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.

Steel prices bottom out

So says a recent Moody’s documents. The above chart is HRC prices from China.

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Hindalco isn’t all that hot

Hindalco is generally regarded as amongst India’s topmost metal companies alongwith Tisco. In aluminium it is amongst top ten companies in the worl in terms of cost competitiveness. India has ample bauxite, and Hindalco makes its own power very cheaply for its Al plant.

However, when u look at what its done in copper, one has trouble reconciling whether it is the same company we are talking about. Nothing has gone right for Hindalco in copper in last 2 years. Cost of its slip ups – Rs 1000 crore, or around $250mn. Thats not a small amount by any standards. It has 3 copper smelters, almost all of them have given Hindalco trouble in the last 2-3 years. Compare the profits it has made from copper to what Sterlite has done, and the difference is stark.

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