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Monday, December 11, 2006
FII: Positive +334 cr (provisional)
11-Dec-2006 FII (Provisional) Gr Pur Rs 2403.16 - Gr Sales Rs 2068.95 = +Rs 334.21cr..
With such strong buying; its extremely confusing to see a 500 point fall. Certainly something is amiss.. Watch this space as we try to unravel that
Close: A full blooded correction ! finally !
Market plunged down into the negative cage right from the start despite positive global cues. There were some signs of recovery at mid day but heavy selling in the final trading hour again pushed the market into deep red. It was the highest loss in a day after May 18. This weakness was largely attributed to the RBI's surprise move to increase the CRR by 50 basis points. Banking, Steel , Cement stocks were the major losers while selling activity was witnessed across almost all the sectors. The global scenario however was positive with both Asian markets and European markets traded in green.
Sensex closed down by 400 points at 13399.43. Weighing on the Sensex were losses in SBI (1242.75,-8 percent), ICICI Bk (819.4,-7 percent), ACC (1036.2,-6 percent), TISCO (453.4,-6 percent) and NTPC (142.85,-6 percent). It was a full blooded correction and the speed of fall has instilled fear which kept away the buyers.
Banking stocks draghed down the market, State Bank of India (SBI), the country's largest bank today raised interest rates on domestic term deposits by 0.25% in a move that could compel other commercial banks to revise their deposit rates as well, while commercial banks have seen lending rise by more than 30 per cent, deposit growth has been only at over 18 per cent. In such circumstances, a hike in deposit rates can draw resources into the banking system to feed the demand for loans. The banking stocks saw panic selling on the CRR (cash reserve ratio hike by 50 basis Major Stocks were down like BOI down by 11%, SBI down by 8.88% and Canara bank by 7.7%.
Zee Tele slipped drastically after the news reported that leading sports broadcaster ESPN Star Sports had won the ICC telecast rights for yje eight-year period starting 2007. Industry estimates that ESPN Star's bid was at $1.1 billion followed by Nimbus at $900 million, Zee ($850 million) and Tensports ($825 millon). Besides the 2011 and 2015 World Cups, the rights will cover ICC's major tournaments such as Champion's Trophy in 2008, 2010, 2012 and 2014, Twenty20 World Cup, Women's World Cup and Intercontinental Cup. Some initial sentimental negatives for ZEE but if we see the broader aspect, a huge investment for a game whose viewership is declining and to recover this investment is unlikely to be an easy job. ESPN Star is targetting to $ 2.7 billion from this contract but that is easier said than done. Zee Tele ended down by (-8.43%) while other peers were also down.
Steel sector was down with the market and the major loser include Tata Steel. As per a leading business daily, the company had revised upwards its bid for the Anglo-Dutch steel maker Corus to US$ 9.2 bn to head off a potential counter bid from Brazil's CSN. Under the revised bid, the new cash offer would be 500 pence per Corus share from the earlier 455 pence per share. The Brazilian steel maker however counter bid some hours later at 515 pence in cash for each Corus share. This fight continues.. We would prbably favour if Tisco lets go.. but surely they have their economics and calculations in place. HIgher price entails a bigger weight on the balance sheet. Avoid Tisco for long was our suggestion. The stock however ended the day down by 7%.
Technically speaking: Overall market was in red and ended the same. Volumes were at 4830 cr. The breadth has been in favor of Decliners as they were at 1974 while Advances at 589. The Resistance was at 13570 while Support at 13200 levels.
No room: Luxury hotels booked till March!
If you want a room in Bangalore's Leela Palace Kempinski, the country's most expensive hotel, you will have to wait till March next year. The hotel, with an average room rate of Rs 18,000, is full till February, when the Air Show is scheduled to be held in the city.
The Oberoi Rajvilas, Jaipur, the second most expensive hotel with an average room rate of Rs 15,000, is also booked till March. The Oberoi Rajvilas has rooms in two categories -- premier and luxury tent -- available at Rs 26,750 and Rs 31,200, respectively. Despite its high prices, its booking have been soaring.
"By the end of this season, we expect to close with a higher occupancy compared with the same period last year," said an Oberoi spokesperson. Even when the Oberoi Rajvilas' average room rate touched Rs 20,000 during January, no rooms were available.
* The 10 best hotels in India
The Taj West End, Bangalore, which reached an average room rate of Rs 14,500, is the next most expensive hotel in the country. Though the hotel did not divulge booking figures, a spokesperson said it was booked through March.
Welcome to the great Indian hotel boom. The Leela Palace Kempinski is investing Rs 40 crore (Rs 400 million) to add 132 rooms to its sprawling six floors of 256 rooms and suites in Bangalore.
Analysts say hotel room rates in India are among the highest in the Asia Pacific, rising by 20 per cent annually. Yet Indian hotels maintain an average occupancy rate of over 70 per cent. The reason is shortage.
There are an estimated 105,000 hotel rooms in India, compared with 135,000 in Shanghai alone, and only a quarter of these are in the branded segment. Another 100,000-125,000 rooms will be needed over the next five years to meet demand.
MindTree files IPO papers
MindTree Consulting, an international IT and R&D services, has filed its
draft red herring prospectus (DRHP) with Securities & Exchange Board of India (Sebi). It proposes to offer 55,93,300 equity shares of Rs 10 each.
The issue comprises of a net issue of 49,40,740 equity shares of Rs 10 each to the public, up to 3,72,900 shares to be reserved for employees and up to 2,79,660 shares to be reserved for business associates.
