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Tuesday, February 13, 2007

Motilal Oswal - SAIL & Patni

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Motilal Oswal - Idea Cellular IPO

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Morgan Stanley :)

Mr Gautam Shah of JM Morgan Stanley gives his perspective on where the markets are headed.

Do you sense a jump to 15,000 on the index next?
Yes absolutely, I think we should be going much higher. This is a market that has behaved extremely well in the last couple of months.
We are continuously making higher tops and higher bottoms without any problem whatsoever.
Every time there is a correction, we are retracing it very quickly.
The fact is that once we take out important resistance levels, the market consolidates before moving higher. So the fact that markets are consolidating and rallying is very positive because it is only rational and very acceptable for most market participants. Given some of the pattern breakouts last week, I guess we will see strength all this month and possibly a level of 15,200 on the Sensex, 4400 on the Nifty, which we have updated as our short-term targets.

What about the medium-term - what kind of levels can you see for you?

We initiated our conservative medium-term target of 15,500 last November. So we are maintaining our conservative call of 15,500.
But I guess the kind of strength this market is showing and the fact that we should be topping out sometime in April-May this year, I guess my medium-term target of 15,500 should be exceeded.
We are not talking of any levels beyond that right now, maybe we will take a call after the next couple of weeks once we are around 15,000.

What is the significant level that you had broken in terms of resistance last week? Do you foresee a clear run from here to 15,000 plus?
Yes, I think it should be a very clean run because I think we have consolidated really well in the last couple of weeks.
Clearly, I think 14,000 -14,300 has been the range for the Sensex. A couple of times we tested 14,000 on the downside and I thought 14,000 was an important resistance in December because we corrected 1,200 points from that level. Even in early January, we corrected from 14,000.

Which sectors do you see leading this move up to 15,000?

Since it will be a very straight run all the way to 15,000 plus, I think this is what every sector is going to participate.
But I think oil and gas has been our favourite for the last couple of months. There are a few index heavyweights in the oil and gas space and I think this is a sector, which is likely to be a star performer this month.
Along with oil and gas, auto is one space, which we really like. Most stocks in the sector have the technical set-up to gain as much as 10 per cent in the next 2-3 weeks.
So we are banking on oil and gas and autos from a near term point of view, and mid-caps and small-caps will continue to outperform till the market actually tops out in the month of April and May.

India's Hottest Software Product Companies

An Indian Windows Vista may take years in coming, but here are 10 home-grown software product companies that could make it big.

In India's glorious software story, there is a sad chapter. While India by now is top of mind in software services, there's no software product-like an SAP enterprise resource planning (ERP) package or Microsoft Windows-that enjoys instant recall globally. The reasons are fairly simple. Developing a software product demands investment upfront and high-decibel marketing, without any guarantee that the product will fly. Besides, it has always been said that to launch a software product, you need to be in the US or some other first-world nation, not India. As a result, while the Indian it software & services industry will log Rs 1,32,750 crore in revenues (domestic and exports) end of this financial year, an overwhelming 79 per cent of it will come from services. Yet, there's evidence that things are changing. A handful of Indian companies are bravely developing products in the belief that a world that has accepted their service offerings will also accept their products. Business Today spoke to a variety of industry experts to identify the 10 software companies that could make it big. Here's the list they are betting on:

In India's glorious software story, there is a sad chapter. While India by now is top of mind in software services, there's no software product-like an SAP enterprise resource planning (ERP) package or Microsoft Windows-that enjoys instant recall globally. The reasons are fairly simple. Developing a software product demands investment upfront and high-decibel marketing, without any guarantee that the product will fly. Besides, it has always been said that to launch a software product, you need to be in the US or some other first-world nation, not India. As a result, while the Indian it software & services industry will log Rs 1,32,750 crore in revenues (domestic and exports) end of this financial year, an overwhelming 79 per cent of it will come from services. Yet, there's evidence that things are changing. A handful of Indian companies are bravely developing products in the belief that a world that has accepted their service offerings will also accept their products. Business Today spoke to a variety of industry experts to identify the 10 software companies that could make it big. Here's the list they are betting on:

3i Infotech

CEO & MD, V. Srinivasan
Revenues: Rs 445.1 crore*
Employees: 3,500
Flagship Product: Kastle: A universal banking product that covers origination, servicing and collection of funds
Funding/ Listing: Listed in April 2005, raised $70 million (Rs 315 crore) in
Aug 2006, via an FCCB issue to fund M&A deals
* For nine months ended Dec. 31, 2006

Since its first tentative steps into the products market six years ago, 3i has become the fourth-largest player in the Indian products market, according to Dataquest, a trade journal. Not bad for a company that began life in 1993 as ICICI Investor Services and went on to become an it services firm (ICICI Infotech) six years later, before adding products to its portfolio. What helped? To put it simply, it bought its way into the products market, buying small firms such as Datacons, FDG and Stet and, in the process, moving into anti-money laundering, insurance and mutual funds markets. Today, half of its revenues come from products. "We are closely focussed on financial services and we offer products in every niche in this market," says V. Srinivasan, CEO & MD of 3i. Instead of trying to take on established players in this market, 3i has focussed on tapping unexplored markets (such as Africa) and tapping unexplored product niches too. To get into more developed markets such as the US, 3i is again banking on acquisitions. "We yet have around Rs 54 crore from two FCCB (foreign currency convertible bonds) issues of $50 million and $20 million in March and October last year," says Srinivasan. If you can't beat them, buy them.

Infosys Technologies

VP - Global Head (Sales & Marketing), Merwin Fernandes
Revenues: Rs 391 crore* amounting to 4.83 per cent of Infosys revenues
Employees: 2,400
Flagship Product: Finacle: A universal banking solution
Funding/ listing: Listed. An SBU of Infosys
* For nine months ended Dec. 31, 2006

For a company that has become India's best-known software brand, success in the products arena has been slow in coming. Its first core banking solution was implemented in 1992, and until 1998, Infosys CEO, Nandan Nilekani, was hopeful of getting 40 per cent of the company's revenues from products. That never happened, since Bancs 2000, as Ver 1.0 of the banking product was known then, never took off. In contrast, iFlex, spun off from a Citigroup tech arm, took such a commanding lead with its Flexcube that in 2005 us-based it major Oracle was prompted to acquire it for an eventual consideration of around $1.5 billion.

