Standard & Poor's Ratings Services has lowered its corpoarte credit rating on Tata Motors to 'BB' from 'BB+'.
The agency has also lowered its rating to 'BB' from 'BB+' on all Tata Motors' rated debt. The ratings remain on CreditWatch with negative implications.
These rating action comes after Tata Motors' recent announcement on its agreement with Ford Motor Company for the purchase of Jaguar and Land Rover, comprising brands, plants, and intellectual property rights.
The transfer of ownership to Tata Motors, as announced, is expected to close by the end of the second quarter of 2008, subject to applicable regulatory approvals.
Tata Motors will pay about $2.3 billion in cash for Jaguar and Land Rover, out of which Ford will then contribute up to $600 million to the Jaguar-Land Rover (JLR) pension plans.
"The rating action reflects Tata Motors' heightened financial leverage, resulting from the $3 billion bridge loan mobilized to fund this transaction," said Standard & Poor's credit analyst Anshukant Taneja.
"It also reflects a more challenging business environment, both for the company's domestic passenger and commercial vehicle segments in India and for the high-end luxury car segments in the key markets for Jaguar and Land Rover."
Tata Motors intends to fund the acquisition with new equity of up to $1 billion. While the company has demonstrated adequate financial flexibility and benefits from its parentage, S&P's would factor in the impact of such equity inflows only when they are successfully concluded, a release from the company stated.
While JLR has recently demonstrated some improvement in its profits and cash flows, this trend remains susceptible to changing demand and rising operating costs, both of which are currently vulnerable in prevailing macroeconomic conditions.
In this backdrop, Tata Motors also intends to continue with its relatively aggressive capital spending plans for its existing Indian operations as well as the newly acquired JLR operations.
"This could result in still higher leverage and a potentially protracted improvement in its credit metrics," Mr. Taneja said. "Nonetheless, the increase in Tata Motors' geographic diversity and presence in uncorrelated business segments, which may add to revenue stability, has been factored in the current ratings."
The CreditWatch negative position reflects concerns related more to Tata Motors' long-term financing arrangements for replacing the existing bridge facility and limited details on its plans for the transition of JLR operations. A greater level of certainty addressing these issues would be required for the CreditWatch resolution.
Overall, the likelihood of a further lowering of the ratings is relatively low assuming: (1) the bridge facility refinancing risks are addressed, (2) Tata Motors' capital commitments to its domestic operations and to JLR remain broadly at the levels given by the company, and (3) the transition of the JLR assets from Ford proceeds as expected.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
No comments:
Post a Comment