Friday, March 09, 2007
Markets had an excuse of a global meltdown during the session last week but this week there was really no excuse. The there was none this week but the market itself. The Budget repercussions were felt this week and it stood out as the stand off between the cement manufacturers and the Government. The Industry was adamant at the not so logical way of the Government to cool prices. There was a war of words and threats. Finally the Industry backed off. Its yet another debacle for a economics where populism seems to have won. There is a faint hope though that the Government will roll back the excise duty. But hope is on what the markets live on. Global markets was the ripples of Yen carry trades getting unwound. Japan was down on worries of strong yen hitting export business. Other markets were down on worries that cheap Yen funds getting withdrawn. Later part of the week however saw stability. We have been mentioning about this increased interest rates in Japan for months now. However even we were surprised at the ferocity of the fall. Clearly the direction was down. Metals and cement crash added fuel to fire. Indian Markets showed strong recovery on Thursday with the cement controversy behind it. However Friday had another disaster in store from the Commerce Minister. The less said about it the better. The markets will now price in worries from Politics where the Congress seems to be acting in panic and that has clouded sound judgement. We have seen the impact of such decisions on Power sector where capacities have not come simply because the investment returns were killed by free power for farmer. The Fertiliser sector was killed with returns not justified. The story goes on with sugar and now.. its the cement sector. Rs 45000 cr of investments in Cement could get jeopardised is the Government acts the way it is doing.. and the loser will be the economic growth.
Inflation is numbers remained a worry. Inflation for the week ended January 24 rose to 6.10% against expectation of less than 6%. Various steps have been taken but thats really not having an impact. The real impact will be felt in a matter of a month we believe. There is a base effect there. Supply side issue also needs to be tackled well.
Leading the rally for the week were Bharti Airtel +6.4%, IPCL +5.96%, MTNL +5%, HDFC Bank 4%. HLL also gained 2.54% for the week as most of its loss was covered in one single day. Pharma has shown some strength we may see some action here.
ITC down 7.32%, Arvind -9.5%, ACC -8.6%, Alok -5.52%, Dabur down 7.5% India Cem -9.4%, Maruti -5.5%, M&M -4.5% and Tatamot -2.3% led to the index loss. Cement and Banks where main counters which were smashed and badly.
Cement party spoiled by Govt and thats really a bad sign. Investors will vote with their feet !
Cement sector was at war with the Govt. this week. They stuck to hiked prices despite warnings by the FM. The cement manufacturers said that they were not in a position to absorb the increase in taxes following a differential duty structure slapped on them in the Budget. The excise duty on cement priced above Rs 190 per bag was increased to Rs 600 per tonne from Rs 400 in the Union Budget last Wednesday. Duty on cheaper cement bags was cut to Rs 350. And then there was history created with the Commerce Ministry losing the debate on a TV channel. But really it was the Ministerial diktat which has prevailed.. This could have serious repercussions on Indias Image. The only hope is from a roll back of the hiked duties. Fingers crossed on this one.
Century saw a smart recovery on the back of its property in Mumbai. Century holds 30 acres of land in the heart of the city of which roughly of 10 acres, was taken on lease from Bombay Dyeing on a 999-year lease and can be extended for another 999 years apart from Century Bhavan at mid-town Worli. Gujarat Ambuja sold 2 acres at Rs 333 cr and the deal was signed this week. Using the same benchmark rates as the latest deal, (2 acre plot in Kalina for Rs 333 cr) just the land value is more than the market cap of the company inclusive of debt. The stock was also supported by some dividend news. We remain positive on Century..
Primary steel manufacturers had also raised hot-rolled steel prices across the board followed by increase in 1% education cess. But then they rolled back the price hike on Govt. request to assist in inflation control. The FInance Ministry seems to be becoming the department for price control.
ITC saw all it gains go up in smoke. The Govt. increased excise duty on cigarettes by 5%. Now market news is that, ITC may increase price of cigarettes. It is believes that a 7% sustained volume growth in cigarettes provides comfort with regards to the company's ability to pass on burden through price hikes to the customers. However the things really seem difficult here. The big negative is that hopes of VAT not being implemented may receive a jolt. Its likely that VAT would be imposed as well. The stock was hit.
The week continued to be tough for the IT sector as well. Talks that Fringe Benefit Tax would be removed on ESOP had the stocks up in euphoria. But there was really no positives. Knowing the FM and his rationale it seems unlikely that the FBT will be removed. The catch here is that details on the quantum or tax or the % of the actual to be considered for tax is not yet decided and that the quantum may be the positive surprise the market was waited for. The Markets have reacted adversely and the FM may want to give it a small push..! So again we have some hope here.
Idea cellular was listed this week and valuation enjoyed by the company led to rally in other telecom stocks with strong gains posted by the GSM subscriber base. Auto stocks also came under the hammer this week. Some stock of interest was M&M. M&M acquired a 43% controlling stake in the 4th largest tractor firm Punjab Tractors (PTL) outbidding Hinduja group firm Ashok Leyland. This acquisition will help increase M&Ms market share to 40% from 30% currently. The big positive is that it would gain in technology with Swaraj Mazda as well. Markets had priced in the expectations and the stock came in for profit taking.
Technically Speaking: Market have found support near 12330 and have formed a hammer on the weekly charts. A hammer is a bottoming formation, but needs confirmation. The bias is shifting slowly towards the positive side. A cross above 13100 provides confirmation. Resistance on the way up are 13380
Greenspan sees 1/3rd chance of recession in US
After rattling global investors last week with his remarks of a "probable" recession this year in the US, former Federal Reserve chairman Alan Greenspan said he saw a "one-third probability" of a downturn in the world's largest economy this year. "We are in the sixth year of a recovery; imbalances can emerge as a result," the 81-year-old Greenspan said in an interview to Bloomberg News. He said he was surprised by the market reaction to comments he made on Feb. 26 on the possibility of a recession in the US. "It is possible that we can have a recession at the end of this year," said Greenspan, who headed the American central bank for 18 years until January 2006. The interesting part is that the current Fed chief, Ben S. Bernanke disagrees with Greenspan's recession theory. In a speech to the Congress last week, Bernanke, 53, said that the economy may strengthen this year. Meanwhile, Bernanke continued Fed's campaign to rein in the mortgage portfolios held by Fannie Mae and Freddie Mac. He suggested that the companies' sizes and structures posed a risk to financial markets and called for stronger regulation and supervision.
China to take more steps to curb growth
With the economy not showing any signs of cooling, China is prepared to take further steps to check the relentless flow of FDI, besides placing curbs on local lending. "China will take more steps to curb investment and lending," Premier Wen Jiabao said. "The Government will control excess liquidity and further boost domestic consumption," he said. China has been trying to engineer a smooth landing amid nagging fears that record high trade surplus is sending asset prices, especially that of property, soaring while strong FDI may lead to excess capacity. "The country will further regulate real estate," Wen told the annual meeting of the National People's Congress, China's parliament in Beijing. The Chinese economy, which accounts for about a tenth of global GDP growth, grew by 10.7% in 2006, the fastest pace in 11 years. China is planning an 8% growth in 2007. China will do more to save energy and cut pollution in 2007 while striving to keep its economy growing following four straight years of double-digit growth, Jiabao said. In his annual report to the National People's Congress, Wen also promised to lift spending on the restless countryside by 15.3% this year to 391.7bn yuan (US$50.6bn) to improve schools, hospitals and lagging incomes.
Paulson wants China to open financial markets
China should move faster on opening its financial markets if it is to sustain high economic growth and stability, US Treasury Secretary Henry Paulson said. Speaking at Shanghai's newly opened Futures Exchange, Paulson said that open markets are the fastest way to prosperity for all. "The risks for China are greater in moving too slowly than in moving too quickly toward transparent, liquid, stable capital markets," he said. Paulson also urged China to relax currency controls that keep the yuan from rising more quickly in value against the dollar. The system makes Chinese goods relatively cheap and adds to the trade imbalance. It also limits China's monetary policy options and puts a huge burden on China's banking system, he said. China's leaders acknowledge that the country's financial markets need an overhaul. But, so far China's leaders have balked at more drastic reforms, saying might damage the country's fragile financial systems. Also, Beijing has one eye on the upcoming once-in-five-years Communist Party congress in the autumn. So, leaders are focusing on social issues like free rural schooling, health, housing and pollution. Big bang reforms for the financial sector that will please the West, especially the US, will have to wait.
Yen falls after hitting 3-month high
The yen was headed for a weekly loss after a rebound in global stocks encouraged traders to sell the Japanese currency and buy higher- yielding, and in many cases risky assets. The currency slid against all but one of the world's 16 most-actively traded currencies as equity markets rallied from last week's crash. The yen dropped the most against the New Zealand dollar, where the central bank yesterday raised its benchmark interest rate to 7.5%. The yen fell to 154.26 per euro from 154.10 a week ago after the European Central Bank (ECB) raised its benchmark refinancing rate for a seventh time since December 2005 to 3.75%. Meanwhile, the Swiss franc, which is also used as a funding currency for carry trades, also weakened as a government report showed inflation at a three-year low, limiting scope for the central bank to raise borrowing costs. Switzerland's 2% rate is the second-lowest among major economies after Japan. The Bank of Japan's benchmark is 0.50%. The Federal Reserve and the Bank of England's key rates are 5.25%.