However, Infosys went back to the drawing board and relaunched the banking product as Finacle. Last year, Finacle fetched $81.86 million in revenues ($86.74 million or Rs 390 crore in the first nine months of 2006-07)-around four per cent of Infosys revenues. "The important thing today is that Finacle is growing faster than products from competitors such as iFlex and Temenos, though admittedly on a smaller base," says Merwin Fernandes, Vice President and Global Head of Sales & Marketing for Finacle. With the replacement market for core banking solutions projected to touch $34 billion (Rs 1,53,000 crore) in 2010 (compared to $13.9 billion in 2004), Finacle should have a lot of room to grow.

IBS Software
CEO, V.K. Mathews
Revenues: $50 million (Rs 225 crore)
Employees: 1,500
Flagship Product: AIRES - Passenger reservation and inventory management solution
Funding/listing: Privately held

A decade ago, IBS started operations as the sole offshore it services provider to (the now bankrupt) Swissair Group and then added Emirates to bolster its focus on the aviation market. Two years on, when 9/11 hit, IBS nearly went belly up. Rather than shut shop, IBS decided to lean on its domain expertise in travel and tourism industry to build three different it solutions: aires, iCargo and iLogistics. The industry expertise was primarily driven by V.K. Mathews, who headed the technology operations for the Emirates Group before relocating to Thiruvananthapuram, Kerala (and later to Bangalore) to set up his software products shop. "The airline industry globally, in the last 50 years, has cumulatively not made any profit. Though it is a problem for the industry, it is also a great opportunity for companies like IBS to come up with it solutions that will help airlines come out of this economic disaster," says Mathews. To try and match the marketing muscle of its larger competitors, IBS has jointly developed its passenger reservation system aires with Travelport, the holding company of other well-known travel firms such as Galileo, Orbitz, Gulliver Travels and eBookers. It also plans to raise capital to fund growth. "We see a clear opportunity for IBS to attain leadership position in the next 3-4 years," says Mathews. Keep an eye on IBS.


Chairman & CEO, Srini Rajam
Revenues: $8 million (Rs 36 crore)*
Employees: 200
Flagship Product: DSP solutions for portable media players
Funding/listing: Raised $11.5 million from GTV & Bank of America Equity Partners
*BT Estimate

Bought any Taiwan or Korea-made portable media player or digital camera of late? If yes, then you might already be using some of Ittiam Systems' products without knowing it. The company, whose name is inspired by Descartes' most famous one-liner in philosophy, 'I think therefore I am', has by now provided its software product stack to more than 2 million devices.

It's no mean achievement. Six years ago, when Srini Rajam gave up his job as the head of Texas Instruments in India at the behest of venture investor V.G. Siddhartha of Global Technology Ventures to start a product company, the business environment was far from ideal. The dotcom crash was followed by the telecom crash. However, Rajam turned adversity into an opportunity, and imposed financial discipline on the company from Day One to emerge as a player of repute in the digital signal processing (DSP) space. For the third year in a row, it has been voted the world's most preferred provider of DSP-based intellectual property in a survey of DSP professionals. Rajam's ambitions, though, are higher. "Even though we have become profitable, I am not happy with the scale we have achieved," says Rajam. "We had hoped to be a bit farther along the road at this point in our journey, but we are working hard and I think this model will work." Rajam, however, says that he thinks Ittiam has made the right bets, including, most recently, building products for IP video phones, imaging and video.

Ramco Systems

Vice Chairman, Managing Director and CEO, P.R. Venketrama Raja
Revenues: Rs 194 crore*
Employees: 2,000
Flagship Product: Enterprise Series - ERP package targeted at primarily small businesses
Funding/listing: Listed in April 1999
* For nine months ended Dec. 31, 2006

If the software products business were to be won on size alone, the Chennai-based Ramco Systems would have been kayoed in round one itself. This company, which focusses on providing enterprise resource planning (ERP) tools for a range of businesses, is minuscule compared to its multi-billion dollar MNC rivals such as sap, Oracle and more recently Microsoft. If it has survived, it has done so by targeting smaller companies and the domestic market to grow its business. Its small customers needn't buy its products such as Ramco ERP OnDemand. They can simply use it for a fee. But Kamesh Ramamoorthy, Ramco Systems' coo, says that cost isn't the only reason why customers prefer Ramco. "We provide a powerful software application assembly and delivery platform that not only address the functional requirements but also enhance the IT capability of our customers," says Ramamoorthy. Having established a stable base for its existing product base both in India and overseas, Ramco is now looking to build a business services repository in a few verticals and ramp up the delivery of its products on a subscription model. It has taken Ramco 18 years to get this far. The road ahead won't be as arduous, but it won't be easy either.

Sasken Comm. Tech.

Chairman & CEO, Rajiv C. Mody
Revenues: Rs 339.69 crore*
Employees: 2,504
Flagship Product: NA - Solutions at the heart of millions of cellphones in use globally
Funding/listing: Listed in August 2005
* For nine months ended Dec. 31, 2006

Being a software products company isn't easy. Just ask Sasken Communication Technologies. Founded by Rajiv Mody in a garage in San Jose, California, way back in 1989 as Silicon Automation Systems, it arrived in India (Gujarat) as ASIC Technologies, moved to Bangalore a year later, and when investors such as New Enterprise Associates, Nokia Venture Partners, and Intel Capital pumped in $22 million, it reincarnated itself as a telecom solutions provider. "This was clearly a risky move when we made it but it seems to have paid off handsomely over the last couple of years," says G. Venkatesh, Sasken's Chief Technology and Strategy Officer. Today, Sasken's products are shipped with millions of phones worldwide. For instance, its modem software has been slapped into some 55 million handsets globally to date and its application suite installed in more than 8 million high-end or smart phones. "Sasken is driven by the philosophy of connecting the dots in the communications value chain. Operators are rolling out new services and solutions as they want to exercise larger control over this value chain," says Venkatesh. Achieving this involves resolving multiple paint points such as interoperability issues. Pain points for telcos, but opportunity for Sasken.

Subex Azure

Chairman & CEO, Subash Menon
Revenues: Rs 172 crore*
Employees: 1,200#
Flagship Product: RocWare - Operational efficiency and service agility software suite
Funding/ listing: Listed but in the process of raising $200 million (Rs 900 crore) through sponsored GDR
# This includes 300 employees from its recent acquisition Syndesis
* Does not include Syndesis revenues

Sometimes, persistence pays. Back in 1999, when competitors were eating Subex Systems' (as it was called then) breakfast, lunch and dinner in the systems integration business, its founder Subash Menon went against popular advice into software products, although he stuck to its area of expertise, telecom.

As it turns out, that was the best decision he could have made. In the seven years since, Subex has made seven acquisitions worth $323.5 million, including a $164.5-million (Rs 740-crore) purchase of Canadian company, Syndesis, just last month. As a result, Subex's bouquet of products has expanded from telecom fraud management (Ranger) and billing solutions (Concilia) to revenue-enhancing solutions such as Moneta and Optima.

