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Monday, February 05, 2007
FIIs turn buyers
Net inflow of Rs 664.60 crore on 2 February 2007
On Friday (2 February 2007) foreign institutional investors (FIIs) turned buyers and bought shares worth a net Rs 664.60 crore compared to Thursday’s (1 February) sales of Rs 469.70 crore
FIIs made gross purchases worth Rs 3927.40 and gross sales worth Rs 3262.80 cumulating into a net inflow of Rs 664.60 on 2 February 2007. The 30-shares BSE Sensex finished 136.59 points higher, at 14,403.77 on 2 February 2007
FIIs inflow for the month of February stood at Rs 194.90 crore.
For the calendar year 2007, till 2 February, the FIIs total inflow aggregates Rs 687 crore.
Market Forecasts
'Nifty resistance seen at 4,340'
I do not see the market cooling down until the Nifty touches 4,340. It can be seen as the next resistance level. The F&O segment, too, indicates a further positive run for the market. The Nifty future is trading at a discount of 10 points to the underlying index, and the cost of carry in stocks across the board averages to about 7 - 8%. So I do not see any selling concerns in the derivatives segment.
Being the budget month, volatility cannot be ruled out. There will be sector specific action at times, when the finance minister announces related policies. Telecom and banking stocks should do well. Taking a technical view, most IT stocks are trading around their resistances or at the upper limit permitted by their valuations. There could be some consolidation in this space.
- Ankur Agarwal, Technical Analyst, IDBI Securities
'Telecom, banks seen bullish'
I expect telecom stocks to surge up on the back of speculation, as people try to figure out who would bag the Hutch deal. I am also bullish about banks. The State Bank of India (SBI), IDBI, Indian Overseas Bank (IOB) and Union Bank look good among the lot.
In the light of government making it compulsory for consumers to either opt for the CAS technology, or the DTH technology for television viewing, Wire & Wireless India (WWIL) stock should see appreciation. The Dish TV brand is owned by the company. Its main competitor in the segment, Tata Sky, is not listed on the bourses.
The market should also get a boost if the government does not hike the Securities Transaction Tax (STT) in the forthcoming Union Budget.
Currently, there is this ambiguity about the tax treatment of frequent purchase and sale of a security within a year. Gains from purchasing shares and selling them off within a period of less than 1 year are considered short-term capital gains. But gains out of repetitive purchase and sale of a stock in the same year are often interpreted by tax authorities as business income. And if such gains fall in the category of business income, then the tax rate applicable is 33%. In case of short-term capital gains, the rate is just 10%. If the Government dispels the ambiguity about what gains will qualify as business income and which as short-term gains, or rather puts all such gains in the category of short-term capital gains, then we can expect a marginal rise in the securities transaction tax (STT).
Day traders will benefit the most from any such decision. But there is also a chance of the short-term capital gains tax getting hiked by 200 to 300 basis points from the current 10% if a similar policy is adopted.
Tomorrow the market looks bullish to me. The Nifty has a resistance at 4,250 – 4,260. We can see a correction of 150 - 200 points on the Nifty from those levels.
- John Jose Perin Chery, Research Analyst, Anagram Stock Broking
Close: New high yet again.. in the momentum of the budget
Great rally by the Sensex! The market managed to gain sharply in late trading session largely led by the Telecom sector. The major drivers were Reliance and HDFC while metals were the disappointment. The start was bit lacklustre as there was no significant trigger for the market. Result season is almost over and digested. Budget is the next event to be tracked. Lot of expectation and speculation is driving the markets. Excise cuts on cars, VAT on cigarette etc etc etc. .Whether they materialise is the big question. Best to avoid any action on back of speculations. Mid caps were in focus and we believe that they are set to deliver.
Sensex closed up 112 points at 14515.9 helped by gains in RCVL (515.1,+5 percent), HDFC (1817.25,+4 percent), Rel Energy (548.5,+3 percent), Maruti (963.35,+2 percent) and Hero Honda (730.1,+2 percent). Restricting the gains were Hindalco (178,-3 percent), Wipro (634.75,-1 percent), Cipla (247.35,-1 percent), Grasim (2789.45,-1 percent) and NTPC (141.25,-1 percent).
Inflation is a worry for now. 6% plus inflation growth have put in force the Govt. to takes immediate steps. The custom duty on cement, palm oil and various other imported items had been reduced. But we believe that this won?t have any significant impact as the crisis remains on supply side. The industrial and manufacturing sector continues to grow in double digit whereas agriculture is growing only by 2-3%. This really puts a big question mark on the self sufficiency of a country like India with GDP growth of 8.5-9%. This will be the main issue to be discussed in Union Budget 2007-08. Agriculture will be in focus. Jain irrigation and Kirloskar pumps are the companies related to agriculture. Jain Irrigation rallied.
SBI continued with its gains. An official indicated that they may dilute govt equity by share sale via rights issue. RBI will transfer its 59.7% stake to the government of India @ Rs 1300/share or market based on the Sebi formula of 6 months average price. This will happen by June 2007 and would be cashless. Thus the Government will be able to lower its holding to 51% from the 55% that mandatory under the SBI act. This should enable SBI to raise fresh equity by diluting about 8% holding to help fund growth and also meet Basle II requirements. However, the big trigger for SBI is the merger with its subsidiary banks and there is no word on that. Investors had been hoping for a change to the FII/FDI ownership a limit which is pegged at 20% for government banks.
The Index has touched all time high- but Textiles have remained an underperformer. As per market sources, denim prices have moved up and that is some positive for the Denim Manufacturers. The demand scenario continues to be sluggish. Cotton prices have moved up by 5% pushing up yarn and Denim prices. The companies which would benefit from the same are spinners who would have contracted cotton already. Some trading upsides possible.. but tough call to say whether they will enjoy sustained higher margins and this also depends on how much cotton has been contracted.
