Friday, February 02, 2007
S&P lifts India to investment grade
After 15 years, Standard & Poor's raised India's sovereign debt rating to investment grade citing its record pace of growth. S&P increased the rating by one notch to BBB- from BB+. Moody's Investors Service raised its rating to investment grade in January 2004, followed by Fitch Ratings in August 2006. Investment grade ratings is likely to attract increased overseas investments into the country. The upgrade will also reduce borrowing costs for companies in India. However, the global credit ratings agency said that the ratings on India remain constrained by the weak fiscal profile, especially its high government debt burden and deficit. "Further rating improvements will depend on sustained prudent fiscal policy that leads to a decline in government debt and interest burden," it added.
Inflation above 6% again
India's inflation, based on the Wholesale Price Index (WPI), rose to 6.11% in the week ended January 20, as prices of fruits, vegetables, condiments and spices increased, the Government said on Friday. The WPI inflation stood at 5.95% in the previous week, the Ministry of Commerce and Industry said in New Delhi. The annual inflation rate had been estimated at 6.03% to 6.08%. Inflation was 4.24% during the corresponding week of the previous year.
December exports up 7.8% yoy
Merchandise exports during December 2006 stood at US$9.9bn compared to a revised US$9.19bn in December 2005. Imports during the month were US $15.58bn as against US$11.88bn in December 2005. The trade deficit increased to US$5.68bn from US$2.69bn in the corresponding month a year earlier. Crude oil imports stood at US $4.82bn in December 2006 compared with US$3.72bn in the same period last year, thus registering a growth of 29.58%. Non-oil imports were estimated at US $10.76bn during December 2006, which was 31.81% higher than the value of non-oil imports at US $8.17bn in December 2005.
Govt ups FY06 GDP forecast to 9%
The Government revised upwards its FY06 Gross Domestic Product (GDP) growth estimate to 9% from an earlier projection of 8.4%, owing to higher expansion in agriculture and manufacturing. Manufacturing output growth was revised to 9.1% for the year ended March 31, 2006 from 9% earlier, the Government said in a statement in New Delhi. Agriculture output was at 6% for FY06 compared to an earlier estimate of 3.9%. The Government will announce its growth forecast for the current financial year ending March 31 on February 7. The Indian economy grew by 7.5% in the year ended March 31, 2005.
Manufacturing growth slows
The strong growth in the manufacturing sector decelerated sharply last month as the Government's desperation to contain inflation hurt domestic as well as overseas demand, a private survey of purchasing managers reveals. The seasonally adjusted Purchasing Managers' Index (PMI) eased to 55.3 in January from 56.6 in December - its lowest since March 2006. A reading above 50.0 signals an improvement in business conditions while anything below 50.0 indicates a deterioration. The survey published on Feb. 1 was conducted before the Reserve Bank of India (RBI) hiked its benchmark short-term lending rate by 25 basis points to 7.50%, its highest in nearly four years, to reign in inflation. The PMI is compiled by UK-based NTC Research and sponsored by ABN AMRO Bank. The index, introduced in April 2005, hit its highest in October. It has declined steadily since.
Transfer of RBI stake in SBI to Govt approved
The Union Cabinet approved the proposal to transfer the Reserve Bank of India's (RBI) stake in State Bank of India (SBI) to the Government by the end of June. The exact value will be worked out while effecting the actual transfer. The Government may acquire the stake in a cashless transfer valuing each share at Rs 1,300, Finance Minister P. Chidambaram said after a Cabinet meeting. At that price, the 59.73% stake will be valued at Rs 404bn (US$9.15bn). The RBI currently holds 59.73% in the country's largest commercial bank but has proposed transferring the stake to avoid conflict of interest as both a bank owner and a regulator. "The RBI will be able to focus on its regulatory and supervisory functions, and it will also remove the conflict of interest in due discharge of its duties as the banking regulator and also having ownership in banks / financial institutions," the Government said. Separately, the Cabinet also approved the plan to transfer the RBI's shareholding in NABARD and NHB to the Government in June 2008 at book value.
Govt bans milk products till Sept-end
The Government banned exports of milk products until the end of September to boost domestic supplies and rein in prices, Finance Minister P. Chidambaram said. In recent times, the Government has announced a slew of measures to contain inflation, which touched a two-year high of 6.12% in the first week of January. The latest move appears to be in the same direction as prices of milk products have been rising due to supply constraints. "Surging exports of skimmed milk powder reduced availability of milk for domestic consumption, prompting the Government to ban overseas shipments," Chidambaram said. Milk procurement by Indian co-operative producers declined by 100,000 kilograms a day to 23 million kilograms from a year earlier, the Finance Minister said. Higher global milk powder prices, fueled by a lower production in drought-hit Australia and Europe, was expected to push up India's exports of the dairy products by 61% to 65,000 tons in the year ending in March, Chidambaram said.
DD, AIR to get ad-free live sports feed
The Union Cabinet passed an ordinance, making it mandatory for private broadcasters to share live ad-free feed of sporting events of "national importance" with public broadcaster, Prasar Bharti's Doordarshan and All India Radio (AIR). "This ordinance would provide access to the largest number of listeners and viewers, on a free to air basis, of sporting events of national importance whether held in India or abroad," the Government said in a statement. A bill will be introduced in the coming budget session of Parliament to replace the Sports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Ordinance, 2007 by an Act. The executive order comes amid a raging debate on Government's access to the live feed of the just-concluded one-day internationals between the West Indies
and India. Private broadcaster Nimbus Communications Ltd. last year paid US$613mn for winning the telecast rights for all cricket matches arranged by BCCI, the Indian cricket board, for four years.
Govt unveils recast package for HMT
The Cabinet Committee on Economic Affairs approved the revival of HMT Machine Tools Ltd. with a cash infusion of Rs7.23bn. This will enable the ailing public sector company to restructure its balance sheet and fund the Voluntary Retirement Scheme (VRS). Of the total amount being pumped in by the Government, Rs4.43bn will be in the form of preferential share capital, Rs1.8bn by fresh equity capital and Rs1bn through special non-plan loan for the VRS scheme. "With the restructuring of the company, its balance sheet including the debt equity ratio will improve," Finance Minister P Chidambaram said after the CCEA meeting, which cleared the restructuring package. However, Chidambaram said that the details of the proposed Joint Venture are yet to be worked out. He also added that the issue of negative net worth of the company would be addressed through repayment of long term loans, discharge of old liabilities and restructuring of balance sheet.
Carrefour close to signing India deal
French retail major Carrefour is close to signing a deal with an Indian company in the next two weeks, Commerce and Industry Minister Kamal Nath said. "Carrefour is looking at India very closely. They said they are very close to closing up a retail deal in the next two weeks, that's what they told me," Nath told reporters on the sidelines of a conference in London. Carrefour, the world's second-largest retailer, was in talks with the Wadia Group and its Britannia unit, Nath said, adding that the Government of India would explore liberalising FDI norms for the retail sector in the next two to three months. A financial daily reported earlier this week that Carrefour's worldwide Chairman and CEO, Jose Luis Duran is visiting India and is likely to meet potential partners after talks with the Dubai-based Landmark group fell through. Duran may hold talks with the Aditya Birla group for the French company's India foray.
Cairn India reports new oil find in Rajasthan
Cairn India Ltd. announced that it had found more oil in Rajasthan, this time in the Shakti North East, located six kilometres north-east of the Shakti-1 discovery. The well, known as Shakti-NE-1, encountered about six metres of net pay of oil. It flowed about 83 barrels of oil per day, Cairn India said. The company also said it plans to return cash to Cairn Energy Plc shareholders in the second quarter. The cash will come from the proceeds of the IPO of Cairn India, which raised around US$1.9bn. Cairn India did not say how much of the proceeds will be distributed to Cairn Energy shareholders. In addition, Cairn India said the resolution of the dispute with ONGC on the proposed pipeline project is expected in the first half of the year. Cairn India said it would announce its preliminary results for the year ended December 31, 2006 on March 27.
