Monthly Update From Mansukh (For Private Circulations Only) Issue: November 2012
Indian equity markets made a good bounce back in the passing week and after some initial jitters surged in the second half of the week, recovering more than what they lost in last week, mainly on the back of good global cues and encouraging macro and earnings number. Markets closed lower on only one trading session out of five when RBI in its
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Second Quarter Review of Monetary Policy 2012-13 left key policy rates unchanged, however it slashed CRR by 25 basis points from 4.50% to 4.25% to inject Rs 17,500 crore of primary liquidity into the banking system. Though the central bank's status

quo stance was more or less expected but what spooked the markets was its increase in forecast for the headline WPI inflation for March 2013 to 7.5% from its previously projected 7.0% and simultaneously lowering its economic growth estimate to 5.8 percent for 2012-13, from 6.5 percent projected earlier. Though, the boost also came from the macro front, as the eight core sectors, which occupies 37.9% of weightage in the overall Index of IIP, surged to a seven-month high at 5.1% in September, compared to 2.5% in the September month of the previous fiscal. Not only this, HSBC PMI, a headline index designed to measure the overall health of the manufacturing sector, expanded at steady space of 52.9 in October, slightly higher from September reading of 52.8.

From the expiry perspective, market wide rollover of 59.45% was observed, which was lower than the three month average of 63.06% while Nifty rollovers were at 52.15%, lower than three month average of 53.28%. Sectorally, capital goods, power and telecom space witnessed high rollover of positions while infrastructure, oil & gas and media stocks observed relatively low rolls into the November series.

The US markets got some relief in the passing week supported by a string of positive data from the region which buoyed hopes that the global economic recovery remains on track. The markets made a historic two-day closure during the week as Hurricane Sandy prompted shutdown of the New York Stock Exchange, with New York City and the East Coast hit hard by the storm. Meanwhile, Federal Reserve Governor and the president of the Atlanta Fed, Dennis Lockhart stated that the Federal Reserve will continue its bond-buying program to keep interest rates near historic lows until the US labor market returns to healthy levels. For the upcoming sessions investors will be awaiting India's trade deficit data for the month of October. Technically 5850-5870 could be the crucial resistance zone in the upcoming sessions where we might see some sharp profit booking scenario. On the flip side 5340-5360 may provide materialistic cushions at lower levels. Wishing you with Wealth & Prosperity, as your journey towards greater success, “Happy Deepawali”

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The IMF has also revised its evaluation of the possible pace of fiscal tightening in the coming years. Last September, it arbitratored that, in aggregate, advanced G20 governments would stiffen fiscal policy by 1.2% of GDP this year and 1% next, after which austerity would be more or less over. It now thinks this year's cuts have been drastically Iower, but expects the fiscal tightening to be bigger in 2013 and to persist until 2015. The IMF projects a cumulative fiscal contraction in advanced G20 countries during 2013-15 of 2.6% of GDP, compared to only 1% a year ago. When interest rates are already near zero and many governments are tightening fiscal policy simultaneously, hopes that fiscal contraction could lead to an expansion in activity, as a recovery in private sector demand outweighs the fiscal tightening, always seemed far-fetched. Although Asia will not be immune from the continuing crisis in the euro-zone and weak global demand, healthy fundamentals and plenty of scope for policy easing mean growth should hold up relatively well over the next couple of years. Nevertheless, the risks are skewed to the downside. Sudden and rapid deterioration of the global economy would hit Asia hard. We expect Asian currencies and equity markets to finish 2013 lower than where they are now. Government bond yields are likely to remain at historically-low levels.

The US Q2 earnings season has already started. The news is likely to be downbeat, with the annual growth rate of profits reportedly expected to be negative for the first time since 2009. In recent months investors have shrugged off this prospect and sought solace in the Fed and the ECB. Granted, macroeconomic profits differ from the earnings reported by companies in the stock market for reasons of accounting treatment, coverage, dilution and taxation. But the growth rates of macroeconomic profits after tax of the US non-financial sector (including foreign earnings retained abroad) and S&P 500 operating earnings per share have still tended to track a similar path historically. Of course, the prospect of a turn in the earnings cycle has not prevented the stock market from climbing by almost another seven percent since the end of the second quarter as investors' appetite for risk


has been kindled by US and European policymakers. But now that expectations of QE3 have been met, even open-ended asset purchases by the Fed may not provide much of an extra boost. Meanwhile, the crisis in the euro-zone is likely to flare up again before too long.

