India Equity Analysis, Reports, Recommendations, Stock Tips and more!
BUY Financial Tech (2022)
SL 1965 T 2115, 2125
BUY Punj Lloyd (1066)
SL 1035 T 1115, 1125
BUY Nagarjuna Constructions (220)
SL 210 T 239, 245
BUY NTPC (145)
SL 139 T 155, 157
BUY EID Parry (125)
SL 118 T 137, 142
GlaxoSmithkline Consumer Healthcare Ltd (F12/06)
Result Update
GlaxoSmithkline Consumer Ltd. recorded 15% yoy growth in net sales at Rs11.1bn during F12/06 driven by average volume growth of ~8% in Horlicks and Boost. Revenues for the quarter increased by 9.2% yoy (down 12.2% qoq) to Rs2.6bn, led by a average volume growth of ~4% in Horlicks and Boost. Biscuits category recorded a ~11% yoy growth during the year. The company has taken ~5% price increase in Horlicks and 2% price hike in Boost (in November) resulting in a average price increase of ~4.5%.
Operating profit for the year remained almost stable at Rs1.8bn. Operating margins dipped by 250bps to 16.6% mainly due to the sharp 190bps rise in raw material cost. Milk prices increased significantly by 16% this year and are expected to remain higher by ~20-25% in F12/07. Prices of other key raw materials like malted barley (expected to remain higher by 5% yoy in F12/07), wheat, sugar, coco powder etc are also expected to remain firm. During Q4 F12/06, margins dipped by 540bps to 10.4% due to higher input (370bps) and staff (250bps) cost. Lower adspend (12.7% of net sales in Q4 F12/06 from 14.9% of net sales in Q4 F12/05) restricted further margin erosion.
Other income (including cross charge of Rs70mn per quarter received on account of OTC products sold on behalf of GlaxoSmithkline Pharmaceuticals Ltd) for the quarter and year was higher at Rs169mn and Rs522mn respectively. PBT rose by 17.3% yoy to Rs1.9bn during F12/06 driven by higher other income and lower interest cost. Effective tax rate was at 33.4% resulting in a tax outgo of Rs636mn. Net profit for the year increased by 18.5% yoy to Rs1.3bn translating into an EPS of Rs30.1.
The management expects to record a double-digit topline growth in F12/07 driven by strong growth in Horlicks and Boost and expects to maintain the margins at ~20% (including other income). However, higher input cost could put pressure on margins. Exports account for 5% on the company’s total sales and are expected to continue at the same level. Acquisitions, if any could be a growth driver for the company. At the current market price of Rs582, the stock is trading at 19.3x FY07 EPS of Rs30.1 per share. We recommend a ‘Hold’ rating this stock.
Madras Cements Ltd. (MCL) - Q3 FY07
esult Update
MCL’s cement volumes increased by 27% y-o-y to 1.48mn ton and on sequential basis it went up by 1%. MCL has increased its despatches despite monsoon in the Southern States. We expect MCL’s despatches to be at 5.78mn ton for FY07, up from 5.66mn ton as per our previous estimation. We retain our FY08 and FY09 cement volume at 6.02mn ton and 7.49mn ton as new capacities comes in at FY08/FY09.
MCL’s OPM increased by 1560 bps to 32.7% on y-o-y basis but went down 620 bps on sequential basis due to increase in cost per ton of cement. Cost per ton increased by 4.8% sequentially to Rs1784 in Q3FY07. On y-o-y basis it increased by 3.0%. Higher coal prices in international market and increase in freight charges has led to increase in costs. Power & Fuel expenses per ton went up by 6.7% sequentially to Rs551 and freight charges increased by 9.8% to Rs374. Realization per ton fell by 4.7% sequentially to Rs2651. We have factored 2.3% fall in our estimations for the quarter. Cement price have rebound in Southern markets post monsoon and hovering at pre-monsoon levels at present.
Interest cost for the quarter has come down 24.6% y-o-y to Rs85mn. Sequentially it has more than doubled. Higher requirement for working capital due to fund requirement for ongoing expansion and interest rates firming up has increased the interest burden for Q3FY07 over Q2FY07.
We revise our FY07 earnings estimate from Rs291.2 to Rs280.7 and retain our FY08 and FY09 earnings estimates at Rs339.3 and Rs355.8 respectively. We consider MCL as better play in Southern region going forward. MCL is expanding cement capacity by 4mn ton to take the total capacity to 10mn ton by FY09. MCL is putting up 18MW CPP at Jayanthipuram facility by Q1FY08. MCL is trading at 10.1x and 9.6x of its estimated FY08 and FY09 earnings of Rs339.2 and Rs355.7 respectively. We maintain our BUY rating with target price of Rs4270. Our target price discounts FY09 earnings by 12.0x and EV/EBIDTA by 7.6x.
Arihant Foundation & Housing Ltd (Q1 F9/07 )
Result Update
Property demand in Chennai remained firm in the Oct-Dec quarter, helping AFHL book a 64% growth in revenues. The company currently has 5 on ongoing projects and has booked total sales of 0.19mn sqft during the quarter as against 0.16mn sq ft in the previous quarter. AFHL is currently carrying a Work-In-Progress inventory of Rs590mn, the sales for which should be converted over the next two quarters.
While the CBD, OMR and GST rd have seen stable to rising prices, other areas like Ambattur have not picked up as well as expected. As a result majority of the company’s projects are earning gross margin in the range of 35-40%. However, the commercial project at Ambatur (approximately 55% of revenues in Q1 F9/07) grossed around 22%, pulling down blended margin to 25.3%, a drop of 114bps over Q1 F9/07. However, we expect margin to look up from third quarter as high margin project contribution increases.
In line with the company’s guidance, it has started foraying outside Chennai. AFHL has added four new projects one each in Madurai (21 acres), Vijaywada (50 acres), Poonamali high rd (5 acres) and Mall + hotel (0.6mn sq ft) on the OMR rd. We have yet to factor in these new projects in our estimates, which are likely to contribute to revenues from F9/09.
We have delayed our project completion phase in some of AFHL’s projects (no guidance from the management). As a result we have revised our revenue growth downwards by 17% each for F9/07 and F9/08, while earnings have been revised downwards only 7% and 1% in the respective years. Lower revision in earnings is on account of lower tax rate.
Usha Martin Ltd
Result Updat
Usha Martin posted strong results for Q3 FY07 with stand-alone earnings rising 19.8% qoq and 72.2% yoy. On consolidated basis, net profit growth was higher at 29.3% on sequential basis. This robust bottomline performance was led by significant operating margin expansion; 170 bps qoq on stand-alone basis and 390 bps qoq on consolidated basis. During the quarter company reaped the benefits of higher iron ore integration, better realizations and improved product mix. We maintain 'BUY' and raise our EPS estimates to Rs27.2 (earlier Rs26) for FY07 and Rs34.1 (earlier Rs32.6) for FY08. Our one-year target price is Rs251 based on 5.2x FY08 EV/EBITDA and implying a multiple of 7.4x on FY08 EPS.
Since our last recommendation at Rs170 in our Q2 FY07 Investment Update in November 2006, the stock has run-up by 24%. Despite this, we still maintain 'BUY' as Q3 FY07 performance was above our expectations and has forced us to raise earnings estimates. At CMP of Rs210, company trades at 7.7x FY07E EPS and 6.2x FY08E EPS. We believe these valuations does not reflect sufficient premium to commodity steel makers with company's character of an alloy/special steel manufacturer producing high value added products like Wires and Wire Ropes in majority. Also company's products are subjected to far less cyclical price fluctuations than that of commodity steel players. With operating margin on improvement path from backward integration (iron ore - started & coal - to start) and stress on value added products, we expect material upgrades to valuations.
