No Updates in the next week

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DP will be out of town and will have no Internet access or email facility and there will be no updates to the site the rest of this week & next week.

Will be back in the first week of Feb.

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Sharekhan Highnoon dated January 25, 2007

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Sharekhan Commodities Buzz dated January 25, 2007

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Kotak - Morning Brief + Everest Kanto

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Intra-day Stock Ideas

NIFTY (4089.9) SUP 4073 RES 4106

BUY GOLDIAM (149.65)
SL 145 T 157, 159

BUY BAJAJHIND (192.40)
SL 188 T 200, 202

BUY STER (532.85)
SL 527 T 542, 545

SELL AIRDECCAN (147.10)
@ 149 SL 153 T 141, 138

SELL HINDLEVER (214.40)
@ 217 SL 221 T 209, 207

STRATEGY INPUTS FOR THE DAY

F&O expiry; birth of budget swing

There is nothing new under the sun but there are lots of old things we don't know.

It happens every month and most market players are all too familiar regarding what to expect on F&O expiry. The swing, most of it unnecessary will now be blamed on budget expectations. Given the long weekend ahead and uncertainty about the near-term direction of the market, we may see the indices continuing to swing wildly on an intra-day basis. The action will remain stock specific and in some cases, sector centric. Also, with less than a week to go for the RBI credit policy review, concerns over spiraling inflation and its fallout on interest rates might prove to be a spoil sport.

FII inflows have not been great in the first month of the new year. There has been some heavy selling by Mutual Funds in the past couple of days as well. Inflows from overseas investors have to improve substantially to take the market up sharply from these levels. This may take a while to happen, as FIIs could be waiting for the budget, as are all the other players.

Global cues are mixed. One big worry could be the sudden rebound in oil prices to the $55 per barrel mark. In equity markets, US stocks rose last night while in Asia the scene is pretty lackluster. We expect a cautious to higher opening and another volatile trading ahead. Some more short-covering in the derivative segment could help lift the market before we break for the extended weekend.

We've had two straight months of consolidation. This trend may continue for some time and the key indices could remain rangebound with a positive bias. Some observers are also talking about a possible pre-budget rally. But, as always FII inflows will continue to be the trump card, before the budget or after the budget.

Steel stocks were in the limelight on Wednesday and outperformed the key indices with the BSE Metal index rising over 3% on speculation that rising profit at U.S. producer Steel Dynamics Inc could provide an improved outlook for the industry. Q4 net income for the Steel Dynamics, the fifth-largest U.S. steelmaker rose by 68%.

Major Bulk Deals:
Citigroup Global has bought Asian Hotels; Franklin Templeton MF has picked up Hindalco; Deutsche Securities has purchased IFCI while Morgan Stanley has sold it; BNP Paribas has bought KEI Industries but Emerging Capital has sold the stock; CLSA has picked up Kotak Mahindra Bank; Goldman Sachs has purchased Pitti Laminates; Citigroup Global has sold Venus Remedies.

Insider Trades:
Usha Martin Limited: HSBC Global Investment Funds - A/c HSBC Global Investment Funds (Mauritius) Limited has purchased from open market 500000 equity shares of Usha Martin Limited on 17th January, 2007.

Mercator Lines Limited: Mr. Anil Khanna, Director sold in open markets 2000 equity shares of Mercator Lines Limited on 18th January, 2007.

Results Today:
Apollo Tyres, Arvind Mills, Aurionpro Solutions, BHEL, Century Textile, Century Enka, Crompton Greaves, Cummins India, Federal Bank, Four Soft, GE Shipping, Hindalco, Hindustan Motors, Kale Consultants, Mawana Sugars, Moser Baer, MRF, Pantaloon Retail, Renuka Sugar, Titan, Tata Coffee, Union Bank of India, TVS Motors and Uttam Galva.

Market Volumes:
The turnover on NSE was up by 2% to Rs81.87bn. BSE Metal index was the major gainer and gained by 3.72%. BSE Capital Good index (up 1.52%), BSE PSU index (up 1.34%) and BSE Bank index (up 0.95%) were among the other major gainers. However, BSE Auto index lost 1.10%.

Volume Toppers:
IFCI, SAIL, IDFC, KPIT Cummins, Gujarat Ambuja, Indiabulls, Reliance Communication, Ashok Leyland, Essar Steel, IDBI, Tata Steel, TTML, Cairn India, Balrampur Chini, Hindalco, Ispat Industries, Aptech and ITC.

Upper Circuit Filters:
Crisil, Heritage Foods, Radha Madhav, Fedders Lloyd, Aurionpro Solutions, Crest Animation, Electrotherm, Ganesh Housing, Goldiam International and BF Utilities.

Delivery Delight:
Amtek Auto, Aptech, Bank of Baroda, BEL, BHEL, Cambridge Solutions, Crompton Greaves, Infotech Enterprises, IDFC, Jain Irrigation, Jyoti Structures, L&T, ONGC, Sesa Goa and Tisco.

Major News Headlines:
Tata Steel Singapore subsidiary hikes stake in three of its own units
Bombay Dyeing Q3 net profit at Rs72.1mn (down 72.5%), sales at Rs1.07bn (down 60%)
HDFC Q3 profit at Rs3.56bn (up 25%), total income at Rs14.58 (up 38%)
XL Telecom to declare interim dividend on 27th January, 2007
Max India recommends splitting each share into five
Tata Power in pact with Chhattisgarh State for 1000MW Plan
GMR Infra Q3 group profit at Rs532.6mn (up 49%), revenue at Rs3.68bn (up 67%)
Savita Chemicals to give two bonus shares for every three held
Bank Of Baroda Q3 profit at Rs3.29bn (up 63%), total income at Rs27.2bn (up 33%)
Maruti to invest Rs2500 crores in Diesel plant
OBC Q3 net profit at Rs1.82bn (up 27%) and total income at Rs14.47bn (up 23%)
IOB Q3 profit at Rs2.47bn (up 25%), total income at Rs16.72bn (up 28%)
Indian Regulator cuts roaming charges by 22% to 56%
BHEL wins contract for 1000 MW plant
Apollo Hospital Q3 net at Rs179mn (up 6%), sales at Rs2.34bn (up 27%)
L&T gets order worth Rs3.55bn

Brokers Recommendations:
Jain Irrigation - Buy from CLSA with target of Rs450
NALCO - Outperformer from Man Financial with target of Rs249.

Long Term Investment:
Sterlite Industries

How Market Fared

F&O expiry holds the key

The markets recovered today as bulls accumulated healthy gains with benchmark index gaining over 60 points and NSE Nifty adding over 20 points. Key indices started off well following firm global cues ignoring the spurt in crude oil prices. The key indices fell from days high as investors preferred to book some profit in heavy weights like Tata Motors, HLL, ACC, Bajaj Auto and Reliance Communication. However, Short covering lifted the indices higher. Buying was also seen in Bank, Capital Good and Metal stocks holding the markets from slipping into red lifting the BSE benchmark Sensex to hit an intra-day high of 14156.46. Finally, the BSE benchmark Sensex gained 69 points to close at 14110. NSE Nifty was up by 23 points to close at 4090.

Maruti gained 1.7% to Rs934 after the company announced that they would invest Rs2500crores in Diesel plant. The scrip touched an intra-day high of Rs936 and a low of Rs914 and recorded volumes of over 10,00,000 shares on NSE.

Bank of Baroda advanced over 4.5% to Rs245 after the company declared its Q3 result with net profit at Rs3.29bn (up 63%) and total income at Rs27.2bn (up 33%). The scrip touched an intra-day high of Rs248 and a low of Rs233 and recorded volumes of over 12,00,000 shares on NSE.

Corporation Bank gained 1.2% to Rs315 after the company announced its Q3 result with net profit at Rs1.46bn (up 26.9%), total income at Rs1.46bn (up 33.5%). The scrip touched an intra-day high of Rs318 and a low of Rs309 and recorded volumes of over 1,00,000 shares on NSE.

Metal stocks were in the limelight as metal prices firmed up on LME. SAIL, Hindalco, Tata Steel and Sterlite Industries were among the major gainers.

Capital Good stocks recorded smart gains. BHEL surged 2.7% to Rs2367, L&T advanced 3% to Rs1583, Punj Lloyd advanced 1.3% to Rs1030 and Jyoti structure was locked at 5% upper circuit to Rs176.90.

Pharma stocks also witnessed profit booking. Cipla fell 3.2% to Rs246 the Company announced its Q3 result with profit at Rs1.84bn (up 5.1%) and sales at Rs8.81bn (up 12.5%), Sun Pharma declined 2.5% to Rs1021, Dr Reddy’s Lab was down by 1.1% to Rs762 and Glaxo slipped 0.4% to Rs1138.

Oil & Gas marketing stocks fell as crude oil prices rose over 7% to $55 per barrel. HPCL dropped by 2.1% to rs311, IOC was down by 1.9% to Rs482 and BPCL fell 1.25 to Rs353. However, oil exploration stocks ONGC advanced 2.4% to Rs912 and RIL was added 0.7% to Rs1369.

Positive outlook on global Mining stocks by Foreign Brokerage spurred Sesa Goa by over 10% to Rs1816. The scrip touched an intra-day high of Rs1835 and a low of Rs1650 and recorded volumes of over 12,00,000 shares on NSE.

