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Market Update 2012

In the second quarter, the much awaited government reforms finally came through. The government opened FDI in multi-brand retail and aviation, hiked price of diesel, reduced withholding tax on foreign borrowings and also suggested a debt recast for the state power utilities. Markets responded positively to the reforms moves by the government. Continued liquidity support by the Foreign Institutional Investors (FIIs), who have invest about 7b USD so far,  also aided the positive momentum.

Now the Nifty is around 19,200 and post this rise (~10% gain for the Nifty in 2QFY13), valuations are at about 15x FY13 earnings, which is the average of the long term PE band for the benchmarks. Further sustainable rise in the markets will be led only by further initiatives on the core reforms. These core reforms are necessary to encourage more investments and help sustain the earnings and valuations at current levels.

Expectations from the results are not very high, which may act as a cushion for the …

Crompton Greaves

Crompton Greaves stock update:

Crompton Greaves (CRG) is taking steps to align its manufacturing base and

(1) increase associated sourcing from low cost countries, such as India, to supply material for a new transformer facility in Brazil;
(2) its Hungarian facility will cater to a greater share of European demand;
(3) its Belgian facility (high cost base) will have a reduced role;
(4) potential shut down of units in high cost areas.

Presently, each entity in the group (Pauwels, Ganz etc.) operates as an independent silo. CRG plans to integrate key business functions (such as finance, payroll and HR) across the entities, which would help to cut headcount and overhead costs. Besides, CRG’s overseas business may have potential to operate leverage-led margin expansion on a high proportion of fixed costs.

CRG plans to incrementally increase cross selling between recently acquired companies, leveraging group synergies across geographies, technologies and customers. CRG will (1) use Ind…