Retail reforms blocked
Sonia Gandhi reportedly restrained the Government from going full throttle on opening up the retail sector. Newspaper reports said that the Congress party President asked Prime Minister Dr. Manmohan Singh to study the impact on mom and pop grocery stores across the country before opening up the sector to the MNC giants like Wal-Mart. "I have received suggestions from many quarters about the desirability to first study the possible impact of transnational supermarkets on livelihood security of those engaged in small-scale operations... I thought I would convey this to you so that you may consider having the relevant issues properly examined before further decisions are taken," Gandhi said in a letter to the Prime Minister. Toying the line of the party president Sonia Gandhi, the Congress Party said it wanted the Government to put in place safeguards for neighborhood grocery stores before further opening up the retail sector to foreign investors.
Disinvestment's back, but...
The Government cleared the proposal by Rural Electrification Corporation Ltd. (REC), Power Grid Corporation of India Ltd. (PGCIL) and National Hydroelectric Power Corporation Ltd. (NHPC) to sell 10% each through Initial Public Offerings (IPO). In addition, the Cabinet Committee on Economic Affairs (CCEA) gave its approval for sale of 10%, 5% and 5% of the pre-issue paid up equity of REC, PGCIL and NHPC, respectively out of the Government’s shareholding. Post IPO, the Government's stake in PGCIL and NHPC will fall to 86.3% while that in REC will come down to 81.3%, Finance Minister P. Chidambaram said after a cabinet meeting. "The Government will be piggybacking on the IPOs of REC, PGCIL and NHPC to raise Rs15bn for the National Investment Fund (NIF), which has no funds currently," he said. The three PSUs together are targeting to raise close to Rs24bn, the Finance Minister said, adding this was based on the estimated current book value of these unlisted companies. However, as usual the Left parties came out against the disinvestment, asking the Government to reverse the process. It remains to be seen if the noise raised by the communist parties against the stake in the three poser PSUs is just a bark, or will the comrades step up their protest.
Govt to sell 7% in BEML
The Government will sell a 7% stake in Bharat Earth Movers Ltd. (BEML), Finance Minister P. Chidambaram said. The Government will sell 4.9mn shares in BEML, Chidambaram told reporters after a Cabinet meeting. He said the sale price has not been decided. Presently, the Government's holding in BEML stands at 61.23% comprising 22.5mn shares of Rs10 each. Individuals and other institutions hold 38.77% equity in BEML. After the public issue, Government’s stake in BEML will come down to 54% with the balance 46% being with institutions and the public.
NELP VI...ONGC tops with 24 blocks
Oil & Natural Gas Corp Ltd. (ONGC) won 24 oil & gas exploration blocks, including 12 deep-water blocks, under the sixth round of New Exploration and Licensing Policy (NELP VI), the Government said. Reliance Industries Ltd. was awarded seven deep-sea blocks. Reliance Natural Resources Ltd. (RNRL) has bagged just one block while the Essar Group and the Adani Group won two blocks each. Santos Ltd., Australia's third-biggest oil and gas producer, secured two fields. Oil India Ltd. (IOL) and its partners bagged six blocks, while Gujarat State Petroleum Corporation (GSPC) got three. The Government approved the award of 52 oil and gas exploration blocks, Petroleum Minister Murli Deora said. India had offered 55 blocks in its latest licensing round. The Government had received 165 bids from domestic and overseas players for 52 blocks. There were no bids for three blocks.
GSM subscriber addition
India's booming telecom story just got better. The GSM mobile industry added over 5mn new subscribers in January as against the addition of 4.6mn in December, the Cellular Operators' Association of India (COAI) said. The All India GSM subscriber base increased from 105.4mn in December 2006 to 110.5mn in January 2007, recording an overall growth of 4.8% over the previous month, the COAI said. Bharti Airtel added 1.76mn new subscribers in January as against 1.71mn in December. Hutch Essar, which is at the center of a takeover saga, added 1.11mn new users in the month versus 1.03mn in December. Idea Cellular, which will launch an IPO this month, added 629,499 new users in January compared to 601,296 in December.
Core sector grows by 8.3% in December
The country's infrastructure sector grew by 8.3% in December 2006 compared to 7.5% in the corresponding period last year. The improved year on year show was largely due to higher output of Crude Oil and Electricity even as Steel, Coal and Cement sectors failed to turn on the heat. On a cumulative basis, the six key infrastructure industries expanded by 8.3% in the period April-December 2006 as against 5.5% in the same period last year, according to figures released by the Ministry of Commerce and Industry. The index of the six core sectors, which have a combined weight of 26.7% in the overall Index of Industrial Production (IIP), stood at 232.6.
Iran, Pak, India to sign gas deal by June-end
The much-delayed gas pipeline deal between Iran, Pakistan and India will be signed by the end of June after the three parties agreed on a key pricing formula for the natural gas, Petroleum Minister Murli Deora said. Iran has changed the price formula from 10% of the ruling Brent crude oil price plus US$1.2-per million British thermal unit (mbtu) fixed cost to 6.3% of the Japanese crude cocktail plus US$1.15 per mbtu. Taking a crude price of US$60 per barrel, the cost of gas at Iran-Pakistan border translates into US$4.93 per mbtu. As per the previous formulae, proposed in August 2006, gas price came to US$7.2 per mbtu at US$60 per barrel crude oil price. Besides, India would pay US$1.5 per mbtu for piping gas through Pakistan and transit fee to Islamabad.
NSE revises F&O contract size of 64 scrips
As part of its periodic review of size/value of derivative contracts, the National Stock Exchange (NSE) has revised the lot size of 64 scrips. With this, once can buy a Nifty contract in the F&O segment for just Rs2 lakh, instead of the current Rs4 lakh. The exchange wants to keep the contract size between Rs2 lakh and Rs4 lakh. The size will be reduced for 52 scrips, and hiked for 12 stocks. This revision will take place over two phases, the first taking effect starting with the March series, and the second beginning with the May series. All subsequent contracts (i.e. May expiry and beyond) will have revised market lots.
PSBs asked not to hike home loan rates
Less than a week after the Reserve Bank of India (RBI) raised short-term rates to curb spiraling credit growth, Finance Minister P. Chidambaram called upon all public sector banks not to hike home loan rates and to rebalance their loan portfolios to moderate credit growth to some sectors. Chidambaram met the head honchos of state-run banks to ensure credit flow to productive sectors like infrastructure after the central bank raised the red flag last week by hiking the provisioning requirement for credit cards, loans against shares, commercial real estate and borrowings from NBFCs.
ICICI Bank ups home loan rates by 1%
Notwithstanding the Finance Minister's diktat to nationalised banks to refrain from jacking up home loan rates, the country's largest private bank, ICICI Bank hiked interest rates on housing loans by 1%. The Benchmark Advance Rate (I-BAR) and the Floating Reference Rate (FRR) for consumer loans, including home loans, have been revised by 1% from 13.75% to 14.75% and 10.75% to 11.75%, respectively. Accordingly, customer will have to pay 10.5% on the home loans with a floating rate, while the interest rate on fixed home loans will now be 12.5%. ICICI Bank also raised the deposit rates on five-year fixed deposits of under Rs1 lakh from 8.25% to 9.5%. The revised home loan rates and deposit rates would came into effect from Feb 9. Besides home loans, all other rates, including on auto loans, loans against shares and loans for corporates will see a rise of 100 basis points.
