Sharekhan Investor's Eye dated March 13, 2007

Esab India
Cluster: Vulture’s Pick
Recommendation: Buy
Price target: Rs575
Current market price: Rs328

Top line growth ahead of expectations

Results highlights

• Esab India's Q4CY2006 results are good. Its top line grew by 32.4% which was ahead of our expectations. The profit before tax grew by an impressive 50%. However due to a higher tax rate vis-à-vis Q4CY2005, the net profit growth of 21.7% was below our expectations.
• The higher top line growth was aided by the company's new facility in Chennai. This facility, on a fully operational basis, can contribute additional Rs60 crore to the top line. The revenues for the quarter recorded an impressive 32.4% growth as the equipment division's revenue increased by a whopping 98% and the consumable division's revenue grew by 16%.
• The operating profit for the quarter grew by 49.6% to Rs14.4 crore as the operating profit margin (OPM) improved by 211 basis points to 18.4%.
• The improvement in the OPM was on account of the better profitability of the equipment division. The earnings before interest and tax margin of the equipment division improved by 1,200 basis points to 17.5%.
• The depreciation for the quarter increased by 35% as the company has commissioned its new plant in Chennai.
• The tax rate for the quarter stood at 33.3% as against 18% in the same quarter last year.
• Consequently, the net profit grew at a lower rate of 21.7% to Rs10.1 crore.

New Delhi Television
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs348
Current market price: Rs304

Fund mobilisation begins for new channels
New Delhi Television (NDTV) has received a major push towards implementing its ambitious plans of diversifying its broadcast offerings by entering the general entertainment and lifestyle space. Last week the news broadcaster received the approval of the Foreign Investment Promotion Board to raise foreign investment of Rs585 crore (~$130 million) for its proposed channels through its UK-based subsidiary NDTV Network Plc. Taking a step forward, it has also entered into a definitive agreement with Com Ventures V.I.L.P for infusing $20 million in NDTV Network Plc. We believe the company will expedite the fund raising process by roping in strategic/financial investors or go for a listing on the Alternative Investment Market (commonly known as AIM).

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MUTUAL FUNDS: WHAT’S IN—WHAT’S OUT

Fund Analysis: March 2007

An analysis has been undertaken on equity and mid-cap funds' portfolios, indicating the favourite picks of fund managers for the month of February 2007. Equity funds comprise of all diversified, index, sector and tax planning funds, whereas mid-cap funds include a universe of 18 funds such as Reliance Growth, Franklin India Prima Fund, HDFC Capital Builder, Birla Mid-cap Fund etc.

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Technical Analysis

Sensex is now moving in a channel.. and 12470 becomes important. Breaking this would lead to levels between 12350 near the 200 DMA. However the upsides will see resistance between 12970 - 13040

FII: - Rs 84 cr, MF -Rs 13 cr

FII Gross purchases Rs 1641 Cr, Gross Sellers 1725 Cr, Net selers Rs 84 Cr.
MF Gross Purchases Rs 334 Cr Gross Sellers Rs 347 Cr Net Sellers Rs 13 Cr

Our View:

Really a number to be ignored.. given the global mayhem in equities
However what will be important will be the provisional number for today.Unlikely to be very negative as markets started low and remained low

Close: Now its the US Housing market which added to the woes !

Markets went into a tailspin after bloodshed seen in US markets which had the Asian markets mauled. Markets across the globe cracked due to concerns the delinquencies reported in the US mortgage market. Asia reflected the pessimism too Market traded in deep red and the movement was restricted to a relatively narrow band. There was some level of recovery from lower levels but the recovery proved short lived. Investors cautiously traded as they wanted to play safe. Selling pressure was not just restricted to frontline stocks but was also to the Mid and Small caps. IT, Telecom and Banking stocks were out of favour while some buying was seen in Cement and Auto stocks. European markets traded weak.

