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Wednesday, April 11, 2007

STRATEGY INPUTS FOR THE DAY


Good, flat, now what?

An unhurried sense of time is in itself a form of wealth.

We've had a good Monday, a flat Tuesday and perhaps some kind of Wednesday wear out is in the offing later in the day. There is no need to rush in and do something which you are not convinced off. Take your time to pick and choose carefully. Global cues indicate we are in for another volatile day. Stock indices in the US closed flat and Asian markets are marginally in the positive zone. Oil prices are hovering under the $62 per barrel mark. FIIs were net buyers to the tune of Rs3.5bn (provisional) in the cash segment yesterday. In the F&O segment, they pumped in Rs1.12bn. On Thursday, they were net buyers at Rs5.69bn in the cash segment. Mutual Funds were net buyers of Rs463.2mn on the same day.

Going by these indicators, the market should open in the green. But, uncertainty ahead of Friday's Infosys results will keep the bulls on tenterhooks. With so much being made out of the rupee's appreciation and its impact on IT firms, a positive surprise from the likes of Infosys and TCS could change the short-term outlook for the market. What's more, even if the software majors' numbers are slightly disappointing, the market should hold up as negative expectations have already been built into the stock prices. The wild card will be Infosys' guidance.

And remember, the market is not just about IT companies. There is a broader market out there, which is driven more by factors such as inflation, interest rates, the health of the US economy, overheating in China, the yen carry trade and fund flows to emerging markets et al. Right now things are looking sanguine but be prepared for sudden jolts.

iGate Global has come out with its numbers for Q4FY07. Its net profit is at Rs22.6 crore vs Rs15.95 crore QoQ. Revenues are at Rs210.1 crore vs Rs210.7 crore Qoq. EPS is at around Rs16. Operating margins are reportedly on a higher side while the topline is lower than expected.

Mastek will announce its results today. Not much is expected out of the mid-cap software firms, as the focus remains on the heavyweights like Infosys and TCS. Nonetheless, a 1.7% gain in the rupee in the January-March quarter is likely to hit their margins.

US stocks finished barely changed on Tuesday, as investors remained cautious ahead of the start of the quarterly earnings season. But, the Dow Jones Industrial Average eked out gains for the eighth session in a row, its longest winning streak since 2003, buoyed by improved profit outlook for Intel and Exxon Mobil.

Energy shares rose to a record and accounted for 54% of the Standard & Poor's 500 Index's sixth consecutive increase after oil prices rose for the first time in five days.

The Dow Jones added 4.71 points to 12,573.85. The S&P 500 rose 3.78 points, or 0.3%, to 1448.39, leaving it within 1 point of erasing all of its losses from the Feb. 27 global sell-off. The Nasdaq Composite Index increased 8.43 points, or 0.3%, to 2477.61.

After the close, Dow component Alcoa reported higher quarterly earnings and revenue that topped estimates, jump starting the earnings period on a positive note. Shares gained more than 1.5% in extended-hours trading.

US light crude oil for May delivery rose 38 cents to settle at $61.89 a barrel on the New York Mercantile Exchange after slumping 4 percent Monday on fund selling and relief about the developments in Iran. The front-month contract was quoting nearly unchanged at $61.89 a barrel in extended trading in Asia.

COMEX gold for June delivery added $4.60 to settle at $681.50 an ounce. Treasury prices rose, lowering the yield on the 10-year note to 4.72% from 4.75% late on Monday. In currency trading, the dollar fell versus the euro and the yen.

European stock markets advanced. In the first day of trading since the markets' four-day Easter break, the German DAX 30 closed up 0.9% at 7,166.67. The UK's FTSE 100 added 0.3% to 6,417.80, while the French CAC 40 gained 0.4% at 5,766.27. The pan-European Dow Jones Stoxx 600 index added 0.5% to 382.21.

Asian stocks rose for a third day on Wednesday. Samsung Electronics and AU Optronics gained after LG.Philips LCD reported a loss that was smaller than some analyst estimates. The Nikkei in Tokyo was up 14 points at 17,679 while the Hang Seng in Hong Kong lost 20 points at 20,327. The Kospi in Seoul advanced 17 points to 1516 and the Straits Times in Singapore shed 3 points at 3419.

In the emerging market space, the Bovespa in Brazil was up 0.7% at 47,174 while the IPC index in Mexico was 0.4% down at 29,515 and the RTS index in Russia gained 0.7% at 1977.

HOW MARKET FARED

Volatile market ends flat

The markets after opening on a volatile mode managed to close flat in green. Technology and Banking stocks were the major losers. However, Metal, FMCG and oil refinery stocks bucked the negative trend aiding the key indices to close higher. Mid-Cap and small cap index outperformed against the frontline indices. Finally, the 30-share benchmark Sensex was flat at 13189. NSE Nifty was also flat at 3848. Satyam Computer, Infosys and Wipro were among the major losers however BPCL, Sun Pharma and HDFC were among the major gainers.

Indiabulls surged by over 12% to Rs502. Reports suggest that the securities broking firm has asked some of its employees to leave and shut some offices. The company denied any such development. The scrip touched an intra-day high of Rs530 and a low of Rs436 and recorded volumes of over 1,00,00,000 shares on NSE.