HRC prices up by Rs500 per ton
Even as investors fret over the seemingly expensive Tata Steel-Corus deal amid uncertainty about the steel sector's outlook, domestic producers have jacked up prices of Hot-Rolled Coils (HRC) in step with the international trend. A financial daily reports that domestic steel companies have increased HRC prices by an average of Rs 500 per ton, the first upward trend this year. The increase takes domestic HRC prices to about Rs 26,000 per ton. International prices are hovering around the US$600-per-ton mark. The price hike by domestic players have taken experts by surprise, as they had been expecting prices to fall with the jump in China’s exports.
Maruti inaugurates Manesar plant, engine facility
Suzuki Motor Corp. and Maruti Udyog Ltd. inaugurated a new car assembly plant (fourth for Maruti) and a diesel engine & transmission facility at Manesar in Haryana. Suzuki and Maruti plan to invest Rs90bn in India up to 2010. This includes investment in the fourth car assembly plant, the diesel engine and transmission plant, launch of new models and upgradation of existing facilities in Gurgaon. Maruti's fourth car assembly plant started with an initial capacity of 100,000 units per year. This will be scaled up to 300,000 per year. A total investment of Rs25bn will be made in this car plant by 2010. Maruti's exciting premium compact car, Swift, is being manufactured at this plant. Maruti's new export model, expected to be launched in 2008-09, will also be manufactured at this plant. The diesel engine and transmission plant has been set up under a Suzuki-Maruti joint venture called Suzuki Powertrain India Ltd. (SPIL). Suzuki holds 70% equity in SPIL while the rest is owned by Maruti. This plant would entail an investment of Rs25bn, in phases till 2010. This facility has an initial capacity to manufacture 100,000 diesel engines a year. This is being scaled up to 300,000 engines per year by 2010. The diesel engines manufactured at this plant will also be exported to Suzuki companies across the world.
FLAG claims US$406mn from VSNL
Videsh Sanchar Nigam Ltd. (VSNL) announced that FLAG Telecom Group Ltd. (FLAG) was seeking US$406mn, plus interest from the company in relation to the dispute over the FLAG Europe-Asia (FEA) cable system. FLAG, part of the Anil Dhirubhai Ambani Group (ADAG), moved the Arbitration Tribunal of the International Chamber of Commerce (ICC), seeking the monetary relief from the Tata Group owned VSNL. In May 2006, the ICC Tribunal had by a Partial Award by a 2:1 majority ordered VSNL to grant FLAG access to the Mumbai landing station of the FEA cable system. VSNL said it was studying FLAG's claim and will file its response with the ICC Tribunal in due course. In addition, the company has already filed a writ petition in the Netherlands, seeking to set aside the Partial Award to FLAG.
Gammon India appeals against SEBI ban
Gammon India Ltd. said it had moved the Securities Appellate Tribunal (SAT) against a SEBI order, barring it from launching the IPO of its subsidiary Gammon Infrastructure Projects Ltd. (GIPL) for one year. The capital market regulator, on Feb. 2, advised the merchant bankers that the proposed IPO of GIPL cannot be permitted for a period of one year from the SEBI order dated Dec. 21, 2006. It may be recalled that on Dec. 21, 2006, SEBI barred Gammon India, its chairman Abhijit Rajan, and two others from accessing the capital market for one year due to alleged irregularities in the company's 2001 Rights Issue. The capital market watchdog also barred them from selling or transferring their shareholding in GIPL, a company promoted by Gammon India.
Rain Calcining and Rain Commodities to merge
Rain Calcining Ltd. and Rain Commodities Ltd. announced that the two companies will be merged with effect from April 1, 2007. The Boards of the two companies approved the proposal. The merger will create the world's largest calcining company with assets in India, Kuwait, USA and Argentina and a combined market share of about 28% of the total CPC sales in the western world. As per the plan, the Calcined Petroleum Coke (CPC) business of Rain Calcining will be integrated with the CPC business of GLC Carbon USA Inc., proposed to be acquired by Rain Commodities (USA) Inc., a wholly owned subsidiary of Rain Commodities. Rain Calcining and Rain Commodities will jointly develop the proposed Greenfield CPC plant with co-generation facility at Vishakhapatnam in Andhra Pradesh. As part of the merger, Rain Commodities will transfer the cement business of Rain Industries as a going concern. Also, the CPC and Power Generation businesses of Rain Calcining will be transferred to Rain Industries. The Board of Rain Commodities also decided to rescind its earlier decision to merge Rain Industries with the company.
Indiabulls to demerge broking outfit
Indiabulls Financial Services Ltd. announced that it had decided to spin-off the broking business into a separate company besides taking full control of two other subsidiaries. Indiabulls Financial Services will demerge 100% subsidiary, Indiabulls Securities Ltd. and give shares to existing investors. The new broking company will be listed on the stock exchanges. As part of the restructuring, Indiabulls Financial Services will also merge Indiabulls Credit Services Ltd. with itself and buy Farallon Capital's 33% stake in Indiabulls Housing Finance Ltd.
Orders galore for India Inc
Tata Consultancy Services Ltd. (TCS) agreed to provide IT consultancy services to Mumbai International Airport Pvt Ltd (MIAL), for the Chhatrapati Shivaji International Airport in Mumbai. MIAL, the joint venture led by the GVK Group, and TCS signed a MoU for a period of five years. The size of the contract was not disclosed. IBM and TCS bagged a contract estimated to be worth US$100mn to upgrade computer systems for Bank of China Ltd. The two companies will upgrade the main banking system for China's second-biggest bank, IBM said in a statement. ABB India said that it had been awarded orders worth Rs3.11bn to provide Grasim Industries Ltd.’ cement division and Ultratech Cement Ltd. power and automation products and systems for their cement capacity expansion. The project is expected to be completed by the end of 2007. Bharat Heavy Electricals Ltd. (BHEL) said it had secured a contract worth Rs4bn for setting up a 520 MW (4x130 MW) Hydro Electric Project in Himachal Pradesh. The order for Parbati Hydro Electric Project, Stage-III, has been placed on BHEL by National Hydroelectric Power Corp Ltd. (NHPC). BHEL also secured orders worth over Rs39bn for the supply and installation of the Main Plant Package at two power stations in Maharashtra, involving three units of 500 MW each. With this, BHEL’s Power Sector order booking crossed Rs200bn in a single year, for the first time in history.
Buzz from M&A Street
Suzlon Energy Ltd., a maker of wind-turbine generators, and Portuguese builder Mota-Engil SGPS SA offered to buy German windmill maker Repower Systems AG for 1.02bn euros (US$1.33bn), topping a bid from Areva SA. Suzlon offered 126 euros a share for Repower, it's German unit said in a statement. Areva offered 105 euros a share on Feb. 5 for the 70% of Repower it doesn't already own. Martifer, a unit of Oporto-based Mota- Engil, already owns 25% in Repower and said that today it's a 25% partner in Suzlon's offer. Suzlon's bid doesn't require any minimum percentage of Repower shares. The offer by French state-owned Areva depends on it gaining a stake of more than 50%.
Mahindra & Mahindra Ltd. (M&M), India's largest tractor maker, has submitted a non-binding bid to acquire about 44% in smaller rival Punjab Tractors Ltd., its Chairman Keshub Mahindra said. A financial daily reported today that the Burmans, founder promoters of FMCG major Dabur India Ltd., are likely to sell their 14.5% stake in Punjab Tractors to the buyer of Actis' 29% stake. Apart from M&M, other suitors also in the race for Punjab Tractors include Tata Motors Ltd., TAFE, John Deere and Escorts. Tata Motors denied that it was bidding for Punjab Tractors, but a financial daily said that the company was planning to team up with Fiat's CNH (New Holland Tractors India). Actis had acquired a 29% stake in Punjab Tractors for about Rs2.7bn while the Burmans bought 11.2% in the company in 2005.
