HDFC Sec: Subscribe to ICRA IPO

HDFC Secutiries Retail Research, in a research report released on March 15, has asked investors to apply for listing gains.

The report said: "At a price band of Rs 275– 330, the stock is offered at 15.2x–18.2x FY07 fully diluted EPS. Given the steady economic growth, visibility in revenues on account of consolidation and widening of services, one could see continued growth in topline and bottomline of the company.


"The new segments like the information technology services and outsourcing services could bring in large contracts from the IT sector thus giving a thrust to margins going forward apart from diversifying revenue streams. Any move in future by Moody’s to hike its stake in the company from the current 28.1% (Post issue) could be a further trigger.


"Selling shareholders of ICRA are offering shares at 15.2x – 18.2x FY07 EPS (Post issue). This is cheap compared to the valuation at which its large competitor, CRISIL, quotes. Although CRISIL is much larger in terms of size/services offered and S&P holds 55% of CRISIL’s equity, the IPO of ICRA offers scope for gains due to expected narrowing of the valuation difference unless the valuation of CRISIL itself falls dramatically by the time ICRA’s shares are listed. One could apply in this issue for listing gains."

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Punj Lloyd arm to set up world’s largest ethanol unit

Simon Carves Ltd, a subsidiary of Punj Lloyd Ltd, a global energy and infrastructure EPC services provider, will design and construct the world’s largest wheat-based bio-ethanol production facility.

The plant, being constructed for The Ensus Group, will also be the first global scale facility to be built in the UK. It will mark a major step in meeting the EU bio-fuel obligations. Full production is likely to commence by early 2009, with the construction work starting in the second quarter of this year, a company statement said. The plant is likely to have an initial capacity of 400 million litres.

The facility will be built at the Wilton International site in Teesside, an integrated petrochemical complex in Northeast England.

This prestigious contract with Ensus comes close on heels of Simon Carves’ recent LOI to build 300 ktpa LDPE plant in Saudi Arabia.

Ensus Ltd is owned by global private equity firm The Carlyle Group and energy-focused Riverstone Holdings The investment is the first of a series of global scale facilities planned for construction by Ensus throughout Europe.

The production of bio-ethanol from the plant will contribute significantly to EU’s strategy to scale back dependency on fossil fuels and reduce greenhouse gas emissions. The EU council of ministers recently endorsed a 10% binding minimum target for the share of bio-fuels in the grouping’s overall transport fuels by 2020 to be achieved by member states.

Weekly Ideas - Indiainfoline

BUY Sun Pharma (1012)
SL 985 T 1060, 1067

BUY India Cements (158)
SL 150 T 169, 172

BUY NDTV (287)
SL 279 T 304, 309

BUY BEML (1042)
SL 1015 T 1087, 1093

BUY Ranbaxy (316)
SL 308 T 330, 334

DOMESTIC NEWS & GLOBAL NEWS

Nandigram violence sets WB on fire
West Bengal is burning, literally. The 12-hour bandh called by Trinamool Congress and other opposition parties in protest against March 14's police firing at Nandigram has thrown normal life completely out of gear in the state. All three transport services - rail, road and air - were disrupted badly. As a precautionary measure, the West Bengal Higher Secondary Board exams for Class XII, which were to start on March 16, were postponed to Monday. Nearly 4 lakh students were hit by the move. The ICSE exams for Class X and ISC exams for Class XII were also postponed but no fresh dates were announced. This affected over 30,000 students in the state. The bandh was in protest against the police firing at Nandigram that left 15 people dead and several others injured. The Trinamool Congress, Congress and SUCI called a 12-hour strike from 6:00 am, while the BJP called a 24-hour bandh. Angry mob set several state-owned buses on fire. The protestors also set CPM and CITU offices on fire in Ranihati of Howrah district. A mob was lathi-charged outside Bhawanipur police station. There were also reports of clashes between police and protestors in different parts of Kolkata. The Congress and Trinamool Congress also decided to boycott the presentation of the West Bengal budget by the state Finance Minister in the Assembly. The emergency Left Front meeting that was called on March 15 ended inconclusively and another meeting has now been called on March 17.

RIL to team up with Dow

Shares of Dow Chemical got a boost on a report that it was close to signing a joint venture agreement with Reliance Industries Ltd. A leading financial daily stated that an announcement from Dow and Reliance Industries could come by the end of the week. There also has been speculation of late that the company could be a takeover target. On Feb. 26, Dow's shares hit a new 52-week high after the Daily Express, a British tabloid, reported that the company may be on the verge of selling itself to a group of private equity investors for US$54bn. Reliance Industries, which has been talking to Dow Chemicals has inched closer to signing an MoU with the US company, The Economic Times stated in its March 16 edition. The paper added that Reliance Industries chairman Mukesh Ambani, along with top officials, including Nikhil Meswani, Kamal P Nanavaty, Alok Agarwal and Haresh Shah, was scheduled to meet Dow CEO Andrew N Liveris for the final round of negotiations. However, Reliance Industries official spokesperson denied the news. Dow Chemical’s media relations leader Andrew Wood said it was Dow’s policy not to comment on rumours.

Banking Regulation Bill passed

A bill seeking to give greater powers to the Reserve Bank of India (RBI) in managing monetary policy was cleared in the Lok Sabha. Finance Minister P. Chidambaram introduced the legislation in the Lok Sabha and it was approved by a voice vote. The Banking Regulation (Amendment) Bill, 2007 would replace an ordinance promulgated in January. It seeks to amend Section 24 of the Banking Regulation Act, 1949 and allows the RBI to fix the Statutory Liquidity Ratio (SLR) without a floor limit. At present banks are required to invest a minimum of 25% of their deposits in government securities, as dictated by SLR. A possible reduction in SLR would enable banks to sell government bonds and free up cash for lending to companies and consumers. The overall ceiling of 40% for SLR would remain.

Areva trumps Suzlon bid for REpower

The bidding battle between French energy major Areva SA and India's Suzlon Energy Ltd. for German wind-turbine maker REpower Systems AG escalated. Areva hiked its offer for REpower, from €105 per share to €140. The new bid by Areva is about 11% higher than Suzlon's offer of €126 per share of REpower and values the German firm at €1.14bn. Areva is bidding for an additional 30% equity stake in REpower. It already owns 29% in REPower and is the single largest shareholder. The new Areva offer closes on April 20. Incidentally, Suzlon's offer (in partnership with Martifer) also ends on the same day. Martifer, a unit of Mota Engil SGPS, is the second largest shareholder in REpower with a 25% stake. Suzlon said that it will take a decision on a higher offer after examining the Areva bid. Reports said the Tulsi Tanti-promoted company was in talks with its merchant bankers and may announce an offer close to €160 per share.

Vodafone reaches deal with Essar

Vodafone Group Plc and the Essar Group reached an agreement on their new partnership following the British cellular major's acquisition of a majority stake in Hutchison Essar. As per the new shareholders' agreement between the two partners, Vodafone gets control over the day-to-day operation of Hutch Essar, India's fourth-largest wireless telecom operator based in Mumbai. Essar would continue to hold its present 33% stake in Hutch Essar, which would be renamed Vodafone Essar. In the meantime, the JV will market its products and services under the Vodafone brand. The Essar Group has the option to sell its entire stake to Vodafone for US$5bn between third and fourth year of operation. In addition, it can sell shares worth between US$1bn and US$5bn to Vodafone at an independently-appraised fair value. Vodafone CEO Arun Sarin was named vice chairman while Essar Group Vice Chairman Ravi Ruia would become the Chairman of Vodafone Essar. The reconstituted Board of the JV will have 12 members. Vodafone will have seven members, including existing CEO Asim Ghosh and Max India Chairman Analjit Singh. Essar would have four members on the JV's Board in addition to Ravi Ruia. Separately, HTIL said it will pay Essar as much as US$415mn for cooperation in the sale of its 67% stake to Vodafone. Hong Kong-based HTIL will pay Essar US$373.5mn on completion of the US$11.1bn sale in Hutch Essar, and a further US$41.5mn in two years. HTIL expects to complete the sale of its Hutch Essar stake to Vodafone during the second quarter.

Ranbaxy shortlisted for Merck's generic biz

Ranbaxy Laboratories Ltd. was short-listed for acquiring the generic pharmaceutical business of Germany's Merck KGaA. Cipla, which also submitted a bid in partnership with a consortium of private equity firms, was not selected. Others in the fray include the likes of Israel's Teva Pharma, Iceland's Actavis and US-based Mylan Labs, said a financial daily. Germany's third-largest generic drug firm Stada and Barr Pharma had also bid, but have not been selected by Merck's merchant bankers, it added. Meanwhile, Novartis' generic subsidiary Sandoz did not submit a bid. India's Dr. Reddy's also stayed away from the auction citing high valuations and improper timing as the main reasons. Merck's generic unit has been valued at US$5bn by merchant bankers. Merck has decided to sell its generic business to concentrate on its core business. The Merck unit had US$2.6bn in sales in 2006 and accounted for about 30% of the company's total revenue. It employs about 5,000 people worldwide.

