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Tuesday, December 26, 2006
Unshining India? - Dhirendra Kumar
Here's a joke that I read somewhere on the net the other day. A woman calls her husband while he's driving home from work. "Be careful," she says, in an alarmed voice, “The traffic reports on TV say that there's a madman driving in the wrong lane on the highway. He's traveling north in the south-bound lane and could cause a big traffic accident any time.” “I know,” replies the husband, “but it's not just one madman - everyone except me is driving in the wrong lane.”
I must confess that nowadays I often feel like the man in the joke. This feeling of driving in the wrong lane comes on most strongly when, once a week, I sit down to write this article. My problem is that, like anyone who is involved with investing, I'm constantly bombarding with what I mentally classify as India Shining propaganda. What started of as the catchphrase of the BJP's election campaign is now all around us in a much stronger form.
For example, last week I sat through a presentation which sought to prove that India's share of the world economy had historically been very high and implied, in a manner of speaking, that the last few centuries have been an anomaly. The presentation, which was being made by the CEO of a fund company, purported to know the total size of the world economy and India's share in it for the last three thousand years or so.
Anyone with even a passing familiarity with historical research knows that these kind of numbers are basically assumptions based on assumptions which are based on yet more assumptions. And even if all the assumptions are miraculously correct, they still don't have any bearing on what the future holds.
India is today awash with economic patriotism. Perfectly level-headed people have started believing in the coming golden age. At one level there's nothing wrong with this. The belief that one is going to succeed is an important component of actual success so I'm quite sure that if a lot of people believe in India Shining then that makes it more likelier that the things they dream of will actually happen.
However, there's a catch. Far too many people are selling dubious investment opportunities that are being bought because of the India Shining factor. The feeling seems to be that eventually all investments will do brilliantly because, well, because India is shining. This India Shining soft-headedness is most in evidence in the real estate market. People are mortgaging amazingly high proportions of their income on the assumption that India will continue (for 15-20 years, no less) to shine so brightly and dazzlingly upon property prices and their income growth rates that the EMIs that they will have to shell out will be effectively trivial.
Investment decisions actually need to be made more, not less, carefully in this situation. This is not just true if India turns out be shining less brightly but also true, in fact specially true if the shine turns out be as dazzling as is being advertised. It is correct that many businesses are doing very well and their stocks are worth buying at almost any price. However, this is precisely because of this that there are many other worthless ones being pitched as potential stars. This is a time to be happy and to look forward but for the very same reasons, it is also a time to be especially careful of where you put your money. Some things will turn out better than expected but some will inevitably be much worse and it is in times like these that it's particularly difficult to make right decisions.
FII: MF + Rs 347.90 cr
MF Gross Purchases Rs 767.24 Cr Gross Sellers Rs 419.34 Cr Net buyers Rs 347.90 Cr
Mutual funds seem to have started taking advantage of the volatility and thats a good sign. Such strong buying by Mutual funds sets the day and tone positive for tomorrow.
Close: Merry Christmas ! say the markets !
The market session today started off with cheerful momentum and buying interest was seen across all the sectors across board. It also included mid and small caps. The volatility of the previous week was soon forgotton for a strong start for this week. Buying across sectors like Cement, Automobile, Pharma, Textile and Power helped the indices to close at the high point of the day. Global Markets traded mixed but they were no dampener.
Sensex closed up by 237 points at 13708.34 helped up by gains in Wipro (597.35,+4 percent), TCS (1190.25,+3 percent), Cipla (255.9,+3 percent), Satyam (476.55,+3 percent) and Tata Motors (884.4,+3 percent). Restricting the gains were TISCO (477,0 percent), Dr Reddys (802.15,0 percent), RCVL (467.25,0 percent), Hero Honda (749.15,0)
Indian coal ministry plans to allot 41 critical blocks of coal with a joint coal reserve of 16 Billion Tons (blocks are in Orissa, Jharkhand, Maharashtra, and Chattisgarh). Furthermore, the ministry has already started inviting applications from private power firms and PSUs regarding this. Nearly, 15 blocks will be allotted to private players such as Reliance Energy, Tata Power, and Jindal Steel, whereas 16 blocks shall be awarded to firms who win bids for nine mega power projects. However, Central & State power Public Sector Undertakings (PSUs) will receive the rest of the 10 blocks. Well this has been going on for so many months. Solar gains as it is the supplier of explosives for coal mining. The worries are that prices have been pushed down in the tendering process and are hurting margins badly. We are not buyers yet. We would let prices stabilize though with a long term perspective it?s not a bad idea. The stock closed up by 17%.
IndusInd Bank, a fast-growing private-sector bank in India has received fresh authorisation from the Reserve Bank of India (RBI) for opening 10 more branches and 100 new ATMs. The bank presently has a network of 147 branches and 84 ATMs spread over 118 geographical locations in 24 states and union territories. The 10 new authorizations for branches relate to semi-urban and rural centres and it plans to open these branches by the end of this financial year. IndusInd Bank is expanding its business aggressively by opening new branches also they are reducing the employee cost by installing new 100 ATMs and this will help to give better service to customers but risk is that the bank may not able to raise the deposits to meet the growing demand in loan. The stock closed up by 2%.
