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Wednesday, January 03, 2007
Take a joint home loan with your spouse
Do you plan to take a joint home loan along with your spouse? It can be a good decision as the joint effort could get you greater resources to buy a bigger house. But, the big question is who will get the tax benefits on a joint home loan. The good news is that all the co-borrowers can get tax benefits. But, this can happen only if your paperwork is in order. Here are a few points co-borrowers can keep in mind:
Both should be co-owners in the property
Ownership of property makes one eligible to claim tax benefits. A joint home loan involves an applicant and a co-applicant. Housing finance companies insist that the co-owners of the house have to be co-borrowers as well.
However, they do not insist on the reverse. But, it is essential for co-borrowers to be co-owners to seek tax rebate. You cannot get tax benefits if you are just a co-borrower but not a co-owner. Co-borrowers, who are also co-owners, are eligible for tax rebate in the proportion of their share in the loan.
Thus, repayment capacity of each spouse should be taken into account while deciding the share of the loan. So, a couple can be equal owners but if their share of the loan is in the ratio of 60:40, the tax benefits would be shared in that proportion. Tax experts suggest that you have to get a break-up of the share of the loan on a stamp paper at the beginning itself to avoid tax complications.
Each co-borrower can claim tax benefits
The overall tax deduction for a single borrower is Rs 1,50,000. This deduction would apply to each borrower taking the total possible deduction to Rs 3 lakh. Consider a couple which jointly owns property worth Rs 25 lakh with a loan share of 50:50.
If this couple pays Rs 1,50,000 as the interest and Rs 50,000 as principal, each can claim Rs 75,000 and Rs 25,000 as interest and principal deduction. It is advisable for you to lay down the share of the property and other loan details on a stamp paper for tax purpose, say tax experts.
Each needs a copy of the borrower certificate
Every borrower has to provide a copy of the borrower certificate to claim their respective tax relief. At the outset, the co-borrowers should enter into a simple agreement with the spouse on a Rs 100 stamp paper. This agreement should basically contain the share of the ownership along with that of the home loan availed by the couple. You need two copies of the certificate from the HFC and each of you can submit copies of the certificates along with a copy of the agreement signed between the two of you, say our tax experts. They, however, point out that there are no clear guidelines to this effect. Hence, it is possible for either of the borrower to miss out on the tax rebate. In such cases, they can claim it as a refund while filing tax returns.
Better to share payment of installments
A couple cannot pay two cheques for servicing the same EMI, i.e., EMI of the same month. An HFC cannot accept two cheques, as the internal systems do not support this. One viable option is to service the EMI from a joint account of the co-borrowers. The second option is to share the number of instalments. So, for example, eight cheques in a year could be issued from the husband’s account while the wife could issue the balance.
Another option is that one spouse pays off the instalments and seeks reimbursement from the partner. However, tax experts say that this process could get highly cumbersome both for the borrowers and the HFC.
Can one claim all benefits if spouse is not earning?
This is a relevant question, especially if one of the co-owners does not have any income. In such a case, the other co-owner should enter into an agreement with the spouse. The agreement should state that the entire repayment is met only by one borrower’s income. This would ensure you have 100% beneficial home ownership and consequently you can enjoy all tax benefits applicable to a single borrower.
It’s never too late for paperwork
What if the loan has already been taken without the above mentioned groundwork or if you want to change the loan share further down the line. You can still figure out the ownership share and the share of the loan between the two of you. But, this can have stamp duty implications. This also applies to those couples where the wife starts working after a year or later from the date of repayment. However, our tax experts recommend that co-borrowers should not keep changing the share of the loan every now and then. This can be viewed as a tax avoidance device
Close: Above 14000 for the first time ! Will it hold ?
Keeping the jubilation on its back markets opened on a firm note but profit booking at higher levels saw gains eroded as the indices were dragged into the red. However investor interest in value buying pushed the indices back into positive and the drive continued to build till the final hour of trading. Bajaj Auto, Ranbaxy and Cipla emerged as the top gainers. Pharma, Software and Telecom stocks were in favor but selective stocks in the Energy and FMCG sectors surrendered to selling pressure. As we stressed that Small and Mid caps will see interest, that was apparent among investors and it showed. Asian indices closed mixed while the European indices were mixed with no clear direction.
Sensex ended up by 73 points at 14014.92. It was helped up by gains in Bajaj Auto (2842.65,+4 percent), Ranbaxy (412.25,+3 percent), TCS (1281.3,+3 percent), Cipla (257.85,+3 percent) and Infosys (2312.6001,+2 percent). Restricting the gains are HLL (212.2,-2 percent), ACC (1075.55,-2 percent), TISCO (471.6,-1 percent), ITC (175.35,-1 percent) and HDFC (1606.55,-1 percent).
ACC reported a 3% increase in dispatches at 1.65 million tonne in December 2006 when compared with 1.60 million tonne in December 2005. Cumulative dispatches (January - December 2006) increased 6% to 18.62 million tonne as against 17.46 million tonne in the corresponding period of the previous fiscal. Gujarat Ambuja Cements Ltd., India's third-biggest cement maker, said on Tuesday cement shipments for the year ending December 2006 rose 11.3 percent to 16.33 million tonnes, from 14.67 million a year earlier. ACC dispatch growth is disappointing and Ambuja?s is encouraging. But really in the scheme of things cement companies are having a good time. Demand remains robust. Mixed trend was seen in the stocks as ACC was down by 1.7% while Gujarat Ambuja was up marginally.
The press report about the progress on the demerger of Bajaj Auto had the stock flying. The process which will result in the financial business of the auto major is being demerged. Besides holding part of the investment portfolio worth Rs 7,200 crore (as of June 2006), the holding company would have shares of subsidiaries such as the listed Bajaj Auto and insurance subsidiaries like Bajaj Allianz Life Insurance Co, and Bajaj Allianz General Insurance Co. Bajaj Auto has an enviable investment portfolio. Among the major investments it holds in its books are 4.3% stake in ICICI Bank, 5.6% stake in Bajaj Hindustan, and 15% in Force Motors. Bajaj Auto generated 25% PBIT from its treasury last year. This year onwards rising interest rates and also Investment gains could be quite good. The demerger would give greater clarity to the valuation of the main auto business. We have a positive view on Bajaj Auto despite increasing competition. The stock rallied yesterday on the back of super dispatches. This news is some more reason to be bullish. However competitive pressures could keep immediate gains on hold unless this demerger story carries weight. The stock was up by almost 4% despite the Chairman clarifying that the proposal had not even reached the board stage. Value unlocking is the mantra and markets reacted to this news.
