Analysing the Economy and Stock performance in India

Indian economic system has shown a great character with singular turnaround after the economic lag which started in 2008. Harmonizing to GOI, Indian economic system grew by 7.2 % during last financial twelvemonth i.e. 2009-10, an addition from 6.7 % last twelvemonth figure. To be more specific, the industrial sector has shown phenomenal public presentation, making a well high cumulative growing of 10.4 % .

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GDP

The World Bank has pegged the economic system to turn at a nice rate of around 8 % in 2010. This is harmonizing to a study published in June 2010.

The overall GDP growing in the 4th one-fourth of 2008-09 remained at the same degree as in the last one-fourth. On the history of a turnaround in growing in agribusiness and allied activities, even as industry and services continued to exhibit sustained slowing over the four consecutive quarters of the twelvemonth, with the rate of slowing lifting in the 2nd half reflecting the contagious disease from the planetary synchronised recession.

The macro-economic parametric quantities have shown betterment led by a 13.5 % growing in the index of industrial production in March 2010.

In another study by IMF, the projection is of 9.5 % . The current history shortage is expected to remain within 1.5 % .

In the four old ages get downing at the terminal of 2010, planetary growing is expected to average a little more than 4 % a twelvemonth, below the 5 % mean one-year growing before the fiscal crisis erupted, the IMF study said.

Inflation

In India CPI would be about 8.4 % in 2010. The rate of rising prices for the month of June, 2010 is 13.73 % . Though there are marks of seasonal moderateness in nutrient monetary values, of the points of nutrient. And rising prices continues at an elevated degree.

It is due to the fact of structural alterations of certain agricultural trade goods such as comestible oils, milk and pulsations. And in close hereafter excessively monetary values of these nutrient points will increase which will increase the rising prices rate further if some important stairss from the authorities side will non be taken.

Second, planetary monetary values of trade good monetary values poses upside hazards to rising prices. So this is besides a ground of rising prices.

CPI GRAPH-LONG TERM

Third, the Reserve Bank ‘s industrial mentality study shows that corporate are progressively recovering their pricing power in many sectors. As the recovery additions further impulse, the demand force per unit areas are expected to stress.

Fourth, the Reserve Bank ‘s quarterly rising prices outlooks study for families indicates that family rising prices outlooks have remained at an elevated degree.

Besides these every other sector has besides shown promise in their public presentation. The car sector is picking up and the IIP has besides improved. The IIP fell in the month of May in YOY footings, but it is still appreciable. The planetary demands every bit good as domestic demands are get downing to pick up appreciably. This is the chief ground for the growing in credits and loans.

The cardinal involvement rates, fed rates and bank involvement rates are besides projected to turn by up to 150 footing points in the coming financial.

Industry Analysis: NBFCs

Non-banking fiscal companies ( NBFCs ) are fast emerging as an of import section of Indian fiscal system. It is an heterogenous group of establishments ( other than commercial and co-operative Bankss ) executing fiscal intermediation in a assortment of ways, like accepting sedimentations, doing loans and progresss, renting, engage purchase, etc.

NBFC have performed good in the past one twelvemonth despite tough economic environment. Though, the growing rate in the sector dropped as the economic system slowed, their concern theoretical account remained robust as the plus quality excessively remained really high.

The growing chances of NBFCs depend upon the demand of funding. At high ratings, merely those companies that can go on to turn their bottom-line at higher rates than reflected by their ratings can anticipate to see grasp in the stock monetary value.

Equally far as other companies are concerned, it seems that their stock monetary values have already factored in the expected growing. HDFC ‘s net net income growing stood at 23 % in the December 2009 one-fourth. At a P/E of near to 30, it seems that the stock is adequately valued. Similarly, LIC Housing Finance excessively has run up a batch, and as a consequence, its expected growing has already been factored in by the monetary value. Its net income grew by 14 % in the December 2009 one-fourth and its P/E stands at 14. This shows that there is non much range left in the stock monetary value to travel up.

As status of other rivals in the market is more or less same one should size up the facts carefully to derive out of the investings.