Technically Speaking: Sensex has given a break out and its two days a close above 14320 which was a big resistance. Sensex next resistance is now at 14640 levels and in a new range.. The caution is that MACD is showing divergence.. Sensex has supports at 14210 and then at 14020. One could use the above levels as stoploss for long positions and trade up with the flow of the Index
Sensex, Nifty in uncharted terrain
The key indices set their second record in as many sessions. The Sensex hit 14,500, while the Nifty hit 4,200 for the first time. Telecom shares extended gains, as auto shares rose on renewed buying. Metal shares, however, retreated. The rally on the domestic bourses materialised amid a mixed trend in Asian and European shares.
The 30-share BSE Sensex gained 112.13 points (0.78%), to settle at a lifetime closing high of 14,515.90. It also struck a lifetime high of 14,526.51, surpassing its earlier all-time high of 14,462.77 from Friday (2 February 2007).
The S&P CNX Nifty gained 31.85 points (0.76%), to settle at a lifetime closing high of 4215.35. The Nifty hit an all-time high of 4,219.
The market-breadth was strong. For 1,529 shares rising on BSE, 1,135 declined. As many as 60 shares were unchanged. Gainers outpaced losers by a ratio of 1.34:1.
The BSE clocked a turnover of Rs 4694 crore, much lower than Friday’s Rs 5630 crore.
Barring IT and metal sector indices, the rest of the sectoral indices ended in the green. The BSE Auto index gained 114.73 points (2%), to settle at 5,712.79. The BSE’s Capital Goods index rose 97.16 points (1%), to end at 9,920.97. The BSE Metal index lost 111.55 points (1.1%), to 9,345.74. The BSE IT index shed 5.24 points, to 5,387.05.
The BSE Small-Cap gained 94.93 points (1.2%), to 7,655.65. The BSE Mid-Cap index advanced 37.04 points (0.61%), to end at 6,155.24.
With today’s rise, the Sensex has gained 424.98 points (3%) in the past three trading sessions from 14,090.92 on 31 January 2007. The market sentiment is firm due to US Federal Reserve keeping interest rates steady at its 31 Jan 2007 meeting. Sentiment was also boosted by the RBI, on the same day, raising fiscal 2006-07 GDP growth forecast upwards to 8.5% to 9% from earlier 8%. The barometer index is up 5.2% in calendar 2007 thus far.
Market men feel that a pre-budget rally has started. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. There are also expectations that a surcharge on corporate tax will be abolished.
Auto shares rose on renewed buying. Car major Maruti Udyog rose 2% to Rs 965, while Tata Motors gained 1% to Rs 920. Bajaj Auto rose 1.7% to Rs 2827 and Horo Honda gained 1.2% to Rs 724.90. There are hopes that auto industry may get tax sops in the budget. Expectations are that the excise duty on small cars may be cut further from 16% to 8%. Last week, top automakers reported good vehicle sales numbers for January 2007.
Reliance Communications surged 5% to Rs 515.75. The scrip hit a lifetime high of Rs 518.40. As many as 33.2 lakh shares changed hands in the counter on BSE. Bharti Airtel was up 1% to Rs 779.40, off an all-time high of Rs 797, struck earlier during the day.
Mobile service majors continued in Friday's buoyant vein. The Telecom Regulatory Authority of India (TRAI) decided to lower port charges, allowing cellular operators to connect to BSNL and MTNL lines by up to 29%, a move which is expected to result in tariff cuts on Friday. A race for India's fourth-largest mobile firm, Hutchison Essar, is also expected to boost the valuation of telecom stocks. Suitors for Hutch also include Britain's Vodafone.
Housing finance major, HDFC, gained 4% to Rs 1818, extending Friday’s surge. The stock also hit an all-time high of Rs 1821.95. The company continues to benefit from a strong demand for housing loans.
Reliance Energy rose 2.8% to Rs 549.50, amid reports that the company will bid for the global power assets of a British power investment company, Globeleq, by mid-February.
Tata Steel gained 1.7% to Rs 471.05. The stock plunged last week after winning Anglo-Dutch steel maker, Corus Group, in an auction held in London. The Tatas will pay $12.1 billion for Europe's leading steel producer. The price is said to be expensive and may put under strain Tata Steel's finances, at least in the short term.
Index heavyweight Reliance Industries (RIL) 1.3% to Rs 1390. In January, the company reported robust Q3 December 2006 results. The State Bank of India (SBI) was up 1.2% to Rs 1196, after the bank's chief said domestic interest rates have peaked for the fiscal year ending March 2007.
Metal shares lost, responding to a fall in base metal prices, on the London Metal Exchange (LME) on Friday. Hindustan Zinc lost 5.7% to Rs 653.50, Sterlite Industries shed 6.6% to Rs 485.50 and Hindalco lost nearly 3% to Rs 177.80. Fund-liquidation, triggered by a report of heavy losses at a hedge fund, had caused the fall of metal prices on LME.
Media shares were in demand. Shree Ashtavinayak Cine Vision jumped 19.5% to Rs 370.70, UTV Software gained 12% to Rs 321.50, Balaji Telefilms rose 10% to Rs 140.20, Pritish Nandy Communications gained 5% to Rs 55.10, Pyramid Saimira Theatre rose 5% to Rs 421.35, and Adlabs Films gained 4% to Rs 487.
Real estate developer Ansal Properties & Infrastructure jumped 5% to Rs 799.60, after it said its board will meet on 12 February 2007 to consider a bonus issue of shares.
Oil and gas services company, Deep Industries, dropped 4.4% to Rs 57.50 despite the firm winning two contracts of total worth Rs 26.07 crore.
Federal-Mogul Goetze (India) lost 2.6% to Rs 364. The company informed on Monday that ABN Amro Bank N.V. had acquired an additional 2.53%, taking its holding in the company to 5.18%.
Eicher Motors rose nearly 3% to Rs 382.65, after the company said on Monday that its sales rose 7% to 2,713 units in January 2007. Domestic sales rose 8% to 2,612 vehicles, while exports fell 14% to 101 units.