Sensex has closed above 14000 for the first time. Last time the markets could not sustain. This time the conviction is a bit higher as it comes post a correction. The results season is around the corner and the markets are pricing in lot of positives in anticipation post the advance tax numbers. However it will be performance which is needed for sustainance. FII buying is limited off late. There is a lot of money which will go into the huge IPOs planned. Its going to be tough to sustain the Sensex but we believe that action will shift to mid cap stocks where there is immense value still and the companies are delivering.
Technically Speaking: Market traded in a ranged manner. Sensex rallied between the channels of 13897 - 14035 level. However, the breadth had been in the favor of Advances as they were 1.84 times the Decliners. Volumes was decent at 4286cr. Sensex sees resistance at 14070 level if it holds above that then 14500 level could be seen and support is seen at 13700 levels.
Sharekhan Investor's Eye dated January 03, 2007
PULSE TRACK
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Infrastructure index up 9.5% for November 2006
STOCK UPDATE
Bharat Heavy Electricals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs2,650
Current market price: Rs2,301
BHEL plans to hike capacity to 15,000MW
Bharat Heavy Electricals Ltd (BHEL) has successfully completed its capacity expansion to 10,000 megawatt (MW). The total cost of the capital expenditure (capex) programme was close to Rs1,200 crore. This was undertaken primarily to meet the expected capacity addition of 66,000MW in the 11th Five-Year Plan.
Tata Motors
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,004
Current market price: Rs939
Another month of exhilarating performance
- Tata Motors' December sales numbers were above expectations as the company reported a 37% growth year on year (yoy) in the total sales (including exports) with sales touching 48,792 units during the month.
- The performance was again largely driven by the strong growth in the domestic commercial vehicle (CV) sales, which grew by 50% yoy to 28,179 units in December 2006. The medium and heavy commercial vehicle (M&HCV) sales stood at 17,274 units, growing by 55% yoy while the light commercial vehicle (LCV) sales grew by 43% to 10,905 units.
- The passenger vehicle sales also remained strong during the month, rising by 27% to 16,515 units. The sales of Indica grew by a whopping 52% to 10,588 units during the month. The new Indica V2 Xeta with a 1.2 litre engine at an introductory discount of Rs25,000 continued to lead the volume growth during the month. The scheme, however, has been withdrawn with the start of the new year. The Indigo family registered sales of 2,077 units, declining by 24.6%; however the sales of Sumo and Safari grew by 16% to 3,850 units.
- The company's sales from exports rose by 7% in December at 4,098 units as compared to 3,831 units in the same month in 2005. The cumulative exports grew by 11.6% for the April-December period to 38,733 units from a year ago.
- The cumulative total sales for the current fiscal (April-December period) stood at 406,949 units, rising by 33.1% compared with the total sales in the corresponding period of the last fiscal. The cumulative domestic passenger vehicle sales were up 22.5% to 125,660 units, whereas the sales of domestic commercial vehicles grew by 47.2% to 211,206 units in the same period.
- At the current market price, the stock discounts its consolidated FY2008E earnings by 13.9x. We maintain our Buy on the stock with a price target of Rs1,004
Wednesday Capita Telefolio Volume No 5, Issue No 28 dated Wednesday, 3rd January 2007.
Wednesday Capita Telefolio Volume No 5, Issue No 28 dated Wednesday, 3rd
January 2007.
The following recommendation is based on price as on Wednesday, 3rd January
2007.
BUY: VST Tillers Tractors at Rs 144
Now full details:
BUY : VST Tillers Tractors at Rs 144
BSE Code : 531266
NSE Symbol : Not listed
Face Value : Rs 10
VST enjoys a dominant market share in the tiller business. It also commands
a niche market share in the smaller HP tractors. Government's continued
emphasis on agriculture, increasing rural incomes, growing linkages with
organised retail and good monsoon augurs well for the company's growth
prospects. The company's precision component division is also expected to
bounce back to capitalise on the growing outsourcing opportunity from
overseas customers.
Actual EPS for year ended March 2005 : Rs 10.2
Actual EPS for year ended March 2006 : Rs 12.9
Projected EPS for year ended March 2007: Rs 20.2
End of Capita Telefolio Volume No 5, Issue No 27 dated Wednesday, 3rd
January 2007.
Sensex, Nifty strike all time closing highs
The market staged a smart recovery in the second half of the day’s trading session, after slipping to an intra-day low of 13,897.42 in mid-morning trade, as buying interest resumed for index pivotals at lower level.
The 30-shares BSE Sensex settled 72.68 point (0.52%) higher at 14,024.49, an all time closing high. It struck an all time high of 14,035.67 in mid afternoon trade surpassing its previous all time high of 14,035.30, which it had struck on 6 December 2006. Its low for the day was at 13897.42
The S&P CNX Nifty rose 16.65 points to 4,024.05, a lifetime closing high.
The market breadth was strong, as buying continued for small-cap and mid-cap stocks. For 1,695 shares advancing on BSE, 933 declined. Just 64 shares were unchanged. The BSE Mid-Cap Index gained 1.04% while the BSE Small-Cap Index rose 1.17%
The BSE clocked a turnover of Rs 4286 crore as compared to Rs 3381 crore on Tuesday (2 January).
Among the 30-Sensex pack, 20 advanced while the rest declined.
Bajaj Auto was the top gainer, up 3.85% to Rs 2844, on 89735 shares. The company had reported strong sales for December 2006 on Monday. Its December sales rose 24% to 214,928 units from a year ago.
