Saturday, June 15, 2013

Falling Rupee and Stocks .....




Weakness of Rupee is the headline of financial media for the past many weeks.But the case of our currency is not an isolated one and the currencies of many other  countries are also showing the same trend.Possibility of an early withdrawal of QE may be an important  reason for this  along with many other.Lot of amount bearing cheap interest rate originated from US are deployed in various assets across the globe .Even partial withdrawal of this money may create wide fluctuations in currency values especially in  countries like India with an unfavourable CAD position.But ultimately ,in a long run this withdrawal of money from various assets  and commodities may reduce the inflationary pressure which may  help the government to start aggressive rate cuts. If we take the case of India, even if WPI showing signs of cool off CPI is not giving any comfort. Only  Creating a strong and fair distribution channel and taking stern action against those who are unwilling to pass on the benefits of falling WPI to the end user  will ensure the reach of any benefit to the common man.Otherwise all these gains of falling WPI will ends in the hands of few middlemen and politicians and we can’t expect any significant reduction in CPI.

As investors in stocks ,we are always looking for opportunities to gain out of weakening rupee.But blindly selecting an export oriented  company may not save the purpose.Company’s obligations in the form of foreign debt which took at an earlier stage when rupee was in strength is playing the spoil spot of many companies in these days.This sharp crash in rupee value force them to pay back huge extra amount to settle the debt  which is beyond the ability of many companies .What I mean is, before selecting a company for investment based on ‘weak rupee ‘ theme we should also check the size of  obligation in foreign currency  and their ability to repay it .Normally IT and Pharma companies are first catching the attention during a weak rupee scenario. Major IT  companies are debt free  and immune from this threat.But many companies in this sector heavily depending non US countries mainly Europe for their business and the early signs of revival is visible only in US economy and no respite for EU countries .Such a situation may offset the possible gains due to weak rupee .More than that the currency hedge adopted by big players may limit their risk as well as gain.In the case of Pharma companies one should analyse the percentage of  export income and import of raw materials to get a clear picture. 
                                                                              Other than these two sectors another one which may benefit from the rupee weakness is rice exporting companies .If the earlier sign of monsoon is any indication ,there is no chances for any change in export policy of rice in this year.If it is the case ,companies from this sector may immensely benefit due to the current scenario.We should also watch the price trend of offerings  by other major rice producers in the world market to get a fair picture.Stock price of  companies  from this sector started to show some firmness in last few sessions but they are still at the lower level if we take a ten year statistics. Many of these companies  reported good numbers even in the  latest March quarter itself .Lakshmi Energy and Foods,Kohinoor Foods,KRBL,REI Agro,LT Foods ( Daawat)..etc are the major  listed players in this sector.I expect some out performance of companies from this sector in the ongoing FY...

30 comments :

  1. Hello VP Sir,

    Thank you for the picks. How do you see government quantitative control over the rice products to impact these companies?

    ReplyDelete
  2. Not expecting any tight control in this year if monsoon is OK .Moreover many of these companies are in basmati exports .

    ReplyDelete
  3. VP Sir! A very important request. What are your thoughts on Apollo Tyres' acquisition of Cooper. Its a plain LBO and one of the few transactions of its kind. In my opinion, because people in India are unaware of the concept of LBO, the stock got hammered. What are your thoughts on the company post acquisition and what do you think of Apollo's management. Thanks!

    ReplyDelete
    Replies
    1. I think there was an over reaction in price movement

      Delete
  4. Dear VP,

    Any reason why GPIL is falling , inspite of good results ?

    Best Regards,
    Shankar.

    ReplyDelete
    Replies
    1. I don't think there is any specific problem to GPIL .Not this alone many stocks like Tata Steel,Jindal Steel ..etc are trading near to their multi year low.

      Delete
  5. Dear VP sir, which automobile company will you recommend to buy in current market scenario for long term?
    Pls reply sir.

    - Amit

    ReplyDelete
    Replies
    1. M&M is better placed.If you are looking for long term with higher level of risk ,SML Isuzu is a good one.

      Delete
  6. sir,
    As strong monsoon progressing, cement sector face a less favorable situation. Is it wise to shift from mangalam cement to other sector cos u mentioned?

    ReplyDelete
    Replies
    1. Extented monsoon is negative for cement sector .If you are looking for short-medium term , may consider a shift either to Rallis or United Phos.

      Delete
  7. Sir why sequent Scientific promoters bought shares at around 172 when it is cheaply available in the market?

    ReplyDelete
    Replies
    1. Dear Sourabh

      Increasing stake is not the only purpose of share purchase by promoters.They are bringing more money to the company for further expansion. If they purchase shares from open market , money will go to the pocket of Sellers and not to the company

      Delete
  8. can u plz shad light on mahindra ugine plz

    ReplyDelete
    Replies
    1. Nows is already in the public domain.

      Delete
  9. Dear sir,
    Good evenining
    I have Mangalam cement(-25%), Orient bell (-30%), Granules(-13%), & va tech wabag (-12%), in my porfolio, What is your advice sir, shall i hold simply or shall i accumulate further to average, kindly give your precious views sir.

    D.Sathishkumar

    ReplyDelete
  10. Dear Satish

    I don't think the promoters of any of these cos are fraud or so.Common issue to three of these, except Granules is the lower growth rate of constuction and engineering industry .This is expected to reverse once there is some moderation in Interest rate.

    ReplyDelete
  11. Hi VP
    I have got some amount of EON electric is it a time to add to it? Also has SEBI lifted the ban on it due to very limited liquidity?

    ReplyDelete
    Replies
    1. Nobody banned EON Electric ,stock is trading in PCA

      Delete
  12. Dear sir,

    Your views about Talwalkars gym, & speciality restaurant, gruh finance at current cmp is it a buy...

    D.sathishkumar

    ReplyDelete
    Replies
    1. First two are are consumer spending based themes and such cos will show good performance when there is enough money in the pocket of people and not at the time of financial crisis.One may SIP with long term view.Not tracking Gruh Finance

      Delete
  13. Hi VP,

    Vadilal is currently trading in 160's? Does its summer season specific product portfolio restrict its positive movement in other seasons? Are you still positive on it going forward?

    Thanks.

    ReplyDelete
    Replies
    1. Early and extented monsoon may reduce the sale of Ice cream companies.

      Delete
  14. A quick question regarding the JV with Omnichem. While I understand that civil works,etc are close to completion,it looks like it is going to be a private company( http://www.newkerala.com/news/newsplus/worldnews-91537.html)

    I even saw an ad for a company sec ( http://commerceduniya.com/2012/11/15/fresher-company-secretary-required-in-granules-omnichem-private-limited)

    My question here is: when this JV is commercialized, will income from operations reflect in the statements of Granules India ( in which I am an investor) ?

    How will investors profit from this venture which is a private concern?

    ReplyDelete
  15. Hello VP Sir,

    I am a small investor. How can I get access to analyst conference calls that companies conduct periodically? Somehow can't find calls of all companies on their website.

    ReplyDelete
    Replies
    1. Any investor can participate in concall by dialing the provided nos.

      Delete
  16. Dear Sir, whats your view on L&T Finance and MCX for long term investment?

    ReplyDelete
    Replies
    1. Positive on L&T finance for long term ,not tracking MCX

      Delete
  17. Dear value pick

    i shall refine my question,can you suggest from your last one year recommended stocks,stocks at current price having intrisic value to be bought at evry dip nowonwards

    please suggest such stocks

    ReplyDelete
    Replies
    1. Bit busy now related with PCA issue,shall do it once time permits.

      Delete

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