Saturday, March 31, 2012


In all, we gave 10 stock recommendations during the year of which 6 have managed to deliver positive returns. Although, we may add that most of them have yet to reach their target prices, due to challenging market conditions. We continue to remain positive on all the recos except Ispat Industries and Tecpro Systems. The performance of the recommendations is given below.  


Disclaimer: Investors are requested to do their own due diligence before following the recommendations. The author or any of his business entities will not be held responsible for any losses that investors may incur due to investments made on the basis of the recommendations.

Stock Date of Reco Current  Appr/
  reco. price price Depr.
Ispat Industries 10-02-2011 22 12 -45%
Kewal Kiran Clothing 19-02-2011 522 665 27%
Tecpro Systems 11-03-2011 380 169 -56%
Eicher Motors 29-03-2011 1250 1983 59%
Oberoi Realty 08-04-2011 256 268 5%
Indraprastha Gas 13-04-2011 314 379 21%
Britannia Ind. 15-06-2011 465 593 28%
Dhanuka Agritech 20-06-2011 83 83 0%
Infoedge 29-06-2011 720 729 1%
Akzo Nobel 02-08-2011 969 816 -16%


We are happy to disclose the latest model portfolio and the portfolio as of March 31, 2011. The following observations are noteworthy:

  • The number of stocks has reduced and the bias towards large caps has increased
  • Half of the stocks have remained in the portfolio, without any changes, in the last one year
  • Bias towards growth rather than value, continues
  • Large weights in financials and auto have been partially neutralised by large weights in FMCG and IT
  • Within financials, bias remains towards private sector banks
  • Stock specifics - Stocks like Asian Paints, Hexaware, e-clerx, Page Industries, Sadbhav Engg, LIC Housing, TTK Prestige, Castrol have added alpha to the portfolio while ICICI Bank, TISCO, Hindalco, Rallis have been underperformers


  • We expect inflation and deficit numbers to remain elevated, hence central bank stance may bot become too dovish
  • Commodity prices  may inch up towards the end of the year
  • Road development activity will pick up. However, other infrastructure activity will continue to be subdued
  • Fresh capex may not gain momentum atleast in the first half
  • Outlook globally will continue to be mixed
  • Rupee will continue to hover around the current levels
  • Consumption businesses will continue to do well relatively


The current balanced stance in the portfolio will continue, through the year. However, we may add a few high growth midcaps/smallcaps to the portfolio.


Disclaimer: Investors are requested to do their own due diligence before following the portfolio given below. The author or any of his business entities will not be held responsible for any losses that investors may incur due to investments made by them,  according to the model portfolio. 


Scrip Weights
  Mar-12 Mar-11
Banking & Financials 25% 28%
Axis Bank 3% 0%
HDFC Bank 8% 8%
ICICI Bank 6% 8%
LIC Housing 3% 3%
M &M Financials 0% 2%
SBI 0% 7%
Shriram Transport 2% 0%
Syndicate Bank 2% 0%
Yes Bank 0% 2%
Energy 0% 3%
Cairns 0% 3%
IT 19% 8%
e-clerx 2% 2%
HCL Tech 4% 4%
Hexaware Tech 4% 2%
TCS 6% 0%
Wipro 3% 0%
Engineering & Infra 2% 15%
ILFS Transportation 0% 2%
Larsen & Toubro 0% 6%
LMW 0% 2%
Sadbhav Engg 2% 2%
Thermax 0% 3%
Consumer Products 14% 7%
Asian Paints 2% 2%
Castrol 2% 2%
HUL 5% 0%
Nestle  5% 3%
Metals 4% 6%
Hindalco 2% 3%
Tata Steel 2% 3%
Autos 11% 6%
Eicher Motors 2% 2%
Hero Honda 2% 2%
M & M   4% 0%
Maruti Suzuki 3% 0%
Tata Motors DVR 0% 2%
Healthcare 4% 4%
Divis Labs 2% 2%
Sun Pharma 2% 2%
Real Estate 2% 2%
Oberoi Realty 2% 2%
Telecom 2% 3%
Bharti 2% 3%
Other growth stories 16% 19%
Ispat Industries 0% 2%
Jain Irrigation 0% 2%
Kewal Kiran 2% 2%
Page Industries 3% 2%
Rallis 2% 2%
Solar Industries 2% 0%
Titan Ind. 0% 4%
TTK Prestige 4% 3%
Ultratech Cemco 3% 0%
VIP Industries 0% 2%
No. of stocks 32 35