Pharma major Ranbaxy Laboratories advanced 3.80% to Rs 413.50, on a volume of 5.13 lakh shares. The company’s alliance with Ipca Laboratories received US Food and Drug Administration approval to sell atenolol tablets in the United States. Atenolol is indicated in the management of hypertension. Ranbaxy’s atenolol tablets will be available in the US healthcare system during the first quarter of 2007, according to the company.
Frontline IT stocks witnessed renewed buying interest ahead of their Q3 December 2006 results. The BSE IT Index gained 1.5% to 5,450.51. Infosys (up 1.85% to Rs 2315), TCS (up 2.30% to Rs 1277.25) and Wipro (up 1.06% to Rs 618) edged higher. Infosys kickstarts earnings reporting season on 11 January 2007.
Satyam Computers rose 1.31% to Rs 515.25 on a high volume of 20.21 lakh shares. A block deal of 14.30 lakh shares was struck in the counter on BSE in early trade, at Rs 512.50 per share.
Tata Motors rose 1.22% to Rs 941.25, as its vehicle sales rose 37% in December 2006 to 48,792 units from 35,598 units a year earlier. The stock came off its intra-day high of Rs 959.45 struck in early trade. Tata Motors’ commercial vehicles sales rose 50% in December 2006 to 28,179 units from 18,730 units, while sales of passenger vehicles rose 27% to 16,515 units. Exports rose 7% to 4,098 units.
Gujarat Ambuja Cements gained 0.52% to Rs 144.95, after the company said on Tuesday cement shipments for the year ending December 2006 rose 11.3% to 16.33 million tonnes, from 14.67 million a year earlier. Production in the year rose 11.7% to 16.34 million tonnes, the company said in a statement.
Engineering and construction major L&T rose 1.10% to Rs 1475, after it secured an order valued at Rs 418 crore from the Abu Dhabi Water & Electricity Authority for the construction of six major electrical substations in the Al Ain sector of Abu Dhabi. The project will be completed within 18 months.
Index heavyweight Reliance Industries was up 0.34% to Rs 1286 on 4.86 lakh shares. The stock moved in broad range of Rs 1256 - 1291.80.
FMCG major HLL was the top loser, down 1.94% to Rs 212.25, on 9.06 lakh shares.
Tata Steel (down 1.55% to Rs 471), Hero Honda (down 1.55% to Rs 772) and ITC (down 0.90% to Rs 175.25) were the other losers.
Cement major ACC dropped 1.23% to Rs 1079, after the company reported a muted 3.1% growth in cement dispatches for the month just gone by. ACC said on Wednesday its December 2006 shipments rose 3.1% to 1.65 million tonnes from 1.60 million tonnes a year ago. The company said production in December totalled 1.63 million tonnes, up from 1.57 million a year ago.
Nissan Copper plunged 5% to Rs 109.45 after the regulator Securities & Exchange Board of India put the newly listed stock in trade-to-trade segment with immediate effect. There were outstanding sell orders for 1.78 lakh shares on BSE at the 5% lower limit. The circuit filter for a stock in trade to trade segment is 5%. The regulator has also asked stock exchanges to withhold the payout of securities and funds in respect of trading in the shares of Nissan Copper done on December 29, 2006 and January 2, 2007 for a period of 15 days.
IOL Broadband jumped 5% to Rs 277.85 after the company said on Wednesday it has tied up with state-owned telecommunications company Bharat Sanchar Nigam for providing Internet Protocol TV.
Allcargo Global Logistics surged 6.30% to Rs 1242, after the company said on Tuesday it had acquired Hindustan Cargo, a subsidiary of travel and forex major Thomas Cook India. Hindustan Cargo is predominantly an airfreight and logistic business. The deal would be funded through internal accruals. For the year ended October 2006, Hindustan Cargo reported a revenue of Rs 32 crore and profit-after- tax of Rs 1.30 crore.
Radha Madhav Corporation jumped 5% to Rs 53.35, after the packaging material maker's board approved raising up to $5 million through qualified institutional placement.
Power transmission equipment firm RPG Transmission gained 3% to Rs 184 after the company said on Wednesday it had secured orders worth Rs 193 crore from state-run utility Power Grid Corporation of India.
GEI Hamon Industries jumped 8.43% to Rs 58.50 after the company bagged an worth Rs 23 crore from Jaypee Associates for supply air cooled steam condensers ranging from 22MW to 38MW.
Indian real estate developer DLF has filed a prospectus for an initial public offering (IPO) after pulling a planned issue last year. As per reports, the sale of 10.2% of the company could raise more than $2 billion. This offer is said to India's biggest ever-public issue.
Asian markets were mixed on Wednesday (3 January 2007). Hong Kong (up 0.51%) and Singapore (up 1.74%) edged higher, whereas Seoul Composite (down 1.81%) and Taiwan index (down 0.04%) slipped.
Oil prices eased on Wednesday in Asian trade, in a market focused on mild North American weather. New York's main contract, light sweet crude for delivery in February, slipped 18 cents to $60.87 a barrel.
US markets were closed on Tuesday (2 January).
The next major trigger for the market is Q3 December 2006 results. While strong Q3 results are already factored into the share prices, market players will be closely watching what the company managements have to say about outlook for Q4 March 2007 and FY 2008 (year ending 31 March 2008).
FIIs turned buyers on the last trading day of calendar 2006, purchasing to the tune of Rs 331.90 crore on Friday (29 December), compared to a huge outflow of Rs 1049.70 crore on Thursday (28 December). But as per provisional data, FIIs were net sellers to the tune of Rs 201 crore on Tuesday (2 January), the day when the Sensex had risen 155 points
Market surpasses 14000
The Sensex touched an intra-day high of 14036 on the back of the gains of over 94 points in early trades. However the market lost some momentum and was range-bound with a positive bias for the rest of the session. Profit taking in mid-session saw the index touch a low of 13898, down 44 points. The Sensex witnessed an intra-day swing of 138 points and closed with gains of 73 points at 14015. The Nifty advanced 17 points to close at 4024.