Technically Speaking: Sensex Sensex touched intraday high of 13726 and low of 13490. Market turnover stood good at Rs 3051 cr. Overall breadth went in favor of Advancers where advancers stood at 1644 and Decliners at 956. The Resistance level was at 13880 -13799 while Support at 13563 -13409 levels.
Third straight day of rally
The market extended its rally into the third straight day, with the BSE Sensex striking a fresh intra-day high of 13,726.62 at the fag end of trading.
The 30-shares BSE Sensex settled 236.60 points (1.76%) higher, at 13,708.34; its intra-day low being 13,490.77.
The S&P CNX Nifty rose (1.79%) to 3,940.50.
The market-breadth was strong, as buying continued for small-cap and mid-cap shares. On BSE, there were over 1.7 gainers for every loser. Against 1,644 shares that advanced, 956 declined and 76 remained unchanged. The BSE Small-Cap index was up 84 points, or 1.3%, to 6,805.56, while the BSE Mid-Cap index ended at 5,697.69, up 48.92 points, or 0.9%, from its previous close.
The total turnover on BSE amounted to Rs 3,051 crore.
Among the 30-Sensex pack, 26 advanced while the rest had declined.
IT stocks saw renewed buying in anticipation of a robust set of December quarter results. Wipro was the top gainer, up 4.69% to Rs 599.95, on a volume of 1.90 lakh shares.
Other IT shares - TCS (up 3.45% to Rs 1,191) and Satyam Computers (up 3% to Rs 476) had also gained.
IT bellwether Infosys Technologies rose 2.33% to Rs 2,222.15, after it scheduled a board meeting on 11 January 2007, to consider Q3 December 2006 results on 11 January 2007. It is also believed to be in talks with ten global banks for its banking software – Finacle.
ITC jumped 3.04% to Rs 174.80, after the FMCG major said it had struck an agro-alliance with Marubeni Corp, a Japanese trading house. Under the alliance, both companies will consider joint exports of Indian-made soyabean cake and maize grains for livestock feed, Marubeni said in a statement. The tie-up is aimed at expanding the trade of food and other agricultural products between India and Japan.
PSU oil exploration major ONGC advanced 2.80% to Rs 889.50. Media reports have surfaced about the PSU finding oil in Assam and ONGC Videsh bagging 28% stake in a Libyan oil well. The company has declared an interim dividend of 180%, its highest ever, for the ongoing fiscal.
PSU engineering company BHEL rose 1.53% to Rs 2,236.30, amid reports that it is in talks with global players such as GE and Siemens, and may invest up to Rs 500 crore to expand nuclear production capacities.
Tata Motors advanced 2.78% to Rs 883.15, on a volume of 3.37 lakh shares, while the State Bank of India (SBI) gained 2.36% to Rs 1,242.70 on a volume of 3.42 lakh shares.
Index heavyweight Reliance Industries (RIL) was up 0.52% to Rs 1,278, on a volume of 4.35 lakh shares.
Hero Honda was the top loser, down 0.62% to Rs 745, on 1.06 lakh shares. It had slipped to a low of Rs 737.
Among side-counters, Genus Overseas Electronics sprung 9.33% to Rs 218, after it won a Rs 75 crore order for single phase and three phase electronic energy meters. The Rajasthan State Electricity Board has asked Genus Overseas Electronics to supply single phase and three phase electronic energy meters.
Low cost airline Deccan Aviation surged 3.61% to Rs 129.05, after its board approved allotment of 19.63 lakh equity shares of Rs 10 each to Investec Bank (UK), London, at Rs 150 per share.
Textile firm S Kumar's Nationwide was down 0.76% to Rs 73.35, after the company said its board will meet on 30 December 2006, to consider spinning off the retail business.
Software firm Four Soft rose 2.10% to Rs 71.30, after its board agreed to raise $70 million through an issue of depository receipts, bonds and debentures.
Simplex Infrastructures gained 5.29% to Rs 395, after the company said it had bagged orders worth Rs 825 crore.
Shriram City Union Finance advanced 3.23% to Rs 160, after it sold 40 lakh shares at Rs 160 each to Indopark Holdings on a preferential basis.
Arihant Foundations rose 3.35% to Rs 512, while Hind Rectifies surged 7.30% to Rs 950 after they were admitted for dealing on National Stock Exchange (NSE) today.
The Nikkei share average rose 0.45%, or 76.30 points, to 17,169.19, its highest close in seven and half months on Tuesday, as Fast Retailing Co. rose after government data showed a slower-than-expected fall in personal consumption in November.
India's central bank, on Friday, allowed up to 49% foreign investment in stock exchanges, paving the way for New York Stock Exchange (NYSE) to expand into Asia's best performing markets.
The Reserve Bank of India also said that foreigners could hold up to 49% in depositories and clearing corporations.