M&M buys German forging firm
Mahindra & Mahindra Ltd. (M&M), through its Mauritius-based subsidiary Mahindra Forgings Global Ltd. acquired a 90.47% stake in Schoneweiss & Co. GmbH., a leading company in the forgings sector in Germany. Schoneweiss is a family-owned German company with over 140 years of experience in the forging sector. It is one of the top five axle beam manufacturers in the world and specializes in suspension, power train and engine parts. The company has forging capacity of 50,000 tons per annum and turnover of Euro 90mn (for CY2005). Its top customers include DaimlerChrysler, MAN, Scania and Volkswagen. Schoneweiss has three manufacturing plants in Hagen and Gevelsberg, Germany with a total manpower of 550 people.
Alembic Ltd. announced the acquisition of the entire domestic non-oncology formulation business of Dabur Pharma Ltd. The consideration for the acquisition is Rs1.59bn plus the actual net working capital on the closing date. The acquisition would be on a going concern basis. Non-oncology formulation business of Dabur Pharma is mainly into high growth life style segments like Cardiovascular, Diabetic and Gastrointestinal, Gynaecology, etc. The transaction is likely to be completed in about two months. This business had net sales of Rs 620mn for nine months ended December 31, 2006 and is expected to post sales of Rs 800mn for the full year.
NTPC, Railways to form 74:26 JV
The Cabinet Committee on Economic Affairs gave its approval for the setting up of a Joint Venture called Bhartiya Rail Bijlee Co. Ltd. with seed capital of Rs100mn and authorized capital of Rs16.06bn. NTPC Ltd. will hold a 74% stake in Bhartiya Rail Bijlee, the remaining 26% stake will be owned by the Railways. NTPC will invest Rs11.88bn in the JV while the Railways will pump in Rs4.18bn towards equity. Tata Chemicals Ltd. said that it will form an equal joint venture with Ireland's Total Produce Plc. to distribute fresh fruits and vegetables in India. The joint venture will set up a distribution network and begin supplying Indian retailers and wholesalers. It will first set up centres in the north and east at a cost of Rs260mn, the two companies said.
MindTree, Idea IPOs announced
MindTree Consulting Limited said that it had set a price band of Rs365-425 per share for its forthcoming Initial Public Offering (IPO). The company is offering 5,593,300 equity shares, comprising a net issue of 4,940,740 equity shares. Up to 372,900 shares will be reserved for employees and up to 279,660 shares for business associates. The issue will constitute 15% and the net issue 13.25% of the post-issue capital of the company. The proceeds of the issue will be used to fund a new development centre in China and repay loans. The issue will open on February 9 and close on February 14. Idea Cellular Ltd., an Aditya Birla Group company, fixed the price band of Rs65 to Rs75 per share for its forthcoming Initial Public Offer (IPO) of equity shares. The issue opens for subscription on February 12 and closes on February 15. The issue, with the greenshoe option, aggregates to Rs24.44bn. The company has concluded a pre-IPO placement of Rs3.75bn, to certain of its promoters, directors and certain high net worth individuals.
FLAG Telecom to be listed globally
The Board of Directors of Reliance Communications approved the global listing of FLAG Telecom, the company's global undersea cable infrastructure company. Reliance Communications said that it has turned around FLAG Telecom over the past year and aligned it with the Indian franchise. FLAG Telecom recently announced its nearly Rs70bn (US$1.5bn) Next Generation Network project which on completion will make the company the largest fully IP-enabled global undersea cable system operator touching 80% of the world population. The potential global listing of FLAG Telecom would highlight the hidden value created in its business and provide further focus on the unique growth opportunities, Reliance Communications said in a statement. Meanwhile, Reliance Communications said that FLAG Telecom won major new contracts worth more than US$100mn (about Rs4.4bn) during Q3 FY2007.
HT Media launches business paper
HT Media Ltd. launched its business newspaper with content from the Wall Street Journal. The new daily, titled Mint, hit the stands in New Delhi and Mumbai a day after the Reserve Bank of India (RBI) announced its third quarter review of the annual monetary policy. The two metro cities account for the majority of India's annual advertising revenue. The newspaper will be published Monday through Saturday. Along with Indonesia, India is the fastest-expanding newspaper industry in Asia-Pacific and print media has about half the share of advertising spend in the US$854bn economy, according to the Indian Newspaper Society. Advertising may expand by as much as 15% in the next five years. Advertising expenses at 0.34% of India's GDP are about a third of the global average of 0.98%, according to the India Brand Equity Foundation.
Marico unveils major recast
Marico Ltd. on Friday announced a re-organisation aimed at extending its successful run of sustained profitable growth. The Marico Group will now comprise three Strategic Business Units (SBUs) - Consumer Products Business, Kaya Business and International Business. It will also have three functional units- Technology, Finance & IT and HR & Strategy. "We like to think ahead in terms of structures to manage growth. While we have always been growing with a double digit CAGR in both turnover and profits over the post six years - the past two years have seen an acceleration in growth. This re-organisation is aimed at giving each business a higher thrust and focus to enable growth and providing the right platform for Functional support for growth," said Harsh Mariwala, Chairman and Managing Director of Marico Group.
India's 1st Gold ETF opens on Feb 15
India’s first Gold Exchange Traded Fund (Gold ETF) will be open for subscription on February 15. Benchmark Mutual Fund is the first Asset Management Company (AMC) to launch India’s first open-ended gold fund called Gold BeES. The new fund offer (NFO) will close for subscription on February 23. After the closure, within 30 days the fund proposes to list on the National Stock Exchange (NSE). The scheme intends to provide returns that closely correspond to returns provided by domestic prices of gold by investing 90% in physical gold. The minimum subscription amount for the scheme is Rs10, 000 and in multiples of Rs 1,000 thereafter. Units will be allotted within 30 days from the date of NFO closure up to three decimal points. Each unit of Gold BeES will be approximately equal to the price of one gram of gold.
US economy grows faster than expected
The US economy grew at a surprisingly faster 3.5% annual rate in the fourth quarter of 2006 despite the sharp downturn in the housing market. Robust spending and slowing inflation more than offset the biggest decline in residential investment in 15 years. The Government's first report on the health of the world's largest economy in the October-December quarter was better than expected. Economists had forecast GDP expansion of 3%. The Q4 report is subject to two revisions in coming months. The US economy grew by 3.4% for the whole of 2006. That was an improvement from a 3.2% showing in 2005 and the strongest showing in two years. The GDP report also delivered good news on inflation. It said that the personal consumption expenditures (PCE) price index, closely watched by the Fed, declined at a 0.8% annual rate during the quarter, biggest decline since the third quarter of 1954, when it dropped 1.2%. The quarterly decline reflected a huge drop in energy prices, a Commerce Department official said, and was substantially lower than the 1.9% advance economists were expecting.
Fed leaves rates steady
As expected, the US Federal Reserve kept the benchmark interest rates unchanged while adding that the world's largest economy was doing well without pushing inflation higher. The central bank left its target for the federal funds rate, an overnight bank lending rate at 5.25%. It was the fifth straight time the Fed held rates steady after lifting the same for 17 straight times. Investors cheered the news, pushing key stock indices higher. Bond prices also rallied as investors bet that rates wouldn't head higher anytime soon. The Fed's decision came just a few hours after the government reported that GDP growth in the fourth quarter was higher than expected and that inflation pressures had eased. "Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market," the FOMC said in its closely watched statement, adding that the economy "seems likely to expand at a moderate pace over coming quarters." The Fed also said that "readings on core inflation have improved modestly in recent months," and that "inflation pressures seem likely to moderate over time." There is a growing sense on Wall Street that the Fed may leave the fed funds rate at 5.25% for the next few months, and possibly through the rest of 2007, sparking a broad based rally in the stock market.