The issue is being made through the 100% book-building method, and will constitute 15% of the post-issue capital of the company.
Kotak Mahindra Capital Company and JM Morgan Stanley are the Book Running Lead Managers to the issue
FII sell-off, CRR hike trigger plunge
FIIs, along with market operators, delivered a body-blow to the market today with the S&P CNX Nifty dropping to a low of 3,800 from the previous day close of 3,962, down 162 points. The FIIs had triggered a sell-off last Friday by short selling 27,300 Nifty contracts valued at Rs 1,080 crore.
The market was rife with rumors that FIIs had sold Nifty and stocks futures worth Rs 2,000 crore today. The December series of Nifty was sold heavily in the market with Nifty open interest increasing further by 44.85 lakh shares to 32.57 million shares. The December Nifty clocked a turnover of Rs 16,226 crore, up 16% from the Friday level.
The Nifty recovered thereafter to close at 3849.50 thanks to buying at lower levels in Bharti Airtel, Tata Steel, Reliance Communications, BHEL, HDFC Bank and VSNL. The stocks recovered between 4-8% cent from the day’s low levels.
Rahul Rege, business head (non-institutional) at BRICS Securities, said the market was anticipating a correction after the failure to sustain the recent momentum in the indices last week. "I think, today's fall was an over-reaction. Further, investors are yet to recover from the May-June fall," he said.
According to him, the market cannot be compared to the May-levels. "I don't see the market in an overly leveraged situation," Rege added.
An analyst at a local brokerage firm said he expected support to come around 3,830 level for the Nifty. The surprise decision by Reserve Bank of India (RBI) late on Friday was the trigger for today's fall, which slowly spread to other sectors and stocks. "Clearly, there was some build up happening in banking stocks over the last 1-2 weeks. The hike in CRR was good in terms of reducing this build up," the analyst said.
An analyst at a local brokerage firm said he expected support to come around 3,830 levels for the Nifty. The market witnessed substantial build up at the next support level of Nifty at 3,800 with open interest in 3800 put increasing almost 15% or by 2.47 lakh shares.
CSN of Brazil Tops Tata Bid for Corus
Brazilian steelmaker CSN raised the stakes in the bidding war for Britain's Corus Group PLC on Monday, topping a sweetened offer by Tata Steel of India.
Companhia Siderurgica Nacional's offer of 515 pence ($10.00) per share, valuing Corus at 4.9 billion pounds ($9.6 billion), was accepted by Corus' board, the companies said.
Corus earlier agreed to an offer of 500 pence ($9.78) per share from Tata Steel, which had raised its original bid of 455 pence ($8.90) per share in hopes of closing out the rival bid.
Shares in Corus, the world's eighth-largest steel producer, jumped 4.9 percent to 524.25 pence ($10.22) on the prospect of an accelerating bidding war. Tata said it was considering its position.
Corus' stock has soared more than 80 percent this year on takeover speculation. A takeover by either company would create the world's fifth-largest steel company.
Commerzbank analyst Jutta Rosenbaum said the cost savings advantage rests with CSN, but upping the offer is ambitious and expensive.
Rosenbaum added that a combination with Tata has long-term advantages but requires large capital expenditure.
Corus Chairman Jim Leng, who late Sunday backed the revised Tata offer, on Monday approved the CSN bid.
"It is ... consistent with our strategic objective of securing access to raw materials, low-cost production and growth markets," said Leng. "The combination of the two businesses will create a strong platform from which to compete and grow in an increasingly global market."
The proposed deal would create a company with output of 24 million tons of steel per year. It would also give Corus access to high-quality, low-cost iron ore from CSN's Casa de Pedra mine in Brazil as well fast-growing markets in South America.
"The strategic impetus for this combination is growth -- growth in Brazil, in Europe and for our combined work forces," said CSN Chairman and Chief Executive Benjamin Steinbruch.
Corus, which employs 47,300 people worldwide, has been searching for a business partner for a year.
It has been under pressure to link with a low-cost rival, and has said it would make sense to find a partner with assets in countries such as Brazil, India and Russia, as rising raw material and energy costs in the Britain and the Netherlands chip away at profits.
The fight for Corus extends consolidation in the steel industry, following the summer acquisition of Arcelor SA by Lakshmi Mittal's Mittal Steel Co. to create a global powerhouse with output of more than 110 million tons of steel a year.
FIIs press sales
Net outflow of Rs 152.60 crore on 8 December
FIIs turned net sellers after staying net buyers for three previous consecutive sessions, selling net shares worth Rs 152.60 crore on 8 December.
Gross purchases were Rs 1,657.50 crore and gross sales amounted to Rs 1,647.40 crore.
FIIs (till 8 December) have divested Rs 1,671.50 crore by the first few days of December 2006, thanks to a huge outflow of Rs 2,814 crore in a single trading session on 4 December because FIIs reported money that they had received from shares not tendered in the sponsored ADR issue of Infosys, thus not representative of their sales in secondary markets in Indian equities.
Cumulative FII inflow in 2006 has reached $8.43 billion, compared to a record inflow of $10.7 billion in 2005.
Market mends as RBI wields baton
A surprise 0.5% hike by the RBI in cash reserve ratio (CRR), and data showing heavy FII sales in the futures segment on Friday (8 December), took a very heavy toll on the market. The domestic bourses bucked the steady-to-firm trend in Asian and European shares.
Bank shares witnessed a setback. Out of the 30 Sensex stocks,16 declined between 3 - 9%, as many as 11 declined between 1% to little less than 3% while three Sensex stocks shed between 0.5% to a little less than 1%.