ECB up rate, BOE on hold
The European Central Bank (ECB) increased the key refinancing rate by a quarter point to 3.75%. The bank also raised its growth and inflation forecasts for 2008. ECB President Jean- Claude Trichet said that interest rates were still fueling economic growth, signaling that the bank may raise borrowing costs further after the latest hike. "Given the favorable economic environment, our monetary policy continues to be on the accommodative side, with the key ECB interest rates moderate," Trichet said. Investors raised bets on higher rates after Trichet's comments. The ECB raised its inflation forecast for 2008 to around 2% from about 1.9%. In 2007, inflation may average about 1.8% instead of 2%, the bank said. Separately, despite a sharp rise in housing prices from Britain's biggest mortgage lender, the Bank of England (BOE) left interest rates unchanged at 5.25% for a second month. With Gordon Brown's 11th budget less than a fortnight away, the Bank's monetary policy committee decided against the quarter-point increase in borrowing costs predicted by some analysts. But financial markets are betting on an increase shortly. House prices are still racing ahead, manufacturing is growing and there is little evidence of a slowdown in consumer spending. The UK economy is on course for its best performance in 2007 in three years. Moreover, the BOE's own forecasts, published last month, showed inflation would overshoot its target unless rates rise above the current level.
New Thai FM promises no shock rules
Thailand's Finance Minister Chalongphob Sussangkarn said that he had no plans to shock investors still reeling from new ownership restrictions and currency controls. "Government policies must be implemented to boost confidence, not destroy it," said Chalongphob. "There will be no policies that will shock the market." Sussangkarn said on his first day on the job that he wants Thailand's capital controls adjusted in ways that don't rattle markets. Some measures will still be needed to prevent inflows from creating excessive volatility, he said. Thailand's consumer confidence slid to the lowest in six- months in February and business confidence dropped to a four- month low a month earlier after Bank of Thailand currency controls in December triggered the stock market's steepest slide in 16 years. Discord within the government installed after a Sept. 19 coup led to Pridiyathorn Devakula quitting as finance minister a week ago.
Indian economy may be overheating: study
After growing at 8.6% in the last four years, the Indian economy is all set to soften a bit amid rising inflation and some signs of overheating, domestic credit ratings agency CRISIL said. For 2007-08, the GDP growth is expected to moderate to 7.9 - 8.4%, CRISIL said in a report. Asia's fourth-largest economy is estimated to grow by 9.2% in the current fiscal year on top of the 9% growth in FY06. Inflation, which is currently just above 6%, is projected at 5-5.5% while 10-year G-sec yield is expected to be at 7.8-8%, CRISIL said. The INR/US exchange rate is expected to stay in the band of Rs 44-45 in 2007-08, it added. According to CRISIL, the Indian economy continues to demonstrate robust growth driven by all sectors of the economy, with the underlying domestic consumption-led growth that is swiftly translating into investment-led growth, with a little overheating.
Inflation rises to 6.1%
India's inflation, based on the Wholesale Price Index (WPI), rose to 6.1% in the week ended Feb. 24 from 6.05% in the preceding week, the Government announced. The latest barometer of wholesale prices was higher than the consensus estimate of 6.03%. The WPI inched up by 0.1% to 208.8 from 208.6 in the previous week. The Primary Articles Index declined by 0.5% to 213.9 from 215.0, while the Fuel & Power Index was unchanged at 318.9 and the Manufactured Products Index increased by 0.4% to 182.5 from 181.8. The Ministry of Commerce & Industry revised upwards inflation for the week ended Dec. 30 to 5.89% from the preliminary estimate of 5.58%
RBI puts cap on inter-bank borrowings
The monetary tightening continues and private banks may find it tough to manage liquidity going ahead. In a bid to check excessive borrowings by banks to fund the spiraling growth in loans, the Reserve bank of India (RBI) has capped inter-bank liabilities of banks. The move is likely to curb borrowings by banks that tap the money market to lend to customers. Such borrowings could take place in the overnight call money market, or as term money, certificate of deposits or tier bonds that banks float to shore up capital adequacy. The inter-bank liabilities of a bank should not exceed 200% of its net worth as on March 31 of the previous year. However, individual banks may, with the approval of their Boards, fix a lower limit for their inter-bank liabilities, keeping in view their business model. The banks whose Capital Adequacy Ratio (CAR) is at least 25% more than the minimum (9%) i.e. 11.25% as on March 31, of the previous year, are allowed to have a higher limit up to 300% of the net worth for inter-bank liabilities. The guidelines will be applicable from April 1. However, banks, which are not in a position to comply with these requirements from April 1 may furnish a plan to the RBI for approval indicating the date by which they would be able to comply with the requirements.
Steel companies cut prices on Govt diktat
All the top steel producers of the country slashed prices after the Government asked them to rollback the recent price increase to help reign in inflation, which is still above 6%. Steel producers, including Tata Steel, Essar, Ispat, JSW and Jindal, agreed to lower prices of Hot-Rolled Coils (HRC) by Rs500 per ton to Rs27,000 a ton, said RS Pandey, Secretary in the Steel Ministry. Prices of TMT bars will be reduced by as much as Rs700 a ton, he said, adding that the profitability of steel companies would not be affected by the reduction. "The Government has expressed concern about the impact of the price increases on the common man and on inflation," Pandey said in New Delhi. "We thought there is need to talk to them (steelmakers) and they decided to roll-back prices."
Pawar denies sugar decontrol proposal
Refuting media reports of a plan to decontrol the sugar sector, Agriculture Minister Sharad Pawar said that the Government had no plans to allow sugar mills to sell their entire produce in the open market. "I don't have any proposal and neither are we thinking about it," Pawar told reporters in New Delhi on the sidelines of the India-Africa Agrifood Summit. Earlier today, a financial daily reported that the Government planned to do away with the levy quota system from April 1 and could also scrap the Minimum Support Price (MSP) for cane to allow farmers get a better deal. Levy quota is a system where sugar mills have to sell 10% of their total output to the Government at below market rates. Sugar producers can sell 90% of their output at market rates, while the Government usually fixes the quantity and time of the sale every month.
Feb car sales up 46% yoy
Domestic sales of passenger cars grew by 46.47% in February to 92,594 units from 63,213 units in the same month a year ago, data released by the Society of Indian Automobile Manufacturers (SIAM) showed. According to analysts, the sharp rise is mainly because in the year-ago month sales were down as customers had postponed their purchases in anticipation of a reduction in excise duty on small cars in the budget. Commercial vehicle sales during the month were up 26.45% at 44,322 units as against 35,049 units in the corresponding month last year. Motorcycle sales in the month under consideration rose by about 5% to 516,410 units from 492,116 units in the same month a year ago. The slow growth was mainly on account of a decline in Bajaj Auto's sales.
M&M to buy 43.3% in Punjab Tractors
Mahindra & Mahindra Ltd. (M&M) won the race for picking up a 43.3% stake in rival Punjab Tractors Ltd. for about Rs9.51bn. The company agreed to pay Rs360 per share for purchasing the stake from Actis and the Burman family. The deal values Punjab Tractors at around Rs22bn. While Actis will get Rs6.34bn for its 29% stake in Punjab Tractors, the Burmans (of Dabur fame) will fetch Rs3.17bn for its 14.5% holding. The other two suitors in the last round of bidding included Ashok Leyland Ltd. and TAFE. Earlier, the Tata group (with Fiat-CNH) pulled out of the race. Before that a clutch of companies like the Sonalika Group, Escorts, Italian tractor firm Sam Duetz-Fahr and a private equity consortium had withdrawn from the bid. As a result of this deal, M&M will also get a 33% in Swaraj Engines and 24% in Swaraj Automotives. M&M will have to announce a mandatory open offer for buying a 20% stake each in Punjab Tractors, Swaraj Engines and Swaraj Automotives.
Morgan, Citigroup, Actis buy 6% in NSE
The National Stock Exchange (NSE) has once again beaten the Bombay Stock Exchange (BSE) by securing the minimum 26% foreign ownership stipulated by the Government ahead of the old rival. Morgan Stanley, Citigroup and Actis have agreed to pick up a total of 6% in NSE for an undisclosed amount. While Morgan Stanley will purchase 3% equity stake in NSE, Citigroup and Actis will buy 2% and 1%, respectively. The Government has restricted individual foreign holding in local stock exchanges at 5%. The stake will be bought from IDBI (2%), SBI (1.5%), SBI Capital Markets (0.5%), Corporation Bank (0.265%), Union Bank (0.125%), Bank of Baroda (0.89%), Canara Bank (0.385%) and Oriental Bank of Commerce (0.335%). The investments follow the earlier agreements between NYSE, General Atlantic, Goldman Sachs and Softbank Asian Infrastructure Fund with IFCI, IL&FS, ICICI, PNB and GIC to acquire 5% each in NSE from the domestic Institutions. They paid US$460mn for stake totaling 20% in January, valuing NSE at US$2.5bn. The latest stake sale from NSE comes close on the heels of BSE announcing the induction of a second strategic investor in the form of Singapore Exchange as part of its demutualisation process. Earlier this week, Singapore Exchange paid US$42.7mn for a 5% stake in BSE. Last month, Deutsche Boerse bought a 5% stake in BSE, valuing Asia's largest exchange at around US$900mn.
