Friday, December 15, 2006
As the secondary market is in the midst of yet another roller coaster ride, usual doubts have begun resurfacing about the fate of the companies planning public issues in the near future. Companies with total issues of over Rs 55,000 crore are already at an advanced stage of tapping the markets.
Prithvi Haldea, MD, Prime Database, said the actual amount raised could far exceed that if the market remains stable.
“The companies have to take a call on the market two months before as this is the time required for the whole process. If the markets do not show signs of stability, the companies do not get ahead with it,” he said.
“Therefore, if there are signs of stability in the coming year, the issues could go much higher. This is evident as there are plenty of issuers apart from the above and the enough domestic and foreign investors to subscribe to these issues,” Mr Haldea added.
According to Prime Database, the company which tracks primary markets, public issues by companies amounting to over Rs 11,500 crore have already been filed with Securities and Exchange Board of India and some of them have already received approval. The major initial public offerings (IPOs) among them being Idea Cellular, Fortis Healthcare, Power Finance Corporation, Indian Bank among others having an issue size of approximately Rs 2,500 crore, Rs 1,000 crore, RS 1,500 crore and Rs 900 crore respectively.
Also in the offing are IPOs of companies which are yet to file prospectus for approval like the much awaited DLF Universal and others like National Hydroelectric Power Corporation, Omaxe Construction, Bombay Stock Exchange, Multi Commodity Exchange, Power Grid Corporation, Spice Communications, SET India, Peninsula Land and United Spirits amounting to about Rs 21,000 crore.
Also in the pipeline are large Follow-on Public Issues (FPOs) largely from public sector banks like State Bank of India (SBI), Canara Bank, Vijaya Bank and Uco Bank amounting to a total of about Rs 16,500 crore with SBIs issue alone amounting to Rs 12,000 crores apart from the Central Bank of India’s IPO of about Rs 750 crore.
Rajnish Rangari, president and head, investment banking, Bajaj Capital said it may not be possible for companies to raise that much amount in a single year. “In the last three years the companies have raised about Rs 75,000 crore from the market. In the financial year 2006, the companies have raised about Rs 25,500 crore, this calendar year’s figures could go up to about Rs 22,000 crore, if we include the Cairn IPO also.
However, issues amounting to Rs 55,000 to 60,000 crore seems to be an uphill task for 2007 calender year alone. Another thing to take into consideration would be how much of this amount that the company’s are planning would be through pre-IPO placement as that could also reduce the total amount raised from the market significantly.”
Other investment bankers say that even if the markets do not continue to perform like the past, there is no stopping to these IPOs. The only difference would be that the companies would not be able to price the issue the way they would have done in the past. But, there are companies that would go ahead with their fund raising plans even if the bull-run does not continue.
The other major companies that are at an advanced stage include Orbit Corporation, Ind Synergy, Akruti Nirman, Pearl Fashions, Gammon Infrastructure, Mudra Lifestyle et al. Besides these there are other companies like North Eastern Electric Power, Haldia Petrochemicals, Mindtree Consulting and Alliance Nirmaan.
Crude oil: OPEC cuts production by 500,000 barrels/day
Yesterday's OPEC meeting was a big market-moving factor for the oil counter. Registering a low of $61.375 per barrel, January crude oil futures recorded a high of $62.725 and closed marginally off the intra-day high at $62.525. According to OPEC, market fundamentals clearly indicate that there is more than ample crude supply and stock levels are high. Further, OPEC opined that the November output stabilised the market and has decided to trim production by 500,000 barrels/day, effective February 1, 2007. Expect the prices of crude to be firm with $60 forming a good base.
The market is expected to see high volatility in the coming week on account of mixed views.
Profit-booking may cap the upside from this level.
A section of the market expects sideways movement on the bourses, as FII-participation will be limited on account of “year end” factor, taking its toll on volumes. Foreign fund managers will be on a holiday for Christmas and year-end from about 20 December 2006.
Market men will also be closely eyeing third installment of advance tax paid by corporates and FII allocations for India for calendar year 2007. The third installment is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results.
Technical analysts feel that 3,900-3,920 is a key resistance level for Nifty. Only a decision close to that level will indicate resumption of uptrend, they say. Nifty also has strong support at 3,700 level, market participants feel.
The BSE Sensex snapped its winning streak, posting a loss for the week ended Friday, (15 December) on profit-booking.