Moser Baer India Ltd. announced it would acquire OM&T BV, a highly specialized technology company for optical R&D and currently a 100% subsidiary of Philips. "This acquisition is a major strategic milestone for the Moser Baer as we implement our strategy to be at the forefront, of technology in both the optical and solar photovoltaic (PV) segments," said Ratul Puri, Executive Director of Moser Baer. This acquisition will complement the existing cutting edge technology research being done in Moser Baer's R&D center in India and help the No.2 player in the optical media market to further consolidate its leadership position.
Action Construction Equipment Ltd. (ACE) said that Frested Ltd. (the company's Cyprus based wholly owned subsidiary) had acquired a 73.9% stake in Romania's SC Forma SA for US$2.15mn. ACE intends to enter the European market of Cranes, Loaders, Forklifts etc. through SC Forma. The company also intends to acquire further stake in SC Forma, by way of an open offer, through Frested. SC Forma is a 58-year old company. Its shares are listed on Rasdaq Stock Exchange in Bucharest.
Indian Bank, PFC public issues get strong response
The Initial Public Offering (IPO) of Power Finance Corporation (PFC) received a tremendous response, particularly from foreign investors and well-heeled individuals. The issue, which opened on January 31 and closed for subscription on Tuesday has been subscribed 77.24 times. The issue price of PFC was fixed at the higher end of the Rs73-85 price band and the shares of the public sector giant are likely to get listed on bourses in the third week of February. While the QIB portion of the issue was subscribed 137.16 times, the HNI portion was subscribed 48.80 times and the retail portion more than 8 times, according to data provided by the National Stock Exchange (NSE). Similarly, Indian Bank's public issue too got strong response from investors. The IPO of the Chennai-based bank was subscribed 29 times with the QIB portion getting subscribed by 53 times.
GBN, Cambridge Tech shine on debut
Shares of Global Broadcast News Ltd., the operator of business television channels CNN-IBN and IBN-7, jumped on debut on Bombay Stock Exchange (BSE). The stock listed at Rs417.10 as against the issue price of Rs250, translating into a premium of 66.8%. The closed the week at Rs490.95. Earlier, it hit a high of Rs534 and a low of Rs381.25. Shares of Cambridge Technology Enterprise Ltd. climbed in their maiden trading day on BSE. The stock opened at Rs48.90 versus the issue price of Rs38. It closed the week at Rs96.6 after touching a peak of Rs119.9 and a low of Rs48. Shares of Akruti Nirman Ltd. ended marginally higher in their stock market debut after a strong start. The stock opened at Rs701.35 as against the issue price of Rs540 a share. The scrip closed at Rs555.1 after hitting a high of Rs729 and a low of Rs546.6. Pochiraju Industries Ltd. opened its account on BSE at Rs45 versus an issue price of Rs30. The stock touched a peak of Rs64 and a low of Rs35 before closing at Rs49.15.
Oil tops US$60 per barrel
Crude oil prices in New York rose past the US$60 per barrel mark amid renewed US- Iran tension, violence in Nigeria and cooler weather in the US. Also, a fire shut output from the Elk Hills field in California, adding to delays and production outages in the US Gulf and Canada. Light, sweet crude for March delivery dropped 14 cents to US$59.57 a barrel on the New York Mercantile Exchange at 11:59 a.m. London time. The contract had advanced as much as 71 cents, or 1.2%, earlier to US$60.42, the highest since Jan. 3. Oil prices jumped US$2 a barrel yesterday after Occidental Petroleum Corp. said it had shut most output from the seventh-largest field on the US mainland. Separately, Iran's Supreme Leader Ayatollah Ali Khamenei said that Tehran would retaliate against any US attack, raising concern that the long-standing nuclear issue may cut supplies from OPEC's second-largest producer. England-based oil-tanker tracker Oil Movements predicted lower February shipments from OPEC members. The market was also keeping a watch in Nigeria, where a Frenchman was kidnapped in the latest round of violence targeting oil workers. A late cold snap has pushed US fuel demand to a 13-month high. Oil touched a 20-month low of US$49.9 in New York on Jan. 18 after mild weather in the US Northeast cut heating oil demand. But, oil futures have gained 21% since, as temperatures dropped and US gasoline demand remained above the year-ago levels.
ECB, BoE keep rates steady
The dollar fell slightly against the euro on Friday, after indications by the European Central Bank (ECB) that it would increase its key interest rates next month. ECB President Jean-Claude Trichet warned that strong vigilance remains of the essence so as to ensure that risks to price stability over the medium term do not materialize. The remarks were taken to mean a rate hike in the following month. The ECB held interest rates steady at 3.5%. The euro was last quoted $1.3003 in early Friday trading, down slightly from US$1.3038 in late New York trading. The dollar rose slightly against the Japanese yen, to 121.45, up from 121.05 yen on Thursday. British interest rates remained at 5.25% after a surprise quarter-point increase last month. Meanwhile, Australia's central bank kept its benchmark interest rate unchanged at a six-year high of 6.25% after consumer prices fell for the first time in eight years.
Hyundai chief sent to 3-yr jail
Hyundai Motor Chairman Chung Mong-koo was given a three-year imprisonment for misappropriation of company funds, dealing another blow to a company battling a rising won and restive labour unions. He was sentenced to jail by the Seoul Central District Court for embezzling US$100mn and bribing government officials for business favors. Despite the conviction, Chung remains free on bail pending his appeal. The court said that Chung used several million dollars for himself, calling the chairman's behavior a "clear-cut criminal act." In a separate judgement, the same court sent the head of Glovis, a logistics arm of Hyundai Motor, to a one-and-a-half-year suspended jail term for similar charges. Lee Ju-eun, president and CEO of Glovis, was found guilty of embezzling about 4.5 billion won (US$4.8mn) in company funds between 2001 and 2006. Amid a series of rulings against the world's seventh-largest car maker, Hyundai Motor said it will begin construction of a new plant in the Czech Republic as planned, adding that its affiliate Kia Motors will hold its scheduled plant opening ceremony in Slovakia.
Metals met on hedge fund losses
Zinc, copper and other metal prices fell following news that Red Kite Management Ltd., UK's metal-trading hedge fund, has made heavy losses in a one-billion fund. Red Kite's US$1bn fund lost 20% in the 12-month ended January 24, the Wall Street Journal reported last week, sending metal prices on the London Metal Exchange (LME) into a tailspin. Red Kite's performance in January was the worst for any month in at least a year, the Wall Street Journal said. One of Red Kite's funds last year gained more than 190% betting on metals, the newspaper reported. Industry analysts say that signs of losses by hedge funds that had poured money into metals during last year's rally may prompt some speculators to cut their holdings, accelerating the decline in prices. But, others say that problems at one hedge fund cannot be taken as signal that metals are a bad investment. Meanwhile, Red Kite plans to extend the notice period for redemptions. The investors will now be required to send redemption notices to the fund by February 15 in order to get their money back at the end of the first quarter. "Given the current size of the fund we believe that to maintain efficient operation it is necessary to increase the withdrawal notice period," Red Kite said in a statement.
