants to be an international player, and they need to own more gold than they currently have.” ...“China is out to have more gold than America, and Russia is aspiring to the same,” [Robert] McEwen, [the chief executive officer of producer U.S. Gold Corp] said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the U.S.”

...China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.

 

This is a big reason why gold and silver are heading higher. Occasional dips are inevitable, of course. When they happen bears will declare the bubble popped (after a one-week correction). Then the uptrend will continue, intact. And they'll say, "bubble! bubble bubble bubble bubble, bubble!", again. And gold bugs will be laughing all the way to the vault.

 

That's how I see it, anyway. Could be wrong, it's happened before. But, I did say the same thing when gold was $1140 inWhy I'm Buying the Gold Dips in December 2009:

 

"The bottom line is that Bernanke and crew actually want inflation. It's easier than the alternatives: raising taxes or slashing spending. And it will help erase debts. It will also wipe out the savers and reward the borrowers — but that seems to be the path we're on, like it or not. 

Besides, do you really think they will allow America's debt to be paid off with dollars worth more rather than less? Of course not. Devaluing our currency and printing money are part of a strategy. A reckless and morally hazardous one, but still a strategy.

So that's why I still am bullish on precious metals. I'm hoping for a nice pullback in gold and silver. It'll be a great buying opportunity. Once everyone realizes that the Fed's printing presses are just getting warmed up, it'll be off to the races again."

 

The time will eventually (and sadly) come to sell significant amounts of precious metals, but I just don't see us being close to that point yet. Inning 4 or 5, if this were a ballgame, perhaps? " Lots more printing ahead, though it's hard to say how much. My view has been that we see at least QE5 (possibly under a different name) and $3,500 gold and $150 silver before things top out.

 

It all depends on how much inflation the public will take before it declares shenanigans; forcing spending cuts and a tightening of monetary policy. Then - after a (hopefully brief) adjustment period - America and the world will be on a path to sustainable growth. A time to move from being overweight in metals, and shift into stocks and real estate.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

India: How Can A Market Fetch A PE of 15, When Earnings Growth Is A Mere 7.5% ?

Is India Growing Or Is It The Rest Of The World?

Earnings growth back to the starting line? — Do Q3 aggregates leave India where it started the earnings season? We think not. This is because domestic businesses seem to be driving top-line growth, while bottom line momentum is fuelled by commodity biased/ cyclical foreign subsidiaries. This 

 could well challenge India’s domestic growth/valuation premium. 

India’s headline 3Q11 profit growth was robust but with almost 80% of this growth being generated by its foreign subsidiaries (swinging from losses to large profits), it is actually a fairly disappointing show. ‘Domestic only’ earnings growth at 7.5% is weak, short of expectations, and in line with trends observed midway through the results season.

The negative bias in the quarter is apparent in the upside/downside surprise ratio (37/53, with 34 in line); Citi’s own earnings upgrade/downgrade ratio at 23/19. Surprisingly, the Street continues to hang onto extremely high earnings estimates for FY11 inspite of a poor show for the first three quarters of FY11.

It’s commodities, banks and swings — Commodities and banks make up almost 80% of earnings growth – commodities with help from abroad and banks due to more fundamental reasons. The telecom and energy sectors are the laggards, with median earnings growth for companies at around 20%. The quarters’ results do also stand out in the level of earnings concentration (sectors/stocks) and volatility, suggesting less predictability up ahead.

Sales and operating margins relatively balanced — While overall sales and margins have been boosted by the foreign business turnarounds, domestic margins have largely held, with sales too growing as per expectations. 

This suggests pressures are below EBIDTA levels, which could exacerbate given rising rates.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

Deutsche Bank-India's Infrastructure Caught Between Price And Permits

Following the emergence of worries over domestic coal availability coupled with recent tightening of global coal markets, we are beginning to get concerned about the resultant impact on Indian utilities and cement producers. For Indian power utilities, peak utilisation levels could drop 2,000bps by FY14E supporting a demand growth <6%. For cement players already grappling with excess supply, the tightness in coal markets will likely exacerbate margin pressure. 