Tata Steel buys two mills in Vietnam
Tata Steel also announced that its 100% subsidiary NatSteel Asia Pte. Ltd. had agreed to acquire controlling stake in two rolling mills in Vietnam. NatSteel will acquire a 100% stake in SSE Steel Ltd., which operates a 250,000 tons per annum (TPA) bar/wire rod mill. It will purchase a 70% stake in Vinausteel Ltd., which produces 180,000 TPA reinforcing bars. The remaining 30% equity in Vinausteel is held by Vietnam Steel Corporation. The acquisition will result in an addition of 430,000 TPA finishing capacity. The enterprise value for the two acquisition is around US$41mn. This transaction is likely to be completed by June. Tata Steel Ltd. announced that it had acquired a 100% stake in Kolkata-based Rawmet Industries, at an enterprise value of Rs1.01bn. Rawmet has a Ferro Alloy Plant near Cuttack, consisting of two 16.5 MVA semi closed electric arc furnace having a capacity of producing around 50,000 tons per annum of High Carbon Ferro Chrome. The Board of Rawmet has been reconstituted with nominees of Tata Steel. Corus shareholders clear acquisition by Tata Steel
Vodafone's Hutch deal lands in court
Even before the ink dries on Vodafone Group Plc's deal to buy the 67% stake in Hutchison Essar from Hutchison Telecom International Ltd. (HTIL), it is being challenged in the Delhi High Court. The acquisition was contested on the ground that the new firm would violate the existing FDI norms for the telecom sector as it would have total foreign holding of 89% as against the stipulated limit of 74%. The deal has been challenged by a non-government organization (NGO) called Telecom Watchdog. The Delhi High Court directed the Government and the Foreign Investment Promotion Board (FIPB) to complete in two months, an inquiry into the allegations that the deal between HTIL and Vodafone is in violation of the current FDI norms. "Since the aforesaid matter is before FIPB and an inquiry is (being) done by FIPB, we are not issuing any notice to the companies. The Centre and FIPB will decide the matter as expeditiously as possible within two months," said a division bench comprising Chief Justice M K Sharma and Justice Sanjiv Khanna.
Tata's Rs1-lakh car to cost more on road
The much-touted Rs1-lakh-car from Tata Motors Ltd. is likely to cost much more on road after accounting for excise duty, sales tax, octroi and other expenses, Chairman Ratan Tata said. The car will be priced at Rs1 lakh ex-factory, Tata said at the Geneva Auto Show. The four-door car will have a 600cc engine under the hood and will be able to accommodate 4-5 people, Tata said, adding that variants with extra features such as AC, power steering, etc. will be more expensive.
The car, scheduled for launch in 2008, will be made at a plant at Singur, West Bengal. The proposed factory has become a political hot potato with opposition parties in the state alleging wrongdoings in procuring the land. Tata has blamed rivals for fuelling the political controversy over the group's small-car project at Singur. Meanwhile, the company signed a lease agreement with the West Bengal Government for the Singur Land.
Listings...MindTree and Idea shine
As expected, shares of MindTree Consulting and Idea Cellular climbed on listing while that of Indus Fila, Oriental Trimex, Evinix Accessories, Broadcast Initiatives, Euro Ceramics, Mudra Lifestyle and Vijayeshwari Textiles were hammered as investors were reluctant to buy into companies with relatively weak management quality.
Idea Cellular opened at Rs92.40 on BSE as against the issue price of Rs74. The stock closed at Rs85.55 after being as high as Rs94.25 and a low of Rs84. MindTree opened at Rs627 on NSE as against the issue price of Rs425, translating into a premium of 47.5%. On Friday, the stock closed at Rs651.80 after touching a high of Rs678.80 and a low of Rs575.20.
Broadcast Initiatives opened at Rs140 versus the issue price of Rs120. However, the stock lost altitude and ended the week at Rs68.55 after hitting a low of Rs60.40. Oriental Trimex also suffered the same fate. After opening at Rs50.10 compared to the issue price of Rs48, the stock declined to a low of Rs25.40 after being as high as Rs47. It closed the week at Rs26.55.
Evinix Accessories also could not attract investors' attention. The stock opened at the issue price of Rs120. It fell to a low of Rs69.20 after touching a high of Rs128. Euro Ceramics opened at Rs151 on BSE versus the issue price of Rs165. The scrip ended at Rs118.65 after being as low as Rs115.25. Mudra Lifestyle shares opened at Rs94.80 on BSE compared to the issue price of Rs90 per share. The stock finished at Rs63.80 after hitting a low of Rs62.05. Vijayeshwari Textiles opened at Rs90.05 on BSE as against the issue price of Rs100. It shut shop at Rs69.95 after touching a low of Rs65.
Volatility with negative bias
At the end of all the ups and downs of the Sensex, which swung by 800 points during the week, not much has changed as far as the indices are concerned. A closer look at the sectoral front shows that bulls may have shed quite some weight, especially the cement sector. In the latest development, cement makers have agreed to hold prices even if input prices rises over a period of year.
We could well see lower levels being tested though upward spikes like the ones witnessed on Thursday may confuse markets even more. For day traders the volatility seems unfavorable. For investors who have a medium to long term horizon, heavyweights are available at better prices. The weekend development regarding Reliance's merger with IPCL and the ratios declared could see some action on these counters. Not that Reliance needs any particular reason to swing either way. Further correction in the coming week could see 3650 levels on the Nifty being tested. RBI on the other hand is taking steps to ensure that credit growth in speculative segments remains under control. Reports say the central bank has asked banks to furnish details of borrowers who have taken multiple housing loans.
Invest if you have the money. Trade if you have the risk appetite. Relax if you are a long term investor.
Swinging Sensex ends flat
In my place, in my place
Were lines that I couldn't change
I was lost, oh yeah
The bulls have been struggling to find some sunshine during this sun outage season. While they seemed to be in darkness for most part of the week, on Thursday they appeared out of nowhere and took the Sensex past the 13K mark, only to fall on Thursday. Amid these huge gyrations on the bourses, the bulls appear to have lost, tired and under prepared as the tussle between the Government and Cement Manufacturers kept intensifying.
Despite sessions of occasional spurts, trading over the week was highly volatile with the Sensex hitting a peak of 13145.72 and a low of 12344.44 before settling flat at 12884.99. While, the NSE Nifty touched a peak 3795.70 and a bottom of 3554.5 before closing at 3718, down 9 points from previous week's level.
Selling was seen across the sectors with Cement stocks leading from the front. Banking, FMCG, Metal, Capital Good, Small- Cap and Mid-Cap stocks were among the other major losers.
However, IT stocks bucked the negative trend and managed to close higher. Not even stability across the global markets in last few trading sessions failed to inspire the bulls. Making things worse at the moment is the inflation, which accelerated after two weeks of slowing down, as prices of cement and other manufactured products rose. India's Inflation rate was 6.10% in week ended Feb 24 against expectation of 6.03%.
Cement stocks lost further ground after cement companies agreed to hold prices of the building material for a year. Commerce minister said, Cement makers will hold prices "even if there are increases in input prices." Both mid-cap and large cap stocks witnessed heavy selling. Index heavy weight ACC declined over 8.5% to Rs780, the scrip was the top loser among the 50-scrip's of NSE Nifty, Grasim was down 2% to Rs2071, Prism Cement fell over 6.5% to Rs32 and India Cement dropped over 9% to Rs153. However, Gujarat Ambuja rose marginally by 0.3% to Rs110.
Capital Good stocks were also on the receiving end. Punj Lloyd was down over 4% to Rs755, Siemens fell over 5% to Rs1038, ABB declined 1.5% to Rs3487 and BHEL edged lower by 0.3% to Rs2095.
Fears that rising interest rates would make Car loans more costlier brought the Auto stocks lower. Tata Motors declined over 2.5% to Rs755, Bajaj Auto fell 2.3% to Rs2489, Hero Honda was down 0.3% to Rs690. Among the Mid-Cap stocks, M&M fell over 5% to Rs732 and TVS Motors lost 5% to Rs587.
Selling continued among the mid-cap and small cap stocks with most of the scrips hitting lower circuits on regular basis. Small Cap index was the top loser among the key indices, the index fell nearly by 6% over the week. CNX Mid-Cap stocks dropped nearly by 4% during the week Hinduja TMT fell over 10% to Rs511, Patni declined over 6.5% to Rs391 Madras Cement lost over 7% to Rs2598 and Gammon India lost over 3.5% to Rs1031.
Selling was also seen across the Metal stocks after the Government asked the steel companies to roll back the prices. Tata Steel lost by over 2% to Rs433, SAIL was down by 2.2% to Rs104, JSW Steel dropped by over 4% to Rs452 and Jindal Stainless slipped over 7% o Rs119.
Selective buying was seen across the IT stocks, on optimism that new taxes would not impact earnings of the tech companies in the long term. Index heavy weights like TCS, Infosys and Satyam Computer led from the front holding off the markets from a major fall. Satyam Computer rose over 2.5% to Rs438, Infosys was up by 1% to Rs2123 and TCS added 0.4% to Rs1212. However, mid-cap stocks like Patni and Financial Technologies declined over 4% each.