Windows Vista launched for consumers
Microsoft launched its new operating system, Windows Vista for consumers having spent a whopping US$6bn and after a delay of some two years. Microsoft claims that it's latest operating system, the first since XP in 2001, has better security and new navigational designs. Bill Gates, the chairman of the software giant, promised PC users that "the wow starts now," but analysts said they would wait for Vista's sales figures before arriving at any conclusions about the product. But despite the high decibel marketing campaign, there were no queues at a Manhattan Best Buy store where Microsoft CEO Steve Ballmer kicked-off the high profile launch. And, since only about 15% of existing computers have memory and graphics cards powerful enough to run premium versions of Vista, most will have to buy a new computer if they want to upgrade. US research firm IDC says it does not expect a significant boost in PC shipments due to Vista. Apple called Vista a copycat version of its Mac OS X Tiger operating system, which introduced many of the new features. The iPod maker plans to introduce a new operating system of its own later this year. Nonetheless, research reports say Vista will be installed on more than 100 million PCs worldwide.
NYSE, Tokyo Stock Exchange form alliance
The New York Stock Exchange and the Tokyo Stock Exchange said they will form an alliance that could eventually lead to a merger of two of the world's largest financial markets. The broad agreement will allow both sides to cooperate on joint developments, such as financial products, mutual listings and technology. Further, it sets into motion the possibility of a true combination once Japan's biggest stock exchange becomes a public company in 2009. The development comes amid the ongoing consolidation between domestic and global exchanges. The process was kicked off by NYSE, which turned into the first trans-Atlantic market with its acquisition of Paris-based exchange operator Euronext NV. For Japan's biggest stock market, the pact should help boost market confidence, which has been dented by a series of technical mishaps in its trading operations. One obstacle both exchanges face is symmetry between the regulatory bodies that govern them. addition, companies based in Japan and in the U.S. have different regulatory standards to guarantee they are safe and liquid.
Michael Dell returns as CEO
Dell Inc. Chairman and founder Michael Dell reclaimed the CEO's position, ousting Kevin Rollins. The computer-maker is trying to reboot its business in response to sliding market share, a string of disappointing earnings and an ongoing federal accounting probe. Investors were heartened by the news. Dell's return at the helm of one of the world's largest computer manufacturers is effective immediately and comes after a nearly four-year hiatus. Dell said he was "excited to be CEO again and feel the same level of energy and drive I did when we launched the company back in 1984. I am as passionate as ever about delivering a superior value to our customers." Dell said he would focus his efforts on improving customer service. Dell's direct-sales model, which allows business and consumers to buy equipment directly from the company, turned it into a leading computer manufacturer and a darling of the Wall Street. But in recent years, the company has been stung by a glut of low-cost, low-profit PCs and weaker-than-anticipated sales of its pricier, more lucrative desktops and notebooks. Just last year, Dell lost its No. 1 position in the industry to rival HP.
Other Global News Roundup
Shares of Posco, the world's third- largest steelmaker, rallied to a record on speculation that it may be a takeover target, and as the company's CEO met with a senior official from Arcelor Mittal. AstraZeneca Plc said it will cut 3,000 jobs, or about 4.6% of the workforce, as the U.K. drugmaker reduces expenses to counter generic competition to its medicines. Power Financial Corp., the owner of Canada's biggest mutual-fund company, agreed to buy Boston-based Putnam Investments from Marsh & McLennan Cos. for US $3.9bn in cash to break into the US $10 trillion US fund market. US Airways withdrew its hostile US $9.8bn offer for Delta Air Lines after Delta's creditors threw their support behind the bankrupt carrier's reorganisation plan. Delta and its pilots' union insist the company has a future as an independent airline, but the bid has raised speculation about more attempts at consolidation in the industry. Tanabe Seiyaku Co. agreed to buy Mitsubishi Chemical Holdings Corp.'s drug unit for 560 billion yen (US$4.6bn) in stock to create Japan's fifth-largest pharmaceutical company.
Bulls may remain in control
After a fairly volatile month, looks like the market may have kicked off the much-awaited pre-budget rally. The Sensex gained 4.5% in January after a listless December. The rise last month came without much support from the FIIs, who have been pretty slow in the first month of the new year. However, if Friday's session is any indication, the outlook for overseas portfolio investment appears bright. S&P's decision to upgrade India to investment grade should also help attract more money into India. However, one must be always careful as the indices are in unchartered territory and there's always danger of a correction though any fall is unlikely to be too severe. Still, it pays to be on a safer side. Also, with the results out of the way, the market may turn rangebound and choppy in the near term. The medium to long-term outlook remains bullish. Although stock specific activity will continue, the market is expected to witness some consolidate at higher levels. Although, we would like to believe that the undertone for the market is upbeat, one must not get sentimental. The market has risen smartly in last couple of sessions. So, some profit booking is not ruled out. Investors should stick to a stock centric approach.
Bulls overcome volatility, Tata Steel
Time grabs you by the wrist, directs you where to go
So make the best of this test, and don't ask why
It's not a question, but a lesson learned in time
It's something unpredictable, but in the end it's right.
I hope you had the time of your life
It was another volatile and eventful week on Dalal Street. The bulls bounced back with a bang after Tata Steel's seemingly expensive Corus deal upset the apple cart. Even the quarter percentage point hike in the repo rate could not deter the bulls from propelling the key indices to all-time closing highs. The bulls also chose to ignore the spike in oil prices, which rose above the US$57 per barrel mark. Strong earnings growth and firm global markets lent good support to the rally. There were impressive gains across counters like Capital Goods, Auto, Telecom, Infrastructure and Consumer Durables. L&T, R Com, Bharti Airtel, BHEL, Hindalco and REL were the major gainers in the Sensex. On the other hand, Tata Steel, ITC and HLL topped the losers' list. The unpredictable nature of the market did catch many by surprise. However, in the end the bulls had the last laugh. with the benchmark Sensex crossing the 14400 mark for the first time and the NSE Nifty closing above 4150. The Sensex added 121 points or 0.85% over the truncated week to end at 14404 and the Nifty rose 36 points or 0.86% to close at 4184.
Telecom stocks were the flavour of the week with Bharti Airtel and R Com leading from the front. The latter came out with a strong set of numbers for the third quarter and said it will list Flag Telecom globally. On the last day of trading, the Telecom Regulatory Authority of India (TRAI) cut inter-connection charges by 23% to 29%. The move could result in more and more new telecom users coming in. R Com said its Q3 net profit climbed to a record Rs9.24bn and sales rose 26% to Rs37.55bn. Bharti Airtel was the top gainer and gained over 12% to Rs771. R Com spurred by over 12% to Rs490, VSNL added 3% to Rs505.
Auto stocks were a mixed bag with Maruti and Bajaj Auto closing higher on the back of strong sales figures for January. Hero Honda was among the losers after the company announced disappointing Q3 results. Bajaj Auto paced ahead by 1.4% to Rs2777 and Maruti rose 1.3% to Rs944. However, M&M lost 1% to Rs912, Tata Motors was down by 07% to Rs910 and Hero Honda fell marginally by 03% to Rs716.
