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Friday, January 19, 2007

Weekly Ideas - Indiainfoline

BUY Kernex (222)
SL 207 T 249, 255

BUY Kotak Bank (446)
SL 431 T 472, 477

BUY Glenmark (626)
SL 601 T 670, 675

BUY IVRCL Infra (403)
SL 390 T 423, 429

BUY Kesoram Industries (614)
SL 589 T 643, 649

From Research Desk

Jubilant Organosys Limited
Result Update (Q3 FY07)

Jubilant Organosys Limited's (Jubilant) Q3 FY07 sales increased by 11.2% to Rs4.69bn driven by continued growth momentum in Pharmaceuticals and Life Science division (PLSC), which comprises high growth, segments like CRAMS, API's, drug discovery and formulations. Lower than expected sales were due to a 3.3% decline in the Industrial Products segment attributed to one-time merchandise sales of alcohol in Q3 FY06. Normalized growth stands at 18.6% for the quarter. Operating profit margins expanded by 383bps to 19.1% on account of strong volume growth in PLSC, favorable raw material cost scenario and savings on S,G&A front. Robust margin expansion and contribution of other income has led to 74% bottom line growth to Rs637mn, translating into an annualized EPS of Rs14.1 on a fully diluted basis.

Jubilant is well placed to deliver revenue CAGR of 22.9% to Rs22.75bn over FY06-08. PLSC division estimated to account for 57% of sales in FY08 has all its growth drivers in place while the non-pharma divisions will continue to generate cash flows for investment in PLSC. We estimate operating margins to expand by 520bps to 19.6% over the next two years driven by higher contribution from PLSC division and a favorable material cost scenario. Consequently earnings are likely to witness CAGR of 50% to Rs2.9bn over FY06-08. At Rs259, the stock is trading at 19.9x FY07E EPS of Rs13.0 and 16.2x FY08E EPS of Rs16 on a fully diluted basis. While the growth drivers are in place, we believe the market has factored in all the positives from the stock. Our target price of Rs275 at 17x FY08 earnings leaves an upside potential of 6.2% from current levels. We recommend a HOLD on the stock.

Jubilant has decided to venture into the healthcare space and has earmarked Rs800mn over a period of two years for this project. The management has indicated that they would be sharing further details about this venture over the next 2-3 months. We shall revisit our estimates post this announcement.

Reliance Industries Ltd. (Q3 FY07)
Rating: BUY

Reliance Industries Ltd (RIL) reported Q3 FY07 PAT of Rs28bn, which was significantly higher than our estimates of Rs23.3bn. The earnings surprise is primarily on account of a stellar performance posted by the refining segment of the business. RIL earned a GRM US$11.7/bbl as against US$9.1/bbl in Q3 FY06. However, the petrochemical business witnessed some slump in EBIT margins due to higher depreciation and rising feedstock prices for the polyester business. Production from the Panna-Mukta-Tapti fields have increased and there is a greater clarity on the KG-D 6 production status, as the field is all set to commence commercial production from second half of FY09. Reliance Retail business kicked off in the quarter and currently operates 24 retail outlets in Hyderabad and Jaipur. We believe that in the years to come, contribution from the high margin E&P business to revenue and profitability will increase substantially, thus reducing dependence on highly volatile and unstable business of Refining and petrochemicals. Our sum of parts valuation gives us a target price of Rs1,499 providing an upside of 8.5% from current levels.


Govt may not revise fuel prices this month

The Government would slash domestic retail prices of petrol and diesel only if crude oil prices stabilise under US$50 per barrel for at least a month, Petroleum Minister Murli Deora said. Deora said that prices of petroleum products may not be reviewed at the end of the month, as announced earlier, as the Petroleum Ministry was waiting for the Indian crude basket to stabilise below US$50 a barrel. "We want prices to stabilise below US$50 a barrel at least for a month," Deora told reporters Petroleum Secretary MS Srinivasan had said earlier that the Government would review fuel prices by the end of this month. Deora also said that he would meet Finance Minister P. Chidambaram on Tuesday to discuss budget proposals for the petroleum sector. He said that the Petroleum Ministry had sought a cut in excise duties on petroleum products to lower retail prices, but declined to divulge details. Meanwhile, crude futures in New York were set for a fifth weekly decline, after US stockpiles surged and the International Energy Agency (IEA) cut forecast for global demand because of warmer weather. Oil prices in New York fell under US$50 per barrel, but recovered to trade above the psychological level.

Refined profits for Reliance

Reliance Industries Ltd. stunned the market with a much better than expected performance for the October to December quarter, thanks largely to the sharply higher gross refining margins. The company posted a net profit of Rs27.99bn for the quarter ended December 31, 2006 as against Rs17.76bn for the year-ago quarter. The turnover was up 40% at Rs277.71bn versus Rs198.99bn in the quarter ended December 31, 2005. PBDIT for the quarter stood at Rs47.51bn compared to Rs31.56bn in the corresponding quarter a year earlier. Earnings Per Share (EPS) for the fiscal third quarter were Rs20.1 versus Rs12.7 in the same quarter of the previous financial year. The operating profit margin climbed 170 basis points to 17.7%. Crude throughput was up 18%. However, the base was lower in Q3 FY06 as the refinery was shut for about a month in October and November 2005. Shares of the company climbed on the news and quite a few brokerages raised their price targets on the stock, citing the much improved show from the private sector giant. But, all is not hunky dory for Reliance Industries as the petrochemicals business remains under pressure. While revenues in this segment rose by 48% margins fell sharply from 14.5% to 12.9%.

Tata Steel shares slip on higher bid news

Shares of Tata Steel Ltd. fell by more than 2% on Friday after a financial daily reported that its Board was likely to authorize Chairman Ratan Tata and MD B. Muthuraman to offer as much as 600 pence per share for Corus Group Plc. According to the business newspaper, the Board of India's largest private sector was to meet soon to "enable the management to take the bid up to 600 pence per share." The financial daily reported that Tata Steel was likely to first increase its offer to 530 pence per share and study CSN's response before deciding its future course of action. But a Tata Steel spokesman denied the news. The stock closed down 1.7% at Rs467.6 after being as low as Rs463.25 and as high as Rs479.40. Tata Steel shares are down about 8.5% since Oct. 20, when Corus approved the mumbai-based company's initial offer of 455 pence a share. On Dec. 11, Tata Steel increased its initial bid for Corus by 10% to 500 pence per share. However, Brazil's CSN offered to buy the Anglo-Dutch steel major for 4.9bn, or 515 pence a share in cash. Britain's takeover watchdog has set a January 30 as the deadline for Tata Steel and CSN to make a revised offers for Corus.

India, ASEAN FTA to be signed by July

The much-delayed Free Trade Agreement (FTA) with ASEAN could see the light of day sooner rather than later. The two sides agreed on the broad contours of the agreement, which is expected to be signed by July, Commerce Minister Kamal Nath announced on Jan. 14. Speaking to the media after the conclusion of talks with ASEAN leaders at the tropical Philippines resort of Cebu, Nath said that the two sides had agreed to have a list of products that would not be subject to any tariff cuts till 2022. The negative list will not exceed 5% of India's total trade with ASEAN countries. Likewise, ASEAN will have a negative list which will not cross 5% of its trade with India. On all the other goods that would make up 95% of the trade, there would be either elimination or reduction of duties.
India is expected to bring into this list some 490 items that include rubber and coconut. In addition, India has offered to cut tariffs on about 700 manufactured items to 0-5% over the next 10 to 15 years.