SUPERSTORM SANDY MAY CUT U.S. ECONOMIC GROWTH: According to our estimates the super storm 'Sandy' may cut output in the world's largest economy by more than $20 billion in the fourth quarter. Due to impact of this its fourth quarter growth pace may be seriously shattered to between 1 percent and 1.5 percent. The physical damage wrought by Sandy is poised to exceed $20 billion after the storm slammed into the East Coast, damaging homes and offices and flooding the New York City subway system. The total would include insured losses of about $7 billion to $8 billion. As seen in the charts below Us markets seems to be struggling at current juncture as 13000-12950 could be the crucial support levels. Any drift below these levels may drag spot index towards 12200-12150 in a short span of time where we might see some consolidation.

Source: Reuters India
Prolonging its anti-inflationary stance, Reserve Bank of India (RBI) in second quarter review of monetary policy 2012-13, left its key policy rates, viz. repo and reverse repo, unchanged at 8 per cent and 7 per cent respectively. However, the apex bank, in a much anticipated move, slashed cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.50 per cent to 4.25 per cent, which would inject Rs 17,500 crore of primary liquidity into the banking system. Meanwhile, the marginal standing facility (MSF) rate and the Bank Rate also stand unchanged at 9.0 per cent. The RBI, which disappointed the markets with its decision of not to cut key policy rates in its quarterly monetary policy review and only to go with CRR rate cut of 25 basis points has justified the decision, saying that the liquidity in the system was tightened due to a build-up in government cash balances and festival demand, with the CRR cut the bank intended to pre-empt a prospective tightening of liquidity conditions, thereby keeping liquidity comfortable and supportive of growth.

RBI governor Duvvuri Subbarao said that considering that a rate cut won't help if liquidity is tight and looking at the current balance between growth and inflation risks, it was appropriate to maintain the policy rate where it is, just a little bit above the inflation rate. He further said that even if you have comfortable liquidity and if the rate is very high, it does not help. You have to calibrate both

the reverse repo and the repo rates and the CRR such that transmission takes place and the interest rate is at the correct level given the growth-inflation balance. Talking on inflation, the RBI governor said that it turned up again in September, reflecting the partial pass-through of adjustment of diesel and electricity prices, and elevated inflation in non-food manufactured products. It was, therefore, critical that even as the monetary policy stance shifts further towards addressing growth risks, the objective of containing inflation and anchoring inflation expectations is not de-emphasized. Failing to do Quid pro quo with Finance Ministry, RBI submissively preferred to fight against the inflation monster, which has remained its topmost priority. On Oct 29, Finance Minister P Chidambaram unveiled a five-year road map for fiscal consolidation to promote investments, contain inflation and reduce fiscal deficit to about three percent to take India onto the high growth trajectory.

Meanwhile Disappointing the tactical measures taken by the government to garner more foreign investments for triggering financial health of the nation, the Department of Industrial Policy and Promotion has reported that the foreign FDI in India has dipped by 20% to $2.26 billion in the month of August with respect to same month last year's $2.83 billion worth foreign inflows, while in July month foreign investments were about 60%. However, the centre has expressed hopes that relaxation of investment caps in FDI in multi- brand retail and civil aviation would aid in garnering more investments to the country in the coming months. It also affirmed the significance of foreign investments as India needs fund above $1 trillion over the next five years for its infrastructure developments in sector like ports, airports and highways. The pummeled foreign inflows are likely to weigh on the country's balance of payments (BoP) and could also impact on rupee. The major shares of FDI inflows in the month has reached the sectors like services with $2.28 billion, automobile about $617 million, for construction $601 million and metallurgical by about $595 million. The major contributors to FDI in India are Mauritius with $2.53 billion, Japan with $1.16 billion, the Netherlands with $923 million, the UK with $570 million and Singapore with $961 million. While the foreign inflows for the financial year in 2011-12 was about $36.50 billion, with respect to 2010-11's $19.42 billion and 2009-10's $25.83 billion.