The BSE Sensex lost 400.06 points (2.9%), to settle at 13,399.43, its lowest closing since 10 November 2006. The last major fall in the Sensex occurred on 11 September 2006, which was for 368 points. The S&P CNX Nifty shed 112.50 points (2.8%), to settle at 3,849.50.
Volatility was high in the second half of the trading session. After a fall of a massive 537.76 points, to 13,261.73 by 12:59 IST, the Sensex had staged an instant recovery from a lower level, to reach 13,463 at 13:21 IST, a fall of about 336 points for the day. However, recovery proved shortlived as the Sensex again drifted to 13,313 by 13:53 IST, a fall of about 486 points for the day. It again recovered to reach 13,497 at 15:07 IST, which was a fall of about 302 points for the day. Once again, sell-off gripped the market at the fag end of the trading session and the Sensex hit 13,300.59 at 15:28 IST, a fall of 498.90 points for the day.
The market remained weak right from the onset of trading today.
The market-breadth was quite weak. For 1,974 shares that declined on BSE, 589 rose. As many as 43 shares were unchanged.
The BSE clocked a turnover of Rs 4,830 crore, much higher than Friday’s Rs 4,148 crore. Turnover on NSE’s futures & options (F&O) segment surged to Rs 41,689 crore compared to Friday (8 December)’s Rs 29,146.38 crore.
All the BSE sectoral indices ended in the red. The biggest loser was BSE’s banking sector index, the Bankex, which tanked 6.4% to 6,749.78.
Finance Minister P Chidambaram, on Monday, said an increase in the cash reserve ratio for banks will moderate credit growth and the government was ready to take further action to curb inflation. In a surprise move, the RBI hiked cash reserve ratio (CRR) by 50 points after trading hours on Friday. The RBI move fuelled expectations of rise in lending and deposit rates by Indian banks. They are likely to take a final view on raising interest rates on loans as well as deposits, by the end of this week, or early next week. Reports suggest that interest rates on home loans are likely to become the first casualty. "Banking scrips will adjust because their profitability is good. The stock market is on a high so no need to worry," Chidambaram opined.
Meanwhile, the data released after trading hours on Friday (8 December) showed FIIs were net sellers to the tune of Rs 1,087 crore in index-based futures on that day. Sensex had lost 173 points on that day. FIIs were net sellers to the tune of about Rs 106 crore in individual stock futures that day. As per provisional data, FIIs were net sellers to the tune of Rs 106 crore in the cash segment the same day.
With today’s fall, the BSE Sensex has shed 572.60 points (4%) in the past two trading sessions, from a record closing high of 13,972.03 on 7 December 2006.
The market was overbought following a solid surge over the past few weeks. The rally did not offer any worthwhile correction; the Sensex had risen 10.6% in a short while to a lifetime closing high of 13,972.03 on 7 December, from 12,623.28 on 23 October. There was a surge in open interest in NSE’s futures & options segment during this rally.
FII buying, on expectations that earnings growth of India Inc will continue, had triggered the solid surge. Latest data indicates Indian economy grew at stronger-than-expected 9.2% in Q2 September 2006, turning the picture even rosier.
In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is on Tuesday (12 December), and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves.
A major near term trigger for the market is Q3 December 2006 results. It is expected to be another quarter of strong performance from corporate India.
Meanwhile, good FII allocations are expected for India in the new calendar year 2007.
Expectations that banks will raise lending and deposit rates following RBI’s move to raise CRR, spooked bank scrips. SBI plunged 9% to Rs 1,230, ICICI Bank lost 7% to Rs 814, and HDFC Bank shed 5.3% to Rs 1,027.
Reliance Industries (RIL) lost 3.2% to Rs 1,227. As many as 17.8 lakh shares changed hands in the counter on BSE.
Cellular service providers succumbed to profit-taking. Bharti Airtel shed 4.9% to Rs 602 and Reliance Communications shed 4.6% to Rs 426.70.
Tata Steel 6.7% to Rs 460. The stock recovered from a 9.2% plunge, to Rs 438, at 13:00 IST. Reacting to the CSN bid Tata Steel said Monday, it was considering its position on Corus. Brazil’s CSN today announced a bid at 515 pence per share for Corus. CSN's announcement came close on the heels of Tata Steel raising its offer for Corus to 500 pence per share from the earlier 455 pence per share, today.
Cement major ACC plunged 6.8% to Rs 1,029.50, and NTPC lost 6.5% to Rs 141.65.
Infosys lost 0.6% to Rs 2,182 in volatile trade. As per reports, the company is renewing a few of its contracts at a premium. Meanwhile, the stock has been included in the Nasdaq 100 index.
L&T was down 1.3% to Rs 1,431.50. As per reports, it has bagged a massive Rs 5,400 crore contract from GMR Infrastructure, to design and construct the terminal and run-way at New Delhi airport. Oil exploration major ONGC was down 0.4% to Rs 837.
IVRCL Infrastructures rose 0.3% to Rs 404, after the company said Cushman & Wakefield India had valued land reserves of its subsidiary, IVR Prime Urban Developers, at Rs 3,887.90 crore - Rs 4,297.10 crore. As many as 22.5 lakh shares changed hands in the counter on BSE.
Zee Telefilms plunged 8.7% to Rs 316.45, after rival ESPN-Star, a joint venture of Walt Disney Co and News Corp, won the broadcast rights for International Cricket Council (ICC) matches.
