Global gloom engulfs domestic bourses

The market suffered another setback today due to weakness in Asian markets and as investors exhibited caution before earning reports start trickling in. The weakness accentuated after the Nifty broke the key support level of 3,900.

The benchmark index plunged 204.17 points (1.5%) to settle at 13,362.16, its lowest closing since 20 December 2006. The S&P CNX Nifty lost 61.10 points (1.5%), to settle at 3,850.30.

The market has fallen sharply from record highs last week. At 14,014.92 on 3 January 2007, the Sensex has hitherto lost 652.76 points (4.6%) in the past five trading sessions. Nifty has lost 173.75 points (4.3%) during this same period.

Japan's Nikkei lost 1.7% on Wednesday, recording its biggest one-day percentage decline since Nov. 20. Hong Kong’s Hang Seng was down 1.6%. Reports suggest that a 9% fall in crude prices since the start of calendar 2007 had forced some hedge funds betting on higher oil prices to cut their losses and sell assets across markets. Nymex crude was down 69 cents at $54.95 on Wednesday. Crude had recovered from a lower level on Tuesday, after striking an 18-month low of $53.88 intra-day.

Emerging markets were additionally hit after Venezuela nationalised some major oil projects and other industries, and measures by Thailand to tighten rules on majority-owned foreign companies, which prompted investors to move out of riskier assets. Among Asian emerging markets, Indonesia’s Jakarta Composite was down nearly 4% and South Korea’s Seoul Composite shed 1.3%.

Back home, recent data showed heavy FII sales. As per provisional data, FIIs were net sellers to the tune of Rs 361 crore on 9 January. They were net buyers to the tune of Rs 201 crore in index-based futures and net sellers worth Rs 167 crore in individual stock futures on the same day. FIIs were net sellers of stocks worth Rs 3076 crore on Monday (8 January 2007), which apparently included shares tendered by FIIs in Oracle’s open offer for additional shares of i-flex. Oracle’s open offer for i-flex got over late last month.

The market-breadth was weak today. Against 1,699 shares declining on BSE, 942 rose. Just 45 shares were unchanged. BSE clocked a turnover of Rs 3632 crore, lower than Tuesday’s Rs 5167 crore.

Accrording to technical analysts, the next support level of Sensex is at 13,182 level. If that level is broken, the Sensex may slip to 12,800 they reckon.

Selling was conspicuous today in banking shares. ICICI Bank, with a 9.3% weigtage in the Sensex, lost 3% to Rs 883. SBI lost 3.3% to Rs 1135.

HDFC Bank was down 1.5% to Rs 998. HDFC Bank unveils Q3 results tomorrow. Five brokerages have forecast between 27.4 - 31.8% growth in HDFC Bank’s Q3 December 2006 net profit, between Rs 285.90 crore and Rs 295.90 crore, compared to a net profit of Rs 224.40 crore in Q3 December 2005.

ONGC lost 3% to Rs 890. Newly-listed Cairn India lost nearly 3% to Rs 133.55. A massive 75.7 lakh shares changed hands in Cairn India.

PSU power equipment major Bhel plunged 4.5% to Rs 2146. The stock was the biggest loser from among the 30-Sensex scrips.

Telecom scrips ran out of steam. Reliance Communications shed 3.5% to Rs 408 despite reports of 1.4 million new mobile subscribers in December 2006. Bharti Airtel shed 2% to Rs 611.

Wipro led an intra-day rebound in IT shares. It rose 2.2% to Rs 594. Satyam Computer gained 0.03% to Rs 467.90, off the session’s low of Rs 456. However, TCS (down 1.7% to Rs 1234) lost heavily.

Infosys ended just 0.2% down to Rs 2185.70, off the session’s low of Rs 2158. Infosys announces Q3 results tomorrow. Eight brokerages have predicted between 4.1 - 7.3% sequential growth in Infosys’ Q3 consolidated net profit, between Rs 973.50 crore and Rs 996.70 crore, compared to a net profit of Rs 929 crore in Q2 September 2006. These brokerages expect between 5.7 - 10.7% sequential growth in Infosys’ consolidated sales, between Rs 3646.60 crore and Rs 3819.20 crore, compared to the net sales of Rs 3451 crore in Q2 September 2006.

The key factor to watch is the operating profit margin. Citigroup expects a marginal uptick in Infosys’ operating margins. It reckons that better pricing and lower selling, general & administration costs would offset margin pressure arising from an appreciating rupee.

Cement shares, too, staged an intra-day recovery. Gujarat Ambuja Cements ended 0.3% down at Rs 139, off the session’s low of Rs 136.10. Grasim lost 0.6% to Rs 2809, off the session’s low of Rs 2757.50.

Reliance Industries shed 0.7% to Rs 1271.50.

Zee News closed at Rs 34.40 and Wire and Wireless (India) ended at Rs 120.80, on their debut. It maybe recalled that Zee Telefilms had demerged its cable distribution subsidiary into Wire & Wireless (India) (WWIL) and its regional and news broadcasting undertaking into Zee News (ZNL), in a restructuring scheme. Ahead of the listing of Zee News, RBI on Tuesday said foreign portfolio funds will not be permitted purchases of Zee News scrip without obtaining prior permission from the bank. The foreign portfolio limit in Zee News had reached the maximum permissible limit of 26%, RBI said.

