Nifty - change in consituents

India's major equity index has seen change in weightage since last year. First of all a summary of whats added and whats removed in last 1 year:

• on 10-September-2008 Reliance Power added and Dr Reddys Laboratories Ltd removed 
  
• on 12-January-2009 Reliance Capital Ltd replaced Satyam Computer Services Ltd
  

Over the period we saw weightage of Giant PSUs increasing on Nifty. 

• NTPC increased from 5.62% to 8.19% now, increase of 2.58%! 
  
• ONGC increased from 7.83% to 9.10% now, increase of 1.27%! 
  
• Similary Infosys weightage increased by 1.26%, ITC by 1.15%, Hindustan Unilever by 1.03% and Reliance Industries by 1.01%.
  

On the downside we see DLF, Reliance coomunications, Unitech and ICICI losing their weights on Nifty:

• DLF decreased from 3.93% to 1.54% now, decrease of 2.39%!
  
• Reliance communication decreased from 3.79% to 1.82% now, decrease of 1.97%!
  
• Unitech weightage decreased by 1.29%, ICICI Bank by 1.17% and L&T by 1.1%.
  

This chart shows how weights have changed sectorwise:

This shows the current weights in NIFTY:

India Inflation at all time Low

Wholesale price index for the week ending 7th March fell more than expected to 226.7 pulling inflation down to 0.44%, an all time low. Previous all time low was 1.13% in February 2002. Very soon inflation will fall into negative territory now. 

Market Summary (comparing 52 week High-Low)

I did this analysis on 500 stocks in BSE-500 Index. I wanted to check stocks which are farthest and nearest to their 52-weeks Low and 52-weeks high. 

(This is the first time I tried this, so please let me know if there is any mistake and pour in your suggestions and comments)

1) These are the names which are farthest from their 52 week high. Note that these all reached their highs in March-May '08. They have almost lost their entire wealth with Vishal Retail losing as much as 97%. Another known name in the list is Maytas! 

Name	Price	Year High	Year High Date	Distance from High
Vishal Retail Ltd	25.65	879.95	4/1/2008	97.08%
Prajay Engineers Syndicate Ltd	13.15	319.9	3/26/2008	95.89%
Maytas Infra Ltd	33.95	750	4/2/2008	95.47%
B.L.Kashyap & Sons Ltd	89.55	1750	5/2/2008	94.88%
Cals Refineries Ltd	0.36	6.7	5/30/2008	94.63%

2) These are the names which are closest to their 52 week high. Note that Hero Honda and Akruti City are reaching highs this week. Important here is Akruti City which has doubtfully risen almost 84% from 858 to 1577.8 in first 10 days of March. 

Name	Price	Year High	Year High Date	Distance from High
Power Grid Corporation of India Ltd	96.3	108.45	5/5/2008	11.2%
GlaxoSmithkline Pharmaceutical Ltd	1155.85	1233.7	2/18/2009	6.31%
Colgate Palmolive (India) Ltd	448.35	473.8	3/2/2009	5.37%
Akruti City Ltd	1577.8	1610	3/17/2009	2%
Hero Honda Motors Ltd	974.35	985	3/13/2009	1.081%

3) Here are the names which are now closest to their 52-weeks low. But also note here that these names reached their 52-weeks low very recently. 

Name	Price	Year Low	Year Low Date	Distance from Low
Greaves Cotton Ltd	50.4	50.1	3/17/2009	0.59%
Future Capital Holding Ltd	93.7	92.9	3/12/2009	0.85%
Raymond Ltd	70.75	70.05	3/9/2009	0.99%
Allied Digital Services Ltd	147.8	146.05	3/12/2009	1.19%
Vishal Retail Ltd	25.65	25.25	3/17/2009	1.58%
Jubilant Organosys Ltd	86.4	85	3/17/2009	1.64%
Apollo Hospitals Enterprise Ltd	356.45	350	3/17/2009	1.84%
Mindtree Ltd	190.6	187.1	3/13/2009	1.87%
Alok Industries Ltd	11.55	11.33	3/17/2009	1.94%

4) These are the names which are farthest from their 52 week low. 

Name	Price	Year Low	Year Low Date	Distance from Low
Matrix Laboratories Ltd	97.75	48	11/25/2008	103.65%
Dish TV India Ltd	24.6	11.75	10/27/2008	109.36%
Jindal Steel & Power Ltd	1101	517.3	10/27/2008	112.84%
National Aluminium Co Ltd	230.7	108.35	10/27/2008	112.92%
Birla Corp Ltd	170	71	10/27/2008	139.44%
AllCargo Global Logistics Ltd	694.65	271.85	10/31/2008	155.53%
Spice Communications Ltd	63.05	23.25	3/24/2008	171.12%
Akruti City Ltd	1577.8	550.05	1/15/2009	186.85%
Satyam Computer Services Ltd	43.55	11.5	1/9/2009	278.69%

Chart presenting number of stocks and their distance to 52 week low.

Chart presenting number of stocks and their distance to 52 week high.

Declining Inflation

Inflation for the latest week came down to 2.43%. It is little better than I estimated below. But still if WPI number doesn't improve in the coming week then most likely inflation will dip below 0 by March end as I have calculated and shown earlier. Current level of inflation is lowest since June 2002. This is attributed to the record fall in the factory output. 

Now I present the historical graph of Inflation in India since 1995. 

The highlights of Inflation in India since 1995:

1) Lowest inflation was in February 2002, when inflation was at 1.13%.

2) Peak of 2000 can be attributed to the .com bubble when IT companies flooded India.

3) In February 2008, Inflation was at peak of 12.91%. 

Please give suggestions, analysis, information if you have on this topic. 

Easing Inflation

Continuing my previous blog on inflation below. Here is current inflation graph.