Sensex closed down 453 points at 12529.62. Weighing on the Sensex were losses in ICICI Bk (829.7,-5 percent), Bharti Tele (729.05,-5 percent), Wipro (555.25,-5 percent), RCVL (398.55,-4 percent) and Satyam (432.7,-4 percent). Losses were restricted by gains in Bajaj Auto (2529.3,+0 percent) and Guj Ambuja (106.15,+0 percent).

MindTree Consulting spurted in late session. The stock was up almost by 15% to Rs 1005. Volumes in the scrip were a huge 90.1 lakh shares on BSE. The stock was also the most active counter with a turnover of almost Rs 824 crore. Mindtree has spurted on high volumes in the past three days. MindTree made an impressive debut when it got listed at Rs 599 on BSE on 7 March 2007 with a premium of 40.9% over the IPO price of Rs 425. The stock finally ended up by 5.5%. Promoted by ex CEO of Wipro, Mr. Ashok Soota, the company has certainly done well and expectations are high.

Low cost Airlines got a relief with civil aviation minister Mr. Praful Patel rolling back the ministry's proposal to hike peak hour airport charges. This is negative for Jet airways which was looking for a differentiation for its services. Still there is something to cheer here in a sense but really we still avoid the sector though falling crude could bring in positive surprises. Jet airways and Deccan Aviation both ended down by almost 2%.

The latest data showed that the infrastructure sector output grew by 8.7% in January 2007 from a year earlier, marginally higher than a revised 8.5% in December 2006. Infrastructure output in the April 2006-January 2007 period rose by 8.4% from a year earlier, despite a slowdown in production of crucial construction material cement as well as finished steel and coal. The data was certainly encouraging but didn't help much today as investors are more worried on the global issues.

Technically Speaking: Markets opened with a gap down of almost 280 points. Sensex started at 12694 levels today which was incidentally the intraday high and made a low of 12504. Volumes were decent at Rs. 4308 cr. Overall breadth was in favor of Decliners, where the Advance to Decliners ratio stood at 1:3. Sensex is now moving in a channel and 12470 levels becomes an important support for it. Breaking this would lead to levels of 12350 near the 200 DMA. However upsides will see resistance between 12970 - 13040 levels. This is 3rd gap down in last 1 month and may be tough to sustain. Sensex is just near the support and a bounce near term may be on cards. Do have a look at the technical chart on our website for BSE Sensex.

Emkay - Tanla Solutions

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SSKI Daily

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Sharekhan Valueline Hindi - March 2007

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Anand Rathi - Daily Fundamental Snippets

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Kotak - Engineering Sector

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Sensex crashes on global meltdown

Sub-prime mortgage sector woes triggering the heavy sell-off in US equities, suggesting a slowdown in the US economy and unwinding of the yen carry trades put pressure on Asian as well as domestic indices. The Sensex began the day deep in the red with a negative gap of 289 points at 12694 and remained range-bound with a negative bias throughout the session. The Sensex slipped further in the afternoon on unabated selling in banking, information technology and oil stocks to touch an intra-day low of 12504, down 479 points. The Sensex managed to pare some losses towards the close and ended the session with losses of 453 points or 3.49% at 12530. The Nifty shed 129 points and closed at 3641.

The breadth of the market was extremely negative. Of the 2,573 stocks traded on the BSE, 1,765 stocks declined, 748 stocks advanced and 60 stocks ended unchanged. All the sectoral indices came under sharp hammering and shed 2-4% each. Among the heavy losers, the BSE Bankex, the BSE Teck Index and the BSE IT Index dropped 3-4% each.

Except Bajaj Auto and Gujarat Ambuja Cement all the Sensex stocks closed weak. ICICI Bank plunged 5.43% at Rs830, Bharti Airtel slipped 4.72% at Rs729, Wipro dipped 4.58% at Rs555, Reliance Communications plummeted 4.36% at Rs398, Satyam Computers slumped 4.30% at Rs433, ITC lost 4.13% at Rs143, Infosys tumbled 4.11% at Rs2,019, BHEL fell 4.10% at Rs2,030, TCS shed 4.03% at Rs1,214 and Tata Motors was down 3.63% at Rs745. The other front-line stocks shed 2-3% each.