Mid-Day Multimedia rose 1% to Rs 53.15, ahead of a board meeting on Monday afternoon to consider a fund raising plan, which envisages allotment of shares to promoters and an unidentified Indian investor.
Budget airline SpiceJet jumped 8.7% to Rs 58.10, after Tata group on Monday said it had picked up `less than 10% stake' in the company as a purely financial investment. The stock rose on an extremely high volume of 41.8 lakh shares on BSE.
Saurashtra Cement lost 3% to Rs 71. The company said on Monday, it will allot 1.52 million shares at Rs 73 per share as part of its corporate debt restructuring strategy. The shares will be allotted on conversion of 10% of the outstanding loan amount, to lenders and debenture holders.
Cement producer Rain Commodities lost 7.5% to Rs 170.80. The company said on Monday its board had approved raising the foreign funding limit to 49% of the share capital.
Textile firm Suryajyoti Spinning Mills lost 4% to Rs 62. The company said Monday, it expects 2007/08 operating margins at 17-19% and revenue to be more than Rs 250 crore, driven by capacity expansion. The company reported operating margins of 12% on revenue of Rs 140 crore in 2005/06. Suryajyoti said, it had started production of its expanded yarn unit in Andhra Pradesh. The company spent Rs 48 crore on expansion.
Chowgule Steamships lost 6.9% to Rs 26.30. The company said on Monday, it has signed an agreement with Singapore's Skill Navigation Co to buy a used, 47,574 dead weight tonnage vessel built in 1995, which will join the company's fleet by March 2007.
Aftek Infosys shed 4.7% to Rs 50.50. The company set a 123-for-100 share-swap ratio for merger of Elven Micro Circuits, with itself.
Carborundum Universal shed nearly 1% to Rs 170.30. The company said on Friday, it had acquired two industrial units in Madhya Pradesh for Rs 3.20 crore.
Nymex Crude was down, or rather almost unchanged, at $62 a barrel.
Response to Cairn India IPO, which opened for subscription today, improved as the day progressed. By 16:00 IST, the IPO was oversubscribed. It had bids for 34.14 crore shares compared to the issue size of 32.8 crore shares.
Market closes with losses of 400 points
The market was hit by substantial selling pressure and the indices tumbled by over 2.90% each at the close in a choppy trading session. The Sensex opened slightly above its previous close at 13799, but immediately slipped into the red amid frenzied selling to touch the day's low of 13262, down 540 points from the day's high. Although the market remained in negative territory throughout the trading session, the Sensex pared some losses and wrapped up the session with losses of 400 points at 13,399 while the Nifty shed 112 points to close at 3849.
The market breadth was extremely weak. Of the 2,611 stocks traded on the BSE, 1,977 stocks declined, 592 stocks advanced and 42 stocks ended unchanged. All the sectoral indices slipped sharply. The BSE Bankex dropped 6.43%, the BSE Metal index shed 4.00%, the BSE PSU index declined 3.88%, the BSE CD index dropped 3.18%, the BSE Auto index was down 2.76% and the BSE CG index declined 2.36%. The remaining indices were down 1-2% each.
Most of the index heavyweights witnessed considerable correction. Among the banking stocks SBI tumbled 8.18% at Rs1,243, ICICI Bank dropped 6.54% at Rs819 and HDFC Bank lost 4.70% at Rs1,034. Among the other major losers ACC slumped 6.54% at Rs1,036, Tata Steel slipped 6.01% at Rs453, NTPC shed 5.80% at Rs143, Reliance Energy lost 5.23% at Rs526, Bharti Airtel fell 4.12% at Rs607, Reliance Communication crumbled 3.93% at Rs430 and BHEL dipped 3.90% at Rs2,533. The other front-line stocks lost between 2% and 3% each. Select counters, however, bucked the downtrend and ended with gains. Asian Paints advanced 1.83% at Rs715 and Bharat Electricals gained 0.47% at Rs1,215.
Blue Bird was listed on the BSE at Rs109. Hectic activity saw the counter lose momentum and touch a low of Rs92. The counter closed at Rs95 on strong volumes of over 53.05 lakh shares on the BSE.
Over 93.62 lakh Reliance Communication shares changed hands on the BSE followed by Tata Steel (44.42 lakh shares), Zee Telefilms (26.49 lakh shares), Allahabad Bank (21.58 lakh shares) and Adani Enterprises (20.82 lakh shares).
Austere RBI sends shivers down market's spine
A spike in cash reserve ratio by the RBI and data showing heavy FII sales in index-based futures on Friday (8 December), rattled the bourses, which bucked the steady-to-firm trend in Asian and European shares.
Bank shares witnessed panic-selling. Index heavyweight Reliance Industries (RIL) weakened in late-trading.
The BSE Sensex lost 400.06 points (2.9%), to settle at 13,399.43.
Volatility was high in the second half of the trading session. After a fall of a massive 537.76 points, to 13,261.73 by 12:59 IST, the Sensex had staged an instant recovery from a lower level, to reach 13,463 at 13:21 IST, a fall of about 336 points for the day. However, recovery proved shortlived as the Sensex again drifted to 13,313 by 13:53 IST, again a fall of about 486 points for the day. It again recovered to reach 13,497 at 15:07 IST, which was a fall of about 302 points for the day. Once again, sell-off gripped the market at the fag end of the trading session and the Sensex hit 13,300.59 at 15:28 IST, a fall of 498.90 points for the day.
The market remained weak right from the onset of trading today.
The market-breadth was quite weak. For 1,974 shares that declined on BSE, 589 rose. As many as 43 shares were unchanged.