HSBC to up bad loan provisioning
Shares of HSBC Holdings Plc fell after Europe's largest bank by market capitalization said it was raising provisions for bad loans by 20% higher than the market had expected. HSBC gets its biggest share of pretax profit from the United States. "Foreclosures have shown a higher severity than expected," CEO Michael Geoghegan said on a conference call. "The major impact was taking into account adjustable mortgage resets." The consensus among 11 analysts had been that credit risk provisions would be US $8.8bn, HSBC said. So, loan provisions would rise to almost US $11bn. Still, over 90% of the portfolio is working," Geoghegan said. "We are taking provisions for what might happen." Separately, US-based New Century Financial, another big lender to stretched borrowers, said it may report a loss for the fourth quarter and will restate earlier 2006 earnings after not setting aside large enough reserves to repurchase sub-prime loans. Investors in mortgage bonds reacted bearishly to news that HSBC and New Century Financial faced bigger-than-expected difficulties with their portfolios of loans to US borrowers with weak credit. A key credit derivatives index tracking credit risk on sub-prime mortgage bonds rose sharply, indicative of a fall in the value of underlying mortgage-backed securities
Alcatel-Lucent hikes job cuts
Alcatel-Lucent, the world's largest telecom-equipment maker, announced it would cut an additional 3,500 jobs, taking the total to 12,500, after it slid into a fourth-quarter loss and forecast a drop in first-quarter sales. The newly merged French-American group said the move will allow it to achieve pretax synergies of 1.7bn euros (US$2.2bn) over three years, up from an original target of 1.4bn euros. At least 600mn euros of these savings will take place in 2007. The company had originally said it would cut 9,000 jobs over three years. "These are difficult but necessary decisions, and we will manage these reductions with care. We are committed to serving our customers' needs, with a competitive cost structure and effective operating model," CEO Patricia Russo said. Goldman Sachs said the move increased its confidence that the company has greater restructuring potential than some investors believe. The group also said it sees some decline in revenue in the first quarter, but expects revenue growth to resume as the year progresses. It forecast that revenue would grow by at least 5% for the year.
Sanofi-Aventis loses major patent
French drugmaker Sanofi-Aventis said it lost a patent infringement lawsuit filed against Amphastar and Teva Pharmaceutical, putting sales of its top-selling drug in jeopardy. Sanofi-Aventis said the US District Court for the Central District of California ruled against the company in its lawsuit over Lovenox, a popular drug to treat blood clots. The company said it was evaluating options for further legal recourse. Lovenox was the company's top revenue producer, with nine-month sales of 1.82bn euros (US$2.4bn). Sanofi-Aventis shares came under pressure in early trading in Paris, losing 2.2%.
Don't fall in love with stocks
Forfeit the game, before somebody else
Takes you out of the frame....
The pace is too fast, you just won't last
After hitting an all time high of 14723.88 during the week, the Sensex lost some steam by Friday. Rising inflation and the usual profit booking were responsible for the brakes on the bulls. Despite Friday's fall, the markets managed to post its seventh week of gains indicating that India Growth Story is still intact. However, for the short term, wild swings are expected with a flat to lower bias. The recent rally has indeed been backed by strong liquidity both from local funds and foreign players. For the coming week, we may continue to see sector specific activity as we run up to the Budget. Valentine's Day has seen new peaks in the past, not to mention the crashes after that. Remember not to fall too much in love with the stocks. Interestingly, the month of February has always seen the Sensex hitting record highs. It has already hit a peak this time with benchmark Sensex surging past the 14,700 mark to touch a lifetime high of 14,723.88. However, the road ahead won't be easy for the bulls as they have to deal with the uncertainty of the policy changes, developments and reforms in the upcoming Budget. Stay more in cash and for anything in the world, don't be over-leveraged.
Sensex ends slightly higher
The market was pretty choppy during the week. Still, the key indices managed marginal gains, led by Bajaj Auto, Infosys, ICICI Bank, REL and L&T. Capital Goods, Auto, IT, Banking and Power sectors were among the major gainers helping the Sensex record its seventh straight winning week. Even PSU stocks were in action after some positive announcements by the Government on disinvestment. The Cabinet this week approved plan to sell 7% in BEML and gave the go-ahead for the IPOs of three power PSUs - REC, PGCIL and NHPC.
The higher than expected estimate for FY07 GDP boosted the sentiment on Dalal Street. The CSO (Central Statistical Organization) announced a forecast of 9.2% growth for the Indian economy. However, a sharp jump in inflation prompted profit booking at higher levels on Friday. Inflation accelerated at the fastest pace in more than two years to 6.58%, raising concern that the RBI may announce more tightening measures.
Over the week, we saw Auto and Heavy Engineering Goods companies in action. FMCG stocks continued to drift lower. Telecom stocks lost some steam after last week's rally. Real Estate companies continued to bear the burnt of the investors' ire after the RBI raised interest rates, making home loans costlier. HLL, Bharti Airtel, Hindalco and Satyam were the major losers. Finally, the Sensex added 135 points or 0.9% to close the week at 14,538.9 and the NSE Nifty rose by just 4 points or 0.09% to finish the week at 4187.
Energy stocks were in momentum on expectations that the budget will provide important incentives. Healthy order book position and capacity expansion plans boosted power stocks. Reliance Energy surged by over 4% to Rs556. Anil Ambani and associates raised their stake in the company by 4.73%. Also, the Supreme Court asked rival Tata Power to deposit Rs2.27bn in a dispute pertaining to sharing of standby charges. Suzlon gained 2.1% to Rs1245 and NTPC added 2.1% to Rs145. Suzlon joined hands with Portuguese builder Mota-Engil SGPS SA to buy German windmill maker for 1.02bn euros (US$1.33bn), topping a bid from Areva. However, Tata Power lost 1% to Rs599.
PSU stocks hogged the limelight after the Government announced disinvestments of REC, PGCIL and NHPC. BEL jumped by over 16% to Rs1598 after the company signed a contract with Northrop Grumman to explore joint production opportunities in aerospace and defense electronics technology for the Indian and overseas markets. BEML rallied by over 9% to Rs1178 and SCI rose over 12% to Rs201. The Cabinet approved the plan to sell a 7% stake in BEML through the public issue route.
Capital goods and heavy engineering stocks recorded smart gains with L&T leading from the front. The scrip added over 2% to Rs1715 after the company announced plans to start concrete plant in Dubai. L&T also signed MoUs with Boeing and EADS for exploring opportunities in defence and aerospace. ABB advanced by 2% to Rs3836, Punj Lloyd rose by over 4% to Rs1064 and Siemens added 0.7% to Rs1188.
Auto stocks were a mixed bag this week. Apart from Bajaj Auto and Hero Honda, other auto stocks mostly underperformed. Hero Honda added 1.4% to Rs726. Among the losers, Tata Motors was down 0.5% to Rs905 and Maruti edged lower by 0.4% to Rs941. Metal stocks lost their shine over the week as metal prices on LME fell sharply after a heavy losses at a hedge fund was reported. Tata Steel fell by over 2% to Rs453, Sterlite Industries dropped by over 11% to Rs459, Hindustan Zinc lost 4% to Rs663 and JSW Steel declined by over 3% to Rs446.
IT stocks were up. Infosys surged by over 4.5% to Rs2361, Financial Technologies rallied by over 13% to Rs2021 and HCL Tech was up 1% to Rs660. However, Satyam slipped over 4.5% to Rs468, TCS was down by 0.9% to Rs1287 and Wipro edged lower by 0.2% to Rs642. Buying was also seen across the Banking stocks. Heavyweights led from the front, ICICI Bank rose by over 5% to Rs992, SBI was up by 1.3% to Rs1197, HDFC Bank added 0.5% to Rs1109 and Kotak Bank gained 3.3% to Rs504.