"Until the Syndesis buy, we were offering only operational efficiency tools to our customers-that is, help to reduce cost. With this acquisition, we will be able to provide service agility and thus help increase their revenues," says Menon, 41. Thanks to the acquisitions, 32 of the world's top 50 telecom players are now Subex customers.

Tally Solutions

MD, Bharat Goenka
Revenues: Rs 120 crore
Employees: 850
Flagship Product: Tally 9.0 Accounting package
Funding/ listing: Privately held. Mukesh Ambani CMD of Reliance Industries is a major investor

There are only two kinds of companies in India when it comes to accounting software," says Bharat Goenka, Managing Director of Tally Solutions. "Those who already use Tally and those who will shortly." He isn't exaggerating. Tally enjoys a 90 per cent share in the domestic market for accounting software.

Expanding reach and cutting price from Rs 22,500 per installation three years ago to Rs 10,000 currently has helped the 20-year-old company curb piracy. Around that time too, Tally forayed into Middle East and Africa, and claims to now have 2 million users in 92 countries. Now, it's looking at ERP solutions for small businesses and another one for the retail industry. Things must be headed in the right direction at Tally, since Reliance Industries' Mukesh Ambani recently picked up an undisclosed, personal stake in it. "Tally's turnover must be rounding off error for him, but it is my good fortune that he has taken a personal interest in it," says a grateful Goenka.


CEO, Dan Vetras
Revenues: N.A.
Employees: 260
Flagship Product: Talisma CIM - Multi-channel customer interaction management solution
Funding/listing: $79 million* (Rs 355.5 crore) from Oak Investment Partners and SeaPoint Ventures
N.A.: Not available *BT Estimate

With competitors such as SAP, Siebel and on one hand, and Kana, eGain and LivePerson on the other, you'd expect the Bangalore-based provider of customer relationship management (CRM) and customer interaction management (CIM) solutions, Talisma, to be hemmed in. You would be wrong. "We have trebled our customer count to over 800 worldwide now, and we expect to add 50+ customers (big and small) every quarter," informs Girish Krishnamurthy, Managing Director (Asia Pacific), Talisma, which was spun out of Pradeep Singh's Aditi Technologies in 2000. To compete with the larger players, Talisma's executives say, the firm focusses on ease of implementation (measured in days, not weeks or months, they say) and domain expertise. The company, which is headquartered in the US but does almost all of its R&D in Bangalore, relies on word-of-mouth and search engine-based marketing. Despite its rapid growth in recent years, Talisma recognises that it faces many challenges. Attracting and retaining talent apart, Krishnamurthy says, "there are issue of expanding our bandwidth and entering new markets such as travel and tourism and, inevitably, BPO."

Tejas Networks

CEO, Sanjay Nayak
Revenues: Rs 250 crore*
Employees: 350
Flagship Product: Optical Networking Products
Funding/ listing: Raised $49 million (Rs 220.5 crore) till date through investors like Mayfield Fund, Intel Capital, Sycamore Networks, Battery Ventures
*BT Estimate

There could not have been a worse time to start a software product company, that too from India," grins Sanjay Nayak, who co-founded Tejas Networks with one of Silicon Valleyer's posterboys from India, Gururaj Deshpande, just a year before the telecom nuclear winter of 2001. Tejas had stepped into optical networking solutions just as the global telecom industry was coming crashing down due to overcapacity and ruinous auctions of 3g spectrum. Few thought the Bangalore-based company would survive.

For one, global majors such as Cisco, Huawei and ZTE had entered the segment, offering solutions at rock-bottom prices. Yet, Tejas, whose products help telecom carriers build converged networks that support both traditional voice services and data services, has a 25 per cent market share in the segments it operates in. It also ships boxes to other international telecom infrastructure providers, although Nayak won't reveal names. "Once we are able to build a brand internationally, we will sell under Tejas name," says Nayak. With some big investors backing the Rs 250-crore Tejas, it's now just a question of scaling up and challenging global rivals on their turf.

Indiainfoline - Indian Transformer Industry

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Sensex slips amid substantial volatility

The market continued correcting and shed 100 points for the day. The market began the trading session on a bearish note at 14168, down 22 points, and continued moving southwards as the trading session progressed. The Sensex managed to recover from its early losses in the afternoon on selective buying in several heavyweights. The sentiment turned extremely bearish after the Sensex touched the day's high of 14364 and the index slipped to the day's low of 13953. The Sensex pared some losses towards the close and ended the session at 14091, down 100 points. The Nifty shed 14 points and closed at 4045.

The breadth of the market was negative. Of the 2,604 stocks traded on the BSE, 1,480 stocks declined, 1,055 stocks advanced and 69 stocks ended unchanged. All the sectoral indices except the BSE PSU index and the BSE Oil & Gas index closed in the red. The BSE Metal Index led the slump and slipped 1.52% at 8485. The BSE Bankex declined 1.31% at 7267 and the BSE IT index was down 1.05% at 5367.

Among the Sensex stocks Hindalco plunged 4.92% at Rs142, Reliance Communications shed 3.07 % at Rs441, L&T declined 2.80% at Rs1,613, Tata Steel slipped 2.59% at Rs432 and Maruti fell 2.34% at Rs891. HDFC, HDFC Bank, Infosys, Cipla and BHEL were down 1-2% each. Among the metal stocks Hindustan Zinc slipped 2.42% at Rs621, Jindal Stainless declined 1.69% at Rs114 and Maharashtra Seamless lost 1.53% at Rs507. The banking stocks also felt the heat. UTI Bank tanked 6.37% at Rs518, Andhra Bank shed 2.26% at Rs82, Centurion Bank of Punjab slipped 1.97% at Rs35 and PNB dipped 1.64% at Rs484.

Over 56.42 lakh Hindalco shares changed hands on the BSE followed by SAIL (54.89 lakh shares), Gujarat Ambuja (48.12 lakh shares), Cairn India (39.76 lakh shares) and IDBI (38.03 lakh shares).

Value-wise Reliance Communications registered a turnover of Rs150 crore on the BSE followed by Hindalco (Rs81 crore), Gujarat Ambuja (Rs63 crore), Reliance Industries (Rs62 crore) and BHEL (Rs62 crore).

Sensex drops 100 points amid extreme volatility

High volatility was the order of the day and the Sensex underwent wild gyrations. Heavyweights came to the rescue of the two key indices, the BSE Sensex and the NSE Nifty. An upmove in ONGC restricted the fall in the Nifty, while Reliance Industries (RIL) restricted the damage in the Sensex.