The Sensex lost 184.97 points for the week ended Friday, (15 December) to 13,614.52, while the NSE Nifty lost 63.90 points, to settle at 3,888.65.
The Sensex started the week with a sharp plunge of 400.06 points, to settle at 13,399.43, on 11 December 2006, after the RBI came out with a surprise 0.5% hike in cash reserve ratio (CRR), after market hours on Friday (8 December).
On 12 December 2006, the BSE Sensex registered a mammoth 404.41 point loss, to settle at 12,995.05 as selling continued following data showing lower-than-expected 6.2% growth in industrial production in October 2006, which raised fears of economic slowdown.
The BSE Sensex jumped 186.32 points on 13 December, to settle at 13,181.34, on bargain-hunting after a steep fall and on short covering later in the day.
The market continued to recover due to strong buying in index pivotals, with the Sensex gaining 305.82 to 13,487.16 on 14 December 2006.
The Sensex jumped 127.36 points, to settle at 13,614.52 on 15 December on the back of firm global markets, and a decline in inflation.
Reliance Industries (RIL) lost 1.22% to Rs 1,252.55. RIL has reportedly paid Rs 444 crore towards the third installment of advance tax due 15 December 2006. CLSA, a brokerage, while issuing an outperform rating on the scrip with a 12-month price target of Rs 1,265, recently stated that RIL's scrip performance over the next year will hinge on news flow.
State Bank of India (SBI) declined 7.33% to Rs 1,261. The Standing Committee on Finance has endorsed the proposed legislative amendment to reduce State Bank of India’s shareholding in its subsidiary banks from current 55% to 51%.
ICICI Bank slipped 0.10% to Rs 868.05, after it announced an increase of 0.5% in its Benchmark Advance Rate (I-BAR) and its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from 18 December 2006. The hike in lending rates will help protect margins.
Tata Steel lost 5.27% to Rs 460. Brazil’s CSN had announced a higher bid at 515 pence per share for Corus. There are media reports that the company will invest Rs 450 crore for setting up an iron ore smelting plant in Thailand. The iron ore smelter unit will be part of Millennium Steel, Tata Steel's Thai subsidiary. Tata Steel had also hiked its offer for Corus to 500 pence per share, from the earlier 455 pence per share. Reacting to the CSN bid, Tata Steel said Monday, it was considering its position on Corus. Media speculates that Tata Steel may raise its bid to 550 pence per Corus share, raising the price to over $10 billion, to trump Companhia Siderurgica Nacional's (CSN) offer of 515 pence per share.
Reliance Communications gained 4.58% to Rs 466, on media reports that it is in talks with three US private equity groups, for buying the India operations of Hutchison Telecommunications International in a deal worth more than $14 billion.
ONGC lost 3.39% to Rs 812, on reports that its joint venture with Mittal group, is close to signing an agreement for an oil block in Turkmenistan. Another report that ONGC’s overseas investment arm proposes to undertake joint exploration and production activities in Iraq with Reliance Industries (RIL), too, aided the recovery after a steep decline in the past four days. ONGC Mittal Energy (OMEL), the joint venture between ONGC and Mittal group, is eyeing opportunities in Kazakhstan, Azerbaijan and Indonesia, reports add.
Larsen & Toubro (L&T) rose 0.39% to Rs 1,454, after announcing that the company won two major contracts of an aggregate value of $ 86 million from a leading Chinese petrochemical company, Sinopec. It had also bagged a massive Rs 5,400 crore contract from GMR Infrastructure, to design and construct the terminal and run-way at New Delhi airport. Also L&T Infotech, the software and services arm of construction major Larsen & Toubro, signed an agreement to acquire US-based GDA Technologies, an electronics design services firm.
Diversified firm Grasim lost 0.15% to Rs 2,741. The company is reportedly said to be buying a stake in Austrian cellulose-fibre maker Lenzing AG. The deal could help the firm to get a foothold in the global viscose staple-fibre market, and will increase its fibre production capacity by almost 4,53,000 tonnes. The deal is likely to be completed during the current fiscal.
Budget airline SpiceJet advanced 6.33% to Rs 56.25, after Tata group on Monday said it had picked up `less than 10% stake' as a purely financial investment.
In a surprise move, the RBI hiked cash reserve ratio (CRR) by 50 basis points after trading hours on Friday (8 December). 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.