Volatility ahead

Yesterday's pull back after consecutive two weak sessions followed by strong global markets, the bias remains positive. However, today is being the last day of derivatives expiry for January series and there has not been too much roll over from investors followed by weak Asian markets in the morning trades, caution should me maintained on account of intra-day volatility. Although most of the quarterly numbers announced so far have met market expectations, players are concerned over sliding FII & MF inflows. Among the local indices, the Nifty could test higher levels around the 4100 level and has a support at 4060. The Sensex on the downside may slip to 14040 and may face resistance at 14157. On the results front BHEL, Century Textiles, TVS Motors, Titan Industries, Hindalco, Great Eastern Shipping are scheduled to announce their numbers.

US indices ended in the positive territory with Dow hitting the new record all-time high on Wednesday on account of upbeat quarterly results from Yahoo and Sun Microsystems . While the Dow Jones rose by 88 points to close at 12622, the Nasdaq ended 35 points up at 2466.

Most of the Indian ADRs were gainers on the US bourses. Rediff rallied sharply and soared over 5.44% followed by Patni Computers gained 4.53% while Wipro, HDFC Bank, MTNL, VSNL ,ICICI Bank ended with steady gains. Tata Motors fell sharply and tumbled over 2.75% and Satyam declined by 0.87%.

Crude oil prices gained in the last session. The Nymex light crude oil for March delivery rose 33 cents to close at $55.37. In the commodity space, the Comex gold for February series added $2.30 to settle at $648.20 a troy ounce.

HDFC Bank - Murdeshwar Ceramics

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Volatility may remain high ahead of derivatives expiry

Volatility may remain high ahead of today’s expiry of January 2007 derivatives contracts. But volumes may be low due to a slew of holidays. The market remains closed on Friday (26 January) on account of Republic Day and again on next Tuesday (30 January) on account of Moharram.

The rollover in Nifty futures has been about 47% and in individual stock futures at about 55% to 60% according to a derivatives dealer with a local brokerage.

As per provisional data, FIIs were net buyers to the tune of Rs 159 crore on Wednesday 24 January, the day when Sensex had risen 69 points. They were net buyers to the tune of Rs 194 crore in index-based futures on 24 January. They were net sellers to the tune of Rs 255 crore individual stock futures on that day.

The major Q3 results today are Bhel and Hindalco. The Q3 results announced so far were good. The season is in its last lap and the focus will shift to the Union Budget 2007-08 and related expectations. The RBI meeting for monetary policy is on 31 January 2007. With inflation surging to a two-year high of over 6%, the central bank is widely expected to raise interest rates.

Asian equity markets were mixed on Thursday. Tokyo's Nikkei was up 0.3 percent at the midsession, after hitting its highest level since July 2000.

US stocks rose sharply on Wednesday, driving the Dow Jones industrial average to a record high, after profit reports from Yahoo Inc. and Sun Microsystems Inc. renewed optimism about tech company profits. The Dow Jones industrial average was up 87.97 points, or 0.70 percent, at 12,621.77. The Standard & Poor's 500 Index was up 12.14 points, or 0.85 percent, at 1,440.13. The Nasdaq Composite Index was up 34.87 points, or 1.43 percent, at 2,466.28.

The Dow hit an all-time intraday high of 12,623.45 and recorded its first-ever close over 12,600. The S&P 500 rose to its highest close since September 2000 and recorded its best one-day percentage gain in a month.

Oil gave up some of the previous day's gains but held above $55 a barrel, as US plans to boost strategic reserves and colder weather in the northeastern United States, the world's top heating oil market, offset swelling crude stockpiles. NYMEX crude for March delivery eased 13 cents, or around a quarter of a percent, to $55.24 a barrel.

Anagram - Daily Call - Jan 25

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ASK RJ - Cadila, Pfizer

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Emkay - Morning Notes + Tata Motors, Paradyne Infotech, Cosmo Films

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No major correction expected tomorrow

As we get closer to Jan derivative contracts expiry, the cost of carry is getting lower. Reliance Jan contracts and the cash segment prices were almost at par. Sail Jan futures were trading at a discount.

Last month, the Nifty rollover was around 65 – 70% levels. This month, the figure until yesterday was pegged at 47%. For individual stocks, the rollovers haven’t been too bad until now at 55 – 60% levels. Long positions were not rolled over aggressively.

The implied volatility for Feb futures contracts has come down to around 20 % levels from the 24 - 25% levels seen a few days back.

The Put-Call ratio has corrected to 1.59 as of yesterday.

I am bullish on the market and don’t see a major correction coming in tomorrow in the event of expiry. But if the high premiums continue in individual stocks in the first half of the day, then we may see some correction in the last half an hour of trade tomorrow.

- Zeal Mehta, Derivatives Analyst, Emkay Shares

ENAM Reports

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Bajaj Auto

Container Corp

HCL Tech

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IDBI Capital - Dena Bank

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IDBI Capital - Morning Alert

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Macquarie - Oil Price Forecast

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Sharekhan Eagle Eye (equities) & Derivatives Info Kit for January 25, 2007

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Sharekhan Daring Derivatives for January 25, 2007

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Sharekhan Investor's Eye dated January 24, 2007

Bharat Electronics
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,525
Current market price: Rs1,378

Performance ahead of expectations

Result highlights

• Bharat Electronics (BEL) has announced a robust growth of 27.6% in its net sales to Rs863.8 crore, which is ahead of our expectations.
• The operating profit margins have improved by 150 basis points to 22.9% in spite of the 620-basis-point jump in the raw material cost as a percentage of sales. However, the saving of 770 basis points in the staff cost and the other expenses as a percentage of sales more than made up for the adverse impact of the higher raw material cost.
• Consequently, the earnings jumped by 52.7% to Rs148.2 crore, which is ahead of our expectations of around Rs119 crore.
• On the nine-month basis, the revenues have grown by 9.9% to Rs2,181.2 crore. The operating profit has declined by 50 basis points to 20.9%, largely due to the increase in the raw material cost as a percentage of sales. However, the jump of 72.1% in the other income component aided the growth in its earnings, which grew at a relatively higher rate of 18.8% to Rs356.6 crore. The company is expected to comfortably achieve our full year earning estimates of Rs672.6 crore (which implies a growth of 12.5% in Q4FY2007).
• The company has declared an interim dividend of 40% (or Rs4 per share).
• At the current price, the stock trades at 12.2x FY2007 and 9.7x FY2008 estimated earnings (price has been adjusted for cash on the books). We maintain the Buy call on the stock with a target price of Rs1,525 (12x adjusted FY2008 earnings).

Elder Pharmaceuticals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs508
Current market price: Rs412

Growth momentum continues

Result highlights

• Elder Pharmaceuticals (Elder) continued its strong performance during the quarter. The company's net sales rose by 31.7% to Rs115.7 crore in Q3FY2007, on the back of a steady momentum in its core brands, a ramp-up in the sales of the Fairone brand due to the launch of the product in south India and the growing revenues from the in-licenced portfolio. The sales were in line with our estimate.
• Elder reported a 150-basis-point drop in its operating profit margin (OPM) to 18% during the quarter, on account of a 34.9% rise in the raw material cost and a 32.6% increase in the staff cost. The raw material cost was higher on account of the distribution of free samples as a promotional initiative and the staff cost was higher due to an increase in the sales force in order to expand its market reach and penetration.
• Consequently, the company's operating profit rose by 21.8% to Rs20.8 crore in Q3FY2007.
• Despite a 20% drop in the other income, and an increase in the interest and depreciation costs, Elder's net profit grew by 35.7% to Rs14.6 crore. The net profit was in line with our estimate. It was aided by a sharp 41.2% reduction in the company's tax outgo. The tax incidence halved from 24% in Q3FY2006 to just 12% in Q3FY2007, as the company increased the production from its tax-exempt plants of Himachal Pradesh and Uttaranchal.
• In view of its strong growth potential, we remain positive on Elder's future growth prospects. At the current market price of Rs412, the stock is quoting at 10.2x its estimated FY2008 earnings. We maintain our Buy recommendation on the stock with a price target of Rs508.

Marico
Cluster: Apple Green
Recommendation: Buy
Price target: Rs634
Current market price: Rs569

Margins disappoint, but stay on course!!