The Sensex lost 99.72 points (0.7%) for the day, to settle at 14,090.98. The S&P Nifty shed 13.75 points (0.34%), to 4,044.55.

RIL gained 1.1% to Rs 1372. The stock was up after an initial slide to a low of Rs 1341.10. RIL has a huge 11.3% weightage in the Sensex. The upstream regulator said last Thursday that crude production from RIL’s deepwater gas block, off the country's east coast, was commercially viable.

ONGC rose 2.5% to Rs 887.90. RIL and ONGC have a combined weightage of 18.51% in the NSE Nifty. As per reports, ONGC, which is looking for better technological expertise to increase output from its oil and gas fields, as well as for acquiring more assets abroad, is set to strike the first asset swap deal with Italy’s ENI on Wednesday.

Another report said ONGC had initiated talks with Brazil’s Petrobras for offering each other a stake in their respective oil & gas blocks. Volatility remained high today. A sell-off took the Sensex below 14,000 points in late trading before a solid rebound materialised, thanks to strength in RIL. The Sensex recovered from a lower level after losing as many as 233 points, to 13,957.70, at 14:58 IST.

In early trade, the Sensex had recovered from the lower level after an initial sharp fall of 177.24 points, to a low of 14,013.46, and kept recovering till the afternoon, only to fall all of a sudden. The Sensex had surged as many as 172 points, to a high of 14,363.74, at 13:25 IST.

The barometer index fluctuated a massive 960 points between some of the vital intra-day tops and bottoms of the day. It also fluctuated 406.04 points between the day’s low of 13,957.70 and high of 14,363.74.

The market-breadth turned weak in the latter part of trading. For 1,490 shares declining on BSE, 1,101 shares rose. Just 76 stocks were unchanged. Losers outpaced gainers by a ratio of 1.35:1. In afternoon trade, the advance-decline ratio was almost 2:1. BSE Small-Cap Index lost 39.11 points (0.5%), to 7,088.15. The BSE Mid-Cap Index shed 36.17 points (0.6%), to 5,785.28.

All the BSE sectoral indices except the BSE Oil & Gas index ended in the red. The biggest losers in percentage terms was the BSE Metal Index. It dropped 130.94 points (1.5%), to 8,485.49. BSE’s banking sector index, the Bankex, shed 96.09 points (1.3%), to settle at 7,266.74. The BSE IT index shed 57.22 points (1%), to 5,366.54. The BSE Oil & Gas index gained 71.36 (1.1%), to 6,548.54.

The BSE clocked a turnover of Rs 4860 crore, compared to Monday’s Rs 4271 crore.

The turnover in NSE’s derivatives segment surged to Rs 49029 crore. The turnover had risen to Rs 39996 crore on 12 February 2007 compared to a turnover between Rs 26682.02 crore and Rs 32219 crore from 1 February 2007 to 9 February 2007. Nifty February futures were at 4068, a premium of 23.45 over the spot Nifty closing of 4044.55.

Fears of a further rise in domestic interest rates, and a large number of IPOs lined up for the next few weeks has weighed on the market sentiment of late. The Sensex had tanked 348 points on Monday (12 February 2007) partly due to weak Asian markets, and partly due to concerns of further rise in interest rates.

Data on Friday (9 February 2007) showed inflation rose to its highest level in more than two years, fanning concerns of a further rise in interest rates. 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.

FIIs have pressed heavy sales in the derivative market recently. FIIs were net sellers to the tune of Rs 1204 crore in index-based futures on 12 February 2007. They were net sellers to the tune of Rs 560 crore in index-based futures on 9 February 2007.

Before the current fall, the Sensex had risen sharply on the back of increased buying by FIIs. 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 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.

The barometer index is up 304.07 points (2.2%) in calendar 2007 so far. It has lost 561.11 points (3.8%) from a lifetime closing high of 14652.09 on 8 February 2007.

In today’s trade, Bharti Airtel was up 2.3% to Rs 745.65, off sharply from the session’s high of Rs 768.25. As per reports, Bharti Airtel signed an infrastructure sharing agreement with Vodafone, which will allow both operators to share nearly 70,000 mobile towers across the country. Vodafone emerged as a top bidder for the fourth largest cellular firm, Hutch-Essar, on Sunday.

Reliance Communications dropped 2.3% to Rs 444.35. The stock dropped for the second day in a row after missing out on the acquisition of Hutch-Essar.

Hindalco lost 4% to Rs 143 , extending Monday’s sharp fall in the counter. Worries that Hindalco will not reap the benefits of the $5.9 billion deal to buy Novelis Inc for some time, had knocked down its shares on Monday.

Engineering & construction major L&T lost 3% to Rs 1609.

Tata Steel lost 2.5% to Rs 432.55. The stock has been hit by its acquisition of Corus late-January 2007, which is seen as expensive.

IT bellwether Infosys shed 1.7% to Rs 2310 in volatile trade. The stock moved between Rs 2285 and Rs 2358. Wipro gained 2% to Rs 641.50.

Ranbaxy rose 1.8% to Rs 617.70, after the drug maker, which is fighting to overturn Pfizer Inc's exclusivity on cholesterol fighter Lipitor, launched a generic form of the drug in Denmark.

Select side-counters were in demand. Top gainers among side counters were Syngenta India (up 12% to Rs 422), Pritish Nandy Communications (up 12.2% to Rs 58.65), Tulip IT Services (up 10% to Rs 569.45), Steel Strips Wheels (up 10% to Rs 231), Shalimar Paints (up 10% to Rs 177.35), Shakti Pumps (up 8.7% to Rs 136.80), Yuken India (up 7% to Rs 179), NIIT (up 6.6% to Rs 580), Rajesh Exports (up 6% to Rs 444), Lloyd Electric (up 6% to Rs 180.50, Finolex Cables (up 5.9% to Rs 101), Zee Entertainment (up 5% to Rs 272.50) and Balaji Telefilms (up 5% to Rs 126.25).

South East Asian Marine Engineering & Construction rose 1.6% to Rs 186.50. The company unveils December 2006 quarter results today.

Syngenta India jumped nearly 10% to Rs 414, after the agri-busines firm said it will seek shareholders' approval on 15 March 2007 to delist the company's shares from the BSE.

While IDBI rose 3.4% to Rs 89.70, IFCI gained 3.4% to Rs 27 after NSE removed curbs on building fresh positions in the derivative contracts of both companies.

Federal Bank jumped nearly 5% to Rs 249.45, after its board on Monday approved a 1:1 rights issue.

Ansal Properties plunged 5% to Rs 707.80. The stock plunged for the second day in a row even as the company, during trading hours on Monday, recommended a 1:1 bonus issue.