Gujarat Gas Company lost 1.2% to Rs 1332. The company said on Friday its board will meet on 23 February 2007 to consider a sub-division of equity shares.
Global Vectra Helicorp was up nearly 12% to Rs 317. The stock recovered after losing as much as 4.8% to Rs 270 earlier during the day. Volumes in the stock were substantial at 20.2 lakh shares on BSE.
Shringar Cinemas jumped 10% to Rs 73.45, after the company said its FAME Multiplex, at Aurangabad, was exempted from paying entertainment tax. Under the entertainment tax exemption policy, this multiplex will enjoy 100% exemption for the first three years and 75% exemption of the prescribed rate for the subsequent two.
Indiabulls Financial Services (IBFSL) jumped 8% to Rs 453.95, after the company said it was considering various restructuring options, including the transfer of its stock-broking business, in favour of a separate company. The new company will then be listed on the stock exchanges. IBFSL has three businesses: stock-broking, consumer finance and housing finance. The real estate venture, Indiabulls Real Estate (IBREL), was demerged in December 2006.
Rain Commodities jumped 9% to Rs 183.25, after the company said its US subsidiary will buy the assets of Great Lakes Carbon Income Fund, giving the cement maker an indirect control over GLC Carbon USA. Rain will acquire the fund's wholly-owned Canadian subsidiary, Carbon Canada, which has 73.56% stake in GLC Carbon USA. Rain already owns 20.23% in GLC Carbon, the world's largest producer of anode and industrial grade calcined petroleum coke.
ABB rose 1.2% to Rs 3799. The company announced Q4 December 2006 results on 16 February 2007.
Jain Irrigation gained 6% to Rs 425, after it said Citigroup Global Markets acquired an additional 13.3 lakh shares on 31 January 2007 from the secondary market, raising its holding in the company to 5.83%.
Battery maker Eveready Industries rose 5.4% to Rs 79.25 after prices of zinc, a major raw material for batteries, fell.
FIIs were net sellers to the tune of Rs 470 crore last Thursday (1 February 2007), the day when the Sensex had jumped 176 points. But as per provisional data, FIIs were net buyers to the tune of a huge Rs 947 crore on Friday (2 February 2007), the day when the Sensex gained 137 points, settling at a lifetime closing high of 14,403.77. The Nifty also struck a lifetime high the same day.
FIIs were net buyers to the tune of Rs 546 crore in index-based futures on 2 February. They were net buyers to the tune of Rs 19 crore in individual stock futures the same day.
European markets were little changed in early trade. London’s FTSE 100 index was up 0.07%. Asian markets were mixed. Japan’s Nikkei 225 average was down 1.1% as Japanese automakers tumbled after Nissan Motor slashed its earnings forecast. Hong Kong’s Hang Seng was down 0.5%. Key benchmark indices in South Korea, Singapore and Taiwan were up between 0.08 - 0.34%.
US blue-chips eased on Friday after data showed a moderate job creation in January, suggesting that the Federal Reserve will not cut interest rates yet, while the S&P 500 and the Nasdaq had edged higher. The Dow Jones industrial average fell 20.19 points, or 0.16%, to 12,653.49, while the Standard & Poor's 500 Index rose 2.45 points, or 0.17%, to 1,448.39. The Nasdaq Composite Index gained 7.50 points, or 0.30%, to 2,475.88.
Finance Minister P Chidambaram said earlier on Monday that last week's upgrade to investment grade of the country's credit rating by Standard & Poor's will lead to increased foreign investment. "Thanks to the upgrading of our ratings to investment grade, I am confident more investments will come to India," the finance minister told a conference. Last Tuesday, S&P raised India's rating, citing the country's strong economic prospects and external balance sheet.
Prime Minister Manmohan Singh said on Saturday that inflation reduction, which spiked over 6% last week, remains a top priority for his government.
Weekly Recommendations
Recommendations for the week from Geojit
Stock Recommendation for the week February 5, 2007 to February 9, 2007
Scrip Name Price Recommendation
Biocon 420.50 Buy
Indian Hotel 156.80 Buy
SE Asia Marine 187.35 Buy
VSNL 505.45 Buy
Zee Entertainment 339.55 Buy
Thanks Kiran
Another show of strength by Sensex, Nifty
The market surged for the third day in a row today, even as the key indices struck record highs for the second successive day. The Sensex hit 14,500, while the Nifty 4,200 for the first time. Telecom shares extended gains, as auto shares rose on renewed buying. Metal shares, however, retreated.
The rally on the domestic bourses materialised amid a mixed trend in Asian and European shares.
The Sensex’s provisional closing was 14,510.16, a gain of 106.39 points. It also struck a lifetime high of 14,526.51, surpassing its earlier all-time high of 14,462.77 from Friday (2 February 2007).
The provisional closing of Nifty was 4,215.75, a gain of 32.25 points.
The market-breadth was strong. For 1,529 shares rising on BSE, 1,135 declined. As many as 60 shares were unchanged. Gainers outpaced losers by a ratio of 1.34:1.
The BSE clocked a turnover of Rs 4691 crore.
Auto shares rose on renewed buying. Car major Maruti Udyog rose 2% to Rs 965 while Tata Motors 1% to Rs 920. Bajaj Auto rose 1.7% to Rs 2827 and Horo Honda gained 1.2% to Rs 724.90. There are hopes that auto industry may get tax sops in the budget. Expectations are that the excise duty on small cars may be cut further from 16% to 8%. Last week, top automakers reported good vehicle sales numbers for January 2007.
Reliance Communications surged 5% to Rs 515.75. The scrip hit a lifetime high of Rs 518.40. As many as 33.2 lakh shares changed hands in the counter on BSE. Bharti Airtel was up 1% to Rs 779.40, off an all-time high of Rs 797, struck earlier during the day.
Mobile service majors continued in Friday's buoyant vein. The Telecom Regulatory Authority of India (TRAI) decided to lower port charges, allowing cellular operators to connect to BSNL and MTNL lines by up to 29%, a move which is expected to result in tariff cuts. A race for India's fourth-largest mobile firm, Hutchison Essar, is also expected to boost the valuation of telecom stocks. Suitors for Hutch also include Britain's Vodafone.