India's wholesale price index rose 5.16% in the 12 months to 2 December 2006, lower than the previous week's annual rise of 5.30% helped by a decline in food and energy prices, data showed on Friday (15 December).
India's industrial production rose 6.2% in October from a year earlier, which was well below market expectations, lower-than-expected manufacturing output being the prime culprit for the slowdown. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6.0% in October from a year earlier, compared with 12.0% annual growth in September.
Meanwhile, the US Federal Reserve kept interest rates unchanged on Tuesday (12 December) for the fourth straight time, as worries about inflation continued to overshadow concerns about the slowing economy. At its final meeting of 2006, Fed left its target for federal funds at 5.25%. The funds rate, the interest that banks charge each other, has been at that level since June, when the Fed raised rates for the 17th consecutive time in a two-year effort to combat rising inflation.
The northbound trend continued in the Sensex for the third consecutive session with the index registering smart gains on buying in heavyweight and sectoral stocks. The Sensex began the trading session with gains of 59 points at 13546 and rallied past 13650 to touch an intra-day high of 13670 in early trades. The Sensex came close to testing 12700 towards the close, but ended the session with gains of 127 points at 13615. The Nifty gained 46 points to close at 3889.
The breadth of the market was positive. Of the 2,615 stocks traded on the BSE, 1,546 stocks advanced, 993 stocks declined and 76 stocks ended unchanged. On the sectoral indices front, the BSE Metal index surged 3.94% at 8803 followed by the BSE CD index (up 1.96% at 3403) and the BSE Bankex (up 1.38% at 6995). However, the BSE FMCG index and the BSE Oil & Gas index inched lower.
Among the gainers Tata Steel advanced 5.36% at Rs459, Reliance Communications surged 4.31% at Rs467, Hindalco added 3.73% at Rs178, SBI advanced 3.39% at Rs1,264, Grasim Industries gained 2.93% at Rs2,741, ACC jumped 2.63% at Rs1,059 and Satyam Computers was up 2.07% at Rs477. However, NTPC dropped 1.68% at Rs143, ITC lost 1.36% at Rs175 and Wipro declined 1.06% at Rs564. Cipla, Reliance Industries, Bajaj Auto and Dr Reddy’s closed with marginal losses.
Several metal stocks attracted strong buying support. Jindal Steel & Power soared 6.86% at Rs2,167, JSW Steel advanced 5.58% at Rs339, Tata Steel surged 5.36% at Rs459 and SAIL gained 3.76% at Rs83. NALCO, Jindal Stainless Steel, Ispat Industries, and Hindustan Zinc gained 1-3% each.
Over 48.32 lakh Zee Telefilms shares changed hands on the BSE followed by Hindalco Industries (38.30 lakh shares), Reliance Communications (30.70 lakh shares), Tata Steel (27.42 lakh shares) and Sterling Biotech (23.56 lakh shares).
Value-wise Suzlon Energy registered a turnover of Rs259 crore on the BSE followed by Zee Telefilms (Rs167 crore), Reliance Communications (Rs142 crore), Tata Steel (Rs124 crore) and Reliance Industries (Rs105 crore).
Firm global markets, a psychologically important decline in inflation and provisional data showing heavy FII buying on Thursday, boosted the market. The BSE benchmark index traded in the green throughout the session.
However, the market failed to sustain the higher level as it approached a key resistance level.
The BSE Sensex’s provisional closing was 13,606.41, a gain of 119.25 points. The provisional closing of CNX Nifty was 3,883.95, a gain of 1%.
Nifty pared gains after scaling 3,908.45 in mid-afternoon trade. Technical analysts feel that 3,900-3,920 is a key resistance level for Nifty. Only a decision close to that level will indicate resumption of uptrend, they say. Nifty also has a strong support at 3,700 level, market participants feel.
Sensex swung 124.05 points between a low of 13,545.60 and a high of 13,669.65.
The market-breadth was strong. For 1,549 shares rising on BSE, 1,007 declined. A total of 71 shares were unchanged. Gainers outpaced losers by a ratio of 1.53:1.
The BSE clocked a turnover of Rs 4,150 crore.
PSU banks surged after data released at 12:00 IST revealed that inflation eased to 5.16% for the 12 months to 2 December, compared to 5.3% in the previous week. Canara Bank surged 9.9% to Rs 291.90, Bank of Baroda rose 4.7% to Rs 246 and Bank of India gained 4.4% to Rs 193.25.