Under the new rules, foreign direct investment will be limited at 26%, while foreign portfolio investments would be capped at 23% in all such entities, the central bank said. It, however, said portfolio investments will be allowed only through the secondary market. The stock exchange also plans to list its shares on its own trading floor.
Recently, media reports suggested New York Stock Exchange was eager to pick up a stake in the BSE.
The Japanese nationwide core consumer price index rose 0.2% on year in December, government data showed Tuesday, registering the sixth straight month of increases. The results, which exclude volatile food prices, outpaced the 0.1% growth in the previous month, according to data released by the Ministry of Internal Affairs and Communications.
The core CPI for the Tokyo metropolitan area for December considered a leading indicator for nationwide consumer prices, rose 0.2% from a year earlier, according to the ministry data. The figure matches the 0.2% rise expected in the survey of economists.
The overall Japan-wide CPI, including fresh food prices, climbed 0.3% on year in November, but down 0.3% compared with the previous month, according to the data. For the Tokyo area, the overall CPI gained 0.3% in December from a year earlier. It was up 0.1% from November.
Volatility is expected to remain high on the domestic bourses ahead of the expiry of December futures contracts on 28 December 2006 (Thursday). Participation by FIIs is also expected to remain low as most fund managers will have proceeded on a Christmas vacation, which will last till the New Year.
The Dow Jones had closed at 12,343.22, down 0.63%, while the S&P 500 and the Nasdaq had lost 0.53% and 0.61%, to close at 1,410.76 and 2,401.18, respectively, on 22 December 2006 (Friday).
FIIs were net buyers of equities worth Rs 264.80 crore on the Indian bourses, on 22 December 2006 (Friday). This was a result of purchases worth Rs 1,666.50 crore and offloading to the tune of Rs 1,401.70 crore in the Indian equities market. The country’s premier index, the BSE Sensex, had climbed 87 points on Friday, closing at 13,471.74. NSE’s S&P CNX Nifty rose 37.65 points, to end at 3,871.15, the same day.
Market ends buoyant
Today the market rallied sharply by over 200 points during intra-day trades on a broad-based buying support. The Sensex made a sound start by adding 29 points over its last close of 13472 and remained firm throughout the session. By mid-morning trades, the Sensex edged past the 13650 mark and continued with its upward march as market sentiment was extremely buoyant. Buying intensified towards the closing hours and the Sensex breached the 13700 mark to touch an intra-day high of 13727, up 255 points from the previous close. Finally, the market wrapped up the session with a steep upsurge of 1.76% at 13708 while the Nifty flared up 1.85 to close at 3943.
The breadth of the market was positive, of the 2,671 stocks that traded on the BSE, 1,646 stocks advanced, 958 stocks declined and 67 stocks ended unchanged.
All the sectoral indices reported gains. The BSE IT Index vaulted 2.81% at 5197 while the BSE Tech Index gained 2.26% at 3602. The BSE Auto Index, the BSE CD Index, the BSE CG Index, the BSE Bankex, the BSE FMCG Index, the BSE HC Index, the BSE Oil & Gas Index, the BSE PSU Index and the BSE Metal Index rose by above 1% each.
IT stocks were in the limelight, with I-Flex appreciating by 7.83% at Rs1,944. The other major gainers Wipro, Patni Computers, TCS, Satyam Computers and Infosys advanced by 3-4% each. However, only Mphasis BFL ended in the negative territory.
Other than the Sensex, the gainers that helped the market to gain are Moser Baer, which zoomed by 6.96% at Rs312; Century Textiles that soared 6.78% at Rs702; Mirc Electronics that spurted 5.99% at Rs20; Zee Telefilms that scaled up 5.13% at Rs291; Jaiprakash Associates that moved up 4.93% at Rs704; and Sun TV that appreciated by 4.51% at Rs1410. The other gainers like SAIL, Sterlite Industries, Birla Corporation, CMC, Ashok Leyland, Infra Development, Tata Elexsi, Jindal Saw, Bombay Dyeing and Sun Pharmaceuticals notched up 3-4% gains. However, a few stocks also ended lower with Great Eastern declining by nearly 2.46% at Rs204 and Indian Oil dropping by 2.19% at Rs435.
Jain Irrigation System at Rs397.95, M&M at Rs893, NCL Industries at Rs63.85, Modern India at Rs156.80, Simplex Trading at Rs92.15, IST at Rs377.25 and Mefcom Agriculture at Rs133.40 touched their new all-time highs.
Ansal Infrastructure at Rs913.60, BPL at Rs97.70, Ester Industries at Rs6.11, Flex Industries at Rs126.40, Parekh Plantation at Rs4.91 and Wartsila India at Rs362.70 hit the upper circuit. However JIK Industries at Rs1.27, Goldstone Technology at Rs57.65 and Atlanta at Rs1,022.65 hit the lower circuit.