Maruti hikes prices across models

Maruti Udyog Ltd. announced that it was revising car prices effective immediately following the increased education cess announced in the Union Budget 2007-08. The increase ranges, between Rs258 and Rs1017 (Ex-showroom Delhi) and is effective across all models and cities. While the higher education cess came into effect from March 1, the company decided to maintain its ex-showroom prices at pre-budget levels for a fortnight, Maruti said. This was keeping in mind customers who had postponed their purchases in anticipation of certain tax concessions in the Budget, it added. Hyundai Motor India Ltd. (HMIL) increased prices of all its car models in range of Rs 362 to Rs 2,816 on account of the increased cess announced in this year's budget.

Havell's sets pace on deal street

Havell's India Ltd. announced that its Dutch subsidiary Havell's Netherlands BV had signed an agreement with SLI Holdings Inc., to acquire SLI Sylvania's lighting business for US$300mn (Rs13.26bn). The acquisition is expected to be financed with non-recourse debt facilities of US$160mn and recourse facilities of US$105mn by way of loans / equity through Havell's subsidiaries (Recourse Borrowers) guaranteed by the company. Havell's recently raised around US$150mn (Rs6.75bn) through an overseas issue, and had raised its borrowing limit to Rs25bn.

Khazanah Nasional Berhad, the investment arm of the Malaysian Government, bought a 8.97% stake in Infrastructure Development Finance Co. Ltd. (IDFC) for Rs8.48bn. In a block deal done on the NSE, Sipadan Investments, part of Khazanah, bought about 10.09 crore IDFC shares at Rs 84 apiece from UBS Securities, which sold the shares on behalf of Mauritius-based Swiss Finance Corp.

Geojit Financial Services Ltd. announced that BNP Paribas SA had picked up a 27.18% stake in the company through a preferential allotment of shares and warrants. The share of BNP Paribas will increase up to a minimum of 34.35% in the coming few weeks. Geojit said it issued 56.8mn shares to BNP Paribas at Rs26 apiece. It also issued 22.8mn warrants to the French bank. The warrants are convertible into equity shares at the same price. Post conversion of warrants, BNP Paribas' stake in Geojit will be 34.35%. BNP Paribas became the largest shareholder of Geojit. The name of the Kochi-based company will change to "Geojit BNP Paribas Financial Services Ltd."

Cadila Healthcare Ltd. announced that it had acquired Mumbai-based Live Healthcare, a mid-sized pharma company with a dermatology-focused product portfolio. Cadila acquired 97.5% stake in the privately-held Live Healthcare. The all cash transaction will be funded through cash accruals and debt. With this strategic acquisition, the company establishes its presence in the Rs15bn dermatology segment, which is the 7th largest therapeutic segment in India, Cadila said.

Rain Commodities sues Great Lakes Carbon

Rain Commodities Inc., the 100% subsidiary of Rain Commodities Ltd., sued Great Lakes Carbon Income Fund for accepting a higher offer from Oxbow Carbon & Minerals Holdings Inc. Great Lakes Carbon said on March 14 that Rain Commodities was seeking to overturn the finding by the trust's board that the Oxbow bid was a superior proposal. On March 12, Oxbow raised its offer to C$13.50 per unit, a day after Rain Commodities boosted its bid to C$13.25 per unit. Rain Commodities has until March 20 to match the Oxbow bid. Oxbow's offer values Great Lakes Carbon at C$657mn, more than Rain Commodities' first offer of C$437mn made public on Feb. 5. The decision on the case is scheduled at a Toronto Superior Court of Justice on March 19. Rain Commodities shares lost 2.75% on the week at Rs115.10.

ICRA fixes IPO price band of Rs275-330

ICRA, a leading provider of investment information and credit rating services in India, is entering capital market with an IPO of 25.81 lakh shares. ICRA has set a price band of Rs275-330 per share for the public issue. The equity shares are proposed to be listed on the NSE and the BSE. About 26% of ICRA is being sold by current shareholders, and significant portion of it would be from IFCI. The state-run term lender will be selling around 18.6 lakh shares.

The Adani Group promoted Mundra Port and Special Economic Zone Ltd. is planning an IPO of equity shares. The company has already filed the Draft Red Herring Prospectus (DRHP) with capital market regulator SEBI for the same. Media reports said Mundra Port plans to raise around Rs18bn (over US$400mn) through the public issue in order to fund the construction and development of the basic infrastructure for the proposed SEZ at Mundra, Gujarat. The IPO proceeds would be used for setting up cargo terminals besides other logistics facilities. The IPO is expected to hit the capital market between last week of May and first week of June. The issue, based on a 100% book-building process, would constitute 10.01% of the fully diluted post-issue paid-up capital of Mundra Port.

Orbit Corporation Ltd. real estate company, is entering the capital markets with an IPO of 9,100,000 shares of Rs10 each for cash between a price band of Rs108 and Rs117 per share along with one detachable warrant per share. The issue opens on March 20 and closes for subscription on March 23. The shares of the company are proposed to be listed on the BSE and the NSE.

Page, Raj TV down on debut

Shares of Page Industries Ltd. tumbled on March 16 as the exclusive licensee of Jockey International Inc. in India, Sri Lanka, Nepal, Bangladesh and Maldives, got listed on the Indian bourses. The stock opened at Rs341.90 on BSE compared to the issue price of Rs360. It touched a low of Rs272 and closed the maiden trading day and the week at Rs282.10 with traded volume of 5.1mn shares. Page Industries came out with an IPO of 2,804,000 shares of Rs10 each. The issue was subscribed 1.44 times.

Shares of Raj Television Network Ltd. slumped on its stock market debut on March 16 as investors, rattled by the recent crash in the market, continued to punish new entrants with relatively weak fundamentals. The regional broadcaster's stock opened at Rs275 on BSE as against the issue price of Rs257. However, shortly after the higher opening, the counter faced selling pressure. The stock declined to a low of Rs207 and finished its first trading day at Rs225.95 with 9.48mn shares changing hands. Raj Television entered the capital market with an IPO of 35,68,250 equity shares of Rs10 each. The issue was subscribed just three times.

Japanese economy accelerates

Japan's economy grew at the fastest pace in three yeas in the last quarter of 2006, the Government said. Solid growth in exports prompted companies to step up investments even as consumer spending remained lackluster. The Cabinet Office said that October-December quarter GDP grew by 1.3% from the previous quarter, bigger than the preliminary estimate of a 1.2% growth, or by an annualized 5.5% against the initial estimate of 4.8%. The pace of growth was the fastest since the October-December quarter of 2003, when real GDP grew by 1.5% sequentially or an annualized rate of 6.3%. In the quarter ended September 2006, Japan's GDP had grown by 0.1% quarter-on-quarter or at annualized rate of 0.5%. Deflationary pressure continued to ease. The GDP deflator, which measures the degree of deflation, was down by 0.5% year-on-year in the October-December quarter, the smallest fall since the fourth quarter 2004, when the deflator registered a drop of 0.3%. But economists believe that the solid growth in the October- December quarter is not likely to give the Bank of Japan any further leeway in considering another rate increase. Last month, the central bank hiked its benchmark overnight call rate by 25 basis points to 0.5%. Bank of Japan Governor Toshihiko Fukui has said that the central bank needs to gradually raise borrowing costs as the economy expands and prices rise.

China pledges slew of financial reforms

China will pursue gradual reform in the foreign exchange market this year and was aiming to keep the currency basically stable, the People's Bank of China said. The central bank also said that while it was willing to accelerate financial reforms it needed more time to reduce its trade surplus. China will strengthen controls on the money supply and maintain a stable monetary policy in 2007, the People's Bank of China said in a statement. China may introduce over-the-counter yuan derivatives and interbank yuan futures, the central bank said, adding that it would use open market operations and changes in banks' required reserves besides other tools to manage liquidity. It would also ease pressure on money supply by adjusting its own lending and discounting policies. The central bank said it would keep credit in check by guiding commercial banks concerning the sectors that they should lend to. The People's Bank of China added that it would earnestly apply policies to keep the country's property sector sound and healthy. The Chinese central bank said it would improve management of its foreign exchange reserves, without giving details. Meanwhile, Prime Minister Jiabao said that China's economic expansion was unstable and environmentally unsustainable. "China's investment growth is too high, lending growth too fast, liquidity excessive and trade and international payments very imbalanced, he said at a press conference in Beijing on March 16. Energy efficiency and environmental protection issues haven't been properly resolved, Jiabao said.