State Bank of India gained 3% to Rs 1,261. The Standing Committee on Finance has endorsed the proposed legislative amendment to reduce State Bank of India’s shareholding in its subsidiary banks from current 55% to 51%.
Reliance Industries (RIL) declined in volatile trade. The stock shed 0.7% to Rs 1252.55. Reports today suggest, RIL has paid Rs 444 crore towards the third installment of advance tax due 15 December 2006. CLSA, a brokerage, while issuing an outperform rating on the scrip with a 12-month price target of Rs 1,265, recently stated that RIL's scrip performance over the next year will hinge on news flow.
Battered Tata Steel surged 5.5% to Rs 460. A strong 27.3 lakh shares changed hands in the counter on BSE. The stock rose on bargain-hunting, after a steep fall caused by concerns over its bidding war with Brazil’s CSN. Both are locked in a deadly duel over European steel maker Corus Group.
Reliance Communications surged 4% to Rs 466, extending its rebound of the last two days, amid reports of the company chasing Hutchison's India operations.
Hindalco surged nearly 4% to Rs 177.95, tracking firm global copper prices. The stock rose on a huge volume of 38.2 lakh shares on BSE.
Select IT pivotals gained, tracking overnight gains in their ADRs. Satyam Computer rose 3% to Rs 481.70, after its ADR rose 3.6% to $23.79. Infosys rose 1.8% to Rs 2,239; its ADR rose 2.1% to $55.20.
ACC (up 2.2% to Rs 1,055) held firm. The board of ACC has approved an expenditure of about Rs 1,480 crore to raise the capacity of the New Wadi plant, by about 3 million tonnes per annum.
Grasim gained 2.9% to Rs 2,741, extending its recent surge.
Asian and European markets were steady-to-firm. Key benchmark indices in Hong Kong, Japan and London were up 0.3 - 1%. US stocks surged on Thursday, driving the Dow industrials to a record close on strong earnings from companies such as investment bank, Bear Stearns Company, and an improving outlook for the US economy. The Dow Jones industrial average gained 99.26 points, or 0.81%, while the Standard & Poor's 500 Index jumped 12.28 points, or 0.87%, to end at 1,425.49. The Nasdaq Composite Index finished up 21.44 points, or 0.88%, at 2,453.85.
International rating agency S&P said on Thursday, it is looking to upgrade India’s sovereign rating.
As per provisional data, FIIs were net buyers to the tune of Rs 480 crore on Thursday (14 December), the day when the Sensex had surged 306 points. They were net sellers to the tune of Rs 96.90 crore on 13 December, the day when the Sensex had gained 186 points.
Nymex crude rose 27 cents, to $62.78 a barrel, extending Thursday’s near 2% surge due to an OPEC decision to cut production once again.
Cluster: Emerging Star
Price target: Rs320
Current market price: Rs232
Designed to grow
- Niche player with distinct competitive strengths: Tata Elxsi Ltd (TEL) has built the required scale of operations and established strong client relationships with leading global companies to effectively tap the huge opportunity emerging in the niche segment of product design and engineering space. In this space, the size of the opportunity for the domestic companies is estimated to more than double to $6.6 billion by 2010. TEL also has the advantage of having developed reusable components (intellectual property to provide faster and more valuable proposition to the customers) and is investing to boost its delivery capabilities in the high-end services like VLSI and chip design.
- Aggressive expansion plans: TEL has aggressive expansion plans in terms of the capital expenditure on physical infrastructure and employee addition. This clearly reflects the management's growing confidence in the revenue growth visibility over the next few years.
- Improving margins: The shift in the revenue mix in favour of the high-margin software development service business has significantly improved the company's operating margins in the past two years (up by 490 basis points to 19.8% in FY2006). The trend is expected to continue and further boost margins by 250 basis points during FY2006-08, in spite of the aggressive expansion plans and rising wage inflation.
- Attractive valuations and decent dividend yield: Revenues and earnings are estimated to grow at a robust rate of 26.8% and 34.5% respectively, during the period FY2006-08. Moreover, the company offers a decent dividend yield of 2.8% (based on the 65% dividend given in FY2006), which is likely to limit the downside risk. We recommend Buy call on TEL with a one-year target price of Rs320.