The breadth of the market was positive. Of the 2,700 stocks traded on the BSE, 1,697 stocks advanced, 944 stocks declined and 59 stocks ended unchanged. Barring the BSE FMCG index and the BSE Oil & Gas index, the remaining sectoral indices finished with gains. The BSE CD index gained 1.61% followed by the BSE IT index (up 1.52%), the BSE HC index (up 1.42%), the BSE Teck index (up 1.30%) and the BSE Auto index (up 0.46%).
Leading the rally Bajaj Auto surged 3.79% at Rs2,843, Ranbaxy soared 3.48% at Rs412, TCS advanced 2.62% at Rs1,281, Cipla added 2.50% at Rs258 and Infosys was up 1.77% at Rs2,313. Among the other gainers IndusInd Bank surged 14.85% at Rs56, Polaris soared 12.31% at Rs196, IGate Global advanced 7.03% at Rs377 and Pfizer rose 7.03% at Rs829. Welspun Gujarat, Sterlite Optical, Dabur India, Balaji Telefilms and Moser Bear advanced by 3-6% each.
Development Credit Bank was the most actively traded counter on the BSE with trades of over 1.04 crore shares followed by Pentium Infotech (87.46 lakh shares), Bellary Steel & Alloys (81.37 lakh shares), IFCI (45.75 lakh shares) and IndusInd Bank (39.21 lakh shares).
Several FMCG stocks rallied sharply on sustained buying support. Rajesh Exports soared 4.98% at Rs373, Goldiam surged 4.98% at Rs113, Titan Industries advanced 2.05% at Rs895, Blue Star added 1.33% at Rs194 and Videocon Industries gained 0.91% at Rs461.
Value-wise Satyam Computers registered a turnover of Rs103.56 crore on the BSE followed by HDFC (Rs67.71 crore), Reliance Industries (Rs62.55 crore) and Infosys (Rs52.21 crore).
Sensex settles above 14,000
The market staged a smart recovery in the second half of the day’s trading session, after slipping to an intra-day low of 13,897.42 in mid-morning trade, as buying interest resumed for index pivotals at lower level.
The 30-shares BSE Sensex settled 72.68 point (0.52%) higher at 14,024.49, an all time closing high. It struck an all time high of 14,035.67 in mid afternoon trade surpassing its previous all time high of 14,035.30, which it had struck on 6 December 2006.
Its low for the day was at 13897.42
The S&P CNX Nifty rose 16.65 points to 4,024.05
The market-breadth was strong, as buying continued for small-cap and mid-cap stocks. For 1,695 shares advancing on BSE, 933 declined. Just 64 shares were unchanged.
The BSE clocked a turnover of Rs 4,286 crore as compared to Rs 3381 crore on Tuesday (2 January).
Among the 30-Sensex pack, 20 advanced while the rest declined.
Bajaj Auto was the top gainer, up 3.85% to Rs 2844, on 89735 shares. The company had reported strong sales for December 2006 on Monday. Its December sales rose 24% to 214,928 units from a year ago.
Pharma major Ranbaxy Laboratories advanced 3.80% to Rs 413.50, on a volume of 5.13 lakh shares. The company’s alliance with Ipca Laboratories received US Food and Drug Administration approval to sell atenolol tablets in the United States. Atenolol is indicated in the management of hypertension. Ranbaxy’s atenolol tablets will be available in the US healthcare system during the first quarter of 2007, according to the company.
IT stocks witnessed renewed buying interest ahead of their December quarterly results. Infosys (up 1.85% to Rs 2315), TCS (up 2.30% to Rs 1277.25) and Wipro (up 1.06% to Rs 618) edged higher.
Satyam Computers rose 1.31% to Rs 515.25 on a high volume of 20.21 lakh shares. A block deal of 14.30 lakh shares was struck in the counter on BSE in early trade, at Rs 512.50 per share.
Tata Motors rose 1.22% to Rs 941.25, as its vehicle sales rose 37% in December 2006 to 48,792 units from 35,598 units a year earlier. The stock came off its intra-day high of Rs 959.45 struck in early trade. Tata Motors’ commercial vehicles sales rose 50% in December 2006 to 28,179 units from 18,730 units, while sales of passenger vehicles rose 27% to 16,515 units. Exports rose 7% to 4,098 units.
Gujarat Ambuja Cements gained 0.52% to Rs 144.95, after the company said on Tuesday cement shipments for the year ending December 2006 rose 11.3% to 16.33 million tonnes, from 14.67 million a year earlier. Production in the year rose 11.7% to 16.34 million tonnes, the company said in a statement.
Engineering and construction major L&T rose 1.10% to Rs 1475, after it secured an order valued at Rs 418 crore from the Abu Dhabi Water & Electricity Authority for the construction of six major electrical substations in the Al Ain sector of Abu Dhabi. The project will be completed within 18 months.
Index heavyweight Reliance Industries was up 0.34% to Rs 1286 on 4.86 lakh shares. The stock moved in broad range of Rs 1256 - 1291.80.
FMCG major HLL was the top loser, down 1.94% to Rs 212.25, on 9.06 lakh shares.
Tata Steel (down 1.55% to Rs 471), Hero Honda (down 1.55% to Rs 772) and ITC (down 0.90% to Rs 175.25) were the other losers.
Cement major ACC dropped 1.23% to Rs 1079, after the company reported a muted 3.1% growth in cement dispatches for the month just gone by. ACC said on Wednesday its December 2006 shipments rose 3.1% to 1.65 million tonnes from 1.60 million tonnes a year ago. The company said production in December totalled 1.63 million tonnes, up from 1.57 million a year ago.
Most of the Asian markets were trading with gains on Wednesday (3 January 2007). Hong Kong (up 0.51%) and Singapore (up 1.74%) edged higher, whereas Seoul Composite (down 1.81%) and Taiwan index (down 0.04%) slipped.
Oil prices eased on Wednesday in Asian trade, in a market focused on mild North American weather. New York's main contract, light sweet crude for delivery in February, slipped 18 cents to $60.87 a barrel.
US markets were closed on Tuesday (2 January).
The next major trigger for the market is Q3 December 2006 results. While strong Q3 results are already factored into the share prices, market players will be closely watching what the company managements have to say about outlook for Q4 March 2007 and FY 2008 (year ending 31 March 2008). Infosys kickstarts Q3 earnings season on 11 January.