Concerns on new power capacity addition – read spot rates to be strong We estimate that Indian coal availability will now rise at a CAGR of only 4.2% over FY10-14E, which is insufficient to meet the power capacity growth of 10.4%.

Operating rates (PLF) would hence compress by 2000bps over FY11-14E, assuming other sources of capacity do not suffer from lack of fuel. Risk of running plants at a PLF of less than 55% may result in the deferral of capacity-addition in early stages of development. Consequently, we estimate that medium-term spot rates will stay at INR4/unit vs. the street’s expectation of a sharp decline.

Production discipline may be one of few options for cement players Weak utilization and rising costs may force cement companies to discipline

production or risk a sharp compression in margins. Our estimates factor in some benefits from manufacturers’ production discipline for six to seven months in FY12.

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

India: Q3FY11 Earnings Final Cut-Growth Is Slowing (Morgan Stanley)

The slowdown in earnings remains a matter of concern for market participants.

-Q3FY11 Results show 25 per cent of the companies reporting a yoy decline in earnings.

-Earnings growth was the slowest in 5 quarters.

-Excluding Ongc and Tata Motors Sensex earnings are up a mere 10.5 per cent yoy.

-Telecoms and Utilities were the biggest laggards with a substantial drop in YOY earnings.

-Financials produced the biggest positive surprises while consumer staples and healthcare produced the most negative surprises.

-FY11 earnings growth revisions were negative for 6 out of 10 sectors over the past month with Materials and Helathcare seeing the highest negative earnings revisions.

-The recent events in the country coupled with higher inflation and global factors is putting pressure on growth and creating the risk of downward earnings revisions. For now we think that the downgrades will be moderate. However, lead indicators point to slower broad market earnings growth in the coming quarters.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

FMCG-On Very Shaky Legs (JPM)

More price hikes.

Stiff input cost environment led to consumer companies continuing to increase prices in the past month to mitigate margin pressures. Key hikes include: 1) P&G discontinued the promotional – 10% extra offer – on its key detergent brand Tide Plus, 2) Marico took more price hikes in Jan’11 amounting to 8-20% across various SKUs of Parachute Coconut Oil. Marico cumulatively hiked prices across Parachute SKUs by 20-40% since Sep’10, 3) HUL raised prices for some of the SKUs for its soap brands – Lux andLiril by 3-10% and increased price for Dove shampoo by 5%, 4) Colgate undertook a 17% price hike for Cibaca toothpaste, and 5) Dabur continued with more price increases across its toothpastes, hair oils and Chyawanprash portfolio.

ITC took further price hikes ahead of the budget and increased price for its leading brand Gold Flake by 8% and Wills Flake by 12%. It had earlier hiked prices for its low price brand Bristol by 12%.  

New product launches. 1) HUL has introduced a new variant Bru Lite to expand its coffee portfolio, 2) Dabur has forayed into professional facial market with launch ofOxyLife Professional Facial Kit.  

Global Research. L’Oreal reported 32% LTL sales growth in India in 2010 supported by new product introductions and increased distribution reach. This comes over strong 31.5% LTL sales growth witnessed in 2009 by the company.

Key commodity trends. Palm oil (+3% m/m), coconut oil (+12% m/m) and soybean prices were firm over the past month. Sugar (-1% m/m) and wheat (-3% m/m) prices were soft. LAB prices were up 4% m/m. Cotton prices rose sharply (+24% m/m).

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

India's Inflation While Nascent Now, Could Become Persistent (Morgan Stanley)

The recent food inflation print has brought the inflation debate back into the market. How is the market likely to respond and which sectors will benefit or lose from the specter of rising inflation? 

Our View: We still think that inflation may have peaked in April 2010 and is likely decelerating into 2011.

That said, a rise in oil and agricultural commodities prices will keep inflation risks alive. Recent optimism in developed world growth outlook has increased the risk of a potential rise in crude oil prices to US$110-120/bbl. It appears that inflation expectations have risen and thus the seasonal variation in food supply is causing a pronounced effect on overall inflation.