Bajaj Auto gained over 9% to close at Rs 3047. A financial daily reported that the company would be split between founder Rahul Bajaj's two sons - Rajiv and Sanjiv. The paper said as part of the demerger, which has been hanging fire for quite some time, Rajiv is to get the automobile business while Sanjiv would look after the financial services & insurance business.
Sujana Metal has been in momentum attracting buying interest from FIIs. The scrip outperformed the BSE Small Cap Index, rising by over 21% to close at Rs121. The company decided to de merge both the Transmission Tower and Steel Businesses into two separate companies and is awaiting the approval from High Court. Sujana Metal also has a healthy order book. Deutsche International, Goldman Sachs and Morgan Stanley have bought the stock in huge quantity over the week. Goldman Sachs has bought over 5 lakh shares over the week. .
FY07 GDP seen at 9.2%
The 'India Shining' story keeps getting better by the day notwithstanding the high base and a slew of monetary tightening measures announced by the Reserve Bank of India (RBI). The Government said that the Gross Domestic Product (GDP) will grow by 9.2% in the current fiscal year ending in March as against 9% in the previous financial year. According to advanced estimates by the Central Statistical Organisation (CSO), manufacturing is estimated to expand by 11.3% versus 9.1% in the year ended March 2006. The financing, insurance, real estate and business services are projected to clock a 11.1% growth as against 10.9% in FY06. However, agriculture growth in is likely to dip from 6% last fiscal to just 2.7% in 2006-07. The construction sector is estimated to witness a decline from 14.2% in FY06 to 9.4% while there will be a marginal improvement in mining and quarry to 4.5% from 3.6% in the year ended March 2006.
The market’s winning streak was cut short as a surge in inflation to an over two-year high raised concerns that interest rates may rise further. The rise in oil price to above $60 a barrel also weighed on the sentiment. The decline was spread over small-cap, mid-cap and large-cap segments. Volatility also remained high.
The 30-share BSE Sensex lost 113.19 points (0.77%), to settle at 14,538.90. The S&P CNX Nifty lost 36 points (0.85%), to 4,187.40.
The Sensex had opened firm and struck a high of 14,723.88 at 10:07 IST, surpassing an earlier all-time high of 14,697.69, which the barometer index had struck only on Thursday (8 February 2007).
The market was volatile. It swung about 466 points between some of the vital intra-day tops and bottoms of the day. It swung 230.21 points between the day’s low of 14,493.67 and a high of 14,723.88.
The wholesale price index rose 6.58% in the 12 months to 27 January 2007, the biggest rise in more than two years, and higher than the previous week's annual increase of 6.11% due to higher food prices. At its quarterly policy review on 31 January 2007, RBI had raised its key short-term rate, the repo rate, by 25 basis points. Recently, private sector ICICI Bank raised its benchmark reference rate on corporate loans and home loans by 100 basis points.
US crude oil futures rose 35 US cents to $60.06 a barrel on Friday. In addition to the OPEC cuts and tensions over Iran, energy prices were also supported by news that Occidental Petroleum was unable to meet supply contracts due to a fire-stricken oilfield in California.
All the BSE sectoral indices ended in the red. BSE Metal index lost 161.05 points (1.7%), to 9,114.05. The BSE Healthcare Index lost 57.94 points (1.4%), to 3,842.94. The BSE Oil & Gas Index lost 56.49 points (0.8%), to 6,631.51. The BSE IT Index shed 41.76 points (0.7%) to 5,479.15. The BSE’s banking sector index, the Bankex, shed 34.52 points (0.45%), to 7,560.31.
The market-breadth was very weak. Against 2,043 shares declining on BSE, 622 rose. Just 45 shares were unchanged. Losers outpaced gainers by a ratio of 3.28:1. The BSE Small-Cap Index lost 160.97 points (2.1%), to settle at 7,490.10. The BSE Mid-Cap Index lost 108.76 points (1.7%), to 6,064.79.
The BSE clocked a turnover of Rs 4332 crore, lower than Thursday’s Rs 5136 crore.
The market witnessed a solid surge in the past few days with FIIs stepping up buying. From 14,090.92 on 31 January 2007, the Sensex rose 561.17 points (3.98%) in six trading sessions to a lifetime closing high of 14,652.09 on 8 February 2007. Foreign funds stepped up buying since the upgradation of India by Standard and Poor's to investment grade. A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities after the Standard & Poor's upgrade on 30 January 2007
Foreign funds bought equities worth Rs 2211 crore in four trading sessions, from 2 February to 7 February 2007. As per provisional data, FIIs were net buyers to the tune of Rs 255 crore on 8 February 2007, the day when the Sensex staged an intra-day rebound from an over 100- point fall, to settle nearly flat for the day.
Corporate earnings growth remains strong in a booming Indian economy. The government, on Wednesday (7 February 2007) estimated GDP growth of 9.2% in the financial year ending March 2007, above the Reserve Bank of India (RBI)’s forecast between 8.5 - 9%, spreading cheer all around.
The near-term trend on the bourses will be determined by expectations regarding the Union Budget 2007-08. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. According to a pre-budget report of Man Financial, though the 10% surcharge on corporate tax may be eliminated, the effective tax burden for corporates may go up if certain open-ended exemptions are removed.
In today’s trade, IT shares dropped after the rupee hit a one-year high against the dollar today. Satyam Computer lost nearly 4% to Rs 467, TCS lost 1% to Rs 1286 and Infosys Technologies shed 0.7% to Rs 2350. Infosys was volatile. The stock moved between positive and negative zone.
Cement pivotals were under pressure. ACC lost 3.2% to Rs 1032, Gujarat Ambuja Cements shed 1.9% to Rs 138.75 and Grasim shed 1.5% to Rs 2815. Cement pivotals had firmed up in the past two days after the government on Wednesday (7 February 2007) forecast 9.2% GDP growth for the current fiscal. Demand for cement is closely linked to economic growth.
Interest rate worries hit banks. The State Bank of India lost 0.8% to Rs 1195, Bank of India shed 3.3% to Rs 186, Canara Bank shed 2.9% to Rs 232, Punjab National Bank shed 2.4% to Rs 502.75, and Bank of Baroda lost 1.4% to Rs 238.
Cellular service providers slipped following reports that the Department of Telecom is set to impose penalty on seven operators for non-fulfillment of the roll out obligations as per their license conditions. Reliance Communications shed 2.7% to Rs 475.80 as reports suggested it will have to pay a penalty of Rs 147 crore on this count. Bharti Airtel shed 1.6% to Rs 753.90. Bharti has added 1.76 million new GSM subscribers in January 2007.
L&T shed 2.3% to Rs 1711 on profit-taking after a recent surge.
Maruti Udyog dropped 2.6% to Rs 938. However, Tata Motors rose 1.1% to Rs 906, following reports of launching its models, Indigo Sedan and Indigo Marina Estate, with 1.4 litre direct injunction common rail diesel engine.
Bajaj Auto rose 0.2% to Rs 3015. However, the stock came sharply off a high of Rs 3171.90, reached in early trade. A newspaper reported that the company had put the plan to spin off the cash and investment assets on a fast track. The paper also said Bajaj Auto may consider merging these assets, which include the insurance business, with Bajaj Auto Finance. Bajaj Auto Finance jumped 16% to Rs 429.
Oil exploration major ONGC lost 1.2% to Rs 882. The Centre on Thursday awarded 25 oil and gas exploration blocks to ONGC in the largest ever auction of assets.