The BSE clocked a turnover of Rs 4,830 crore.
Finance Minister P Chidambaram, on Monday, said an increase in the cash reserve ratio for banks was to moderate credit growth and the government was ready to take further action to curb inflation. In a surprise move, the RBI hiked cash reserve ratio (CRR) by 50 points after trading hours on Friday. "Banking scrips will adjust because their profitability is good. The stock market is on a high so no need to worry," Chidambaram opined.
Scared out of their skins, banking stocks posted heavy losses due to the CRR hike. SBI plunged 9% to Rs 1,230, ICICI Bank lost 7% to Rs 814, and HDFC Bank shed 5.3% to Rs 1,027. Banks are likely to take a final view on raising interest rates on loans as well as deposits, by the end of this week, or early next week. Reports suggest that interest rates on home loans are likely to become the first casualty.
Reliance Industries (RIL) lost 3.2% to Rs 1,227. As many as 17.8 lakh shares changed hands in the counter on BSE.
Cellular service providers succumbed to profit-taking. Bharti Airtel shed 4.9% to Rs 602 and Reliance Communications shed 4.6% to Rs 426.70.
Tata Steel 6.7% to Rs 460. The stock recovered from a 9.2% plunge, to Rs 438, at 13:00 IST. Reacting to the CSN bid Tata Steel said Monday, it was considering its position on Corus. Brazil’s CSN today announced a bid at 515 pence per share for Corus. CSN's announcement came close on the heels of Tata Steel raising its offer for Corus to 500 pence per share from the earlier 455 pence per share, today.
Cement major ACC plunged 6.8% to Rs 1,029.50, and NTPC lost 6.5% to Rs 141.65.
Infosys lost 0.6% to Rs 2,182 in volatile trade. As per reports, the company is renewing a few of its contracts at a premium. Meanwhile, the stock has been included in the Nasdaq 100 index.
FIIs were net sellers to the tune of Rs 1,087 crore in index-based futures on 8 December – the day when the Sensex lost 173 points. They were net sellers to the tune of about Rs 106 crore in individual stock futures that day. As per provisional data, FIIs were net sellers to the tune of Rs 106 crore in the cash segment the same day.
Nymex Crude was down, or rather almost unchanged, at $62 a barrel.
Response to Cairn India IPO, which opened for subscription today, improved as the day progressed. By 15:00 IST, the IPO had bids for 17.72 crore shares compared to the issue size of 32.8 crore shares. Most of the bidding took place at the upper end of the Rs 160 to Rs 190 price band.
Sharekhan Commodities Buzz dated December 11, 2006
Soybean: Off take strong in spot market
The demand for soybean is expected to increase during this week. Stockists and farmers are not willing to sell their stocks on expectations of the prices going up. However, the downtrend in soy meal prices has kept away the players from buying aggressively in the last month. Agriculture minister Sharad Pawar has said that the industry has estimated India's kharif 2006 oilseed output at 12.8 million tonne as against 13.7 million tonne a year ago.
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5 Intra-day Stock Ideas
NIFTY (3962) SUP 3929 RES 3994
BUY ROLTA (264)
SL 259 T 275, 277
BUY KARURVYSYA (404.75)
SL 400 T 414, 416
SELL NAGARCONST (209.45)
@ 214 SL 218 T 205, 203
SELL JKLAKSHMI (139.8)
@ 143 SL 147 T 136, 134
SELL STER (557)
@ 562 SL 565 T 551, 548
STRATEGY INPUTS FOR THE DAY
Bullfight between Cairn and Able
I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy. You won't get there by reading 'Now is the time to buy.'- Peter Lynch
While most market men are talking of liquidity being sucked out for the Cairn IPO which opens today, the global cues could be able to give the bulls an upper hand at least at start. Going ahead its going to be a swing based on daily and sometimes hourly news development. Don't expect any clear trend in the coming days as markets try to digest and hype all the news that comes its way.
US stocks rose on Friday after the world's largest economy added more jobs than expected. Most Asian markets are up this morning, led by export-oriented stocks like Toyota and Hyundai, as the yen and the won weakened against the dollar.
The negative bit of development is the recent selling by FIIs. They pulled out Rs2.05bn from the cash segment on Friday. In the F&O segment, they were net sellers to the tune of Rs12.55bn. On Thursday, foreign funds were net buyers of Rs101mn in the cash segment. Mutual Funds were net buyers of Rs41.9mn on the same day. The slowdown in overseas money is likely to cause some worry for the bulls notwithstanding the strong long-term fundamentals.
The market struggled to hold up last week after the Sensex crossed 14,000. Even that achievement is under a cloud with clear indications of market manipulation. We have been saying for quite a while but have no choice to repeat the same caveat. It is overtime to be cautious.
Now, we come to the most interesting part. The news. Predictably, Tata Steel has raised the offer for Corus. It has announced a revised bid of 500 pence per share for the Anglo-Dutch steel major. As if that is not enough. The Tata Group is reportedly eyeing a stake in the low-cost carrier SpiceJet. But, Zee will take a knock as it has lost the lucrative ICC cricket rights bid to arch rivals ESPN-Star combine.
ICICI Bank's Board has approved the proposal to merge the unlisted Sangli Bank with itself. However, the stock may come under some pressure as the RBI has hiked CRR by 50 basis points. Shares like L&T, BHEL and Hindustan Construction could gain as the Indo-US civilian nuclear deal is through in the Congress. President Bush is scheduled to sign on the dotted line today. A couple of other big events to watch out for will be tomorrow's Fed meeting and the OPEC meet on Dec. 14.