Source: Reuters India

Cera Sanitaryware is an establish player in the sanitary ware segment in India. It is the third biggest company in the structured sector with over 18% market share. Cera has been persistently moving towards its undertaking of becoming a total bathroom solution company. It is the first sanitaryware company to use Natural gas. The company has registered sharp numbers for the quarter ending September 2012. The company has achieved yet again impressive growth with a figure of Rs. 111.38 Cr. being 52% smart increase in top line as against Rs.73.29 crores in the like quarter last year. Operating profit skyrocketed about 58% at Rs.18.43 crore vis-a-vis Rs.11.70 crores y-o-y. The increase in business was due to increased demand. Despite the market vagaries, the company has registered a 44 per cent rise in its profit after tax (PAT) at Rs 11.03 crore for the quarter ended 30 September, 2012 as compared with Rs.7.65 crores in Q2FY12. EPS stood at Rs.8.72 as against Rs.6.05 clocked in quarter ended September 2011.

On technical perspective, after taking significant correction from the highs of Rs 400, scrip has shown crucial resistance below Rs 340 level. At current juncture we believe scrip has the potential to recover from the current level as its technical indicators i.e. RSI and MACD also suggest some technical pull back in near term. Hence we recommended 'Buy' in this stock.



monthly research report
CERA 360-370 325 405 432 1 Months

Venus Remedies is a pharmaceutical manufacturing company. The company provides formulations in area of antibiotics and oncological therapeutics. The company has two manufacturing facilities located in India and Germany. It manufactures Oncological and Cefelosporine Injectable products. The promoters holding in the company stood at 34.21% while Institutions and Non-Institutions held 14.43% and 51.36% respectively. Venus Remedies has received its first patent from Mexico for 'Vancoplus', a novel antibiotic formulation to Combat MRSA infections. The patent has been granted from the Mexico Patent office and is valid till February 2026. Receiving a paten grant from Mexico for the research product Vancoplus at this point in time when the frequency of MRSA strains is growing high (50-85%) in Mexico, is a great achievement for the company. Vancoplus will prove to be the best known remedy to control MRSA, VRSA and multi-drug resistant bacteria in a situation wherein around 3 to 6 percent of the population carries the community form of MRSA.

On technical viewpoint, stock has shown consolidation pattern around Rs 270-280 and currently in upward bias. Moreover it's RSI and other technical indicators also displaying some buying opportunities in near term. Hence investors are advised to BUY this stock for a price target of Rs 330-350 in near term.



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VENUSREM 280-290 260 330 350 1 Months
   REC Ltd Target Price:` 268

Rural Electrification Corporation Ltd (REC), a PSU Enterprise provides loan assistance to State Electricity Boards (SEBs), State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them. REC operates through its Corporate Office located at New Delhi and 17 field units (Project Offices), the Project Offices in the States coordinate the programmes of REC's financing with the concerned SEBs/State Power Utilities and facilitate in formulation of schemes, loan sanction and disbursement and implementation of schemes by the concerned SEBs/State Power Utilities.

Financials: In the last five years (FY07-FY12) the Top Line of REC has phenomenally grown at CAGR of 31.09%, Operating Profit of the company grew at 31.5% while PAT also grew at impressive CAGR of 33.60% during the same period. In FY12, the Net Sales of REC grew by 26.58% to Rs 10264.02 crore over FY11, Operating Profit grew 23.6% to Rs 10003.45 crore while owing to loss on foreign exchange of Rs 52.55 crore, PAT increased only 9.6% to Rs 2817.03 crore for the same period. In Q1FY13, The Net Sales of the company jumped 29.6% compare to Q1FY12, Operating Profit grew 31.10% whereas PAT surged 32.40% compare to corresponding quarter of the last year. OPM of the company for the same period turned down 113bps to 99.60% while PAT margin improved by 63bps to 29.26%.

Huge financing opportunities in the power sector of India ...
India has the fifth largest power generation capacity in the world. The top four countries, viz., US, Japan, China and Russia together consume about 49% cent of the total power generated globally. As on March 31, 2012, the total installed generation capacity in the India stood at 1,99,877 MW with share of 42.99% in the State Sector, 29.86% in the Central Sector and 27.15% in the Private Sector. In order to maintain a sustained economic growth of 8% power generation capacity needs to reach around 800GW by 2032. Therefore, to support economic growth Planning Commission has projected that about 88.4 GW of generation capacity has to be added by 2017 in the XII Five Year Plan and the investment under this plan for power infrastructure targeted at Rs. 16 trillion, which provides huge financing opportunities in the power sector.