Reliance Industries lost 0.7% to Rs 1385.25. The upstream regulator said on Thursday crude production from RIL’s deepwater gas block off the country's east coast was commercially viable.
Tata Steel shed 1.5% to Rs 454.55. The stock had been hit recently after clinching the Corus deal, at a valuation deemed expensive by the market.
Real estate scrips witnessed selling pressure on worries about high cost of funds. Parsvnath Developers lost 6% to Rs 338.80, Peninsula Land shed 6.7% to Rs 458, Sobha Developers shed 6% to Rs 911, Mahindra Gesco Developers shed 5% to Rs 643, Ansal Properties & Infrastructure lost 5% to Rs 784.25 and Akruti Nirman lost 2.3% to Rs 550.45.
Power transmission equipment maker ABB India ended flat at Rs 3820. The company said it won a Rs 311 crore order for power and automation equipment.
Zee Entertainment Enterprises surged 5% to Rs 361.55. In January 2007, the media major reported strong Q3 results.
IDBI dropped 8.7% to Rs 97.60, and Arvind Mills shed 5.6% to Rs 55.70 after futures & options (F&O) contracts in both scrips crossed 95% of the market-wide position limit. No fresh positions are permitted in these stocks in the (F&O) segment.
Gammon India lost 6% to Rs 352, extending a recent fall when the regulator, Securities & Exchange Board of India, recently barred IPO of its subsidiary Gammon Infrastructure Projects. On 21 December 2007, Sebi barred Gammon, its chairman Abhijit Rajan and two other entities, from any transaction in shares of Gammon Infrastructure for three years. Gammon has challenged the order.
European markets opened positive on Friday. Key benchmark indices in London, Germany and France were up by about 0.6% each. Key Asian markets were mixed on Friday (9 February 2007). While Japan’s Nikkei 225 average was up 1.2%, Hong Kong’s Hang Seng was down 0.27%.
US stocks fell on Thursday after warnings by two big banks about bad loans in the US mortgage market reignited concerns about the housing market. The Dow Jones industrial average fell 29.24 points, or 0.23%, to close at 12,637.63. The Standard & Poor's 500 Index was down 1.71 points, or 0.12%, at 1,448.31. The Nasdaq Composite Index was down 1.83 points, or 0.07%, at 2,488.67.
On Thursday, the European Central Bank (ECB) kept interest rates steady at 3.5% but signaled that it is not done with hiking rates. Bank of England also left its key policy rate unchanged at 5.25% overnight, which had been widely expected following January's surprise 25 basis point increase.
The market is on a roll following strong growth in corporate earnings in a booming Indian economy. On Thursday (8 February 2007), the Sensex set its fourth record in the last five trading sessions. The government, on Wednesday (7 February 2007)estimated GDP growth of 9.2% in the financial year ending March 2007, above Reserve Bank of India (RBI)’s forecast between 8.5 - 9%, spreading cheer all around.
FIIs have stepped up buying since the upgradation of India by Standard and Poor's to investment grade. A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities after the Standard & Poor's upgrade on 30 January 2007.
Foreign funds bought equities worth Rs 2211 crore in four trading sessions, from 2 February to 7 February 2007. As per provisional data, FIIs were net buyers to the tune of Rs 255 crore on 8 February, the day when the Sensex staged an intra-day rebound from an over 100- point fall, to settle nearly flat for the day.
FIIs were net buyers to the tune of Rs 39 crore in index-based futures on 8 February 2007. They were net sellers to the tune of Rs 275 crore in individual stock futures the same day.
Key Asian markets were mixed on Friday (9 February 2007). While Japan’s Nikkei 225 average was up 0.6%, Hong Kong’s Hang Seng was down 0.37%. Markets in Singapore, South Korea and Taiwan were flat.
US stocks fell on Thursday after warnings by two big banks about bad loans in the US mortgage market reignited concerns about the housing market. The Dow Jones industrial average fell 29.24 points, or 0.23%, to close at 12,637.63. The Standard & Poor's 500 Index was down 1.71 points, or 0.12%, at 1,448.31. The Nasdaq Composite Index was down 1.83 points, or 0.07%, at 2,488.67.
On Thursday, European Central Bank kept interest rates steady at 3.5% but signaled that it is not done with hiking rates. Bank of England also left its key policy rate unchanged at 5.25% overnight, which had been widely expected following January's surprise 25 basis point increase.
US crude oil futures rose 43 US cents to $60.14 a barrel on Friday. In addition to the OPEC cuts and tensions over Iran, energy prices were also supported by news that Occidental Petroleum was unable to meet supply contracts due to a fire-stricken oilfield in California.
NIFTY (4223) SUP 4194 RES 4242
BUY BHARATFORG (362)
SL 358 T 372, 374
BUY PIDILITIND (125)
SL 122 T 133, 135
BUY KARUR VYS BK (291)
SL 287 T 301, 303
SELL WOCKPHARMA (346)
@ 350 SL 354 T 340, 338
SELL JPASSOCIAT (678.55)
@ 683 SL 687 T 672, 670
Another choppy day ahead
Never be frightened to take a profit. Better in your pocket then theirs.
The markets bounced back from their lows yesterday. So, that's a good sign for the bulls going into trade on the last day of the week. However, it is better to pocket some profit when the going is good. After a fairly choppy week, the market could look to settle down a bit. The key indexes may remain sideways though with a positive bias. The pre-budget rally is definitely in tact, but one needs to remain alert for any untoward incident. The market always has a way of surprising the investors. Remember May-June period last year.
Global cues are mixed yet again. One negative factor at this juncture could be the spike in oil prices above the $60 per barrel. Having said that the jump in FII inflows in the past few days is heartening and could keep the market from falling sharply. We expect a cautious to higher opening and a volatile day. The inflation data will be released at noon, and it may spook the party for the bulls if the WPI-based reading on prices inches higher.
Making money in the market from these levels is going to be tough. At the same time interest rates are on their way up and inflation remains at an uncomfortable level. So, expect market returns to moderate this year. The absolute level of open interest in the F&O segment is quite high and so is the cost of carry. Much of the good news is in the prices. Valuations look expensive vis-a-vis other emerging markets as well as the historical average. Earnings growth may also slow down given the high base and increasing costs. The risk-reward ratio is skewed more towards risk compared to say in 2003 or even last year.
Going by the high volatility in the market this year so far, investors must be finding it difficult to take a decisive step. One way out is to focus on one's own portfolio and adopt a trading/investing strategy that suits one's style.
Shares of Pochiraju Industries Ltd. will get listed on the bourses today.
Bajaj Auto is likely to be in the thick of things amid reports of a possible split in the company and the reported rift between the sons of Rahul Bajaj. United Breweries could advance as a financial daily has reported that the company could snap up Whyte & Mackay for $1bn.
Keep an eye on Sagar Cements. The company's Board will meet today to consider issue of further equity shares on a preferential basis. Grapevine has it that private equity major Blackstone could pick up a stake. The stock was up nearly 5% yesterday.
The Indian Bank IPO will close today. It has been subscribed 6.4 times so far. C&C Construction IPO will also close today. It has been subscribed more than 3 times. SMS Pharma IPO closed yesterday. It has been subscribed 2.6 times only.
The IPOs of Broadcast Initiatives and MindTree Consulting will open today.
Major Bulk Deals:
UBS has bought BPL; Reliance Vision Fund has sold Cambridge Technology; Morgan Stanley has sold Electrotherm; Reliance Capital has picked up Global Broadcast News; Deutsche Securities has purchased GVK Power while Jpmsi A/C Copthall has sold the stock; T Rowe Price has sold Network Fincap; Bear Stearns has bought Northgate; Lehman Brothers has picked up Prajay Engineers while Bear Stearns has sold it; Goldman Sachs has bought Sujana Metal.