Result highlights

• In Q3FY2007 the net revenues of Marico grew by 34.7% year on year (yoy) to Rs409.2 crore, ahead of our estimate. The top line growth was higher in this quarter on account of the full contribution from the acquired brands of Nihar, Manjal, Camelia and Aromatic, partial contribution from the Fianc�e acquisition, and the strong growth of 20% in the focused brand portfolio (organic growth).
• The operating profit margin (OPM) declined by 210 basis points to 13.5% on account of an increase in the selling and administration expenses, and the other expenses as a percentage of sales. Consequently, the operating profit grew by 16.2% year on year (yoy) to Rs55.1 crore. The same was below our estimate.
• The interest cost for Q3FY2007 grew to Rs5.4 crore from Rs1.3 crore in Q3FY2006, on account of the debt taken to achieve inorganic growth. The depreciation and amortisation cost was lower by 20.2% due to a one-time write-off in Q3FY2007 on account of the change in the depreciation policy.
• The net profit before extraordinary items grew by 26.4% yoy to Rs27.7 crore and it was below our expectation. The net profit after the extraordinary items grew by 29.6% yoy to Rs28.4 crore. But due to the placement with the qualified institutional buyers and the resultant equity dilution, the earnings per share (EPS) grew by a slower 20.4% to Rs4.5.
• Marico has acquired two brands (Fianc�e and HairCode) in Egypt which will generate revenues of Rs90-95 crore in FY2008. Significantly, these brands provide 15-18% profit after tax (PAT) margin against that of 7-7.5% for Marico. This indeed comes as a positive surprise as it will help Marico expand its OPM next year.
• The Kaya business grew by an impressive 64% yoy to Rs19.7 crore. It managed to achieve a profit before tax (PBT) in the current quarter. Marico expects the Kaya business to also break even on a full-year basis. This is a big positive because going forward the business will be contribute to the bottom line and its higher margin profile will contribute to the margin of Marico. Marico plans to open roughly 12 new Kaya clinics in FY2008 and Marico wants to concentrate on increasing the utilisation levels and product penetration going forward.
• We are revising our FY2007 and FY2008 earnings estimates higher by 0.6% and 0.7% to Rs18.5 and Rs24.2 respectively. The stock is trading at attractive valuations of a price/earnings ratio (PER) of 23.1x FY2008E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 13.2x FY2008E. We continue to remain bullish on Marico and reiterate a Buy on the stock with a price target of Rs634.

Indian Hotels Company
Cluster: Apple Green
Recommendation: Buy
Price target: Rs175
Current market price: Rs159

Another good quarter

Result highlights

• For the third quarter of FY2007, Indian Hotels Company Ltd (IHCL) reported a top line growth of 29% at Rs409 crore against Rs317 crore in the third quarter of the previous year. The bottom line of the company grew by a healthy 43% to Rs87.9 crore from Rs61.5 crore in Q3FY2006, resulting in earnings of Rs1.5 per share.
• The operating profit margin (OPM) improved by 450 basis points from 32.9% in Q3FY2006 to 37.4%. The operating profit has shown a growth of 35% year on year (yoy) to Rs155 crore.
• The healthy trend in the top line is due to the rise in the number of foreign tourist arrivals into India, which has pushed up the average room rate (ARR) and the occupancy rate (OR). During the third quarter, the ARR grew by 32% to Rs10,772 from Rs8,150 in Q3FY2006; the OR zoomed to 76% from 74% in the corresponding quarter of the last fiscal. The hotel industry has witnessed continued buoyancy in the arrival of foreign tourists. During the period January-December 2006, the number of foreign tourist arrivals increased to 4.4 million from 3.9 million in Q3FY2006, representing a 13% growth yoy.
• At the current market price of Rs159 the stock is quoting at a price/earnings ratio (PER) of 25x FY2007E consolidated earnings per share (EPS) of Rs6.2. We maintain our Buy recommendation on the stock with a revised price target of Rs175.

Cipla
Cluster: Cannonball
Recommendation: Buy
Price target: Rs300
Current market price: Rs248

Growth triggers remain intact

Result highlights

• Cipla reported lower than expected numbers for Q3FY2007 with a net profit of Rs184.4 crore against the expectation of Rs192.1 crore.
• The earnings were lower due to the disappointing revenues, which grew by only 13% to Rs880.5 crore against the expectation of a 22% growth to Rs952.7 crore.
• The exports of active pharmaceutical ingredients (APIs) declined by 35% due to reduced supplies of Simvastatin and Finasteride APIs to Teva owing to the expiration of the 180-day exclusivities for the said products in December 2006. This affected the company�s revenue growth. Also, the sales of domestic formulations were lower than expected at Rs435.7 crore.
• However, the company reported a strong 35% growth in the formulation exports to Rs319.7 crore on the back of its global partnerships. The stellar performance of the formulation business was however overshadowed by the 35% decline in the API exports.
• The operating profit margin (OPM) witnessed a 450-basis-point expansion to 24.9% in the quarter, as the other expenses saw savings of 490 basis points caused by the foreign exchange (forex) fluctuation gain and lower factory overheads. Consequently, the operating profit increased by 38% to Rs219.3 crore.
• With the reduction in tax incidence to 14.9% from 22.6% (possibly due to the commissioning of the new export-oriented unit at Patalganga), the net profit before the extraordinary items was up 79.7% at Rs184.4 crore.
• At the current market price of Rs248, the stock is trading at 20.6x its estimated FY2008 earnings. Expecting a strong momentum in the company�s formulation exports, we maintain our Buy recommendation on the stock with a price target of Rs300.

Tata Motors
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,075
Current market price: Rs916

Forex gains lift profits

Result highlights

• The net sales (excluding the foreign exchange [forex] gain/loss) of Tata Motors for Q3FY2007 have marked a strong growth of 34.5% to Rs6,825.2 crore, ahead of our expectations. This was led by a 27.7% volume growth and a 7.7% growth in the realisations. The total income for the quarter stood at Rs6,956.8 crore and includes the forex gains of Rs131.6 crore.
• The operating profit margins (excluding the effect of the forex gains) have declined by 80 basis points year on year (yoy) but have improved slightly sequentially to 12.3%. Consequently, the operating profits excluding the forex gain/loss have improved by 26.5% to Rs842.6 crore. The sequential improvement in the margins is due to the stable raw material costs and cost savings in the other overheads.
• Both the interest costs as well as the depreciation costs have risen due to the higher capital expenditure (capex) of the company. As a result, the adjusted net profits for the quarter stood at 535.6 crore as against Rs80.4 crore a year ago.
• On a consolidated basis, the company has marked a 37% growth in its net sales and a 14% growth in the net profits.
• Due to a very strong volume growth registered in the first nine months, we are revising our estimates upwards for both FY2007 and FY2008. Our net profit estimates are revised upwards by 7.4% and 3.8% respectively.
• At the current market price (CMP) of Rs916, the stock trades at 13.1x its consolidated earnings and at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.8x. We maintain our Buy recommendation on the stock with a revised price target of Rs1,075.

Bank of Baroda
Cluster: Apple Green
Recommendation: Buy
Price target: Rs327
Current market price: Rs246

First-cut analysis of Q3 results

Result highlights

• Bank of Baroda's Q3FY2007 results are much above expectations with the profit after tax (PAT) reporting a growth of 62.8% to Rs329 crore compared to our estimates of Rs258.9 crore. The higher than expected total income growth was mainly driven by the other income and resulted in the actual PAT exceeding expectations.
• The net interest income (NII) was up 17.8% to Rs960.8 crore compared to our estimates of Rs921.3 crore. The other income increased by 22.6% to Rs333.7 crore with the net total income up 19% yoy and up 6.8% quarter on quarter (qoq).
• With the net income up 19% yoy and the operating expenses up only 4.5% yoy, the operating profit was up by 37.6% yoy to Rs656.9 crore.
• The provisions declined by 26.7% to Rs141.7 crore primarily due to the nil non-performing assets (NPAs) provisions made during the quarter as compared to Rs42.6 crore in Q3FY2006. The strong operating profit growth and a decline in the provisions helped in the PAT reporting a sharp rise of 62.8% to Rs329.1 crore.
• The total business of the bank increased by 37.06% to Rs189,959 crore, while the deposits increased by 31% to Rs112,298 crore and the advances increased by 46.8% to Rs77,661 crore. The retail credit has increased by 49.2% yoy and constitutes 19.3% of the total gross domestic credit.
• The asset quality has improved as the gross NPAs have come down on a y-o-y and q-o-q basis with the net NPAs in percentage terms also down to 0.67% from 1.1% yoy and 0.77% qoq. The capital adequacy stood at 12.24% compared to 12.93% on a sequential basis.
• The numbers have been strong for Q3FY2007 and based on the higher than expected PAT numbers we have revised our FY2007 PAT upwards by 3.6% to Rs1,015.6 crore. At the current market price of Rs246, the stock is quoting at 7x its FY2008E earnings per share (EPS), 3.4x pre-provision profits (PPP) and 0.9x book value. The bank is available at attractive valuations given its low price to book multiple compared to its peers and earnings upside possibilities. We maintain our Buy call on the stock with a price target of Rs327.

Grasim Industries
Cluster: Apple Green
Recommendation: Buy
Price target: Rs3,350
Current market price: Rs2,800

Q3 results ahead of expectations

Result highlights

• The Q3FY2007 net profit of Grasim Industries (Grasim) stood at Rs412 crore. The same was ahead of our expectations on account of the better than expected performance of the viscose staple fibre (VSF) and sponge iron businesses.
• The top line grew by 38.3% year on year (yoy) to Rs2,280 crore on account of the excellent performance of the cement business, higher realisations in the VSF business and strong volumes in the sponge iron business.
• The operating profit jumped by 108% to Rs666 crore whereas the operating profit margin (OPM) expanded by 980 basis points to 29.2%. The margin expansion was driven by a jump of 50% in the cement realisation and a rise of 24% in the VSF realisation. It was also aided by a robust 49% volume growth yoy in the sponge iron business.
• The other income increased substantially by 191% yoy to Rs44 crore, thanks to the deployment of the surplus cash during the quarter.
• The interest cost increased marginally by 2.2% quarter on quarter (qoq) to Rs24 crore whereas the depreciation provision rose by 10% qoq to Rs80.6 crore.
• The excellent performance at the operating level was sweetened by the other income component and this led the net profit to zoom by 154% to Rs412 crore.
• The consolidated results too were of stellar kind on account of a superlative performance of UltraTech Cement Ltd (UTCL). The consolidated net profit (after minority interest) stood at Rs555 crore, up 184% yoy.
• At the current market price of Rs2,800, the stock is discounting its FY2008E earnings by 11.4x and FY2008E enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (EBITDA) by 5.4x. Taking cognisance of the sanguine outlook, we maintain our Buy recommendation on the stock with a price target of Rs3,350.