Consumer prices up 0.4% in Feb

US consumer prices rose 0.4% last month, paced by gains in fuel, food and medical care, underlining the Federal Reserve's concerns over inflation in the world's largest economy. The increase in the CPI followed a 0.2% January rise, the Labor Department said. Core prices, which exclude food and energy, rose 0.2% and were 2.7% higher than a year earlier. Combined with last month's jump in wholesale prices, the data make it tougher for the Fed to slash rates should the mortgage crisis snowball into a larger problem. Fed policy makers are forecast to leave their benchmark interest rate unchanged for a sixth time when they meet next week. Economists had forecast that CPI would rise 0.3%. Estimates ranged from increases of 0.1% to 0.5%. Core prices were projected to rise 0.2%. Overall prices were up 2.4% from the same time last year, compared with a 2.1% gain in January. The January year-over-year increase in core prices was also 2.7%. The CPI is the government's broadest gauge of costs because it includes goods and services. Other inflation reports this week showed wholesale prices jumped 1.3% in February, the most in three months, while prices of US imports rose less than forecast.

OPEC keeps output targets unchanged

The Organization of Petroleum Exporting Countries (OPEC) agreed to leave its targets for production unchanged, after pledging last year to lower crude supply by 1.7mn barrels a day to keep stockpiles from growing and prices from falling. The cartel, which pumps about 40% of the world's oil, raised its forecast for this year's oil demand by about 130,000 barrels a day to an average 85.5mn barrels a day, up from the previous estimate. Meanwhile, crude oil rose on expectations that demand for fuel will grow as the summer driving season approaches in the US, the world's largest energy consumer. Crude oil for April delivery rose as much as 25 cents to US$57.80 a barrel in after-hours electronic trading on the New York Mercantile Exchange and traded at US$57.69 at 11:54 a.m. in London. Brent crude oil for May settlement fell 8 cents to US$60.60 a barrel in electronic trading on the ICE Futures exchange in London.

Arcelor Mittal eyeing Posco: report

The Korea Economic Daily reported that Arcelor Mittal could be interested in making a hostile takeover of South Korean steel maker POSCO. The paper reported that a senior Arcelor Mittal executive expressed interest in POSCO's M&A strategy when he visited Seoul last month to meet POSCO chief executive Lee Ku-taek. "That means that Arcelor Mittal has put POSCO on its M&A target list," the POSCO executive told the newspaper. However, POSCO denied the newspaper report. Roland Junck, a member of Arcelor Mittal's management board, met POSCO Ku-taek last month, but M&A issues were not discussed, POSCO said at the time. "There was no discussion on issues related to M&A when the Mittal executive met POSCO CEO last month," an official from the world's third-largest steelmaker reiterated.

Ghosn gives up US ops after Nissan cuts forecast

Nissan Motor CEO Carlos Ghosn will give up oversight of North American operations after Japan's third-largest carmaker missed its profit forecast for the first time in seven years. Ghosn, who heads both Nissan and Renault, will hand over responsibility for operations in the Americas to Executive Vice President Hiroto Saikawa, who is also in charge of purchasing, the carmaker said in a statement. Handing over day-to-day control of North American operations will give Ghosn more time to focus on a plan to be announced next month that will tackle what he's called a crisis. Nissan cut its earnings forecast for the current year in February due to weaker-than-expected sales in the US and Japan. The company also plans to cut production at two of its factories in Japan from April 2 until the end of June because of weaker domestic demand. Nissan's COO Toshiyuki Shiga will focus on Japan and shift responsibility for general overseas markets to Senior Vice President Colin Dodge. From April, Ghosn will directly oversee the company's treasury, which had been overseen by Shiga. Ghosn will continue to spend half of his time at Nissan and the other half at Renault, Nissan said.

Citigroup ups takeover offer for Nikko Cordial

Citigroup Inc., the largest bank in the US, raised its takeover offer for scandal-tainted Nikko Cordial by 26% in a deal worth up to US$13.35bn after the Japanese brokerage's largest shareholders rejected the initial price as too low. The boards of the two companies agreed to raise the tender offer price for Nikko Cordial to 1,700 yen (US$14.40) a share from last week's initial 1,350 yen (US$11.44) a share offer. It would be the biggest foreign acquisition of a Japanese securities company. Citigroup aims to raise its stake to up to 100% from the 4.9% it held at the end of December 2006 in an acquisition that is expected to cost the US financial group US $13.35bn. Citigroup said it will begin an all-cash tender offer for Nikko Cordial stock "as soon as practicable." Citigroup also raised the offer price after the Tokyo Stock Exchange announced that it would keep Nikko Cordial's shares listed despite an accounting scandal last year. The Japanese brokerage was fined 500mn yen (US$4.3mn) on charges of falsifying financial statements, the largest fine ever levied by Japan's financial authorities.

INVESTMENT STRATEGY

Bulls seek positive triggers

Despite over 15% fall from the all time highs, the market is struggling to gather some momentum, as investors are still reluctant to resume their shopping spree. Valuations are still quite high compared to other emerging markets. FIIs continue to be net sellers. Mutual Funds too are sitting tight. Retail investors are the worst hit among all category of investors. The mood of the market can be gauged from the fact that new listings are getting hammered unless it is a fundamentally strong company like MindTree or an Idea Cellular. Companies are finding it tough to get the IPOs subscribed. The undertone remains fairly weak and the trend will take time to turn around. Globally, many key economies such as US, Japan and China are facing some sticky issues. Liquidity too has dried up considerably. Emerging markets are witnessing heavy outflows. Risk appetite, which had soared in the last 2-3 years, has suddenly nose dived. There is more bad news in the air than good news. Investors are so rattled that no good news is good enough to revive the sentiment. Next week too doesn't look rosy. The market direction will continue to hinge on global trends, liquidity flows and inflation numbers. There are more chances of the market falling than rising. Even if the bulls do manage to rally for a day or two, its highly doubtful whether they can keep up the momentum for a long time. Talks of a downturn in the US housing market, concerns over the overheated Chinese economy and upcoming policy meetings of Bank of Japan and the Federal Reserve will keep the bulls on tenterhooks. We are in for yet another choppy week. Investors should tread cautiously and lock-in some profits at every rise.

MARKET MOOD

Fifth straight weekly loss

It's easier to run
Replacing this pain with something numb
It's so much easier to go
Than face all this pain here all alone

It seems the bulls have nowhere to run as losses keep mounting. Every week there is more bad news either from the domestic market or from abroad. Sometimes it is the Chinese market crash, while sometimes its the unwinding of the yen carry trades. This week, the big worry across global markets was the rising delinquencies in the fragile US housing market. Locally too, the lingering worries continue over rising inflation and the possibility of further monetary tightening by the RBI. The pain keeps getting heightened with the key indices recording their fifth consecutive weekly drop. This week, selling was seen in Cement, Banking, Capital Goods, FMCG and IT stocks. The BSE 30-share Sensex lost 454 points or 3.53% during the week to close at 12430 and the NSE Nifty fell by 109 point or 2.94% to end at 3608. BHEL, SBI, HDFC Bank, ACC and ITC were among the major losers.

Capital Goods stocks declined with the BSE Capital Goods index down over 3%. BHEL slumped over 6.5% to Rs1955, L&T was down by 2.2% to Rs1448, Siemens slipped 2.6% to Rs1011 and ABB edged lower by 0.7% to Rs3463. Selling was also seen in Auto stocks. Hero Honda slipped .5% to Rs652, Maruti was down 1% to Rs779 despite announcing across the board price hike. Tata Motors declined 0.9% to Rs749 and Ashok Leyland lost 2.6% to Rs39.

Banking stocks fell following the disappointing advance tax figures of SBI. Also, concerns of another rate hike also weighed on the lenders. HDFC Bank fell by over 7.5% to Rs904. The scrip was the top loser in the Sensex. SBI declined by over 7% to Rs914 and ICICI Bank lost 5.6% to Rs810. Bank of India, PNB and Canara Bank were the major losers in the Mid-Cap space.

FMCG stocks continued their slide with blue chips leading the down fall. Cigarette major ITC plunged by over 6% to Rs145 amid fears that an impending VAT on tobacco products will hurt its topline and bottomline going forward. HLL declined 3.6% to Rs176, Colgate slipped 1.3% to Rs301 and Dabur slumped over 7% to Rs84.

Cement stocks continued to get pounded after producers last week decided to hold prices for a year. ACC fell by over 7.5% to Rs721, Gujarat Ambuja was down by over 5.5% to Rs103, Grasim also declined 3% to Rs2013. Mangalam Cement, Birla Corp and Prism Cement were the major losers among the Mid-Cap stocks.