Housing finance major HDFC gained 4% to Rs 1818, extending Friday’s surge. The stock also hit an all-time high of Rs 1821.95. The company continues to benefit from a strong demand for housing loans.
Reliance Energy rose 2.8% to Rs 549.50, amid reports that the company will bid for the global power assets of a British power investment company, Globeleq, by mid-February.
Tata Steel gained 1.7% to Rs 471.05. The stock plunged last week after winning Anglo-Dutch steel maker, Corus Group, in an auction held in London. The Tatas will pay $12.1 billion for Europe's leading steel producer. The price is said to be expensive and may put under strain Tata Steel's finances, at least in the short term.
Index heavyweight Reliance Industries (RIL) 1.3% to Rs 1390. Last month, the company reported robust Q3 December 2006 results.
State Bank of India (SBI) was up 1.2% to Rs 1196, after the bank's chief said domestic interest rates have peaked for the fiscal year ending March 2007.
Metal shares lost, responding to a fall in base metal prices on the London Metal Exchange (LME) on Friday. Hindustan Zinc lost 5.7% to Rs 653.50, Sterlite Industries shed 6.6% to Rs 485.50 and Hindalco lost nearly 3% to Rs 177.80. Fund-liquidation, triggered by a report of heavy losses at a hedge fund, had caused the fall of metal prices on LME.
European markets were little changed in early trade. London’s FTSE 100 index was up 0.07%. Asian markets were mixed. Japan’s Nikkei 225 average was down 1.1% as Japanese automakers tumbled after Nissan Motor slashed its earnings forecast. Hong Kong’s Hang Seng was down 0.5%. Key benchmark indices in South Korea, Singapore and Taiwan were up between 0.08 - 0.34%.
US blue-chips eased on Friday after data showed a moderate job creation in January, suggesting that the Federal Reserve will not cut interest rates yet, while the S&P 500 and the Nasdaq had edged higher. The Dow Jones industrial average fell 20.19 points, or 0.16%, to 12,653.49, while the Standard & Poor's 500 Index rose 2.45 points, or 0.17%, to 1,448.39. The Nasdaq Composite Index gained 7.50 points, or 0.30%, to 2,475.88.
Finance Minister P Chidambaram said earlier on Monday that last week's upgrade to investment grade of the country's credit rating by Standard & Poor's will lead to increased foreign investment. "Thanks to the upgrading of our ratings to investment grade, I am confident more investments will come to India," the finance minister told a conference. Last Tuesday, S&P raised India's rating, citing the country's strong economic prospects and external balance sheet.
Prime Minister Manmohan Singh said on Saturday that inflation reduction, which spiked over 6% last week, remains a top priority for his government.
Sensex rallies past 14500
The market witnessed strong all-round buying during the day. However in early trades after a positive opening gap of 28 points the Sensex slipped on selling in front-line stocks and touched an intra-day low of 14372. The subsequent strong buying in auto, consumer durables and oil stocks lifted the Sensex above the 14500 mark to an all-time high at 14527. The Sensex ended the session at 14516, up 112 points, while the Nifty closed at 4216 with gains of 32 points.
The breadth of the market was positive. Of the 2,724 stocks traded on the BSE, 1,537 stocks advanced, 1,138 stocks declined and 49 stocks ended unchanged. Among the sectoral indices the BSE Auto index advanced 2.05% at 5713 followed by the BSE CD index (up 1.53% at 4029) and the BSE CG index (up 0.99% at 9921). However, the BSE Metal index and the BSE IT index closed in negative territory.
Select blue chips notched up substantial gains. During the day mobile service providers were in the limelight on TRAI's decision to lower port charges by up to 29%. Bharti Airtel hit an all-time high of Rs797 and closed with gains of 1.32% at Rs781. Reliance Communications surged 5% to Rs515.
Among the Sensex gainers HDFC surged 4.22% at Rs1,817, Reliance Energy advanced 2.70% at Rs549, Maruti Udyog climbed 1.97% at Rs963, Hero Honda added 1.96% at Rs730, Bajaj Auto gained 1.71% at Rs2,825, Tata Steel added 1.50% at Rs470, SBI jumped 1.31% at Rs1,197 and Reliance Industries was up 1.14% at Rs1,388. Among the laggards Hindalco tumbled 2.73% at Rs178 and Wipro slipped 1.35% at Rs635. Cipla, Grasim, NTPC, Satyam Computers ended with marginal losses.
Among the metal shares Sterlite Industries tumbled 6.27% at Rs487, Hindustan Zinc slipped 5.52% at Rs655, SAIL lost 1.76% at Rs111, JSW Steel fell 1.63% at Rs455 and Jindal Stainless shed 1.03% at Rs125.
Over 40.06 lakh IDBI shares changed hands on the BSE followed by Reliance Communications (33.35 lakh shares), IDFC (29.14 lakh shares), SAIL (21.55 lakh shares) and Balaji Telefilms (19.57 lakh shares).
Value-wise Reliance Communication registered a turnover of Rs169 crore on the BSE followed by Reliance Capital (Rs66 crore), Tata Steel (Rs58 crore), SBI (Rs58 crore) and Reliance Industries (Rs43 crore).
Intra-day Stock Ideas
NIFTY (4183) SUP 4165 RES 4205
BUY GMRINFRA (395)
SL 390 T 405, 407
BUY GREAVESCOT (369.8)
SL 364 T 379, 382
BUY LITL (244.75)
SL 241 T 254, 256
SELL JPASSOCIAT (700.5)
@ 706 SL 711 T 690, 688
SELL 3IINFOTECH (283)
@ 287 SL 291 T 277, 275
STRATEGY INPUTS FOR THE DAY
Time to hope for best, prepare for worst
This time, like all times, is a very good one, if we but know what to do with it.