Madras Cement
Cluster: Cannonball
Recommendation: Buy
Price target: Rs4,000
Current market price: Rs3,386

Upgrading earnings for FY2007
Continuing the trend witnessed in the earlier two quarters, Madras Cements (MCL) is once again expected to report a stellar 795% year-on-year (y-o-y) growth in its net earnings to Rs85 crore for the third quarter of FY2007. The top line is expected to witness a 67% y-o-y increase to Rs405 crore on the back of a 26% jump in the volumes and a 33% rise in the realisations. MCL, which has one of the highest earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne in the industry, is expected to see the same triple to Rs1,070.

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HDFC Bank - Avaya Globalconnect

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Goldman Sachs - India Rising

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Cinemax India IPO Subscription Details

Qualified Institutional Buyers (QIBs) 60.6831 times

Non Institutional Investors / HNI 44.9865 times

Retail Individual Investors (RIIs) 15.7688 times

Employee Reservation 0.4118 times

Overall - 42.32 times

CRISIL - Impact Analysis of Duty Cuts

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Market Close: Ranged action but not willing to give up!

Indian Indices traded in a range bound manner with majors like Tisco, L&T, ONGC supported the rally as market closed up. Global cues were positive with Asian Indices ending in green territory and Europe in green too. Metal stocks like SAIL, Tisco, Hindalco all rallied for the day talks that China had scrapped subsidy on steel exports. There is the bidding for Corus which is on and that lent its feel to the markets. Cement saw yet another day of profit taking. Mid caps and Small contributed their part in the rally with good results. Maruti launched a Diesel Variant of Swift today which brought in some interest here. Oil majors ONGC too traded as Crude prices jumped to trade around $55 A barrel. Not a good sign for Oil Marketing companies which investors reacted with their feet and stocks were down 2% plus each.

Sensex ended up 69 points at 14110.46 helped up by gains in TISCO (481.45,+4 percent), L & T (1576.8,+3 percent), ONGC (913.25,+3 percent), HDFC Bk (1056.8,+2 percent) and Hindalco (168.85,+2 percent). Restricting the gains were HLL (214.25,-4 percent), Tata Motors (916.2,-4 percent), Cipla (248.7,-2 percent), RCVL (434.95,-1 percent) and ACC (1026.35,-1 percent).

Bank of Baroda results were above the street expectations. The company's Q3 net profit was up at Rs 329 crore in the third quarter versus Rs 202 crore in the corresponding quarter of the previous year. Net interest income was up 17.8% at Rs 961 crore from Rs 815 crore. The total income has grown QoQ by almost 33% and the other income had also gone up 21%. Total business has gone up by 37%. The net profit was up by 62.8%, while the net interest income was up by 18.1%. The net interest margin had improved from 3.18% to 3.21%. Bank also has ambitious plans for overseas expansions. Overseas business contributes 18% towards total business and 35% to net profit. Bank has presence in 21 countries with 60 branches and has licenses for 10 more overseas branches. Stockjumped to end higher by 5.16%.

L&T the engineering major reported that the company's engineering and construction division has bagged three orders from the Delhi Metro Rail Corporation for the second phase of the Delhi Metro project (L&T was also involved in the first phase, which has been successfully completed). The projects are valued at Rs 360 Cr (US$ 79 m). The second phase of this project is targeted for completion by 2010, in time for the Commonwealth Games to be held in New Delhi. While two of the three contracts are directly in L&T's fold, the remaining one contract will be implemented as a joint venture with some international and domestic contractors. L&T executed Rs 700 cr (US$ 156 m) worth of contracts in the first phase of the Delhi Metro project. L&T rallied to support indices to close high.

The Cement stocks took it on the chin. The overall impact is unlikely as bad as the stocks make it out to be. A cut in import duty will not lead to any big imports. Its too difficult to import cement.. It needs large storage facilities and a strong distribution network. However given that the Government is so keen to keep prices low, the announcement of price hikes could have the Government banning exports as well and thats the worry. Ambuja was the big loser. The Government has put a freeze to trading on a couple of commodities.. i.e . Urad and Tur futures trade has been banned. Such irrationality needs to be priced into commodities and thats reason for some caution.

FNO closing is an event which will get over.. Its the results which keep flowing in thick and fast. Most of the numbers are good but there are a few negative surprises as well. There are others where performance did not meet raised expectations and the stocks came off despite good comparative numbers. Its all about expectations. Markets will now bring in expectations from the budget. With the economy doing what it is, expecting a further phillip from the budget would be asking for too much. However no one can stop expectations. The pink papers put them out daily.

Technically Speaking: Sensex Traded ranged ahead of FNO expiry. Declines were ahead of Advances. Market turnover stood good at Rs 4,447 cr. Market traded in the range of 14156 and 14043. Sensex Resistance lies at 14170-14220 levels and support at 14058-13994 levels.

Sensex up on positive global cues

The market rallied smartly towards the close on buying in select heavyweight, metal, capital goods and oil stocks and ended the session with gains of 69 points at 14110. The Sensex opened in positive territory at 14070 on the back of firm international markets and rallied further to touch the day's high at 14156.The market appeared to be heading towards a negative close after a strong bout of profit taking in the afternoon chopped off 112 points from the gains. The Sensex ended the session with gains of 69 points at 14110, while the Nifty added 24 points to close at 4090.

The breadth of the market was neutral. Of the 2,674 stocks traded on the BSE, 1,296 stocks advanced, 1,329 stocks declined and 49 stocks ended unchanged. Among the sectoral indices the BSE Metal index advanced 3.72% at 9229 followed by the BSE CG index (up 1.52% at 9469), the BSE PSU index (up 1.34% at 6232) and the BSE Oil & gas index (up 0.97% at 6639). However, the BSE Auto index, the BSE CD index, the BSE FMCG index, the BSE HC index and the BSE Teck index closed in negative territory.

L&T jumped 2.85% at Rs1,577, ONGC added 2.52% at Rs913, HDFC Bank advanced 2.50% at Rs1,057, BHEL was up 2.36% at Rs2,370 and HDFC added 2.26% at Rs1,643. Wipro, Maruti Udyog and ICICI Bank gained over 1% each. Among the metal stocks Sesa Goa soared 10.53%, SAIL added 7.52% and JSW Steel jumped 6.49%. Jindal Steel, Tata Steel and Sterlite Industries added over 3% each.

Over 80.35 lakh SAIL shares changed hands on the BSE followed by Kotak Bank (39.65 lakh shares), IDFC (34.57 lakh shares), Reliance Communication (33.46 lakh shares) and Tata Steel (30.47 lakh shares).

Sensex ends above 14,100

Firm global markets, short-covering in derivatives and a surge in FII buying sparked a recovery on the domestic bourses after Tuesday’s 168-point fall. A bout of intra-day volatility was witnessed ahead of the expiry of January 2007 derivatives contracts on Thursday (25 January 2007). .

The 30-share BSE Sensex gained 69.22 points (0.49%), to settle at 14,110.46. The S&P CNX Nifty advanced 23.80 points (0.59%), to settle at 4089.90.

The market was afflicted by volatility. The Sensex had almost evened out in mid-afternoon trade, but rose again during the latter part of the session. It had dropped to 14,043.54 at 14:06 IST, just 2.30 points more for the day. The barometer index had gained as many as 115 points, to 14,156.46, in early trade.

The market-breadth turned negative in the latter part of trading in contrast to a strong breadth earlier during the day. For 1,345 shares declining on BSE, 1,287 rose and 49 remained unchanged. Losers outpaced gainers by a ratio of 1.04:1.

Nifty January 2007 futures finished at 4098.95, compared to the spot Nifty closing of 4,089.90. Nifty February 2007 futures ended at 4107.

The BSE metal index was the top gainer among sectoral indices. It rose 331.25 points (3.7%), to settle at 9,228.90. While the BSE banking sector index, the Bankex, added 69.21 points (0.9%), to end on 7,383.82, the BSE PSU index gained 82.14 points (1.3%), to 6,231.89. The BSE Auto index lost 61.53 points (1.1%), to settle at 5,539.78.

The BSE Small-Cap Index added 42.61 points (0.5%), to settle at 7,543.89, against a BSE Mid-Cap Index rally of 14.30 points (0.24%), to 6,028.48.

The BSE clocked a turnover of Rs 4448, compared to Tuesday’s Rs 4055.48 crore.

Tata Steel jumped 4% to Rs 483.20. A block deal of 20 lakh shares was struck in the counter at Rs 471. Tata Steel said on Wednesday its Singapore-based subsidiary NatSteel Asia increased its holding in three of NatSteel's units. All three stakes were bought from Malaysia's Southern Steel Berhad, Tata Steel said.

L&T gained nearly 3% to Rs 1577, after bagging Rs 355 crore order. Larsen & Toubro also said it will invest Rs 500 crore over the next five years in a technology park in Gujarat.

Bharat Heavy Electricals rose nearly 3% to Rs 2382, after the company said it had a contract for building two, 500-megawatt units at a power plant in West Bengal.