TOP STORIES

US housing market in disarray

Increasing number of US consumers are finding it tough to meet their mortgage payments, leading to worries about more loan defaults and sending financial markets across the world into a tailspin. Leading the pack of non-performing loans is the so-called subprime mortgages given to people with weak credit history, says a survey released by the Mortgage Bankers Association (MBA). The proportion of all outstanding loans in the initial stages of foreclosure was at the highest in the 37-year history in the fourth quarter, says the MBA report. The share of mortgaged homes at the start of the foreclosure process rose to a seasonally adjusted 0.54% last quarter, topping the previous record of 0.50% touched in the second quarter of 2002, when the economy was recovering from recession. The delinquency rate for one-to-four-family houses rose to 4.95% of all loans outstanding compared with 4.67% during the third quarter and 4.70% a year earlier.

"Although the US economy and job market remain solid, the housing market continued to decelerate in the fourth quarter of 2006. Nationally, house prices increased at a slower rate and the pace of sales and construction activity continued to slow," says Doug Duncan, chief economist of the MBA.

Meanwhile, Accredited Home Lenders Holding, a US subprime mortgage lender, agreed to sell US$2.7bn of loans to pay bankers who demanded cash to cover the risk of defaults. The loans will be sold at a substantial discount to alleviate pressure from margin calls, leading to a pretax charge of US$150mn, the San Diego, California-based company said in a statement. Accredited didn't identify the buyer. At least 20 so-called subprime lenders have closed in the US and more are fighting for survival after a surge in defaults by customers. Accredited shares have lost 66% of their value this year. Former Federal Reserve Chairman Alan Greenspan said this week that he expected the fallout from the mortgage crisis to spread to other parts of the US economy, especially if home prices decline.

Shares of US mortgage companies rose on March 15 after Blackstone agreed to buy PHH Corp.'s home-lending business and Bear Stearns said it may buy more subprime loans. Countrywide Financial, the biggest US mortgage lender, gained 3.1%, Accredited added 56% and New Century Financial more than doubled. Accredited shares rose 5.9% in German trading on March 16. Shares of mortgage companies have plunged by a rise in late payments and lack of demand from investors who buy home loans. More than two dozen lenders have shut down or sought buyers since the start of 2006 as defaults in US subprime markets have grown.

Inflation up; so is industrial output, core growth

The Government is unlikely to have any relief anytime soon as far as prices are concerned. Inflation, based on the Wholesale Price Index (WPI), climbed further to 6.46% in the week ended March 3, due to higher edible oil and naphtha prices. Cement, fruits and vegetables also turned costlier. Inflation was at 6.1% in the previous week. The figure was higher than the consensus forecast of 6.31% and much higher than the annual inflation rate of 3.86% during the comparable period of the previous year. The Congress-led UPA regime has been under pressure ever since the WPI-based inflation has crossed the 5% mark. It has taken several measures along with the Reserve Bank of India (RBI) to contain spiraling prices of essential goods. Inflation hit a two-year peak of 6.73% in the week ended Feb. 4. The cut in petrol and diesel prices last month helped soften the blow a little bit. Inflation declined to 6.05% for the week ended Feb. 17. However, it spiked again to 6.1% in the last week of February.

India's industrial output grew by 10.9% in January as against 8.5% in the same month a year earlier, the Government said. However, the latest reading on the Index of Industrial Production (IIP) was lower than the upwardly revised 12.5% growth in December. The manufacturing sector expanded by 11.6% in January versus 9.4% in the year-ago period. Mining output grew by 6% in January this year compared to just 2% in the same month last year. The electricity sector logged a growth of 8.5% in the month as against 6.4% in the year-ago period. In the first 10 months of the current fiscal year (April-January 2006-07), industrial output grew by 11% compared to 8% in the corresponding period of the previous financial year, the Government said. Meanwhile, the infrastructure sector output grew by 8.7% in January as against 8.2% in the same month a year earlier, and marginally higher than a revised 8.5% in December, the Government said. During April-January 2006-07, the infrastructure growth was 8.4% as against 5.8% in the corresponding period of the last fiscal year.

KRC INVESTMENT IDEAS: PARSVANTH, HLL & APAR INDUSTRIES

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Sharekhan Investor's Eye dated March 16, 2007

Mahindra & Mahindra
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,050
Current market price: Rs731

Acquisition marginally earnings accretive

Key points

• As mentioned in our earlier note dated March 9, 2007, M&M had won the bid to acquire a 43.5% stake in Punjab Tractors at Rs360 a share in an all-cash deal. Private equity fund Actis and the Burman family are selling their respective stakes of 29% and 14.5% in Punjab Tractors.
• M&M's management expects a number of strategic benefits and synergies from the acquisition. Several benefits are expected to come from the brand Swaraj, a well-respected brand that enjoys a good brand loyalty, particularly in the northern states like Punjab, Haryana, Uttar Pradesh and Bihar. M&M is particularly strong in the central, western and southern regions. The acquisition of Punjab Tractors would further increase its presence in the north Indian market.
• The acquisition would make M&M an undisputed leader in the tractor segment, with an overall market share of about 40%. It would help it consolidate its presence in the 31-40 horsepower (hp) category and help it to acquire a dominant status in the >51hp category. This would be a huge positive as a strong growth is expected in the higher-end tractor segment.
• We believe that the acquisition would have a marginal impact on M&M's earnings for FY2008. The management has indicated that it will use a mix of internal resources and debt to fund the acquisition. At present the management has surplus funds of up to Rs800 crore, and its debt equity ratio currently stands at 0.43:1. We expect that about 40-50% of the acquisition cost would be financed through debt. Considering this, our calculations suggest that the deal would be marginally earnings accretive for M&M for FY2008. However, we believe that the deal is a good strategic move by M&M, which would yield substantial long-term benefits for M&M.
• At the current levels, M&M trades at 11x its FY2008E consolidated earnings. We maintain our Buy recommendation on the stock with a price target of Rs1,050.

Sun Pharmaceutical Industries
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs1,341
Current market price: Rs1,012

R&D pipeline adds sheen

Key points

• Sun Pharma Industries has de-merged its innovative research division into a separate company called Sun Pharma Advanced Research Company (SPARC) Ltd.
• As anticipated Sun Pharma has unfolded the innovative research pipeline for SPARC Ltd, which comprises of 4 new chemical entities (NCE) and 4 novel drug delivery systems (NDDS). The lead molecule—SUN 1334H—that targets anti-allergic disorders is undergoing Phase-II clinical studies in the USA and is likely to enter Phase-III trials in 2008.
• On the NDDS technology front, Sun is working on four platforms including controlled release system (which covers gastro retentive innovative device and WRAP matrix system), dry powder inhalers (DPI), targeted delivery by Nanoemulsion and biodegradable injections/implants.
• Sun Pharma's NCE research is analogue-based which means that the research is for creating newer drugs by modifying the existing ones. Hence, the risks of uncertainty about the molecules are minimal.
• The de-merger would positively affect Sun Pharma Industries, as Sun Pharma currently spends 35-40% of its research and development (R&D) expenses for innovative research, which will be saved on the de-merger. On the other hand, the NDDS technologies developed by SPARC would help Sun Pharma to launch new NDDS products in various markets where it has a presence.
• For lack of information, we are maintaining our earlier estimate for SPARC at Rs54 per share. And as per our earlier estimate, the base business is valued at Rs1,287 per share. Hence, our target value for Sun Pharma remains at Rs1,341 per share.

---

SECTOR UPDATE

Pharmaceuticals

Strong competition to limit gains from Zolpidem
Ranbaxy Laboratories has received a tentative approval from the US Food and Drug Administration (US FDA) to manufacture and market Zolpidem Tartrate tablets, of 5mg and 10mg strength.

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Flavour of Equities : 16th Mar '07

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FII: + Rs 18 cr, MF - Rs 206 cr..

FII Gross purchases Rs 1979 Cr, Gross Sellers 1960 Cr, Net buyers Rs 19 Cr.
MF Gross Purchases Rs 283 Cr Gross Sellers Rs 489 Cr Net Sellers Rs 206 Cr


Our View:

The FII numbers are not large negatives and thats some consolation for the markets. The MFs seem to be on a selling spree and thats a worry.

Weekly Close: A world cup Holiday for the Bulls !

Market continued its slide this week and this was the 5 consecutive weeks of losses. Global selloff in US and the economic events triggered off worries across markets. Indian markets have been said to be fundamentally strong liquidity seepage led market to pare the gains further. Subprime mortgage lending default and yen carry trade unwinding were the spotlights and jargon learnt by Indian Investors this week. US markets was hit by delinquencies in the housing mortgage market and markets were hit badly. There is growing concern that tightening lending standards might further slow the housing market and the economy. It is the fiscal year end outflow of liquidity in terms of advance tax and corporates withdrawing cash from Mutual Funds was seen which added fuel to fire. Indian Markets were bogged by all these factors. All positives from Industrial production data were forgotten and so also the strong GDP growth numbers which came in. Its just that India is an emerging economy and hence seen as higher risk in the face of shrinking risk appetite. Technical supports were indicated near 12 12350 - 12400 which is also is the 200 Day Moving average and these levels were tested at the end of the week.