After a fairly eventful week, the bulls will look to consolidate their hold on the market. With the results and the RBI policy meetings out of the way, the only near-term trigger is the budget for FY08. Even here, nothing much is expected in terms of reforms, as the UPA regime is still hamstrung by political compulsions. At best, what we can say is that the budget probably won't have any bad news. Chidambaram will be more than happy to maintain status quo.
At the same time we do have a few worries on our hands. The sudden spike in oil prices is one. NYMEX crude futures is quoting at $59.07 per barrel in extended trading in Asia. Plus, inflation has crossed 6% yet again and is giving the Government and the central nightmares. Further tightening measures are not ruled out in the future. High valuation is another concern. A lot of penny stocks have started shooting up once again. For many this is a sign that the market is overheated. In fact, the Economist of the UK feels the Indian economy itself is overheated.
Meanwhile, according to a Wall Street Journal report, metal trading hedge fund Red Kite's $1-billion fund lost 20% in the year to January 24. Following this report, zinc, copper and aluminium plunged. Some pressure on metals cannot be ruled out.
Indications from the F&O segment are not encouraging either. The Nifty February Futures are trading at a discount to the spot Nifty. Also, the Put Call Ratio (PCR) is high at 1.7. But, if you are a long-term investor, who is willing to hold stocks for more than a year, you should stay invested. Those who have missed out on the rally and plan an entry may also check in at lower levels for long-term gains.
For the day, we expect a cautious to lower opening and a volatile day. The stock specific action will continue. We could have a traditional pre-budget rally but post the event (or should we say non-event), there may be some cooling. We had a decent start to the year in January, the upside from here will hinge on FII inflows. On Friday, we saw huge buying from foreign funds. This trend has to sustain if the market has to rise substantially from the current level.
Keep an eye on Siemens as the German parent is keen on hiking its stake in the Indian arm. Kalyani Steels is eyeing acquisitions in the domestic market. Xpro India could get a boost from the sale of land at Kandivali in Mumbai. KPIT Cummins is likely to announce a major order from overseas. Indiabulls Financial Services is going to be among the stocks to watch out for. The company will go through another restructuring. This time it is spinning off the broking outfit. Also, steel titan Lakshmi Mittal is eyeing a higher stake in the company, according to reports. One can also buy RPG Cables.
S.Kumars Nationwide Ltd. might see some action. The company's Board has approved the demerger of the retail business. The Board has also approved swap ratio of one share of the new company for every five shares held.
Valecha Engineering has gained 27% in a month. The company's Board will meet today to consider organic or inorganic growth opportunities in India or overseas.
TCS is likely to rise as it has signed a five-year agreement with the Mumbai International Airport.
The IPOs of Indian Bank, SMS Pharma, C&C Construction will open for subscription today.
FIIs were net buyers of Rs9.47bn (provisional) in the cash segment on Friday. In the F&O segment, they were net buyers of Rs6.66bn. However, on Feb. 2, FIIs were net sellers to the tune of Rs4.7bn. Mutual Funds were net buyers on the same day at Rs1.08bn.
Major Bulk Deals:
Deutsche Securities has bought Balmer Lawrie; T. Rowe Price has picked up BF Utilities; Crown Capital and CLSA have purchased Champagne Indage while ABN AMRO MF has sold the stock; ICICI Prudential MF has bought Cummins India; CLSA has picked up Denso India while Templeton MF has sold the scrip; ABN AMRO Bank has sold Escorts; Goldman Sachs and Citigroup have bought Gitanjali Gems; Deutsche Securities has purchased GVK Power and IOL Broadband; Crown Capital has bought Radico Khaitan; UBS has picked up Swan Mills and SBI MF has picked up Zicom.
Insider Trades:
Dabur India Ltd: PD Narang, Group Director has sold in open market 199800 equity shares of Dabur India Ltd on 24th January, 2007.
Market Volumes:
The turnover on NSE was up by 27.7% to Rs102.6bn. The BSE Capital Good index was the major gainer and gained 2.46%. BSE Technology index (up 2.04%), BSE Consumer Durable index (up 1.90%) and BSE Pharma index (up 0.92%) were among the other gainers. However, BSE PSU index lost 0.82%.
Volume Toppers:
SAIL, TTML, Nagarjuna Fertilizers, Reliance Communications, Tata Steel, XL Telecom, Aftek, Indiabulls, Escorts, Gujarat Ambuja, Hindalco, Satyam, Cairn, IVRCL, ITC and Indian Hotels.
Upper Circuit Filters:
Heritage Foods, Shri Adhikari Brothers, Goldstone Technology, Fedders Lloyd, Aurionpro Solutions, Electro therm, Ganesh Housing, HOV Services, IOL Broadband, Taneja Aerospace and Tanla.
Delivery Delight:
Aditya Birla Nuvo, Amtek Auto, Arvind Mills, Bajaj Auto, BEML, Bharat Forge, Blue Star, Bombay Rayon Fashions, CEAT, Cipla, Cummins, D S Kulkarni, Dr Reddy's, Gitanjali Gems, Gujarat Ambuja, HDFC Bank, Hindalco, HDFC, Infotech Enterprises, ITC, JP Associates, Jyoti Structures, Prism Cement, Radico Khaitan, SCI and Wipro.
Brokers Recommendations:
Royal Orchid Hotels – Buy from Emkay with target of Rs243
ABB – Buy from Citigroup with target of Rs4400.