We see a steep drop in inflation resulting out of falling crude price which results in lowering price of commodities. Series duty cuts again eased the inflation. It is expected that by March end inflation could come to Zero!

Here is the calculation how inflation can very well cross 0. This is the inflation calculation for last month. Our WPI is decreasing constantly leading to lowering of inflation. WPI till 21/02/2009 is known. Now lets assume that WPI for following weeks remain constant at 227.6 (as it is constantly decreasing so in best case assume it doesn't decrease). So we see inflation for first week of March would be 2.38% and 0.84% for the second week of march. This is because there is a small jump in the inflation same time last year. So even if current WPI remains constant but when it is compared to a higher number the inflation figure comes down. And hence we very well see negative inflation by March end. This is the best case scenario, inflation can get to zero much before if WPI keeps falling.

Date	WPI	Date	WPI	Inflation
07/02/2009	228	09/02/2008	219.4	3.92%
14/02/2009	227.8	16/02/2008	220.4	3.36%
21/02/2009	227.6	23/02/2008	220.9	3.03%
	227.6	01/03/2008	222.3	2.38%
	227.6	08/03/2008	225.7	0.84%
	227.6	15/03/2008	226.4	0.53%
	227.6	22/03/2008	226.6	0.44%
	227.6	29/03/2008	226.7	0.4%
	227.6	05/04/2008	227.8	-0.09%
	227.6	12/04/2008	228.2	-0.26%

In my next blog I will explain impact of inflation less than 0 called 'Deflation'.

Another Stimulus Package: Rate cuts

Reserve Bank of India cut Repo and Reverse Repo Rate by 50 bps. Repo rate, the rate at which central bank (RBI) lends to banks is now at 5%. Reverse Repo is the rate at which central bank takes money from banks is now at 3.5%. This was very much expected for quite some time with growth as a key issue and inflation quite low (As Rate cuts can take inflation higher, but inflation is already at a low of 3.2% now) RBI cut rates to infuse more credit. Banks are now expected to cut lending rates. Though there is no change to CRR, as RBI believes there is enough liquidity in the system.

This Rate cut is done after worse than expected figures across the globe. The global cues for this were:

1. US real GDP contracted sharply at an annualised rate of 6.2% in the fourth quarter of 2008
2. Unemployment rate in the US has moved up to 7.6%
3. The real GDP in the euro area also declined by 1.5% in the fourth quarter of 2008
4. Japanese exports fell by 45.7% in January 2009
5. Japanese economy also contracted sharply by 3.3% in the fourth quarter of 2008

In short the major effect of these cuts could be:

1. Cheaper loans and lower deposit rates by banks
2. Better GDP figures for the 4th quarter
3. Increase in inflation by small amount
4. Weakening INR against USD

There have been series of rate cuts since Dec '08:

Reverse repo rate (%)
Jun 8 ‘06	5.75
Jul 25 ‘06	6
Dec 8 ‘08	5
Jan 2 ‘09	4
Mar 4 ‘09	3.5

Repo rate (%)
Oct 20 ‘08	8
Nov 3 ‘08	7.5
Dec 8 ’08	6.5
Jan 2 ‘09	5.5
Mar 4 ‘09	5

INR, Crude

INR 

1) INR which was getting stronger at 40 at this time last year is now struggling at 52 and some says the situation could get worse and INR could reach 55. 

2) This benefits exporters as they are paid in $ so they got more INR for their products.

3) This also favors IT industry as most of the out sourced work is paid in $. But IT companies hedge themselves against rising INR by buying 6 months to 12 months future. So this fall of INR might not help them. 

4) Also in the current time of global recession exports are already low and Obama's protectionist policy is already affecting Indian IT. 

5) Currently INR bid/ask = 51.6/51.62

6) The Indian finance ministry has begun a public competition to select a design for the symbol of the rupee! 

http://news.bbc.co.uk/2/hi/south_asia/7925248.stm

This is historical performance of Indian Rupee: 

Crude Oil

1) Crude was falling freely for quite some time. It now shows some sign of improvement after production cut by OPEC. 

2) Reached 47.07 a barrel from 40.15 a barrel in a week. 

3) 1 Barrel is 42 Gallons or 159 Lts (US liquid Gallon is equal to 3.7854 Lts)

This is historical performance of Crude Oil:

ADR

What is an ADR / GDR?

Indian companies issue shares which are traded on Indian stock exchanges like BSE, NSE etc. These shares are sometimes also listed and traded on foreign stock exchanges like NYSE (New York Stock Exchange) or NASDAQ (National Association of Securities Dealers Automated Quotation).

The company deposits a large number of its shares with a bank located in the country where it wants to list indirectly. The bank issues receipts against these shares, each receipt having a fixed number of shares as an underlying (Usually 2 or 4).

These receipts are then sold to the people of this foreign country (and anyone who is allowed to buy shares in that country). These receipts are listed on the stock exchanges. They behave exactly like regular stocks – their prices fluctuate depending on their demand and supply, and depending on the fundamentals of the underlying company. These receipts, which are traded like ordinary stocks, are called Depository Receipts.

Following are the major Indian ADRs:
Cognizant CTSH
HDFC Bank Ltd. HDB
ICICI Bank Ltd. IBN
iGATE Corp. IGTE
Morgan India Investment Fund . IIF
Infosys Technologies Ltd. INFY
Mahanagar Telecom MTE
Patni Computer PTI
Dr. Reddy's RDY
Rediff.com REDF
Satyam SAY
Sify Ltd. SIFY
Syntel Inc. SYNT
Tata Motors Ltd. TTM
Videsh Sanchar Nigam VSL
Wipro Ltd. WIT
WNS Ltd. WNS
The India Fund Inc. IFN
Sterlite Industries India Ltd. SLT