Shree Ashtavinayak Cine Vision closed at Rs 226.50 on its debut on Wednesday, higher than its issue price of Rs 160.

IFCI jumped 21.6% to Rs 16.40 after it, along with other shareholders, sold part of their holdings in the National Stock Exchange to NYSE Group and other foreign investors.

Chemicals maker BASF India plunged 7% to Rs 232.50, after the company's net profit fell 25% for Q3 December 2006 to Rs 8.83 crore from Rs 11.74 crore a year ago.

Sintex Industries dropped 6% to Rs 213. The company today reported 27% growth in net profit for October-December 2006 quarter at Rs 25.90 crore (Rs 20.40 crore).

Newspaper publisher Deccan Chronicle Holdings rose nearly 6% to Rs 821.90 after the company called a board meeting on 19 Jan 2006 to consider splitting each share into five.

Nestle India rose almost 5% to Rs 1215. The company said on Tuesday, its board will meet on 15 January 2007 to consider a scheme formulated under Sections 391 to 394 of the Companies Act, 1956 read with Sections 100 to 102 of the Companies Act, 1956 for distributing a part of the general reserves and the share premium account to shareholders.

Construction firm Atlanta rose 5% to Rs 1142.75, after its Oct - Dec 2006 net profit surged. Its board will meet on 16 Jan 2006, to consider splitting each share into five.

PVR rose 0.5% to Rs 232, after its multiplexes at Latur and Aurangabad, in Maharashtra, were granted exemption from entertainment tax for five years.

Praj Industries rose nearly 4% to Rs 234.95. The stock had slipped a bit on Tuesday, even as it reported outstanding Q3 results.

Electrical appliance maker Asian Electronics dropped 1.5% to Rs 559.50. The company said on Wednesday Citigroup Global Markets (Mauritius) bought an additional 1.36% stake in the company, thus raising its stake to 6.34%.

Dolphin Offshore dropped 2% to Rs 345.10. The stock came sharply off an intra-day high of Rs 374. Today was the last day for the scrip to trade cum-bonus (for 3:5 bonus issue). The company has set 12 January 2007 as record date for the bonus issue.

iGate Global Solutions ended flat at Rs 401. iGate Global Solutions reported a standalone net profit of Rs 17.05 crore for Q3 December 2006 compared to a net profit of Rs 9.27 crore for Q3 December 2005. Net sales rose 33.3% to Rs 196.03 crore (Rs 146.95 crore).

Tanla Solutions gained 2% to Rs 402.95, the maximum permissible level of the day. The stock has hit 2% upper limit in each of the last past four trading sessions from the day of its debut on 5 January 2007. The stock had debuted at Rs 379.80 on BSE on 5 January compared to the IPO price of Rs 265.

Gas cylinder maker Everest Kanto Cylinder shed 3% to Rs 738. As per reports, the company won an order worth Rs 40 crore from defence authorities.

Television software producer Baba Arts rose 5% to Rs 51.10, after its board approved raising up to $20 million and increasing foreign fund holding to 74%.

Market sheds another 204 points

The market slipped further as selling backed by substantial intra-day volatility continued for the second straight session with the Sensex slipping sharply in mid-morning trades. The Sensex witnessed a wild intra-day swing of 229 points in the first half of the trading session and the index crashed sharply to the day’s low of 13337 after touching an early high of 13570. Although some of the losses were erased on stock-specific gains, the Sensex closed with losses of 1.50% or 204 points at 13362. The Nifty declined by 61 points to close at 3850.

The market breadth was expectedly negative. Of the 2,707 stocks traded on the BSE, 1,712 stocks declined, 952 stocks advanced and 43 stocks ended unchanged. Among the sectoral indices, the BSE Bankex, the BSE PSU index and the BSE CG index shed over 2% each. The other sectoral indices also closed in negative territory.

Except Wipro and ITC the rest of the Sensex stocks witnessed steep falls. BHEL tumbled 4.66% at Rs2,144, Reliance Communication lost 3.72% at Rs407, ICICI Bank declined 3.27% at Rs883, SBI slumped 3.20% at Rs1,137, ONGC slipped 3.06% at Rs890 and Dr Reddy’s fell 2.95% at Rs775. HDFC at Rs1,527, Reliance Energy at Rs505, NTPC at Rs133, Gujarat Ambuja at Rs137, Bharti Airtel at Rs613, TCS at Rs1,234, L&T at Rs1,409, Grasim at Rs2,786, Ranbaxy at Rs411, HDFC Bank at Rs999 and Infosys at Rs2,169 dropped 1-2% each.

The banking stocks fared badly on the bourses. Canara Bank dropped 5.72% at Rs262, Oriental Bank declined 3.69% at Rs214, Allahabad Bank lost 2.11% at Rs88 and Indian Overseas Bank slipped 1.63% at Rs108. Consumer goods stocks also witnessed heavy selling pressure. Kalpataru, Carborundum, Alstom Project, Thermax and Triveni Engineering were down 2-4% each.

Shree Ashtavinayak Cine Vision made its debut on the BSE. The stock touched an intra-day high of Rs248 before profit taking dragged it to a low of Rs185. The company had sold the shares at Rs160 in the initial public offering. The stock finally closed at Rs227. Over 1.60 crore shares were traded on the BSE.