Long Term Investment:
Maruti
Major News Headlines:
ACC Jan Cement sales at 1.64mn Tons against 1.65mn tons
Gujarat Ambuja net sales at Rs 13.29bn (up 72%), profit at Rs3.38bn (up 288%)
Gujarat Ambuja to pay Re0.8 per share as dividend
India's Inflation rate was 6.11% in week ended Jan 20 against expectation of 6.8%
Aurobindo Pharma gets US approval to sell Cefprozil Oral Suspension
GMR Industries wins bid for Sugar factory in Karnataka
Tata Chemicals to form 50:50 JV with Total Produce Plc
NTPC and Railways to build a 1,000MW thermal power plant in Bihar
Gujarat Gas to consider stock split on February 23, 2007
Steel Stripes to raise FII Investment limit to 35%
Emco Board to mull strategic investment on Feb 7
From Research Desk
ACC Ltd. Result Update
Per ton cement realization has gone up for ACC both on yoy basis and on sequential basis for Q4CY06. On yoy basis the realization has gone up by 44.9% to Rs3156. On sequential basis the growth is 3.4%. We expect cement prices to remain firm in CY08 with small upsides and capacity growth is not expected to match the demand growth. We expect prices to start softening from last quarter of CY08. We estimate CY07 realization to be at Rs3267 compared to CY06 realization of Rs2914, a growth of 12% and come down by 2% in CY08.
Cement volumes for Q4CY06 was up by 7% to 4.9mn ton and on sequential basis the volume growth was higher by 14.8%. Cement volumes has picked up post monsoon for ACC, but lagging behind the industry growth rate. For the full year also the volume growth has lagged behind at 7.8% compared to the industry growth rate of 11.3%. Clinker production for CY06 was higher by 2.7% at 13.1mn ton. Higher blending has increased cement production by 7.8% in CY06. We expect cement volume growth for CY07 and CY08 at 7% and 5% respectively with new capacities coming in. ACC is expanding its Lakheri facility by 0.6mn ton shortly and by adding grinding facilities at Kymore, Tikaria, Sindri and Wadi the overall capacity is expected to touch 23.1mn ton by end of CY07 from the present 20mn ton capacity.
Operating margin for Q4CY06 increased by 1340bps on y-o-y basis and by 230bps on sequential basis as cost per ton remained almost flat for the quarter whereas realisations picked up. We expect margins to grow in CY07 with improvement in realisations and possible reductions on power front as 25MW power plant is coming up at Lakheri shortly and another 30MW power plant is coming at the end of CY07 which will reduce power cost in CY08.
ACC’s CMP discounts the estimated CY07 and CY08 earnings by 13.5x and 14.4x respectively. We expect average cement prices to move by around 2-3% from the current levels in the country despite duty reductions. With incremental capacity lagging behind demand growth and possibility of imports not matching with the incremental growth due to pricing and logistical bottlenecks we expect cement prices to be higher till mid of CY08. We maintain our HOLD rating with a target of Rs1077. Our target price discounts CY08 earnings by 15x.
How Market Fared
Rally likely to continue
The markets recorded second consecutive day of gains as bulls were on a rampage. Firm global markets and India's Inflation rate which was at 6.11% in week ended January 20, 2007 against expectation of 6.08% aided the key indices to cross the 14400 level for the first time. The US Federal Reserves decision to keep interest rates steady also acted as a positive trigger boosting the sentiments at home. The Telecom and the Capital Good stocks led from the front. Heavy weight Bharti Airtel and Reliance Communication led the rally and Capital Good were led by L&T and Siemens, however the Bank and Oil & Gas stocks suffered losses as profit booking dragged them down.
Finally the benchmark Sensex closed at an all time high of 14403 gaining 136 points and NSE Nifty added 46 points to close at 4183.
Tata Steel, after getting battered following the Corus deal was back in action as the scrip advanced 2.5% to Rs468. The Company has announced their plans for raising fund for Corus by Month End. The scrip has touched an intra-day high of Rs483 and a low of Rs459 and has recorded volumes of over 81,00,000 shares on NSE.
Tata Chemicals advanced 3.7% to Rs237 after the company announced that they would form 50:50 Joint Venture with Total Produce Plc. The scrip touched an intra-day high of Rs239 and a low of Rs232 and recorded volumes of over 1,00,000 shares on NSE.
Capital Good stocks were the top gainer. L&T advanced nearly by 5% to Rs1680, Gammon India rallied by over 8% to Rs420, Crompton Greaves rose over 4.5% to Rs208 and Punj Lloyd was up 1% to Rs1028.
Telecom stocks were in the limelight. Bharti Airtel surged over 5% to Rs770, Reliance Communication gained 3.4% to Rs490 and VSNL was up 6% to Rs505.
The BSE Pharma index surged 0.92%. Lupin, Cipla, Orchid Chemicals, Wockhardt and Cadila were among the major gainers.
Cement stocks are also in momentum on back of fresh buying. Gujarat Ambuja was up by 2.5% to Rs142 after the company’s quarterly net sales reported 72% growth at 13.29bn and profit at Rs3.38bn (up 288%), ACC has gained by 0.6% to Rs1040, Grasim advanced 1.3% toRs2811 and Mangalam Cement rose 0.5% to Rs225.
Market may remain firm
The market may remain firm tracking Asian markets most of which were in the green. With the results season over, the near term trend on the bourses will be driven by expectations regarding the Union Budget 2007-08. Market men expect the budget to give big thrust to agriculture and infrastructure. There are also expectations that surcharge on corporate tax would be abolished.
FIIs were net sellers to the tune of Rs 470 crore last Thursday (1 February 2007), the day when Sensex had jumped 176 points. But as per provisional data, FIIs were net buyers to the tune of a huge Rs 947 crore on Friday 2 February 2007, the day when Sensex had gained 137 points to settle at lifetime closing high of 14,403.77. Nifty too struck lifetime high on that day.
FIIs were net buyers to the tune of Rs 546 crore in index-based futures on 2 February. They were net buyers to the tune of Rs 19 crore in individual stock futures on that day.
Mutual funds were net buyers to the tune of Rs 108 crore on 1 February. Mutual funds have pressed substantial sales since the middle of last month.
Asian markets barring Japanese markets were in the green on Monday. Key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan were up by between 0.18% to 0.45%. Japan’s Nikkei 225 average was down nearly 1% as Japanese automakers tumbled after Nissan Motor slashed its earnings forecast.