Three IPOs are opening today with Cairn India's mega issue being the main highlight. The other two are Pyramid Saimira and Tanla Solutions. Shares of Blue Bird will get listed on the bourses today.
Major Bulk Deals:
Merrill Lynch has bought Classic Diamonds; Franklin Templeton MF and HSBC have picked up Infotech Enterprise but Merrill Lynch has sold the stock; Morgan Stanley has sold MphasiS BFL.
Insider Trades:
Aptech Limited: Pramod Khera, Managing Director of the company has sold 17936 equity shares of Aptech Limited on 06-DEC-2006 in open market.
Mphasis Limited: Jaithirth Rao, Chairman has sold 136972 equity shares of Mphasis Limited on 05th Dec 2006.
Market Volumes:
The turnover on NSE was up 1% to Rs75.56bn. The BSE Oil & Gas index was the major loser and lost 2.21%. BSE Metal index (down 1.74%), BSE Auto index (down 1.58%), BSE FMCG index (down 1.44%) and BSE Capital Goods (down 1.27%) were among the other major losers.
Volume Toppers:
Tele Data Informatics, IFCI, Ashok Leyland, Polaris, NTPC, IDBI, SAIL, IndusInd Bank, R Com, Zee, Mphasis BFL, Gujarat Ambuja Cements, IVRCL Infra, Lanco Infratech, DCB, Yes Bank, ITC, Tata Steel and JP Associates.
Delivery Delight:
Aurobindo Pharma, Cummins India, Dr Reddys Laboratories, Era Constructions, Geometric Software, Gujarat Ambuja Cements, I-Flex Solutions, IndusInd Bank, Mphasis BFL, NTPC, Patel Engineering, Rajesh Exports, Ranbaxy, Rolta, Sonata Software, SBI and Yes Bank.
Brokers Recommendations:
Panacea Biotech - Buy from Kotak
Ceat - Buy Edelweiss
Long Term Investment:
ICICI Bank
Major News Headlines:
EID Parry in pact for sugar venture with Cargill Asia Pacific
Oracle announces revised open offer of Rs2,100 per share for i-flex
Govt considering taking over RBI stake in SBI
Mahindra unit sells cable accessories business
Parsvnath wins Delhi land bid for Rs2.3bn
GAIL acquires stake in Oil & Gas block in Myanmar
NEWS ROUND UP
UTV Software Communications Ltd has entered into an arrangement with Indiagames Ltd for acquisition of controlling equity stake in the Mumbai based mobile and online gaming company for Rs680mn. UTV would also be acquiring majority stake in Ignition Entertainment Ltd,, a UK based company involved in developing console games for Rs600mn.
The Cabinet Committee on Economic Affairs has given its approval to the initial public offering of shares by National Hydroelectric Power Corporation. The Government will sell upto 24% of NHPC’s share capital in one or more tranches from the domestic/external markets. The issue proceeds will be used for enabling the PSU to met the capacity addition targets.
Indian Oil Corporation Ltd. (IOC) has acquired a 12.5% stake in the Trans-Anatolian Pipeline Company (TAPCO), which is laying a crude oil pipeline between Turkey's Black Sea port of Samsun to the Mediterranean coast town of Ceyhan. TAPCO is currently owned by Eni SpA of Italy and alik Enerji AS of Turkey on a 50-50 basis. Eni has an oilfield in Kazakhstan and is a partner in the Blue Stream pipeline project.
The total GSM-based subscriber base in India crossed the 100mn mark in November, the Cellular Operators Association of India (COAI) announced on Friday. GSM service providers have set a new record by adding 5mn new users in November. This is even higher than the 4.7mn subscribers added in October. India has now joined the super-elite club of countries having more than 100mn GSM subscribers well ahead of expectations.
Dr Reddy's Laboratories is reportedly planning to invest $100mn over the next 18 months on capacity expansion, including setting up of two greenfield plants. Managing Director and Chief Operating Officer Satish Reddy said on Friday that the company would be scaling up capacities for formulations, active pharmaceuticals ingredients (API) and custom pharmaceutical business (CPB).
The Investment Commission has identified more than a dozen projects that would require a total investment of US $40bn. The investment inflow includes US chemical giant Dow's investment of US $10bn and investments by Citigroup, Barclays and Royal Bank of Nova Scotia amounting to US $2-3bn.
Indiainfoline - Patel Engineering Ltd.
Patel Engineering Ltd.
CMP: Rs445
Market Performer
Patel Engineering Ltd (PEL), with a dominance in the hydropower segment (40.3% of its order book and 61.7% of revenues), commands a 22% share in this vertical. We estimate spend of Rs500bn on hydropower during the 10th and 11th plan. Maintaining its share would mean Rs10bn order flow (simple average) to PEL from this vertical each year, ensuring a comfortable position for the next 6-7 years.
PEL’s OPM at 12.9%, is one of the highest among peers on account of complexity of work in this vertical and capabilities that only a handful of players possess. We expect an increased share of hydropower in PEL’s order book (43.2%) in FY07, helping sustain margins.
PEL’s initiative, to move up the value chain by bidding for independent power projects in hydropower and lumpsum turnkey projects in the irrigation segment, is a value accretive one. PEL is awarded its maiden annuity project valued at
Rs4.1bn, wherein its share is 60%. We assign a value of Rs8.2 per equity share of PEL to this annuity project, expecting an IRR of 12-14%.
PEL’s order book at Rs4.3bn translates into 4.2x FY06 turnover, offering visibility for a 3-year period. Order intake at 2.5x its FY06 consolidated revenues and the expected increase of 35% in order book in FY07 to drive growth.