Over 4.70 crore IFCI shares changed hands on the BSE followed by Shree Ashtavinayak (1.60 crore shares), Pentium Infratech (1.58 crore shares), Zee News (1.36 crore shares) and Vishal Export (83 lakh shares).

Earnings anxiety, weak Asia knock off over 180 points

Weakness in Asian markets and Indian ADRs coupled with caution ahead of earning reports pulled the market sharply lower today as well. A late rebound, however, was witnessed in IT and cement pivotals.

The weakness accentuated after the Nifty broke the key support level of 3,900.

The provisional closing of the Sensex was 13,378.95, a fall of 187.38 points for the day. Short-covering at the fag end of the trading session saw the Sensex recoup a bit of the lost ground, after the barometer index plunged as many as 229.81 points, to a low of 13,336.52 at 15:05 IST.

The S&P CNX Nifty lost 1.5% to 3,850.30.

Energy scrips dragged Asian shares lower on Wednesday, after crude oil prices fell to an 18-month low on Tuesday. Japan’s Nikkei 225 shed 1.7% and Hong Kong’s Hang Seng was 1.6%. Nymex crude was down 69 cents at $54.95.

Selling was conspicuous in banking shares. ICICI Bank, with a 9.3% weigtage in the Sensex, lost 3% to Rs 883. SBI lost 3.3% to Rs 1135.

HDFC Bank was down 1.5% to Rs 998. HDFC Bank unveils Q3 results tomorrow. Five brokerages have forecast between 27.4 - 31.8% growth in HDFC Bank’s Q3 December 2006 net profit, between Rs 285.90 crore and Rs 295.90 crore, compared to a net profit of Rs 224.40 crore in Q3 December 2005.

ONGC lost 3% to Rs 890. Newly-listed Cairn India lost nearly 3% to Rs 133.55. A massive 75.7 lakh shares changed hands in Cairn India.

PSU power equipment major Bhel plunged 4.5% to Rs 2146. The stock was the biggest loser from among the 30-Sensex scrips.

Telecom scrips ran out of steam. Reliance Communications shed 3.5% to Rs 408 despite reports of 1.4 million new mobile subscribers in December 2006. Bharti Airtel shed 2% to Rs 611.

Wipro led an intra-day rebound in IT shares. It rose 2.2% to Rs 594. Satyam Computer gained 0.03% to Rs 467.90, off the session’s low of Rs 456.

Infosys ended just 0.2% down to Rs 2185.70, off the session’s low of Rs 2158. Infosys announces Q3 results tomorrow. Eight brokerages have predicted between 4.1 - 7.3% sequential growth in Infosys’ Q3 consolidated net profit, between Rs 973.50 crore and Rs 996.70 crore, compared to a net profit of Rs 929 crore in Q2 September 2006. These brokerages expect between 5.7 - 10.7% sequential growth in Infosys’ consolidated sales, between Rs 3646.60 crore and Rs 3819.20 crore, compared to net sales of Rs 3451 crore in Q2 September 2006.

However, TCS (down 1.7% to Rs 1234) lost heavily.

Cement shares, too, staged an intra-day recovery. Gujarat Ambuja Cements ended 0.3% down at Rs 139, off the session’s low of Rs 136.10. Grasim lost 0.6% to Rs 2809, off the session’s low of Rs 2757.50.

Reliance Industries shed 0.7% to Rs 1271.50.

The Strategist

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Sharekhan Highnoon dated January 10, 2007

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BRICS PCG - Morning Call + HDFC Bank

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Sharekhan Investor's Eye dated January 09, 2007

Q3FY2007 pharma earnings preview

Key points

• We are positive on the Indian pharmaceutical sector and expect most companies to report good earnings growth for Q3FY2007, driven by continued domestic growth, steady contributions from exports and synergies arising out of integration of acquisitions. We expect the pharmaceutical companies under our coverage to report a revenue growth of 22.7% for Q3FY2007.
• Despite the de-stocking impact caused by the anticipatory introduction of value-added tax (VAT) in Tamil Nadu with effect from January 1, 2007, the branded formulation business in the domestic market continued its growth momentum in the quarter. The growth momentum was maintained on the back of aggressive new product launches and continued focus of companies on the high-growth chronic lifestyle segments. The companies with a wider domestic presence like Cipla, Sun Pharmaceuticals, Nicholas Piramal and Cadila Healthcare are the likely beneficiaries.
• On the export front, the growth is expected to be strong, on the back of new product launches, especially of products under 180-day exclusivity. For example, Ranbaxy Laboratories is expected to derive strong sales from "Zocor" under 180-day exclusivity while Dr Reddy's Laboratories may witness revenue upsides from the sale of "Zocor" and "Proscar" under authorised generic terms with Merck Inc. Similarly, Cipla is expected to strengthen its exports by supplying active pharmaceutical ingredients (APIs) of "Zoloft" and "Proscar" to Teva.
• With a greater number of players entering the generic space in the USA, pricing pressures are likely to continue. The pricing environment in the key markets of Europe too is likely to be tough with the ongoing regulatory reforms.
• The merger and acquisition (M&A) focus of Indian pharmaceutical companies has continued in the quarter, with Ranbaxy Laboratories acquiring South African Be Tabs and Wockhardt acquiring the Irish generic company, Pinewood. The integration of past acquisitions is likely to get reflected in the earnings growth of the pharmaceutical companies during the quarter. Moreover, we expect the Indian pharmaceutical companies to continue to widen their geographical presence and expand product portfolios through inorganic means.
• On the domestic front, the contentious issues of pricing control, data exclusivity etc continue to loom over the domestic pharmaceutical industry. Despite this, the increasing focus on the high-margin regulated markets coupled with an improvement in the product mix (moving more towards the high-margin formulation business), improved cost discipline and shifting of production to tax-free zones is likely to get reflected in the improving operating profit margin (OPM) of the Indian pharmaceutical companies. We expect the OPM of the pharmaceutical companies under our coverage to expand by 540 basis points in Q3FY2007.
• The recent outlicencing deal of Glenmark Pharmaceutical's anti-diabetic molecule to Merck KG has reinforced confidence in India's innovative and research abilities. India's capabilities in drug discovery research are being increasingly recognised by global pharmaceutical majors. Lupin's anti-migraine compound entering Phase III clinical trials further vindicates the capabilities of the Indian companies to create their own innovative new chemical entity (NCE) pipeline. We expect further positive newsflow on the innovative research and development (R&D) front from Sun Pharmaceuticals, Lupin, Dr Reddy's Laboratories and Glenmark Pharma in the coming quarters.
• The strong cost control initiatives coupled with the synergies derived out of the integration of acquisitions are expected to drive the earnings growth of the Indian pharmaceutical companies. The pharmaceutical companies under our coverage are expected to report a jump of 58.9% in their net profit in Q3FY2007.