FIIs turned buyers on the last trading day of calendar 2006, purchasing to the tune of Rs 331.90 crore on Friday (29 December), compared to a huge outflow of Rs 1049.70 crore on Thursday (28 December). But as per provisional data, FIIs were net sellers to the tune of Rs 201 crore on Tuesday (2 January), the day when the Sensex had risen 155 points
Sharekhan Commodities Buzz dated January 03, 2007
Soy oil: Lower duty on SAFTA edible oil imports
India has cut the import duty on refined edible oil coming from Pakistan and Sri Lanka to 52.5% from 68.75%. The duty on edible oil imports from Nepal, Bangladesh, Maldives and Bhutan has been cut to 52.5% from 56.67%, an official notification from the Central Board of Excise and Customs said. The duty on crude palm oil imports from the South Asian Free Trade Agreement (SAFTA) member nations has been reduced to 50%. However, this move is not going to make a very big impact, as edible oil imported from SAFTA constitutes a very negligible part of the total edible oil imports.
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PowerYourTrade Trading Calls
Ashwani Gujral
Buy Bajaj Auto with stop loss of Rs 2650 for a target of Rs 3000
Buy Praj Industries with stop loss of Rs 195 for a target of Rs 255
Deepak Mohoni
Buy Adlabs Films below Rs 453 with stop loss of Rs 445. This is a day-trading recommendation
Buy Hinduja TMT below Rs 766 with stop loss of Rs 700. This is a day-trading recommendation.
Rajat K Bose
Buy GMR Infrastructure with stop loss below Rs 369 for a target of Rs 387
Buy Maruti Udyog with stop loss below Rs 968 for a target of Rs 999
Examine the coil to understand the spring
Sucheta Dalal
Nissan Copper is a scrip that few had heard about until the last trading day of 2006. On that day, this company made the most incredibly brazen debut on the two national bourses. From a subdued listing at Rs 40, the share price soared to an amazing Rs 136 before closing at a high of Rs 131.
But the price does not even begin to reveal the extent of manipulation in a single day of trading. Nissan Copper, which manufactures copper products, entered the market with a capital of 1.45 crore by making an Initial Public Offering (IPO) of 64.10 lakh shares priced at Rs 39. It raised Rs 25 crore to fund a Rs 35 crore expansion programme, where the balance Rs 10 crore is being funded through term loans.
The run up to the issue was bereft of any hype, probably with good reason. At least three brokerage houses and an investment advisor openly told investors to avoid the issue. One specifically said that post-issue appreciation seemed difficult because of the big jump in capital, prior to the issue by way of a hefty bonus that the promoter group had awarded itself. Yet, Nissan Copper was over-subscribed 4.7 times and only one large brokerage seemed confident of appreciation on listing.
A popular investment website probably provided a clue to the possibility of price rigging. When the site carried a poll on December 8 to find out whether the share would be listed above Rs 50, a surprising 61% said it would. There seemed to be little basis for such optimism and sure enough the scrip debuted at Rs 40 as against the issue price of Rs 39.
Now consider what happened on Friday, December 29. Nissan Copper was listed by the National Stock Exchange (NSE) as the most active share that day, ahead of Reliance, Rcom, India Bulls, Paravsnath, Satyam Computers and others, with a whopping Rs 670 crore worth of shares being traded that day. In terms of numbers, the company which offered 64 lakh shares for public subscription saw 6.99 crore being traded on the NSE on listing day and another 6.11 crore shares being traded on the Bombay Stock Exchange (BSE). Add it up and you have nearly 10 times the capital being traded on a single day.
This level of manipulation was possible only because circuit filters do not operate on the day of listing. The large trading volumes make it clear that the transactions were part of a deliberate manipulation of the share price. This is not the first time that the share price has been outrageously manipulated on listing day. What makes Nissan Copper different is that it is the first time this has happened after the Securities and Exchange Board of India’s (Sebi’s) Integrated Market Surveillance System (IMSS) has turned operational. Since this system is supposed to track and integrate trading data from the stock exchanges, clearing corporations and depositories, theoretically it should be absurdly easy for the regulator to initiate action in the quickest possible time and send a powerful signal to the market that IPO manipulation has got to stop.
The regulator is already on the case. A top Sebi source tells us that two Foreign Institutional Investors (FIIs) as well as persons connected to the company have been identified and the data is being processed for further action. Sebi now needs to demonstrate the IMSS’s capabilities by swift and stringent action.
Incidentally, IPO manipulation is not restricted to post listing price rigging. The Rs 5,000-crore Cairn Energy IPO, which marked the first time that an international company was listing on Indian bourses, also turned fairly sordid. The market was rife with rumours about ‘corporate rivals’ trying to damage the IPO when the market corrected sharply on the day the issue opened. They almost succeeded, except for the fact that institutional investors connected to some of the investment banks ensured a 1.1 time over-subscription on the day the issue opened. In the next few days, hectic lobbying with insurance companies and mutual funds brought in more subscriptions for this high priced issue. Some retail investors also invested. Until the subscription lists closed, the issue showed an over-subscription a little more than two times. However, on the very last day, a one-time subscription vanished as large institutional investors withdrew their bids. According to sources, the withdrawal of bids was by a group of entities connected to two of the lead managers—DSP Merrill Lynch and JM Morgan Stanley. Here too, Sebi has written a letter to the lead managers seeking their comment on the withdrawal.
In fact, a detailed investigation of the Cairn IPO to get to the bottom of how the issue was priced, how subscriptions were canvassed (especially institutional investment) and the basis on which the price and size of the issue was decided is important to ensure the health of the primary market.
While Sebi has accepted a recommendation to introduce mandatory grading for IPOs, if cleared by its board of directors, it is important to remember that such grading will only deal with quality of disclosures made in the prospectus. They will still not help investors to figure out various deals that go into ensuring full subscription of over-priced issue or understanding the post-issue price manipulation. These remain the domain of the regulator and the Nissan Copper and Cairn IPOs show that it has its work cut out.