Banking stocks slipped sharply following weak global markets. Bank of India plunged 6% at Rs140, Oriental Bank shed 5.43% at Rs162, Allahabad Bank lost 3.69% at Rs72 and Indian Overseas Bank fell 3.53% at Rs94. UTI Bank, State Bank of India, Canara Bank, Bank of Baroda and HDFC Bank were down 2-3% each.

Over 77.63 lakh Idea Cellular shares changed hands on the BSE followed by Parsvanath Developers (43.37 lakh shares), ITC (32.80 lakh shares), India Cements (27.85 lakh shares) and Gujarat Ambuja Cement (27.67 lakh shares).

Parsvanath Developers registered a turnover of Rs129 crore on the BSE followed by Reliance Industries (Rs112 crore), Reliance Communications (Rs98 crore), ACC (Rs92 crore) and Infosys (Rs89 crore).

Fall wipes out even semblance of recovery

A fresh setback put paid to the recovery on the domestic bourses, that had just started coming into their own, drawing inspiration from the promise showed by global bourses. The trigger for today’s fall was a setback bourses around the globe suffered due to a deepening US mortgage lending crisis.

The 30-share BSE Sensex plunged 453.36 points (3.4%), to settle at 12,529.62. It was the Sensex's biggest daily point fall since 5 March 2007. On that day, the Sensex had lost 471 points due to weakness across the Asian markets.

The S&P CNX Nifty lost 129.45 points (3.4%), to settle at 3,641.10. The Nifty March 2007 futures settled at 3,591, a huge discount of 50.10 points compared to the spot Nifty closing 3,641.10

All the sectoral indices on BSE ended in the red. The biggest loser in percentage terms was the BSE banking sector index, the Bankex, which plunged 270.40 points (4.1%) and settled at 6,268.28. The BSE IT Index plunged 200.13 points (3.97%), to end at 4,836.38. The BSE Capital Goods Index lost 292.68 points (3.3%), to finish at 8,559.83.

The market-breadth was weak. Against 1,798 shares declining on BSE, 751 rose. Just 66 shares were unchanged. Losers outpaced gainers by a ratio of 2.39:1. The BSE Small-Cap Index lost 110.65 points (1.7%), to finish at 6,324.22. The BSE Mid-Cap Index shed 107.45 points (2%), to end at 5,246.38.

The BSE clocked a turnover of Rs 4284 crore compared to Tuesday’s Rs 4193 crore. The turnover on NSE’s futures & options segment rose to Rs 31977.51 crore from Tuesday’s Rs 27434.30 crore.

Domestic bourses had showed some sign of a tentative recovery from a steep fall in late February 2007-early March 2007. From 12,415.04 on 5 March 2007, the Sensex had risen 634.31 points (5.1%), to 13,049.35 by 8 March 2007. It had seen a bout of volatility over the next three days, moving between 12,885 and 12,983.

Deepening US mortgage lending crisis and an unexpected drop in February retail sales, excluding automobiles, rekindled concerns that had spooked US bourses on Tuesday (13 March 2007), which in turn sent Asian shares reeling and the domestic bourses were no exception. Key benchmark indices in Hong Kong, Japan, China, South Korea, Singapore and Taiwan were down between 1.4 - 3%.

The Dow Jones Industrial Average dropped 242.66 points, or 1.97%, to end at 12,075.96 on Tuesday. The Standard & Poor's 500 Index slid 28.65 points, or 2.04%, to 1,377.95. The Nasdaq Composite Index tumbled 51.72 points, or 2.15%, to 2,350.57.

Talking of domestic bourses, selling was conspicuous in IT shares. Wipro lost 4.6% to Rs 555, Infosys shed 4% to Rs 2017 and TCS lost 4.3% to Rs 1210. Bank shares edged lower. ICICI Bank plunged nearly 6% to Rs 825.60, State Bank of India lost 3.7% to Rs 944.10 and HDFC Bank lost 2.6% to Rs 934.