AI-Indian merger by March end

The proposed merger of the Government-owned Air India with Indian (erstwhile Indian Airlines) will be completed by March 31, as part of the Government strategy to counter the dominance by private carriers. Civil Aviation Minister Praful Patel said that there would be no loss of jobs or salary cuts after the merger. "The two airlines would gain Rs5bn annually after the merger," Patel said, adding that the cost of the merger would be about Rs1.5bn to Rs2bn. Meanwhile, the empowered Group of Ministers (eGOM) has asked the Civil Aviation Ministry to hold talks with employees of the two state-run carriers before finalising the merger.

No agreement on pipeline yet: Cairn India

Shares of Cairn India rose more than 8% in the week amid reports that ONGC had agreed to partner it in building the pipeline for evacuating the crude from the Rajasthan fields. Reports said that the cost of the pipeline will be shared in 70:30 ratio by Cairn India and ONGC. Reports said that MRPL will no longer be the designated company to buy the crude from Cairn India. Instead, oil will be sold to Reliance Industries Ltd. (RIL) and Essar Oil in Gujarat. The news sent Cairn India's stock higher. The stock ended the week at Rs146.55 as against Rs134.90 on Jan. 12. But, the Indian subsidiary of the UK-based Cairn Energy Plc said it was yet to reach an agreement with ONGC on the construction of the pipeline. Meanwhile, the controversial IPO of Cairn India got into further trouble. Media reports said that market regulator SEBI had sought details of institutional bids and allotments from merchant bankers in the recently concluded public issue.

PFC to mop up nearly Rs10bn from IPO

Power Finance Corporation Ltd. (PFC) plans to raise close to Rs10bn through its proposed Initial Public Offering (IPO). The public sector company, which provides funds to the power sector, plans to issue 117,316,700 equity shares of Rs10 each to the public through a 100% book building process. It will reserve 2,500,000 shares for the employees of the company. PFC fixed a price band of Rs73-85. At the lower end, the company would raise Rs8.56bn, while at the upper end it could mop up over Rs9.97bn. The issue would open on January 31 and would close on February 6. The company would utilise the funds to boost capital for meeting future requirements arising out of the growth of the power sector. Meanwhile, the Government is considering a proposal to disinvest % stake each in three other public sector power sector companies - Power Grid Corporation of India (PGCIL), National Hydroelectric Power Corporation (NHPC) and Rural Electrification Corporation (REC) via the public issue route.

Govt to table bill for raising FDI in insurance

The Government said it would bring legislation in the winter session of parliament starting next month to increase Foreign Direct Investment (FDI) in the insurance sector to 49% from 26% at present. This was told by Finance Minister P. Chidambaram during his meeting with British Chancellor of Exchequer, Gordon Brown in New Delhi. "The Finance Minister, P. Chidambaram indicated that a bill will be introduced in parliament next month to increase FDI limit in insurance to 49% from 26%," Brown told a news conference. CPM General Secretary Prakash Karat said that the Left parties won't back the Centre's bid to increase the FDI in insurance. The issue of raising the FDI cap in the insurance sector has been hanging fire for quite some time owing to stiff opposition from Left parties, key allies in the Congress-led coalition Government. So, it would be interesting to see how the Government goes about convincing the communist leaders on this issue. The Left parties in the past have accused the Government, led by Prime Minister Dr. Manmohan Singh, of bowing to pressure from western nations such as the US and the UK on key economic policies. The remarks by Brown could lead to another showdown between the Government and its key partners.

Govt to up ECB limit to US$22bn

With India Inc. firing on all cylinders and given the tight liquidity in the domestic market, the Government is all set to increase the cap on External Commercial Borrowing (ECB) for the current fiscal year. The Centre is likely to hike the ECB limit, from the current US$18bn to US$22bn, owing to huge demand for overseas funds from Indian companies expanding rapidly to cash in on the economic boom. A notification to this effect is expected soon. The total amount raised through the ECB route till December 31, 2006 is US$14.3bn. Proposals for another US$6-7bn are awaiting clearance by a high-level committee. The move is expected to help companies like Reliance Communications Ltd., which proposes to raise US$4bn. Apart from Reliance Communications, India Infrastructure Finance Company Ltd., the Special Purpose Vehicle set up by the Government last year, is also expected to raise a sizable amount. IDFC has also started the process to raise money via ECBs.

NCAER ups FY07 GDP growth forecast

With the manufacturing and services sectors on a roll, the National Council for Applied Economic Research (NCAER) said it was revising upwards its FY07 economic growth forecast to 8.4%. NCAER raised its GDP growth forecast from 8.1%. This is the third upward revision in the GDP growth projection by the economic think tank. The Indian economy grew by 8.4% in the year 2005-06. It expanded at an annual pace of 9.1% in the first six months of FY07. NCAER expects the agriculture growth to moderate to 2.7% from 3.9% in 2005-06. Industrial output is estimated to grow at 9.1% this fiscal, up from 8.7% in 2005-06, while the services sector is expected to grow by 10.2%, marginally higher than a year before. NCAER expects inflation to be at the lower end of the 5-5.5% range set by the Reserve Bank of India (RBI).

Moody's warns on capacity constraints

Meanwhile, Moody's Investors Service said India was unlikely to sustain the high GDP growth of close to 9% for long due to capacity constraints. There are several signs of overheating in the economy such as high growth in credit and widening currency account deficit, in addition to concerns over fiscal deficit. Also, inflation is likely to be above RBI’s comfort zone of 5-5.5%. As a result, a further upgrade in India’s sovereign rating outlook is unlikely, Moody's said. India’s robust economic momentum seems to defy the constraints posed by the country’s inadequate infrastructure, and an inefficient government sector, said Kristin Lindow, Senior Credit Officer at Moody’s. And, such a rapid growth and structural impediments cannot coexist. Still, Moody's reaffirmed India's sovereign ratings outlook saying that the country's local currency rating suffers owing to the heavy borrowings by the Government and large budget deficits.

ONGC confirms gas finds in KG, Mahanadi basins

Its official now. Oil & Natural Gas Corp Ltd. (ONGC) has put an end to the protracted drought in discovering new hydrocarbon assets. The public sector oil & gas giant confirmed recent media reports that it had struck natural gas in Krishna Godavari basin and the Mahanadi basin off the country's east coast. "I can confirm a huge gas find in ultra deepwater in KG Basin and a commercial discovery in Mahanadi basin," Petroleum Minister Murli Deora said. The finds are commercially viable, and details would be announced at a suitable time, said ONGC Chairman RS Sharma. But he added that the KG Basin discovery was posing a few 'technological challenges' and that it was scouting for a strategic partner. "We are in talks with Petrobras of Brazil, ENI of Italy, Norsk Hydro of Norway, Malaysia's Petronas and BG of the UK for a strategic tie-up," Sharma said. He also said that the company was willing to offer the partner equity stake in the block KG-DWN-98/2. "Western firms don't just come for charity, we will offer them equity," Sharma said.

Saudi Aramco may buy 26% in Paradip refinery

In line with the growing trade ties between India and Saudi Arabia, oil major Saudi Aramco is likely to pick up a 26% stake in Indian Oil Corp. Ltd.'s (IOC) proposed Paradip grass-root refinery. The 15-MT refinery is expected to go on stream by 2012 at an investment of Rs250bn. According to IOC Chairman Sarthak Behuria the issue was discussed between Petroleum Minister Murli Deora and Ali Al-Niami, Saudi Arabia's Oil Minister. However, Behuria declined to divulge further details. The move is part of the Government's decision to offer Saudi Aramco a stake in three upcoming refineries at Bina, Bhatinda and Paradip. Saudi Aramco has also invited Indian state-run oil companies to invest in refineries in Saudi Arabia. While BPCL is building the Bina refinery in Madhya Pradesh, HPCL is putting up a refinery at Bhatinda in Punjab and IOC is setting up one at Paradip in Orissa.