IT stocks were up during the week. The heavy weights led from the front, Satyam advanced 4.4% to Rs490, Wipro rose 1.7% to Rs643 and Infosys was up by 1.3% to Rs2259. Among the Mid-Cap stocks Patni gained 3.3% to Rs446 and Mphasis BFL surged by over 6% to Rs302.
Capital Goods stocks were among the star performers. L&T surged over 6% to Rs1677, BHEL rose over 5.5% to Rs2508, ABB was up by 4.3% to Rs3752 and Gammon India spurred over by 65% to Rs415.
Cement stocks also did well. Gujarat Ambuja spurred by 37% to Rs142, ACC was up by 1.3% to Rs1040, Grasim gained 08% to Rs2811, India Cements rose 0.9% to Rs221 and Madras Cement added 1% to Rs3420.
Pharma scrips recorded healthy gains. Orchid Chemicals rallied by over 13% toRs256, Divi's Lab rose nearly 8% to Rs3356, Strides Arcolab was up by 64% to Rs383 and Lupin advanced by 5.5% to Rs618. Among the heavy weights Ranbaxy rose nearly 3% to Rs413.
Not surprisingly, Tata Steel was the top loser in the 50-stock NSE Nifty. The scrip fell by nearly by 4% over the week to Rs462 after touching a high of Rs520 and a low of Rs451. Investors are concerned that the company may have overpaid for Corus. Also, the increased debt could put the company's finances in jeopardy.
Tata steels the show
The shine just refuses to fade as far as India is concerned. To continue the good tidings and the wave of euphoria sweeping across the country, Tata Steel Ltd. won the bid to acquire Anglo Dutch steel major Corus Group Plc. The Tata Group company emerged the winner over Brazilian steel firm CSN in the nine-round auction. The 608 pence per share final offer from Tata Steel was higher than the 603 pence share final bid from CSN. It was 34% higher than Tata Steel's original bid of 455 pence per share. With this, Tata Steel is set to become the world's fifth-biggest steelmaker after winning the battle for Corus with a £6.2bn (US$12bn) offer. Corus shareholders will be entitled to receive 608 pence in cash for each Corus share. This represents a price of 1216 pence in cash for each Corus ADS.
The final price tag values Corus at 7.6 times Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for 2006, well above the multiple Mittal Steel paid for Arcelor which was 4.6 times historic EBITDA. On an enterprise value of US$13bn, the deal translates into a multiple of about 7 times EBITDA from continuing operations for the year ended December 31, 2005 and a multiple of approximately 9 times EBITDA from continuing operations for the 12 months ended September 30, 2006 (excluding the non-recurring pension credit of £96mn).
The financing arrangements put in place by Tata Steel prior to announcement of its revised offer for Corus on December 10, 2006 remain in place. The additional finance required will be funded by way of a combination of additional credit facilities and a cash contribution to Tata Steel UK. Tata Steel said that ABN AMRO and Deutsche Bank, as joint financial advisers were satisfied that sufficient resources were available to satisfy in full the consideration payable to Corus shareholders. But, the stock market refused to go along with the Tata Steel management, amid concern that the company had paid too high a price and that the leveraged buyout will put its balance sheet under severe strain.
RBI ups the ante vs inflation
The Reserve Bank of India (RBI), in its third quarter review of monetary policy, has shifted its stance from emphasis on price stability and growth to that of ensuring price stability and anchoring inflation expectations. The RBI hiked the repurchase rate (repo rate), the rate at which lends to banks, by 25 basis points to 7.5% while leaving the reverse repo rate unchanged at 6%. This follows the increase by 25 basis points each on October 31, 2006 and July 25, 2006. The central bank also kept the Cash Reserve Ratio (CRR) and the bank rate unchanged at 5.5% and 6%, respectively. The RBI said that inflation will be maintained between 5% and 5.5% by the end of March 31. It also increased the GDP growth target for the current financial year to 8.5-9% from the earlier 8%.
Further, in its attempt to rein in credit growth, the RBI has increased the provisioning requirement on standard assets in the fast-growing retail assets segment (excluding residential housing), capital market exposures, real estate sector and credit card receivables to 2% from the existing level of 1%. In addition, the central bank has increased the provisioning requirement from 0.4% to 2% as well as risk weight from 100% to 125% for banks’ exposures to systemically important non-deposit taking non-banking finance companies (NBFC-ND-SI), which do not qualify as asset financing companies.
The RBI would use all policy instruments, including the CRR, to ensure the appropriate modulation of liquidity in responding to the evolving situation; and to ensure the maintenance of price stability, the RBI said. "To the extent the current inflationary pressures are attributable to monetary conditions, it is essential to undertake appropriate measures, in continuation of those already taken and in the light of anticipated developments," the RBI said in its quarterly monetary policy review.
Markets had another week of gains. Sensex closed the week with yet another all time high in a holiday shortened week. Sensex gained 130 points this week which is about 0.75% gains.
Global markets were by and large positive and the positive or negative cues for the start were largely followed in the same direction. US markets also closed at all time highs and Indian Markets imitated that. The US Fed meeting this week kept interest rates unchanged and the data was more positive than negative. The bouyancy continues. Crude saw strength but remained ranged this week impacting the refineries which gave away much of their gains.
Markets started off on a cautious note ahead of the credit policy and the bidding for Corus. Tisco emerged winner but markets gave a clear thumbs down for the stock. On all valuation parameters the acquisition was expensive. Though it was a day of pride for an Indian Company to become the 5th largest in the world.. its a big risk that Tisco has taken. Stock was smashed down 9% this week.
S&P upgraded India to investible grade and that was a positive in a way though markets ignored it. The other two big rating agencies, Moodys , Duff and Phelps already have India in that grade. What this does is that now many Funds would be allowed to invest into Indian Debt as many mandates do not allow investment unless all 3 agencies have an investment grade.
The credit policy came in as a mixed surprise. The cost of liquidity for the Banks was raised through a repo rate hike. All other controls of reverse repo, CRR and SLR were left unchanged. The provisioning norms for the retail sector loans in credit card, personal loans, auto loans were increased. Only home loan provisions were left unchanged. The banks saw negatives in this. There was an across the board selloff. Sensex saw some supports around 14060 levels and then it was one way. Maket was surprised positively by the FM who announced that SBI holding would change hands with the RBI selling its 59% holding to the Government at market determined rates of around Rs 1300 as per the Sebi formula. The banks developed wings and rallied and so also the markets. It was no looking back. The Telecom companies saw strong interest on TRAIs suggestion to cut International call rates. Surprisingly even VSNL rallied. Most of these negatives have been discounted it appeared. Also helping was the fact that Idea is intending to have an IPO in the next couple of days and that would bring in more interest in the already listed companies. Bharti and Reliance Communitication were the biggest gainers for the week.
The big gainers this week were. Rel Communication + 12%, Bharti Airtel +7%, Glaxo +4%, Hindalco +4%, Larsen +4%, Ranbaxy +4%, Reliance Energy +6%, Zee +4%. Drag was from Tisco -9%, HLL -3% HPCL -5%, ICICI Bank -4%, Suzlon -4%.
There were a couple of results we covered this week. They included the ones where we have been positive on .. these included Titan which made its grand entry into the 4 digit stock on talks of bonus. Bonus or not.. we believe that the stock is well placed to deliver.
Titans results were good and really the scope remains good. The jewellery offtake despite high gold prices was good. It was surprising to see high margins in Jewellery business. Contributing to high margins were benefits of scale, sales of higher margin products such as diamond jeweller and colored stone jewellery. Jewellery now accounts for around 70% of revenues, This is likely to be the way forward given the size of the Jewellery market. Valuations at about 38X earnings FY07 remains a bit expensive. But good things do not come cheap. We like this business.. Do read the detailed note.