Maruti Udyog rose 1.5% to Rs 934, after the car maker launched a diesel version of the Swift.

ICICI Bank gained 1% to Rs 975.10, and HDFC Bank rose 2.8% to Rs 1060. On Tuesday, HDFC Bank's ADR gained 1.6% to $75.89, while ICICI Bank's rose 1.8% to $44.54.

HDFC gained 2.2% to Rs 1643, ahead of the Q3 results, slated for release today. Four brokerages expect 20.1 - 27.1% growth in HDFC’s Q3 net profit, between Rs 341.80 crore and Rs 361.70 crore, compared to a net profit of Rs 284.52 crore in December 2005 quarter.

ONGC rose 2.7% to Rs 915, following Tuesday’s surge in oil price.

Hindalco gained 2.8% to Rs 169.65, tracking a recovery in global base metal prices. The company unveils Q3 results tomorrow.

Tata Motors lost 3.3% to Rs 918. Tata Motors reported 11.5% growth in net profit in December 2006 quarter, to Rs 513.17 crore from Rs 460.23 crore in December 2005 quarter. The company’s revenue for the quarter rose 37% to Rs 6956.84 crore (Rs 5074.86 crore). The numbers were unveiled after trading hours on Tuesday.

Hindustan Lever was down 3% to Rs 215.30. A strong 15.1 lakh shares changed hands in the counter on BSE.

Cipla shed 2.2% to Rs 248. After trading hours on Tuesday, Cipla reported a marginal 5.2% growth in net profit in December 2006 quarter, to Rs 184.38 crore (Rs 175.31 crore). Net sales rose 12.8% to Rs 880.54 crore (Rs 780.62 crore).

Bharti Airtel rose 0.4% to Rs 692. The telecom regulator on Wednesday slashed tariffs for national roaming on mobile networks by up to 56%, further reducing already low call rates in the fastest growing mobile market. The Telecom Regulatory Authority of India said the new tariffs, effective from Feb. 15, will be applicable for the dominant GSM network as well as the CDMA platform.

Reliance Communications shed 1% to Rs 436.65. The finance ministry has approved Reliance Communications’ proposed issue of $1.2 billion of American or Global Depository Receipts. Reliance Communications said in a regulatory filing earlier this month that it wanted to raise $1.2 billion to expand.

Among index heavyweights Reliance Industries (RIL) rose 0.4% to Rs 1367, whereas Infosys shed 0.6% to Rs 2221.

Bank of Baroda gained 5% to Rs 247.45, after it reported a net profit of Rs 329 crore in December 2006 quarter, compared to a net profit of Rs 202 crore in December 2005 quarter.

Oriental Bank of Commerce was down 0.2% to Rs 223.90. It also posted a net profit of Rs 182.42 crore in the December 2006 quarter, compared to a net profit of Rs 143.42 crore in the December 2005 quarter.

Indian Overseas Bank gained 3% to Rs 115.40. It had posted a net profit of Rs 246.78 crore in December 2006 quarter, compared to a net profit of Rs 197.21 crore in the December 2005 quarter.

Corporation Bank rose 1.4% to Rs 315.75. It also posted a net profit of Rs 146.42 crore in December 2006 quarter, compared to a net profit of Rs 115.07 crore in December 2005 quarter.

Radha Madhav Corporation jumped 5% to Rs 54.90. The company reported a net profit of Rs 3.54 crore in December 2006 quarter, compared to almost breakeven results for December 2005 quarter.

Textiles firm Bombay Rayon Fashions dropped 4% to Rs 203.25, after the company said Citigroup Global Markets (Mauritius) purchased 3.22 million shares, or 5.12% stake, in the company.

Pyramid Saimira Theatre jumped 16% to Rs 292.85. The stock rose on heavy volume of 91.7 lakh shares on BSE.

Gitanjali Gems rose 0.7% to Rs 231.55, after the jewellery maker and retailer reported an 86% increase in net profit in December 2006 quarter, to Rs 24.83 crore.

MRPL rose almost 2% to Rs 45.30, after it reported a surge in net profit in December 2006 quarter, to Rs 118.46 crore from Rs 19.36 crore in December 2005 quarter. Total income rose to Rs 7397.44 crore from Rs 6815.66 crore.

Varun Shipping (down 2% to Rs 64.80) slipped for the second day in a row, after a 24.8% fall in net profit in December 2006 quarter, to Rs 39.62 crore (Rs 52.72 crore). Income from operations declined 13.5%, to Rs 163.47 crore (Rs 189.09 crore).

Kinetic Engineering jumped nearly 15% to Rs 150.70, following reports that the company expects sales of Rs 180 crore in calendar 2007, as it expands its auto components business, which it started last year. The company, now only makes auto components, after it sold its motorcycle business to Kinetic Motor Company, a group firm.

European markets edged up in early trade. Key benchmark indices in London, Germany and France were up between 0.1 - 0.7%. Asian markets were firm. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up between 0.25 - 1.4%.

US stocks gained on Tuesday, as a spike in crude oil prices lifted shares of energy companies, including Exxon Mobil Corp., while strong profits from United Technologies Corp gave investors a reason to buy aerospace stocks.

The Dow Jones industrial average gained 56.64 points, or 0.45%, to end at 12,533.80. The Standard & Poor's 500 Index added 5.04 points, or 0.35%, to finish at 1,427.99. The Nasdaq Composite Index inched up just 0.34 of a point, or 0.01%, to 2,431.41.

Nymex crude was down 35 cents to $54.69 a barrel. It rose nearly $2.50 on Tuesday, when the United States announced plans to build up emergency crude reserves, and as colder weather pushed up demand in the world's top consumer.

FIIs stepped up buying on Monday (22 January). FIIs were net buyers to the tune of Rs 320 crore on 22 January, compared to Friday (19 January)’s inflow of Rs 76.80 crore. Sustained buying by FIIs over the past few days, which followed their substantial sales earlier this month, is also an important factor. FIIs have been net buyers in seven out of the last eight trading sessions.

As per provisional data, FIIs were net buyers to the tune of Rs 127 crore on Tuesday (23 January), the day when the Sensex lost 168 points. FIIs were net buyers to the tune of Rs 30 crore in index-based futures that day. They were net sellers to the tune of Rs 510 crore in individual stock futures on the same day.

The Q3 results announced so far were good. The season is in its last lap and the focus will shift to the Union Budget 2007-08 and related expectations. The RBI meeting for monetary policy is on 31 January 2007. With inflation surging to a two-year high of over 6%, the central bank is widely expected to raise interest rates

BRICS PCG Lakshmi Energy

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Sharekhan Reports

Sharekhan Highnoon dated January 24, 2007

Sharekhan Commodities Buzz dated January 24, 2007

ICICI Direct - PTC

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PowerYourTrade Trading Calls

Ashwani Gujral
Sell Canara Bank with a stop loss of Rs 280 for target of Rs 190
Sell Dr Reddy Laboratories with a stop loss of Rs 800 for target of Rs 680

Deepak Mohoni
Short Sell State Bank of India above Rs 1165 with stop loss of Rs 1180. Its a day-trading recommendation.
Buy Nucleus Software below Rs 840 with stop loss of Rs 820. Its a day-trading recommendation.

Rajat K Bose
Sell Voltas around last close with stop loss above Rs 106.10 for target of Rs 95.20
Buy Nagarjuna Fertiliser with stop loss below Rs 15.85 for target of Rs 18.50.

Kotak Morning View + Murdeshwar Ceramics

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Anagram Daily Call

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STRATEGY INPUTS FOR THE DAY

Concrete gains likely

The most important thing is not to stop questioning.

Yesterday the cement counters cracked following the Government's decision to slash import duties on cement, capital goods and select raw materials. This was done to curtail inflation. Cement shares were hit amid fears that the move could lead to cheaper imports and hurt local players. After some questioning, investors will realize that the panic selling was overdone. Portland cement accounts for just over 30% of total output in the country, according to estimates. So, expect a bounce back this morning in cement stocks to begin with. Banking stocks were hammered following the disappointing results from leader SBI. However, other banks have reported good numbers. As a result, here too, we could see a rebound today.

Do not get trapped in the bounce back. Remember, the key indices are trading near their record levels. Signs from the F&O segment are not very encouraging. Open interest in Nifty January Futures is down with the premium between the Spot Nifty and the Futures narrowing. This indicates that long positions have been liquidated. The difference between the underlying index and the Nifty February Futures too has reduced with a sharp rise in open interest. This shows that some short positions have been created. Hence, one should remain on guard for any untoward development.

We expect a higher opening in line with the firm trend in Asian markets. US stocks too closed higher. The Nasdaq, however finished flat. There's one bad news though. Oil prices climbed past the $55 per barrel mark in New York yesterday. In extended trading in Asia, the front-month crude contract was quoting 17 cents higher at $54.87 a barrel. FII inflows are not too exciting at the moment. They were net buyers of Rs1.27bn (provisional) in the cash segment yesterday. In the F&O segment, they offloaded stocks worth Rs3.43bn. On Monday, foreign funds pumped in Rs3.19bn. Mutual Fund on the other hand pulled out Rs542.3mn.

Some of the key results today include: Allahabad Bank, Apollo Hospitals, BoB, Bombay Dyeing, Corporation Bank, HDFC, Petronet LNG, Prithvi Info, HCL Infosystems, IOB, M&M Financial, OBC, Rolta and Sasken.