RIL to build refinery in Yemen; ONGC may also join

After making its mark in India, Mukesh Ambani is slowly spreading its energy tentacles abroad. His group's flagship company, Reliance Industries Ltd. (RIL) will build a 50,000 barrels per day refinery in Yemen, Khalid Mahfoudh Dahah, Yemen's Oil Minister said. RIL will partner local company Hood Oil for this refinery. The capacity of the RIL refinery can be doubled later. Construction would begin this year and will take 36 months to complete. RIL already has picked up a stake in two onshore oil Blocks 34 and 37 in Yemen. Hood Oil is its partner in the two blocks. Yemen also invited ONGC to set up a US$1bn oil refinery on its Arabian coast. The refinery would have a capacity of 100,000 barrels per day (bpd). "We have proposed to them to partner in one of the two 100,000 barrels per day refineries being planned. They have said they will think of partnering in the refinery project when they get an oil block in Yemen," Dahah said.

UTI, Benchmark win SEBI approval for Gold ETFs

UTI Asset Management Co. and Benchmark Asset Management Company received the approval from capital market regulator SEBI to launch gold exchange-traded funds (Gold ETFs). The schemes would be open-ended and are proposed to be listed on the NSE. Both UTI and Benchmarks said that the unit of the gold shares would be one gram to attract the maximum retail participation. SEBI asked both UTI and Benchmark to file their offer documents to start attracting investments. Gold ETFs are products through which investors can trade in the precious metal via stock exchanges without physically owning it. This product, which tracks the price of gold in the spot market, will enable investors buy even smaller quantity of the metal, without concerns about quality and physical delivery. There are some 10 bullion ETFs in countries including the US, UK, Australia, Turkey, Singapore and South Africa. Other Indian AMCs which have filed offer documents with the SEBI for Gold ETFs include Kotak Mutual Fund.

Nissan Copper...SEBI clamps down on 40 entities

Market regulator SEBI asked the BSE and the NSE to withhold the profits of about 40 entities in a separate escrow account, while it probed the abnormal rise in price, volume and net deliverable quantity in Nissan Copper Ltd. on Dec. 29, the day it made its debut. At the same time, SEBI asked the exchanges to release the funds and securities payout of Dec. 29 and Jan. 2 immediately with the exception of the 40 entities/clients. Earlier, SEBI had asked exchanges to freeze the payout of shares and funds for all transactions in Nissan Copper on Dec. 29 and Jan. 2, except the trades done by retail investors who had subscribed to the issue. SEBI also barred brokers Matrix Equitrade, RSS Investments, Park Light Securities, Dimensional Securities, Religare Securities and H Nyalchand Financial Services from trading in the shares of Nissan Copper. Three FIIs - Venus Capital Management, ITF Mauritius and VACUF - are also under the SEBI scanner. The regulator also initiated action against merchant banker Keynote Corporate Services and registrar Bigshare Services to ascertain whether they have exercised due diligence in the allotment process.

Deals continue to pour

Tata Steel Ltd. said it was acquiring Rawmet Ferrous Industries Pvt. Ltd. at an enterprise value of Rs1.01bn, with Rs413.1mn going towards the equity of the Kolkata-based unlisted company. The company expects the transaction to be completed by the end of February. Rawmet has a ferro alloy plant at Anantapur near Cuttack, Orissa, with two 16.5 MVA electric arc furnaces that have the capacity to produce about 50,000 tons of high carbon ferro chrome annually. Pantaloon Retail India Ltd. said that its wholly-owned subsidiary Future Office Products, has acquired Officedge, an online B2B office products company providing contract delivery services to corporate customers on a pan India basis. Shares of Krebs Biochemicals & Industries Ltd. rose after Ranbaxy Laboratories Ltd. said it was planning to acquire a 14.9% stake in the Hyderabad-based company. Ranbaxy would buy the stake in Krebs Biochemical through a preferential allotment of 10.5 lakh shares at Rs85 per share. Morgan Stanley invested about Rs6.75bn (US$150mn) in Mumbai-based Oberoi Constructions. The quantum of stake sale was not disclosed. According to reports, Oberoi Constructions is valued at US$1bn by Kotak Mahindra Investment Bank, which has brokered the deal.

M&M, Honda unveil plans for new plants

Mahindra & Mahindra Ltd. (M&M) said it would set up a new plant at Chakan near Pune to manufacture commercial vehicles under the Joint Venture (JV) with US-based International Truck and Engine Corp. An agreement to this effect was signed by the company with the Maharashtra Government. M&M plans to spend Rs25bn on the proposed plant, which would have an initial capacity of 250,000 units per annum, said Pawan Goenka, President (Automotive Sector). He said that production would begin in two years. M&M has a 51% stake in the joint venture with Navistar International. Honda to build second car plant in Rajasthan Honda Siel Cars India (HSCI) selected Rajasthan for setting up its second car plant in India. The second plant will manufacture HSCI's small car in the Indian market and will have an initial capacity of 50,000 units per annum. The new plant will also have a Suppliers' Park, which will house Honda's network of ancillary units.

TCS, ABG Shipyard, Areva T&D bag big orders

Tata Consultancy Services Ltd. (TCS) announced that it had signed an agreement with Banco Pichincha, Ecuador's largest private bank, to provide a comprehensive outsourcing solution valued at over US$140mn over the next five years. Banco Pichincha, a renowned regional leader in adopting innovation and new technology, has over 1.5mn clients, a loan portfolio of over US$1.5bn and over 232 branches spanning Ecuador, Peru, Colombia, Panama, Spain and the US. ABG Shipyard Ltd. said it had bagged an order worth Rs10.31bn (US$229mn) from Pacific First Shipping Pte. Ltd., Singapore. The order is for the construction of 9 Anchor Handling Tug Supply (AHTS) vessels and 3 Dry Bulk carriers. The last delivery will take place in December 2009. With this, the company has started accepting orders for its upcoming Dahej Shipyard where it can make vessels up to 120,000 DWT. Also, the company's order book position as on date stands at about Rs34.76bn. Areva T&D India Ltd. announced on Thursday that it had won fresh orders worth Rs25.2bn from Reliance Petroleum Ltd. (RPL), National Aluminium Company Ltd. (NALCO) and General Electricity Company of Libya (GECOL).

Oil falls under US$50; will touch US$100 says Jim Rogers

Crude oil futures in New York were set for a fifth weekly decline, after US stockpiles surged and the International Energy Agency (IEA) cut forecast for global demand because of warmer weather. Light, sweet crude for February delivery was quoting at US$50.57 per barrel in after-hours electronic trading on the New York Mercantile Exchange (NYMEX) at 12:56 p.m. in London. On Jan. 18, it closed down US $1.76, or 3.4%, at US $50.48, after touching US $49.90, the lowest intraday price since May 25, 2005. The five-week losing streak would be the longest since a six-week drop ending Dec. 11, 1998. The February oil contract expires on Jan. 22. The more actively traded March contract was US $52.03 a barrel. Brent crude oil for March settlement rose 41 cents to US $52.16 a barrel on the ICE Futures exchange in London. Meanwhile, Jim Rogers said that crude will resume its upward march towards US $100 per barrel after a correction. "I'm just not smart enough to know how far down it will go and how long it will stay, but I do know that within the context of the bull market, oil will go over US$100," Rogers, who predicted the start of the commodities rally in 1999, told Bloomberg in an interview. "It will go over US $150. Whether that is in 2009 or 2013, I don't have a clue, but I know it's going to happen."