Over 13.44 lakh shares of Sobha Developers changed hands on the BSE followed by SAIL (11.58 lakh shares), Century Textiles (11.52 lakh shares) Zee Telefilms (10.77 lakh shares) and Sterling Biotech (10.26 lakh shares).
Sensex scores quickfire 237
The market extended its rally into the third straight day, with the BSE Sensex striking a fresh intra-day high of 13,726.62 at the fag end trading.
The 30-shares BSE Sensex settled 236.60 points (1.76%) higher, at 13,708.34; its intra-day low being 13,490.77.
The market-breadth was strong, as buying continued for smallcap and midcap shares. On BSE, there were over 1.7 gainers for every loser. Against 1,644 shares that advanced, 956 declined and 76 remained unchanged.
The total turnover on BSE amounted to Rs 3,051 crore.
Among the 30-Sensex pack, 26 advanced while the rest had declined.
IT stocks saw renewed buying in anticipation of a robust set of December quarter results. Wipro was the top gainer, up 4.69% to Rs 599.95, on a volume of 1.90 lakh shares.
Other IT shares - TCS (up 3.45% to Rs 1,191) and Satyam Computers (up 3% to Rs 476) had also gained.
IT bellwether Infosys Technologies rose 2.33% to Rs 2,222.15, after it scheduled a board meeting on 11 January 2007, to consider Q3 December 2006 results on 11 January 2007. It is also believed to be in talks with ten global banks for its banking software – Finacle.
Tata Motors advanced 2.78% to Rs 883.15, on a volume of 3.37 lakh shares, while the State Bank of India (SBI) gained 2.36% to Rs 1,242.70 on a volume of 3.42 lakh shares.
Index heavyweight Reliance Industries (RIL) was up 0.52% to Rs 1,278, on a volume of 4.35 lakh shares.
Hero Honda was the top loser, down 0.62% to Rs 745, on 1.06 lakh shares. It had slipped to a low of Rs 737.
The Nikkei share average rose 0.45%, or 76.30 points, to 17,169.19, its highest close in seven and half months on Tuesday, as Fast Retailing Co. rose after government data showed a slower-than-expected fall in personal consumption in November.
India's central bank, on Friday, allowed up to 49% foreign investment in stock exchanges, paving the way for New York Stock Exchange (NYSE) to expand into Asia's best performing markets.
The Reserve Bank of India also said that foreigners could hold up to 49% in depositories and clearing corporations.
Under the new rules, foreign direct investment will be limited at 26%, while foreign portfolio investments would be capped at 23% in all such entities, the central bank said. It, however, said portfolio investments will be allowed only through the secondary market. The stock exchange also plans to list its shares on its own trading floor.
Recently, media reports suggested New York Stock Exchange was eager to pick up a stake in the BSE.
Volatility is expected to remain high ahead of the expiry of December futures contracts on 28 December 2006 (Thursday). Participation by FIIs is also expected to remain low as most fund managers would have proceeded on a Christmas vacation, which will last till the New Year.
The Dow Jones had closed at 12,343.22, down 0.63%, while the S&P 500 and the Nasdaq had lost 0.53% and 0.61%, to close at 1,410.76 and 2,401.18, respectively, on 22 December 2006 (Friday).
FIIs were net buyers of equities worth Rs 264.80 crore on the Indian bourses, on 22 December 2006 (Friday). This was a result of purchases worth Rs 1,666.50 crore and offloading to the tune of Rs 1,401.70 crore in the Indian equities market. The country’s premier index, the BSE Sensex, had climbed 87 points on Friday, closing at 13,471.74. NSE’s S&P CNX Nifty rose 37.65 points, to end at 3,871.15, the same day.
Hidden Gems - Ashish Chugh - Dec 26 - Amco India Ltd.
Amco India Ltd.
CMP - Rs. 24 BSE Code -530133
Amco India Ltd. (Amco) was incorporated in the year 1987 as Amco Vinyl Pvt. Ltd. and later changed its name to reflect the other product areas that the company ventured into.
The company started its business activities by setting up a plant for the manufacturing of PVC films and sheeting at Noida. The project was financed by PICUP & UPFC. Later, the company set up another unit for the manufacture of PVC Flooring.
Thereafter, in 1996, the company decided to get into manufacturing of Aluminum Foil by Cold Rolling Process. The company today has four units - two located at Noida in close proximity to each other, one at Bhiwadi (Rajasthan) and the latest units coming up at Baddi (Himachal Pradesh). The unit at Baddi enjoys several tax benefits is is expected to go on stream soon. The company currently has manufacturing operations in three states - U.P, Rajasthan and Himachal Pradesh.
In the Aluminium Foil business, the company caters to the Pharmaceutical, Automobile and Packaging industry. The company claims to have a market share of around 7.5% to 10% in the business. In the PVC Films and Sheeting business, the company has executed orders for Automobile & Luggage industry. The company sees potential of the product in various applications including Electric Tape industry, Luggage, Automobile and Stationery. However, the inputs for the business being linked to Petroleum prices, any increase in Oil prices will adversely effect the business.