US blue-chips eased on Friday after data showing moderate job creation in January suggested the Federal Reserve will not cut interest rates yet, while the S&P 500 and the Nasdaq edged higher. The Dow Jones industrial average fell 20.19 points, or 0.16 percent, to 12,653.49, while the Standard & Poor's 500 Index rose 2.45 points, or 0.17 percent, to 1,448.39. The Nasdaq Composite Index gained 7.50 points, or 0.30 percent, to 2,475.88.
US crude oil futures were little changed on Monday after jumping 3% to $59 a barrel on Friday amid forecasts of more cold weather in the United States and concern over supply from OPEC members Iran and Nigeria.
Base metals prices fell sharply on the London Metal Exchange on Friday on fund liquidation after a report of heavy losses at a hedge fund.
Market may exhibit caution
The market surged by over 300 points in the last two trading sessions and is expected to make further headways but the rally was not broad-based as heavyweights in the information technology, banking and auto spaces are still under performing. On Friday, the market breath was marginally positive though both the indices the Sensex and Nifty soared to all-time new highs. Further, rising crude oil prices, sliding fund inflows and mixed global cues may put pressure on local indices. Among the domestic indices, the Nifty has the support at 4140, while on the upside it could edge higher to 4200. The Sensex has a likely support at 14278 and may face resistance at 14463.
US indices ended on a mixed note on Friday, while the Dow Jones dropped by 20 points to close at 12653, the Nasdaq ended 8 points up at 2476.
Indian stocks trading on the US bourses logged steady to firm gains. VSNL rallied sharply and soared over 5% while Tata Motors, Infosys ,Patni Computers ,Satyam, Wipro and Rediff ended with steady gains. However, MTNL slipped 1.58% and HDFC Bank remained unchanged.
Crude oil prices gained strength, the Nymex light crude oil for March delivery rose $1.72 to close at $59.02. In the commodity space, the Comex gold for April series declined $11.50 to settle at $651.50 a troy ounce.
Forecasts
Bullish trend resumes
We have a target for the Nifty of 4,288 by end-February 2007. Most results have been as per market expectations. Companies in telecom, IT and cement sector have done well. Pharma company results, however, did not live up to expectations. The market moved more or less sideways as most results were already discounted in the prices. I think the market should continue bullish due to anticipation on the back of budget policy. Then there can be a correction of 10 - 12 % from the peak. Till then, the outlook is positive.
- Vineet Birla, Technical analyst, Pranav Securities
The rebound of the market started after the RBI meeting on Wednesday. The US Fed too not raising any fresh alarm about inflationary pressures in the world's largest economy provided more fodder. I think the pre-budget rally has begun. The securities transaction tax (STT) is likely to stay flat in the forthcoming Union Budget. There is some speculation of the Government raising the ceiling for foreign shareholding in the aviation sector. We have been recommending aviation stocks to our customers for some time now. The budget seems to have some positives in store for the auto sector as well.
Technical charts suggest a buy signal for GMR Infrastructure and Hanung Toys. Both have formed a bottom. The volumes on GMR Infrastructure were particularly high today.
For the Nifty, the next target is 4,250 in the near-term.
- Gaurav Modi, Technical Analyst, Pragaya Securities
Q&A
It is observed that when a company declares bonus shares, the stock price falls by 50 per cent or more on ex-bonus date from the last trading and then starts rising.
In this backdrop, is it advisable to enter Sundaram Fasteners and Dabur at current price levels? I have a one-two year perspective.
When a company declares a bonus, the stock price declines on the ex-date to adjust for the expanded equity base, based on the bonus ratio. The reason that the share price of a company often rallies after it goes ex-bonus is due to the way in which bonus offers alter investor perception about the company.
The fundamentals of the companies issuing bonus shares are perceived as being very sound. Secondly, investors apply linear thinking and expect the company's management to reward the shareholders with more bonus issues in future as well.
This results in the share prices moving up after the share price goes ex-bonus.
Though share prices often move up when they go ex-bonus, it is not a rule that is carved in stone. Depending on the market conditions and the factors influencing the sector in which the company operates, the prices can move lower too.
Take the example of Bajaj Auto that had declared a 1:2 bonus in 1997. The stock price fell 57 per cent in the four years succeeding the issue. Similarly, shares of Tata Chemicals lost 84 per cent in the five years after the shares went ex-bonus in 1995.
On your stock specific queries, Sundaram Fasteners has halted its short-term down move at Rs 73. This is 50 per cent retracement from the high of Rs 94. This seems like a good point to buy this stock with a stop at Rs 70. Price targets would be Rs 128 and then Rs 178.
The Dabur India stock is reversing direction after hitting a high of Rs 117. The stock price is hovering around Rs 100, where the 50-day moving average is positioned.
A slide below these levels can take the price to the next support band that exists between Rs 90 and Rs 95. You can buy the share with a stop at Rs 88. If there is a dip below Rs 90, the price can slip all the way to Rs 73.
I have a demat account with a private bank, which allows online transactions. But due to non-availability of Internet connection I am unable to execute my transactions online.
So, now I want to open an account with a local broker. Please tell me whether it is possible to open more than one demat account, or some other way to do this.
Most online brokers have the facility for placing orders through the telephone as well. You can check with your online broker if you can place your orders though the telephone line.
Even if you decide to change your broker, there is no need for you to open a new demat account. The demat account that you were accessing with the online broker can continue to be used with the local broker as well.
SEBI clearly states that the investor need not consider the convenience of his broker while deciding on his demat account.
The laws of our country permit the investor to open more than one demat account with the same depository participant or with different depository participants. You are free to open and operate more than one demat account, if you so desire, provided they are not in fictitious names.
Stocks you can pick up this week
Aurobindo Pharma
Research: Edelweiss
Rating: Buy
CMP: Rs 720 (Face Value Rs 5)
12-Month Price Target: NA
Aurobindo Pharma continued with its growth momentum in Q3 FY07 with Y-o-Y sales growth of 29%, EBITDA growth of 35% and net profit growth of 130%. While sales and net profit were in line with the estimates, EBITDA was significantly below estimates on account of: (1) Higher pen-g prices pulled down overall gross margin by 300 bps; and (2) some operating income was reported as other income.
