Tag: Analysis

Analysis of Merger of Cairns India & Vedanta Ltd

Vedanta is the parent company of cairns India. Vedanta is mostly interested in cairns energy who value approx. 62.5% of cairns India with 8.5 billion USD

June 4, 2015 – Vedanta Ltd, formerly known as Sesa Sterlite Ltd/ Sesa Goa Ltd, on Thursday said it has acquired a 4.98 per cent stake in Cairn India Ltd for a cash consideration of USD 315 million from its wholly owned subsidiary, Twinstar Mauritius Holdings Limited (TSMHL).

 Fall in share price of Cairn would have been a trigger for announcement of the merger. Cairn shares have fallen by around 44 per cent since March 2014 while Vedanta Ltd shares are almost flat. That has taken the Cairn-Vedanta swap ratio to 1:1. Under current market conditions, therefore, Vedanta Public limited company’s interest in Vedanta Ltd would fall from 62.9 per cent to 50.7 per cent post a merger, thereby retaining control.

The move will give the parent access to Cairn’s cash and help reduce debt.

The merger gives the group unencumbered access to excess cash and continuing free cash flow generated by Cairn, the second largest free cash flow (FCF) after Hindustan zinc limited generator in the group (26 per cent of total). Positive credit rating implications should result in lower interest costs over time.

	Cairns India	Vedanta Ltd.
Share value	185  (NSE)	182.8 (NSE)
Debt	20,500 crore Rs	75,800 crore Rs
Cash	16,000 crore Rs	27,200 crore Rs + Vedanta cash reserves
Share merging	1:1	1:1
Advantages	More exploration Upliftment in share value Chance of increase in revenue	Technology acquisition Reduction in debt burden More borrowing capacity
disadvantages	Reduction in cash flow Increase or overpass of Vedanta debt	Reduction in share price Sharing of mines & exploratory Downgrading by financial rating institution
Reason for merger	1.         Help in exploration of Greenland energy	1.   Asset optimization & reduction in liability2.   Cash requirement3.   Technology acquisition from cairns energy

As per the ABOVE information we conclude, that Vedanta has more advantage as the debt will be covered from the cash of the Cairns India ltd & it is expected to rise in the share value of the Vedanta at approx. 7-9  % in the next 2-3 months. Vedanta CMP 182.80 (NSE)

Above analysis is purely for an educational purpose. 

 

 

Report prepared by

MBA Interns

Beeline Broking ltd.

 

Ain’t a right time to prove Intermarket Analysis true?? Above chart witnessed a relationship between Copper and
Shangai Stock Exchange. Chinese stock market have doubled in last one year while on the other side Copper the
red metal is making lower lows.

As seen from the history, since 2004 Shagai Market is considered as the leading indicator which means the move
that we have witnessed in a Chinese Market ( Because of the 3 straight rate cuts) yet to be witness in Copper. So its
better to accumulate Copper on dips.

Below we have added Correlation between Copper and Chinese Market, as seen since 2007 it remained mostly in a
positive region till late 2014 but currently its showing a divergence. Interestingly, this divergence remained for
maximum 7 months which is over in current scenario.

Till December 2015, we assume Copper may give 11-12% (conservative ) upside return.

Euro pushes higher as dollar rally pauses

The euro pushed higher against the dollar on Wednesday after Greece played down the threat of an imminent default, as the greenback paused following a rally on the back of expectations for a U.S. rate hike later this year. EUR/USD was up 0.41% to 1.0916, still not far from the one-month lows of 1.0862 struck on Tuesday. The single currency found support after the Greek government expressed confidence to that it would make a €305 million payment to the International Monetary Fund due on June 5.

USD/CAD rises to 1-month highs in early trade

The U.S. dollar rose to one-month highs against its Canadian counterpart on Tuesday, after the release of mixed U.S. durable goods orders data, as expectations for a U.S. rate hike in the coming months continued to support. USD/CAD hit 1.2416 during early U.S. trade, the pair’s highest since April 15; the pair subsequently consolidated at 1.2415, advancing 0.82%. The pair was likely to find support at 1.2275, Monday’s low and resistance at 1.2570, the high of April 15. In a report, the U.S. Commerce Department said that total durable goods orders, which include transportation items, declined by 0.5% last month, compared to expectations for a drop of 0.4%.

Pound falls to 2-week lows vs. stronger dollar

The pound fell to two-week lows against the U.S. dollar on Tuesday, as expectations for a U.S. rate hike in the coming months continued to lend broad support to the greenback.

GBP/USD hit 1.5385 during European morning trade, the pair’s lowest since May 8; the pair subsequently consolidated at 1.5415, sliding 0.36%. Cable was likely to find support at 1.5241, the low of May 8 and resistance at 1.5591, the high of May 20. The dollar was boosted after Federal Reserve Chair Janet Yellen reiterated Friday that the bank still expects to start raising interest rates later in the year if the economy continues to improve as expected.
Rupee third on fake foreign currency list in Switzerland!

With Switzerland remaining in focus in India’s fight against black money stashed abroad, the quantum of counterfeit Indian rupee seized by Swiss Police is third highest among all foreign currencies despite a sharp fall from the previous year.