IFC Status gives a Competitive Advantage over Competitors…

REC has been classified as an Infrastructure Finance Company (IFC) by RBI, which provides it a better position and more flexibility in its business operations. It has enhanced RECs ability to raise funds on a cost-competitive basis and also increased its lending exposures to individual entities, corporations and groups etc. IFCs are also eligible to avail ECBs up to US$500 million in each fiscal year subject to maximum of 50% of their owned funds, from recognized lenders. Furthermore, being a government finance company it gets about 90% of its money from tax-free bonds and taxable bonds and a little bit of financing from financial institutions and banks. Its cost of capital is relatively low, between 8-8.5% and its disbursements are especially to state and central government companies.


Likely to sanction loan amounting Rs 546 billion in FY13…
REC is planning to raise Rs 300 billion crore during the current financial year, 2012-13 and to disburse this amount company has also approved various projects during the June quarter 2012, during the quarter the company sanctioned new projects of Rs 21,789 crore and disbursed Rs. 6864 crore to various power sector borrowers. In fact, REC would sanction loans worth Rs 546 billion during FY13 as the company mentioned the FY13 targets in the MoU signed with the Power Ministry for the next financial year. The targets for sanction and disbursement of loans have been set at Rs 546 billion crore and Rs 273 billion respectively for FY13.

Sustainable Financial Growth with Impressive Assets Quality...
REC has shown a consistent growth in its revenue since last eight quarters, the revenue of REC from Jun-2010 quarter to Jun-2012 gew at CAGR of more than 6%, however despite of high volatility in interest rates on credit company has maintain the bottom line (PAT) growth of over 5% during the same period. Moreover, this company has maintained its crucial margin NIM at 4.5%, which is quite high compared to other banks. With the NPAs of around 0.46% the assets quality of the company is also encouraging. Further, up to FY13, REC has one-year extension from banking & financing regulatory body RBI to adjudicate the issue of provisioning on standard asset and adopting exposure norms applicable to NBFCs..

A true Investor is an investor who does the value investing in the companies trading significantly below their historic averages and below the market. While most of investors rely on metrics such as price-to-earnings (P/E) or price-to-book (P/B), but they can use better valuation method using enterprise value to earnings (EV/E) or enterprise value to book (EV/B). Actually, a company's value is sometimes expressed as the total funds being used to finance it, which is increasingly used in place of the price/earnings ratio, and indicates the economic rather than the accounting return that the company is generating on the total value of the capital supporting it. Companies that have borrowed heavily to finance growth, or that have paid large premiums for acquisitions or assets, are more frequently evaluated by enterprise value method. The enterprise multiple takes into account a company's debt and cash levels in addition to its stock price and relates that value to the firm's cash profitability. Each of other valuation multiples has flaws, but the enterprise multiple is the most encompassing and generally considered the most useful in analyzing the current valuation of a stock.

What is Enterprise Value?
Enterprise value is the total value of a company. Whereas multiples that use the stock price look only at the equity side of a stock, enterprise value includes a company's debt, cash and minority interests. It is calculated as market capitalization (stock price times shares outstanding) plus net debt (total debt minus cash and equivalents) plus minority interest and a more simplistic view of enterprise value is as the sum of a company's market capitalization and its net debt. Investors use enterprise value to determine how debt financing, corresponding interest payments and joint ventures affect the valuation of company.

Importance & Use of Enterprise Value
Enterprise value is used like a valuable investment tool. Particularly, it can be useful when comparing companies with different capital structures. This is obvious that two companies can have the same market capitalization and very different enterprise values if one has substantial debt and very little cash on hand and the other has little or no debt and/or substantial cash on hand. Therefore, EV is an appropriate way to measure the value of the entire company rather than just the stock price, which looks only at the equity market capitalization of the stock, ignoring the company's cash, minority interests and debt. In fact the enterprise multiple compares the total value of a company relative to its cash profits, it is often more desirable than P/E


because EBITDA is considered less manipulable than earnings and than P/B because it is a better measure of cash profitability than book value. Enterprise value is also useful from the acquisition point of view as acquirers considering a takeover of a company, enterprise value helps them to determine a reasonable price for their desired acquisition.