Even if inflation rises persistently over the coming months, the situation is a bit different than 2009-10 because interest rates are also much higher. Using our current estimate of core inflation and short-term deposit rates, real rates are positive versus deeply negative levels at the start of 2010.

However, investors need to be vigilant against persistent food inflation since it has a tendency to reflect into core inflation over time through higher wages.

How does the Market Fare?: We identify five periods of rising inflation over the past decade. Indian equities have outperformed emerging markets in the first three out of five occasions while performing almost in line with emerging markets in the two most recent episodes of rising inflation. The absolute performance was positive in four out of five of these cycles – the only exception being 2008 when rising inflation coincided with a sharp rise in rates as well as turmoil in global financial markets.

Global Sectors Outperform Led by Energy; Consumer Staples and Telecoms Underperform: The more solid evidence is with respect to sector performance. Very clearly, global sectors which include materials, energy and technology are outperformers with Energy leading the charge. Conversely, telecoms and consumer staples are consistent underperformers. We are underweight consumer staples and technology and overweight energy, materials and telecoms in our sector portfolio. 

The historical trends for other sectors are less reliable. Banks, industrials, autos and utilities are mixed bags losing money more often than not.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

India: Risks To Fiscal Consolidation In FY12

The FY12 budget backdrop is challenging.  

The backdrop of the FY12 budget is bearish, due to (1) rising prices, interest rates and persistent deficits and (2) poor governance, slowdown in decision making and lack of execution, in our view. As a result, the FM will need to walk the tight-rope in keeping the populace happy and addressing the urgent issue of fiscal containment, given the limitations of further monetary action to address inflation.

Fiscal outperformance for FY11 is priced in… 

We think it is now well-priced in is that due to higher nominal GDP and buoyancy in revenues offsetting supplementary expenditure, the deficit in FY11 is likely to see some improvement from 6%+ in FY10. Incorporating the advance GDP numbers (nominal GDP growth of 20.8% v/s budgeted 12.6%), the fiscal deficit target for  FY11 would stand at 4.8% v/s the 5.5% budgeted. Depending on the extent of higher subsidies, we expect a print of 5.1-5.2%.

…But the picture is not likely to be as bright in FY12 

In fact, a combination of factors both on the expenditure (implementation of food security bill, rising oil under-recoveries) and revenue front (delays in tax reform) could result in the pace of deficit consolidation being stalled. While we are likely to see measures aimed at reducing food inflation (i.e food processing, agri-related steps),infrastructure financing and FDI, another encouraging factor could be the introduction of biometric cards, which would help stem leakages on food subsidy/ employment guarantee scheme. 

CAD could surprise positively, pressure on INR ....

Possibility of a positive surprise on the current account.

On the external front, export growth continues to post sustained trends, with growth averaging at ~30% levels. Moreover, import growth has seen some moderation in recent months, thus resulting in the trade deficit averaging US$8-9bn from US$11-13bn levels earlier. This could result in the current account deficit surprising positively from our estimate of US$56.4bn (3.2% of GDP), vs. US$38.4bn in FY10. 

…But weak sentiment and a stronger USD add to depreciation pressure on the INR.  

While overall capital flows are more than sufficient to finance the CAD, the deceleration in FDI needs monitoring, given that the CAD is being largely financed by portfolio flows, which is a concern especially in the current risk on/off environment. This, coupled with weak sentiment on India due to recent corruption/governance related issues and a near-standstill on policy progress, as well as our global team’s outlook for a marginally stronger dollar, places downward pressure on our currency estimates. We are thus revising our Mar11 INR forecast to 46.5/$ from Rs44.5/$ earlier; and our Mar12 forecast to Rs45.5/$ from Rs43.5/$ earlier. However, a recovery in sentiment would lead us to relook at these forecasts more optimistically.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

Consumer Confidence Heats Up The Kitchen

Regardless of which study you look at, over the last 12 months, consumer confidence numbers are moving higher.  Up and to the right if you will.As a result, the freewheeling spending by consumers, while not back with a bang, is picking up speed.  Right now, consumers are more willing to spend disposable income on higher end products, travel, vacations, and even food. The willingness to open up the wallet is improving… and that’s important for our economy.  It’s also great news for stocks…

As a matter of fact, I’ve already discussed a number of different ways to profit from this trend.  I’ve suggested you look at areas where consumers have cut back.  Identify industries where consumers put away their wallets during the recession.