Cement cos won't hike prices for a year
After several days of bickering, the Government and the cement companies finally agreed to a compromise that doesn't pinch either of them much. Notwithstanding the threat of an export ban from Commerce Minister Kamal Nath, cement companies refused to rollback the post-budget hike in cement prices. However, as a middle path to the standoff, cement makers pledged to freeze cement prices for a year. They will not hike prices even in the event of a rise in input costs, Nath said after a meeting with the Cement Manufacturers' Association (CMA). At the same time, cement companies will pass on the benefits of any tax relief from the Government to the consumers. So far, the Government has not given any assurances on reversing the hike in excise duty announced in the budget. It may be recalled that in his budget speech, Finance Minister P. Chidambaram increased the excise duty on cement sold at Rs190 or higher for a 50-kg bag. For cement bags sold at under Rs190 he slashed the excise levy. The very next day, cement makers jacked up prices by Rs12 per bag to nullify the effect of the higher excise duty. The price hike didn't go down well with the Government, which asked cement companies to reverse the move. The cement firms refused to budge, prompting Government to warn of a possible ban on exports to meet the shortfall in local supply. The real losers will be the investors, who had put money in cement shares amid a rosy outlook for the sector. Cement stocks have lost heavily and continue to bleed in the aftermath of the budget and the ensuing the feud between the Government and the cement companies.
Reliance to merge with IPCL
The Boards of Directors of Reliance Industries Ltd. (RIL) and Indian Petrochemicals Corp. Ltd. (IPCL) will meet on March 10 (Saturday), to consider a proposal to merge the two companies. The Boards of the two companies will also discuss and declare an interim dividend for the year ending on March 31. In May 2002, RIL won the bid to acquire a 26% stake in IPCL at Rs231 a share for Rs14.91bn. RIL's bid was way ahead of the other two bids. While public sector oil major Indian Oil Corp. Ltd. (IOC) bid Rs128 a share, Nirma offered Rs110 a share. RIL went on to buy an additional 20% stake in IPCL through the mandatory open offer. At present, the promoters' stake in IPCL stands at 46.68%. Foreign Institutional Investors (FIIs) own 12.5%, Insurance Companies 8.8%, MFs/UTI 3.4% and FIs/Banks hold 2.4%. The Government has a miniscule 0.35% stake in IPCL. It sold the residual stake in 2004 in the market. The merger has been in the works and has been anticipated for quite a while given the potential synergies. Several other small petrochemical companies had been merged into IPCL and the RIL-IPCL merger was a foregone conclusion. In fact, the two companies have already integrated quite a few aspects of their business. RIL supplies raw materials such as naphtha to IPCL and could supply gas, going forward. The share swap ratio is expected to be between 5:1 or 6:1 in favour of RIL shareholders. Shares of IPCL surged after the announcement.
Selling pressure in most of the heavyweights saw a sharp downmove in the Sensex.
The market succumbed to heavy selling pressure on profit booking in most of the front-line counters. The Sensex began the trading
session with a positive gap of 58 points at 13107 and moved up to touch an intra-day high of 13146. The index soon lost ground and slipped sharply as the session progressed. Although the market recouped some of its losses in the afternoon, a fresh bout of selling saw the index slip below the 12800 mark and touch the day's low of 12788. The Sensex finally ended the session with losses of 164 points at 12885 while the Nifty shed 44 points and closed at 3718.
Leading the slump Grasim Industries plunged 7.43% at Rs2,069. ACC dropped 6.30% at Rs781, BHEL declined 3.68% at Rs2,095, ITC tumbled 3.44% at Rs154, Cipla dipped 3.19% at Rs229, Hindalco slipped 3.14% at Rs128, Gujarat Ambuja was down 2.61% at Rs110, Reliance Communication closed weaker by 2.60% at 423, L&T shed 2.59% at Rs1,482 and Dr Reddy�s declined 2.55% at Rs660. Reliance Energy, Wipro, Tata Motors, Satyam Computers, SBI, Reliance Industries, Infosys, Ranbaxy, Bajaj Auto and Bharti Airtel also closed in negative territory. Bucking the weak trend, NTPC gained 2.68% at Rs140, Hero Honda advanced 2.53% at Rs690, Tata Steel added 1.50% Rs434 and HDFC gained 1.08% at Rs1,567. HDFC Bank and ONGC also closed in positive territory.
The market breadth was negative on the BSE. Of the 2,466 stocks traded, 1,308 stocks declined, 1,098 stocks advanced and 60 stocks ended unchanged. The BSE FMCG Index was the major loser among the sectoral indices and shed 1.64%. The BSE CG Index declined 1.47% and the BSE Auto Index was down 1.31%.
Over 6.35 crore Ideal Cellular shares changed hands on the BSE followed by IFCI (1.25 crore shares), Gujarat Ambuja (75.02 lakh shares) and Mudra Lifestyle (71.17 lakh shares).
The market is expected to remain under selling pressure, as profit booking might continue. A host of factors including lack of inflows at higher levels, the surprise CRR-hike, high valuations, rising inflation and rising interest rates, fears of an earnings slowdown in the coming quarters kept the sentiment edgy all along.
The defeat of the Congress in Uttarakhand and Punjab, weak global markets and profit-taking at higher levels have also plagued the market lately.
The latest and most dreadful demon to strike was unwinding of “yen-carry trade”, which had severely affected the Chinese bourse in particular, but the correction was widespread across global markets. This is expected to weight on the sentiment for few more weeks, as further possible repatriation of overseas profits by Japanese banks and companies, ahead of the country’s fiscal ending 31 March 2007, could lead to further rise of the Japanese currency against the US dollar and a resultant sell-off in shares.
Carry trades involve borrowing in a low-interest rate currency and investing the proceeds in higher yielding assets. In Japan, investors took advantage of the near-zero interest rate in the past many years by borrowing yen, converting them into dollars and investing in higher-yielding assets including overseas equities.
Analysts said some hedge funds, which have indulged in yen-carry trade over the past couple of years, are reviewing options about investments in some emerging market equities, including India due to doubts about scope of appreciation in them hereon.
Inflation has been a cause of concern. India's wholesale price index rose 6.10% in the 12 months to 24 February 2007, little changed from the previous week's annual increase of 6.05%, latest data released showed on Friday (9 March 2007). Any increase in this figure will dampen the sentiment, and may spook a sell-off.
Also any sharp spurt in crude oil prices, which are hovering around the $61 per barrel mark, may also affect the sentiment significantly.
Grindwell Norton and Motor Industries Company (MICO) will announce their results in the coming week.
The BSE Sensex finished the week on a flat note, amid intense volatility, as value buying emerged for the battered index pivotals, after a sharp fall from all-time highs. A host of factors including lack of inflows at higher levels, the surprise CRR-hike, high valuations, rising inflation and rising interest rates and fears of an earnings slowdown in the coming quarters kept the sentiment edgy all along.
The defeat of the Congress in Uttarakhand and Punjab, weak global markets and profit-taking at higher levels have also plagued the market lately. Caution was also partly due to worries of a possible interest rate hike by the Bank of Japan (BoJ), which came true later. Japan's central bank raised the benchmark lending rates in the country to 0.50%, on 22 February 2007.
The BSE Sensex settled with a marginal loss of 1.13 points, at 12,884.99, while the S&P CNX Nifty settled at 3,718, a loss of 8.75 points.
On 5 March 2007, the BSE Sensex plunged 471.09 points, to 12,415.04 as heavy selling continued for the entire day, following a global market meltdown. Experts opine that one of the reasons for the current sharp correction is due to Yen carry-trade unwinding.
The Sensex jumped 282.05 points, to settle at 12,697.09, on 6 March 2007, tracking a recovery across Asian markets. The short-covering in derivatives also played a part in today's remarkable upsurge. IT, telecom shares and leading banks also edged higher.
However, a correction again set in with the Sensex declining 117.34 points, to 12,579.75, after the government said it will consider banning cement exports if such a move could help bring down prices.
The Sensex jumped 469.60 points, to settle above the 13,000 mark, at 13,049.35, following strong rally in Asian markets. There was strong buying demand for battered blue-chips as well as a host of small-cap and mid-cap shares.
The 30-share BSE Sensex lost 164.36 points, to 12,884.99, as the mood was dampened by rising inflation figures, and was not able to sustain the higher levels, succumbing to sales.
Reliance Industries (RIL), advanced 0.32% to Rs 1318.50. There were reports that RIL will transfer its overseas oil assets to a new holding company, to reduce risk on its balance sheet as many of these are located in politically risk-prone areas. RIL has also scheduled a board meet on 10 March 2007, to consider the amalgamation of Indian Petrochemicals Corporation (IPCL), with itself.
IPCL gained 4.70% to Rs 268.60, on speculation that the merger ratio or swap ratio will be in favour of IPCL shareholders. Marketmen expected this ratio to be 4:1 (4 shares of IPCL for every share of RIL).
Tata Steel lost 2.10% to Rs 433.80. Shareholders of the Corus Group have agreed to Tata Steel’s $12 billion takeover of the European steelmaker. Also NatSteel Asia, a wholly-owned subsidiary of the company, entered into an agreement to acquire two rolling mills in Vietnam. The transactions are likely to be completed by June 2007.