The company is continuously carrying out new product and application developments/ innovations. The company has developed Surgical Films for Pharma industry and Laminated Sheets which have applications in the Advertising industry. The company has also developed printed rolls which are fixed on Glass to give them better look (Like Frosted Glass, Printed Glass).
Financials
The company has an Equity Capital of Rs.4.11 crores with the promoters holding 63%. For the year 05-06, the company achieved a Net Sales of Rs.90.34 crores and a PAT of Rs.1.36 crores leading to an EPS of Rs.3.31. The company paid a dividend of 10%.
Conclusion
Amco India Ltd. has set up a new plant at Baddi to manufacture Flexible Laminated Foils which is expected to go on stream shortly. The plant being set up in an area enjoying several tax and excise benefits is expected to add substantially to the Topline and Bottomline of the company. The plant has been set up out of internal accruals and debt financing, without any equity dilutions. The company has a market cap of Rs.10 crores and Long Term Debt of roughly Rs.3.70 crores. (excluding working Capital Finance). In the year 05-06, the company achieved a PAT of Rs.1.36 crores leading to an EPS of Rs.3.31. The stock therefore trades at a PE of 7. The earnings in the year 07-08 are expected to take a substantial leap owing to the full benefits of the Baddi plant. The company with manufacturing operations at 4 locations, with Sales with Revenues from Manufacturing Sales many times over its market cap available at an enterprise value of Rs.13.70 crores and at a PE of 7 looks undervalued.
Long term investors can accumulate the stock at the current levels and on declines.
Indiainfoline - Intraday Calls
NIFTY (3871) SUP 3851 RES 3899
BUY UNIPHOS (301.8)
SL 295 T 311, 313
BUY HEXAWARE (185.5)
SL 181 T 193, 195
BUY SUZLON (1262.1)
SL 1248 T 1300, 1305
BUY VOLTAS (117.20)
SL 113 T 125, 127
SELL YESBANK (131.9)
@ 134 SL 138 T 126, 123
STRATEGY INPUTS FOR THE DAY
Ring out the old, bring in the new!
An optimist stays up to see the New Year in. A pessimist waits to make sure the old one leaves.
Compliments of the season and wish you a Merry Christmas. A little early to wish you a Happy New Year. But we thought its better to remind you early that you could use the New Year as an excuse to do some cleaning and churning of your portfolio if required.
You have the whole year ahead to make your money next year. The Sensex has already gained over 4,000 points this year. The Sensex closed at 13,471.74 on Friday as against 9,397.93 on the last trading day of 2005.
The bulls and bears will continue to fight it out. The holiday season may make the battle appear more ferocious though volumes could take a bigger beating. December F&O series comes to an end. Some short positions have been created for the January series while longs for the current-month contracts have been cut. As mentioned earlier, Dec 29 will see the introduction of around 29 more securities in the F&O segment. This could cause some adjustments in portfolios.
The opening is expected to be muted. All in all, no clear trends till the New Year sets in. Till then remain on the sidelines, enjoy the holiday mood.
Among the Bulk Deals, Blue Bird was bought by Merrill Lynch Capital. Sujana Metal was picked up by Morgan Stanley. TRF Ltd was bought by Birla Mutual Fund and sold Goldman Sachs.
Insider Trades:
Kirloskar Oil Engines Ltd: Mr. Vikram Shreekant Kirloskar, Director has sold in the open market 10000 equity shares of Kirloskar Oil Engines Ltd on 19th December, 2006.
Shringar Cinemas Limited: Mr. Balkrishna Shroff, Director has purchased from open market 3997 equity shares of Shringar Cinemas Limited on 19th December, 2006.
Market volumes:
The turnover on NSE was down by 4.6% to Rs75.70bn. BSE Metal index was the major gainer and gained 1.48%. BSE Capital Good index (up 1.20%), BSE Oil & Gas index (up 1.07%), BSE Pharma index (up 0.94%) and BSE Auto index (up 0.83%) were among the other major gainers. However, BSE FMCG index lost 0.37%.
Volume Toppers:
TTML, IFCI, SAIL, R Com, Tech Mahindra, Indiabulls, Gujarat Ambuja, Sobha Developers, MTNL, India Cements, ITC, Unitech, Polaris, Ashok Leyland, NTPC, IVRCL Infrastructure, Satyam Computer, Parsvnath and Bank of India
Delivery Delight:
3i Infotech, Allahabad Bank, APIL, Aurobindo Pharma, BEL, BHEL, BPCL, Century Textiles, Colgate, Cummins, Dr Reddys, Educomp, Gateway Distriparks, Godrej Industries, Gujarat Ambuja Cements, HCC, India Cements, IPCL, Jaiprakash Associates, Mphasis BFL, Nagarjuna Construction, NDTV, ONGC, Polaris, Reliance Capital, Sesa Goa , Siemens, Suzlon, Tata Power, Wipro and United Phosphorous.