As per the latest ‘counterfeit statistics’ released by the the Federal Office of Police (Fedpol), the total number of counterfeit Indian rupee notes seized during 2014 stood at 181, down from 403 in the previous year.  This is third highest among all foreign currencies after the euro (2,860) and the US dollar (1,101).

Important events and their explanation:

 

Time ( IST)	Currency	Economic Data	Expectation	Previous
6:20am	JPY	Monetary Policy Meeting Minutes
6:40am	USD	FOMC Member Lacker Speaks
12:30pm	EUR	GfK German Consumer Climate	10	10.1
Day 1	ALL	G7 Meetings

Explanation:-

No Major events for the day. Except G7 Meeting

 

Market is waiting for the RBI meeting , and we expect .25 basis cut in the meeting which is already been discounted. Hence any further cut i.e .50 would be negative for the USDINR.

 

EURINR

l

 

All eyes are on the Greece payment to the World bank. Any negative news might drag the pair till 69.20/.10 levels.

Support is expected to be around 69.60/50  levels and resistance 71.63/78  levels.

 

A Weaker US Dollar Leads to Gold Price Gains

The US dollar fell to a four-month low of 93.1 on May 15, mainly due to weak US economic data. US consumer confidence also fell by the most we’ve seen in over two years, pointing toward less positive prospects for US economic growth ahead. Weak data also deferred the likelihood of a rate hike, which is negative for the US dollar. As well, a narrowing of the spread between US and German bond yields led investors to the euro, further hurting the US dollar.

USD/CAD re-approaches 5-week highs in early trade

Investing.com – The U.S. dollar edged up against its Canadian counterpart on Monday, re-approaching a five-week high as demand for the greenback remained broadly supported by Friday’s U.S. inflation data. Trading volumes were expected to remain thin with markets in the U.K., Germany and the U.S. closed for holidays.USD/CAD hit 1.2308 during early U.S. trade, the session high; the pair subsequently consolidated at 1.2294, adding 0.12%. The pair was likely to find support at 1.2173, the low of May 22 and resistance at 1.2329, the high of April 16.

The dollar strengthened broadly on Friday after data showed that U.S. core consumer prices rose 0.3% in April and were 1.8% higher on a year-over-year basis, the largest increase since October.

Lanka reserves expected to boost from Indian currency swap

Sri Lanka’s official reserves are set to receive a boost by the currency swap arrangement with India, signed during Prime Minister Narendra Modi’s visit, the country’s Central Bank said today.

During his visit to Sri Lanka last month, Prime Minister Modi had pledged USD 1.5 billion in financial assistance on a currency swap arrangement. The Reserve Bank of India and Central Bank of Sri Lanka agreement will help Sri Lanka keep its Rupee stable. The Sri Lankan Rupee has been under pressure since early January and has fell around 1.5 per cent so far this year despite Central Bank action to sell dollars to defend it.

Euro at 1-month lows against firmer dollar

The euro slid to one-month lows against the stronger dollar on Monday after U.S. data showing that consumer prices rose for a third straight month in April, as concerns over Greece continued to weigh on the single currency. EUR/USD slid 0.35% to 1.0974, the lowest level since April 29.

Important events and their explanation:

 

Time ( IST)	Currency	Economic Data	Expectation	Previous
6:00 PM	USD	Core Durable Goods Orders m/m	0.50%	0.30%
7:30 PM	USD	Durable Goods Orders m/m	-0.40%	4.70%
7:30 PM	USD	CB Consumer Confidence	95.2	95.2
7:30 PM	USD	New Home Sales	501K	481K
10:00 pm	USD	FOMC Member Fischer Speaks	-1.3M	-2.2M

USD-  For the day , we would focus on the New home sales and Consumer confidence number, we assume it might come with the expectation, hence it wont create any significant move for the currency.

Technical touch :

 

As seen pair has pierced its prolonged weekly symmetrical triangle , where price is about throwback till its falling trend line support levels which is 63.10-63.20 levels.

For the next few sessions we assume pair might remain in a band of 63.96– 63.40 levels.

Support is expected to be around 63.40/50 levels and resistance 64.00/30 levels.

EUR INR

 

After a prolonged downtrend pair tried to form its base and RSI moved into bullish territory.

As seen RSI is trading near its rising trend line. Hence we assume INR might appreciate till 70.55/40 levels

Support is expected to be around 70.38/69.90  levels and resistance 71.63/78  levels.

 

 

After a steep fall from 106 levels till 46 finally price indicating some positive technical signals. As seen from the chart, price given a breakout gap above its prolonged falling trendline and RSI to pierced its falling trendline.

Interestingly price trading above its 55 DSMA and forming resistance at 89 DSMA  both are the fib numbers. At the down its also forming a bullish gartely, where B = 61.8% of the XA move and we expect CD to travel atleast AB move i.e till 56.30 levels.

For the conservative traders we advice to buy above 53.30 levels and aggressive may buy with rising window’s SL which is 51.05 levels. We expect bounce till 56.40-60.00-63.10 with SL closing below 50.90. CMP 52.55

 

 

Nishant Bali CMT (L3), MBA, CeTA, CSC

Independent Consultant

Erudite Financial Institute