Wipro lost 0.71% to Rs 564.60, amid reports that the company was close to another US acquisition. According to reports, it will be acquiring a US-based aerospace services company. The buyout, expected to be around $90 million, will help Wipro strengthen its aerospace capability. Other areas where Wipro is looking at acquisitions are manufacturing, travel and transport, infrastructure and BPO.
ACC tanked 8.85% to Rs 780.85, after its February shipments fell 7.2% to 1.42 million tonnes year-on-year. The production in February 2007 declined to 1.45 million tonnes, down from 1.54 million tonnes in February 2006. Production was hurt due to technical modifications at three of its plants.
Meanwhile, India Cements, down 9% to Rs 153.25, and Shree Cements, down 13.5% to Rs 1026.90, slipped after cement companies agreed to hold prices of the key building material for a year.
ICICI Bank gained 1.75% to Rs 859.55, after it decided to consider transfer of investments in four subsidiaries in insurance and mutual fund businesses to a wholly-owned subsidiary, which also may lead to the eventual listing of the holding company. ICICI Bank’s investments in the four subsidiaries may be transferred to ICICI Holdings, the new subsidiary to be formed.
Ranbaxy Laboratories rose 4% to Rs 326.05, after the company's subsidiary, Terapia, in Romania, reported 50% growth in sales for 2006. Ranbaxy also informed that Terapia had won approval for 20 new products, which it plans to launch soon.
Engineering and construction major, L&T, moved higher by 1.64% to Rs 1481.70, on reports that the company was in talks with Japan's Toshiba Corporation for a joint venture for power plants and equipments in India. As per the deal, L&T will hold majority stake in the joint venture. The company will invest about $ 173 million to build plants for steam turbines and power generators. The joint venture aims to have an annual turnover of 20 billion yen in five years.
FMCG giant Hindustan Lever rose 2.94% to Rs 183.55, after influential brokerage in a report put 'buy' on the stock with a 12-month price target of Rs 240, citing attractive valuation after the steep correction in the counter of late.
NTPC dropped 6.10% to Rs 139.75. The board of NTPC approved a proposal for the company's foray into nuclear power generation. NTPC is planning to float a subsidiary for its international operations. The company plans to make a global foray by building a 700 Mw gas-based power plant in Nigeria and 500 Mw thermal plant in Sri Lanka. NTPC is likely to sign an agreement with the Nigerian government for the $ 700 million project within a month.
Suzlon Energy was down 3.23% to Rs 1015.05, after its target company, Germany's REpower, reported a turnaround in 2006 on Tuesday. REpower reported a profit for 2006, as a restructuring programme took effect. REpower's earnings before interest and tax (EBIT) were 12.2 million euros ($16 million) in 2006, up from a loss of 4.3 million euros the year before. Net profit rose to 7.1 million euros from a loss of 6.8 million euros in 2005.
R Systems International tumbled 30.62% to Rs 122.70, after the company reported a dismal financial performance for the fourth quarter ended 31 December 2006. On a consolidated basis, R Systems reported a loss of Rs 6.56 crore for Q4 December 2006 compared to a net profit of Rs 3.18 crore in Q4 December 2005. Consolidated sales for the December 2006 quarter rose 32.5% to Rs 56.02 crore (Rs 42.27 crore).
On 7 March 2007, MindTree Consulting settled at Rs 620.30 on BSE, a sharp premium of 45.88% over the IPO price of Rs 425. The stock debuted at Rs 599. It also hit a low of Rs 575.20 and a high of Rs 678.80.
Aditya Birla group's Idea Cellular settled at a slight premium, at Rs 85.55, on Friday ( 9 March 2007). The stock made its debut on the Bombay Stock Exchange (BSE) and listed at Rs 90, against the IPO price of Rs 75. The stock also hit a high of Rs 94.25, and a low of Rs 84.
India's wholesale price index rose 6.10% in the 12 months to 24 February 2007, little changed from the previous week's annual increase of 6.05%, data released on 9 March 2007 showed. Analysts were expecting this figure to be at 6.03%. Annual inflation for the week ended 30 December 2006 was revised to 5.89% from 5.58%. It stood at 4.18% in the corresponding week a year ago.
In a major development, Morgan Stanley, Citigroup and private equity fund Actis, have entered into agreements to buy 6% stake in the National Stock Exchange (NSE) for undisclosed sums, the exchange informed. The deals will take foreign ownership of NSE to 26%, the maximum allowed by Indian law, after NYSE Group Inc, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund paid $460 million for stakes totaling 20% in January 2007.
Morgan Stanley will buy 3%, while Citigroup will take 2% and Actis 1%, NSE said in a statement.
The market was highly volatile throughout the day, with the bias being towards bearish, as selling continued throughout the day.
The 30-share BSE Sensex ended 164.36 points (1.26%) lower, at 12,884.99. It had opened higher, at 13,107.37 level, and surged to an intra-day high of 13,145.72.
The S&P CNX Nifty lost 43.65 points (1.16%), at 3,718.
The benchmark Sensex was not able to sustain the higher levels, and succumbed to selling. It had slipped to a low of 12,788.16, as selling picked up. The mood was also dampened by rising inflation figures of today.
Even after a 470-point surge on Thursday (8 March 2007), experts feel that the market is yet to stabilise. Investors are also scared by the severe volatility on the bourses.
The market-breadth was weak. Against 1,066 shares advancing, 1,287 declined. Just 60 shares were unchanged.
The total market turnover amounted to Rs 48901.15 crore
India's wholesale price index rose 6.10% in the 12 months to 24 February 2007, little changed from the previous week's annual increase of 6.05%, data released a little while ago showed on Friday. Analysts were expecting this figure to be at 6.03%. Annual inflation for the week ended 30 December 2006 was revised to 5.89% from 5.58%. It stood at 4.18% in the corresponding week a year ago.
Cement shares were down sharply after India's cement companies agreed to hold prices of the key building material for a year, India's Commerce Minister Kamal Nath said, "Cement makers will hold prices even if there is an increase in input prices,'' Nath said, following a meeting with cement manufacturers. Any tax relief will be passed on to consumers, Nath said. The government did not give any assurances on duty cuts, said Manoj Gaur, President of Cement Manufacturers' Association, in a phone interview. Finance Minister Palaniappan Chidambaram raised taxes on cement in his Budget presented on 28 February 2007. Cement makers earlier said they will reduce prices only if Chidambaram reverses the tax increase.
The decision was announced by Commerce Minister Kamal Nath after a meeting with the cement industry on Friday (9 March 2007). Nath also said that cement makers have committed to absorb all input costs and levies.
The government's close vigil on cement prices had already spooked cement scrips over the past one and a half months. Nath had said on Wednesday (7 March 2007) that the government may consider banning cement exports if that would help cool prices, sending cement shares sliding. Shares in third-biggest cement maker, Gujarat Ambuja Cements (GACL), declined 2.61% to Rs 109.95, while larger rival ACC fell 6.30% to Rs 781.
Grasim tumbled 7.43% to Rs 2069.15, on a volume of 2.91 lakh shares. India Cement (down 8.26%), Mysore Cement (down 9.8%) and Shree Cement (down 9.5%) were the other losers from the cement pack.
NTPC, India 's largest power generating company, rose 2.68% to Rs 139.75. It is planning to float a subsidiary for its international operations. The company plans to make a global foray by building a 700 Mw gas-based power plant in Nigeria and 500 Mw thermal plant in Sri Lanka . NTPC is likely to sign an agreement with the Nigerian government for the $ 700 million project within a month. The Nigerian government has agreed to provide gas for the project, and the electricity generated from the plant will be sold to state-run utilities there. NTPC's other plans in Nigeria include refurbishing gas-based sick power plants for extending their life span to enhance production capacity. This move is part of company's strategy to aggressively expand capacity going forward.
FMCG major HLL was down 0.14% to Rs 183.55, on a volume of 6.60 lakh shares, after surging close to 10% on huge volumes by Thursday (8 March 2007).
Cigarette major ITC was down 3.44% to Rs 154.35, on a volume of 26.22 lakh shares.
PSU engineering major Bhel slipped 3.70% to Rs 2095. It had also slipped to a low of Rs 2063, in intra-day trade.
Index heavyweight Reliance Industries (RIL) was down 2% to Rs 1308.05, on a volume of 9.83 lakh shares.
Tata Steel gained 0.97% to Rs 431.55, after it acquired 100% equity stake in Rawmet Industries Private (Rawmet), a company having its registered office in Kolkata, for an enterprise value of Rs 101 crore. This is the second 100% acquisition of Tata Steel in Orissa. In September 1991, Tata Steel took over the ferro-alloy plant in Bamnipal. Rawmet has a ferro-alloy plant near Cuttack as well, consisting of two 16.5 MVA semi-closed electric arc furnaces with a capacity of producing around 50,000 tonnes per annum of high carbon ferro chrome.
The Board of Rawmet has been reconstituted with nominees of the company. The company's board now consists of five directors, of which four are nominees of Tata Steel. Prior to this, Tata Steel had taken over the ferro-alloy plant at Bamnipal in Jajpur district, one of the first ones to successfully undergo disinvestment.
Idea Cellular settled at a slight premium, at Rs 85.55, on a huge volume of 6.35 crore shares. The stock made its debut on the Bombay Stock Exchange (BSE) and listed at Rs 90, against the IPO price of Rs 75. The stock also hit a high of Rs 94.25, and a low of Rs 84.