Upper Circuit filters:
Crest Animation, Donear Industries, Nirlon, Rajesh Export and BPL Ltd
Major News
M&M to buy Germany's Schoneweiss
Rajesh Exports gets order worth Rs2.76bn
Uttam Galva cuts prices by Rs3000 per ton
Fedders Lloyd to consider increase in limit of investment of FIIs on Jan 2
GHCL buys assets of HW Baker Lenin for $6.5mn
Vodafone considering acquisition of Hutchison Essar
Aurobindo Pharma receives tentative approval from USFDA for Efavirenz capsules
Tata Steel wins EU approval to buy Corus
IOC declares interim dividend of Rs6 per share
Brokers Recommendations
Srei Infrastructure � Buy from Emkay Research
HDFC � Buy from CLSA
Suzlon Energy � Buy from ASK RJ
Long Term Investment
IPCL
From Research Desk - Nagarjuna Construction
Nagarjuna Construction Company Ltd. CMP: Rs194 BUY
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 futureHow Market Fared
F&O expiry holds the key
Friday really turned out to be a good day for the bulls. The markets registered third consecutive week of losses with NSE Nifty losing 0.45% and benchmark Sensex down 1.05%. After registering positive opening the key indices immediately lost ground on back of high volatility. The key indices grew stronger throughout the day as buying in the Auto, Metal, Capital Good, Oil & Gas, Power and Telecom stocks lifted the markets to close with healthy gains. Finally, the BSE benchmark Sensex added 86 points to close at 13471. NSE Nifty was up 37 points to close at 3871.
M&M surged 2.7% to Rs870 after the company announced that they would buy Germany's Schoneweiss. The scrip touched an intra-day high of Rs879 and a low of Rs851 and recorded volumes of over 11,00,000 shares on NSE.
JSW Steel spurred over 4% to Rs378 after the company planned to spend Rs20bn to produce high grade steel. The scrip touched an intra-day high of Rs381 and a low of Rs365 and recorded volumes of over 3,00,000 shares on NSE.
Rajesh Exports was locked at 5% upper circuit to Rs338.95 after the company received order worth Rs2.76bn. The scrip touched an intra-day high of Rs338.95 and a low of Rs325 and recorded volumes of over 3,00,000 shares on NSE.
Uttam Galva was down 0.5% to Rs31 after the company cut prices by Rs3000 per ton. The scrip touched an intra-day high of Rs32 and a low of Rs31 and recorded volumes of over 1,00,000 shares on NSE.
Metal stocks were in the limelight. JSW Steel surged nearly by 5% to Rs380, Tisco advanced 2.2% to Rs479, Hindalco gained 1.2% to Rs173 and SAIL added 0.6% to Rs82.
Capital Good stocks followed suit with heavy weights leading from front. L&T rose 2.2% to Rs1433, BHEL advanced 1% to Rs2301, Punj Lloyd was up by 2% to Rs988 and Siemens added 1.4% to Rs1122.
Pharma stocks are trading firm on back of buying. Aurobindo Pharma has surged by over 3.5% toRs689, Sun Pharma is up by 0.6% to Rs948, Dr Reddy’s Lab has gained by 0.6% to Rs803 and Cipla has edged higher by 0.2% to Rs247.
Oil Exploration stocks were in demand today. ONGC advanced by 1.1% to Rs867 and Reliance Industries rose 0.9% to Rs1272. However refinery stocks were also up with BPC and IOC the major gainers.
Telecom once again rang with smart gains. MTNL was the star performer rose 4.9% to Rs139, Reliance Communication advanced 1.5% to Rs468, Bharti Airtel edged higher by 0.5% to Rs614 and VSNL was up 1.8% to Rs406.
Next week will be the most crucial as December F&O series comes to an end. The market will remain highly volatile as the near term direction remains unclear. Though, India continues to be the most expensive market among the emerging economies space, it also remains one of the favorites for the overseas investors. Despite the blip during the start of the week, or any talks of overheating valuations, Indian markets remains the best bet for the long term. FIIs activity did slowed down during the week on account of Christmas holiday’s. However, it is likely to pick up soon after the New Year and the results expectations start rolling into the street.
Market may remain on tenterhooks
The market may remain edgy due to a mixed trend across the Asian markets, and lack of cues from the US market, which remained closed on account of Christmas yesterday. China and Hong Kong markets were up 2.12% and 0.51%, respectively, while Japan’s Nikkei had lost 0.07%. Even Singapore’s Straits Times was 0.05% in the red, whereas, South Korea’s Seoul Composite had dropped 0.51%.
A lower closing of the US market on 22 December 2006 (Friday) will also keep the market here on tenterhooks. The Dow Jones had closed at 12,343.22, down 0.63%, while the S&P 500 and the Nasdaq had lost 0.53% and 0.61% to close at 1,410.76 and 2,401.18 respectively that day.