Q3FY2007 banking earnings preview

We expect the interest on advances to show a strong growth on the back of ~30% year-on-year (y-o-y) credit growth and the full impact of the hike in the prime lending rates (PLRs) effected by banks in August 2006. However, the cost of funds may have an upward bias as the deposit costs, especially the bulk deposit rates, have moved up sharply and many banks have also made significant borrowings to shore up their capital requirements in Q3FY2007. Hence we expect some pressure on the margins of the banks on a quarter-on-quarter (q-o-q) basis. The other income growth too is expected to be strong for the third quarter, with the fee income also expected to show a good growth. The trading income component could be a surprise though. For the banking stocks under our coverage (without adjusting for State Bank of India [SBI]), we expect a 12.9% increase in the net interest income (NII), an 18.5% rise in the operating profits and a 17.2% growth in the profit after tax (PAT) on a y-o-y basis. For all banks excluding SBI, we expect the NII, operating income and PAT to grow by 22.6%, 26.8% and 21.2% respectively on a y-o-y basis. Among the public sector banks (PSBs), Bank of India (BOI), SBI (adjusted numbers), Punjab National Bank (PNB) and Bank of Baroda (BOB) are expected to report a strong profit growth. On the other hand, the private banks (PVBs) are expected to report a y-o-y profit growth in the range of 26-32%.

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Kotak - Reliance Communications

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Sharekhan Commodities Buzz dated January 10, 2007

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Poweryourtrade.com Trading Calls

Ashwani Gujral

Buy HOV Services with stop loss at Rs 175 for a target of Rs 240

Buy Mercator Lines with support at Rs 40 for a target of Rs 57

Deepak Mohoni

Short Sell Tata Steel above Rs 454 with stop loss at Rs 464. This is a day-trading recommendation.

Buy Sasken Communications below Rs 610 with stop loss at Rs 595. This is a day-trading recommendation.

Rajat K Bose

Sell NIIT Technologies around the last closing price with stop loss above Rs 301 for a target of Rs 283

Buy HOV Services around the last closing price with stop loss below Rs 189 for a target of Rs 218

Kotak Daily Reports - Construction Results Preview

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Market may remain weak

Weakness in the market may continue further amid a slide in Asian indices and dwindling net FII inflows in the domestic market. The market will also be focusing on the global crude oil front although the crude prices has fallen in yesterday's trades. Among the local indices, the Nifty has a short term support at 3870 and may face resistance at 3935. The Sensex has a likely support at 13500 and could test higher levels of 13750.

US indices registered mix trend on Tuesday, While the Dow Jones moved down marginally by seven points at 12417, the Nasdaq was up six points at 2444.

Indian ADRs declined sharply following a slump in the domestic market. Satyam was the biggest loser amongst the ADRs and tumbled over 2.45% while Tata Motors, ICICI Bank, HDFC Bank, Dr Reddy's, Infosys, Satyam and Wipro dropped over 1% each. However, only Rediff was ended in positive territory.

In the crude oil front, the Nymex light crude oil for February series lost 45 cents to close at $55.64 per barrel. The Comex gold for february delivery gained $5.60 to settle at $615 respectively.

Supports & Resistances

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5 Intra-day Stock Ideas

NIFTY (3911) SUP 3874 RES 3949

Buy TATATEA (725.9)
SL 721 T 735, 737

Buy AIRDECCAN (150.7)
SL 146 T 158, 160

Buy GESHIP (228)
SL 225 T 237, 239

SELL POLARIS (186)
@ 189 SL 192 T 181, 179

SELL BRFL (225)
@ 228, SL 232 T 220, 218

STRATEGY INPUTS FOR THE DAY

Weak Wednesday…just bear it

Sometimes our greatest strength come from our weakness.