—Email: suchetadalal@yahoo.com
Brokers bullish on UltraTech Cement, Aventel Softech
Anandrathi has kept outperformer rating on Jindal Saw; with a target of Rs 440.
Edelweiss has maintained reduce rating on Bajaj Hindustan.
Emkay PCR has kept buy rating on Ultratech Cement; with a target of Rs 1122.
Emkay PCR has kept hold rating on Praj Ind; with a target of Rs 222.
Karvy has kept buy rating on Aventel Softech ; with a target of Rs 85.
Kotak PCR has kept buy rating on Allcargo Global Logistics; with a target of Rs 1224.
Kotak PCR has maintained buy rating on Gateway Distriparks; with a target of Rs 259.
5 Intra-day Stock Ideas
NIFTY (4007) SUP 3990 R 4038
Buy BEL (1355)
SL 1341 T 1379, 1389
Buy SRF (192.5)
SL 188 T 200, 202
Buy GEOMETRIC (124)
SL 120 T 132, 134
Buy IVRCLINFRA (398.55)
SL 394 T 409, 412
SELL ZEETELE (287)
@ 291 SL 295 T 281, 279
STRATEGY INPUTS FOR THE DAY
A loud bang with less volume!
A loud voice cannot compete with a clear voice, even if it's a whisper.
The bulls voices may get louder on the street but the volume is toning down. Need we tell you to be very very cautious. The bulls welcomed the new year with a bang. Though volume was down, market breadth was quite positive. For today, global cues are encouraging. We may see yesterday's rally spillover into the early part of the session. Thereafter there might be some softening owing to the usual profit booking.
Looks like expectations are already building up for another quarter of strong earnings growth. Indian companies will start declaring results in the next few days. As usual, IT firms will set the tone with Infosys unveiling its results on January 11. Other sectors likely to do well include: Construction, Real Estate, Capital Goods, Engineering, Cement, Pharma and even Oil & Gas. FMCG, Metals and Auto companies may disappoint. Banking could be a mixed bag, with private sector on a better wicket than their PSU counterparts.
Another event that nobody's talking about is the quarterly review of the Monetary Policy by the RBI on January 31st. Going by the mood on the Mint Street, the central bank could well go ahead and hike short-term rates yet again to reign in inflation and moderate the accelerating growth in credit. That may have some impact on sentiment on Dalal Street as rising interest rates are generally seen as bad news for corporate earnings and therefore for equity markets. Budget will also play some role in swinging the direction of the market. But, FIIs will continue to gold the key to the market.
BHEL may be in action amid reports that it is set to bag a Rs4bn contract from Bangladesh. Nissan Copper could come under fresh pressure as market regulator SEBI is all set to probe its unprecedented rise since listing last week. Deepak Fertilisers has been witnessing value buying in recent times.
FIIs were net sellers to the tune of Rs2bn (provisional) in the cash segment on Tuesday despite the Sensex rising by over 100 points. On the other hand, they were net buyers of Rs2.02bn in the F&O segment. On Friday, foreign funds pumped in Rs3.32bn in the cash segment. Mutual Funds too were net buyers at Rs2.25bn.
Asian stocks were mostly higher on Wednesday, with Australia's S&P/ASX 200 rising to an intraday record. Australia's S&P/ASX 200 rose as much as 0.2% to 5,682.60. Shanghai's Composite Index was up as much as 4.2%, or 107.88 points, to 2,675.47.
Japan's stock exchanges remained closed for national holidays. They are scheduled to re-open Thursday.
US markets are scheduled to re-open later in the day. They were closed on Monday for the New Year's holiday and Tuesday for a state funeral for former President Ford.
Elsewhere in Asia, South Korea's Kospi declined 0.7%. Singapore's Straits Times Index was up 1% and Malaysia's KLSE Composite rose 1.1%. Taiwan's Weighted Price Index was up 0.1%. Hong Kong's Hang Seng Index rose 0.6% in early trading to a record 20,423.51.
Oil hovered above $61 a barrel on Tuesday in thin trade as mild weather in the US capped demand for winter fuel. Oil markets in Japan and Singapore were shut for a holiday. Trading floors in New York were also closed in memory of former US President Gerald R. Ford.
Front-month crude-oil futures fell as much as 11 cents to $60.94 a barrel in electronic trading.
Spot gold was quoted at $639.50 an ounce.
The dollar traded near its lowest level in more than three weeks against the euro on speculation that an industry survey will show manufacturing failed to grow in the world's largest economy last month.
European shares rose to a six-year high on Tuesday. The pan-European Dow Jones Stoxx 600 index advanced 1.3% to 369.86, its top level since Dec 2000. The French CAC-40 rose 1.4% to 5,617.71. The UK-based FTSE 100 rose 1.5% to 6,310.90 and the German DAX Xetra 30 increased 1.3% to 6,681.13.
In the emerging markets, the Bovespa in Brazil was up 2% at 45,382 while the IPC index in Mexico gained 0.8% at 26,664 and the RTS index in Russia out on 0.6% at 1921.
2006 was another record year for fund flows into emerging market equity funds, in total US Dollar terms, as these funds attracted $22.4bn of new money, according to Emerging Portfolio Funds Research. Of this amount, a full $11.2bn, or half of the total inflows into all EM equity funds tracked by EPFR, went into China related equity funds.
Major Bulk Deals: Goldman Sachs has sold BF Utilities.
Insider Trades:
ICICI Bank Ltd: V Vaidyanathan, Executive Director has sold in open market 9950 equity shares of ICICI Bank Ltd on 27 December, 2006.
Godrej Industries Ltd: Jamshyd N Godrej (Director and relative of Smita V Crishna, the seller) has sold in open market 2000 equity shares of the company on 27 December, 2006.
Kirloskar Oil Engines Ltd: Vikram Shreekant Kirloskar, Director has sold in open market 5000 equity shares of Kirloskar Oil Engines Ltd on 28th and 29th December 2006.