Asian countries agree on trading bloc

Move over US and EU. Here comes Asia. With the two major western powers refusing to resolve differences with developing nations, Asia decided to form a large trading zone to rival the US and EU. The trend of forming regional trade agreements picked up momentum, with Asia's key economies saying they would start planning a free trade zone stretching from India to New Zealand, after China gave up its resistance against such a move. Leaders of 16 nations endorsed the plan for a trade zone including India, Australia and New Zealand at a meeting in Cebu, in the Philippines. Japan, the region's largest economy, will fund a study into the proposal. The 16 countries that would be included in the free trade area are Japan, China, India, South Korea, Australia, Indonesia, Thailand, New Zealand, Malaysia, Singapore, the Philippines, Vietnam, Brunei, Laos, Cambodia and Myanmar. The free trade area would include countries with economic output of US$9 trillion and a combined population of three billion - almost half the world's people. However, experts cautioned that it will take years for the plan to become a reality and that Asian leaders should try to revive the WTO talks. Setting up so many regional agreements could lead to chaos and the move will undermine the multilateral system. Meanwhile, China signed a free trade agreement covering 60 services industries with 10 Southeast Asian nations. The pact, which covers everything from transport to energy services, will come into effect on July 1.

BOJ keeps rates unchanged

The Bank of Japan (BOJ) left the benchmark interest rate unchanged for a sixth month running as it collects more evidence of strength in the world's second-largest economy. Policy makers kept the overnight lending rate unchanged at 0.25% in a six-to-three vote, the Japanese central bank said in a statement today in Tokyo. Economic growth and inflation were slower than the forecasts made in the semi-annual assessment made in October, the BOJ said. The central bank wants more time to study consumer spending and other economic data like consumer price inflation before moving to lift borrowing rates at its meeting in February. The Government will publish fourth-quarter GDP data in the middle of next month, a week before the BOJ meeting on Feb. 20-21. Investors increased their bets that the BOJ will lift rates in February to a 69% chance, up from 42% before the decision, according to Credit Suisse. The Swiss investment bank calculates the chances of a quarter-point rate increase based on trading in contracts for the exchange of interest payments.

GE unveils 2 big-ticket deals

General Electric Co. (GE), the world's largest aircraft engine maker, agreed to buy the aerospace business of Smiths Group Plc, Britain's third-largest aerospace company, for US$4.8bn in cash. Smiths will return US$2.1bn to shareholders. GE and Smiths also announced plans for a joint venture called Smiths GE Detection. Smiths Aerospace has more than 11,000 employees and posted revenue of US$2.4bn in 2006. GE also said it will buy two of Abbott Laboratories Inc.'s diagnostics business units for US$8.13bn in cash. GE said it would buy Abbott's primary in-vitro diagnostics businesses and its Point-of-Care diagnostics business. Abbott's molecular diagnostics and diabetes-care businesses are not part of the transaction. GE said that fourth-quarter profit rose, boosted by growth across all its units except GE Industrial. The industrial unit's results were hurt by weak performance in the plastics business, which may be put up for sale, the company said. GE also said it overstated its earnings dating back to 2001 by a total of US $343 mn, as a result of its accounting for interest rate swaps.

Airbus bagged less orders than Boeing in 2006

Airbus won orders for 824 airliners last year, well short of both Boeing's 1,050 tally and its own industry record of 1,111 in 2005. But, Airbus delivered 434 planes compared to its US-based rival's 398. Despite the production crisis that is hurting the double-decker A380, year 2006 was the best year ever in terms of deliveries and the second best year in terms of sales, said EADS co-CEO Louis Gallois, who also heads Airbus. Meanwhile, EADS said the two-year delay to the Airbus A380 was proving costlier than expected, sending shares lower. EADS said an unspecified fourth-quarter accounting charge tipped Airbus into an operating loss for 2006 that will "roughly balance" earnings before interest and tax from other divisions. Full-year results will be released March 9.

Special Story

Freest economies...HK, Singapore top again

Hong Kong, Singapore and Australia topped the list of the world's freest economies. The three are ranked No.1, No.2 and No.3, respectively in the Index of Economic Freedom survey for the year 2007 conducted by the Wall Street Journal and the Heritage Foundation.

However, China and India, two of the world's fastest growing economies, have been ranked way down at 104 and 119, respectively.

Hong Kong and Singapore finished 1st and 2nd in the rankings for the 13th straight year with a score of 89.3% and 85.7%. Australia jumped from 9th to 3rd, giving Asia a sweep of the top three spots and, with New Zealand at No. 5, four of the top 10.

The US came at No.4. Europe had four countries in the Top 10, including the UK, Ireland, Luxembourg and Switzerland. Rounding off the Top 10 is Canada. For the first time 'Americas' has been listed as a separate region.

North Korea remains the world’s least-free economy with just 3 points.

The move toward greater economic freedom worldwide stalled over the last year, according to the 13th annual Index of Economic Freedom. The 157 nations rated in the new Index received an average economic freedom score of 60.6 on a scale of 1-100. That’s down slightly (0.3%) from the previous year’s average, but still rates as the second highest level of freedom in Index history.


Market may remain choppy

...If you never try then you'll never know
How long do I have to climb
Up on the side of this mountain of mine

The bulls seem to be unstoppable. Records are being broken, mountains are being conquered. The corporate numbers, which have been extremely good have helped the Sensex to remain comfortably atop the 14k mark. With many key results out of the way, investors must be wondering where do we go from here? How long will the indices climb?

Well, for the near term, consolidation will continue for a while. The market may remain choppy and stock specific at the moment, investors should remain alert at all times for any unforeseen event(s). Inflation concerns have started to have its bearing as well. RBI's monetary meeting later this month will also remain on the minds of investors. A lot will depend on expectations from the budget. But all said and done, the markets have the habit of charting its own course and will throw its share of surprises. It no longer relies pre-set triggers for movement.

Colgate, Dr Reddy's, India Cements, J&K Bank, Kotak Mahindra Bank, Maruti, Polaris, Yes Bank, Adlabs, BEML, ZEE, Cipla, Glenmark, Bombay Dyeing, BHEL, Century Textile and M&M are among the major companies, which will announce its quarterly numbers


Earnings power Dalal Street

Impressive earnings reports continued to drive the markets forward. IT heavyweights kicked off the earnings season with a bang and other index majors followed suit. Apart from Wipro and Reliance, Siemens, Reliance Energy, Ranbaxy and Tech Mahindra all registered strong growth aiding the key indices to post their fourth straight weekly gains. Quite a few mid-cap companies, particularly in the cement pack, came out with good results.

However, a slight disappointment from Satyam brought the markets lower on Friday. Capital Goods, select FMCG, Small Cap, Oil & Gas and Banking stocks were in momentum.

The BSE 30-share Sensex added 126 points or 0.9% during the week to close at 14,183 while the NSE Nifty closed at 4090, down 38 points. L&T, Reliance, Bharti Airtel and ACC were the major gainers.

Oil & Gas stocks continued to be in the limelight, as crude oil prices fell under US$50 per barrel before rising above that level. Oil futures in New York fell as low as $49.90, the lowest intraday price since May 25, 2005. As a result, HPCL, BPCL and IOC advanced. HPCL surged by nearly 6% to Rs321.

There were also reports that Lakshmi Niwas Mittal may take stake in the company's proposed refinery project in Bhatinda. Reports also said that HPCL could offer a stake to Total SA of France in its Vizag refinery. IOC was also in the news. Reports said that it was interested in refinery projects in Nigeria. Also, Saudi Aramco might pick up a stake in its Paradip refinery. .