ABG Shipyard gained 1.8% to Rs362 after the company secured $139mn order from Essar Shipping unit. The scrip touched an intra-day high of Rs385 and a low of Rs351 and recorded volumes of over 9,00,000 shares on BSE.

Prism Cement was up 1.5% to Rs33 as reports stated that the company announced its Q3 result with net profit at Rs550mn and sales at Rs2.02bn up 21%. The scrip touched an intra-day high of Rs35 and a low of Rs33 and recorded volumes of over 24,00,000 shares on NSE.

Sesa Goa advanced by over 2.5% to Rs1756 amid an ongoing bidding war, where Arcelor Mittal still seems to be the frontrunner. The scrip touched an intra-day high of Rs1799 and a low of Rs1720 and recorded volumes of over 7,00,000 shares on NSE.

Technology stocks were on the receiving end on back of profit booking. Index heavy weight led the fall Satyam Computer declined by over 3.5% to Rs445, Wipro slipped by 2.4% to Rs547 and Infosys dropped by 2.4% to Rs1998. MphasiS BFL and HCL Tech were the major losers among the Mid-Cap stocks.

Oil Refinery stocks were on the move crude oil slipped sharply. BPCL jumped by over 5% to Rs329, HPCL gained 1.8% to Rs258 and IOC added 2.5% to Rs405 as reports stated that the company may participate in a project to build a $7 billion refinery in Russia with the capacity to process up to 15mn metric tons of crude oil a year.

Steel stocks shined as reports stated that steel companies have raised HR coil prices by Rs1000 per tonne. JSW Steel surged by over 4.5% to Rs532, Essar Steel rose over 3% to Rs38, Tisco was up by 0.5% to Rs495 and Jindal Steel added 2.9% to Rs2485.

Auto stocks were a mixed bag. Tata Motors advanced by 2.6% to Rs721, Hero Honda edged higher by 0.2% to Rs640. However, Bajaj Auto dropped by 1.2% to Rs2270 and M&M was down 1% to Rs727

Market Watch

Insider Trades:

Sakthi Sugars Ltd: 1) Morgan Stanley & Co. International Ltd., A/c Morgan Stanley Dean Witter Mauritius Co. Ltd. 2) Morgan Stanley & Co. International Ltd., A/c Morgan Stanley Investment Mauritius Ltd has purchased from open market 418000 equity shares of Sakthi Sugars Ltd on 4th April, 2007.

Granules India Limited: 1) Morgan Stanley & Co. International Limited a/c Morgan Stanley Dean Witter Mauritius Co. Ltd. 2) Morgan Stanley & Co. International Limited A/C Morgan Stanley Investment Mauritius Ltd has purchased from open market 34946 equity shares of Granules India Limited on 5th April, 2007.

Market Volumes:

The turnover on NSE was up by 34% to Rs84.41bn. BSE FMCG index was the major gainer and gained 2.18%. BSE Metal index (up 1.07%), BSE PSU index (up 0.38%) and BSE Consumer Durable index (up 0.34%) were among the other major gainers. However, BSE Technology index lost 1.07%.

Volume Toppers:

IFCI, Indiabulls, SAIL, IB Real Estate, SRF, Tata Steel, R Com, ITC, IDFC, Nagarjuna Fertilizers, Gujarat Ambuja, NTPC, Satyam Computer, Bank of India, JP Hydro, India Cement, Page Industries, Indian Hotels, Gitanjali Gems and Ashok Leyland

Upper Circuit:

Marksons, Teledata Informatics, TV Today, India Infoline, PBA Infrastructure, Vyapar Industries, Shree Precoated, Garware Offshore, Goldiam International, Marg Construction and Atlanta

Abnormal Delivery:

Tata Tea, Andhra Bank, Colgate-Palmolive, Indian Hotels, BEL, GAIL, Ranbaxy Laboratories, Housing Development Finance Corporation Ltd, Tata Power, Bajaj Auto and ACC.

Delivery Delight:

3i Infotech, Adlabs Films, Arvind Mills, Bank of India, Bharati Shipyard, Gateway Distriparks, Federal Bank, Industrial Development Bank Of India, ITC, Jaiprakash Associates, Moser Baer, Tata Motors, TV TODAY and VSNL.

Stock Futures with Largest Increases in OI:

Indian Bank, Jet Airways, strides Arcolab, BEL, ICICI Bank, Infosys, Satyam Computers, IVRCL Infra, NDTV and Aban Offshore

Stock Futures with Largest Decreases in OI:

Crompton Greaves, Bank of India, Srf, Chennai Petroleum, PFC, United Spirits, GMR Infra, VSNl, Gujarat Alkalies and Tata Motors.

Brokers Recommendations:

Reliance Comm – Outperform from CLSA with target of Rs486

Mphasis BFL – Buy from Man Financial with target of Rs390

Long Term investment:
Reliance Petroleum Ltd.

Major News Headlines

Jet to acquire Air Sahara at around Rs19.5bn

ICICI Bank fined by Hong Kong Regulator for license breach

Steel companies raises HR coil prices by Rs1000 per ton – Reports

Tata Steel to meet on April 17 to consider fund raising plans for Corus acquisition

i-flex solutions gets order from allied Irish Bank

ABG Shipyard wins $139mn order from Essar Shipping unit

Subhash Projects gets orders worth Rs3.09bn

Suzlon raises bid for REpower to 150 Euros and gets order for turbine generators from US.