However, the market may derive some inspiration from the fact that FIIs were net buyers of equities worth Rs 264.80 crore on the Indian bourses,on 22 December 2006 (Friday). This was a result of purchases worth Rs 1,666.50 crore and offloading to the tune of Rs 1,401.70 crore in the Indian equities market. The country’s premier index, the BSE Sensex, had climbed a steep 87 points on Friday, closing at 13,471.74. NSE’s S&P CNX Nifty rose 37.65 points, to end at 3,871.15, the same day.
Volatility is expected to remain high ahead of the expiry of December futures contracts on 28 December 2006 (Thursday). Participation by FIIs is also expected to remain low as most fund managers would have proceeded on a Christmas vacation, which will last the New Year.
RPL's IPO world's 13th biggest in '06
Mukesh Ambani group company Reliance Petroleum, RPL may not have found much favour with investors during its nearly eight-month stay on the bourses, but the company has found mention in a list of the world's 15 biggest IPOs in 2006.
Reliance Petroleum made its debut on the Indian stock market in May this year following a much-hyped initial public offer that was oversubscribed by more than 50 times and generated total proceeds of about Rs 8,200 crore (USD 1.83 billion) for the company, reports The Economic Times.
RPL's public issue has emerged as the world's 13th biggest IPO in 2006 and is the only Indian entry in the list of top-20 IPOs, according to data compiled by global research major Ernst & Young and financial information providers Dealogic and Thomson Financial.
While the stock debuted at a sharp premium of 70% over the IPO price of Rs 60 a share on May 11, it has pared nearly the entire premium and is trading near its offer price over the past few months.
After listing at Rs 102 per share, RPL shares have remained below Rs 70 a share since the end of May and closed at Rs 63.05 a share on Friday last week. Still, the hugely successful IPO has earned the company a place with China's Industrial & Commercial Bank of China, ICBC, which has emerged as the biggest IPO with total proceeds of about 22 billion dollars in Hong Kong.
There are as many as seven Asian companies that figure in the top 20 list, while six IPOs were from the emerging markets, the data compiled by E&Y, Dealogic and Thomson Financial shows. There are as many as seven Asian companies that figure in the top 20 list, while six IPOs were from the emerging markets, the data compiled by E&Y, Dealogic and Thomson Financial shows.
The IPO from a Chinese bank, Bank of China, raised USD 11.19 billion in Hong Kong and earned itself the second slot in the biggest ever IPO list. Along with China's Daqin Railway Co (ranked 12th with proceeds of USD 1.88 billion), there are three Chinese companies in the top-20 list, while there are four companies from the UK and two from the US.
Crude prices continue to trade around USD 62.50 mark
Crude prices continued to trade around the USD 62.5
Speculation that inventories will decline as the Organisation Of Petroleum Exporting Countries(OPEC) reduce production supported the prices.
In after hours access trading, crude is trading at USD 62.77 up 36 cents on the Nymex.
Brokers bullish on SREI Infra, L&T, Alembic, Marico
Emkay has kept buy rating on SREI Infrastructure; with a target of Rs 70.
Citigroup has kept buy rating on L&T; with a target of Rs 1579.
CLSA has kept outperformer rating on Reliance Communications; with a target of Rs 486.
ICICI Securities has kept buy rating on Alembic; with a target of Rs 87.
ICICI Securities has kept buy rating on Marico and Adlabs Films.
DSP Merrill Lynch has kept buy rating on Panacea Biotech; with a target of Rs 513.
Karvy has maintained outperformer rating on ACC; with a target of Rs 1230.
Karvy has kept buy rating on Tata Steel; with a target of Rs 671.
Karvy has kept buy rating on JSW Steel; with a target of Rs 468.
Stocks in news: BPCL, Glenmark, Havells India, Anant Raj
Arihant Foundations to list today
Board meetings:
BPCL and Glenmark on interim dividend
Hazoor Media results
Havells India on QIP/FCCB/ADR/GDR issue
Hutch update:
3 bids and 1 new expression of Int have come for Hutch Essar: Srcs
Bids are said to be from RCL, Vodafone and Maxis: Srcs
Expression of interest is said to be from Qatar Telecom: Srcs
Bids are said to have come in at USD 16-18 billion valuation: Srcs
Sources close to potential bidders deny that bids have been made
Vodafone sources:
Looking at Hutch-Essar acquisition in cash: Vodafone Sources
Have cash in hand, other options available: Vodafone Sources
No need to issue any fresh shares to fund transaction: Vodafone sources
No decision yet on Bharti exit/dilution: Vodafone Sources
Sunil Mittal:
Vodafone has informed us of interest in Hutch-Essar: Sunil Mittal
Bharti awaiting further developments: Sunil Mittal
Yes Bank ups PLR by 50 bps to 13%
PNB may raise corporate lending rates, term deposit rates by 25-75 bps – ET
OBC hikes PLR by 25 bps to 11.75%
BoI raises deposit rates by 25-50 bps across maturities – ET
ONGC strikes oil in Assam – ET Sat (Different from the last 2 gas find)
Actis initiates talks to offload its stake in Punjab Tractors, Durbans likley contenders – BL
NSE bars fresh F&O positions in Parsvnath as 95% of marketwide limit reached (NDTV already in curb)