Sensex pared 3.7% for the week. Cement showed no sign of concreting. ACC lost 8%, GACL 6%. Other losers were the HDFC -7.7%, BHEL -6.4%, ITC -7%, Rcom -11% ICICI -6% and SBI -7.12.

The advance tax numbers were out. SBI numbers seem to be quite poor but thats because last year they had windfall gains from the Resurgent India bonds though this year too on apples to apples the number does not appear to be exciting. Century advance tax numbers were bad on the face of it but this we believe is because of the VRS payments, to clear the Mumbai factory to make way for land, which masks the profit growth they have had. All in all Cement stocks have had bumper year and that should continue. The agreement with the Government does not seem to be as negative for the cement manufacturers as was made out to be. However this reflects the past year and also indicates that profits to be reported will be good.. However Markets are more worried about Inflation. This number was reported today and at 6.46% it triggered a selloff. Next two weeks will be tough too for inflation but that will set up an opportunity.

Cement stocks were on the wrong end of the stick since the budget and then the price cap. Rationally thinking, the cement manufacturers have agreed to prices which are quite remunerative and that should show super profits for them in the quarters ahead. Secondly this arrangement of the manufacturers and that should stand even when the capacities come in. This sounds logical. Also beneficiaries will be the companies who sell at a discount to the big brands of Ambuja ACC and Ultratech as they would be able to sell higher at the agreed to prices. Valuations have come off significantly. We believe there could be value buying here. South is where prices are expected to remain strong. But more to add is that, in an informal discussion with one of the cement manufacturers we came across the fact that, the Price cap which was agreed to with the Government gives a leeway of further increase in prices. The prices in essence have been fixed at MRP of Rs 270. Cement was actually selling at Rs 250 a bag against this MRP. The dealer would get something extra from this depending on the customer. The large customers would manage a lower price as well from the dealer but the MRP is Rs 270. This price agreement means that MRP levels remains unchanged and the manufacturer can actually bill the dealers a bit higher. The final selling price can rise upto Rs 270 per bag. Second..comes the monsoons when prices normally are reduced. The volumes fall by around 30% as well. However, this time around the price arrangement will ensure that prices are not reduced. So certainly much higher profits. Valuations have corrected and the arrangement certainly does not look as bad as it appeared to be prima facie. Smart move by the manufacturers. It has saved the face for the Government whereas the cement manufacturers have ensured that profits will remain. Cement is a story which we believe will become stable now. Results will be good and that will keep investors interested. The buoyancy may be missing but downsides are limited as well.

Banks tend to be the worst hit in a rising inflation and interest rate scenario. Inflation was 6.46% for the week ended March 3 against market estimates of 6.31%. Inflation will ease off only in about 3-4 weeks. Banks continued to trade weak. However some recovery was seen on the news that Lok Sabha had passed a bill to remove the SLR Floor. There was ceiling of 40% and floor of 25% prescribed by government any changes to that needed Parliamentary approval, that has now changed and powers are vested with RBI with no floor. The ceiling at 40% still remains. In any case this was there in the offing for quite some time.

The launch of the Insat-4B satellite paved the way for the Sun Network's direct-to-home (DTH) venture. Insat-4B's launch will increase competition among the DTH players with the availability of over 200 additional channel offerings by Sun Direct, DD Direct and Dish TV. However there continues to be shortage of satellites and transponder space will mean that ADAG Reliance Bluemagic's and Bharti Group's DTH ventures will have to wait for a few more months. Reliance Bluemagic will have to wait till July for the launch of Insat-4CR, which will carry eight Ku-band transponders for the company. Bharti's DTH foray will be possible only in 2008, and that too if the Indian Space Research Organisation (ISRO) books transponders on Measat-3, a Malaysian satellite scheduled for lift-off. However what this does is that the broadcasting companies will see increased subscription revenues. Zee entertainment is our pick here and now its pure broadcasting company with DTH, CAS and News ventures spun off. We will update you on this one soon.

Suzlon was hit with the bid for Repower is getting more hot. REpower is the world's seventh-largest wind turbine producer. Areva has renewed its bit to Euro 1.14 which is 11% higher than that of Suzlon and teams last bid. The two bidders are Areva (which owns over 30 per cent) and the other party Suzlon with its Portugal partner Martifer, (which owns 25.4 per cent of REpower) REpower's product range of 1.5-5MW onshore & offshore turbines compliments Suzlon's portfolio of 0.35 - 2MW turbines and thats the reason in terms of synergy. But the price which both are ready to pay seems to indicate the desperation. Payback is being calculated in excess of 8 years and the deal will be dilutive as well. Suzlon may see further pressue.

Technically Speaking: Markets are still coming to terms with high valuations. 12300-12130 are really crusial levels to be look ahead. If market breaches this we can see further downsides. Resistance is at 12550-12800. Nect couple of weeks are crucial.

Sensex loses 455 points

The week was extremely volatile and the Sensex traded below the psychologically-important 13,000 mark for most days in the week ended 16 March 2007. The market declined despite the Sensex gaining in three out of the five trading sessions for the week ended 16 March 2007. A global market meltdown, due to a deepening US mortgage lending crisis, coupled with higher inflation data pushed the market lower.

The BSE Sensex shed 454.59 points for the week ended 16 March 2007, to settle at 12,430.40, compared with the previous week’s closing of 12,884.99 on 9 February 2007. The S&P CNX Nifty lost 109.45 points, to settle at 3,608.55, compared with the previous week’s closing of 3,718.

The BSE Mid-Cap Index rose 7.13 points for the week ended 16 March 2007, to settle at 5,235.57. The BSE Small-Cap Index rose 23.59 points, to 6,274.64.

The market edged higher on Monday (12 February 2007), tracking firm Asian markets. The 30-share BSE Sensex gained 17.64 points (0.14%), to settle at 12,902.63. The market had surged in the early-afternoon, and the benchmark Sensex jumped as many as 171.87 points, to 13,056.86 at 13:05 IST.

On Tuesday (13 March 2007), the barometer Sensex settled with gains, as buying resumed in the late afternoon session, with IT, metals and select pivotals leading the charge. Real estate stocks rebounded after a severe pounding, which had eroded 25 - 50% value in such stocks. The 30-share BSE Sensex settled 80.35 points (0.62%) higher, at 12,982.98.

On Wednesday (14 March 2007), 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 Wednesday’s fall was a setback on bourses around the globe 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 on that day. It was the Sensex's biggest daily point fall since 5 March 2007.

On Thursday (15 March 2007), the Sensex experienced a trend reversal during the day. The benchmark index, which after opening higher at 12,655.94, had surged to 12,789.81, eased as selling began in full swing. Offloading continued till the barometer index touched a low of 12,510.75, a fluctuation of 279.06 points. Volatility was the trademark of Thursday's session, which experts opine the domestic market will suffer through March 2007. According to them, healthy corporate results in April should usher in some stability. The 30-share BSE Sensex settled 14.23 points higher, at 12,543.85 on that day.

On Friday (16 March 2007), The market edged lower. However, it ended above the lower level due to recovery by index heavyweight Reliance Industries and some IT pivotals. Telecom, cement and banking shares edged lower. The Sensex closed at 12,430.40, a fall of 113.45 points for the day. The Sensex had tumbled 227.75, to 12,316.10, at 14:49 IST, when the market was hit by data showing a surge in inflation, reigniting worries of interest rates rising further. Caution on the global bourses, ahead of key US inflation data, also weighed on the sentiment.

Till 19 March 2007, trading on the bourses will be halted for 45 minutes at 11:45 IST due to sun outage. Trading will then resume at 12:30 IST, and will continue up to 16:15 IST.

Ranbaxy was down 3.07% for the week ended 16 March 2007 to Rs 316.05. The stock came under pressure as market men continued to fret over possible equity dilution if Ranbaxy acquired Merck's generic drugs business. The stock has declined even as the company had dismissed media reports that it was planning an issue of shares in the US, or dilution in stake by founders to fund the acquisition. This week, Ranbaxy put in its bid for Merck's generics business.

Reliance Industries (RIL) ended 1.42% lower for the week, at Rs 1299.80. As per reports, RIL had made two more gas discoveries off the country's east coast. The discoveries were made in gas-rich KG DG block in the Krishna-Godavari basin, and in NEC 25 block of the Mahanadi basin.

IPCL dropped 3.43% to Rs 259.40. Reliance Industries (RIL) set a ratio of one share of RIL for every five held in IPCL, to give shape to the merger of IPCL with RIL.

State-run Oil and Natural Gas Corporation rose 2.41% to Rs 762.20 on reports it was seeking 49% stake in Venezuela's San Cristobal oil block.

IT bellwether Infosys shed 3.59% to Rs 2047.25, whereas TCS rose 1.97% to Rs 1236.10. Wipro gained 0.23% to Rs 565.90.

