morning thoughts...
On 7th september we published and posted an article clearly stating that markets have bottomed out when nifty was at 7600 levels and bank nifty below 16000 with targets of 8350 and 18000 plus , our logical targets of the same gets achieved - one can go to that post and read the same
India Inc continues to be stumped by piling debt, the debt levels of the top 10 business groups in India has risen seven folds in the past eight years. These conglomerates include the likes of Lanco Group, Jaypee Group, GMR Group, Videocon Group, GVK Group, Essar Group, Adani Group, Reliance Group, JSW Group and Vedanta Group.
The business groups have been hit badly by the economic recession and the delay in acquiring requisite government approvals for land acquisition and fuel procurement. This in turn has put a large number of their infrastructure projects on the backburner constraining cash flows and impeding their debt servicing abilities. As a result their combined interest coverage ratio has slumped to 0.8 times in FY15.
The combined loans of these business groups constitute 12% of the total loans in the banking system. Although some business groups have reduced capital expenditure and are also selling assets to raise funds but this has not helped in bringing down debt levels due to ongoing projects as well as operating losses from cost overruns. Therefore, debt of these business groups is being increasingly downgraded by rating agencies. Four of the business groups, Jaypee, Lanco, Essar and GMR have around 40-65% of their group debt downgraded to default category by rating agencies.
As large business groups struggle with stressed balance sheets coupled with growing incidence of downgrades, banks are also likely to face the heat of increased slippages into bad loans. As per the report, the share of stressed loans of the top ten highly leveraged business groups constitutes 4.5% of system loans. State owned banks that have huge exposure to corporate lending will be the worst affected as they continue to battle poor capital adequacy and falling profitability.
Crude oil prices plunged to record lows this year. While this has been a blessing in disguise for emerging economies such as India, fuel producing nations have been caught on the wrong side of the fence. As per the International Monetary Fund, countries such as Saudi Arabia, Bahrain and Oman in the six-member Gulf Co-operation Council are likely to exhaust their buffer of financial assets within five years as they run huge fiscal deficits on account of large spending.
Cashing in on the black gold crude, Saudi Arabia has in the past decade built large dollar reserves with its debt falling to less than 2% of GDP in 2014. However, the slump in crude price to below USD$ 50 a barrel and continued spending by the Arab nation is expected to push its budget deficit to over 20% of the GDP in 2015.
Factors such as fighting a war in Yemen and measures for avoiding stringent economic policies to ward off political or social unrest have added on to its woes. Moreover in a bid to protect market share, Saudi Arabia has been boosting production even in the face of weak crude prices that have further strained its cash flows. If reports are to be believed then Saudi Arabia’s net foreign assets fell to the lowest level in August 2015.
Smaller oil producing nations such as Oman and Bahrain are likely to be more severely impacted by the rout in crude price with their fiscal deficits swelling to more than 14% of the GDP in 2015. Therefore the empire built on the riches from crude oil faces a threat of crumbling much sooner unless adequate steps are taken to curtail on huge spending by the oil.
The coming session is likely to be volatile with some profit booking at higher levels and buying at lower levels.
Monday wealth gains
Buy nifty and bank nifty on dips or panics
Buy mphasis bfl , bhel
Buy bajaj auto 2500 ca, bharti 360 ca
Buy gold , nickel , crude
Sell iifl , bob
On 7th september we published and posted an article clearly stating that markets have bottomed out when nifty was at 7600 levels and bank nifty below 16000 with targets of 8350 and 18000 plus , our logical targets of the same gets achieved - one can go to that post and read the same
India Inc continues to be stumped by piling debt, the debt levels of the top 10 business groups in India has risen seven folds in the past eight years. These conglomerates include the likes of Lanco Group, Jaypee Group, GMR Group, Videocon Group, GVK Group, Essar Group, Adani Group, Reliance Group, JSW Group and Vedanta Group.
The business groups have been hit badly by the economic recession and the delay in acquiring requisite government approvals for land acquisition and fuel procurement. This in turn has put a large number of their infrastructure projects on the backburner constraining cash flows and impeding their debt servicing abilities. As a result their combined interest coverage ratio has slumped to 0.8 times in FY15.
The combined loans of these business groups constitute 12% of the total loans in the banking system. Although some business groups have reduced capital expenditure and are also selling assets to raise funds but this has not helped in bringing down debt levels due to ongoing projects as well as operating losses from cost overruns. Therefore, debt of these business groups is being increasingly downgraded by rating agencies. Four of the business groups, Jaypee, Lanco, Essar and GMR have around 40-65% of their group debt downgraded to default category by rating agencies.
As large business groups struggle with stressed balance sheets coupled with growing incidence of downgrades, banks are also likely to face the heat of increased slippages into bad loans. As per the report, the share of stressed loans of the top ten highly leveraged business groups constitutes 4.5% of system loans. State owned banks that have huge exposure to corporate lending will be the worst affected as they continue to battle poor capital adequacy and falling profitability.
Crude oil prices plunged to record lows this year. While this has been a blessing in disguise for emerging economies such as India, fuel producing nations have been caught on the wrong side of the fence. As per the International Monetary Fund, countries such as Saudi Arabia, Bahrain and Oman in the six-member Gulf Co-operation Council are likely to exhaust their buffer of financial assets within five years as they run huge fiscal deficits on account of large spending.
Cashing in on the black gold crude, Saudi Arabia has in the past decade built large dollar reserves with its debt falling to less than 2% of GDP in 2014. However, the slump in crude price to below USD$ 50 a barrel and continued spending by the Arab nation is expected to push its budget deficit to over 20% of the GDP in 2015.
Factors such as fighting a war in Yemen and measures for avoiding stringent economic policies to ward off political or social unrest have added on to its woes. Moreover in a bid to protect market share, Saudi Arabia has been boosting production even in the face of weak crude prices that have further strained its cash flows. If reports are to be believed then Saudi Arabia’s net foreign assets fell to the lowest level in August 2015.
Smaller oil producing nations such as Oman and Bahrain are likely to be more severely impacted by the rout in crude price with their fiscal deficits swelling to more than 14% of the GDP in 2015. Therefore the empire built on the riches from crude oil faces a threat of crumbling much sooner unless adequate steps are taken to curtail on huge spending by the oil.
The coming session is likely to be volatile with some profit booking at higher levels and buying at lower levels.
Monday wealth gains
Buy nifty and bank nifty on dips or panics
Buy mphasis bfl , bhel
Buy bajaj auto 2500 ca, bharti 360 ca
Buy gold , nickel , crude
Sell iifl , bob