The sharp 38% increase in pen-g prices did not allow Aurobindo to increase realisations on an immediate basis. However, in Q4 FY07E, realisations may improve to partially compensate for the loss, although the net impact on margins will still be negative.
The traction of growth drivers continues with formulations sales growing 19% Q-o-Q. Going forward, the US generics business is likely to see greater momentum with launches of Simvastatin and Sertraline in Q4 and likely launches of a couple of Cephalosporins in Q1 FY08E.
Sales of anti-retrovirals are also proceeding as per expectation and are on track to achieve a total of $100 million in FY07E. At current market price, the stock trades at a P/E of 13.9x its FY08E earnings.
Bhel
Research: Angel Broking
Rating: Neutral
CMP: Rs 2,509 (Face Value Rs 10)
12-Month Price Target: NA
Bhel reported net sales of Rs 4,339.7 crore in Q3 FY07 (Rs 3,326.7 crore). This was on account of 28.6% and 33.2% Y-o-Y growth recorded by the power and industry segments, respectively. For the nine months ended December ’06, the company posted 33.8% Y-o-Y growth to Rs 10,317.8 crore.
The company’s order book till December ’06 has risen 38.2% Y-o-Y to Rs 46,700 crore. It has announced an investment of Rs 3,200 crore for expansion of brownfield capacity and modernisation of existing facilities. It will further expand its annual equipment manufacturing capacity to 15,000 mw.
Bhel is an ultimate power play. The government’s initiative of ‘Power for all by 2012’, APDRP and rural electrification programmes augur well for Bhel’s future growth. But competition from foreign companies and timely execution of projects pose a threat to growth.
Given the company’s track record, as well as its technological tieup with global power majors like Alstom and Siemens, Bhel may be able to counter these risks. At the current market price, the stock trades at 21.6x and 19.2x its FY08E and FY09E EPS. Though the valuation looks stretched, considering the sustained earnings momentum for the next few quarters, Angel Broking is neutral on the stock.
Bihar Tubes
Research: Religare Securities
Rating: Buy
CMP: Rs 116 (Face Value Rs 10)
6-Month Price Target: Rs 190
Bihar Tubes is a leading manufacturer of galvanised steel tubes, structural pipes, black pipes and pre-galvanised pipes. The company operates in a steel tubes industry which is likely to grow 30-35% in the coming years due to the government’s thrust on infrastructure development.
The company has been looking to cash in on this opportunity and is expanding its production facilities to a significant extent. Bihar Tubes has been making structural shifts in the production of pipes and is diversifying into specialty pipes manufacturing.
The company has already increased its production capacity and its fourth tube mill will be operational in the last quarter of FY07. Also, with the rise in demand for steel tubes, it is likely to post operating profits of Rs 11.5 crore and Rs 19 crore in FY07 and FY08, respectively.
The structural shift in products by entering into specialty products will allow the company to increase its operating profit margins to 5% in the coming years.
Due to increase in sales and margins, the company will be able to increase its PAT margins to 2.7% and 2.4% in FY07 and FY08, respectively. It is currently trading at P/E multiples of 6x and 8x of its FY07 and FY08 earnings. Hence, the stock is a good pick with a price target of Rs 190 with a time period of six months.
ITC
Research: SSKI
Rating: Outperformer
CMP: Rs 176 (Face Value Rs 1)
12-Month Price Target: NA
ITC continues to traverse a high growth trajectory, with Q3 FY07 revenues growing 24% to Rs 3,170 crore. EBITDA margins have remained stable at 34.2%. Adjusted PAT has increased by 23% to Rs 720 crore. The cigarettes business reported 13.8% growth during the quarter (fifth consecutive quarter of double-digit growth and over 7-8% volume growth).
ITC’s stock has underperformed the Sensex by 22% over the past three months, mainly due to the fear of bringing cigarettes under VAT net. While levying of VAT on cigarettes looks more probable this year (during the state budgets in April), there is lack of clarity over the rate (between 4% and 12.5%) and assessable value (MRP or net of excise).
While this will continue to drag stock performance in the near term, sustained volume growth of 7-8% in the cigarettes business indicates the strong traction and ability to take price hikes. SSKI believes that 7-8% of sustainable volume growth in the cigarettes business can potentially redefine the growth traction for ITC.
The company continues to scale each of its noncigarettes portfolio – this includes portfolio expansion in foods, hotel room addition through organic, as well as inorganic route, and capacity augmentation in the paper business.
Tata Steel
Research: JM Morgan Stanley
Rating: Overweight
CMP: Rs 463 (Face Value Rs 10)
12-Month Price Target: Rs 564
JM Morgan Stanley is cutting its target price to Rs 564 to reflect the post-Corus acquisition scenario, but is maintaining the overweight stance.
This implies about 21.5% upside potential for the stock. While the Corus acquisition can be a good long-term strategy for Tata Steel, the transaction valuation leaves little margin for error and poses risk.
Tata Steel is one of the fastest growing steel companies globally, with a strong geographical mix. Tata Steel has won the auction for Corus at an enterprise value of $12.9 billion (cash outflow $11.3 billion). At EV/EBITDA of more than 8x CY06E on consensus estimates and replacement value of $679/tonne, the valuation for the deal looks stretched.
However, if steel prices hold strong and Tata Steel can begin slab supply by early CY2010, the company could gain in the long term. Having acquired Corus, Tata Steel need not look outward for growth; instead, it can focus on integrating Corus and implementing its greenfield projects in India.
Tata Steel’s stock has underperformed its domestic peers by 46.1-71.6% since the first news of this transaction. This implies a $3.2-5. billion range for Tata Steel’s market capitalisation.
The net profit valuation analysis of the likely cost synergies indicates that Tata Steel shareholders are hit to the tune of $1.4 billion. JM Morgan concludes the stock has been penalised more than it deserved to be as a result of this deal.
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