On Wall Street, the Dow Jones and the S&P 500 rose, while the Nasdaq was little changed, as investors struggled to absorb a nearly 5% jump in oil prices and a spate of mixed earnings reports.

The Dow industrials added 56.64, or 0.5%, to 12,533.80, its first gain in five days. The S&P 500 rose 5.04, or 0.4%, to 1427.99. The Nasdaq ended static at 2431.41.

Among the Indian ADRs, Patni surged 7.8%, Infy rose 1.5%, Satyam gained 1.7%, Tata Motors lost over 1%, Dr. Reddy's dropped 4.7%, HDFC Bank advanced 1.7% and ICICI Bank tacked on 1.8%.

European shares closed in the red, hit by technology-sector weakness. The pan-European Dow Jones Stoxx 600 index lost 0.1% at 372.61. The German DAX Xetra 30 closed down 0.1% at 6,678.93 and the French CAC-40 slipped 0.1% to 5,575.07. The UK's FTSE 100, however, gained 0.2% to 6,227.60.

Asian markets are on firm footing this morning. The Nikkei was up 113 points at 17,552 while the Hang Seng in Hong Kong too climbed 128 points to 20,898.

The Morgan Stanley Capital International Asia-Pacific Index rose 0.4% to 142.17 at 12:11 p.m. in Tokyo, heading for the highest close since May 10. The gauge is within 1% of its record close on May 8.

Stock benchmarks in Australia, China, Hong Kong and Singapore were set to close at all-time highs. Indexes in markets open for trading gained, except in Indonesia.

In emerging markets, the Bovespa in Brazil gained 1.4% while the RTS index in Russia was up 0.8%.

Major Bulk Deals:
Morgan Stanley has picked up Lloyd Electric; Citigroup has sold Orient Hotels; Deutsche Securities has purchased Phoenix Mills; Tata MF has sold Punjab Chemicals; Morgan Stanley has sold REI Agro; Goldman Sachs has sold Shriram Transport; Goldman Sachs has bought Sical Logistics from Lloyd George Investment; Citigroup has sold Venus Remedies; HSBC has picked up Vyapar Industries.

Market Volumes:
The turnover on NSE was up by 5.9% to Rs80.26bn. BSE Bank index was the major loser and lost by 2.17%. BSE Pharma index (down 1.66%), BSE Consumer Durable index (down 1.53%), BSE PSU index (down 1.29%) and BSE FMCG index (down 1.11%) were among the other major losers.

Volume Toppers:
IFCI, Nagarjuna Fertilizers, SAIL, India Cement, TTML, Shree Ashtavinayak, IDBI, R Com, Satyam Computer, Aftek, Balrampur Chini, Hindalco, ITC, MTNL, IDFC, KPIT Cummins, Ispat Industries, Ashok Leyland and Voltas.

Upper Circuit Filters:
Flex Industries, Heritage Foods, Pyramid Saimira, Nesco, Crest Animation, Ganesh housing, Hindustan Dorr and Suven Life.

Delivery Delight:
Apollo Tyres, Bharat Forge, Cambridge Solutions, Educomp Solutions, Gammon India, GTC Industries, Indiabulls, Jammu and Kashmir Bank, Orchid Chemicals, Sun TV, Tata Power and Zee Entertainment.

Brokers Recommendations:
Great Offshore – Buy from Kotak with target of Rs878.

Long Term Investment:
Jyoti Structures.

Major News Headlines:
Bharti Airtel Q3 profit at Rs12.15bn (up 122%); revenues at Rs49.13bn (up 62%)
SBI Q3 net at Rs10.65bn (down 9.5%); total income at Rs115.47bn (up 1.2%)
Glenmark developing asthma drug with Forest Labs
Neyveli Lignite Q3 profit at Rs1.52bn (up 11.7%), revenues at Rs6.42bn (down 6.5%)
BEML Q3 profit at Rs529.7mn (down 5%); revenues at Rs5.59bn (up 5.6%)
Tata Motors Q3 profit at Rs5.13bn (up 11.5%), sales at Rs69.56bn (up 37%)
Cipla Q3 profit at Rs1.84bn (up 5.1%), sales at Rs8.81bn (up 12.5%)
Hindustan Zinc cuts prices by 2.3% to Rs188,000 per ton
Indian Hotels Q3 profit at Rs879.9mn (up 42.9%), revenues at Rs4.12bn (up 25%)
Grasim Q3 profit at Rs4.12bn (up 154%), sales at Rs22.79bn (up 37%)
LIC Housing Finance Q3 profit at Rs766.1mn (up 31%), total income at Rs4.05bn (up 27%)

Research Desk - Bank of India

Bank of India
Q3 FY07
Result Update

Profit growth was not only above expectation, but was qualitatively better as well. Bank managed 16bps margin expansion on an expanded loan book of 28%. BOI’s growth story of recovering asset quality along with improving loan mix leading to margin expansion is playing out well. Despite factoring in an equity dilution of 20%, we expect ROE to remain around 19%. We rate BOI as the best play on the Indian Banking sector among the PSU banks. We reiterate our positive stance on the stock with a BUY rating and a price target of Rs268, implying an upside potential of 31%

Rapid asset growth, though managed well through rising CASA ratio
Digressing from its guidance of 24-25% loan growth, bank grew its loan book by 28%, aided mainly by the retail segment (55% growth yoy). However, this was managed well through higher CASA mobilization, which grew by 22% yoy to 41.3% up from 40.4% in Q2 FY07.

Rising share of retail loan book now forming 32.3% from 27% in Q3 FY06, along with improving mix of international loan book expanded yields by 78bps yoy to 8.4%. Funding cost also remained under control with rising CASA ratio, restricting deposit cost rise to 30bps yoy to 4.4%. This expanded margins by 16bps yoy to 3.2%, while domestic NIMs expanded by a huge 21bps to 3.8%.

BOI’s main investment theme of improving asset quality continued to play out well with gross NPAs coming down by Rs334mn qoq to Rs21.8bn, while net NPAs fell by Rs404mn to Rs7.5bn. Net NPAs on a proportionate basis have come down to less than 1% from 1.1% in Q2 FY07.

We expect profit growth in Q4 FY07 to remain subdued on a high base effect. However, we expect rising ROE to continue expanding valuations for the bank. Despite factoring in a 20% equity dilution in FY08, we estimate an average ROE of 18.5% over FY08 and FY09.

How Market Fared

Volatility likely to continue

The markets ended on a weak note as profit booking was witnessed in the scrip’s across the sectors. Weak openings were led by subdued global cues. Decision of the government to cut import rates further dragged the benchmark index to hit an intra-day low of 14025.74. All the key indices closed in red as profit booking in the blue chips like Dr Reddy’s Lab, SBI, Tata Steel, Tata Motors, HLL, RIL and Infosys. Finally, the BSE benchmark Sensex lost 168 points to close at 14041. NSE Nifty slipped by 36 points to close at 4066. The bank index was the major loser and lost 2.17%, Consumer Durable, FMCG and Pharma followed suit.

BEML declined 2.5% to Rs1125 after the company announced its Q3 result with profit at Rs529.7mn (down 5%) and revenue at Rs5.59bn (up 5.6%). The scrip touched an intra-day high of Rs1175 and a low of Rs1080 and recorded volumes of over 1,00,000 shares on NSE.

SBI slipped 4.1% to Rs1174 after the company declared its Q3 result with net profit at Rs10.65bn (down 9.5%) and total income at Rs115.47bn (up 1.2%). The scrip touched an intra-day high of Rs1231 and a low of Rs1167 and recorded volumes of over 21,00,000 shares on NSE.

Nalco surged nearly by 4% to Rs221 after the company declared its Q3 result with net profit at Rs5.72bn (up 46%) and sales 14.48bn (up 9.3%). The scrip touched an intra-day high of Rs223 and a low of Rs212 and recorded volumes of over 4,00,000 shares on NSE.

Reliance Industries was down 1% to Rs1360. The company announced that it has no plans to spin off KG basin oil and gas fields. The scrip touched an intra-day high of Rs1380 and a low of Rs1357 and recorded volumes of over 12,00,000 shares on NSE.

Cement stocks slipped heavily as government decision to cut import rates dragged them down. Heavy weight ACC lost.7% to Rs1036, Gujarat Ambuja slipped over 7% to Rs136, Mangalam Cement dropped over 9% to Rs224 and India Cement slipped over 8% to Rs220.

Auto stocks were in reverse gear led by selling pressure. Maruti dropped 2.1% to Rs918, Tata Motors slipped 1.3% to Rs950, Hero Honda lost 1% to Rs717 and M&M edged lower 0.8% to Rs921.

Metal stocks also lost their shine on back of profit booking. Tata Steel fell 1.5% to Rs464, SAIL was down by 1.2% to Rs97, Sterlite Industries dropped 2.3% to Rs516 and Hindustan Zinc was down 1.5% to Rs757

Market may remain under pressure

The Asian indices in the ongoing trades are in green and overnight gains in global market may help the local bourses to open on a positive note in early trades. However, it likely to extend its downward trend on account of unwinding of position of Jan series derivative contracts and yesterday's correction likely to keep the sentiment bearish. Among the major domestic indices, the Nifty could test 4044 on the downside and faces resistance at 4100. The Sensex has a likely support at 13940 and test higher levels of 114150.