Auto parts maker, Autoline Industries, gained nearly 4% to Rs 398 after the company said on Tuesday its board will meet on 21 February 2007, to consider a take over of 49% stake in subsidiary, Autoline Dimensions Software. The board will also consider a proposal to take over a domestic or a foreign company, Autoline Industries added.

Suzlon Energy gained 1.6% to Rs 1098, recovering from Monday’s sharp fall. The stock had nosedived on Monday on concerns about a short-term strain on its financials due to plans for a big acquisition overseas. Suzlon Energy is bidding in consortium with Martifer, Portugal, a steel construction company operating across Europe, for acquiring control of Germany’s REpower.

Alstom Projects gained nearly 5% to Rs 471, after it won a large order worth Rs 750 crore.

Orchid Chemicals dropped 9% to Rs 243.95, due to concerns of equity dilution after the company raised $175 million in a five-year, zero-coupon convertible bond. The bonds have a yield-to-maturity of 7.25%, calculated semi-annually, and having an initial conversion price of 30%, above Rs 267.95.

Indiabulls Financial Services rose 2.6% to Rs 409.85, after the company said its board will meet on 15 February 2007 to consider a composite scheme of arrangement under Sections 391-394 of the Companies Act 1956, for the amalgamation of Indiabulls Credit Services with the company. The proposal for demerger of the securities trading and advisory business of Indiabulls Financial Services to Indiabulls Securities will also be taken up at the same meeting.

Construction firm IVRCL Infrastructures & Projects dropped nearly 4% to Rs 366.70 in volatile trade after the company said on Tuesday it had secured contracts for irrigation, rural electrification and construction of an aggregate worth Rs 516 crore.

Omax Autos gained 2.2% to Rs 93.05, after the company said it would spend Rs 155 crore to set up a truck and bus-chassis making unit to reduce dependence on two-wheeler components, forecasting revenue of Rs 700 crore for 2006/07 and about Rs 800 crore for 2007/08.

Nymex crude was hovering flat at $57.79 a barrel after Monday’s sharp fall. US crude oil prices fell more than $2 to below $58 a barrel on Monday after OPEC members, Saudi Arabia and Qatar, and the cartel's head of research said OPEC may steer away from further supply cuts.

European markets opened positive. Key benchmark indices in London, Germany and France were up between 0.2 - 0.4%. Asian markets were mixed. Key benchmark indices in Hong Kong, Singapore and Taiwan were down between 0.5 – 2.2%, whereas key benchmark indices in Japan and South Korea were up between 0.29 - 0.67%.

US stocks slipped on Monday after a 3.5% drop in oil prices hit shares of energy companies, while worries about rising mortgage defaults spilled over to the banking and housing sectors for the third day. The Dow Jones industrial average slipped 28.28 points, or 0.22%, to end at 12,552.55. The Standard & Poor's 500 Index declined 4.69 points, or 0.33%, to finish at 1,433.37. The Nasdaq Composite Index dropped 9.44 points, or 0.38%, to close at 2,450.38.

Kotak - Economy Update - IIP Performance

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Sharekhan Reports

Sharekhan Highnoon dated February 13, 2007
Sharekhan Daring Derivatives for February 13, 2007

PowerYourTrade Trading Calls

Deepak Mohoni

Short sell Shree Renuka Sugar above Rs 304 with stop loss of Rs 310. This is a day-trading recommendation
Short sell Colgate above Rs 330 with stop loss of Rs 337. This is a day-trading recommendation.

Rajat K Bose

Sell BPCL around the last close with a stop above Rs 337.50 for target of Rs 318
Sell Gujarat Ambuja Cement around the last close with a stop above Rs 136 for target of Rs 126-122.

Emkay Morning Notes, Wipro

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Anagram Daily Call

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Hesitation can bring devastation

He who hesitates is not only lost, but miles from the next exit.

Our suggestion to increase your cash position would have done well for you. Hesitation to lighten over-leveraged position usually wipes out most of your earlier gains in a session or two. Is the pre-budget rally over? That's the question considering the recent events, especially Monday's carnage. The bulls will hope for a dead cat bounce to exit some counters. It's seems like an uphill battle this time to scale to a new peak before budget. With inflation shooting up and interest rates likely to continue their upward march, the bears seem to be slowly resurfacing. In case of a minor rebound, don't get fooled, as there could be some more downside left in the near term. Barring a slight decline in oil prices the scene on the global front is also not particularly encouraging.

One positive could be the FII figures. They were net buyers on Friday as well as Monday (provisional) in the cash segment. But, its the F&O segment where the action has taken place in the past few days. Unwinding of long positions in the derivative segment has accentuated the weakness in the cash segment. How much more of the fall is still on the cards is debatable. Hence, it would be prudent to take a backseat for a while and wait for the market to stabilise before taking a fresh plunge. We expect a weak opening and perhaps some buying could set in at lower levels. Long term investors can continue holding the fundamentally sound stocks and again expect bounce back in the front line counters first.

FIIs were net buyers to the tune of Rs1bn yesterday (provisional) in the cash segment. On Friday too, they pumped in a net of Rs2.75bn. However, in the F&O segment, foreign funds were net sellers of Rs16.58bn yesterday. Mutual Funds are also not offering any support and pulled out Rs1.91 on Friday.

US shares closed lower on Monday as lower oil prices hit energy companies and the nagging concerns about delinquencies in the sensitive housing market continued to weigh on homebuilders and mortgage lenders.

The S&P 500 dropped 4.69, or 0.3%, to 1433.37 after slumping 0.7% last week. The Dow Jones Industrial Average fell 28.28, or 0.2%, to 12,552.55. The Nasdaq Composite Index slipped 9.44, or 0.4%, to 2450.38. All three benchmarks retreated for a third day in a row.

Crude oil futures declined 3.5% to $57.81 a barrel on the New York Mercantile Exchange after Saudi Arabia told Asian refiners to expect more shipments next month and the nation's oil minister said that OPEC doesn't need to cut production further. March crude was at $57.88, up 7 cents from NY close in extended trading in Asia. Oil prices are down 26% from a record $78.40 in July 2006.

Investors were also wary at the start of a busy week that brings reports on retail sales, housing and manufacturing, as well as Fed Chairman Bernanke's visit to the Capitol Hill. The Fed chairman gives his semiannual testimony before the Congress on Wednesday and Thursday.

COMEX gold for April delivery sank $5 to $667.30 an ounce. Treasury prices slipped, lifting the yield on the benchmark 10-year note to 4.8% from around 4.78% late on Friday.