Idea Cellular is the sixth-largest mobile operator in India with 13.5 million subscribers by end-February 2007. It had a market share of 8.5% by end-December 2007, and operates in 11 circles. The IPO proceeds are expected to be used for the expansion of existing network, and roll out of services in the Mumbai circle.
The National Stock Exchange (NSE) has also added Idea Cellular in the futures & options segment from day one of its listing today. The lot size of Idea Cellular in F&O segment is 2,700.
Mudra Lifestyle settled at Rs 63.80 on volume of 71.17 lakh shares, a discount of over the IPO price of Rs 90. The stock debuted at Rs 94.80, hit a low of Rs 62.05 and a high of Rs 95. The IPO was priced at the top end of the Rs 75 - Rs 90 price band. The issue was subscribed over four times.
Mudra Lifestyle had issued shares to investors in May 2006 at Rs 60, and to SIDBI and to State Bank of India at Rs 75 each in January 2007, just before the IPO. The post-issue equity of Mudra Lifestyle is Rs 35.99 crore and the face value per share is Rs 10.
A block deal of 31 lakh shares was executed in Welspun Gujarat Stahl Rhoren counter amounting to 2.3% of company’s equity share capital, at Rs 99 per share. The stock settled at Rs 96.90 on total volumes of 42.13 lakh shares.
Mphasis rose 2% to Rs 265.50, after unconfirmed rumours that EDS may hike the open offer price for shareholders. Its open offer, which concluded recently, had drawn a poor response, against the proposed 20% (3.3 crore shares) buyback, EDS managed to attract just 2,201 (0.0013%) shares. The open offer price was set at Rs 204.5 per share.
Punjab Tractors rose 1.81% to Rs 309.50, after Mahindra & Mahindra said it will buy 43.3% stake in the North Indian tractor major at Rs 360 per share. The deal values the north India-based tractor maker at Rs 2200 crore. Although M&M emerged as a top bidder for Punjab Tractor (PTL), the stock was down 2.6% to Rs 745.40 following reports that the Punjab government on Thursday (8 March 2007) ordered a vigilance enquiry into the 2003-disinvestment by the state government, to a financial investor. It may be recalled, in 2003 the private equity investor, Actis, had paid $60 million for acquiring 29% stake in Punjab Tractors.
The state government has also now cautioned new bidders, and anybody participating in further acquisitions, that they will be doing so at their own risks and responsibilities.
Biocon advanced 3.40% to Rs 448.80, after releasing five renal therapy drugs, which are priced 35 – 40% lesser than those available in the market. The new immunosuppressant drugs for renal therapy include Renodapt, Tacrograf, Cyclophil ME, Rapacan and Erypro. Immunosuppressants are medicines that inhibit or prevent the activity of the body's immune system.
Biocon undertook research as well as conducted countrywide multi-centric trials for over four years before launching the drugs, an official with the company said. The company expects to garner 25% of the Rs 300-crore market for renal therapy products in the country. The immunosuppresant drug market itself is worth around Rs 125 crore. The global market for renal therapy drugs is worth around $3.3 billion. It expects to grab a fourth of India's kidney disorder treatment market in the next five years, as part of a drive to boost the branded drug business, Biocon's chief said on Thursday. The Bangalore-headquartered firm will launch kidney disorder drugs in overseas markets such as Latin America, the Middle East, and neighbouring countries in the next six to nine months.
Trading on the bourses was halted from 11:45 to 12:25 IST due to sun outage. It will be however extended till 16:15 IST. The revised trading schedule will be in place till 19 March 2007.
Asian and European markets were trading mixed. The Nikkei share average gained 0.43% on today, as machinery stocks such as Fanuc rose on upbeat machine orders data, while a weak yen lifted shares in Canon Inc and other exporters. The Nikkei closed up 73.73 points at 17,164.04, after booking its largest daily percentage gain since October in the previous session.
Hang Seng was down 0.21% to 19134.88.
In a major development, Morgan Stanley, Citigroup and private equity fund Actis, have entered into agreements to buy 6% stake in the National Stock Exchange (NSE) for undisclosed sums, the exchange informed. The deals will take foreign ownership of NSE to 26%, the maximum allowed by Indian law, after NYSE Group Inc, Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund paid $460 million for stakes totaling 20% in January 2007.
As per laws, individual foreign holdings are limited to 5%. Morgan Stanley will buy 3%, while Citigroup will take 2% and Actis 1%, NSE said in a statement late on Thursday.
Of this stake sale, IDBI has sold 2%, SBI sold 1.5%, Corporation Bank sold 0.265%, Union Bank sold 0.125%, Bank of Baroda sold 0.89%, Oriental Bank of Commerce (OBC) sold 0.335%, and Canara Bank sold 0.335% of their stake.
Earlier this week, Singapore Exchange paid $42.7 million for a 5%stake in NSE's rival, the over 150 year old exchange – the Bombay Stock Exchange (BSE), following a similar deal by Deutsche Boerse in February 2007.
The European Central Bank (ECB) raised its benchmark interest rate by a quarter of a percentage point on Thursday (8 March 2007), to 3.75%, and made clear that it was willing to tighten credit further, possibly by the summer, in a humming European economy that could generate inflation.
Meanwhile, the Bank of England (BoE) chose to keep their benchmark interest rate unchanged at 5.25% after increasing it three times in the last six months. Central bankers in Britain are trying to gauge whether they have headed off inflation, amid a booming real estate market and robust consumer demand allowing British retailers to charge higher prices.
Mutual funds are sitting on cash, thanks to collections from some of the recent new fund offers, and may step up purchases at declines. However, the latest data showed that mutual funds, in fact, stepped up sales – they pressed sales worth a net Rs 379.56 crore on Wednesday (7 March 2007), the day when the Sensex had lost 177 points in volatile trade.
FIIs have resumed buying since the last three days, after their heavy sales since late-February 2007. They were net buyers to the tune of Rs 115.80 crore on Thursday (8 March 2007), the day when the Sensex had spurted 470 points.
Recently, trading sessions have also seen FIIs step-up buying in index-based futures. Foreign funds were net buyers to the tune of Rs 948 crore in index-based futures on Thursday (8 March 2007). They were net buyers to the tune of Rs 198 crore in individual stock futures on the same day. The Nifty March 2007 futures had settled at 3,754.15 on Thursday (8 March 2007), a discount of 7.50 points over the spot Nifty closing of 3,761.65.
Wall Street extended its recovery from last week's big plunge, rising on Thursday, after several stable sessions helped buttress investor sentiment and allay some concerns about the economy. The Dow closed up 68.25 points, or 0.56%, at 12,260.70. The Standard & Poor's 500 index climbed 9.92 points, or 0.71%, to 1,401.89, and the Nasdaq composite index advanced 13.09 points, or 0.55%, to 2,387.73.
Oil prices were nearly flat in Asian trading on Friday, as market participants looked for a trading cue from US employment data due later in the day. Light, sweet crude for April delivery dropped 10 cents to $61.54 a barrel in electronic trading on the New York Mercantile Exchange midmorning in Singapore.
Buy Praj Industries with a stop loss of Rs 300 for target of Rs 520
Buy Bajaj Hindustan with a stop loss of Rs 150 for target of Rs 220
Buy NIIT below Rs 690 with stoploss of Rs 677. This is a day-trading recommendation
Buy Bajaj Hindustan below Rs 172 with stoploss of Rs 168. This is a day-trading recommendation
Rajat K Bose
Buy MTNL around last close with stop loss below Rs 146.80 for target of Rs 154.50-157
Buy Bank of India around last close with a stop loss below Rs 154 for target of Rs 164-168
The Sensex opened with a positive gap of 70 points at 12,650. The buying gained momentum in late noon trades and the index soared to a high of 13,100 - up 520 points from the previous close. The Sensex finally settled with a smart gain of 470 points (3.7%) at 13,049. Nifty gained 135(3.7%) points to close at 3761.
The NSE & BSE cash volumes were significantly lower compared to the previous day at INR 79 bn and INR 37 bn. The F&O volumes were a touch lower at INR 327 bn.
The Implied Volatility (IV) across Nifty strikes has slightly decreased to 29-31% levels. The WPCR of Nifty Options increased to 0.95 compared to the previous day while the 5 day average is 0.93.
We expect the market to continue its uptrend as the Nifty may open with a bull gap. With marginally positive global markets and no negative triggers on the domestic front, the markets can touch the levels of 3820 where some selling can come in. US Payroll data will be coming out later tonight which can provide some trigger for the next week.
The FII’s continued to buy Index futures and continue to prefer position taking in Nifty over single stock positions. We might see some profit booking on Nifty to start as it inches above 3800 levels.
With the listing of Idea cellular today, the Telecom sector may see some gains even as heavyweights RCOM, Bharti Telecom and especially MTNL are showing strength over subscriber numbers. One could look at shorting Idea Cellular at levels above 90 and book some early profits. As the news of RIL- IPCL merger ratio comes out later today, the stocks may see some action.
The market breadth has been extremely positive indicating a secular participation of the stocks on the rise. The support side has not only stabilized from its 200 DMA but also bounced back smartly. The bull momentum seems to be picking up again and our revised resistance level for Nifty are at 3818 and 3856. On the bear side the support levels are at 3738 followed by 3692.