US indices registered gains on Tuesday amid fresh rise in crude oil prices and worries of mixed earnings reports. While the Dow Jones rose by 57 points to close at 12534, the Nasdaq ended 0.34 points up at 2431.

Most of the Indian ADRs gained on the US bourses. Rediff gained 2.8% while MTNL, Infosys, Satyam,ICICI Bank and HDFC Bank gained over 1-2% each. While Dr Reddy's lab lost 4.69% and Tata Motors, Wipro , VSNL declined over 0.5-1% each.

Crude oil prices gained strength after slipping in the last few sessions. The Nymex light crude oil for March delivery rose $2.46 to close at $55.04. In the commodity space, the Comex gold for February series added $11.80 to settle at $645.90 a troy ounce.

Market may recover tracking firm Asian equities

The market may recover from Tuesday’s 168 points, fall tracking firm Asian markets and with data showing a surge in FII inflow. But volatility may prevail ahead of Thursday (25 January)’s expiry of January 2007 derivatives contracts.

FIIs stepped up buying on Monday 22 January. FIIs were net buyers to the tune of Rs 320 crore on 22 January compared to their Friday (19 January)’s inflow of Rs 76.80 crore. There has been sustained buying by FIIs over the past few days, which followed their substantial sales earlier this month. FIIs have been net buyers in seven out of the last eight trading sessions.

As per provisional data, FIIs were net buyers to the tune of Rs 127 crore on Tuesday 23 January, the day when Sensex had lost 168 points. FIIs were net buyers to the tune of Rs 30 crore in index-based futures on that day. They were net sellers to the tune of Rs 510 crore in individual stock futures on that day.

After trading hours on Tuesday, Tata Motors reported 11.5% growth in net profit in December 2006 quarter to Rs 513.17 crore from Rs 460.23 crore in December 2005 quarter. The key result today is that of housing finance major HDFC. Four brokerages expect a between 20.1% to 27.1% growth in HDFC’s Q3 net profit to between Rs 341.80 crore to Rs 361.70 crore compared to a net profit of Rs 284.52 crore in December 2005 quarter.

Asian stocks rose on Wednesday, with Japan's Nikkei nearing a 6-1/2-year high. A more than 4 percent surge in oil and rising gold and base metals prices boosted commodities-related stocks, sending Australia's resource-heavy main index to a record high and pushing Hong Kong's Hang Seng to a new peak.

US stocks gained on Tuesday as a spike in crude oil prices lifted shares of energy companies, including Exxon Mobil Corp., while strong profits from United Technologies Corp. gave investors a reason to buy aerospace stocks. The Dow Jones industrial average gained 56.64 points, or 0.45 percent, to end at 12,533.80. The Standard & Poor's 500 Index added 5.04 points, or 0.35 percent, to finish at 1,427.99. The Nasdaq Composite Index inched up just 0.34 of a point, or 0.01 percent, to 2,431.41

Oil dipped back below $55 a barrel, after racing nearly $2.50 higher on Tuesday as the United States announced plans to build up its emergency crude reserves and as colder weather pushed up demand in the world's top consumer. NYMEX crude for March delivery edged down 7 cents to $54.97 a barrel.

Emkay - I-Flex Solutions, Bhagyanagar Industries, Maruti, Kamat Hotels

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Morgan Stanley - Zee

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ABN Amro - Various Reports

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Geojit Reports

Geojit - Exide Industries

Geojit - Biocon

Geojit - Sterling Tools

Sharekhan Investor's Eye dated January 23, 2007

Omax Autos
Cluster: Apple Green
Recommendation: Buy
Price target: Rs134
Current market price: Rs93

Margins improve

Result highlights

• The Q3FY2007 results of Omax Autos are ahead of our estimates due to higher margins during the quarter.
• The net sales for the quarter rose by 9% to Rs179.4 crore, led by a 7.9% growth in the domestic revenues and a 32% growth in the export revenues.
• The operating profit for the quarter rose by 52.8% to Rs18.5 crore mainly due to a 300-basis-point improvement in the operating profit margin (OPM) to 10.3%. This is a result of various cost saving initiatives implemented by the company in order to bring down its power, personnel and other manufacturing costs.
• The other income is higher than estimated at Rs2.72 crore. Aggressive capacity expansion plans of the company have also led to higher interest and depreciation costs. The profit after tax (PAT) for the quarter stood at Rs6.66 crore, rising by 34.3%.
• The company has also announced that it would set up a new manufacturing unit in Lucknow to manufacture chassis for Tata Motors. The unit would be set up with an initial capacity of 48,000 chassis and is expected to deliver revenues of Rs120 crore by FY2009 and of about Rs225 crore by FY2011.
• At the current market price of Rs93, the stock discounts its FY2008E earnings by 6.3x and quotes at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.7x. We maintain our Buy recommendation on the stock with a price target of Rs134.

Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs220
Current market price: Rs196

Another excellent quarter

Result highlights

• For Q3FY2007 Bank of India (BOI) reported numbers well above the market?s and our expectations. The growth in its net interest income (NII) and other income was in line with the expectations of a good set of numbers. What made the good results look even better was the restrain the bank showed in case of operating expenses.
• The NII grew by 26.9% to Rs920 crore against our estimate of Rs936.3 crore. The 26.9% growth in the NII was brought about by a 22.3% growth in the assets and a 16-basis-point improvement in the global net interest margin (NIM) year on year (yoy) to 3.18%.
• The other income reported a 22.8% growth with the trading income showing a very high growth of 144.5% yoy to Rs55.5 crore. The core fee income was up 22.6% yoy while the recoveries declined by 49% to Rs14.9 crore.
• The operating expenses grew by a sedate 15.3% to Rs627.9 crore as the staff expenses grew by only 7.8% and the other expenses grew by 29.6% yoy.
• The operating profit was up by 38.7% yoy to Rs614.4 crore and the core operating profit excluding the treasury income was up 33% yoy to Rs558.9 crore.
• The provisions increased by 16.6% to Rs289.8 crore with the non-performing asset (NPA) provisions up 55.6% to Rs190.9 crore. Lower taxes during the quarter also helped the profit after tax (PAT) to report a 78% year-on-year (y-o-y) growth while the profit before tax (PBT) grew by 67% yoy.
• At the current market price of Rs196, the stock is quoting at 8.1x its FY2008E earnings per share, 3.3x its FY2008E pre-provisioning profits and 1.5x FY2008E book value. We maintain our Buy recommendation on the stock with a revised price target of Rs220.

Cadila Healthcare
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs425
Current market price: Rs345

Extraordinary income boosts net profits

Result highlights

• The net sales of Cadila Healthcare (Cadila) increased by 24.7% year on year (yoy) to Rs460.9 crore in Q3FY2007. The growth was driven by a 105.1% growth in the formulation exports and a 13.4% rise in the exports of active pharmaceutical ingredients (APIs). The sales growth was ahead of our expectations.
• The 105.1% jump in the formulation exports was driven by the improved performance of the French business (a growth of 188.3% year on year [yoy]) and US business (a growth of 105% yoy). New launches in the USA and regulatory reforms in France led to the strong growth of the US and French businesses respectively.
• An 84.5% rise in the company's generic research and development (R&D) expenses, along with an increased advertising spend in the consumer business, caused Cadila's operating profit margin (OPM) to shrink by 200 basis points to 17.4% in Q3FY2007. However, in view of the fact that the increased advertising spend for the consumer business was a one-time charge, we expect the margin to bounce back in the future quarters.
• Consequently, the operating profit (OP) of the company rose by 12.3% to Rs82.3crore in the quarter.
• Cadila's adjusted net profit grew by a robust 66.4% to Rs65.9 crore, on the back of a one-time extraordinary income of Rs19.6 crore from the sale of the French branded business. The profit growth surpassed our expectations. However, on excluding the extraordinary income, the reported net profit stood at Rs46.3 crore, up by 12.9% yoy. The earnings for the quarter stood at Rs3.7 per share.
• The company has signed three new contract manufacturing contracts during the quarter with international companies, taking the cumulative number of contracts to 20, with peak revenue potential of $27.5 million. Cadila has also filed three abbreviated new drug applications (ANDAs) in the quarter, taking the total number of filings to 44 ANDAs.
• At the current market price of Rs345, the company is quoting at 14.7x its FY2008 estimate earnings. We maintain our Buy recommendation on the company with a price target of Rs425.