PEL is fairly diversified and expected to witness a CAGR of 36.3% in turnover between FY06 and FY08. Its overseas subsidiaries and the recent acquisition in the urban infrastructure segment to add value going forward.
With an order book of 2.4x its current market capitalization, valuations appear attractive. We assign a MARKET PERFORMER rating.
How Market Fared
All round selling drags market
Intensified selling in scrip’s on the bourses dragged the key indices to close in deep red. The key indices lost ground for the first week after six weeks of continues gains, NSE Nifty fell 0.89% and benchmark Sensex dropped 0.50% during the week. After opening in green the markets the markets was on a southward journey as Oil & Gas, Auto, FMCG, Metal and technology index fell sharply. Finally, the BSE benchmark Sensex fell sharply losing 172 points to close at 13799. NSE Nifty also dropped 53 points to close at 3962.
Aurobindo Pharma edged lower 0.6% to Rs660. The company announced that it would consider plans to merge 2 units with itself on 15th December. The scrip touched an intra-day high of Rs672 and a low of Rs655 and recorded volumes of over 18,000 shares on NSE.
IDBI surged over 2% to Rs85 after the company seeks regulatory permission to open new branches. The scrip touched an intra-day high of Rs85 and a low of Rs83 and recorded volumes of over 9,00,000 shares on NSE.
SBI advanced 1% to Rs1361 as the company is likely to come out with a public issue in the next financial year. The scrip touched an intra-day high of Rs1617 and a low of Rs1350 and recorded volumes of over 2,00,000 shares on NSE.
IOC edged lower 0.7% to Rs442. The company bought 12.5% stake in Trans-Anatolian Pipeline Company. The scrip touched an intra-day high of Rs458 and a low of Rs441 and recorded volumes of over 12,000 shares on NSE.
Profit booking dragged the Auto stocks down. Tata Motors, Bajaj Auto, M&M and Maruti were among the major losers.
Telecom stocks also lost ground, heavy weights Bharti Airtel edged lower 0.6% to Rs634 and Reliance Communication lost 1.8% to Rs447. VSNL slipped 2.1% to Rs425 and MTNL was down 0.5% to Rs135.
Power stocks also pared their intra-day gains as profit booking dragged select stocks, Suzlon Energy marginally slipped 0.3% to Rs1350 and Tata power fell 1.6% to Rs584. However, Reliance Energy surged over 2.3% to Rs554.
Technology stocks were on the receiving end on back of profit booking. Index heavy weights Satyam Computer lost 2.7% to Rs455, Infosys fell by over 1.3% to Rs2195 and Wipro was down 1.2% to Rs576. Among the Mid-Cap stocks Moser Baer, HCL Tech and Tata Elxsi were among the major losers.
Pharma stocks were in poor health. Glaxo dropped by over 1.9% to Rs1189, Sun Pharma fell 1.2% to Rs994, Cipla was down 0.5% to Rs247.
Market may open in green
The gains in overnight US indices and strong ongoing asian indices helps domestic market to witness uptrend on the back of a bullish sentiment. The Nifty could rise to 4000 level on the upside while it has a crucial support at 3930 on the downside. The Sensex has a likely support at 13650 and resistance at 13900.
US indices registered gains, with the Dow Jones closing above the level at 12307, up 29 points, while the Nasdaq moving up by 10 points to close at 2437.
Indian floats trading on the US bourses were traded mixed. Dr Reddy was the lead performer and soared 1.06% while wipro rose over 0.57%. Infosys and Satyam gained marginally. However, Tata Motors declined 2.55%, ICICI Bank down by 2.98%, VSNL loss by 2.48% and MTNL declined by 2.33%. While Rediff, Patni Compuetrs ended with steady losses.
In the crude oil front, the Nymex light crude oil for January series lost 46 cents to close at $62.03 per barrel. The bullion Comex gold for February delivery down by $6 cents to settle at $631 respectively.
Profit taking to continue
The market may extend the correction that was set in on Friday (8 December) with RBI in a surprise move raising cash reserve ratio (CRR) by 50 basis points. The news of RBI raising CRR hit the market after trading hours on 8 December. The CRR hike is aimed at controlling inflationary expectations and it is likely to push up deposit and lending rates.
FII inflow holds key and it will dictate near term trend on the bourses. Traders are likely to do front running on expectations of strong FII allocations for the new calendar year 2007. Downside on the bourses is likely to be capped by expectations of strong Q3 December 2006 results which would begin next month.
For global markets, the near term trigger is the US Federal Reserve’s meeting on Tuesday (12 December) to decide on US interest rates. Fed is expected to keep interest rates unchanged. Analysts will be closely watching the Fed’s accompanying statement for cues of future rate moves.
Asian markets were steady to firm on Monday (11 December). Key benchmark indices in Hong Kong, Japan, South Korea and Singapore were up by between 0.2% to 1.4%.
Meanwhile, the US Congress early on Saturday took a major step toward permitting the sale of American-made nuclear reactors and fuel to India by giving final approval to Indo-US nuclear bill.
Stocks you can pick up this week
Mangalam Cement
Research: Emkay
Recommendation: Buy
CMP: Rs 207 (Face Value Rs 10)
12-Month Price Target: Rs 306
Mangalam Cement (MCL) is a Rajasthan-based cement player with an aggregate capacity of 1.5 million tonnes. MCL repaid its entire long-term debt as on October ’06 and plans to expand its cement capacity by 0.50 million tonnes, which will be commissioned by September ’07.
