Eldridge Financial Review: Clarification on GAAR will drive market direction in the short term: ING Investment Management India

http://eldrigefinancialreviews.com/eldridge-financial-review-clarification-on-gaar-will-drive-market-direction-in-the-short-term-ing-investment-management-india/

 Ramanathan K, CIO, ING Investment Management India talks about what will drive the market direction in the short term and sectors he is overweight on to an interview with ET.

What do you expect the earnings delivery to be in Q4 and the commentary to be for FY13? 

One good thing about the expectations vis-a-vis the IT results is that the expectations are poor. Managements like TCS as well as Infosys have already guided for poor volume growth. We are going into the IT results season with poor expectations, which is actually positive. From an overall perspective, the budgets for FY13 or CY12 in the case of global companies are at best flat. These boards are well for a 13% to 16% earnings growth for next year. Valuations in this space, especially in the large cap are in the range of 15 to 17 times. Valuations are not expensive. If you have issues in terms of global flows because of GAAR provisions, rupee should depreciate further. If there is a selloff, that should again be positive. Overall, we are positive on the space and overweight on the sector.

What happened today with regards to PNGRB and the margins for IGL, is not an isolated case of interference. Does this sour the mood for investments? 

Yes. The step taken by PNGRB has been very negative for the company and we have seen a significant de-rating as well as expected EPS downgrades for this stock. It is negative and we have had several such cases of orders being implemented which significantly impacts profitability. We have seen the case of ONGC, Coal India where there is no clarity on implementation in terms of how much they have to provide for, if they default on 80% FSA. We have seen the GAAR provisions which are supposed to be retroactively implemented. All these do not give a positive connotation for global investors.

What can the market do in the near term given the volatility? 

The key issue which is troubling the market is GAAR provisions, its implementation and applicability. We need more clarity which is expected over the next few weeks. If FII P-note holders, private equity hedge fund long only guys are being targeted, that is not going to board well for the market. We need capital flows. We have a huge current account and fiscal deficit. You would have a significant pressure on the rupee if there are no flaws on the capital. And, it is going to be very negative in the markets. Clarification on the GAAR provisions will drive the direction of the markets in the short term.

What does one do with Coal India, BHEL, and GAIL? 

I cannot talk on specific stocks. Vis-a-vis the oil and gas sector, we are underweight in some of the names which you mentioned. I would not like to paint all companies in the PSU space with a negative brush or a black paint. These are stock specific issues. From an overall perspective, regulatory changes are impacting stock performance as well as profitability negatively. Wherever the risks are perceived to be pretty high, we would surely look to go underweight.

Eldridge Financial Review: GEPL Capital`s view on bullions, base-metals, energy

http://eldrigefinancialreviews.com/eldrige-financial-review-gepl-capitals-view-on-bullions-base-metals-energy/

Energy

Oil dropped to a seven-week low as an employment report raised concern that U.S. fuel demand will slow and Iran agreed to resume talks on its nuclear program. Futures fell as much as 2.4 percent after the government reported on April 6 that the U.S. created 120,000 jobs in March, below the median forecast of 205,000 in a Bloomberg survey. The Scheduled negotiations between Iran and the United Nations Security Council members plus Germany increased optimism that the Persian Gulf nation won’t act to disrupt supplies.

Bullions

After the U.S missed the estimates job data, Gold mount up for a fourth day to feb.23 and renowned as the longest rally in more than a month. In the speculations, Federal Reserve may take more steps to spur growth and weakening the dollar. Spot gold rose as much as 0.9 percent to $1,654.90 an ounce, the highest level in a week, and was at $1,652.72 at 11:52 a.m. in Singapore.

The dollar cut down for a third day against a six-currency basket as well as the yen as the Bank of Japan refrained from adding to monetary easing. In the previous month, nonfarm payrolls rose 120,000, the smallest gain in five months, compared with economists’ forecast for 205,000. Central bank policy makers saw no need for more stimuli unless the economy falters based from the data on April 6.The Fed bought $2.3 trillion of debt in two rounds of so-called quantitative easing from 2008 to June 2011. June-delivery gold rose as much as 0.7 percent to $1,655.90 an ounce on the Comex in New York, and traded at $1,652.10. Holdings in gold-backed exchange-traded products were 2,397.577 metric tons yesterday, within 0.6 percent of a March 13 record.

Crude

On the month of May crude delivers fell $1.33, or 1.3 percent, to $101.98 at 1:50 p.m. on the New York Mercantile Exchange. The contract touched $100.81, the lowest level since Feb. 15. Prices have climbed 3.2 percent this year. Brent oil for May settlement dropped $1.14, or 0.9 percent, to $122.29 a barrel on the London-based ICE Futures Europe exchange. Commodity and equity markets were closed in New York and London on April 6 for Good Friday. European stock markets are shut today for holidays, along with Australia, New Zealand, Hong Kong, Thailand and South Africa.

Base-Metals

Copper in London declined to the lowest level in a month as investors bet demand from the two largest users may be curbed after China’s consumer prices rose and U.S. jobs climbed less than expected. The metal for delivery in three months fell as much as 1.7 percent to $8,221 a metric ton on the London Metal Exchange, the lowest price since March 7, before trading at $8,318.50 by 10:13 a.m. Shanghai time. The bourse was closed for two days due to public holidays. Copper for delivery in July was little changed at 59,850 yuan ($9,486) a ton on the Shanghai Futures Exchange.

U.S. nonfarm payrolls rose by 120,000 last month, the smallest gain in five months and less than the most pessimistic estimate in a Bloomberg survey of economists, according to a government report on April 6. May-delivery copper on the Comex rose 1.4 percent to $3.771 a pound, after falling to a seven-week low yesterday. China’s customs department is going to release provisional commodities trade data for March today. On the LME, aluminum gained 0.4 percent to $2,117 a ton, and zinc rose 0.8 percent to $2,019.25 a ton. Lead declined 0.3 percent to $2,053 per ton. Nickel fell 1 percent to $18,218 a ton and tin dropped 0.3 percent to $23,100 a ton.