Market Volumes:
The turnover on NSE was down by 21.4% to Rs59.38bn. BSE Auto index was the major gainer and gained 3.22%. BSE Technology index (up 1.38%), BSE Capital Good index (up 1.16%), BSE Oil & Gas index (up 0.97%) and BSE Metal index (up 0.91%) were among the other major gainers.
Volume Toppers:
IFCI, Nissan Copper, SAIL, Ashok Leyland, GTL Infrastructure, DCB, TTML, Satyam Computer, ITC, MTNL, IVRCL Infrastructure, Indian Hotels, Praj Industries, Parsvnath Developers, Polaris, Hindalco and Unitech.
Upper Circuit Filters:
Educomp Solution, Shaw Wallace, Atlanta, All Cargo, Orient Paper, Crew BOS, Flex Industries, Ganesh Housing, IOL Broadband and KS Oils
Brokers Recommendations:
SBI - Underweight from Morgan Stanley with price target of Rs800
Allcargo Global - Buy from Kotak with price target of Rs1224
Long Term Investment:
M&M
Major News Headlines:
Maruti's Dec sales rose 24%
Bajaj Auto's Dec sales were up 24%
Tata Motors Dec sales up 37%
M&M Dec Tractor sales up 20%
Ipca, Ranbaxy alliance gets USFDA nod for Atenolol Tablets
Jet to buy 10 Boeing 787 aircraft
KM Sugar Mills Board declares 15% dividend
ABG Shipyard secures repeat order from Gujarat Ambuja Cements
GTL Infra announces 1:1 rights issue at par
Lupin gets tentative USFDA nod for Sertraline tablets
Bihar Tubes Board to consider interim dividend, bonus on Jan 10
Nagarjuna Constructions wins orders worth Rs2.55bn
McNally Bharat gets order worth Rs923.1mn
Thomas Cook India to sell Hindustan Cargo to Allcargo Logistics
Aurobindo Pharma gets 2 more USFDA approvals
Mefcom Agro Industries plans to sell shares to some investors
From Research Desk - Genus Overseas
Genus Overseas Electronics Ltd
BUY
CMP Rs209
Genus Overseas Electronics Ltd (GOEL) is amongst the largest electronic meters manufacturers in the country and the pioneer in implementing Automatic Meter Reading (AMR) technology in metering. GOEL stands to be the largest beneficiary of the on going Accelerated Power Development and Reform Program (APDRP), under which the government intends to implement 100% metering. Coupled with this the government also plans to provide electricity to all households in the country, which will be metered. The company has an order book of Rs4bn, which comfortably covers it for FY07 with a partial spill over into FY08.
The meters division is expected to witness 111.3% CAGR over the next couple of years, which will be mainly driven by the governments focus on rural electrification and implementation of APDRP under which it emphasis on 100% metering. This division has an executable order book of about Rs2.2bn.
GOEL diversified into manufacturing inverters and undertaking power distribution projects where meter requirement is high. This exposes the company to huge investments in the T&D space that is being outlined by the government. Its access to sophisticated technology for AMR will give it an edge over its peers while bidding for metering projects.
We expect the company to register a topline and bottomline growth of 52.5% and 58.6% CAGR respectively over FY06-08E. GOEL is currently trading at 10.7x and 7.2x times its FY07E and FY08E earnings of Rs19.6 and Rs28.9 respectively. We recommend a BUY with a one year price target of Rs269, an upside of 39%.
Bulls extend rally into 2007
The Bulls greeted New Year with a smile as buying momentum in the frontline stocks like Satyam Computer, M&M, Infosys, RIL, Bharti Airtel, SBI and TCS lifted NSE Nifty to close above the 4000 mark for the first time. Both the key indices grew by over 1% led by Auto stocks. Impressive monthly sales numbers aided the auto stocks to surge higher, others like Technology and Capital Good stocks also followed the suit. Robust opening ended on a strong note as bears were unable to show their faces in the whole trading session. Finally, the BSE benchmark Sensex surged 155 points to close at 13942. NSE Nifty was up 41 points to close at 4007.
Praj Industries spurred over 10% to Rs211 after the company announced that it had received overseas orders worth Rs1.7bn. The scrip touched an intra-day high of Rs213 and a low of Rs193 and recorded volumes of over 18,00,000 shares on NSE.
Nagarjuna Constructions surged 2.3% to Rs219 after the company secured orders worth Rs2.55bn. The scrip touched an intra-day high of Rs221 and a low of Rs212 and recorded volumes of over 11,00,000 shares on NSE.
Lupin edged lower by 0.4% to Rs611. The company received a tentative USFDA nod for Sertraline. The scrip touched an intra-day high of Rs619 and a low of Rs605 and recorded volumes of over 24,000 shares on NSE.
Auto stocks raced ahead on back of impressive monthly sales numbers. Maruti advanced over 4% to Rs968 as the company reported a 23.7% increase in total sales during December 2006 at 56,985 units as demand for small cars and vans increased, M&M over 5% to Rs954, Bajaj Auto was up 4.5% to Rs2742 after the company’s sales of two and three wheelers rose 24% in December, boosted by demand for motorcycles and Hero Honda was up 2.9% to Rs785 after the company announced on Tuesday that it sold 252,462 units in December, up 3%. Domestic sales grew by mere 2.6% to 245,141 units and exports were up 16.5% at 7,321 units.
Technology stocks ended with smart gains. Index heavy weight Satyam Computer, Infosys, TCS and Wipro were among the major gainers.
Telecom stocks were in demand. Bharti Airtel edged higher 0.7% to Rs635, Reliance Communication 0.5% to Rs474, VSNL spurred 4.6% to Rs444 and MTNL was up 2.8% to Rs146.
Metal stocks were shining brightly. SAIL advanced 2.2% to Rs91, Sterlite Industries gained 2.1% to Rs554, Hindalco was up 2.2% to Rs178 and Hindustan Zinc added 0.8% to Rs833.
Cement stocks also record concrete gains. Gujarat Ambuja advanced 2.5% to Rs144, ACC was up 0.6% to Rs1092, Grasim gained 1.2% to Rs2835 and Mangalam Cement surged 4% to Rs209.