Capital Portfolio Advisors' Blue Chip Model Portfolio has completed one year of performance. We are happy to mention that the portfolio has outperformed it's benchmark quite handsomely. It has delivered positive performance despite negative performance by the markets. The portfolio is always fully invested and does not use derivatives. As compared to it's peers among mutual funds, the portfolio stands in the top quartile. The details of the performance are given below:  

Year-end portfolio break-up(sectoral):
Agri-related 2%
Automobiles 11%
BFSI 25%
Cement 3%
Consumer durables 4%
Energy 0%
Engg & Cap goods 2%
FMCG 14%
Healthcare 4%
IT 19%
Metals 5%
Others 2%
Realty 2%
Telecom 2%
Textiles 5%
Large caps/Midcap break-up:
Large caps 61%
Mid/Small caps 39%
No. of stocks 32
1 year performance  
Portfolio performance 3.95%
Nifty -9.22%
BSE-100 -9.22%
Outperformance over:  
Nifty 13.17%
BSE-100 13.17%
Performance comparison with top mutual funds:
Portfolio performance 3.95%
Birla Frontline -7.19%
DSP Top 100 Equity -1.35%
Franklin Prima Plus -1.26%
HDFC Equity -7.38%
ICICI Pru Discovery 0.29%
IDFC Premier 5.84%
Quantum Equity -1.15%
Reliance Equity Opps. 2.58%
UTI Opportunities 5.60%

Thursday, March 29, 2012

China moves up value chain in Africa

When cheap Chinese goods started flowing in big numbers to Africa a decade ago, consumers benefited from lower prices, but local producers such as textile mills saw their businesses suffer.
Now, with Chinese companies moving up the value chain, that trade-off is changing. African consumers are still lapping up Chinese products, but these are more sophisticated. From smartphones to farm threshers, they are elbowing aside foreign, not local, competitors. 
Chinese exporters have more than tripled their market share in Africa since 2002, supplying 16.8 per cent of the continent’s total imports last year, according to a report published this month by Standard Bank. Over the past four years Chinese companies recorded their biggest gains in selling machinery, vehicles and electronics.
European and Japanese companies have been the losers. African imports from Italy, Spain, Germany, Britain and Japan were all lower last year than they were in 2008. Meanwhile, imports from China surged 38 per cent over that same period.
This data “confirm some of the mature economy fears” that they are losing ground to Chinese exporters in Africa, Standard Bank economists Simon Freemantle and Jeremy Stevens say.
The success of Chinese companies is about more than being cheap. Low prices undoubtedly help, but improvements in product quality and better co-operation between Chinese and African companies in tandem with political ties have also been crucial.
The Ideos phone from Chinese electronics group Huawei is a prime example. Already billed as the world’s most affordable smartphone running Google’s Android system, it is subsidised in Kenya by Safaricom, a mobile network operator, to improve internet penetration.
At 8,000 Kenyan shillings – less than $100 – it is seven times cheaper than other similar smartphones.
“The features sell the phone,” says Martin Muraya, who owns a mobile phone stand in a chemist and has sold all his Ideos stock.
The Ideos was launched in 2010 and had a 45 per cent share of Kenya’s smartphone market less than a year later.
Shipments of Chinese goods to Africa have followed a path ploughed by Chinese money. Chinese companies have invested about $13bn in Africa, most since 2000, according to Standard Bank.
“It complements the competitiveness of Chinese firms in Africa,” the report says.
Zhenjiang Shenglong Machinery Manufacturing, a medium-sized maker of farming equipment in China’s Jiangsu province, gained exposure to Africa by contributing to aid missions.
“We were doing well in the Chinese market, but we realised that our products would die out domestically eventually. We had to break into other under-developed countries,” Luo Min, chairman of Zhenjiang Shenglong, says.
His company made about $3m in sales to Africa last year. For big purchases, Zhenjiang Shenglong sends trainers to teach farmers how to use and maintain the machines.
“Our competitors, some of which make better equipment, offer no training. No matter how good the machine is, without farmers knowing how to use it, it’s nothing but a waste,” Mr Luo says.
But even as Chinese companies fight to move up the value chain, the old guard of the country’s exporters – those making cheap and often shoddy goods – still cast a long shadow.
In Nairobi, Chinese-made goods fill market stands and shop shelves, but many are counterfeits, such as “Nokla” and “Sumsang” phones. So prolific are the imported fakes, locals give them the catch-all tag, “China phones”.
In One World Networks, an electronics shop in central Nairobi, staff say customers regularly return Chinese-made laptops and printers. Yet sales assistant Eunice says they have no choice but to keep buying them.
“The African market is Chinese. They help us because it’s the only one we can afford,” she says. “But they fail more. It works two days and fails the third.”