Positive sentiment bolsters equity AUMs
The assets under management (AUM) for equity funds increased by 6.2% to Rs135,851 crore in November 2006. The rise in the equity AUM was higher than the market movement of 5.2%Download here
NIFTY (3843) SUP 3809 RES 3888
BUY TATACHEM (218.85)
SL 214 T 226, 229
BUY NICOLASPIR (240.25)
SL 235 T 250, 252
BUY CIPLA (247.4)
SL 242 T 257, 260
BUY INFOSYSTCH (2196)
SL 2175 T 2230, 2235
SELL PRAJIND (175.55)
@ 177 SL 181 T 168, 165
Raging Bulls set to get ahead
There are plenty of ways to get ahead.
The first is so basic I'm almost embarrassed to say it: Spend less than you earn.
The raging bulls look set to pounce on the bears who had barely made their entry last Friday. This Friday promises to be a different story. We expect a gap-up opening, on the back of the rally across global markets. Higher oil prices could dampen the sentiment. And some cooling cannot be ruled out after a strong start. Watch out for the advance tax numbers for the October-December quarter for more clues on the health of India Inc. When everything looks fine remember to keep increasing your stop losses. Real estate stocks look set for another run.
The bulls have fought their way back smartly in the last couple of sessions. Half the losses that the Sensex suffered since last Friday have been reversed in just two days. A job well done considering the grim start to the week. So now, where do we go? Up or down? And, how intense will be the move either way? These are tough questions, which only the market can answer. The market will remain volatile in the next few days. FIIs may take it easy towards the holiday season. In short, the market may remain range-bound with short term spikes either way.
In the interim, if there is any negative news, like another rate hike by the RBI, a spike in oil prices or soft economic numbers, the bears could raise their ugly head yet again. This is definitely one of the toughest times in the market. A carefully crafted stock specific approach is the right way to go.
FIIs were net buyers to the tune of Rs4.8bn (provisional) in the cash segment on Thursday. They were net sellers of Rs969mn on Wednesday. Mutual Funds offloaded shares worth Rs2.32bn on the same day.
Our five short- term recommendations given on Thursday performed exceptionally well. Gayatri Projects rose by over 10% and Titan Industries added over 6%. Also, Godrej Industries climbed by 4%.
Aurobindo Pharma's Board will meet today to consider the proposal for merger of APL Life Sciences and Senor Organics, the wholly owned subsidiaries of the company, with itself.
Subex Azure's Board will meet today to consider calling an EGM for approving the proposed issue of sponsored GDRs. Crew BOS Products' Board will meet today to consider a preferential allotment and plans to raise funds up to US$25mn.
US stocks rallied on Thursday with the Dow Jones Industrial Average carving out a new record close and the S&P 500 touching a more than six-year high, thanks to upbeat earnings from the banking sector, a drop in jobless claims and a rebound in technology.
Gains in energy shares lent support, after crude jumped above $62 per barrel. The Organization of Petroleum Exporting Countries (OPEC) said that it will cut output by another half a million barrels a day starting Feb. 1.
The Dow climbed 99.26 points, or 0.8%, to 12,416.76, surpassing its previous high of 12,342.56 set on Nov. 17. The S&P 500 added 12.28 points, or 0.9%, to 1425.49, a six-year high. The Nasdaq jumped 21.44 points, or 0.9%, to 2453.85.
US light crude oil for January delivery surged $1.14 to settle at $62.51 a barrel on the New York Mercantile Exchange. The front-month contract was quoting nearly unchanged at $62.50 per barrel in extended trading in Asia.
Treasury prices fell, with the yield on the benchmark 10-year note rising to 4.60% from 4.58% late on Wednesday. In currency trading, the dollar rose against the yen and euro. COMEX February gold slipped $1.50 to settle at $630.90 an ounce.
Indian ADRs closed sharply higher. Patni was up close to 3%, VSNL surged by nearly 5%, Infy added 2.2%, Wipro advanced 3.2%, Satyam gained 3.6%, Tata Motors climbed 3.3%, Dr. Reddy's put on 3.6%, HDFC Bank rose by over 4%, ICICI Bank jumped 4.4% and MTNL added 1.3%.