The Tatas beat Brazil's CSN to acquire Anglo-Dutch steelmaker Corus Group Plc at slightly more than $11 billion in an all cash deal. Tata Steel raised its final offer to 608 pence a share by the time the auction entered the concluding ninth round from 500 pence a share at the start of the auction. Tata Steel's winning bid of $11.3 billion puts Corus Group's enterprise value, which includes debt, at more than $13 billion. The takeover marks the largest acquisition by an Indian company and would propel the combined entity led by Tata Steel to the fifth rank in steel output in the world.
As per valuation Arcelor valuation EV/Tonne of $650 with margins at 17% EV/EBIDTA at 7. Corus is significantly higher that Corus valued at EV/Tonne of $745 with margins at 11% and EV/EBIDTA of 9.9. Corus is Europe's second-largest steel maker with a capacity of 19 mn tonnes and Tisco with 7 mn. Together they would form the 5th largest steel company. We were not enthused. Acquisition at the peak of the cyle is certainly not exciting. Tatas may benefit because of the feeling of being left out is now covered and they now are a global company. However its not very good for the shareholders of Tisco who will have to wait through the digestion period. Already Zinc prices are heading down indicating slower demand and China is an exporter in steel. The risk reward certainly is not in favour. We were negative. The stock reacted exactly as we anticipated down 9% for the week.
The numbers from Greenply for third quarter 2006-07 were mindblowing. The top line up 48% to Rs.108cr on yoy basis. Operating profits jumped 72% to Rs. 14crs. Ebidta Margins up 1.80 basis points as Uttaranchal plant stabilized for plywood. Net profits up 77% to Rs. 6.5 crs. Profitability from timber improved considerably and added to margins. The company has been conservative and provided for excess tax this quarter .. could come off next quarter adding to bottomline. The company management body language was good. The demand scenario remains robust. There is an order book of 1 month now from the earlier days of less than 10 days. The demand picks up normally after 18 months of cement demand as new housing goes in for construction activity. The company raised plywood prices by about 4%. Also raised for other products by larger amount indicating good demand. The most interesting words were? ?The unorganized sector is expected to lose 5% share every year?.. Well that?s a huge number.. and the story panning out as envisaged ! Valuations etc remain mouth watering.. Wonder why the stock rating remains low.. ? As Warren buffet puts it.. Buy a good business.. the valuations will follow. At the current level stock trades times its 5 times its FY2008 . We had a wow call and the stock delivered well.
Eveready posted a loss in the December quarter. Interesting to note that it experienced the worst shock ever with Zinc prices rallying to $ 4800 per tonne from less than half that. Zinc accounts for 50% of costs for making batteries and that had its effect. The company countered that with numerous price increases but Zinc prices have overwhelmed. Interesting to note that Zinc prices have now crashed and thats good reason to buy. We had a wow call here.. and the stock is delivering well.
Another story we had in our Hunters pick section found takers with the stock hitting up for the week. the Management is XL telecom is on a road show in Mumbai and hence the interest seen in the stock. The company has a good story in terms of manufacturing CDMA handsets where it expects to get orders for 25 k handsets a month from Rel Com after doing the pilot. Also its part fo the BSNL and MTNL initiative in the CDMA business. The company intends to enter the Photovoltaic cells business. However the negative is that the company also has plans in the Ethanol business. We are not that excited though some trading gains could be on cards.
ITC numbers were in line. Bottom line was higher by 23.2% yoy. The revenues from the non cigarette business were up by 31% which are 52% of the company's turn over.The lifestyle retailing business grew by 38%, Gifts, Stationary and Greeting card business saw a growth of 27%. Hotel business was also up by 28%. The near term worries extend from the fact that the Government intends to bring cigarette under VAT. This uncertainty will keep the interest muted. ITC is normally on the receiving end of all budgets and there is likely to be no exception this time. We have been cautious on ITC and its desire not to give away larger cash accruals as dividend.. hence the non focussed approach. The stock ended the week down 1.5%.
The results season is over and most results are discounted. The numbers have been extremely exciting overall and almost nothing to complain. With a GDP growth upgraded to at 9%+ and S&P upgraded Indian debt to investible grade there is little to ask for, except may be cheaper valuations. But important to note.. that when the going seems good.. its time to exercise caution !
Sensex has closed on a bouyant note and the momentum continues. However the one thing missing is the FII numbers. FIIs were sellers for most of the week. But we saw the market up. Clearly the power is there in Domestic buyers as well. Reliance has turned into the largest Fund house in the country. Reliance Capital rallied on the back of that news. It was a good week for ADAG with Reliance Communication, Reliance Capital and Reliance Energy hitting highs on specific news. The budget is on cards and that will drive markets going ahead. Do we expect a pre budget rally. Well no ! we don't. We think that markets are looking heavy. The recent upmove of the markets has been post consolidation and thats supportive that downsides may not be high.. but there seem to be sectors which are losing steam and could be a drag.
Technically speaking: Sensex broke out of the range of the 14050 - 14320 levels and that brought in large short covering. Another day or two here would have technical targets raised to 14740 levels. 14300 becomes a support line but the stronger support is at 14020.
The market attracted considerable buying interest for the second straight session, with the Sensex surging past the 14400 mark. The positive cues from global markets helped the Sensex to resume with a gap of 26 points at 14293 and gain substantial strength to beat its previous all-time high. A strong bout of buying in heavyweights, technology, consumer goods and capital goods stocks in the afternoon trades lifted the Sensex to its intra-day high at 14463. After shading some gains towards the close the Sensex ended the session by adding 137 points at 14404, while the Nifty ended the session gaining 47 points at 4184.
The breadth of the market was positive. Of the 2,719 stocks traded on the BSE, 1,428 stocks advanced, 1,232 stocks declined and 59 stocks ended unchanged. Among the sectoral indices the BSE CG index advanced by 2.46% at 9824 followed by the BSE Teck index (up 2.04% at 3887) and the BSE CD (up 1.90% at 3969). However, the BSE PSU index, the BSE Bankex index and the BSE Oil & Gas index closed in negative territory.
Select blue chips gained substantially. Bharti Airtel rose 5.39% at Rs771, L&T advanced 4.79% at Rs1,677, HDFC climbed 4.26% at Rs1,744, Reliance Communication surged 3.54% at Rs491, Satyam Computer scaled up 3.54% at Rs491, Wipro added 3.38% at Rs643, Gujarat Ambuja jumped 2.48% at Rs143, Reliance Energy moved up by 1.83% at Rs534, Grasim gained 1.33% at Rs2812 and Tata Steel was up 1.14% at Rs463. Among the laggards, NTPC tumbled by 2.30% at Rs142, SBI slipped 1.81% at Rs1,181 and Hero Honda dropped 1.10% at Rs716 while ONGC, ICICI Bank, Infosys and Reliance Industries ended with marginal losses.
Consumer goods stocks were in the limelight. Greaves Cotton soared 8.70% at Rs370, Gammon India jumped 7.67% at Rs416, Jyoti Structures scaled up 4.20% at Rs177, Crompton Greaves advanced 3.99% at Rs207, Areva gained 3.92% at Rs1,266 and Praj Industries added 3.47% at Rs341. Carborundum Universal, Triveni Engineering and SKF India ended with marginal gains.
Over 35.65 lakh Tata Steel shares changed hands on the BSE followed by Reliance Communications (31.66 lakh shares), Cummins India (23.97 lakh shares), Welspun Gujarat (23.74 lakh shares) and SAIL (23.48 lakh shares).