In currency trading, the dollar rose versus the euro and yen after the weekend G7 meeting ended without members - finance ministers of the world's largest economies - specifically addressing the weakness of the yen, which recently fell to a 21-year low.

Shares of aluminum producer Novelis surged by more than 13% after it agreed to be bought by India's Hindalco Industries for $6bn in cash and debt.

Indian ADRs too had a bad day at office in the US. Patni was down 2.9%, VSNL tumbled almost 10%, Satyam was off 1.5%, Tata Motors shed 2.6%, Dr. Reddy's advanced 1.15%, HDFC Bank lost 1%, ICICI Bank slid 2.6% and MTNL plunged 7.8%.

European shares lost ground. The pan-European Dow Jones Stoxx 600 index declined 0.6% to 378.05. The UK's FTSE 100 dropped 0.5% to 6,353.50, while the German DAX Xetra 30 slipped 0.8% to 6,859.45 and the French CAC-40 lost 0.9% to 5,643.95.

In emerging markets, the Bovespa in Brazil gave up 0.8% to 43,934 while the RTS Index in Russia slumped 2.5% to 1838 and the IPC index in Mexico gained 0.2% at 27,972.

Asian markets are mixed this morning. The Nikkei in Tokyo rose by 110 points to 17,614 while the Hang Seng in Hong Kong slumped 376 points to 20,217, and the Kospi in Seoul was down 3 points at 1411.

Market Watch

Major Bulk Deals:
UBS has bought Jupiter bioscience, Spentex Industries and Pochiraju; Bear Stearns has picked up Rain Commodities; Goldman Sachs has sold Spentex Industries.

Market Volumes:
The turnover on NSE was down by 3% to Rs89.08bn. BSE Metal index was the major loser and lost 5.46%. BSE Capital Good index (down 5.17%), BSE Consumer Durable in (down 3.80%), BSE Auto index (down 3.41%) and BSE PSU index (down 3.10%) were among the other major losers.

Volume Toppers:
IFCI, Hindalco, IDBI, TTML, R Com, SAIL, Nagarjuna Fertilizer, GBN, NTPC, Balrampur Chini, Ashok Leyland, India Cement, Tata Steel, MTNL, Bajaj Hindusthan, HLL, Aftek and Cairn.

Delivery Delight:
3M INDIA, ABG Shipyard, HLL, Tata Power and United Breweries.

Lower Circuit Filters:
Amara Raja, Ansal Infrastructure, GMR Industries, Zandu Pharma, Goldiam International, Goldstone Technology, Fedders Lloyd, Swan mills, Nesco, Anant Raj industries, Aurionpro Solutions, BSEL Infrastructure, Electrotherm, Ganesh Housing, Gemini Communication, Heritage Foods, HOV Services, BF Utilities, Tanla and McNally Bharat.

Brokers Recommendation:
IDFC – Sell from Brics

Long Term Investment:
Bharti Airtel

Major News Headlines
Moser Baer to enter K'taka Home Video market

Sesa Goa Board declares Interim Dividend of Rs15 per share

Subhash Projects enters into Extra high Voltage segment in Power projects

HDFC funds raise stake in United Phosphorous to 5%

Essar in JV with two Vietnamese companies for steel plant

Dec industrial production rises 11.1% yoy

Ansal Properties Board recommends 1:1 bonus

Singapore Telecom may raise Bharti Airtel stake under ' right term'

ICSA India to hike FII limit from 49% to 74%

Sunil Hitech secures orders worth Rs62.88Cr

Baba Arts to hike FII limit to 74%


Some dead cat bounce likely

The markets today fell sharply with the benchmark BSE Sensex slipping over 2% and the NSE Nifty down over 3%. The bulls were badly beaten up as both the key indices traded in red throughout the trading session. Along with the frontline stocks the Mid-Cap and the small Cap stocks also took a beating. The Metal index was the major loser and lost 5.4% dragging the benchmark Sensex to hit an intra-day low of 14146.22. Finally, the 30-share benchmark Sensex fell 348 points to close at 14190. NSE Nifty lost 129 points to close at 4058.

Hindalco plunged as much as 14% after it agreed to buy Canada's Novelis Inc. over $3.4bn, 17% more than the closing price on February 9th. The scrip touched an intra-day high of Rs173 and a low of Rs147 and recorded volumes of over 1,00,00,000 shares on NSE.

Ansal Properties & Infrastructure declined nearly 5% to Rs745. The Board of Directors of the company would meet today for considering a bonus issue. The scrip touched an intra-day high of Rs799 and a low of Rs745 and recorded volumes of over 69,000 shares on NSE.

Essar Steel was down by 3% o Rs40. The company announced that they have entered in Venture with two Vietnamese Companies for Steel plant and would spend US $527mn to build plant in Vietnam. The scrip touched an intra-day high of Rs45 and a low of Rs39 and recorded volumes of over 5,00,000 shares on BSE.

Sterlite Optical slipped over 5% to Rs191. The company announced that it has been granted a patent by the Indian Patent Office for its invention of a novel Optical Fiber manufacturing process. The scrip touched an intra-day high of Rs202 and a low of Rs190 and recorded volumes of over 1,00,000 shares on NSE.

FMCG stocks also witnessed heavy profit booking. Mid-Cap stocks were among the major losers. McDowell slipped 4.5% to Rs842, Colgate was down 3.2% to Rs333, Tata Tea declined 2.3% to Rs667 and Dabur dropped 2.2% to Rs101. However, HLL gained 0.3% to Rs203.

Pharma stocks also were in bad health. Glaxo slipped 3.4% to Rs1125, Wockhardt Pharma lost 2.4% to Rs335, Ranbaxy was down 1.8% to Rs409 and Sun Pharma lost 2.2% to Rs1012.

Capital Good stocks were among the major losers. The index lost over 5%. BHEL slipped over 6% to Rs2345, Punj Lloyd lost over 5% to Rs1007, L&T declined 3.2% to Rs1660 and ABB lost 3.7% to Rs3699.

Auto stocks also were in reverse gear on back of profit booking. M&M lost 4.2% to Rs880, Bajaj Auto was down 3.7% to Rs2948, Tata Motors slipped 3.1% to Rs875 and Maruti dropped 3.2% to Rs912.

From the Research Desk - Kesoram

Kesoram Industries Ltd. (KIL) Q3FY07 - Result Update

Kesoram Industries Ltd.'s (KIL) cement despatch for Q3FY07 increased by 10.6% to 0.84mn ton and tyre volumes increased by 19.9% to 20331 ton. Cement capacity utilization for Q3FY07 increased to 116% compared to 105% in Q3FY06 and Q2FY07. We estimate FY07 despatches to be at 3.35mn ton with new capacity expected to commence commercial production in March 2007. We expect cement volumes to be at 4.2mn ton for FY08 with staggered production for the new capacity.