NIFTY (3761) SUP 3711 RES 3820
BUY PIDILITEIND (119)
SL 115 T 128, 130
BUY VOLTAS (83)
SL 78 T 90, 92
BUY BANKBARODA (207.9)
SL 200 T 217, 219
SELL RUCHISOYA (325)
@ 329 SL 333 T 319, 317
SELL GEOINFO (263.7)
@ 266 SL 269 T 253, 251
Strength needs support
"We deceive ourselves when we fancy that only weakness needs support. Strength needs it far more."
Just like the sudden and swift crash, most marketmen surely must have been taken aback by the sharp turn around yesterday. But, the bulls aren't complaining, especially after being slaughtered for the past few weeks. One must remain alert though as there could be a fresh fall any time. Volumes didn’t appear very convincing but that has been the trend when the direction changes. Morgan Stanley, in its latest report warns that the Sensex could touch 11,485 this year. It also sees ROE of Indian companies to be under pressure due to rising costs and capex.
Significant risks remain, especially in relation to inflation and interest rates in the domestic markets. The Government's efforts to cool down prices through a mix of monetary and fiscal measures is also likely to exert some pressure on the market. Globally, the US economy continues to be among the biggest worries, so is the proposed softening of growth in China. Currency fluctuations and its impact on fund flows to emerging markets is another cause for concern.
Much of yesterday's rebound was due to the strength in global markets, particularly in Asia. Things are a little bit different today. While stocks in US were up, Asian markets are mixed with only the Nikkei holding up thanks to a weaker yen.
We expect a cautious to higher opening and high intra-day gyrations. One must trade with caution as there is a likelihood of selling pressure at higher levels. The week may pass off with gains but you need to take a call whether you want to carry forward your position over the weekend.
Watch out for four new listings today. Idea Cellular may well ring in some gains. Mudra Lifestyle is likely to give exit opportunities at open while Euro Ceramics and Vijayeshwari Textiles could see some pressure after listing.
FIIs were net buyers of just Rs601.8mn (provisional) yesterday. However, in the F&O segment they poured in Rs11.97bn. On Wednesday, foreign funds were net buyers to the tune of Rs841mn in the cash segment. Mutual Funds offloaded stocks worth Rs3.8bn on the same day.
US stocks ended higher on Thursday but closed off their highs of the day owing to nagging worries about the health of the financial sector and some jitters ahead of Friday's monthly jobs report.
The Standard & Poor's 500 Index and the Nasdaq Composite Index rose to one-week highs after falling yesterday, while the Dow Jones Industrial Average climbed to its highest this month.
The S&P 500 added 9.92, or 0.7%, to 1401.89. All 10 of its main industry groups rose. The Nasdaq increased 13.09, or 0.6%, to 2387.73. The Dow average advanced 68.25, or 0.6%, to 12,260.70.
Friday's focus will be the February employment report, due before the start of trade. US companies are expected to have added 100,000 jobs to their payrolls, after having added 111,000 in January, according to economists. The unemployment rate is expected to hold steady at 4.6%.
In currency trading, the dollar rallied versus the yen and the euro. The European currency was weaker after the European Central Bank raised interest rates by 25 basis points to 3.75%. The Bank of England held rates steady at 5.25%.
Treasury prices slipped, raising the yield on the 10-year note to 4.51% from 4.48% late on Wednesday. COMEX gold for April delivery added $2.60 to settle at $655.50 an ounce.
US light crude oil for April delivery fell 18 cents to settle at $61.64 a barrel on the New York Mercantile Exchange. The front-month contract was trading 6 cents lower at $61.58 a barrel in extended trading in Asia.
Barring Patni all Indian ADRs did well. VSNL surged by nearly 4.9%, Infy rose 2.9%, Wipro advanced 3.8%, Satyam gained 2.8%, Tata Motors climbed 3.7%, Dr. Reddy's was up 2.5%, HDFC Bank shot up by 5%, ICICI Bank put on 3.8%, MTNL jumped 5.1%, WNS gained 0.2%, EXL Service was up close to 1%, Rediff advanced 1.4% and Sify soared by 3.6%.
European stocks advanced. The pan-European Dow Jones Stoxx 600 improved 1.1% to 366.04. The German DAX Xetra 30 closed up 1.4% at 6,713.23, the French CAC 40 rose 1.3% to 5,524.26 and the UK's FTSE 100 advanced 1.2% to 6,227.70.
Mexican and Brazilian stocks finished higher as well. In Mexico, the benchmark IPC index of 35 most-traded issues surged or 589, or 2.3%, to 26, 773.78. It was the IPC's highest close since the 5.8% plunge 10 days ago .
Brazilian shares rose after the central bank cut its base interest rate late on Wednesday. The Selic rate now stands at 12.75%, down from 13%. The broader market, as measured by the benchmark Bovespa stocks index, closed up 799 points, or 1.9%, at 43,465.83.
Asian stocks rose this morning, headed for a weekly gain. The Morgan Stanley Capital International Asia-Pacific Index added 0.5% to 143.14 at 12:06 p.m. in Tokyo. Japan's Nikkei 225 Stock Average rose 0.3%, while the broader Topix index climbed 0.4%.
Markets open for trading elsewhere in the region advanced, except in Hong Kong, China and South Korea. Gauges in Taiwan and Indonesia were little changed.
Indoco Remedies Ltd. Investment UpdateIndoco Remedies Limited’s (Indoco) Q2 FY07 results were in line with expectations. Sales recorded a growth of 27.9% to Rs794mn driven by a 14% growth in the domestic market to Rs623mn and 136% growth in the export regulated market to Rs125mn. Operating profit margin (OPM) declined by 90bps to 17.5% as new R&D facility at Rabale, Baddi and La Nova are yet to operate at full capacity leading to higher overheads. Higher depreciation and interest outgo resulted in lower earnings growth of 23.1% to Rs96mn, translating into an annualized EPS of Rs32.5. For H1 FY07, Indoco has witnessed a PAT growth of 26.1% to Rs179mn, translating into an EPS of Rs30.3. With Q4 being the strongest quarter for the company (contribution of 40% to profitability), we are confident that Indoco would achieve our EPS estimate of Rs36.9 for FY07.
We estimate Indoco to witness earnings CAGR of 41.6% to Rs633mn over FY06-08. At Rs280, the stock is trading at 8-9x FY07E EPS of Rs36.9 and 5-6x FY08E EPS of Rs51.5 after factoring in the dilution emerging from the merger of SPA Pharma with Indoco. We believe the stock is undervalued and deserves higher multiple considering contribution from high margin US market, increased traction in contract manufacturing as well as clarity on strong domestic market growth. We maintain BUY with a target price of Rs391 from a 12-month perspective.
Visaka Industries Ltd: Dr G. Vivekanand, Managing Director has purchased from open market 8000 equity shares of Visaka Industries Ltd on 2nd March.
Mercator Lines Limited: Mr. Anil Khanna, Director has purchased from open market 4000 equity shares of Mercator Lines Limited on 5th March.
The turnover on NSE was down by 11.5% to Rs79.54bn. BSE Metal index was the major gainer and gained 4.58%. BSE Capital Good index (up 4.51%), BSE Bank index (up 4.45%), BSE Pharma index (up 3.76%) and BSE PSU index (up 3.46%) were among the other major gainers.
IFCI, SAIL, TTML, Indus Fila, ITC, Broadcast Initiatives, India Cement, R Com, IDFC, Evinix, MTNL, Ashok Leyland, Tata Steel, Mind Tree, Reliance Industries, IVRCL Infrastructure and Oriental Trimex.
Upper circuit filters:
Ansal Infrastructure, Binani Industries, Gujarat Fluro Chemicals, Mangalam Cement, Kesoram Industries, Nirlon, 3M India, Deccan Aviation, India Infoline, Swan Mills, Aftek, Aurionpro Solution, Classic Diamond, Crest Animation, Crew BOS, Era Construction, HOV Services, IOL Broadband, KS Oils, Taneja Aerospace and Vkran Software.
Alstom Projects India, Apollo Hospitals, ACC, Bata India, Bombay Dyeing, Canara Bank, Cummins, Divis Laboratories, Federal Bank, Glenmark, GTC Industries, Gujarat Ambuja Cements, HCL Technologies, India Cements, India Infoline, IPCL, Infosys, IDFC, MTNL, Maruti, Nagarjuna Construction, NDTV, ONGC, Praj Industries, Ranbaxy, Reliance Industries, SBi, SAIL and Titan Industries.
Patel Engineering – Buy from Kotak
Tata Tea – Sell from Merrill Lynch
Long Term investment:
Major News Headlines:
Unitech to invest $500mn to develop residential projects
Tata Tele plans to separate towers business
Tata Steel buys 70% in 2 rolling mills in Vietnam
Wockhardt to pay Rs5 per share interim dividend
PM asks PSUs to look for M&As, listing
Japan, India may jointly invest in Oil, Gas Exploration
RPG to pump Rs25bn in retail expansion
Teledata Informatics gets order from Bihar Government
EIH plans to sell shares to raise as much as Rs4bn
Will the recovery continue?