Value-wise Tata Steel registered a turnover of Rs166 crore on the BSE followed by Reliance Communications (Rs154 crore), Reliance Industries (Rs108 crore), SBI (Rs73 crore) and HDFC (Rs67 crore).
The market fired on all cylinders for the second straight day following positive global cues, and a robust set of results from India Inc. A lot of shares struck their all-time highs.
The 30-shares BSE Sensex finished 136.59 points higher, at 14,403.77, an all-time closing high. It had opened higher, at 14,293.11, and had gone on to attain an all-time high of 14,462.77.
The new found vigour on the bourses is because of firm global markets after the US Federal Reserve’s decision to keep interest rates steady.
The S&P CNX Nifty rose 46.30 points (1.12%) to 4183.50, an all-time closing high. It had surged to an all-time high, 4,198.70, in intra-day trading.
The market-breadth was strong, as small-cap and mid-cap stocks were in fashion. For 1,396 shares advancing, 1,274 declined. A total of 52 remained unchanged. Analysts expect the action to stay in this space, outperforming large-cap peers on account of robust results.
The total turnover on BSE amounted to a healthy Rs 5433 crore, as compared to Rs 4012 crore on Thursday.
Among the 30-member Sensex pack, 20 advanced while the rest declined.
Bharti Airtel was the top gainer, up 5.39% to Rs 771.05, on a volume of 5.72 lakh shares. It also struck an all-time high of Rs 777.20, in intra-day trade.
Reliance Communications (RCL) was up 3.54% to Rs 490.55, after hitting a high of Rs 497. As many as 31.63 lakh shares changed hands in the RCL counter on BSE. They are expected to report strong growth in new subscriptions. The media is abuzz with reports that Reliance Communications was planning a $2.5 billion expenditure for expanding domestic operations in the forthcoming financial year. Also, there were reports that TRAI has cut interconnection rates by 23 - 29%.
L&T jumped 4.89% to Rs 1679 on 2.31 lakh shares. It had surged to an all-time high of Rs 1690.
HDFC (up 3.74% to Rs 1735.05), and Reliance Energy (up 1.83% to Rs 534.10) were the other gainers.
IT stocks saw renewed buying. The BSE IT index gained 44.06 points (0.82%) to 5,392.29. Wipro (up 3.38% to Rs 643.45), TCS (up 0.53% to Rs 1299.40) and Satyam Computer (up 3.53% to Rs 490.90) were the chief gainers in this pack. Market rumours about Wipro eyeing around $25 - 100 million foreign buys kept the stock simmering.
Gujarat Ambuja Cements advanced 2.48% to Rs 142.80, on a volume of 23.15 lakh shares. Gujarat Ambuja Cements (GACL) declared its the December quarter numbers. GACL's net profit was up Rs 337 crore for the quarter ended December 2006, compared to Rs 87.90 crore, for the quarter ended December 2005. Net sales increased to Rs 1329 crore (Rs 773 crore). Gujarat Ambuja Cements (GACL) announced its January cement sales numbers. The company's cement sales increased by 6% to 1.49 million tonnes against 1.19 MT in the same month a year ago.
Private sector steel firm, Tata Steel, bounced back after declining sharply by around 12% in the past two sessions, on concerns that it had paid an excessive price to acquire Corus. Tata Steel advanced 1.14% to Rs 462.95, on a volume of 35.59 lakh shares. It had surged to a high of Rs 472.40 in intra-day trade.
Index heavyweight Reliance Industries (RIL) slipped in the red, down 0.24% to Rs 1372.30, on a volume of 7.84 lakh shares. It had touched a high of Rs 1393.35.
Maruti Udyog gained 0.61% to Rs 945.05, as the company raised prices of its cars by up to Rs 12,000. Prices of the Baleno sedan and Gypsy King multi-utility have been raised by Rs 12,000, while the Wagon R hatchback and newly launched Zen Estillo will cost Rs 3,500 more.
The mini-Maruti 800, Omni, Alto, Esteem mid-size and Swift's petrol variant will cost Rs 2000 more. The prices have been raised to offset rising input costs, Maruti Udyog said in an official statement issued to the exchanges.
NTPC was the top loser, down 2.30% to Rs 142.35, on a volume of 6.33 lakh shares.
PSU banking major, SBI, lost 2.20% to Rs 1177, while Hero Honda slipped 1.22% to Rs 715.25.
HFCL jumped 10% (maximum limit) to Rs 29, on huge volumes of 1.51 crore shares, with pending buy orders of 1.30 lakh shares on BSE.
Shares from capital goods sector saw strong buying interest, on the back of strong order-book and consistent order win. Analysts expect the sector to outperform the broader indices. The BSE Capital Goods index advanced 235.71 points (2.46%), to 9,823.81, and was the biggest gainer among the BSE sectoral indices.
The scrips to make merry Jyoti Structures (up 5% to Rs 178.55), Greaves Cotton (up 9.10% to Rs 371), Gammon India (up 8.32% to Rs 418), Crompton Greaves (up 4.44% to Rs 208.15), Suzlon (up 3.82% to Rs 1219.50), Areva T&D (up 3.92% to Rs 1266.25), and Praj Industries (up 3.47% to Rs 341.20).
UTI Bank surged 8.34% to Rs 587.35, extending a recent surge triggered by S&P raising its rating on the private sector bank. The stock hit a high of Rs 615, a life high for the counter. On 30 January 2007, global rating agency Standard and Poor’s (S&P) lifted the country’s rating to investment grade.
The improvement in ratings is likely to help banks raise funds more cheaply abroad to meet their capital requirements. Just before the S&P upgrade, UTI Bank raised $250 million from a three-year floating rate bond priced at 47 basis points above the three-month London Interbank Offered Rate (Libor).
Auto parts firm Denso India rose 0.70% to Rs 92.20, after its board approved investing Rs 28 crore over four years to build a unit for two-wheeler components. The approval was announced late on Thursday.
Tata Chemicals rose 3.75% to Rs 237.80, after it agreed to form an equal joint venture with Ireland's Total Produce to distribute fresh fruits and vegetables in India.
Strides Arcolab rose 1.18% to Rs 385.45, after its European joint venture unit signed an agreement to acquire a stake in Norwegian Farma Plus.
Cummins advanced 2 % to Rs 278.50, on high volumes of 23.97 lakh shares, after a block deal of 15 lakh shares was struck in the counter at Rs 275 per share.
State-run Steel Authority of India rose 0.80% to Rs 113.25, after it received orders worth Rs 117 crore from the government for supplying 11,300 tonnes of ferritic stainless steel strips.
Indiabulls Financial Services rose nearly 9.44% to Rs 423.65, extending Thursday’s rise after reporting a strong financial performance for Q3 Dec-2006. Indiabulls Financial Services rose nearly 4% to Rs 401.70, extending Thursday’s rise after reporting a strong financial performance for Q3 December 2006. Indiabulls Financial Services’ consolidated net profit for the quarter ended 31 December 2006, grew 55.9% to Rs 117.6 crore compared with Rs 71.6 crore in the corresponding period last fiscal. Total consolidated revenues rose by 103.5% in the third quarter to Rs 334.53 crore from the previous year's Rs 164.37 crore.
S Kumar's Nationwide advanced 0.24% to Rs 72.75, after scheduling a board meeting on 3 February 2007, to consider a swap ratio for the demerger of the retail business.
VSNL gained 6% to Rs 505.45, after its ADR rose nearly 4% on Thursday (1 February 2007) to $21.83.
Garments manufacturer, Gokaldas Exports, rose 1.64% to Rs 624.75 after fixing 15 February 2007 as record date for a stock-split. Accordingly, the Rs 10 face value share will now be sub-divided into two of face value Rs 5 each.