Telecom shares drifted lower. Reliance Communications dropped 4.7% to Rs 396.80, and Bharti Airtel shed nearly 5% to Rs 727.20.

Reliance Industries dropped 3.3% to Rs 1282. Reliance Industries (RIL) said on Monday it had made two new gas discoveries in blocks located off the East Coast. While one strike is in the Krishna-Godavari basin, the second find is located in the Mahanadi basin, off the Andhra coast.

ONGC lost 3% to Rs 782, even after the state-run firm said it had received Rs 864 crore as indemnity against an insurance claim seeking damage due to a fire at one of its platforms in July 2005.

Cement pivotals pared losses. Gujarat Ambuja Cements ended down 0.2% to Rs 102.65, off the session’s low of Rs 99.80. Volumes in the stock were substantial, at 27.6 lakh shares on BSE. ACC was down 0.9% to Rs 743.05, and off the session’s low of Rs 708. Cement shares have caved in after firms last week agreed not to raise prices of the key construction material for one year, to cooperate with the government’s efforts against inflation.

Bajaj Auto rose 0.4% to Rs 2529.90, off the session’s low of Rs 2451.05. A strong 1.4 lakh shares changed hands in the counter on BSE.

Maruti Udyog (MUL) was down 1.7% to Rs 790, off the session’s low of Rs 746.40. The government has initiated the process of divesting its residual 10.27% stake in (MUL).

ITC lost almost 4% to Rs 143.10, extending its recent fall on concern that the government may bring cigarettes under the Value Added Tax (VAT) net.

PSU power equipment major Bhel lost 4% to Rs 2030. A strong 1.3 lakh shares changed hands in the counter on BSE.

MindTree Consulting spurted in late trading. The stock was finished up nearly 5% to Rs 921.50. However, the stock came off sharply from an intra-day surge of as much as 14.3%, to Rs 1005. Volumes in the scrip were a huge 90.1 lakh shares on BSE. The stock of Mindtree Consulting has spurted on high volumes in the past three days. From Rs 651.80 on 9 March 2007, it has vaulted 41.3% in the past three trading sessions, to the current Rs 976.50.

A sell-off had gripped domestic bourses in late February-early March 2007 due to setback in global markets, and a disappointing Union Budget 2007-08 on 28 February 2007. A sharp fall of nearly 9% in Chinese stocks on 27 February 2007, had left global bourses badly shaken that time. The sharp fall had driven some investors to cut carry trades, where they borrow cheaply in Japan and invest in countries with higher yields.

A disillusioning Union Budget was another reason why the market fell post Budget. While there was no across-the-board cut in the 10% corporate surcharge as expected, the dividend distribution tax was raised to 15% from 12.5%. The Budget also raised direct/indirect taxes for cement, construction and IT sectors.

The Sensex is off 14.4% from its all-time closing high of 14,652.09 of 8 February 2007. It had declined 9.1% in calendar 2007 thus far.

The next trigger for the domestic bourses may come from global bourses. The US Federal Reserve will meet on 20-21 March 2007 to decide US interest rates. The latest US jobs data helped ease expectations of a possible rate cut by the Fed.

US Sneezes again, Will India catch cold?

Our feeling is initially yes, may recover later.

Traders: Follow strict stop losses else this market will chop you.

Investors: Watch for bargains. Especially early in the morning. If cut deepens, stop buying - you will get better bargains

Have a fun day. More Updates in the evening.

If you have reports that you don't see here, please send them over at dpstock @ gmail.com

Finally, DON'T watch CNBC & Marc Faber.

If you happen to meet Marc Faber, punch him HARD on the face, I will pay for the medication of your hand.

Citigroup - India Investor Conference - March 13 - Day 1

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Motilal Oswal - MOST Momentum

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Citigroup - India Tech Daily - March 14

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Indiabulls - Geodesic, ITC, Sesa Goa

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