Bulls today blast past the 13000 levels as Sensex recorded its biggest single day gain since 15th June, 2006 led by gains in the Banking, Capital Good, Metal and Telecom stocks. Markets reversed its yesterday’s loss as strong Asian Markets and all round buying in scrip’s across the sectors lifted the benchmark Sensex to close at day’s high. The bulls also cheered Prime Minister Manmohan Singh's comments after he said that the country's economy may expand more than 9% in the current financial year.
All the sectoral indices ended in green with BSE Bank, Metal and Capital Good index ended over 4.5% each. The Mid-Cap and small cap stocks also participated in the rally. SAIL, IPCL, HLL and Gujarat Ambuja were the major gainers among the 50-srip’s of NSE Nifty. Finally, the 30-share benchmark Sensex rallied 520 points to close at 13099. NSE Nifty surged 150 points to close at 3777.
Majority of Asian markets closed in positive territory boosting the sentiments across the Street. Japan's Nikkei 225 Stock Average was up 325 points at 17090 after Yen weakened. While the Hang Seng in Hong Kong advanced 256 points to 19,175. Positive start by the Major European Indices also lifted the spirits of the bulls.
Indus Fila had a disappointing debut on the bourses today. The stock opened at Rs158.90 on NSE as against the offer price of Rs170 per share. The scrip dropped by over 20% to Rs135 touching an intra-day high of Rs158 and low of Rs115.60 and recorded volumes of over 1,00,00,000 shares on NSE. The company entered the capital market with an IPO of 48,43,789 equity shares of Rs10 each. The company barely managed to get the issue fully subscribed. The IPO was subscribed just 1.43 times.
IPCL rallied by over 12% to Rs260 after Board of Directors of RIL announced that they would consider merger of the company with itself on 10th March. The scrip touched an intra-day high of Rs272 and a low of Rs238 and has recorded volumes of over 76,00,000 shares on NSE.
Wockhardt Pharma gained 1.9% to Rs377 after the company announced that it would pay Rs5 per share as mid-year dividend. The scrip touched an intra-day high of Rs379 and a low of Rs366 and has recorded volumes of over 6,00,000 shares on NSE.
Auto stocks also gained momentum led by sustained buying. Tata Motors advanced 3.8% to Rs766, Bajaj Auto rose over 2.5% to Rs2510, Maruti was up by 2.3% to Rs792 and M&M added 0.7% to Rs765.
Technology stocks once again hogged the limelight after falling sharply in the previous trading session. Heavy weight Satyam Computer surged 3.5% to Rs445, Wipro advanced 3.3% to Rs572 and Infosys added 2.4% to Rs2135. Polaris, Mphasis BFL and Moser Baer were the major gainers among the Mid-Cap stocks.
Cement stocks today attracted buying interest after dropping sharply in previous trading sessions. Gujarat Ambuja surged by over 8% to Rs112, Grasim spurred by over 6% to Rs2230, ACC gained nearly by 3% to Rs833 and India Cement rallied over 10% to Rs167.
Oil & Gas exploration stocks also recorded smart gains, ONGC advanced 1.9% to Rs779 and Reliance Industries gained 3.6% to Rs1335.
The NIFTY futures saw a decrease in OI 5.18% with prices closing at 3761.00 indicating that lot of short covering happening as market moved up one way with volatility as finally foreign markets recovered which forced bears to run for cover on their positions and liquidating their positions as market recovered .We feel that till the market sustains above 3750 levels we may see aggressive short covering and fresh money coming in the market which is the need of the hour.
The nifty futures discount narrowed again and aggressive buying brought it to a premium .The FIIs were buyers in futures to the tune of 1196 crs .The PCR has come up from 0.91 to 1.00evels indicating some good days in the market .The volatility has come down from 31.50 levels to 29.70 indicating some respite in the market.
Among the Big guns, ONGC saw loss of OI to the tune of 2.79% with prices coming up 1.91% indicating long positions are created in the counter as the counter moved up showing strength whereas RELIANCE saw major loss of OI to the tune of 5.47 % with prices shooting up by 3.63 % indicating that the counter saw lot of short covering in line with the market.
On the TECH front, TCS, INFOSYSTCH, SATYAMCOMP, WIPRO saw fall of OI with sharp rise in prices indicating lot of short positions being cut and longs being formed in these counters performing in line with market.
BANKING counters saw loss in OI with prices going up indicating that shorts positions cut and fresh long positions formed in the counter which may give some support to the rising markets whether be P.S.U'S or P.V.T banks.
In the METALS like other sectors across the board buying took place and without exceptions as all stocks were covered as global prices on the L.M.E also helped to pulp the bears as if we had no tomorrow, however we saw lot of short coverings in all of them at the fag end of the market.
Considering the overall recovery in the market after the initial rise and later the massacre of the short positions which was respite by a pull back at the end, we feel the temporary worst is over if the markets close today above yesterday's close in the positive, we could feel comforted, however traders are still warned and buying with strict stop losses is the need of the hour.
After surging above the 13000 mark yesterday, the market could notch up further gains owing to bullish sentiment, with FIIs also turning net buyers of equity stocks in the last sessions of the current month. The FIIs have been net sellers of equities during the month of february, that saw the Sensex erase over 2000 points from its recent all-time high of 14723. While the Nifty could target 3775 on the upside, it has supports at 3700 on the downside. The Sensex has a support at 12800 and a resistance at 13250.
US indices posted modest gains on Thursday, thanks to a slide in the crude oil prices. While the Dow Jones added 68 points to 12261, the Nasdaq moved up 13 points to close at 2388.
Indian floats, also, gained in US market and ended higher. MTNL advanced 5.14% at $6.55, HDFC Bank gained 5.07% at $67.38, VSNL raised by 4.87% at $17, Wipro up by 3.83% at $15.99, ICICI Bank advnaced 3.80% at Rs $40.44, Tata Motors gained 3.66% at $17.58 and Infosys gained 2.93% at $54.07 , Satyam, Dr Reddy, Reddif and Patni Computers gained about 1-2% each.
Crude oil prices in the international market declined with the Nymex US light crude oil for April falling 18 cents to close at $61.64 a barrel. In the commodity segment, the Comex gold advanced $2.60 to settle at $655.50 an ounce.
The market made a strong comeback on Thursday 8 March 2007 when Sensex surged 470 points to move past 13000. Strong Asian markets triggered a rebound on the domestic bourses, which had seen a huge value erosion over the past few days. Short-covering in derivatives aided the surge.
The key economic data today is that on wholesale price inflation. The inflation rate is forecast at 6.03% for the 12 months to 24 February 2007, marginally down from 6.05%. Indian stocks had tumbled in the last few days due to a sell-off in global markets, with the disappointing Union Budget 2007-08 of 28 February 2007 only compounding their woes. The fall was accentuated as margin calls were triggered.
Mutual funds are sitting on cash thanks to collections from some of the recent new fund offers and they may step up purchases on declines. However, the latest data showed that mutual funds, in fact, stepped sales – they pressed sales worth a net Rs 379.56 crore on Wednesday 7 March 2007, the day when Sensex had lost 177 points in volatile trade.
FIIs have resumed buying since the past two day after their heavy sales since late February 2007. However, the quantum of their inflow is muted. They were net buyers to the tune of Rs 84 crore on Wednesday. As per provisional data, their inflow was Rs 60 crore on Thursday, the day when Sensex had spurted 470 points.
Recently trading sessions have also seen FIIs step up buying in index-based futures. They were net buyers to the tune of Rs 948 crore in index-based futures on Thursday. They were net buyers to the tune of Rs 198 crore in individual stock futures on that day. The Nifty March 2007 futures settled at 3754.15 on Thursday, a discount of 7.50 points over spot Nifty closing of 3,761.65.
Asia-Pacific markets were mixed on Friday. Key benchmark indices in Australia, Japan, and Singapore were up by between 0.1% to 0.4%. Benchmark indices in China, Hong, South Korea and Taiwan were down by between 0.07% to 0.47%.
Wall Street extended its recovery from last week's big plunge, rising Thursday after several stable sessions helped buttress investor sentiment and allay some concerns about the economy. The Dow closed up 68.25, or 0.56 percent, at 12,260.70. The Standard & Poor's 500 index climbed 9.92, or 0.71 percent, to 1,401.89, and the Nasdaq composite index advanced 13.09, or 0.55 percent, to 2,387.73.
The European Central Bank (ECB) on Thursday raised as widely expected its key interest rate to a new five-year high of 3.75 percent and signalled no immediate end to monetary tightening. On the other hand, Bank of England left rates unchanged.
Oil prices were nearly flat in Asian trading Friday as market participants looked for a trading cue from US employment data due later in the day. Light, sweet crude for April delivery dropped 10 cents to $61.54 a barrel in electronic trading on the New York Mercantile Exchange midmorning in Singapore.
Nifty and Sensex have exhibited a bullish candlestick.
Technically, one may use the level of 3625 (Nifty) and 12590 (Sensex) as the stop loss level.
Nifty faces resistance at 3800 and Sensex at 13200.
BSE Smallcap and BSE Midcap exhibited a bullish candlestick.
CNX IT has gained ground.
In the Punter's zone we have a BUY in A.C.C. , IDBI & RELIANCE CAPITAL.
In the Technical call section, we have a BUY in GRASIM , IDFC & INDIA CEMENTS.