The Nikkei share average rose 0.16% to a 10-month closing high on Friday after hitting its highest in more than six years, as investors snapped up shares of companies reporting upbeat earnings' figures such as Casio Computer and Dowa Holdings. The Nikkei gained 27.61 points to 17,547.11, the highest close since last April. Earlier, it rose as high as 17,633.61, its highest since July 2000.
The Hang Hang index rose 133.52 points (0.65%), to 20,563.68.
India's wholesale price index rose 6.11% in the 12 months to 20 January, higher than previous week's annual rise of 5.95% due to a rise in prices of manufactured products and foods, data showed on Friday. The annual inflation rate was 4.24% during the corresponding week of the previous year.
As per provisional data, FIIs were net sellers to the tune of Rs 242 crore on Thursday, the day when the Sensex had surged 176 points. They were net buyers to the tune of Rs 418 crore in index-based futures that day. They were net sellers to the tune of Rs 88 crore in individual stock futures that day.
US stocks gained on Thursday, propelling the Dow to a record close, on stronger-than-expected earnings and expectations that interest rates will not rise in the near future.
The Dow Jones industrial average shot up 51.99 points, or 0.41%, to 12,673.68. The Standard & Poor's 500 Index gained 7.70 points, or 0.54%, to 1,445.94. The Nasdaq Composite Index rose 4.45 points, or 0.18%, to 2,468.38.
The S&P 500 index had its highest close since-September 2000, while the Dow also reached a record intra-day high at 12,682.57.
A worse-than-expected manufacturing report and falling natural gas prices pulled the plug on Thursday, on a two-day oil rally that saw prices jump more than $4 a barrel.
Light, sweet crude for March delivery fell 84 cents, to settle at $57.30, a barrel on the New York Mercantile Exchange. The contract rose $1.17 a barrel on Wednesday and by $2.96 on Tuesday. Brent crude for March delivery fell 68 cents to $56.72 a barrel on London's ICE Futures exchange
NIFTY (4137) RES 4157 SUP 4117
BUY INFOTECENT (380.8)
SL 376 T 390, 393
BUY GAIL (284)
SL 280 T 295, 298
BUY MANGLMCEM (224.6)
SL 220 T 235, 237
SELL HEXAWARE (167)
@ 170 SL 174 T 160, 158
SELL ASAHIINDIA (130)
@ 134 SL 138 T 121, 119
S-election struggle continues
Elections are won by men and women chiefly because most people vote against somebody rather than for somebody
We 'campaigned' for the bulls yesterday and they got voted to power. Elections don't happen frequently, but stock selection is an ongoing process. Legendary investment gurus swear by this style of stock investing. In fact, with the market getting quite volatile these days, the best bet is to adopt a stock-specific strategy. Some suggest a bottom-up approach while others prefer top-down one. But, if stock research is not your cup of tea, you should leave the same to the experts or invest in mutual funds. We expect the market to remain choppy with a positive bias till the budget is out of the way. The trend thereafter will hinge on what the Finance Minister P. Chidambaram has in store. Another key factor will be the FII inflows. So far this year, it has not been great, but things could change going forward. And, the S&P's upgrade of India's sovereign ratings should come in handy.
For today, the trend looks positive. On Wall Street, the Dow Jones Industrial Average hit a new record. Asian markets are also in cheerful mood this morning. Japan's Nikkei 225 Index clocked a 6-1/2 year intraday high. Markets also rose in Europe and emerging markets like Brazil and Russia. The only worry now is oil prices, which are still ruling well above the $57 per barrel mark. So, expect the bulls to hold on to their edge over the bears at least for the day.
FIIs were net sellers of Rs2.42bn (provisional) in the cash segment yesterday. In the F&O segment, they pumped in Rs4.28bn.
US retailers and energy shares catapulted the Dow to its fifth record this year and the S&P 500 Index to a six-year high after the Bush Government said that consumers spent more without fueling inflation.
Personal spending climbed in December by the most in five months and an inflation measure rose less than forecast. The data reinforced the Federal Reserve's decision to leave interest rates unchanged as economic growth picks up without spurring faster consumer-price increases.
The Dow increased 51.99, or 0.4%, to 12,673.68. The S&P 500 added 7.70, or 0.5%, to 1445.94, the highest since September 2000. A drop in Google shares after the company posted revenue that failed to top projections left the Nasdaq Composite Index lagging behind the blue chip indexes. The tech-heavy index rose 4.45, or 0.2%, to 2468.38.
Gold futures closed at their highest level since August 2006 as a recent strength in oil prices and a slight dip in the dollar helped lift prices past $660 an ounce . Gold for February delivery climbed $5.40 to close at $657.40 an ounce on the New York Mercantile Exchange. It rose as high as $661.50 earlier, an intraday level the contract hasn't seen since Aug. 11.
Crude oil futures were pretty volatile. March crude closed down 84 cents at $57.30 a barrel. The contract peaked at $58.85, its highest level since Jan. 3, on expectations that demand for fuel will rise as the US economy remains strong. Also, this week's data on fuel supplies showed the first decline in distillates in seven weeks.
Treasury prices fell, raising the yield on the benchmark 10-year note to 4.83% from 4.80% late on Wednesday. In currency trading, the dollar gained modestly versus the euro and the yen.
Across the Atlantic, European shares finished up as well. The pan-European Dow Jones Stoxx 600 index advanced 1.1% at 376.95. The UK's FTSE 100 climbed 1.3% at 6,282.20. The French CAC-40 rose 1% at 5,662.25 and the German DAX Xetra 30 rose 0.9% at 6,851.28, with both indexes trading near six-year highs.
Emerging markets too are smiling. The Bovespa in Brazil gained 0.4% at 44,815 while the RTS index in Russia surged 2.8% to 1894 and the IPC index in Mexico added 1% to 27,842.
Asian stocks advanced to the highest in nine months on Friday. Sony and Samsung Electronics gained after US consumer spending climbed to the highest in five months.
The Morgan Stanley Capital International Asia-Pacific Index added 0.5% to 142.93 at 11 a.m. in Tokyo, set for the highest since May 9. For the week, the regional gauge added 1.6%, its third straight consecutive advance.
The Nikkei rose 0.5% to 17,600.40. South Korea's Kospi index added 1.8% and the Straits Times Index in Singapore rose to an all-time high. Stock benchmarks advanced around the region, except in China.
China shares listed in Shanghai and Shenzhen were mixed in early trading as bargain-hunting offset concerns that the market may see funds set aside for the A-share subscription for Ping An Insurance, which is set to begin next week.
China shares ended flat on Thursday following a sharp decline on Wednesday on concerns that regulators may impose austerity measures to cool speculative activity. In early Friday trading, the Shanghai Composite index was up 0.2% at 2791.49 while the Shenzhen Index slipped 0.1% to 659.02.
The turnover on NSE was down by 22% to Rs80.34bn. BSE Consumer Durable index was the major gainer and gained 2.47%. BSE Bank index (up 2.11%), BSE Metal index (up 1.65%), BSE Technology index (up 1.64%) and BSE Capital Good index (up 1.08%) were among the other major gainers.
IFCI, SAIL, TTML, IDFC, IDBI, Escorts, Pyramid Saimira, Shree Ashtavinayak, R Com, Ashok Leyland, Indiabulls, IVRCL Infrastructure, Hanung Toys, HMT, ITC, Satyam Computer, Crompton Greaves and NTPC.
Upper Circuit Filters:
Crisil Ltd, Prism Cement, Heritage Food, Goldiam International, Goldstone Technology, Radha Madhav, GVK Power, Rajesh Exports, Ganesh Housing, HOV Services, Marg Construction, Taneja Aerospace and Tanla.