Those are the same industries where spending is now picking up speed. The first area to come to mind is vacation service providers… think of airlines, casinos, and hotels. I also highlighted the recent surge in car and truck purchases.  The automotive companies are seeing product sales pick up steam too. If you put your mind to it, I’m sure you can uncover a few more…As you put on your thinking cap, let me share one of the most obvious areas… Fast Casual Restaurants.

Now bear with me for a moment… I’m not talking high end steakhouses or fancy French restaurants sporting 5 star ratings.  Nope.  I’m talking about the everyday swing by for a sit down meal that many Americans enjoy. Take a look at the weeknight spot to grab a beer, a meal, or enjoy the moment.

This is one of the first areas many Americans cut back on when times were tight.  Dinners out were put on the back burner.  People started cooking at home… Making dinner at home became the new American pastime. Now the trend is starting to reverse.

With consumer confidence rising, many are clearly feeling confident about their jobs once again.  Spending money is no longer shunned.  And while it’s not like the old days, the money flow is starting once again. So who’s going to benefit from this trend? Numerous companies will see their performance improve, but one restaurant I like is Chili’s!  They are owned by a company called Brinker International (EAT).  Don’t you just love their ticker symbol!?!

Chili’s has over 1,300 locations across the country.  I’m willing to bet you’ve eaten at one… or have at least heard about them.

Now, what’s interesting about Brinker is how they reacted to the economic downturn.  They realized customer visits and revenue would fall.  So they started working proactively on cutting back expenses.

But they did things a little differently. Instead of switching to cheaper products or lower quality food, they set out to streamline operations.

They did studies in kitchen efficiency.  They looked at how long it takes to prepare certain meals.  Who actually needs to do what… and how much time it takes.  They installed new kitchen appliances to eliminate some of the hands on cooking.  As a result, they were able to cut back on the number of cooks needed in the kitchen.

The remaining cooks can now focus on other food prep activities.

Brinker was also able to streamline service.  They re-created how food and drinks are delivered to customers.  And, as a result, they eliminated table bussers.

By stripping back just one layer of people and consolidating their job activities, Brinker eliminated a time delay waiters had experienced.  As a result, a bottleneck was eliminated, allowing food and drink to reach your table much faster!

Despite all the streamlining, things are still tight at Brinker.

Last quarter customer traffic was down 7.1%.  It’s not what you want to see, but they made the best of that traffic.  Same store sales fell only 4.9%.  So, despite fewer customers, they were able to keep revenue from falling too far.

Now here’s the upside.

Remember, customers are once again starting to eat out.  Chains like Chili’s will soon begin seeing an increase in customer traffic and spending. Customer numbers will only grow as the economy improves.  And once that happens, you’re going to see revenues jump as well. Best of all, the cost cutting Brinker did during the downturn will stick, so costs will remain low and profits will skyrocket.

These are the types of investment you want to jump into before consumer spending spikes… once financial numbers start improving significantly, the stock is sure to take off.  If you’re looking for a great way to play the improving consumer confidence numbers, take a close look at the fast casual restaurants.  You’re sure to grab some big gains there!

Instead Of Allowing The Bears To Rule, Investors Need To Overcome Their Fear

While the capacity to fear is basic human nature, specific fears are learned.  Psychological studies going as far back as the 1920s show people can be taught to fear almost anything.Take for example John B. Watson's Little Albert experiment.

Watson is the esteemed American psychologist who established the psychological school of behaviorism.  And his controversial Little Albert experiment is now featured in introductory psychology textbooks everywhere.