ICICI Bank lost 5.69% to Rs 810.65. ICICI Bank has no plans for a stock-split, Chief Executive Officer KV Kamath said on Monday responding to market speculation.

Bajaj Auto rose 0.05% to Rs 2488, Maruti Udyog was down 1.04% to Rs 779.40. The government has initiated the process of divesting its residual 10.27% stake in (MUL).

ITC lost almost 6.06% to Rs 145, extending its recent fall, on concern that the government may bring cigarettes under the Value Added Tax (VAT) net.

Pharma major Dr Reddy’s Labs gained 3.39% to Rs 682.10. The company has pulled out of the race to acquire the generic drugs unit of Merck.

Two IPOs debuted this week. Raj Television Network debuted at Rs 275 on BSE on 16 March 2007 compared to the IPO price of Rs 257. It settled at Rs 225.95 on the day of its debut.

The second IPO was Page Industries, which debuted at Rs 341.90 on the BSE on 16 March 2007 compared with the IPO price of Rs 360. It settled at Rs 282.10 on the day of its debut.

The wholesale price index rose 6.46% in the 12 months to 3 March 2007, up from the previous week's annual increase of 6.10% due to higher edible oil and naphtha prices, data showed on Friday. The figure was higher than an expected 6.31%.

Finance Minister P Chidambaram said on Friday, the government had asked the central bank to take monetary steps necessary to maintain price stability. "When I met with the central board of the RBI recently I pointed out ... and urged the RBI to continue to be vigilant and take such measures as are necessary to maintain price stability," Chidambaram told the Lok Sabha.

The Lok Sabha on Friday passed the Banking Regulation (Amendment) Bill, 2007. The Banking Regulation (Amendment) Bill is aimed at allowing more operational flexibility to the Reserve Bank of India in the conduct of monetary policy. The bill seeks to amend Section 24 of the Banking Regulation Act, 1949 to enable the RBI to specify the statutory liquidity ratio without any floor rate. At present banks are required to invest a minimum of 25% of their deposits in government securities, as dictated by the statutory liquidity ratio (SLR).

FIIs were net sellers to the tune of Rs 722.60 crore during the first four days of the week ended 16 March 2007. Mutual funds (MFs) were net sellers of equities for the week ended 16 March 2207. They sold shares worth Rs 327.46 crore during the period under consideration.

IL&FS - AllCargo Global

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Volatility with negative bias expected

The market is expected to remain highly volatilie in the coming week, with sentiment looking bearish.

Inflation has been a concern for quite a while now. Several steps to contain it have been rendered futile. Indian shares had slipped to a five-month low after a rise in inflation spooked investors already unnerved by the recent market turmoil. Data released on 16 March 2007, showed that India's annual inflation rate rose 6.46% for the week ended 3 March 2007, heading back towards two-year highs hit last month, and raising the prospect of a central bank action to contain price pressures.

On 16 March, the BSE Sensex settled at 12,430.40, down from the psycologically important 12,500 level. On a weekly basis, it was the fifth consecutive week of losses for the market. The Sensex was down 3.7%, and the Nifty 3% for this week. The Sensex has lost a sharp 15.6% from a record high of 14,723.88 on 9 February 2007.

From its last closing level of 3,608.55 for the Nifty, the next support exists in the range of 3,555 - 3,516 and on an upmove, may face resistance at 3,714.

Now technical analysts are looking at 12,330 levels for the Sensex to take support on the downside, while they will face resistance at 12,845 levels on the higher side.

Any sharp rise in crude oil prices, above the $60-62 per barrel mark, will trigger fresh selling. Any weakness in global markets will weigh down the sentiment further.

Pfizer India, KSB Pumps, Federal-Mogul Goetze (India) and NEPC India will announce their financial results in the next week.

Market slips, sheds 113 points

The market opened in positive territory despite negative Asian indices led by the buying in metal and pharma stocks. However the Sensex came off its high on substantial selling in heavyweight, telecom and capital goods stocks and slipped into the red. After wiping out the early gains of 68 points, the market remained weak throughout the session. The Sensex slipped further in the afternoon on reports of a rise in the inflation rate and touched a low of 12316, down 323 points from the day's high. There was buying at lower levels and the Sensex managed to pare some losses towards the close and end the session at 12430, down 113 points. The Nifty shed 35 points and closed at 3609.

The breadth of the market was negative. Of the 2,611 scrips traded on the BSE, 1,731 stocks declined, 816 stocks advanced and 64 stocks ended unchanged. Except the BSE Oil & Gas Index all the sectoral indices of the BSE ended in negative territory. The BSE CG Index shed 2.60% at 8335. The BSE Bankex, the BSE Teck Index, the BSE CD Index and the BSE PSU Index were down around 1% each.

Reliance Communications triggered a major sell-off in the market and tumbled 3.52% at Rs377. Among the other major losers L&T dropped 3.03% at Rs1,449, Hero Honda declined 3% at Rs648, BHEL lost 2.57% at Rs1,956, Maruti shed 2.25% at Rs779, Gujarat Ambuja slumped 2.22% at Rs104, Cipla slipped 1.65% at Rs224 and ONGC dipped 1.61% at Rs762. ITC, Infosys, HDFC Bank, Reliance Energy, Bharti Airtel, ICICI Bank, and ACC lost around 1% each. However, Tata Motors managed to report gains of 3.25% at Rs749, Ranbaxy added 1.61% at Rs316, Reliance Industries gained 1.25% at Rs1,230, Dr Reddy's advanced 1.07% at Rs682 and Wipro closed with marginal gains at Rs566.

Select capital goods stocks took a heavy beating on the bourses. Triveni Engineering tanked 5.84% at Rs50, Areva fell 4.70% at Rs994 and Kirloskar Brothers lost 4.61% at Rs372.

Over 63.65 lakh Idea Cellular shares changed hands on the BSE followed by Reliance Communications (36.54 lakh shares), SAIL (18.48 lakh shares), ITC (17.64 lakh shares) and Parsvanath Developers (15.22 lakh shares).

Reliance Industries was the most actively traded counter on the BSE with a turnover of Rs152 crore followed by Reliance Communications (Rs138 crore), SBI (Rs78 crore), Idea Cellular (Rs58 crore) and Infosys (Rs57 crore).

Inflation continues to bother equities

The market drifted lower today, as a surge in inflation reignited worries of interest rates rising further. Caution on bourses around the globe, ahead of key US inflation data, also weighed on the sentiment. Nevertheless, it finished above the lower level due to recovery by index heavyweight Reliance Industries and some IT pivotals. Telecom, cement and banking shares edged lower.

The 30-share BSE Sensex lost 113.45 points (0.9%), to settle at 12,430.40. The Sensex came off the lower level after tumbling 227.75 points, to 12,316.10, at 14:49 IST. It was the Sensex's lowest level in five months.

The S&P CNX Nifty shed 35.05 points (0.96%), to end at 3,608.55. The Nifty March 2007 futures were at 3,570.05, compared to the spot Nifty closing of 3,608.55.

The BSE clocked a turnover of Rs 3225 crore, lower than Thursday’s Rs 3834 crore.

The wholesale price index rose 6.46% in the 12 months to 3 March 2007, up from the previous week's annual increase of 6.10% due to higher edible oil and naphtha prices, data showed on Friday. The figure was higher than an expected 6.31%.

Finance Minister P Chidambaram said on Friday the government had asked the central bank to take monetary steps necessary to maintain price stability. "When I met with the central board of the RBI recently I pointed out ... and urged the RBI to continue to be vigilant and take such measures as are necessary to maintain price stability," Chidambaram told the Lok Sabha.

All sectoral indices on BSE, barring the BSE Oil & Gas Index, ended in the red today. The BSE Capital Goods Index was the worst hit. It shed 222.69 points (2.6%), to 8,334.96, while the BSE's banking sector index, the Bankex, was the second-biggest loser. The Bankex lost 83.71 points (1.3%), to end at 6,107.72. The BSE IT Index lost 47.62 points (0.97%), to settle at 4,879.46 and the BSE FMCG Index lost 15.98 points (0.97%), to finish at 1,625.99.

The BSE Oil & Gas Index rose 23 points (0.38%), to settle at 6,049.30. Gains in Reliance Industries (RIL), which has a huge 57% weightage in this index, helped the energy sector benchmark end firm for today.

The BSE Small-Cap Index lost 93.54 points (1.4%), to settle at 6,274.64. The BSE Mid-Cap Index lost 45.22 points (0.8%), to end at 5,235.57.

The sentiment remains brittle after volatility of the past few weeks, which was caused by global factors amid mixed economic data in the US. A sharp fall of nearly 9% in Chinese stocks on 27 February 2007, had left global bourses badly shaken that time. The sharp fall led some investors to cut carry trades, where they borrow cheaply in Japan and invest in countries with higher yields.

