Investment for Rest half (2012)

Wrt to my last Article, It has been a good climb with the graphs of pharma/healthcare companies still not peaking and yet have more to come. Its Irony, but thanks to Rupee depreciating and this sector leaving stone upturned for  the opportunity to spread domestically and internationally. It is nothing but an experience to learn, on how even in bad times for the overall market, a sector can perform exceptionally good. Look at lupin, Sun Pharma, Ranbaxy (20-30% up, still 10-15% more to come). Except a few disappointments like Dr. Reddy's and also GlaxoSmith (3-7% up).

But what's next?? Surely not Airlines/Telecom for a while, with the battles going on. Monsoon does not favor FMCG. The chase cuts down to IT, Pharma, Auto, banking/finance, Energy, metal or Commodities. Edible commodities like sugar, cotton  have already picked up 10-12% due to foreseeing demand/supply gap(reason being poor monsoon), but still have chance of another 15-17% upside. Festival time for next 3 months indicate precious/semi-precious commodities will pick up pace but how much (Since they are already on there all time peak), another 5-10%  and festive season is good for Auto sector, but the inflation and growing cost will put a break on buying so it can experience 10-15% upside. In IT sector, one needs to be selective, yet the returns will not be same as pharma has shown till now. Energy Sector with most of the PSU's stalled under the weight of subsidiaries. Metal needs to pick up in terms of demand. Banking being marred by NPA's in PSU banks and competitive margins in private banks, also inflation puts yet another hindrance, positive single digit upside expected.    

Steps taken by RBI about Nose diving Rupee

Huge demand for dollars due to rising imports, and shrinking inflows from foreign investors due to sluggish growth, high inflation, widening current account and fiscal deficits and policy stalemate are key factors for the slide in the rupee.

To slow down the depreciating rupee, the RBI had in the recently taken a couple of measures like raising interest rate on NRI deposits in foreign currency to promote inflows, discouraging outflow of foreign currency by instructing exporters to sell 50% of their retained foreign exchange earnings.

Also in the past, RBI had said forward contracts once cancelled cannot be re-booked and that the forward market should only be used for genuine hedges. This drove speculators out of the currency market. RBI also curbed banks’ open exposure to the currency market and set limits for them.

What RBI can do further!

Impose a cash Margin (10-25%) on forwards. This will reduce speculation to a significant extent and will give access to market for actual trade.

RBI could directly propose oil companies to buy dollars directly from the central bank or it could purchase oil bonds.

Reduce the limit of dollars for people going abroad.

Further tariff or restriction on gold import, So that the greenback stays and is not being traded in huge volumes.

Rebates to support more exports, this in turn will improve dollar liquidity. 

Pharmacy/ Healthcare - Sector to invest in 2012

With the crisis deepening and strengthening due to European situation, Currency depreciation, Inflation and Political instability, India's Stock market doesn't seems to be the right place to park money and multiply. But not all sectors will be suffering due to the current situation. Pharmaceuticals sector is a no-stop train, although it gets sluggish due to global factors. Rupee depreciating will boost the sector as 40-45% is exported. Primarily, Lupin in Pharma looks strong without too many hiccups compared to it's counterparts in the sector. Also, Apollo Hospital after a GDR with Mauritus based Healthcare looks strong and promising. Sun Pharma looks in a better position as they have zero hedging policy against dollar. Ranbaxy after the FDA settlement needs to cover up losses.

What Starbucks should do in India!!

Starbucks one of the biggest coffee brands may not be so worried about its operation in India. But there are certain things to ponder upon. With the beverage segment in coffee already divided by others presence, entering the market and making a good impression is a challenge. This means Starbucks should know what tickles the taste buds of Indian consumers, what it takes to change one's regular coffee from others to Starbucks, why should others apart from those who know the brand will try and come back again as their regulars?

Drive Thru Coffee/ Burgers & Pizzas

Quite a few motels/restaurants are their at the highways in India. Road Transport is still not preferable for lot of folks, but it is growing at a faster pace than ever as the highways are getting better. Reservation numbers through RedBus or any other medium are increasingly growing. With roads becoming safer and better medium, soon it will be time for business opportunities for hotels/restaurants to have a Drive Thru/Take Away places near petrol pumps or places where buses halt.

EasyJet Flying High Inspite Downturn in Global Business

EasyJet, UK's low cost airlines & rival to Ryanair, Air France, Lufthansa, is flying high despite weak economic outlook and high fuel cost in Europe. Thanks to a good strategy unveiled last year aimed at business and leisure travelers EasyJet is sailing high tides smoothly, keeping a tight focus on cost to improve margins and finding room for growth in providing better services.

Axe Lynx Outdoor!! Ad banned

The above AXE Lynx Outdoor Ad is banned by advertising Watchdogs for the reason that it objectifies woman and hence is degrading to them. The above poster attracted a lot of complaints for the same reason. In its defense Unilever said the ad shows how the product makes wearer attracted to women in easy going and light-hearted tone. But ASA doesn't want to take the justification.

Airlines in India (need to learn!!)

Airlines in India are facing a tight margin due to increasing fuel prices, high mandatory charges at airports, Weak economic situation and strong competition from competitors. This needs to be tackled before it gets worse and without the measures it is going to hurt all of us be it customers, Airline's employees & employer's or the governing bodies.

A few lessons which Kingfisher, Indigo or Jet can learn are from the Airlines which operates in foreign countries and are leaders in their business. With a cut throat competition in foreign countries, they prevail and fight by innovating things, customizing solutions & giving better options to customers.

Coffee War!!

With established brands like Starbucks and Costa Coffee entering the market, Others(Gloria Jean's, Coffee bean, Java Coffee) ramping up presence in india, it is time for established ones(CCD & Barista) to think a step ahead and attack the most spending segment(Techno Analysts). Opening up as many small outlets in corporate premises or independent outlets in a cyberpark will help more than increasing the numbers in malls or airports.

Ryanair's Marketing Bag

Ryanair is the low cost airline in Europe. Over the years it has been a successful brand and a successful business.Michael O'Leary has a business model with a central focus on cost reduction. In around 20 years he has taken Ryanair from a single plane company to become the largest airline in Europe. The business simply has lower costs and those costs are passed on to their passengers in the form of low fares.

There are lots of factors which contributes to his cost reduction models. Ryanair does not use travel agents so it does not pay agency commissions. It uses direct marketing techniques to extend products and services to customers, which in turn reduces costs. Online booking saves them 15-20% on agency fees.

Ryanair uses Secondary Airports. It is cheaper to from a secondary airport than from the primary/busier airport. Also Since it is less busy aircraft can be turned around very quickly. Many of Ryanair’s destination airports are secondary. For example if somebody wants to go Copenhagen(Denmark) you arrive at Malmo(Sweden), which is a less than 50km drive from Copenhagen.

Keeping aircraft in the air for most of the time is another important part of low cost for which Ryanair has tweaked their operations. There is no check in, One has to show passport and supply your reference number. One cannot select a preferred seat. It is first come, first served. This aids speed. Baggage is deposited directly onto the terminal - it's quick.

Beyond any doubt, Ryanair is one of the strategic marketing successes of the last decade. Undoubtedly synergized by Michael O'Leary - the low cost strategy that it employs is remarkable and industry changing.

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