Slowdown in Investments

An article titled Where have all the Investments Gone by Mahesh Vyas in FE has some very interesting and worrying data. Some excerpts:

CMIE’s CapEx database has thrown up three disturbing signals. The first is that the pace of announcement of new investments has fallen substantially. New investment announcements amounted to R2.63 trillion in the quarter ended March, 2011. This was lower than the R2.92 trillion in the preceding quarter, which, in turn, was lower than the R3.57 trillion worth of new announcements made in the earlier quarter. The average value of new investment announcements in the past three quarters, at about R3 trillion per quarter is nearly half the R5.8 trillion per quarter average in the preceding three quarters.

The total new investments announced in 2010-11 were lower than in 2009-10. This, and the persistence in the fall in quarterly new investment announcements, indicates a possible slowing down….

 

 

 

 

 

 

 

 

Sharply polarised FY11, Investment theme gets dumped

Index return in FY11

The table shows the returns various indices made in FY11 (1 Apr 2010 to 31 March 2011). Note the humongous difference between Nifty and NSE Midcap – a mind boggling 16%.

In sectors, clearly sectors related to investments got dumped, while consumption and export themes did well. The UPA government is hellbent on driving consumption thru large fiscal deficits, while capex goes nowhere. This isnt good. No wonder we have no control on inflation.

Realty is one amazing sector – real estate companies raised equity early in FY11, promptly rigged product prices, saw demand plunge, and underperformed.

Power sector JVs

 

JVs in the BTG space

 The emerging battle lines in the power sector. Some of these will try to compete with BHEL and L&T. 

The BGR Hitachi JV status remains unclear to us. Some media reports in May said the deal was signed. Some other reports say the two companies are still in discussion and the deal will be signed by July. Even in Oct09, a series of stories appeared saying a deal with Hitachi was being signed ‘soon’.

While the stock market is going ga-ga over BGR’s prospects in the power BTG space, some industry sources we have been checking with are not so enamoured by the company.

Construction equipment market

Construction Equipment Market

Data from a corporate PPT, tho the source is what looks like some research outfit.

Lot of action in backhoe loader market. Volvo, Escorts and BEML have entered the market this year. Mahindra will enter the market in 2011. JCB dominates the market with something like 75% market share. And it is a big market, around Rs 3000 crore, as per this table. JCB in India has annual revenues around Rs 3000 crore, could be more now.

Stock Idea: Saraswati Ind Syndicate

The latest stock idea on www.wisdomsmith.com

Saraswati Industrial Syndicate (SISL) is a well run company, remarkably low profile for its size. For the year ended FY09 (year ends in Sep 09), it registered a consolidated turnover of over Rs 2100 crore, and a net profit of Rs 101 crore.

For the detailed note, try …

http://www.wisdomsmith.com/ws/views/Saraswati_Ind_Syndicate:_An_emerging_capital_goods_major

or

http://www.wisdomsmith.com/ws/company/Saraswati_Ind_Syndicate