Asian and European stocks edged lower today ahead of a key US data on consumer price index, which will be unveiled later in the day. Benchmark indices in London, Germany and France were down 0.2 - 0.4%. Stocks in China slipped into the red and Japanese stocks ended the day weak. Japan’s Nikkei 225 average ended 0.69% in the red. China’s Shanghai Composite Index ended down 0.7%.

On the domestic front, the bulls were looking for some sops like a cut in corporate surcharge for a post-Budget rebound. But this did not materialise. Instead, the dividend distribution tax was raised in the Union Budget 2007-08. Earlier, the market had witnessed a pre-Budget correction. Sensex is off 15.1% from its lifetime high of 14,652.09 of 8 February 2007. It has lost 9.8% in calendar 2007 so far.

The next major trigger for the bourses is Q4 March 2007, earnings which will start next month. Market men will closely watch what company managements will have to say about the outlook for FY 2008. Global liquidity still remains strong and may provide the trigger for recovery.

Today, Reliance Industries (RIL) firmed up. The stock was up 1.1% to Rs 1298, and off the session’s low of Rs 1262. A media report today suggested it was close to signing a deal for 59% stake in a $20 billion joint venture with US-based Dow Chemical Company.

Banks fell but pared intra-day losses. HDFC Bank shed 1.3% to Rs 905, but was off the session’s low of Rs 890. The State Bank of India shed 0.8% to Rs 914, and was off the session’s low of Rs 845. ICICI Bank was down 1.8% to Rs 807, up from the session’s low of Rs 802. The Lok Sabha today passed the Banking Regulation (Amendment) Bill, 2007. The Banking Regulation (Amendment) Bill is aimed at allowing more operational flexibility to the Reserve Bank of India (RBI)in the conduct of monetary policy. The bill seeks to amend Section 24 of the Banking Regulation Act, 1949 to enable the RBI to specify the statutory liquidity ratio without any floor rate. At present banks are required to invest a minimum of 25% of their deposits in government securities, as dictated by the statutory liquidity ratio (SLR).

Reliance Communications dropped 4% to Rs 374.50. As many as 36.5 lakh shares changed hands in the counter on BSE. Bharti Airtel was down 1.5% to Rs 716.50, after the stock moved between positive and negative territory. Telecom shares were impacted by concerns of increased competition after Vodafone, on Thursday, reached a partnership agreement with Essar. As per the accord, Vodafone will manage routine operations of Hutch-Essar, which will be renamed Vodafone-Essar.

IT pivotals witnessed intra-day recovery. Wipro gained 1.6% to Rs 570.50, and off the session’s low of Rs 556.10. TCS was down 0.1% to Rs 1235, off the session’ s low of Rs 1215.60. Infosys was down 1.3% to Rs 2050, off the session’s low of Rs 2025.10.

Cement shares drifted lower. Gujarat Ambuja Cements lost 2.8% to Rs 103 and ACC shed 2% to Rs 717. Cement shares have tumbled over the past few days, after manufacturers agreed early this month not to raise prices for one year.

Two firms listed at a discount to their IPO prices, extending a recent trend of new scrips getting listed below their IPO prices. Page Industries settled at Rs 282.20, a discount of 21.6% over the IPO price of Rs 360. Raj Television Network settled at Rs 225.95 on BSE, a discount of 12% over the IPO price of Rs 257. The stock posted the second-highest turnover, grossing Rs 211.12 crore on BSE.

Tata Motors gained 3.3% to Rs 750. The Managing Director, Tata Motors, Ravi Kant said on Thursday its small car project coming up at Singur, Kolkata was on track and would be completed by the middle of next year.

IT firm MindTree Consulting posted a turnover of Rs 467.93 crore, and was the turnover topper on BSE. The stock had seen high volumes ever since listing early this month. It had spurted earlier this week, but ended 3% lower today, at Rs 901.90.

Reliance Industries (RIL), which helped the Sensex at the lower level, was the third highest in terms of turnover. RIL aggregated Rs 152.60 crore today on BSE. Page Industries, another debutante for the day, was the fourth-highest with a turnover of Rs 145.69 crore.

At Rs 138.10 crore, Reliance Communications was the fifth-highest in terms of turnover. The stock lost 3.5%, to settle at Rs 376.90.

Although FIIs resumed buying on Thursday, their daily volume as reflected in daily gross sales and purchases figures for the day was low. They were net buyers to the tune of Rs 18.50 crore on Thursday (15 March 2007) compared to their outflow of a huge Rs 861.40 crore on 14 March. An intermittent surge in funds withdrawal by FIIs has been observed this month. As per provisional data released by the National Stock Exchange, FIIs were net sellers to the tune of Rs 202 crore today.

Kotak - R Systems International

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Sharekhan Commodities Buzz dated March 16, 2007

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Sharekhan Highnoon dated March 16, 2007

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Edelweiss - PCG DAILY MARKET CALL 16-MARCH-2007

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Anand Rathi - Daily Fundamental Snippets

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Investsmart - Morning Call

Market Grape Wine :

In House :

Nifty at a support of 3623 & 3618 & 3565 & 3515 levels .

Markets sentiments negetive reduce your position at all levels .

Sell : SBIN below 918 target 896 s/l 925

Buy : I-Flex above 1876 target 1908 s/l 1865


Out House :

Sensex at a support of 12494 & 12453 levels with resistance at 12656 &
12786 levels .

Buy : RIL & RelCap

Buy : ABAN & SesaGoa

Buy : Polaris & Mphasis

Buy : IciciBank & UtiBank

Buy : Maruti & Bharti in F&O

Buy : ACC & IndiaCement

Buy : PRAJ bullet for the day with stop loss of 368

Buy : IFCI & SkumarSyn

Dark Horse : Ongc , Bharti , Icicibank , Praj , SesaGoa , IFCI , Centextile
& ACC

Bullet for the day : Sterlite & Tisco with stop loss

TGIF : Thank God its Friday : Buy fundamentally strong script with 3 months
prespective .

Caution may prevail; inflation data eyed

The market may remain range bound in early trade due to lack of direction from Asian markets which were mixed on Friday. The weekly inflation data which will be out at about 12:00 IST may set direction for the day. Expectations are that inflation will rise to about 6.31% for the 12 months to 3 March 2007. Annual inflation had moderated to 6.10 percent in late February from a peak of 6.73 percent, its highest in more than two years, at the start of the month.

Meanwhile, brokerages have advised clients that shares bought on March 16, 2007 should not be sold on March 19, 2007 as trades done on both these days will be settled together on March 21, 2007 since March 19, 2007 is a bank holiday due to Marathi festival Gudhi Padva. This may cap trading volumes today.

The market sentiment remains fragile after the volatility of the past few weeks that been caused mainly by global factors. The market failed to sustain higher levels on Thursday (15 March) despite firm Asian markets. Sensex came sharply off higher level after an intra-day 260 points surge. It settled just 14 points higher for the day.

FIIs are once again in selling mode. FIIs were net sellers to the tune of Rs 861.40 crore on Wednesday 14 March 2007. They were net sellers to the tune of Rs 65 crore on Thursday 15 March 2007, as per provisional data by stock exchanges.

FIIs, however, were net buyers to the tune of Rs 579 crore in index- based futures on Thursday. They were net buyers to the tune of Rs 119 crore in individual stock futures on that day. Nifty March 2007 futures settled at 3618.80 on Thursday, a discount of 24.80 points over spot Nifty closing of 3643.60.

Asian markets were mixed on Friday. Key benchmark indices in Hong Kong, Japan and Singapore were down by between 0.19% to 0.7%. Key benchmark indices in China, South Korea and Taiwan were up by between 0.1% to 0.79%.

US stocks rose on Thursday after healthy earnings from Bear Stearns Cos. Inc. eased concerns about the subprime problems spreading to other companies and the wider economy. The Dow Jones industrial average rose 26.28 points, or 0.22 percent, to 12,159.68. The Standard & Poor's 500 Index gained 5.11 points, or 0.37 percent, to at 1,392.28. The Nasdaq Composite Index advanced 6.96 points, or 0.29 percent, to 2,378.70.

Anand Rathi - Daily Strategist

The NIFTY futures saw a decrease in OI 0.70% with prices closing at 3643 indicating that lot of shorts positions were maintained as market saw no recovery and nifty future sustained below 3700 levels .The discount in nifty futures remained indicating that bears did not cover their positions aggressively. .Looking at this the bulls ran for cover in their positions as market moved down .We feel that till the market sustains above 3700 levels we may not see aggressive short covering and fresh money coming in the market.

.The FIIs were buyers in futures to the tune of 699 crores. The PCR is in a range of 0.91 indicating the trend in the market. The volatility has remained in the range of 32 levels indicating uncertainty at higher levels.

Among the Big guns, ONGC & RELIANCE saw gain of OI with prices coming down marginally indicating that fresh selling coming in the counter as market came down from high of yesterday.