In this study, an eleven-month old boy was conditioned in a laboratory to fear a white rat.  Every time Little Albert touched the rat, Watson would smash a steel bar with a hammer.  The loud noise caused the boy to cry and show fear. After several repetitions of this process, Little Albert began to associate the rat with the loud, scary noise.  Until finally, when presented with just the rat, Little Albert cried, turned away, and tried to get away from the rat.

Now this study has been roundly criticized as unethical due to Little Albert's young age.  But the study clearly shows human beings can be conditioned to fear anything.

Here's my point...

A generation of investors have been conditioned to fear the stock market.  And as a result, they're missing out on the opportunity to build enough wealth to support themselves in retirement. It all started with the bursting of the stock market bubble in 2000. Wealth accumulated over many years seemed to disappear in the blink of an eye. This was a hauntingly traumatic experience for everybody. And as a result, many investors swore they would never buy a share of stock ever again. Of course, after a couple of years, the market bottomed and began to recover.  It was the beginning of what would become a five-year bull market for stocks.

But as usual, professional investors led the way. They know the best time to get into stocks is when the economic outlook is bleak.  Most individual investors re-entered the market only after it began making new highs in 2006. I'm sure some of them enjoyed a year or two of nice gains.  But it wouldn't be long before disaster struck again.  Just a short eight years after the last meltdown, the financial crisis hit investors right between the eyes.

This time around though, it wasn't just stocks that suffered.  The most important asset of all, our homes, plunged by amounts that defied even the wildest imaginations. Investor fear shot up to a level not seen since Great Depression days. And now history is repeating itself...

The market bottomed in March 2009 and began to recover.  Professional investors led the way by getting back in while the economic outlook was still horrible.  And stocks have made a historic, nearly uninterrupted two-year bull market run. Once again, individual investors have missed out on the last two years' worth of huge stock market gains.  The stock market has become the individual investor's white rat.

Rather than face their fears head on and get back into stocks, they've mostly stayed in cash.  And that's exactly where you don't want to be when interest rates are nearly zero. If you find yourself in this predicament, don't be too hard on yourself.  As Little Albert proved, fear is a learned response. Instead, focus all of your energy on overcoming your fear of the market.

It's looking more and more like we're going to get a market correction.

The major stock market indices are all approaching pre-financial crisis highs.  Unrest in the Middle East is spurring fears of skyrocketing oil prices.  And a number of important companies have posted disappointing earnings. I don't think you could find clearer signs the market's headed for a round of profit taking.But don't despair.  A little correction offers just the opportunity you've been looking for.  A chance to get into good quality stocks at discounted prices.

Get mentally prepared to buy the dip.  Do your research and find a few stocks or stock-based ETFs.  And when the opportunity comes, don't let your fear of the market prevent you from building wealth you desperately need.

Suzlon Promoters Sells 4 Cr Shares To Morgan Stanley--Stock Not Worth Even Rs 47?

Suzlon Energy Ltd has informed BSE that the Company have been informed by the Promoters of the Company that Vinod Ranchhodhbhai HUF and Sanman Holdings Private Ltd., persons forming part of the Promoter Group, have sold on March 14, 2011 total 4 crore (2 crore each) Equity Shares of Rs. 2 each of the Company, representing approximately 2.25% of the paid-up capital of the Company. Following this sale, the Promoter Group's holding in the Company stands reduced to 54.84% of the paid-up capital.

Further, these shareholders of the Company have indicated to the Company that primary intention of the utilisation of these proceeds is to extend financial support to the Company by suitable mode, subject to applicable law, the Company approving the same and receipt of all requisite approvals.