Disadvantage of using Enterprise Value
Enterprise multiples such as EV/EBITDA or enterprise value to earnings (EV/E) or enterprise value to book (EV/B) are quite useful while evaluating from the investment point of view. There is not much as any major drawback of using enterprise valuation method but it is more relevant to use when the company has higher debt ratio especially long-term debts. The main disadvantage is that enterprise value is not as easy to calculate as market capitalization. The latter is a simple multiplication of the number of shares by the share's unit value, whereas enterprise value considers other less tangible factors, making the calculation more deceptive.

Measurements and other Parameters
Generally stocks with an enterprise multiple of less than 7.5x based on the last trailing twelve months (TTM) is considered a value. Often investors will consider enterprise multiples below the market, the company's peers and its historical average of a stock as a good entry point. However, cyclical stocks usually have a wide dispersion between the peak (high) and trough (low). This creates the need to take the current multiple in context, including where the industry and company are in their cycle, the fundamentals of the industry, and the catalysts driving the stock relative to its peers. Considering these factors will determine whether the LTM multiple is inexpensive or expensive.

Conclusion: Investing in particular stocks requires certain knowledge of a company's fundamentals such as assessing its peers and using a common denominator, like enterprise multiple to evaluate the stock. The enterprise multiple is a proxy for how inexpensive or expensive a stock is trading today based on past and expected cash flows. However using the enterprise multiple is not foolproof and even if a stock is cheap on a multiple basis, market sentiment may be negative. As discussed above, enterprise value considerations likely find their way into standard stock analysis reporting. However, it is true that by using enterprise value, instead of market capitalization, to look at the book or market-cap value of a company, investors can get an idea of overvalued or undervalued company.


The natural disaster in the U.S. is widely believed to dampen demand for crude oil, as the West Texas Intermediate (WTI) contract should be falling. Oil terminals and pipelines may also have been destroyed although it is too early to assess the damage and its impact on the price of oil. The pricing and distribution hub for WTI is the town of Cushing in Oklahoma, and most WTI is refined in the US Midwest. The supply of oil into the region has surged as a result of rising imports from Canada and the development of the Bakken shale formation in Montana and North Dakota, putting downward pressure on the price of WTI. The reason why this has not spilled over into other crude is that it is relatively hard to transport oil from the region.

Over the next five weeks, Crude Oil markets will be driven to wild swings by speculation over the outcome of the US Presidential election and geo-political concerns. Crude Oil prices might remain weaker due to window dressing activities by the US before the presidential election & also dominated by uncertainties and concerns over Spain & further concerns on whether the Chinese economy is stabilizing or sliding. Technically a close below $84.50 for Crude Oil may opens up the gates for a dip towards the $80.20 to $76 range. Crude Oil will regain upside strength on a closing above $90 again.

Most commodity prices & especially Gold, Silver & Base Metals are now at or near support levels and are ready to move up once they get a good momentum trigger. Cautious, range-bound trading may remain the trend for the gold and silver market for the entire week & there are now 5 trading days left until the US Presidential elections on November 6th after which some measure of the uncertainty will be lifted. The most important economic report this week will be the U.S. employment data for October, which comes out Nov. 2. It will also be the last jobs report before the US Presidential Election. Consumer spending and consumer confidence reports are also expected over the week. From technical perspective Gold has started to shown

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Some resilience below $ 1700 from past few sessions. According to our expectation if this support sustain for upcoming days we may find some rally near to $1788-1798. On the flip side $1645-1648 could be the good support levels. Meanwhile Gold prices dropped on Friday ( 02 Nov 2012) as investors stocked up on the yellow metal's traditional hedge, the dollar, to await the results of U.S. presidential elections on Tuesday.

The headline unemployment rate rose to 7.9% from 7.8% in September. Investors brushed off a surprisingly strong October jobs report. On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were down 2.22% at USD1,677.45 a troy ounce, up from a session low of USD1,674.75 and down from a high of USD1,716.95a troyounce. U.S. voters go to the polls on Tuesday to elect a new president and surveys do not indicate that either President Barack Obama or his Republican challenger, Mitt Romney, have emerged as a frontrunner headed in. Investors went long on the dollar on the last Friday before Election Day to ride out electoral uncertainty, which sent gold falling. Remember Gold and the dollar often trade inversely.

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Safe Harbor Statement :Some forward looking statements on projections, estimates, expectation, outlook etc are included in this update ot help investors / analysts get a better comprehension of the Company's products and make informed investment decisions. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Investors are advised to consult their certified financial advisor before making any investments to meet their financial goals.