Insider Trades:
Orient Abrasives Limited: Mr. S. G. Rajgarhia, Managing Director has purchased from open market 41250 equity shares of Orient Abrasives Limited from 1st February to 2nd February.
Market Volumes:
BSE Metal index was the major loser and lost 1.60%. BSE Auto index (down 0.35%), BSE Pharma index (down 0.17%) and BSE FMCG index (down 0.16%) were among the other major gainers. However, BSE Bank index gained 0.90%.
Volume Toppers:
IFCI, GBN, IDBI, Aftek, Hindustan Motors, Reliance Communication, SREI Infrastructure, Shree Ashtavinyak, Satyam Computer, Hindalco, NTPC, Autoline Industries, Akruti Nirman, Zee News, Centurion Bank and GMR Infrastructure.
Delivery Delight:
Adlabs Films, APIL, BEML, Bharat Forge, BHEL, Cummins India, Gujarat State Fertilizers & Chemicals, HEG, IDBI, Jet Airways, Neyveli Lignite, Patni, Praj Industries, Ranbaxy Laboratories, RCF, Reliance Capital, Reliance Com, Sasken, SCI, Sun TV, UTI Bank and Zee Telefilms.
Upper Circuit Filters:
Goldstone Technology, Indiainfoline, ACE, Swan Mills and HOV Services.
Brokers Recommendation:
Spanco Tele - Buy from Emkay with target of Rs302.
Long Term Investment:
Valecha Engineering.
Major News Headlines:
Govt to sell 7% in BEML, price not yet decided
GMR Infra buys 51% in Cadence Cargo, a cargo handling firm
Ranbaxy gets US FDA nod to sell copy of Pfizer’s Zoloft
ABB wins order worth Rs3.11bn from Grasim, Ultratech
Ram Informatics signs accord with Sunrise Systems Inc
Patni Q4 group profit at Rs1.14bn (up 73%), revenues Rs6.841 (up 23%)
BHEL wins order worth Rs4bn
NIIT Tech to set up 12000 seat campus in Noida in 3 phases: reports
ONGC wins 24 exploration blocks, RIL wins 7
HCL Tech in accord with Crane Aerospace for engineering services
Mahindra Defense unit to sell Jordan's Seabird planes
L&T & Boeing to explore opportunities in defense industry
KEI Industries buys land in Rajasthan for expansion
Petron Engineering secures 2 orders worth Rs100mn from RPL
GlaxoSmithkline Consumer Healthcare Ltd (F12/06) - Results Update
GlaxoSmithkline Consumer Ltd. recorded 15% yoy growth in net sales at Rs11.1bn during F12/06 driven by average volume growth of ~8% in Horlicks and Boost. Revenues for the quarter increased by 9.2% yoy (down 12.2% qoq) to Rs2.6bn, led by a average volume growth of ~4% in Horlicks and Boost. Biscuits category recorded a ~11% yoy growth during the year. The company has taken ~5% price increase in Horlicks and 2% price hike in Boost (in November) resulting in a average price increase of ~4.5%.
Operating profit for the year remained almost stable at Rs1.8bn. Operating margins dipped by 250bps to 16.6% mainly due to the sharp 190bps rise in raw material cost. Milk prices increased significantly by 16% this year and are expected to remain higher by ~20-25% in F12/07. Prices of other key raw materials like malted barley (expected to remain higher by 5% yoy in F12/07), wheat, sugar, coco powder etc are also expected to remain firm. During Q4 F12/06, margins dipped by 540bps to 10.4% due to higher input (370bps) and staff (250bps) cost. Lower adspend (12.7% of net sales in Q4 F12/06 from 14.9% of net sales in Q4 F12/05) restricted further margin erosion.
Other income (including cross charge of Rs70mn per quarter received on account of OTC products sold on behalf of GlaxoSmithkline Pharmaceuticals Ltd) for the quarter and year was higher at Rs169mn and Rs522mn respectively. PBT rose by 17.3% yoy to Rs1.9bn during F12/06 driven by higher other income and lower interest cost. Effective tax rate was at 33.4% resulting in a tax outgo of Rs636mn. Net profit for the year increased by 18.5% yoy to Rs1.3bn translating into an EPS of Rs30.1.
The management expects to record a double-digit topline growth in F12/07 driven by strong growth in Horlicks and Boost and expects to maintain the margins at ~20% (including other income). However, higher input cost could put pressure on margins. Exports account for 5% on the company’s total sales and are expected to continue at the same level. Acquisitions, if any could be a growth driver for the company. At the current market price of Rs582, the stock is trading at 19.3x FY07 EPS of Rs30.1 per share. We recommend a ‘Hold’ rating this stock.
Market likely to consolidate
Volatile markets ended flat with benchmark Sensex closing at a new all time high. The markets were in red throughout the trading session as volatility and selling pressure in the heavy weights like Bajaj Auto, Satyam Computer and Bharti Airtel dragged the benchmark index to hit a low of 14523.16. However, the markets recovered from their lows as blue chips like Infosys and L&T witnessed fresh buying. Also, PSU stocks attracted buying interest after Government announced plan to sell 7% stake in BEML. Finally, the BSE benchmark Sensex was flat at 14652. NSE Nifty was also flat at 4223.
L&T gained by 0.9% to Rs1756 after the company announced that they have signed a MoU with Boeing Company for the joint exploration of business opportunities in India's defense sector. The scrip touched an intra-day high of Rs1767 and a low of Rs1702 and recorded volumes of over 6,00,000 shares on NSE.
Global Broadcast News Ltd. made an impressive debut on the bourses. The stock listed at Rs425.10 as against the issue price of Rs250, and ended at Rs505 translating into a premium of 102%. The scrip touched an intra-day high of Rs518 and a low of Rs425 and recorded volumes of over 1,00,00,000 shares on NSE. The company entered the capital market with an Initial Public Offering ( IPO) of equity shares, totaling up to Rs1.05bn. The issue was subscribed 48.74 times.
Patni surged over 2.5% to Rs436 after the company announced its Q4 result with net group profit at Rs1.14bn (up 73%) and revenue at Rs6.841 (up 23%). The scrip touched an intra-day high of Rs459 and a low of Rs426 and recorded volumes of over 12,00,000 shares on NSE.
Reliance Industries also edged higher 0.4% to Rs1397 after the company won 7 Oil Exploration areas in India. The scrip touched an intra-day high of Rs1403 and a low of Rs1381 and recorded volumes of over 10,00,000 shares on NSE.
Metal stocks were the top losers as metal prices on LME slipped. Hindalco slipped by over 3.5% to Rs175, Sterlite Industries fell 2.15 to Rs479, SAIL was down 1% to Rs115 and Tata Steel edged lower by 0.5% to Rs462.
Telecom stocks were a mixed bag today. Bharti Airtel slipped 0.9% to Rs766 and VSNL was down 0.4% to Rs500. However, Reliance Communication gained by 0.7% to Rs489 and MTNL was flat at Rs164.
Banking stocks recorded smart gains. Heavy weight ICICI Bank advanced 1.7% to Rs999, SBI was up 0.9% to Rs1205 and HDFC Bank gained 0.7% to Rs1109. Among the Mid-Cap stocks OBC, Corp Bank and Bank of India were among the major gainers.
Capital Good stocks ended with gains. ABB, Punj Lloyd and BHEL were among the major gainers.