KIL’s gross cement realization went up by 45.7% to Rs3285 yoy for Q3FY07 but was down sequentially by 2.7%. Cement prices are looking up in the recent months. We expect realisations for KIL to improve 3.6% in FY08 over FY07. The recent customs duty removal for cement is expected to have marginal impact on pricing front and prices are expected to rule firm till major capacities are coming in FY09.

Tyre margin for Q3FY07 has come down to 4.1% from 4.6% on yoy basis and on sequential basis the same has come down from 6.1%. Prices of key inputs like Carbon Black, NTCF and Synthetic Rubber has firmed up in the quarter and reduction in average natural rubber price to the tune of 6% has not had a major impact. Tyre producers reduced the prices of tyres also by nearly 4% in September 2006 which has reduced the EBIT margins for tyre segment. We expect natural rubber prices to continue at the present levels and possibility of increase in tyre prices by the producers if the prices exceed Rs10000 per quintal. Recent reduction in Carbon Black is a positive for the sector.

Rayon and Transparent Paper (TP) division has turned around and posted profits at EBIT level in Q3FY07. Definitive anti-dumping duty was imposed for VFY in Q2FY07 and provisional duty was imposed on TP in Q4FY06. This has improved the prospects of these segments and prices have started moving up. From negative EBIT margin in Q3FY06 and Q2FY07 the segment has recorded 4.3% EBIT margin in Q3FY07.

We expect cement and tyre business margins to improve going forward with price increases. With increased cement capacity and ongoing expansion on tyre capacity, we expect KIL to be well positioned to exploit the up-cycle in these sectors. KIL is expanding its cement capacity by 1.5mn ton which is expected to come online in Q4FY09 and planning to increase its tyre capacity by putting Greenfield tyre capacity at Jharkhand. It has purchased land for new tyre capacity at Rs600mn recently. With major capacity expansions, KIL is expected to become a mid-sized player in Cement and Tyres and command better valuations going forward. We revise our target from Rs641 to Rs668 based on estimated FY08 earnings upgrade. Our target discounts FY08 by 10x. We maintain our BUY rating on the stock.

Bias may remain negative

After falling by more than 450 points for last two sessions, the south-bound journey may continue further on weak international markets and mixed Asian indices in morning trades. Among the local indices the Nifty could test 4045 and 4025 on the downside while on the upper side it may move up to 4120. The Sensex has a likely support at 14100 and may face resistance at 14300.

US indices tumbled on Monday after 3.5% drop in oil prices and worries about rising mortgage defaults. While the Dow Jones dropped 28 points at 12553, the Nasdaq fell by 9 points to close at 2450.

Barring Dr Reddy's lab all the Indian ADRs had a weak outing on the US Bourses. VSNL crashed by a huge 10% and MTNL tumbled 8% while Infosys, Wipro, Patni Computers, Tata Motors, HDFC Bank and Rediff fell over 1-3% each.

Crude oil prices dropped on the reports that OPEC may steer away from further supply cuts. The Nymex light crude oil for March series declined by $2.08 to close at $57.81 a barrel. In the commodity segment, the Comex gold for April delivery dropped $5 to settle at $667.30 a troy ounce.

Weakness may persist on heavy derivative sales by FIIs

A surge in sales by FIIs in the derivatives segment may weigh on the bourses today. Mostly weak Asian markets may not provide respite after Monday (12 February)’s sharp fall. Data showing a substantial inflow of Rs 560 crore in index-based futures from foreign funds on 9 February 2007, concerns about rise in interest rates and weak Asian markets spooked the bourses on Monday, the Sensex tumbling 348 points.

Data released on 9 February 2007 showed that the wholesale price index rose 6.58% in the 12 months to 27 January 2007, the biggest rise in more than two years, fanning concerns of a further rise in interest rates.

FIIs were net sellers to the tune of Rs 1204 crore in index-based futures on 12 February, the day when the Sensex had lost 348 points. They were net sellers to the tune of Rs 401 crore in individual stock futures that day. In the cash segment, FIIs were net buyers to the tune of Rs 100 crore as per provisional figures.

The turnover in NSE’s derivatives segment surged to Rs 39996 crore on 12 February compared to a turnover of between Rs 26682.02 crore and Rs 32219 crore from 1 February 2007 to 9 February 2007. Nifty February futures settled at 4053.60, a discount of 4.70 points over the spot closing of 4058.30. The market-breadth has been quite weak in the past two trading sessions.

The sharp market fall on Monday materialized after a solid surge that took the benchmark to all-time highs. From 14,090.92 on 31 January 2007, the Sensex spurted 561.17 points (3.9%), to a lifetime closing high of 14,652.09 on 8 February 2007. Strong Q3 results and the stepping up of buying by FIIs, following an upgrade in India’s rating to investment grade by Standard & Poor's, had triggered this solid surge.

Barring Japan, Asian markets were in the red on Monday. Key benchmark indices in Hong Kong, Singapore, South Korea and Taiwan were down between 0.1 - 1%. Japan’s Nikkei 225 average was up 0.6%.

US stocks slipped on Monday after a 3.5% drop in oil prices hit energy companies' shares, while worries about rising mortgage defaults spilled over to the banking and housing sectors for the third day. Investors also were concerned that comments expected later this week from Federal Reserve Chairman, Ben Bernanke, could signal a more aggressive stance on inflation. The possibility that the central bank may resume raising interest rates if needed, cannot be ruled out.

The Dow Jones industrial average slipped 28.28 points, or 0.22%, to end at 12,552.55. The Standard & Poor's 500 Index declined 4.69 points, or 0.33%, to finish at 1,433.37. The Nasdaq Composite Index dropped 9.44 points, or 0.38%, to close at 2,450.38.

Cinemax IPO - Listing

Cinemax will be listing on Feb 14 2007

FII: +Rs 275 Cr & MF -Rs 191 Cr

Mkt Sources:

FII Gross purchases Rs 2518 Cr Gross Sellers Rs 2243.5 Cr Net Buyers Rs 275 Cr.
MF Gross Purchases Rs 397 Cr Gross Sellers Rs 587 Cr Net Sellers Rs 191 Cr.

Our View:

FII were Net Buyers and one should keep in mind that Inflation is cause for worry. We expect market to trade volatile ahead of budget. Better avoid any fresh position at current level.

Market Close: Major Acquisition spoils the day !!!