Rally may continue
The smooth expiry of the December futures and strong buying interest in heavyweights could further strengthen the market. However, caution should be maintained as intra-day volatility cannot be ruled out. The Nifty is likely to face resistance at 4050 on the upside and while the Nifty has a support at 3960 on the downside. The Sensex has a likely support at 13900 and resistance at 13980 levels.
Indian floats had a mixed run on the US bourses. MTNL lost 1.55% and ICICI Bank moved down 1.67% while, Infosys, Satyam, Wipro, Dr Reddy's, Tata Motors and HDFC Bank were down around 1% each. Among the gainers VSNL rose 2.4%, while Rediff and Patni Computers ended with postive note.
Uptrend may continue
The market began the New Year with a bang as Sensex jumped 155 points to 13,942 on Tuesday 2 January 2007, on the back of strong auto sales for December 2006. Nifty rose 41 points to settle at 4,007.40.
According to technical analysts, Nifty has resistance at 4030. If the Nifty crosses this mark then it is likely to sustain the 4000 levels, they reckon. For the Sensex, a strong resistance lies at 14,035.
The next major trigger for the market is Q3 December 2006 results. While strong Q3 results are already factored in share prices, market players will be closely watching what the company managements have to say about outlook for Q4 March 2007 and FY 2008 (year ending 31 March 2008). Infosys kickstarts Q3 earnings season on 11 January.
FIIs turned buyers on the last trading day of calendar 2006. FIIs were net buyers to the tune of Rs 331.90 crore on Friday 29 December, as compared to their huge outflow of Rs 1049.70 crore on Thursday 28 December. But as per provisional data, FIIs were net sellers to the tune of Rs 201 crore on Tuesday 2 January, the day when Sensex had risen 155 points.
Mutual funds, meanwhile, are on a buying spree on the bourses. Mutual funds bought shares worth a net Rs 1627 crore in December 2006. Mutual funds, it appears, are putting excess cash to use. Mutual funds’ cash level in November 2006 was at Rs.9000 crores. Of this, Rs 7,500 crore lied with existing mutual funds. The NFOs (new fund offers) cash level was at Rs 1,700 crore. Recently, Reliance Mutual Fund raised about Rs 2100 crore from an equity scheme targeted for investment in small-cap and mid-cap shares.
Asian markets were mostly in the green on Wednesday (3 January 2007). Key benchmark indices in Hong Kong, Singapore and Taiwan were up by between 0.6% to 1.1%. US markets were closed on Tuesday (2 January).
Setting sights on 16000: Sharekhan Market Outlook dated January 02, 2007
MARKET OUTLOOK
Setting sights on 16000
We expect the markets to reach 15500-16000 within the next twelve months. This appears a reasonable target given our expectation of a robust growth in corporate earnings, a positive Union Budget and benign global macro factors especially a possible rate cut by the US Federal Reserve (Fed) in mid-CY2007. With the global growth rate likely to moderate, inflationary pressures in the USA should ease in three to four months. India would continue to grow at a robust rate though and thus attract good foreign funds in line with the other emerging markets. This would lead to strong liquidity conditions and money supply will continue to grow at 19-20%. In this issue of Market Outlook, we have analysed the various positives and risks associated with our equity markets in the coming year. Our preferred sectors are those that are driven by domestic consumer demand and capital spending, and therefore are relatively insulated from a US slowdown. Thus sectors like automobiles, banking, capital goods and cement continue to remain our preferred bets
Download here
Sharekhan Investor's Eye dated January 02, 2007
PULSE TRACK
-
Fiscal deficit broadly in line with estimates
MARKET OUTLOOK
Setting sights on 16000
We expect the markets to reach 15500-16000 within the next twelve months. This appears a reasonable target given our expectation of a robust growth in corporate earnings, a positive Union Budget and benign global macro factors especially a possible rate cut by the US Federal Reserve (Fed) in mid-CY2007. With the global growth rate likely to moderate, inflationary pressures in the USA should ease in three to four months. India would continue to grow at a robust rate though and thus attract good foreign funds in line with the other emerging markets. This would lead to strong liquidity conditions and money supply will continue to grow at 19-20%. In this issue of Market Outlook, we have analysed the various positives and risks associated with our equity markets in the coming year. Our preferred sectors are those that are driven by domestic consumer demand and capital spending, and therefore are relatively insulated from a US slowdown. Thus sectors like automobiles, banking, capital goods and cement continue to remain our preferred bets.
STOCK UPDATE
Aban Offshore
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs2,090
Current market price: Rs1,636
Unlocking of value
Key points
- Aban Offshore (AOL) will make an open offer for an additional 60% stake in Sinvest at an estimated cost of $800 million. To fund the same, it has tied up for debt of $625 million at the subsidiary level and is making a private placement of $150 million in Aban Singapore Pte (ASPL).
- The private placement pegs the equity value of ASPL at $1.45 billion, which is much ahead of the market expectations. Consequently, the implied value of AOL's stake in ASPL works out to around Rs1,426 per share. The open offer is also positive in terms of gaining a controlling stake in Sinvest that would provide AOL access to the strong cash inflows generated by Sinvest.
- The target price is revised to Rs2,090 to factor in the higher-than-expected value of ASPL. The stand-alone business is valued at Rs664 per share, which is 12x FY2009 estimated earnings (discounted by 12% for one year).
SECTOR UPDATE
Automobiles
Good growth despite year-end
Key points
- Bajaj Auto has reported encouraging sales numbers for the month of December 2006. This month is generally a lean month being the last month of the year.
- TVS Motors has reported disappointing sales numbers for the month of December 2006. The sales in December were impacted to some extent by the impending implementation of the value-added tax (VAT) in Tamil Nadu with effect from January 1, 2007.
- Hero Honda reported a lower-than-expected growth in its two-wheeler sales in December.
Maruti has reported strong sales numbers for the month of December 2006 at 56,985 vehicles, a growth of 24% yoy. The domestic sales grew by 26%, whereas the export sales declined by 17% yoy. - M&M's utility vehicle (UV) division has reported a growth of 29.5%. Scorpio grew by 22.4% and UVs other than Scorpio grew at a faster rate of 39%.
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