Investors would hope that some strength emerges after today’s weakness. We are more or less taking it for granted that the opening session will be weak. With a day to go for Infosys results, and given the recent dips, the bulls would not want to take too many risks at this point in time. What's worse, Asian markets have taken a severe beating this morning on the back of falling metals prices in London.

FIIs too do not seem to be in the mood to commit fresh money for the Indian market as yet. Perhaps they are also waiting for more positive signals from both the corporate world (read earnings) and the Government (read RBI policy review and the Budget). As a result, we may see the key indices opening sharply down and could remain so for the day. The undertone has suddenly turned weak after a promising start to the new year. There are some uncertainties like rising inflation and hardening of rates in the near term though the long-term outlook is strong as ever. Think long term and continue picking up your favorite counters in smaller quantities. Depending on your risk appetite you take position in counters like Infosys which could turn volatile due to the results.

Shares of WWIL (Zee's cable television arm) and Zee News will list on the bourses today. Shree Ashtavinayak Cine Vision will also make its stock market debut today.

Bihar Tubes is a counter which may see some intra-day swings as the company is likely to announce a 1:1 bonus today. Other lesser known companies which could see action in the coming weeks include Repro India, RS Software, Nicco Corp and Pyramid Saimira. Long term investors can buy Indraprastha Gas and Gayatri Projects.

FIIs were net sellers to the tune of Rs3.6bn (provisional) in the cash segment yesterday. In the F&O segment, they pumped in Rs657.4mn. Foreign funds sold off stocks worth Rs30.75bn in the cash segment on Monday. But, this includes the tendering of shares by FIIs in the i-flex open offer. On the other hand, Mutual funds poured in Rs1.48bn on the same day.

Birla Corporation may come under pressure as workers of its Birla Jute Mills unit have gone on strike from January 5. Nucleus Software might attract some attention after Yes Bank selected it's FinnOne Leading Product Suite. Atlanta is likely to advance as the company's Board will meet on January 16 to consider a stock split and fund raising plans for expansion. The company has also come out with strong results for the October to December quarter. i-Gate Global is expected to rally on the back of better than expected results for the third quarter. Reliance Communications will also be in the limelight as its Board meets to consider fund raising plans for its proposed bid for Hutch Essar.

Results Today:
Bihar Tubes, SBI Home Finance, Sintex Industries, BASF India and GEI Hammon.

Insider Trades:
Nahar Spinning Mills Ltd: Reliance Long Term Equity - Scheme of Reliance Mutual Fund has purchased from open market 130896 equity shares of Nahar Spinning Mills Ltd on 5th January, 2007.

Aditya Birla Nuvo Limited: Franklin Templeton Mutual Fund (Through it Various schemes) has sold in open market 24500 equity shares of Aditya Birla Nuvo Limited on 3 January, 2007.

Market Volumes:
The turnover on NSE was up by 15.5% to Rs88.06bn. BSE Capital Good index was the major loser and lost 1.35%, BSE Pharma index (down 0.95%), BSE Bank index (down 0.94%), BSE Technology index (down 0.85%) and BSE Auto index (down 0.75%) were among the major losers. However, BSE Oil & Gas index gained 0.47%.

Volume Toppers:
Cairn India, Pyramid Saimira, R Com, TTML, ITC, HLL, Satyam Computer, Essar Oil, Ashok Leyland, Praj Industries, Bank of India, Deccan Aviation, SAIL, India Cements, RIL, Polaris, IVRCL Industries, Hindalco and MTNL.

Delivery Delight:
ABG Shipyard, Abhishek Industries, Adlabs Films, AIA Engineering, Bata India, BEML, Educomp Solutions, Essar Shipping, GAIL, Geodesic Information Systems, ICICI Bank, I-Flex Solutions, India Cements, India Infoline, Infotech Enterprises, Pratibha Industries, Punj LLoyd, Sasken, UTI Bank and Zee Telefilms.

Upper Circuit Filters:
Flex Industries, Zandu Pharma, Goldstone Technology, Tanla, Pyramid Saimira, Nesco, ElectroTherm, KS Oils and Rajesh Exports.

Brokers Recommendations:
EKC - Buy from Kotak with price target of Rs924

Long Term Investment:
Gayatri Projects

Major News Headlines:
Chidambaram asks industry to cut prices
Punj Lloyd bags Rs 12.88bn order from ONGC
Teledata Informatics acquires 100% stake in Soltius Pte Ltd
ABB wins order from JSW Steel for Rs2.5bn
Honda Motor India to invest Rs20bn for second car plant
Sadbhav Engineering bags order worth Rs5.10bn
Rama Newsprint board approves spending Rs6.3bn to expand
Everest Kanto Cylinder secures orders worth Rs400mn from Defense authorities
HTMT completes buyout of Multicity BPO company in US
i-flex unit wins order from Friedman, Billings, Ramsey & Co
Suven Life gets patent from European Patent Office
Mefcom Agro to buy property in New Delhi

How Market Fared - Choppy movement likely to continue

The bears once again dominated as the Sensex lost 0.63% and NSE Nifty was down 0.56%. The markets which registered positive opening tracking strong global cues lost ground in the later half of the trading session as profit booking got the bears rolling on bourses. Also, sentiments were dampened on the street after Finance Minister Chidambaram asked industry not to take advantage of growing demand to increase prices as higher inflation would hurt them in the long-run.