Dry spell brews trouble for robusta coffee

A near five-month dry spell in growing areas is likely to affect the production of coffee, especially robusta, the next season starting October.
“Robusta coffee is highly susceptible to water stress. The current dry spell will affect robusta production, though how much is difficult to say ,” said Mr Nishant Gurjer, Managing Partner, Sethuraman Estates and Kaapi Royale Coffee.
“Even this season due to the dry spell, farmers washed less of robustas since they retained water for irrigation. As a result, robusta parchment production was 50-60 per cent lower compared with last year,” said Mr Ramesh Rajah, President of Coffee Exporters Association of India.

deficient rainfall

“The dry spell is likely to spell greater trouble for robustas in areas where there are not irrigation facilities,” said Mr Anil K. Bhandar, former president of the United Planters Association of Southern India.
According to the India Meteorological Department, post-monsoon rainfall between October and December was 48 per cent below normal. Rainfall during January-March was 5 per cent lower than normal. However, since January, about 25 meteorological sub-divisions of the 36 in the country have had deficient rainfall.
Coffee production this season ending September has been estimated at a record 3.20 lakh tonnes against 3.02 lakh tonnes last season. Of this, arabica has been projected at 1.03 lakh tonnes (94,140 tonnes) and robusta 2.16 lakh tonnes (2.07 lakh tonnes).
“Small pockets in growing areas of Karnataka got rain in February and again a week ago,” said Mr Gurjer.
“This quarter-inch rain has led to blossoming in some areas. But there has been no follow-up rain and the blossoming has been squashed,” said Mr Bhandari.
“The prolonged dry spell will impact robusta severely next season,” said Mr Rajah.
More than the dry spell, it is the high temperature in the growing areas that is worrying planters.
“Against a normal temperature of 33-34 degrees Celsius, the temperature is 36 degrees Celsius. Also, there is huge variation between maximum and minimum temperatures. We have to see if this could have any effect,” said Mr Gurjer.
The pre-moosoon rain called “Revathy” in growing areas has been forecast for late March/early April. “If the rain fails to come as predicted, more trouble is in store,” said Mr Gurjer.
Arabica coffee, on the other hand, is drought-resistant and can tolerate the dry spell at least till the month-end. Therefore, it may not face as much problem as the robusta.
“If it rains in the next two weeks, there is sufficient time for arabica to recover,” said Mr Rajah.
“If rain comes on time, there will be good blossoming of arabica since the buds are ready,” said Mr Bhandari.
Karnataka is the key coffee growing State in the country, making up 70 per cent of the total production. Kerala, which is also facing a dry spell that is affecting other plantation crops such as tea, rubber and spices, is the second largest producer of coffee.
Meanwhile, exports this year are marginally higher. As of Wednesday, 98,073 tonnes were exported against 93,113 tonnes during the same period a year ago.
(Source: Business Line)