FIIs can now buy further shares of Anant Raj Industries as holding falls below 24% caution limit
S Kumars board meet on December 30 to consider:
Issue of shares / convertible debentures to promoters via private placement
Demerger of retailing business
NTPC:
Forms JV co Aravali Power
Haryana Power Generation to hold 25% in JV
Indraprastha Power Generation to hold 25%
NTPC owns balance 50%
JV to set up 1500 mw coal based power plant Haryana
RBI approves 26% FDI, 23% FII investment in stock exchanges, depositories
IOC to pay 60% interim dividend for FY07
Reliance to begin oil production from D6 by early 2008: PTI
ONGC wins stake in Libyan block: BL Tues
ONGC Videsh to hold 28% in 1 well, Exxon Mobil 22.3% in 4 wells and Inpex 12.9% in 3 wells: BL Tues
BHEL in talks with US, European nuclear cos, may form JV; invest Rs 500 crore (Rs 5 billon) to expand facilities: BL Tues
Infosys in talks with 10 global banks for Finacle: BL Tuesday
NTPC to get 74% equity in railways captive power unit: DNA Tuesday
Advance Tax: DLF pays Rs 132 crore (Rs 1.32 billion), Parsvnath pays Rs 51 crore (Rs 510 million)
ITC to invest Rs 1540 crore (Rs 15.40 billion) into paper business: DNA Tuesday
Indian Bank’s Rs 800-900 crore IPO to hit the market in January
Some PSU banks considering revoking loans already sanctioned to real estate cos – BS
Railway ministry finalises modalities for opening container traffic to private players – BS
Indo-Asian Fusegear eyeing US acquisition in the range of Rs 100-150 crore – BS
Government moves cabinet note seeking exempting FII investment in real estate IPOs from FDI norms – ET
Government may unwrap uniform excise duty on textiles at 4% - ET
Bilpower close to acquiring power transformer co for Rs 150 crore – DNA
Pioneer Embroideries to enter lingerie segment in first quarter of next year – BL
Kale Consultants bags Portugal airline deal – BL
Equity calls: Kapoor, Harihar, Gaba
Vibhav Kapoor, IL&FS: The market continues to look bearish and the correction should continue for some more time. All global markets seem to be entering correction mode.
TS Harihar, Karvy Stock Broking: The market is expected to be rangebound as Call writing has been happening at 4000 levels on the Nifty and Put writing at 3800-3850 levels. Maximum rollover has happened on the short side.
Prakash Gaba, Technical Analyst: The market has shown some signs of support at 13200 levels and the trend should be positive this week, with crucial support at 13180. I like Gujarat Ambuja .
2007 will be year of consolidation and rise for the Indian markets
"Market is always right. Markets cannot be taught, they have to be learnt.
"We must have an attitude where we must balance fear and greed," was the hot tip by Mr Rakesh Jhunjhunwala, India's high-profile investor and President of Rare Enterprises, when he spoke at a seminar on `Wealth creation through equity investments' organised by Welingkar Institute of Management here on Friday.
Mr Jhunjhunwala spoke about his convictions that made a case for sustaining the India growth story.
Equities, because of their efficiency in allocating capital and ability to leverage, generated superior returns when compared to other assets over the long term, he said.
Since 1979, the Sensex has delivered 21 per cent returns compounded annual growth rate, which compares well with returns on funds managed by the legendary global investor Warren Buffet, he added.
Opportunities
Mr Jhunjhunwala said that enormous wealth was created over the last five years because opportunities in India have been manifold.
There is a strong case for investing in equities considering its under-penetration today.
He predicts the proportion of household savings to equity to rise to 15 per cent in 2011 from 4.5 per cent now as a result of which about $45 billion would flow into equity markets as against $6 billion now.
He expects 2007 to be a year of consolidation and rise for the Indian markets. According to him, the Sensex may have a floor at 12,500 and a peak at 16,500 in 2007.
Admitting that gains were going to be moderate in future unlike the manifold rise over the last few years, he advised investors to be realistic in their expectations.
He said that markets were unlikely to peak unless they were trading at a multiple of 25-30 times forward earnings. They are currently trading at about 16 times their earnings for financial year 2008.
Growth momentum
Speaking on the strength in India's fundamentals, he elaborated on forces that would sustain the growth momentum.
According to him, growth enablers (such as favourable demographics, higher base of skilled people and education base), liberalisation catalysts (such as competition), fall in interest rates, multiplier effect (on account of reforms), structural changes in quality of corporate earnings and micro trends (such as change in mindset of companies who are aspiring to become global) are likely to drive India's growth story to a higher level.
He, however, cautioned that investors should not forget the four-letter word `Risk' while making investment decisions.
"Patience may be tested, but conviction will be rewarded," he said. Mr K. Rajagopal, CIO, Reliance Capital Asset Management, and Mr Joseph Massey, Deputy Managing Director, MCX, were among other speakers on the occasion.
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