It will also set up a 17.5-mw thermal-based captive power plant (to be commissioned by June ’07), which will result in savings in power cost to the tune of Rs 133 per tonne. Emkay expects cement prices to remain firm during FY07E and FY08E, since major capacity additions will come by end FY08E and early FY09E.
This will drive MCL to report a 21% CAGR topline growth between FY06 and FY08, with EBITDA margins improving from 24% in FY06 to 29.7% in FY08E and PAT increasing at a CAGR of 30% during the period FY06-FY08E.
With an expected CAGR of 30% in EPS over FY06-FY08E, Emkay expects RoCE and RoE levels to remain healthy at 28.5% and 36.0%, respectively, for FY07E, and 41.9% and 55.4%, respectively, for FY08E.
Biocon
Research: Anand Rahi
Recommendation: Buy
CMP: Rs 360 (Face Value Rs 5)
12-Month Price Target: Rs 400-460
Biocon is a leading biopharmaceutical company with strong R&D capabilities in fermentation technology, biotechnology and drug discovery. The company is a pioneer and leader in production of biopharmaceuticals through the fermentation route.
With focus on generics, bio-generics and drug discovery, the company is poised to grow exponentially in coming years. Its manufacturing capacity is set to rise four-fold. Moreover, with the commissioning of Biocon’s Biopark, volumes are likely to drive growth in coming years.
The company’s mainstay continues to be bio-pharmaceuticals. The competition in bio-generics is much less and the opening up of the biggest bio-generics market (USA) will boost growth potential for Biocon significantly.
In coming years, the company’s financials will improve, with sharp rise in volumes and wider range of products for the global generic markets. The long-term potential of the company lies in the success of its various R&D projects in drug discovery and drug delivery technologies.
This stock is meant for smart players looking for small downside, a modest upside in the short to medium term and very good long-term gains in a quality large-cap stock. So, it’s a stock for all classes and all time periods.
Bharati Shipyard
Research: Angel Broking
Recommendation: Buy
CMP: Rs 320 (Face Value Rs 10)
12-Month Price Target: Rs 450
Global order book registered a 29% CAGR over the period ’03-06. Going forward, a similar trend is expected on the back of growth in demand for vessels, which is a result of replacement demand and capex boom in the offshore segment (leading to increasing demand for offshore vessels).
India’s current market share in the world ship-building industry is around 0.3% in terms of dead weight tonne (DWT). It is set to gain market share on the back of cost competitiveness and availability of technically qualified manpower.
India also has a locational advantage (a vast coastline of 7,516 km). Bharati’s order book has shown a robust CAGR of 135% over the past three years. The company currently has an order book size of Rs 2,335 crore, which will sustain growth through FY09.
Completion of its Mangalore yard will further boost growth beyond FY09. The stock is currently trading at 17.8x FY07E earnings of Rs 17.9, 8.0x FY08E earnings of Rs 40.1 and 5.6x FY09E earnings of Rs 56.7. Angel initiates coverage on the stock with a ‘buy’ recommendation and a 12-month target price of Rs 450, giving a 41% upside from the current market price.
Sasken Communication
Research: Citigroup
Recommendation: Buy
CMP: Rs 492 (Face Value Rs 10)
12-Month Price Target: Rs 653
Strong presence in offshore R&D services and a turnaround in the products business in FY08E should ensure strong earnings momentum for Sasken in FY06-09E. Growth in the services business is being driven by higher acceptance of offshoring in R&D services.
The services business has marquee clients such as Nortel and Nokia. Citigroup expects the business to register revenue and EBITDA CAGR of 42% and 36%, respectively, over FY06-FY09. The Botnia acquisition has added further momentum to growth.
Sasken has been making significant investment in creating software for mobile phones. It forecast a 52% revenue CAGR over FY06-09 and a turnaround in FY08 for this business, with shipments expected to start over the next few months.
The loss-making products business has been a drag on overall profit. Hence, the stock looks expensive on P/E. Citigroup values the products business on a P/S basis and the services business on EV/EBITDA. Apart from sector risks, the products business has a high risk profile on the technology front and is exposed to delays in handset shipments.
Panama Petrochem
Research: Edelweiss
Recommendation: Buy
CMP: Rs 123 (Face Value Rs 10)
12-Month Price Target: NA
Panama Petrochem manufactures specialty petroleum products that serve as raw materials for various industries like inks and resins, textiles, rubber, pharmaceuticals, cosmetics, transformers and power cables. These industries are growing significantly on the back of strong demand growth for their manufactured goods, which in turn, is propelling Panama’s growth.
Panama also has a well-diversified customer profile, eliminating risks of revenue concentration. Panama has tied up with Petronas, the Malaysian oil and gas (O&G) giant, to distribute Petronas’ high-end auto lubricant ‘Syntium’ in India. Petronas is keen on entering the Indian market in a big way and plans to launch more of its products here.
Panama, the most likely medium for Petronas’ Indian foray, stands to benefit greatly, as the alliance will give Panama a foothold in the Rs 500-crore high-end auto lubes market in India. Depending on Syntium’s success, Panama will also start blending and packaging Petronas’ products at its Baddi plant in future.
Edelweiss expects this division to generate Rs 1.2 crore revenue in FY07E with gross margins of ~12%. It estimates revenues and profits to grow at 25% and 26% CAGR, respectively, between FY07E and FY09E. At the current market price, the stock trades at 5.7x FY07E EPS of Rs 23.2 and 4x FY08E EPS of Rs 33.
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