Week In a Nutshell (WIN) - Week ending July 15th 2011
Synopsis of the Week
Markets were down 1.5% for the week with fears of Europe emanating again. The much touted cabinet reshuffle didn't cheer nor disappoint the markets. The onus now is on action and intent to action won't do anymore. Infosys had another quarter of "inline" performance and a weak guidance pushing the sentiments on the same down. TCS on the other hand had a PICTURE PERFECT quarter. The two companies seem to be working in different industries. TCS has now outperformed Infosys by a staggering 125% over the last 2 years!! With the Infosys management firmly at the oars now, is it time for the tide to turn?
POWER Reforms – Our meeting with TNEB and the recently concluded conclave of Power Ministers is a testament to the fact that the SEB losses is now firmly an issue that the govt. is cognizant of. As they say, the biggest step towards the resolution of a problem is the recognition of the same. We think that the current SEB losses is due to slow pace of capacity addition, no material tariff hikes and inconsistent fund flow from the government. All of the above mentioned are now on "Get it Done" agenda. Brighter days ahead
MINING TAX – The Indian Govt. cannot be left behind to tax natural resource companies as well. A GoM has approved the MMDR bill to usher in profit sharing with the locals. As with every new regulation, a lot of things remain in the grey – Treatment of current efforts, Charge or appropriation?, PBT or PAT? And many more. The uncertainty will remain which is not good for the stock prices.
AUTO DISCOUNTS – With weak sales, high interest rates and increasing slew of model launches, the auto companies have showered discounts to induce purchase. Honda on one of its models is giving a discount of ~20% (Unheard of in India). CY11 continues to be the year of model launches in India. It looks like Maruti maybe going through one its toughest periods – But as with every cycle trough, the upturn may not be far away
Some of the highlights of this edition
ü We own them, we own them not
ü Power Sector Reforms
ü Impact analysis of MMDR
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