Capital Good, Technology and Auto index led the down fall and concerns on rising inflation rates further dragged the benchmark index to hit a low of 13493.48. ICICI Bank, ONGC and TCS were the major gainers among the 50-scrips of NSE Nifty. Finally, the BSE benchmark Sensex fell 85 points to close at 13566. NSE Nifty was down 22 points to close at 3911.

Cairn India had a disappointing debut on the bourses today, the scrip ended at Rs137 translating a 14% discount. Cairn India entered the capital market with a public issue of 328,799,675 equity shares. The scrip touched an intra-day high of Rs162 and a low of Rs128 and recorded volumes of over 6,00,00,000 shares on NSE.

Punj Lloyd advanced 1.5% to Rs1013 after the company won Rs12.9bn Offshore order from ONGC. The scrip touched an intra-day high of Rs1029 and a low of Rs995 and recorded volumes of over 5,00,000 shares on NSE.

Bharti Airtel edged higher 0.3% to Rs623 after the company declared that it would announce its retail investment plans next month. The scrip touched an intra-day high of Rs630 and a low of Rs611 and recorded volumes of over 6,00,000 shares on NSE.

Jet Airways gained 2.1% to Rs629 after the company announced that they hope to be profitable in fiscal 3Q. The scrip touched an intra-day high of Rs634 and a low of Rs611 and recorded volumes of over 4,00,000 shares on NSE.

Capital Good stocks ended lower as profit booking dragged them down. L&T lost 2.1% to Rs1430, Siemens dropped 1.6% to Rs1068 and BHEL was down 0.7% to Rs2250.

Metal stocks continued its downtrend as metal prices on LME were down. Tisco, SAIL, National Aluminum, Hindalco and Sterlite Industries were among the major losers.

FMCG stocks were badly beaten up after Finance minister P. Chidambaram asked industry to cut prices and not take advantage of growing demand. Nirma, McDowell, heavy weight ITC and Britannia were among the major losers.

Telecom stocks also were among the major losers. R Com pared its intra-day gains on back of profit booking, the scrip was down 3% to Rs422, MTNL was down 2% to Rs154 and VSNL lost 0.5% to Rs434. However, heavy weight Bharti Airtel edged higher 0.3% to Rs623.

IDBI Capital - Jupiter Bioscience

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Emkay - Morning Notes + Tanla Solutions

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Autoline Industries IPO

Autoline Industries supplies complex sheet metal assemblies and sub-assemblies to Tata Motors, Bajaj Auto, Kinetic Engineering, Mahindra & Mahindra, Walker Exhaust and Fiat India. The company is the single-source supplier of load bodies for Tata Ace mini truck. It has entered into an arrangement with Stokota Engg, the Indian subsidiary of Stokota NV, Belgium, for supply of tippers, tipper trailers, tankers, cement bulkers, and garbage extractors.

The promoters of Autoline Industries are Vilas Lande (sitting MLA from Haveli constituency in Pune), Shivaji Akhale, Sudhir Mungase, M Radhakrishnan and his wife.

To modernize and upgrade the existing facilities at Chakan, set up a new manufacturing unit at Chankan, expand the UAE joint venture operation, expand facilities in design engineering unit, establish corporate office, make strategic acquisition and meet issue expenses, Autoline Industries is issuing equity shares through the 100% book building process to raise Rs 75 crore. .

Strengths

* Major customer Tata Motors is doing well, specially the Ace LCV model for which the Autoline Industries is the single-source supplier.

* The integrated inhouse facilities of the company cater from design engineering stage to delivery of the final product.

* Positioned as a leading provider of services to overseas manufacturers looking for outsourcing developmental work and design engineering services, the company is expanding the capabilities of its design-engineering unit to supply offshore development and manufacturing (ODM) services to foreign companies.

Weakness

*The cost-reduction targets stipulated by Tata Motors, accounting for 82% of Autoline Industries’ sales, are likely to put pressure on the profit of Autoline Industries. The 9.8% operating profit margin in the latest eight-month period is lower than 11.9% in FY 2006.

Valuation

In the past year, Autoline Industries has issued shares on preferential basis at Rs 50 to Rs 130 per share. At the current offer price band of Rs 200 - Rs 225, the annualised EPS for the eight months ended November 2006 on post-issue equity works out to Rs 10.6 to Rs 10.4, and PE 19.2x – 21.3x. The TTM PE of auto ancillary industry is 13.8x.

Volatility to remain for few more days

In today’s trade, the Nifty found support at 3900. Traders were seen covering their short positions around this level. The negative cost of carry narrowed down to just about 3 points on the Nifty January futures. Apart from short covering, there were some fresh long positions being taken as well.

Among individual stock futures, MTNL is looking very strong. It saw a 90% roll over of positions to this month and we’ve been recommending it from Rs.140. ICICI Bank has held well in the past 2 days of correction and one can expect some good upside to it.

The implied volatility has been 26% and we advice investors to be cautious. The volatility is expected to continue for few more sessions.

- Zeal Mehta, Derivatives Analyst, Emkay Stock Broking

Nifty has strong support at 3,900

The FII taxation issue played a dampener today. The day traders took up this opportunity and added to the panic by taking short positions. However, the strong support for the Nifty at 3900 still holds its place. We saw the markets recover partially at the fag end of the trading session. That was on account of day traders covering up their short positions. The Nifty closed at 3911, which is above its support of 3,900. Infosys’ quarterly results on Thursday would be taken symbolic for the sector and will determine the direction of the stocks in the sector. The mid caps rally was not much hampered inspite of the large cap correction today.