Rising inflation hits the sentiments of the investors and they chose to book profits at higher levels. The market shed its gain in the early sessions and plunged into the negative territory. Global cues were mixed and nothing to settle on. The Indian markets were largely down due to pressure on the index heavy weights. None of the other sectors were spared from profit booking. Budget is ahead by the end of the month and that is also seen as one of the reason for profit booking by the investors as they prefer to play safe in the market. Good Industrial and Manufacturing growth couldn?t help the market to recover from the free fall. Hindalco, BHEL and Ambuja Cement emerged as the top losers on the Sensex. Markets did not spare the Mid and Small caps as they too succumbed to selling pressure. Mid cap index ended down by 4% while Small cap index also down by 5%. European markets traded in the red zone.

Sensex ended down by 348 points at 14190.7. Weighing on the Sensex were losses in Hindalco (149.45,-14 percent), BHEL (2345.2,-6 percent), Guj Ambuja (132.15,-5 percent), RCVL (455,-4 percent) and Rel Energy (534.7,-4 percent). Losses were restricted by gains in HLL (203.3,+0 percent), Hero Honda (727.85,+0 percent).

Hindalco, India's largest non-ferrous metals company with a 60% domestic market share is planning to buy Novelis, the world's leading producer of rolled aluminium products for US$ 6 bn. in an all cash deal. The deal will create the world's largest aluminium rolling group providing cost synergies to Hindalco as it is one of the biggest producers of primary aluminium in Asia. The combined entity will also create an integrated aluminium player with low-cost metal sourcing from India and access to some of Novelis' biggest customers like Coca Cola, General Motors etc. The deal will give Hindalco an entry into value-added aluminum products. The US$ 6 bn imputed value of Novelis includes a cash payment worth US$ 3.6 bn to Novelies' shareholders and debt worth US$ 2.4 bn. While US$ 2.8 bn of the funds required will come from recourse financing and the balance US$ 0.8 bn will come from Hindalco and group company Essel Iron Ore Mining. Nothing much can be commented right now and wil have to wait till the deal is finalized. The stock was down by almost 14%.

Vodafone has won the bid for Hutchison Whampoa's 67% stake in the Hutch-Essar. Vodafone won the bid by an offer of $19.3 billion i.e. around $794 per subscriber to clinch the deal. While the deal is expected to impact the telecom market by way of increased competition in general. Vodafone would set itself aggressively by acquiring customers and increasing its market share. It would likely to have some effect on the GSM plans of Reliance Communication Ltd. (RCL). The major looser here was Reliance Comm. as the company had hoped to make a splash in the GSM space with the acquisition and this turn of events will mean a slower entry for RCL in the GSM space. Telecom sector was under selling pressure as all the stocks ended in red with VSNL leading the pack down by almost 11% while MTNL (-9%), Bharti Airtel and Reliance Comm. both down by 5%.

India?s Industrial Production (IIP) went up by 11.1% for December 2006 over the same month last year, due to strong manufacturing, capital goods and electricity output. The growth rate is higher than market expectations of 10.9%. Output growth for November was revised up to an annual 15.4%, from a previously reported 14.4%. Manufacturing production which represents more than 75% of industrial output rose by 11.9% in December from a year earlier, compared with a provisional 15.7% annual growth in November. No question about industrial and manufacturing growth...But agriculture growth is important which is a major cause of inflation. Inflation will still remain a worry unless and until Govt. take measures to ease supply side concerns.

Technically Speaking: Market traded volatile but in the red zone. Sensex rallied between the channels of 14146 ? 14529 level. However, the breadth had been in the favor of the Declines. There were 7 Declines for every 1 Advances. Volumes were decent at 4191cr. We had an extended fall and the fall seems to be stretched. A pull back rally towards the expiry is on cards. Sensex has a good support at 14040 while the Nifty has it at 4035. We could see a new high coming way post current expiry.

Sharekhan Investor's Eye dated February 12, 2007

Bharti Airtel
Cluster: Apple Green
Recommendation: Buy
Price target: Rs820
Current market price: Rs729

Vodafone deal to boost valuations

Key points

  • The entry of the global telecom giant Vodafone into the Indian markets through the acquisition of a controlling stake in Hutchison Essar Ltd (HEL) would result in a tougher competitive scenario in the already crowded domestic telecom service space.
  • The Vodafone deal values HEL at an enterprise value (EV) of $18.8 billion and is at a steep premium to the current valuations of Bharti Airtel Ltd (BAL) and Reliance Communications (Rcom) in terms EV/earnings before interest, tax, depreciation and amortisation (EBITDA). Consequently, it should have a positive impact on the sector's valuations over the long term and reflects the increasing confidence of global players in the Indian telecom service market.
  • The Bharti group has been granted an option to acquire the 5.6% direct stake held by Vodafone in BAL while Vodafone would retain the 4.4% indirect stake (held in lieu of its interest in a holding company) as a financial investor. The direct stake of 5.6% has been offered to BAL at a consideration of $1.6 billion, which is at a 10-12% discount to the existing equity value of BAL. The Bharti group is likely to utilise the acquired stake to either enhance the free float (through placement to institutional investors) or bring in a strategic partner (some global telecom giant) that could support BAL to roll out 3G services. Thus, the deal is a positive development for BAL from a long-term perspective.
  • On the other hand, the deal is likely to have a negative impact on Rcom. Especially since the acquisition of HEL could have given Rcom the required head start in the GSM-based wireless service space and also enabled it to emerge as the largest telecom service operator in the country.
  • BAL continues to be our preferred pick in the sector. We maintain our Buy call on the stock with a price target of Rs820.



Ringing loud
The upswing in the Indian telecom industry continued as the industry added as many as 6.7 million users during January 2007 (a strong growth of 4.6% over December 2006), taking the total user base to 153.2 million users.

Both the GSM and the CDMA segments witnessed robust growth in their subscriber add-ons. The GSM segment added 5.0 million subscribers during the month, taking the total GSM mobile subscriber base to 110.4 million. The CDMA segment added 1.7 million subscribers, marking a growth of 4.2% over December 2006, and taking its user base to 42.7 million.


Cement majors report lacklustre dispatches
For the month of January, the cement majors cumulatively reported a meagre growth of 2.8% year on year (yoy) at 59.4 lakh tonne on account of operations at near capacity levels.

Amongst the cement majors, Gujarat Ambuja registered the highest growth of 6% yoy at 1.49 million tonne. ACC's volumes stood flat at 1.64 million tonne whereas the AV Birla group (Grasim + ltraTech) reported a meagre 3.09% year-on-year (y-o-y) growth.

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Sharekhan Eagle Eye (equities) & Derivatives Info Kit for February 13, 2007

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ENAM - Patni

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