Category: Observations

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Observations

N Jayakumar of Prime Securities is in trouble

On Friday, ET carried a report which said

 

The National Stock Exchange, India’s largest bourse, has withheld payout to Mumbaibased stockbroker Prime Securities. Three persons familiar with the development told ET that the exchange and the capital market regulator are investigating unusual trades handled by the broker in shares of Gitanjali Gems.

Prime Securities, headed by N Jayakumar, owes more than Rs 80-100 crore to NSE in the equity derivatives segment, said a Sebi source. The exchange is, in turn, holding back payout to Prime and a few other traders and members who are believed to have dealt with Prime. The exchange authorities and Sebi are probing whether Prime was linked to any price manipulation in the spot and derivatives markets.

“There is a fear that Prime may default on its payments, which is why NSE has been holding back on payments that are due to some of Prime’s clients,” said a person. The stockbroker has moved the Securities Appellate Tribunal against NSE.

 

At the risk of stating the obvious, this implies that securities held by Prime Securities/N Jayakumar will be under pressure.

The group portfolio of significant holdings as on March 31, 2013 is as follows:

Comp Name Entity # of Shares %
Aanjaneya Lifecare Prime Broking Company (India) Ltd 1125183 8.1
EL Forge N Jayakumar 289435 1.42
Gitanjali Gems Prime Broking Company India Ltd 1702269 1.85
Greycells Education Prime Broking Company (India) Ltd 192101 3.2
Greycells Education Prime Securities Ltd 79000 1.31
Hind Tin Works N Jayakumar 237500 2.28
Hitech Plast Madhu Vadera Jayakumar 250000 1.9
Logix Microsystems Prime Securities Ltd 200696 1.66
Logix Microsystems N Jayakumar 255000 2.11
Prime Securities Prime Broking Company India 1038585 3.92

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Categories
Observations

Naren of ICICI Pru joins the chorus

I had blogged earlier about how the next sector to be touted will be those of export oriented companies.

Sure enough, S Naren of ICICI Pru made the following statement”We have always believed in exports as a theme.We took this call over the past two years and could
consider adding to exporters of technology, pharmaceuticals,
auto parts and textile”, he said, without naming any companies.

Watch out for more and more fund managers join the chorus.

Categories
Observations

The drumbeat goes.. Exports,Exports,Exports

An peculiar aspect of the Indian equity market is the herd like behavior of its brokerage community.One a meme (idea) takes root it quickly spreads and soon everybody are chasing the same stocks

To illustrate, in 1999-2000 , the IT sector was the meme.All brokerages recommended IT stocks, their clients bought it,so the stocks rose which led to recommendation upgrades and so on till the bubble burst.

The same cycle played out in various sectors over the years…telecom, realty, infra and so on

Recent memes that have done well in the last one year or so are FMCGs, Private banks  etc

Now the meme that is fast gaining currency are Export Oriented Companies.

Like all memes, the underlying premise is simple and sound.Our dear Rupee has collapsed from around 45 Rs/$ to around 60 Rs/$. So export oriented companies should be raking in the moolah and laughing all the way to the bank.

Watch out as this idea spreads and becomes popular and brokerages start recommending names for this play.

How to play this game?Soros would have climbed on to the bandwagon, rode the wave up and got out before the collapse.

But then not all of us are destined to be a Soros !

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Nifty Observations

What is the Nifty Price to Book telling us

Jayant Manglik of Religare Securities recently wrote an article where he predicts that Nifty will cross 6600 by Dec this year.In the article, he states “our valuations are reasonable. Nifty price to book is at multi-year lows,”

I thought it would be interesting to see how the Nifty P/B fared over the years:

The current P/B of 3.07 is is certainly higher than the 5 year low hit on 27 Oct, 2008 when it was 2.12.The current P/B is however is slightly lower than the 5 Year average of 3.28 and 5 Year Median of 3.3

 

 

Categories
Observations Realty RealtyStocks

Why analyzing Indian realty stocks is a waste of time

I came across this article where a brokerage firm does a “Realty Stock Check”-which realty stocks to buy/hold.Found it fairly amusing that there was no “sell” in the title.

Brokerages tend to treat the realty business like any other business.But do they seriously believe that the balance sheet/p&l statements of a realtor reflect the true state of affairs?

Cold hard cash is the mother’s milk which runs the realty business in India.You need cash to buy the land (no land owner will settle for 100% white), you need cash to pay off the contractors,you need cash to manage the politicians, you need cash to manage the officials etc

In Mumbai, builders routinely pay a couple of crores even before construction starts.

When such a large part of the realty business is done off the books,then does looking at the balance sheet etc make any sense?

Realty stocks can be a good medium for speculation/punting.But if you want to make real money from realty, forget the stock and research the hard asset.