Cairn India listed below its issue price today. I don’t see anything wrong with the company’s fundamentals. I rather feel that it’s a good buy if one can hold the stock for a longer term. The company’s output is expected to grow five fold by 2010. Fund managers and institutional investors accumulated the stock at lower levels citing value in the stock for long-term investment.

For the markets as a whole, I don’t see any interruption of the broader bullish trend until Feb 15- Feb 20.

- Rajeev Nainani, Relationship Manager, Anagram Stock Broking

Karvy - Tata Steel & Dena Bank

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Tech View - Jan 10 2006

Sensex closed in Red on second session of the week, down by 86 points at 13566 levels with decent volume of Rs 4678 cr.

Market witnessed more than 200 points fall (from top to bottom) on 2nd consecutive day.Sensex has formed a “Continuation” pattern which indicates weakness in the trend but after a pullback rally. Sensex has still maintained the importance of Bearish candle which is created on Monday. To nullify the importance of this Candle the Market has to sustain above the 13727 levels which is 50 |% of candle. If it does then trend could be positive and 14000 levels can be seen. But failure of this could lead Sensex up to 13230 levels.

FII: - Rs 3076 cr, MF - Rs 148 cr

FII Gross purchases Rs 1385.30 Cr Gross Sellers Rs 4461 Cr Net Sellers Rs 3075.70 Cr.
MF Gross Purchases Rs 564.69 Cr Gross Sellers Rs 712.99 Cr Net Sellers Rs 148.30 Cr
Provisional figures FII Buy value Rs 2644.13 cr Sell Value Rs 3005.16 cr Net Sell Value Rs 361.03 cr.

Our View:

Thats the I-flex open offer subscription included in the big negative figure for yesterday. So really the actual number is more likely to be around 700 cr negative. What will matter is the numbers for today..
Todays numbers would include a bulk deal of Gujarat Ambuja so the sell figure is likelyto be higher. All in all not conducive for the markets.

Market: 11500 Target - Merill Lynch

Merrill Lynch expects negative returns in 2007 - index target 11,500 for December 2007 (15x forward earnings), a 10% drop from current levels. Remain positive on the economy and expect GDP to grow 7.6% in FY08 led by infrastructure spend.

However, markets will likely be dragged by:
(1) Near term rising inflation and interest rate worries;
(2) Slowing corporate earnings (expect to slow to around 13% in FY08 vs. 25% recent years);
(3) Rich valuations at nearly 18x 1-year forward earnings are the highest in a post-bubble era &
(4) Supply of paper as we expect $12 bn over next 6 months to put pressure on flows to the secondary markets

Thats a big call to make for Index.. Market is headed for consolidation. The large caps are seeing consolidation and small and mid caps are running..

As one of our associate put it..
Nifty PE Range > 2002- 13 to 19, 2003- 11 to 21, 2004- 12 to 24, 2005-13 to 17, 2006-15 to 22 Markets move on PE ranges, pinning one pe number is not a wise action. Current Market P/E is around 21 so really its at the upper end of the mean which is around 17

Close: another day of correction !

Sensex made an attempt at a comeback in the morning session but then hgave up as selling engulfed.Value buying helped in a small comeback. Global cues helped the Indices to trade in the positive territory at last profit booking was seen. Midcaps which were stars yesterday too found the going tough. The advance decline ratio closed in favour of the declines with about 14 declining stocks for every 13 advancing stocks.

The selling pressure mounted on the index heavy weights and selective Mid and Small Caps and sectors like Automobile, Banks (PSU), Cement, Construction and Software came under selling pressure. Asian Markets ended mixed, European Markets were trading Firm though probably helping in not so bad close.

Sensex closed down by 86 points at 13566.33. Weighing on the Sensex were losses in Satyam (467.75,-4 percent), SBI (1174.5,-3 percent), RCVL (423,-3 percent), HDFC (1560.7,-2 percent) and L & T (1431.2,-2 percent). Losses were restricted by gains in Guj Ambuja (139.55,+2 percent), ONGC (918.25,+1 percent), TCS (1255.45,+1 percent), ICICI Bk (912.6,+1 percent) and Grasim (2826.25,+0 percent).

The FII number came in a big negative at over 3500 cr. The reason for the same as it included about Rs 2500 crore of I-flex open offer submission by the FIIs. The provisional figure for the day is also high at -361 crores. If it includes the Gujarat Ambuja deal then the number is certainly quite worrisome. There is complete absense of buyers and markets is thus seeing money being taken off the table. Thats not good near term !

Punj Lloyd, along with its offshore engineering arm - PT Sempec Indonesia - has secured its largest offshore platform project to re-develop the Heera oil field on an EPC basis from Oil & Natural Gas Corporation (ONGC). The order is valued at around Rs 1288 cr. Heera field is located about 80 km west of Mumbai in the Arabian Sea. The scope of work includes surveys (pre-engineering, pre-construction / pre-installation and post-installation), design, engineering procurement, fabrication, loadout, tie-down/sea-fastening, transportation, installation, hook-up, testing, pre-commissioning and commissioning of four unmanned platforms, 70 km of submarine pipeline (rigid & flexible), laying of 25 km composite cables, modifications of seven existing platforms and installation of a new SBM in Mumbai High South. The work is scheduled to be completed within 16 months. The construction stocks closed in red while the Punj Lloyd closed up by 1.7%. Expect a bouyant opening here tomorrow.. but whether that will follow up will depend on the overall market.