European shares gained ground. The UK's FTSE 100 closed up 0.6% to 6,228. Germany's DAX Xetra 30 gained 0.5% to 6,552.58. In France, the CAC-40 added 0.6% to 5,509.58. The pan-European Dow Jones Stoxx 600 index rose 0.6% to 364.16.
All the emerging markets closed higher as well. The Bovespa in Brazil gained 1% to 43,754 while the IPC index in Mexico was up 0.7% at 25,863 and the RTS index in Russia added 0.6% to 1840.
Asian stocks rose for a fourth day on Friday, the longest rally in almost two months. Honda and Hynix Semiconductor led gains after US companies reported higher profits, lifting the Dow to a record.
Fanuc led Japanese shares higher after the Bank of Japan's Tankan survey showed that business confidence rose to a two-year high. BHP Billiton and Inpex Holdings climbed after prices of copper and oil gained.
The Morgan Stanley Capital International Asia-Pacific Index gained 0.3% to 138.22 at 10:53 a.m. in Tokyo, adding to a three-day, 1% rally. The index is set for its fifth consecutive weekly gain. All regional benchmarks rose, with indexes in Australia and Singapore heading for records.
Japan's Nikkei 225 Stock Average added 103 points to 16,932. The Hang Seng in Hong Kong advanced 166 points to 19,086. The Kospi in Seoul was up 5 points at 1423 while the Taiex in Taiwan rose 60 points to 7540 and the Straits Times in Singapore climbed 25 points to 2841.
Major Bulk Deals:
Bear Stearns has sold Aarvee Denim; Birla Sunlife MF has purchased Bharat Bijlee; Prudential ICICI MF has sold Century Textiles; Kotak has sold Dynamatic; Fidelity has bought Eastern Silk; Citigroup Global has picked up Gayatri Projects; HSBC Financial has sold Hindustan Motors.
The turnover on NSE was down by 16% to Rs80.87bn. BSE Consumer Durable index was the major gainer and gained by 3.97%. BSE Technology index (up 2.71%), BSE Bank index (up 2.58%), BSE FMCG index (up 2.48%) and BSE Capital Good index (up 2.35%) were the other major gainers.
IFCI, Teledata Informatics, SAIL, HLL, Zee, IVRCl Infra, Parsvnath Developers, NTPC, Century Textiles, Unitech, India Cements, Bank of India, Indiabulls, Reliance Industries, GMR Infra, Voltas, RPL, ITC and Polaris.
Upper Circuit Filters:
Fedders Lloyd, Nirlon, Ansal Infrastructure, BPL Ltd, LMW, Eicher Motors and Flex Industries.
BEL, BHEL, Bombay Dyeing, Canara Bank, CEAT, Century Textiles, Cipla, Divis Laboratories, Dr Reddys Laboratories, Godrej Industries, HCL Technologies, Hindustan Lever, ICICI Bank, Indian Hotels, NDTV, Punj Lloyd, Sun TV, Tata Power, Tata Tea and VSNL.
Areva T&D – Buy from Brics Securities
Long Term Investment:
Major News Headlines:
Tata Motors, Fiat to start building cars, engines beginning 2008
Ranbaxy gets FDA approval to sell generic version of Cefzil
Spanco Tele Board to meet on Dec 20 on fund raising plan
HCL Tech announces 1;1 bonus
Punj Lloyd sets up Engineering Services Outsourcing firm
L&T secures $86mn order from China
Maruti to raise car prices in January
Accentia Tech to acquire BPO companies in US
Kale Consultants wins order from SkyTeam alliance
Federal-Mogul to mull Rights Issue on Dec 21
Nagarjuna Construction Company Ltd.
Nagarjuna Construction Company Ltd (NCC) to benefit from the high investment in road and water verticals, expected to together account for 35.6% of revenues in FY07 and 19.5% in FY08. The current order book at 3.4x FY06 turnover is healthy, given NCC’s average execution period of 27 months. With order intake during FY06 at 2x turnover, NCC is set for high growth in the next two years,
with an expected topline increase of 54.5% and 43.5% during FY07 and FY08 respectively.
NCC was one of the early entrants into the BOT space and enjoys a good mix with two annuity road projects, two toll based ones and two projects in the power vertical. The company plans to bid for new BOTs on its own having raised
the finances. At the book value of NCC’s equity, these six projects translate into Rs15.8 per share of NCC, which is 9% of the CMP.