Bharti Airtel
Cluster: Apple Green
Recommendation: Buy
Price target: Rs820
Current market price: Rs689

Price target revised to Rs820

Result highlights

• Bharti Airtel has announced a robust revenue growth of 12.8% quarter on quarter (qoq) and 62.4% year on year (yoy) to Rs4,912.9 crore for Q3FY2007. The sequential revenue growth was evenly driven by a 13.8% rise in the mobile revenues and a 12.4% growth in the non-mobile businesses.
• The company has positively surprised on the margin front, with a 170-basis-point sequential improvement in the operating profit margin (OPM) to 40.8%--one of the highest ever reported in any quarter. Consequently, the operating profit grew by 17.7% qoq and 81% yoy to Rs2,005 crore.
• In addition to the healthy growth in the operating profit, the earnings growth was also boosted by the foreign exchange fluctuation gains of Rs219.2 crore on the forward hedges (as compared with a marginal gain in Q2). Consequently, the consolidated earnings grew at an exponential rate of 30.1% qoq and 122.9% yoy to Rs1,215 crore, way ahead of the market expectations of around Rs1,070 crore.
• The other key highlights include the proposed acquisition of 100% stake in the submarine cable network from India to Singapore for a consideration of $110 million. The cable link is currently equally owned by SingTel and one of the Bharti group companies.
• The company introduced call card for international calls from the USA to India that would enable it to generate an alternate source of revenues from the 2.5 million strong non-resident Indian (NRI) community based in the USA. It also announced some new initiatives during the quarter, including the approval to launch wireless mobile (2G and 3G) services in Sri Lanka, a new venture to introduce direct-to-home (DTH) broadcasting services and a possible launch of (Internet Protocol) IP-based television channel distribution (IPTV) system after a successful testing in the National Capital Region (NCR).
• To factor in the better than expected performance, we have revised upwards our earnings estimates by 17% and 7.1% for FY2007 an FY2008 respectively.
• At the current market price the stock trades at 31x FY2007 and 22.2x FY2008 estimated earnings. We maintain our Buy call on the stock with a revised on-year price target of Rs820 (24x rolling four quarters forward earnings).

State Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,380
Current market price: Rs1,174

Sequential growth disappoints

Result highlights

• The Q3FY2007 results of State Bank of India (SBI) are below expectations with the bank's profit after tax (PAT) reporting a decline of 4.5% to Rs1,065 crore as against our estimate of Rs1,195 crore.
• The reported net interest income (NII) at Rs3,951 crore is slightly below our estimate of Rs4,034 crore. However the total other income at Rs1,811 crore is much above our expectation of Rs1,551 crore, mainly due to a higher than expected "Others" component in the "Other income" category. The operating expenses are in line with our expectations; however the provisions have risen more than expected, due to an unexpected investment depreciation. A higher than expected growth in the other income has offset the more than expected rise in the provisions to some extent, as it has actually reduced the gap between the actual PAT and the estimated PAT.
• The reported NII is down by 6.4% year on year (yoy) to Rs3,951.3 crore. However the third quarter saw many one-time items adjusted for which the NII growth stands at 33% yoy. But sequentially the NII has grown by only 1.4%.
• The other income is marginally down by 1.6% to Rs1,811 crore, however adjusted for the India Millennium Deposit (IMD) gains, the growth is strong at 38.3%. The core fee income is up 22.9% yoy and the trading income has risen by 139.3%; the same was expected as the bank planned to make up for the low trading income of Rs7.7 crore reported in Q2FY2007. Though the year-on-year (y-o-y) growth rates are good, the core fee income has seen a sequential growth of only 1.9%.
• The operating expenses are down 16% yoy, however adjusting for the voluntary retirement scheme (VRS), wage arrear and extra gratuity payments made to the tune of Rs641 crore, the growth in the operating expenses remains contained. The operating profit is up 9.8% yoy, however the core operating profit is up 27.3% yoy and 1% quarter on quarter (qoq).
• The provisions and contingencies are up 148.2% yoy and 71.2% qoq to Rs1,166.2 crore. The provision base was lower in Q3FY2006 as there was a Rs102.6-crore write-back in the non-performing asset (NPA) provisions during the quarter. This coupled with the unexpected investment depreciation of around Rs158 crore in Q3FY2007 brought  about the sharp rise in the total provisions.
• The adjusted numbers reflect a good core income growth on a y-o-y basis, however there has been no sequential improvement which is a cause for concern. With the deposit costs rising steadily and another interest rate hike looking imminent, the pressure on the margin going forward remains the key issue. Hence, the scrip may remain under pressure in the short term until there is more clarity on how the Reserve Bank of India (RBI) wants to tackle inflation as well as on the measures that the central bank may announce in the latest review of the monetary policy scheduled on January 31, 2007.

Ceat
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs190
Current market price: Rs146

A brilliant performance

Result highlights

• Ceat's Q3FY2007 results are ahead of our expectations. The net sales have risen by a brilliant 30.7% to Rs536.7 crore on the back of a 14% tonnage growth and a very strong realisation growth. The sales to original equipment manufacturers (OEMs) have marked a significant improvement of 130% during the quarter whereas the replacement sales have continued to grow at a handsome pace of 25%.
• The operating profit margin (OPM) has expanded by 250 basis points to 7.3% as a result of a lower raw material cost during the quarter as well as avings in the manpower cost and the other overheads. With several price hikes effected in the last one year, the OEM business has also become a lot more profitable, leading to further margin improvement. As a result, the operating profit has grown by 98.3% to Rs39 crore.
• Stable interest and depreciation costs have helped the company to report a 665% growth in the net profit, which stands at Rs11.8 crore.
• Though the rising rubber prices are a concern, we are pretty confident of the pricing power of the tyre industry and expect another price hike from the tyre majors in the next two to three months.
• At the current market price of Rs146, the stock is trading at 9.4x its FY2008E earnings and at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.7x. We maintain our Buy recommendation on the sock with a price target of Rs190.

ORG Informatics
Cluster: Emerging Star
Recomendation: Buy
Price target: Rs190
Current market price: Rs172

Maintains growth momentum

Result highlights

• ORG Infomatics (ORG) reported a 273.5% growth in its net revenues to Rs108.5 crore during the third quarter ended December 2006. The revenue growth was driven by the execution of some its large orders, especially the Mahanagar Telephone Nigam Ltd (MTNL) order.
• The operating profit margin (OPM) declined by 190 basis points to 8.4% as the initial part of the MTNL order involves low-margin hardware supplies.
• However, the jump in the other income (that included a one-time gain of Rs0.8 crore from the sale of assets) aided the overall growth in the earnings. Consequently, the consolidated earnings grew by 70.6% to Rs5.2 crore during the quarter, which is ahead of our expectation of Rs4.6 crore.
• The fresh order intake continues to be robust and the company has been able to maintain the pending order position of around Rs600 crore (marginally lower than Rs625 crore reported in September 2006). The management also indicated that it is pursuing some more large-sized orders and expects to close one to two large orders in the coming months.
• Along with the results the company has also announced the acquisition of 100% sake in the Bangalore-based TechUnified Pvt Ltd (UT) for a total consideration of Rs49 crore (partly paid through issue of 8.93 lakh shares at a price of Rs181 per share). UT is a profitable company at the net level and is expected to report net profit of around Rs7 crore in the current fiscal. It offers wireless, speech and e-Business solutions to financial companies and telecom operators. This is the second acquisition in the month as the company had recently announced the acquisition of a 100% stake in DGIT Solutions.
• At the current market price the stock trades at 17x FY2007 and 11.7x FY2008 estimated earnings. The estimates do not include the impact of the acquisitions as details of the same are awaited. However, the equity dilution has already been factored in the calculation of the earnings per share (EPS). We maintain our Buy recommendation on the stock with a price target of Rs190 (10x rolling four quarters forward earnings).

Universal Cables
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs179
Current market price: Rs115

Capacity expansion to drive revenue growth

Result highlights

• 
  The net sales of Universal Cables Ltd (UCL) grew by 25% and the growth is in line with our expectations. However the net profit growth of 10.6% is slightly below our expectations on account of a higher than expected increase in the other expenses.
• The net sales for the quarter grew by 25% to Rs87.64 crore. The power cable business grew by 22% to Rs81.66 crore, the capacitors business grew by 9% to Rs3.41 crore and the telephone cable sales stood at Rs2.60 crore against nil in the corresponding quarter of the previous year.
• The operating profit margin (OPM) for the quarter declined by 211 basis points to 9.32% as the other expenses to sales ratio increased to 17.09% from 14.60% last year. Hence the operating profit for the quarter grew by just 1.62% to Rs8.17 crore.
• Going forward, we expect the OPM to improve, as the company focuses on the high-end products that have better margins and as its 100% subsidiary, Optic Fibre Goa Ltd (OFGL), turns profitable. The segmental losses from the telephone cable division stood at Rs0.33 crore in this quarter as against Rs0.79 crore in the previous quarter.
• The interest expense for the quarter increased by 48% to Rs1.54 crore, while the depreciation cost for the quarter increased by 81% to Rs1.92 crore.
• Consequently the net profit growth was lower at 10.6% to Rs5 crore.
• At the current market price of Rs115, the stock is quoting at 8.7x its FY2008E earnings per share (EPS) and 5.2x its FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a price target of Rs179.

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VIEWPOINT

Zee Entertainment Enterprises

Blow-out performance
Zee Entertainment Enterprises Ltd (ZEEL) declared its first set of quarterly numbers after its incorporation on demerger of the erstwhile Zee Telefilms Ltd (ZTL). As of now ZEEL comprises ZTL?s global broadcasting business and direct-to-home (DTH) business. Post-formation of Dish TV India Ltd (Dish TV; likely to be listed in February 2007) the DTH business will be allocated to the new company, leaving ZEEL with the broadcasting operations. Thus the results for Q3FY2007 include the performance of these two revenue streams.

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SECTOR UPDATE

Cement

Import duty on cement slashed to zero
With the headline inflation crossing 6%, the government has slashed the customs duty on cement, various raw materials and capital goods to check inflationary pressures. The changes in the duty structure would come into effect immediately. The duty cut comes as no surprise for the cement sector as cement prices have risen unabated in the last one year

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