The Company plans to use these funds for strategic initiatives.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

India Economy - Inflation scare deepens

Food softening and manufactured products prices hardening continued in Feb '11; inflation continues way ahead of expectations. Yet, due to softer growth (IIP, GDP, investment), the RBI is likely to limit the rate hike to 25bps on 17 Mar '11.

n       WPI inflation edges up. Beating market and our expectations (7.7%), headline inflation based on the wholesale price index (WPI) rose to 8.3% in Feb '11, continuing above 8% for the 14th consecutive month. Dec '10 WPI inflation was raised to 9.4%, from 8.4% earlier.

n       Manufactured products driving inflation up. Though the index of primary articles (weight: 20%) declined 2.9%, m-o-m, in Feb '11, the index for manufactured products (weight: 65%) surged 1.3%, the highest monthly increase since Apr '10. The annual manufactured products inflation also rose, to 4.9%, after softening to 3.8% in Jan '11. Notably, non-food manufactured inflation saw a sharp jump, from 4.9% in Jan '11 to 6.1% in Feb, the highest since Nov '08.

n       Non-food primary articles on fire. Prices of non-food articles (weight: 4.3%) have been rising sharply in the last six months (average 3.1% m-o-m) due to higher prices of castor seed, raw cotton and copra. Annual inflation for this category rose to 29.8% in Feb '11, remaining above 20% for six successive months.

n       Inflation assessment and outlook. Prices of food articles have started softening considerably since end-Jan '11 and the trend is likely to continue for the next 2-3 months on account of better prospects for the rabi crop, which would hit the markets in early April. Manufactured product inflation, however, has started inching up, reflecting the pass-through of high commodity prices, rising interest and wage costs. This, in turn, is expected to keep overall inflation elevated during most of FY12. We see clear upside risks to manufactured product inflation in the next 2-3 months, beyond which such prices should stabilize.

n       Policy outlook. Low industrial production and investment growth on the one hand and unrelenting inflation on the other are rendering the outlook for monetary policy uncertain. We expect the RBI to raise both the repo and reverse repo by 25bps each and to discontinue the temporary dispensation extended on the holding of securities under the Statutory Liquidity Requirement.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

India: A Bubble Deflated

Continuing with its calibrated monetary tightening cycle, the RBI today hiked the repo and reverse repo rates by 25bps each as inflation continues to be nearly double the medium-term target of the RBI since Jan ’10. RBI now projects WPI inflation at 8% by end-Mar ’11. We expect one more rate hike of 25bps each in the repo and reverse repo rates in May ’11.

n       Rate hike on expected lines. In line with market and our expectations, the RBI increased the repo rate (at which banks borrow from the RBI) and the reverse-repo rate (at which banks park money with the RBI) 25bps each in its mid-quarter monetary policy review today, to 6.75% and 5.75% respectively. The cash reserve ratio(CRR) was kept unchanged at 6%.

n       Aggressive effective tightening. Today’s rate hike in the policy rates marks the eighth consecutive hike since Feb ’10. Overall, the RBI has hiked repo rate by 200bps, reverse-repo rate by 250bps and CRR by 100bps in the ongoing rate hike cycle. Moreover, the effective rate hike in the operative rate has been 350bps as the operative rate has changed from reverse repo to repo rate due to change in the liquidity situation.

n       Inflation projection revised upwards. The RBI has increased WPI inflation projection for end-Mar ’11 to 8% from 7% earlier. WPI inflation inched up, to 8.3% in Feb ’11, after softening to 8.2% in Jan ’11. Notably, the RBI has mentioned that non-food manufactured products inflation continues to be well above its medium-term trend – it rose sharply, from 4.8% in Jan ’11 to 6.1% in Feb ’11 – indicating that producers are able to pass on higher input prices to consumers.

n       Outlook. The food articles inflation has started considerably softening on account of improved supply and the trend is expected to continue on a likely bumper rabicrop, which will hit the market early next month. The main pressure to inflation, going forward, is likely to come from manufactured products. We expect inflation to be in 6-8% range in FY12e as against 8-11% range in FY11. On the growth front, though the RBI is upbeat on the domestic growth momentum, it seems to be concerned about the slowing investment. Interestingly, in today’s release, for the first time, the RBI has indicated, “…risks to growth are emerging”. Given these factors, we expect the RBI to hike policy rates once more by 25bps each in the next monetary policy meeting. Thereafter, we expect growth outlook to play a bigger role in deciding the trajectory of the policy rates.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.