NCC will sell 88% of the 50 acres land, in lieu of 12% of the developed area to be given to the government, post the National Games 2007. NCC also has 89% equity stake in the AP Housing project for development of 85 acres. We value these two projects at Rs9.1 per share of NCC at 2x book value of equity infused,
comprising 5.2% of the CMP.
We also assign a value of Rs10.9 per share to the 130 acres land bank, over and above the two projects above, with a current market value of Rs3bn, post a 25% haircut. We foresee enormous value unlocking on the development and
sale of these properties in future.
All round buying lifts Sensex
The markets surged higher for the second straight trading session after suffering huge fall in recent trading sessions. The benchmark index has recovered nearly 500 points in couple of days recouping almost half of their losses. The key indices registered strong opening tracking the firm Asian and US Markets. From, there on, there was no looking back as heavy buying was witnessed in scrip’s across the sectors. The Banking and Technology stocks led from the front each gaining over 2.5%. Heavy gains in the index heavy weights like ICICI Bank, RIL, Infosys and L&T aided the benchmark index to pierce the 13500 mark and supported NSE Nifty to close above the 3800 mark. Finally, the BSE Benchmark Sensex accumulated 305 points to close at 13487. NSE Nifty gained 77 points to close at 3843.
Punj Lloyd rallied over 8% to Rs1015 after the company announced that they have set up Engineering Services Outsourcing Company. The scrip touched an intra-day high of Rs1024 and a low of Rs941 and recorded volumes of over 8,00,000 shares on NSE.
Maruti gained 2.1% to Rs903 amid reports that it would hike prices in January. The scrip touched an intra-day high of Rs910 and a low of Rs890 and recorded volumes of over 5,00,000 shares on NSE.
Reliance Communication gained over 3.5% to Rs447 as reports stated that it has got loan from ABN Amro, Standard Chartered, Citi Group. The scrip touched an intra-day high of Rs451 and a low of Rs432 and recorded volumes of over 71,00,000 shares on NSE.
Air Deccan gained 1.5% to Rs134 as reports stated that the Government is considering relaxing the criterion for flying overseas, from five years of domestic operations to three years. The scrip touched an intra-day high of Rs141 and a low of Rs134 and recorded volumes of over 13,00,000 shares on NSE.
Pharma stocks continued their northward journey. Sun Pharma gained over 2.5% to Rs958, Dr Reddy’s Lab advanced 2.6% to Rs805, Cipla was up 4.2% to Rs247and Cadila spurred 4.3% to Rs326.
Telecom stocks were ringing with smart gains. Bharti Airtel advanced 2% to Rs610 after the company announced their plans to form Mutual Fund Joint Venture with Axa, R Com spurred 3.5% to Rs447, VSNL was up 2.1% to Rs392 and MTNL added 0.7% to Rs132.
The real Estate stocks hogged the limelight. Bombay Dyeing spurred 7.7% to Rs719, Mahindra Gesco surged 5.5% to Rs952 and Century Textile advanced 6.4% to Rs669.
Cement stocks were trading higher. Gujarat Ambuja surged 3.4% to Rs138, ACC advanced 2.3% to Rs1028, Grasim was up 1.9% to Rs2665 and India Cement spurred 4.7% to Rs215.
Broadcasting stocks also put on a good show. Zee Telefilms spurred 5.3% to Rs353 after the company set Dec 18 as date for split into 3 companies, Sun TV spurred by over 4.95 to Rs1326, NDTV gained 2.7% to Rs204 and TV Today was up nearly by 3% to Rs70.
The market is likely to witness upward trend as major Asian gauges like the Nikkei, the Hang Seng index, the Kospi index and the Jakarta index have gained in current trades and US Market also ended with a positive note on note. The domestic indices also gained by 306 points on Thursday and finally closed at 13487 marks.
Among the domestic indices, the Nifty could test resistence around 3850-3875 levels and on the downside 3820. below this level may slip to 3750 level. The Sensex has a likely support at 13440 and may face resistance at 13620.
US indices ended positive on Thursday with, the Dow Jones closing at 12417, up 99 points, while the Nasdaq moving up by 21 points to close at 2454.
All Indian floats, also, gained in US market and ended higher. HDFC Bank, ICICI Bank and VSNL where the heaver gainers by over 4%, while Satyam, Wipro, Dr Reddy's & Tata Motors were up by 3% each. Infosys, MTNL, Rediff and Patni Compuetrs gained above 1-2% each.