Cement stocks rose amid speculation that prices may rise further. Also, mid-cap firms like JK Lakshmi Cement and Shree Cement announced strong results. Prism Cement surged by over 20% to close at Rs43, Gujarat Ambuja added 5% to Rs149 and India Cements was up by over 4% to Rs248. ACC, Kesoram and Grasim were among the other major gainers.

Value buying was also seen in mid-cap stocks. With frontline stocks appearing overvalued, investors are slowly shifting their attention to mid-cap stocks. 3i Infotech rallied by over 23% to Rs296 amid reports that ICICI will sell its stake as part of RBI regulation. The company also declared good set of numbers. ABG Shipyard advanced by over 16% to Rs360 after the company received a big order from Pacific First Shipping of Singapore.

Banking stocks extended last week's rally on optimism that a rule change allowing the RBI to lower the limit on SLR holdings will free up more cash to meet demand for loans from companies and individuals. ICICI Bank gained 2% to Rs986 and Kotak Bank was up by over 6% to Rs446.

FMCG stocks recorded smart gains ahead of their results. HLL advanced by over 1% to Rs220. The company, which recently raised prices of its products, has outperformed the Sensex this week. ITC climbed nearly 3% to Rs175 and Dabur added over 10% to close at Rs168.

Reliance beat the street by a long way by posting a whopping 58% rise in profit on strong refining margins and a low base owing to the shutdown in the year-ago period. Net income rose to Rs27.99bn from Rs17.76bn a year ago. The scrip was also certainly in thick of action itself by recording gains of nearly 3% to close at Rs1380.


Rate hike looms as inflation tops 6%

Even as the Government drags its feet on the issue of cutting fuel prices, India's inflation, based on the Wholesale Price Index (WPI), surged past the 6% mark during the week ended January 6. The barometer of prices at the wholesale level stood at 6.12% versus 5.58% in the previous week due to costlier food and energy products, the Government said. It was the highest inflation rate since Dec. 25, 2004. Inflation was 3.86% during the comparable week of the previous year. The figure, which was just above the forecast of 6.1%, sent the rupee higher against the dollar and pushed the 10-year government bond yield up.

The WPI rose by 0.05% to 208.2. The index for Primary Articles (weight: 22.02%) rose by 0.3% to 213.1. The index for Fuel, Power, Light & Lubricants (weight: 14.23%) was up 0.1% at 322.3. The index for Manufactured Products (weight: 63.75%) declined by 0.1% to 181.1. The index for Food Articles group rose by 0.2%. The index for Non-Food Articles group rose by 0.6%. The index for Textiles group rose by 0.6%. The index for Paper & Paper Products group rose by 0.6%. The index for Food Products group declined by 0.5%. The index for Chemicals & Chemical Products group fell by 0.3%.

The Government also revised the inflation rate for the week ended Nov. 11 to 5.39% from the previous estimate of 5.29%. The final WPI for the same period stood at 209.1 as against 208.9. Analysts said the sharp jump in inflation could prompt the Reserve Bank of India (RBI) to boost its key short-term rates when the central bank reviews its monetary policy on January 31. Some analysts expect the RBI to hike both repo and reverse repo rates by 25 basis points.

IT results remain robust

The result season got off to a sedate start last week with Infosys reporting numbers that pretty much matched consensus estimates. There were no big fireworks from the IT bellwether this time around. But, TCS, Wipro and HCL Tech more than made up for the subdued results from Infosys. All three companies came out with much better than expected earnings and revenues. The new kid on the block, Tech Mahindra too joined the party, but Satyam missed the revelry, sending its shares down along with the market on Friday. TCS became the first software firm to clock US$1bn in revenues in a quarter, and in the process crossed US$3bn in topline for the first nine months of FY07. The company also reported a large US$140mn deal from a bank in Ecuador.

The main focus this quarter was the appreciation in the rupee versus the dollar. Most companies managed the currency fluctuations well, barring Satyam. In fact, all the top tier companies not only managed to limit the damage from a rising rupee, but also registered an increase in operating profit margins. Even Satyam, which suffered the most from the rupee appreciation, improved its OPM by over 200 basis points. Better management of expenditure coupled with increased employee productivity and higher billing rates helped offset the adverse impact on the forex side. The performance of Wipro was quite commendable as it undertook wage hikes for its offshore staff in the quarter. Satyam also effected salary hikes. Attrition continues to remain a sticky issue, though Wipro managed to bring it down over the previous quarter and TCS maintained it at just above 10%.

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Weak heavyweights drag down the market

After adding 53 points in early trades, the Sensex eased and slipped further in the afternoon on the back of weak Asian indices. Profit booking in the heavyweights Satyam Computers, Ranbaxy and Wipro triggered a major slump and the Sensex slipped to the day's low of 14068. Select buying towards the close saw the Sensex pare some losses and end the session at 14183, down 35 points. The Nifty shed 19 points and closed at 4090.

The market breadth was weak. Of the 2,671 stocks traded on the BSE, 1,619 stocks declined, 1,008 stocks advanced and 44 stocks ended unchanged. Among the sectoral indices the BSE IT index shed 1.82% at 5310 while the BSE Auto index declined 1.29% at 5620. However, the BSE FMCG index and the BSE Bankex were up 0.81% and 0.28% respectively.

Select heavyweights declined sharply on strong selling pressure. Satyam Computers tanked 5.30% at Rs488, Ranbaxy dropped 3.66% at Rs414, Wipro fell 3.07% at Rs621, Reliance Energy shed 2.58% at Rs515, Cipla declined 2.23% at Rs253, Bajaj Auto dipped 1.94% at Rs2,730 and Tata Steel slumped 1.67% at Rs468. BHEL, TCS, L&T and NTPC shed over 1% each. Among the select gainers Reliance Communication advanced 2.34% at Rs447, Gujarat Ambuja Cements added 2.17% at Rs148, ITC gained 2.04% at Rs175 and ICICI Bank was up 1.41% at Rs986.

Select information technology and pharma stocks witnessed considerable selling pressure. Tech Mahindra slumped 6.82% at Rs1,771 and Financial Technologies declined 3.50% at Rs1,801. Among the pharma stocks Nicholas Piramal lost 2.33% at Rs266, Lupin fell 2.17% at Rs562 and Orchid Chemicals was down 1.96% at Rs208.

However, select FMCG stocks attracted buying support. Nestle gained 3.52% at Rs1,123, Proctor & Gamble moved up by 2.33% at Rs912 and ITC added 2.04% at Rs175.

Over 41.47 lakh MTNL shares changed hands on the BSE followed by Satyam Computers (26.92 lakh shares), IDBI (25.04 lakh shares), Dena Bank (22.37 lakh shares) and Ashok Leyland (21.63 lakh shares).

Value-wise Reliance Industries registered a turnover of Rs176 crore on the BSE followed by Satyam Computers (Rs131 crore), MTNL (Rs68.64 crore) and Reliance Communication (Rs65.25 crore).

Auto, IT and metal stocks punctured

The market settled in the red as profit-booking dominated proceedings in an extremely volatile day of trades. Brisk selling in autos, IT and metal stocks weighed heavily on the benchmark index.

The 30-shares BSE Sensex lost 35.04 points, ending at 14,182.71.

The BSE benchmark index had opened with a spurt, at 14,271.24, and surged to a high of 14,300.11, buoyed by stronger-than-expected results of index heavyweight Reliance Industries (RIL) and a fall in global crude oil prices. However, selling began soon enough and continued till the benchmark index slipped to 14,067.52.