Eastern Silk Industries, the second largest exporter of silk garments and fabrics posted good numbers for the third quarter and nine months ended December 2006. In both periods under analysis, new capacities, backward and forward integration and better realizations and change in product mix helped the company to improve its Operating as well as Net Profits. Lower input costs; lower tax incidence and benefits of the foreign exchange helped the company surge over the enhanced interest costs. A jump in other income has also added the Net Profit margin by 4%. The stock closed lower by 3% on profit taking.

NRC closed up circuit on talks that the company had a deal for the Real Estate in Kalyan for Rs 1000 cr+. The company is valued at around Rs 130 cr and a debt of around Rs 150 cr. The company has land of around 450 acres near Mumbai of which about 100 acres is being used by the company. Balance 350 acres apparently has been under negotiation for development. As per market talk a deal has been struck for this development. The stock hit upper limits.

Technically Speaking: It was a down session. Sensex touched intraday high of 13748 and low of 13493. Market turnover stood good at Rs 4693 cr. Overall breadth went in favor of Decliners where advancers stood at 1274 and Decliners at 1369. The Resistance level was at 13725 -13864 while Support at 13470 -13354 levels.

Prabhudas Lilladher - ACE

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ISEC - Auto Q3FY07

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ISEC - Technology Q3FY07 Preview

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Citigroup Reports

Citigroup - Indian Hotels

Citigroup - Zee TelefilmsCitigroup - Hotel LeelaCitigroup - EIH Hotels

Q3FY2007 pharma earnings preview: Sharekhan Special dated January 09, 2007

Key points

• We are positive on the Indian pharmaceutical sector and expect most companies to report good earnings growth for Q3FY2007, driven by continued domestic growth, steady contributions from exports and synergies arising out of integration of acquisitions. We expect the pharmaceutical companies under our coverage to report a revenue growth of 22.7% for Q3FY2007.
• Despite the de-stocking impact caused by the anticipatory introduction of value-added tax (VAT) in Tamil Nadu with effect from January 1, 2007, the branded formulation business in the domestic market continued its growth momentum in the quarter. The growth momentum was maintained on the back of aggressive new product launches and continued focus of companies on the high-growth chronic lifestyle segments. The companies with a wider domestic presence like Cipla, Sun Pharmaceuticals, Nicholas Piramal and Cadila Healthcare are the likely beneficiaries.
• On the export front, the growth is expected to be strong, on the back of new product launches, especially of products under 180-day exclusivity. For example, Ranbaxy Laboratories is expected to derive strong sales from "Zocor" under 180-day exclusivity while Dr Reddy's Laboratories may witness revenue upsides from the sale of "Zocor" and "Proscar" under authorised generic terms with Merck Inc. Similarly, Cipla is expected to strengthen its exports by supplying active pharmaceutical ingredients (APIs) of "Zoloft" and "Proscar" to Teva.
• With a greater number of players entering the generic space in the USA, pricing pressures are likely to continue. The pricing environment in the key markets of Europe too is likely to be tough with the ongoing regulatory reforms.
• The merger and acquisition (M&A) focus of Indian pharmaceutical companies has continued in the quarter, with Ranbaxy Laboratories acquiring South African Be Tabs and Wockhardt acquiring the Irish generic company, Pinewood. The integration of past acquisitions is likely to get reflected in the earnings growth of the pharmaceutical companies during the quarter. Moreover, we expect the Indian pharmaceutical companies to continue to widen their geographical presence and expand product portfolios through inorganic means.
• On the domestic front, the contentious issues of pricing control, data exclusivity etc continue to loom over the domestic pharmaceutical industry. Despite this, the increasing focus on the high-margin regulated markets coupled with an improvement in the product mix (moving more towards the high-margin formulation business), improved cost discipline and shifting of production to tax-free zones is likely to get reflected in the improving operating profit margin (OPM) of the Indian pharmaceutical companies. We expect the OPM of the pharmaceutical companies under our coverage to expand by 540 basis points in Q3FY2007.
• The recent outlicencing deal of Glenmark Pharmaceutical's anti-diabetic molecule to Merck KG has reinforced confidence in India's innovative and research abilities. India's capabilities in drug discovery research are being increasingly recognised by global pharmaceutical majors. Lupin's anti-migraine compound entering Phase III clinical trials further vindicates the capabilities of the Indian companies to create their own innovative new chemical entity (NCE) pipeline. We expect further positive news flow on the innovative research and development (R&D) front from Sun Pharmaceuticals, Lupin, Dr Reddy's Laboratories and Glenmark Pharma in the coming quarters.
• The strong cost control initiatives coupled with the synergies derived out of the integration of acquisitions are expected to drive the earnings growth of the Indian pharmaceutical companies. The pharmaceutical companies under our coverage are expected to report a jump of 58.9% in their net profit in Q3FY2007.

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ASK RJ - JSW Steel

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Edelweiss - India Strategy

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