While the Nymex light crude oil for January delivery gained by $ 1.14 to close at $62.51 a barrel. In the commodity space, the Comex gold for February series declined $1.50 to settle at $630.90 an ounce.
Firm global markets and positive news flow triggered a solid rebound on the bourses on Thursday (14 December). The market is likely to extend that gains today tracking firm Asian markets and after Dow hit a record high on Thursday.
News that international rating agency S&P is looking to upgrade India’s sovereign rating and a surprise liberal 1:1 bonus issue by HCL Tech fanned bullish sentiment on the domestic bourses on Thursday as Sensex jumped 306 points to 13,487 and Nifty rose 77.85 points to 3,843.05.
According to dealers, Nifty has a strong resistance at 3,900-3,920 level. Only a decisive breach above that level would mark the resumption of the bull phase in the markets, according a technical analyst with a local brokerage. Nifty also has a strong support at 3,700 level, according to market participants. Key economic data due today is the weekly inflation data at 12:00 IST.
As per provisional data, FIIs were net buyers to the tune of Rs 480 crore on Thursday 14 December, the day when Sensex had surged 306 points. They were net sellers to the tune of Rs 96.90 crore on 13 December, the day when Sensex had gained 186 points.
FIIs were seen cutting cash-futures arbitrage positions in the recent market fall. Simultaneously, they pressed heavy sales in index-based futures. Their net sales in index-based futures in four trading sessions, between 8 December and 13 December, aggregated Rs 3,036 crore.
Mutual funds have pressed heavy sales recently. Their net outflow in three trading sessions between 11 December to 13 December totaled Rs 1439 crore.
After the latest industrial data, which spread fear of an economic slowdown, market men will now be closely eyeing advance tax payment by corporates for the third installment, due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so, given that strong earnings growth has been a key driver of the bull-run on the bourses.
A section of the market expects sideways movement on the bourses in the coming days as, it is felt, FII participation will be limited on account of “year end” factor and volumes might take a hit. Foreign fund managers will be on a holiday for Christmas and year-end from middle of next week from about 20 December.
Asian markets were steady to firm on Friday following overnight gain in US stocks on Thursday. Key benchmark indices in Asia were up by between 0.12% to 1%.
US stocks surged on Thursday, driving the Dow industrials to a record close on strong earnings from companies such as investment bank Bear Stearns Company and an improving outlook for the U.S. economy. The Dow Jones industrial average gained 99.26 points, or 0.81 percent, while the Standard & Poor's 500 Index jumped 12.28 points, or 0.87 percent, to end at 1,425.49. The Nasdaq Composite Index finished up 21.44 points, or 0.88 percent, at 2,453.85. The Dow notched its 19th record close since the beginning of October, closing at 12,416.76, while the S&P 500 hit a six-year high.
Nymex crude was flat at $62.54 on Friday after a nearly 2 percent jump on Thursday caused by OPEC’s decision to cut production again.
ADB has invested Rs120mn ($2.7mn) in Central Uttar Pradesh Gas Limited to form a joint venture company that will introduce clean fuels for vehicles and piped natural gas for domestic, industrial, and commercial users in the city of Kanpur, state of Uttar Pradesh, in India.
HCL Technologies Ltd. Board of Directors has recommended a bonus issue in the ratio of 1:1 i.e: one share for every share held.
Punj Lloyd Ltd. has set up a new company for carrying out back office engineering services for the Punj Lloyd Group in India.
Larsen & Toubro Ltd. has won two major contracts totaling US$ 86mn from Sinopec, a leading Chinese petrochemicals company.
Maruti Udyog Ltd. will reportedly increase prices by as much as Rs 12,000 to overcome higher costs of freight and components. Separately, it would shut down its plant near New Delhi for maintenance from Dec. 24-31.
Qantas Airways Ltd. has accepted a higher A$11.1bn (US$8.7bn) buyout led by Macquarie Bank and Texas Pacific, in what would be the world's biggest aviation takeover.
India and Japan have agreed to develop an industrial corridor along the multi-modal Delhi-Mumbai freight corridor.
ICICI Bank has raised the lending rates by 0.5%, while the deposit rates are being hiked by between 0.25% and 0.75%. The new rates will come into effect from Dec 18.