The S&P CNX Nifty lost 18.55 points, to finish at 4,090.50.

After remaining strong in the past couple of sessions, the market-breadth also succumbed to profit-booking. For 1,642 shares declining, 1,030 advanced and 41 remained unchanged on BSE.

The total turnover on BSE amounted to Rs 4126 crore.

Among the 30-Sensex pack, 19 declined while the rest advanced.

Reliance Communications was the top gainer, up 3.11% to Rs 449.90, on a volume of 14.79 lakh shares. The stock recovered sharply from a low of Rs 431, also attaining a high of Rs 450.

Gujarat Ambuja Cements advanced 2.24% to Rs 148.50, anticipating strong results from the company.

Cigarette maker ITC gained 1.77% to Rs 175, on a volume of 11 lakh shares.

Index heavyweight Reliance Industries rose 0.88% to Rs 1379, on a volume of 12.75 lakh shares. It had also surged to an all-time high of Rs 1409, in early trade. RIL reported 57.6% surge in net profit in December 2006 quarter to Rs 2799 crore from Rs 1776 crore, much ahead of market expectations, after trading hours on Thursday. Net sales rose 45.7%, from Rs 18168 crore to Rs 26472 crore.

RIL’s gross refining margin stands at $11.7 a barrel, much higher than Singapore refining margins during the quarter. However, margins in the petrochemicals business declined during the quarter. "Robust economic growth along with a stable operating environment promises a positive outlook for all our businesses," the company said in a statement.

During the quarter, RIL doubled the estimated natural gas output from its field in the Krishna-Godavari basin to 80 million cubic metres a day, when it starts production in the second half of the fiscal year to March 2009.

ICICI Bank advanced 1.46% to Rs 986. It recovered sharply from its low of Rs 955.40. There are reports that Sangli Bank's merger had hit a roadblock as minority shareholders move to CBL against promoters.

Satyam Computers was the top loser, down 5.75% to Rs 485.70, on 26.91 lakh shares. The stock plunged to a low of Rs 476, as results belied expectations. It had surged to a high of Rs 524.90 in opening trade. Satyam Computer Services reported 5.45% sequential growth in consolidated net profit in December 2006 quarter, to Rs 337.23 crore, compared to a net profit of Rs 319.81 crore in September 2006 quarter. Net profit was within estimates. Operating profit rose 13.1% on a sequential basis, from Rs 362.49 crore to Rs 409.99 crore. Operating profit beat market expectations.

Consolidated sales rose 3.7% on a sequential basis, from Rs 1601.88 crore to Rs 1661.12 crore. Consolidated net sales growth was below market expectations. Five brokerages had forecast 4.9 - 6.7% sequential growth, between Rs 1680 crore and Rs 1708.90 crore.

Ranbaxy (down 3.77% to Rs 414), ONGC (down 2.68% to Rs 892.25) and Wipro (down 3.23% to Rs 620.25) were the other chief losers.

Reliance Energy (REL) lost 2.89% to Rs 512.90. Its Q3 December total income rose Rs 1,820 crore (Rs 1,137 crore), while net profit advanced to Rs 201 crore (Rs 164 crore).

The BSE IT index was the biggest loser among the BSE sectoral indices, down 98.63 points (1.82%), to 5,309.84. Financial Technologies (down 3.65% to Rs 1798), Hexaware (down 2.44% to Rs 177.90), TCS (down 1.66% to Rs 1293), Infosys Technologies (down 0.93% to Rs 2199) and Mphasis BFL (down 0.26% to Rs 290) edged lower.

The BSE Auto index was down 73.23 points (1.29%), at 5,619.82. M&M (down 3.20% to Rs 936), Bajaj Auto (down 2.11% to Rs 2725), Maruti Udyog (down 0.78% to Rs 911), TVS Motor Company (down 0.75% to Rs 79.30), and Punjab Tractors (down 1.15% to Rs 240), had slipped.

The BSE Metal index lost 96.58 points (1.06%), at 8,972.95. Hind Zinc (down 3.03% to Rs 768), Welspun Guj Stahl Rohren (down 2.84% to Rs 109.35), Jindal Saw (down 2.04% to Rs 436.50), SAIL (down 2.28% to Rs 96.50), and Ispat Industries (down 3.27% to Rs 15.40) declined.

OCL India jumped 3.64% to Rs 185, after its board approved demerger of the sponge iron and real estate operations into separate companies. OCL India reported 339.10% spurt in Q3 December 2006 net profit to Rs 17.7 crore, compared to Rs 4 crore in Q3 December 2005. Net sales rose 33% to Rs 225 crore (Rs 173 crore).

Dena Bank lost 4.4% to Rs 38.70, after the state-run bank posted 15% fall in net profit for the December 2006 quarter. Dena Bank posted 15% drop in net profit to Rs 70.53 crore in December 2006 quarter from Rs 83.18 crore in December 2005 quarter. Dena Bank’s net interest income rose 3% to Rs 209.79 crore (Rs 203.58 crore). Other income rose 16.7% to Rs 166.32 crore (Rs 142.51 crore).

Tech Mahindra plunged 6.88% to Rs 1769.50. On a sequential basis, Tech Mahindra’s consolidated profit-after-tax (PAT) before write back of tax provision grew 17% to Rs 166.70 crore. Consolidated revenue rose 10% on a sequential basis to Rs 769.80 crore. The contribution of British Telecom (BT) rose to 65% (64% in September 2006 quarter) of total revenues during the quarter.

Premier Explosives jumped 5% to Rs 48.70, after the company secured a ten-year maintenance contract from ISRO. The contract worth Rs 7 crore per year requires maintenance of a propellant plant for the premier space organisation.

JK Lakshmi Cement surged 7.90% to Rs 181.65, on posting 386% surge in net profit for December 2006 quarter, to Rs 55.06 crore. Net sales jumped 50% to Rs 228.64 crore. For April-September 2006, net profit rose 269% to Rs 117.28 crore and net sales 44% to Rs 580.59 crore.

Hindustan Construction Company dropped 2.53% to Rs 154, after it reported a 2.9% fall in net profit in December 2006 quarter to Rs 21.99 crore from Rs 22.66 crore in December 2006 quarter. Total income rose 17.4% to Rs 536.31 crore (Rs 456.60 crore). The company said the balance work on hand (till 31 December 2006) was Rs 9604 crore, which also includes a share of Rs 1940 crore in an order secured by a joint venture.

BOC India dropped 4.81% to Rs 157.25, after it reported 65.8% fall in net profit in December 2006 quarter to Rs 3.77 crore (Rs 11.04 crore). Net sales declined to Rs 115.29 crore (Rs 163.31 crore). The company said performance in Q3 December 2006, was affected due to a shutdown of a plant at Jamshedpur for 20 days during the quarter due to technical reason. The company continues to monitor its condition and will opt for planned shutdowns to rectify the situation in the future.

PSU telecom major, MTNL, jumped 5% to Rs 169.85 after media reports that the public sector telecom firm is talking to builders for developing commercial properties on large tracts of land it owns in prime locations across Mumbai, Delhi and the National Capital Region (NCR). The stock rose on a heavy volume of 41.3 lakh shares.

Titan Industries gained 4.8% to Rs 935.95, following reports that it had set a turnover target of Rs 1,250 crore for the current fiscal on the back of robust sales of its jewellery brands "Tanishq" and "Gold Plus". Last year, both brands together accounted for a turnover of Rs 780 crore. The company today opened its fourth Gold Plus showroom in Tamil Nadu, the sixth in the country. Titan proposes to open 20 Gold Plus showrooms across the country with special focus on Andhra Pradesh, Maharashtra and Karnataka in the next financial year.