On the TECH front, TCS, SATYAMCOMP, WIPRO & INFOSYSTCH saw rise in prices showing in spite of weakness in the markets, they held forte and forced short positions to cover with some fresh longs as well as new longs formed there.

On the other hand the BANKING counters saw a mixed bag with some loosing open interest the others gaining it. Also we saw some prices moving up while others saw loosing value .This only makes us realize that un-certainty prevails in the sector.

In the METALS like the tech sectors across the board buying coupled with short covering took place in all counters forcing the bears to cover with new genuine buying coupled with short covering happening there in the sector.

Considering the market data, it suggests the most awaited trend should finally peculate and we could see a clear emergence of view happening next couple of days, for the same it is advisable to traders to have strict stop losses.

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Market may remain volatile

The market is moving in tune with international markets for last few sessions. The local indices may witness volatility following the overnight gains in the US markets and major Asian gauges like the Nikkei, the Hang Seng index, the Straits Times Index and the Jakarta index are trading in negative territory in current trades. Although the domestic indices moved up on Thursday, intra-day volatility remains the major concern. Among the local indices, the Nifty could test higher levels around the 3660 level and has a support at 3600. The Sensex on the downside may slip to 12450 and may face resistance at 12650.

In the US markets, the broader Dow Jones was up by 26 points at 12160 and the tech-heavy Nasdaq was gained seven points to close at 2379.

Among the Indian ADRs trading on the US bourses, MTNL was the major gainer by 2.3%, followed by Infosys, Wipro, Patni, VSNL, Satyam and Dr Reddy's with marginal gains, while ICICI bank registered a loss of over 2%.

Crude oil prices slipped further. While the Nymex light crude oil for April series slipped 61 cents at $57.55 a barrel. In the commodity space, the Comex gold for April delivery moved up by $4.60 to settle at $647.10 an ounce.

Anand Rathi - Daily Technical Note

Nifty & Sensex exhibited a candlestick with a longer upper shadow.

Technically, one may use the level of 3550 (Nifty) and 12300 (Sensex) as the stop loss level.

Nifty faces resistance at 3780 and Sensex at 13100.

BSE Small Cap & BSE Midcap exhibited a bullish candlestick.

CNX IT has gained ground.

In the Punter's zone we have a Buy on Mcdowell's & Bombay Dyeing & Sell in Bata India.

In the Technical call section, we have a Buy on TCS & Titan Industries & Sell in Reliance Industries.

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Intra-day Stock Ideas

NIFTY (3643) SUP 3603 RES 3671

BUY NATIONALUM (233)
SL 228 TGT 241 244

BUY MATRIX LABS (161)
SL 157 TGT 169 172

BUY TATA CHEM (193)
SL 189 TGT 199 202

SELL CAN BANK (184)
SL 189 TGT 176 172

SELL RCOM (390)
SL 396 TGT 381 377

STRATEGY INPUTS FOR THE DAY

Pain at every gain

Pain is inevitable. Suffering is optional.

The word gain seems to be getting fast replaced by pain on the bourses. A little gain and there appears a flock which is ready to offload. Looks like the bulls have decided to pack their bags for a summer fiesta in the Caribbean for the cricket world cup. After a positive start, the rally in the Indian market simply fizzles out by the end of the day. This, despite a firm closing in the other regional markets. The local bulls just don't have the nerve to stay put or rather take a call amid continuing uncertainty over the near-term direction of the market.

No amount of good news is enough these days, given the weak undercurrent. On the other hand, players are losing no time in pressing the sell (or panic) button whenever any bad news hits the market. That too without proper examining the real impact of the bad news if any. So nervous are the bulls that they are refusing to buy quality stocks at relatively attractive valuations. Not too long ago, players were willing to pay a high premium for such shares.

In short, the market still looks fragile, and there may be some more pain left to be endured before a fresh move upwards kicks in. Today, we expect a cautious to lower opening on the back of a fall in most Asian markets this morning. The trend will remain choppy and lackluster in the absence of any firm buying support at lower levels. Stay light and take a fresh call next week.

Shares of Page Industries and Raj Television will get listed today. Given the mood of the market, the recent trend, and their steep pricing, the stocks are most likely to go down.

US stocks managed marginal gains on Thursday. Blue-chip indices rose for the fifth time in six sessions as merger news and strength in the financial sector overshadowed concerns about subprime mortgages.

The main indices climbed for the second consecutive day on Bear Stearns' strong earnings and the acquisition of a mortgage company by General Electric and Blackstone.

Citigroup, JPMorgan and Alcoa led gains in the Dow Jones Industrial Average and the Standard & Poor's 500 Index. Dow Chemical posted its biggest advance since July 2003 amid reports in an Indian financial daily that it will merge some assets with Reliance Industries.

The S&P 500 gained 5.11, or 0.4%, to 1392.28. The Dow added 26.28, or 0.2%, to 12,159.68. The Nasdaq Composite Index climbed 6.96, or 0.3%, to 2378.70.

US stocks zigzagged early after the PPI showed a surprising jump. The report fueled concern ahead of next week's Fed policy meeting. But the CPI, a key inflation number more closely watched by the central bank, is due on Friday. The Fed is widely expected to hold rates steady at next week's meeting.

Also weighing on stocks were remarks by former Fed Chairman Alan Greenspan that the problems with subprime mortgages could spill over to other sectors.

US light crude oil for April delivery fell 61 cents to $57.55 a barrel on the New York Mercantile Exchange. The contract was down 36 cents at $57.19 a barrel in extended trading in Asia. Crude prices have fallen from over $62, or 7%, in the last five sessions.

Treasury prices were little changed, with the yield on the 10-year note holding at about 4.53%, similar to its rate late on Wednesday. In currency trading, the dollar gained versus the yen and fell versus the euro.

European stocks surged. The pan-European Dow Jones Stoxx 600 index climbed 2% to 359.03. The German DAX 30 added 2.1% to 6,585.47, the French CAC 40 rose 1.8% to 5,389.85 and the UK's FTSE 100 climbed 2.2% to 6,133.20.

Asian stocks fell this morning, set for the third straight weekly loss. Toyota and Samsung Electronics dropped after US reports indicated slower economic growth and higher inflation in the region's largest export market.

The Morgan Stanley Capital International Asia-Pacific Index lost 0.5% to 141.00 at 10:34 a.m. in Tokyo. The gauge was poised for a 1.1% weekly loss. Japan's Nikkei 225 Stock Average dropped 1% to 16,696.77. Benchmarks also fell in Australia, New Zealand, South Korea and Singapore.

In emerging markets, the Bovespa in Brazil was flat at 43,278 while the IPC index in Mexico

Market Watch & Insider Trades

nsider Trades:

Mercator Lines Limited: Mr. Harish Kumar Mittal, Chairman & Managing Director has sold in open market 450000 equity shares of Mercator Lines Limited on 14th March, 2007.

NIIT Limited: (1) Morgan Stanley & Co. International Limited A/c Morgan Stanley Dean Witter Mauritius Co. Ltd. (2) Morgan Stanley & Co. International Limited A/c Morgan Stanley Investment Mauritius Ltd has purchased from open market 24189 equity shares on 9th March, 2007.

Market Volumes:

The turnover on NSE was down by 11% to Rs77.77bn. BSE FMCG index was the major gainer and gained 1.74%, BSE Metal index (up 1.34%), BSE Technology index (up 1.02%) and BSE Pharma index (up 0.55%) were among the other major gainers. However, BSE Bank index lost 1.23%.

Volume Toppers:

Idea Cellular, India Cement, ITC, MindTree, R Com, Evinix, TTML, Parsvnath, IDFC, Broadcast Initiatives, Rolta, HLL, Hindalco, Indiabulls, Reliance, Firstsource, Praj Industries and Satyam.

Upper Circuit:

GMR Industries, Unitech, Bank of Rajasthan, Alps Industries, Goldstone Technology, Tanla, Autoline Industries, Pantaloon, Dawn Mills, Nesco, Shree Precoated Steels, Gemini Communications, Ganesh Housing, Heritage Food and BF Utilities.

Delivery Delight:

Allahabad Bank, Aptech, BILT, Balrampur Chini, Bharat Forge, Century Textiles, Crompton Greaves, Dr Reddys, Federal Bank, Hindalco, HCC, IOB, Infosys, Polaris, Punj LLoyd, Rolta, Satyam and TCS.

Brokers Recommendation:

Maruti – Outperform from CLSA

Long Term investment:

BEML.

Major News Headlines:

RIL, GAIL sign comprehensive cooperation agreement

BEML Board to meet on March 29 to consider public issue plan

Maruti raises prices across models

Kirloskar Brothers gets Rs3.44bn order

Areva raises bid for REpower, countering Suzlon offer

i-flex gets enterprise software order from Israeli Bank

Praj Industries wins contract from Cronpenergies AG unit

L&T Consortium gets Rs14bn order

TCS wins order from Temasek