Types of NBFCSs

Equipment renting company

Hire-purchase Company

Loan company

Investing Company

NBFCs have been reclassified into three classs: –

Asset Finance Company ( AFC )

Investing Company ( IC ) and

Loan Company ( LC ) .

Cost of Funding – Shooting up during the crisis due to short term of office adoptions, stabilized now & amp ; expected to be less volatile due to larger proportion of long term support.

Asset Quality – Deteriorated more due to unbarred loans which is now virtually stopped by most participants, provisioning has improved & amp ; plus quality expected non to decline farther Asset quality for the sector deteriorated significantly during the crisis. Aggregate Gross NPA ratio trended from around 1.1 % for FY08 to around 2.1 % in FY09.

Aggregate Gross NPA ratio has farther worsened to 3.0 % at the terminal of 9M FY nevertheless it is close to top outing out. De-growth in unbarred portfolio section has lowered the portfolio outstanding growing thereby taking to a ‘base consequence ‘ on the GNPA ratio and adding to the rise in reported Numberss.

Company analysis

Muthoot Capital Services Ltd. ( MCSL ) is a public limited Non Banking Financial Company registered with the RBI and listed on the BSE. Established in February 1994 in Kerala, MCSL offers capital market solutions that include Leasing & A ; Hire Purchase, Vehicle Loans and Bonds & A ; Deposits among others, with cost-efficient value-added services for the benefit of our clients.

MCSL came out with a public issue in February 1995 ; issue was oversubscribed by 8.5 times – at a clip when the Indian Capital Market was sulky. Almost the full subscription was received from the State of Kerala. MSCL has besides diversified into fund and non-fund based activities puting equal accent on the corporate and non-corporate sectors of Kerala.

MCSL has actively entered into the countries of capital market operations, to concentrate chiefly on the possible corporate clients based in Kerala. MCSL ‘s direct attack is to assist its clients to work out which of the finance programs would outdo suit their demands.

The BODs of MCSL Company has recommended a dividend of Rs.2.50 per equity portion of Rs. 10/- each for the fiscal twelvemonth 2009-2010.

FINANCIAL RESULTS

( Rs Lakhs )

Operating Consequences 31.03.2009 31.03.2008 31.03.2007

Entire Income 1738.62 1225.40 802.88

Net income before revenue enhancement 835.15 611.53 317.63

Tax 293.40 211.38 113.03

Net income after revenue enhancement 541.75 400.15 204.60

Net worth 1609.75 1220.09 934.01

Capital employed 6975.33 4686.54 3522.95

Return on net worth ( % ) 33.88 % 32.80 % 21.91 %

Net incomes per portion 8.33 6.16 3.15

STOCK CURRENT MARKET CONDITION ON ( BSE: Jul 30, 15:57 )

149.90 7.10 ( 4.97 % )

Open Price

142.80

A

Volume

42489

High Monetary value

149.90

A

52 Wk High

189.00

Low Price

142.80

A

52 Wk Low

58.00

90-day riskless T- Bill rate

5.74 %

EPS

11.04

dividend payout ratio

20 %

Face value of portion

10

Dividend

2

ROE ( % )

38.3

Growth ( % )

30.64

A

A

Formula for monetary value

EPS* ( 1+g ) /R

A

A

P/E

13.5830

Current P/E

22.7073

Market Cap 97.44 *EPS ( TTM ) 11.04

P/E 13.58 * P/C 13.41 * Book Value 35.80

Price/Book 4.19 Div ( % ) 20.00 % * Div Yield ( % ) 1.33 Market Lot 1.00 *Face Value 10.00 Industry P/E 20.43

Current portion monetary value

149.90

Net net income border ( % ) 31.25, Return on mean equity 33.65

Key ratios

ROE ( % )

38.3

ROCE ( % )

20.9

EV/ EVBIDTA ( x )

7.52

Here we can see that the P/E ratio of 22.7073 is greater than the just value of the P/E ratio. The stock monetary value is undervalued so it would be recommended to purchase the portion and sell it in future.

And as other factors related to economic and industry conditions investor should non be more bad. An investor who wants to put for a longer period as say more than 3 or 6 months should purchase the stock.

All in all the factors converge in measuring the Muthoot Capital stocks as a favourable investing.

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