As regards Tanishq, four showrooms, including one in Bangalore, will be opened before March 2007. Titan's board will meet on 25 January 2007, to consider a restructuring plan for its associate companies. Titan announces December 2006 quarter results on the same day.

Shringar Cinemas jumped 8% to Rs 63.05, on posting turnaround results in December 2006 quarter. Shringar Cinemas posted a net profit of Rs 3.64 crore in December 2006 quarter compared to a net loss of Rs 1.99 crore in December 2005 quarter. Total revenue rose 101.3% to Rs 15.42 crore (Rs 7.66 crore).

The inflation rate rose to a two-year high at the start of 2007, raising speculation of an interest rate increase, when the central bank reviews monetary policy at the end of January.

The wholesale price index rose 6.12% in the 12 months to 6 January, higher than previous week's annual rise of 5.58% due to costlier food and energy. It was the highest inflation rate since 25 December 2004.

The Nikkei share average lost 0.35% on Friday, as chip gear makers such as Nikon Corp fell on concerns about earnings' outlooks and investors grabbed profits in drug shares including Eisai Co. The Bank of Japan (BoJ) left interest rates unchanged, helping shares of consumer loan firms such as Aiful Corp. Property stocks, often burdened by heavy borrowing, also rose.

The benchmark Nikkei average was down 60.49 points, to 17,310.44. On the other hand, Hong Kong’s Hang Seng index was up 50.21 points (0.25%) for the day, at 20,327.72.

FIIs resumed buying after their recent heavy sales, which had caused a steep market fall recently. FIIs were net buyers to the tune of Rs 91.20 crore on Wednesday (17 January 2007). They were net buyers in four out of five trading sessions, from 11 January to 17 January.

As per provisional data, FIIs were net buyers to the tune of Rs 155 crore on Thursday (18 January). FIIs were net buyers of Rs 678 crore in index-based futures on 18 January. They were net buyers to the tune of Rs 111 crore in individual stock futures that day.

US stock indices ended lower on Thursday, after a conservative forecast from Apple sparked worries about the health of the technology sector. The Dow Jones industrial average ended the day down 9.22 points, or 0.07%, at 12,567.93. The Standard & Poor's 500 Index fell 4.25 points, or 0.30%, to finish at 1,426.37, while the Nasdaq Composite Index dropped 36.21 points, or 1.46%, to close at 2,443.21.

US crude oil futures for February delivery touched $49.90 a barrel, the lowest since May 2005, and settled down $1.76 at $50.48 a barrel on the New York Mercantile Exchange. The price of NYMEX crude oil has tumbled 36% from a record peak of $78.40 struck last July.

Sharekhan Highnoon dated January 19, 2007

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Positive bias may continue

The decent earning numbers reported by Reliance, Ranbaxy, Tech Mahindra and strong fund inflows in the last few sessions likely to persist the bullish sentiment. However, weak US markets and Asian indices in morning trades may put pressure on the domestic indices. The Nifty could test higher levels between 4140 and 4200 and may dip around 4040, while the Sensex has a likely support at 14100 and may face resistance at 14325.

US indices ended weak on Thursday amid worries about the strength of technology earnings in the fourth quarter. While the Dow Jones dropped by 9 points to close at 12568, the Nasdaq ended 36 points lower at 2443.

Most of the Indian ADR closed in the red on the US bourses. Rediff fell sharply and tumbled over 6% , Wipro lost 3% and Infosys, Satyam and HDFC Bank declined over 2% each while VSNL and Dr Reddy's ended with marginal gains.

Crude oil prices sipped further. The Nymex light crude oil for February delivery slipped $1.76 to close at $50.48. In the commodity space, the Comex gold for February series declined $5.20 to settle at $628.10 a troy ounce.

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Weak Asian markets may cap upside

Stronger-than-expected Q3 results from Reliance Industries (RIL) and falling global crude oil prices will trigger a firm opening on the bourses. However, subdued Asian markets may cap gains for the day.

The corporate results announced so far are strong. Results from IT and cement sector have been robust. A number of firms are yet to unveil their results, which will dictate the near-term trend on the bourses. The major result scheduled today is that of Satyam Computer Services.

After trading hours on Thursday, RIL reported 57.6% surge in net profit in December 2006 quarter to Rs 2799 crore from Rs 1776 crore, much ahead of market expectations. Net sales rose 45.7% to Rs 26472 crore from Rs 18168 crore.

FIIs have resumed buying after their recent heavy sales, which had caused a steep market fall recently. FIIs were net buyers to the tune of Rs 91.20 crore on Wednesday (17 January 2007). FIIs were net buyers in four out of five trading sessions from 11 January to 17 January.

As per provisional data, FIIs were net buyers to the tune of Rs 155 crore on Thursday 18 January. They were net buyers of Rs 678 crore in index-based futures on 18 January. They were net buyers to the tune of Rs 111 crore in individual stock futures that day.

Asian markets were in the red on Friday. Key benchmark indices in Hong Kong, Japan, South Korea and Taiwan were down between 0.12 - 1.7%.

US stock indices ended lower on Thursday, after a conservative forecast from Apple sparked worries about the health of the technology sector. The Dow Jones industrial average ended the day down 9.22 points, or 0.07%, at 12,567.93. The Standard & Poor's 500 Index fell 4.25 points, or 0.30%, to finish at 1,426.37, while the Nasdaq Composite Index dropped 36.21 points, or 1.46%, to close at 2,443.21.

US crude oil futures for February delivery touched $49.90 a barrel, the lowest since May 2005, and settled down $1.76 at $50.48 a barrel on the New York Mercantile Exchange. The price of NYMEX crude oil has tumbled 36 percent from a record peak of $78.40 struck last July.

Intra-day Stock Ideas

NIFTY (4109) S 4893 RES 4141

BUY Dr Reddy Labs (816)
SL 810 T 828, 831

BUY Polaris (217)
SL 213 T 225, 227

BUY Bharti Airtel (673)
SL 666 T 683, 686

BUY Wipro (642)
SL 637 T 651, 654


Fear is better than greed for now

One of the weaknesses of our age is our apparent inability to distinguish our needs from our greed.

The greed in recent times may have given a backseat to fear. After the turn of IT heavyweights, Reliance Industries has got into action by posting an impressive 58% growth in its Q3 net profit. Apart from RIL, other Index Majors like Ranbaxy, REL, have also announced strong quarter growth, which would power the bulls forward. Notwithstanding Thursday's sudden and sharp fall and recovery from day's low, stay cautious as we expect a cool off. Among the prominent results to watch out for are Satyam, i-flex and Jet Airways.

Pyramid Saimira Theatre could see action as we hear the company may announce some alliance with a Korean firm next week. Market buzz is that Lakshmi Niwas Mittal may take some stake in a refinery project of HPCL.

The Nasdaq fell yesterday for a second straight session following Apple's poor earnings forecast. The Nasdaq was down 36.21 points at 2,443.21, down nearly 1.5%. The Dow Jones was down 9.22 points at 12,567.93.

Crude oil slipped 3.4% to $50.48 a barrel in New York yesterday. Futures earlier fell as low as $49.90, the lowest intraday price since May 25, 2005. February crude was trading at $50.34, down 14 cents from the New York close.

After the close, IBM reported quarterly sales and earnings that topped estimates. However, shares slumped in after-hours trading. Additionally, GE confirmed it will buy two diagnostic units from Abbott Labs for $8.13bn.