ABB, Ashok Leyland, CESC, Indiabulls, IVRCL Infrastructures, Jet Airways, Kesoram Industries, Lupin, Maruti, Patni Computer, Punj Lloyd, Satyam Computer, Siemens, SRF, Strides Arcolab, Titan Industries and Usha Martin.
AIA Engineering – Outperform from Kotak with target of Rs1615
Buy - India Cements from Deutsche Bank with target of Rs295
Long Term Investment:
Major News Headlines:
Tata Motors Jan sales at 55440 units (up 19%)
Bajaj Auto Jan bike sales at 195560 units (up 12%)
Aditya Birla Group January sales at 2.82mn ton (up 3%)
Tata Chemicals to form 50:50 JV with Total Produce Plc
Ballarpur Ind raises uncoated paper prices – Reports
Orchid Chemical signs partnership pact with Actavis
SAIL bags order worth Rs1.17bn
ACC Q4 profit at Rs3.58bn (up 106%), sales at Rs16.2bn (up 50%); to pay Rs15 dividend
BHEL gets Rs5.05bn order from Bangladesh
Kirloskar Brothers wins US orders worth $2.1mn
Gujarat Ambuja Jan cement sales rise 6% to 1.49mn
Hindus Group denies reports of withdrawal from Hutch race
Sesa Goa to consider interim dividend on Feb 10
NTPC and Railways to build a 1,000MW thermal power plant in Bihar
ITC recorded better than expected results driven by robust growth across categories. The strong growth in the cigarette business indicates continuing strong volume growth. Outlook for the non-cigarette businesses such as hotels and paper also remains positive with continued demand buoyancy. The other FMCG businesses are also rapidly expanding, while losses are being gradually curtailed.The company has planned a capex of ~Rs150bn for the next 3-5 years. ITC’s non-cigarette business has been growing rapidly over the last few quarters and now contributes to ~70% of net sales (9M FY07). Given the positive outlook for Indian tourism industry due to increasing foreign tourists, we expect ITC to grow its hotels segment both organically and inorganically. Also, strong cash flows from cigarette business can be invested in scaling up other segments. At the current market price of Rs175, ITC is trading at 24x FY07E EPS of Rs7.3 per share. We maintain our ‘Buy’ rating on this stock.
The markets bounced back as bulls wiped off Wednesdays losses. After falling over 120 points in the previous trading session the key indices bounced back after RBI lifted the growth projections for the current fiscal to 8.5-9% over its last estimate of 8%. The U.S Fed policy-makers kept the short-term interest rate steady at 5.25% for the fifth time in a row also aided the rally. Further all round buying in scrip’s across the sectors lifted the benchmark Sensex to hit an intra-day high of 14278.08. All the key indices finished in green with ABB, SBI, Tata Motors, Bharti Airtel, RIL and Infosys among the major gainers. Finally, the BSE benchmark Sensex surged 176 points to close at 14267. NSE Nifty advanced by 54 points at 4137.
SAIL surged over 3.5% to Rs112 after the company received order worth Rs1.17bn. The scrip touched an intra-day high of Rs113 and a low of Rs104 and recorded volumes of over 15,00,00,000 shares on NSE.
Ranbaxy Labs gained 0.5% to Rs411 after the company received FDA approval to market Amoxicillin & clavulanate potassium. The scrip touched an intra-day high of Rs411 and a low of Rs405 and recorded volumes of over 6,00,000 shares on NSE.
ACC advanced 1.5% to Rs1034 after the company declared its Q4 result with net profit at Rs3.58bn (up 106%), sales at Rs16.2bn (up 50%) and announced that they would pay Rs15 as dividend. The scrip touched an intra-day high of Rs1053 and a low of Rs1015 and recorded volumes of over 10,00,000 shares on NSE.
Maruti advanced 1.6% to Rs940 after the company announced its January sales at 66341 units (up 30%). The scrip touched an intra-day high of Rs954 and a low of Rs920 and recorded volumes of over 6,00,000 shares on NSE.
Banking stocks were in the limelight. Heavy weight ICICI Bank was up by 1.2%to Rs952 and HDFC Bank added 2.3% to Rs1103. PNB, Bank of India and OBC were the major gainers among the Mid-Cap stocks.
Technology stocks ended with smart gains. The Mid-Cap stocks were among the major gainer, NIIT Ltd surged over 4.5% to Rs587, Moser Baer advanced 2.5% to Rs356 and Mphasis BFL gained 3.8% to Rs290. However, Wipro, Infosys and Satyam Computer were the major gainers among the heavy weights.
Pharma stocks recorded healthy gains. Divi’s Lab surged over 3% to Rs3339, Sun Pharma was up 1.5% to Rs1045 and Lupin advanced 1.2% to Rs608.
Capital Good stocks also gained momentum towards the end. ABB surged over 5% to Rs3805, Siemens rose over 2% to Rs1170, L&T was up by 0.9% to Rs1602 and Punj Lloyd added 1% to Rs1019.
Following gains of 176 points yesterday, the Sensex remaining just short of hitting its record high and is expected to make further headways on firm Asian indices in morning trades and Dow hitting its all-time high. Further, fall in the global crude oil prices may also keep the sentiment positive. However, caution should be maintained on account of the prevalence of a intra-day volatility.
Among the local indices, the Nifty could test 4210 on the upside and may slip to 4120 on the downside. The Sensex has a likely support at 14220 and may face resistance at 14350. Major US indices registered significant gains on Thursday, on account of lower oil prices and the relief about economic outlook. While the Dow Jones flared up by 52 points at 12674, the Nasdaq moved up by 4 points to close at 2468.
Except Wipro, most of the Indian ADRs traded firm on the US bourses. VSNL led the pack with gains of nearly 4% while Infosys, Satyam, HDFC Bank, MTNL, Patni Computers, Dr Reddy's, Tata Motors and Rediff jumped over 1-3% each. While, Wipro was down around 1%.
Crude oil prices eased, the Nymex light crude oil for March delivery falling by 84 cents to close at $57.30. In the commodity space, the Comex gold for April series moved up by $5.10 to settle at $663 a troy ounce.
The market may extend Thursday’s gains on the back of firm global markets. Sensex had surged 176 points on Thursday on the back of rally in global markets triggered by US Federal Reserve’s decision to keep interest rates steady. However, according to a dealer with a local brokerage Thursday’s rally on the domestic bourses was mainly due to short covering and not due to building of fresh long positions.
As per provisional data, FIIs were net sellers to the tune of Rs 242 crore on Thursday, the day when Sensex had surged 176 points. They were net buyers to the tune of Rs 418 crore in index-based futures on that day. They were net sellers to the tune of Rs 88 crore in individual stock futures on that day.
The Q3 results which just got over were strong. With Q3 earnings season over, the market’s focus will shift to expectations regarding Union Budget 2007-08.
The weekly inflation data is due today. The wholesale price inflation rate is forecast to edge up to 6% for 12 months to 20 Jan-07 from 5.95% the previous week.
Asian markets were firm for the second day in a row today. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.39% to 1.99%.
US stocks gained on Thursday, propelling the Dow to a record close, on stronger-than-expected earnings and expectations that interest rates won't rise any time soon. The Dow Jones industrial average shot up 51.99 points, or 0.41 percent, to 12,673.68. The Standard & Poor's 500 Index gained 7.70 points, or 0.54 percent, to 1,445.94. The Nasdaq Composite Index rose 4.45 points, or 0.18 percent, to 2,468.38.
The S&P 500 index had its highest close since September 2000, while the Dow also reached a record intraday high at 12,682.57.
Nymex crude was flat in Asian trading on Friday at $57.31 a barrel.
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