Treasury prices climbed, lowering the yield on the benchmark 10-year note to 4.74% from 4.78% late on Wednesday. In currency trading, the dollar hit a nearly four-year high versus the yen after the Bank of Japan opted to hold interest rates steady, but the greenback slipped against the euro. COMEX gold for February delivery fell $5.20 to settle at $628.10 an ounce.

Among the Indian ADRs, VSNL was up 1.9%, Infy was down 2.3%, Wipro shed 3%, Satyam dipped 2.25%, HDFC Bank slid 2.6%, ICICI Bank gave up 1.6% and MTNL slumped 1.8%.

Select Asian markets like Japan and Korea are down this morning. The Nikkei was down 92 points at 17,278 92 while the Kospi in Seoul dropped 23 points at 1359. The Hang Seng in Hong Kong and the Straits Times in Singapore were trading near the breakeven point.

European shares finished mixed. The pan-European Dow Jones Stoxx 600 index closed a fraction of a percentage point lower at 371.58. The CAC-40 lost 0.1% to 5,555.04 and the German DAX Xetra 30 declined 0.1% to 6,689.62. The UK-based FTSE 100 rose 0.1% at 6,210.30.

In the emerging markets, the Bovespa in Brazil was down 0.6% at 42,477 while the IPC index in Mexico dived 1.7% to 26,112 and the RTS index in Russia declined 0.2% to 1807.

Results Today:
BILT, Dabur, Dena Bank, Granules India, Marico, IDFC, PTC India, Sonata Software, Texmaco, Wyeth, Deccan Chronicle, GNFC, Hindustan Construction, ING Vysya Bank, Jain Irrigation, NIIT, Orchid Chem, Raymond, Shringar Cinema, Tata Teleservices (Maharashtra), Zensar Tech.

Insider Trades:
Eveready Industries India Limited: HDFC Mutual Fund has purchased from open market 1538237 equity shares of Eveready Industries India Limited on 8th January, 2007.

Market Volumes:
The turnover on NSE was up by 16% to Rs101.7bn. The Oil & Gas index was the major gainer and gained 1.62%. BSE PSU index (up 1.28%), BSE FMCG index (up 1.13%) and BSE Capital Good index (up 0.61%) were among the other major gainers. However, BSE Consumer Durable index lost 1.86%.

Volume Toppers:
IFCI, DCB, IDBI, SAIL, Nagarjuna Fertilizers, Ashok Leyland, Cairn India, ITC, IDFC, Aftek, Wire & Wireless, Welspun Gujarat, Dabur, Exide Industries, Satyam Computer and Reliance Industries.

Upper Circuit Filters:
Amara Raja, Texmaco, Zandu Pharma, Goldiam International, NIIT Technologies, DS Kulkarni, Ganesh Housing and Suven Life.

Delivery Delight:
Adlabs Films, Ahmednagar Forgings, ACC, Bank of India, BHEL, Bharti Airtel, BPCL, Entertainment Network India Ltd, Glenmark, HCL Technologies, HPCL, ING Vysya Bank, Jet Airways, Kesoram Industries, L&T, Patel Engineering, Prithvi, Reliance Industries Ltd, Satyam, SBI, Sun TV, Taneja Aerospace, TCS and VSNL.

Brokers Recommendations:
Jubilant Organosys - Buy from Citigroup with target of Rs368
NIIT Tech - Buy from Man Financial with target of Rs492

Long Term Investment:
Punj Lloyd

Major News Headlines:
Reliance Q3 profit at Rs27.99bn (up 57.6%), total income (net of excise) is up 44.5% at Rs265.14bn
REL Q1 net at Rs2.01bn (up 22%), revenue at Rs18.2bn (up 60%)
Bharti Airtel gets offer to provide phone services in Sri Lanka
Siemens India Q1 profit at Rs980.7mn (up 100%), sales at Rs16.27bn (up 91%)
ONGC makes major discovery in Mahanadi
Tech Mahindra Q3 profit at Rs1.67bn (up 122%), revenues at Rs7.7bn (up 131%)
Tech Mahindra agrees to buy iPolicy Networks
Kirloskar Bros Board declares interim dividend of Rs2
Subex Azure to buy Syndesis
Nicholas Piramal Q3 profit at Rs433mn (up 81%), sales at Rs4.08bn (up 14%)
Chambal Fertilizers Q3 profit at Rs701.3mn (down 9.9%), sales at Rs7.92bn (down 25%)
Pantaloon Retail forms JV with Staples
Dollex Industries to set up Rs200mn Ethanol plant
TCS says no plans to merge CMC with itself
Biocon licenses its cancer drug to Ferozsons for Pakistan sale
Sobha Developers wins Rs150mn contract from Gold Plus Glass Industry
OCL India approves demerger of Sponge Iron and Real Estate businesses
Elecon Engineering signs MoU with Gujarat Govt for investing Rs4bn

How Market Fared

Reliance may power bulls

Volatile markets ended higher with benchmark index rising 0.61% or 82 points and NSE Nifty gaining 0.80% or 32 points. Decision of the Japanese central bank of keeping the benchmark rates unchanged aided the bourses to register strong openings. However, Profit booking gripped the bourses in the later half of the session dragging the key indices off days high. But frontline stocks like RIL, ONGC, HDFC, Satyam Computer, ITC, HLL and BHEL kept the markets intact aiding the key indices to close with healthy gains. Finally, the BSE benchmark Sensex surged 86 points to close at 14217. NSE Nifty was up by 32 points at 4109.

Reliance Industries announced its Q3 result with net profit at Rs27.99bn (up 57%), beating our expectations. The scrip surged 1.3% to Rs1367 touching an intra-day high of Rs1384 and a low of Rs1349 and recorded volumes of over 35,00,000 shares on NSE.

Siemens edged lower 0.8% to Rs1214. The Company announced its Q1 result with net profit at Rs980.7mn (up 100%) and sales at Rs16.27bn (up 91%). The scrip touched an intra-day high of Rs1245 and a low of Rs1157 and recorded volumes of over 14,00,000 shares on NSE.

ONGC spurred over 2.5% to Rs918 after the company made a major discovery in Mahanadi. The scrip touched an intra-day high of Rs936 and a low of Rs896 and recorded volumes of over 16,00,000 shares on NSE.

Oil & Gas stocks were in limelight as crude oil hovered around the $52 per barrel still down. HPCL surged over 2.3% to Rs321, IOC spurred 3.7% to Rs493 and BPCL added 2.3% to Rs368. Oil exploration major’s also recorded smart gains RIL and ONGC were among the major gainers.

FMCG stocks also recorded smart gains. Heavy weight ITC, HLL, Dabur and Nirma were among the major gainers.

Frontline Technology stocks also were in action. Satyam Computer has surged 1.2% to Rs514, Wipro was up 1.2% to Rs641 and Infosys rose 0.9% to Rs2224. NIIT Ltd, Rolta and HCL Tech were the major gainers among the 50-scrip’s of Nifty.

Pharma stocks also ended with gains. Wockhardt Pharma surged by over 2.2% to Rs364, Glenmark was up 2.6% to Rs617 and Glaxo edged higher by 0.2% to Rs1156. However, Ranbaxy slipped 0.5% to Rs430 and Aurobindo Pharma lost 1.5% to Rs737.

Cement stocks were a mixed bag. ACC was up by 0.2% to Rs1095, Gujarat Ambuja advanced by 0.6% to Rs145. However, Mangalam Cement lost 1% to Rs247, Grasim was down by 0.3% to Rs2865, Madras Cements fell 1.7% to Rs3610. The Board of Directors of the company has announced that they would consider interim dividend on 30th January.

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