Monday, March 19, 2007
Fed actions will be trigger for Sensex
Market sentiments continued to remain on edge at the close of last week, as worries over rising inflation are leading investors to fear more monetary tightening by the central bank.
Moreover, worries over recessionary pressure in the US and fears of continued spillover from the troubled US subprime mortgage lending sector have added to the woes of the market. The market is clearly looking for positive triggers to try and get rid of the bear hug.
This week, very critical from the data point of view, and may indeed give the market some positive triggers. On Tuesday, The first such data is expected, whenthe US will report its housing starts and building permits. This will be followed by the Federal Reserve’s policy-setting meeting on Tuesday and Wednesday.
The two-day meeting is critical from the stock market’s point of view, as global markets will be looking closely for clues to the future of US rate action.
While no rate move is expected in this meeting, it is by and large expected that the Federal Reserve may hint at cutting interest rates some time later in the second quarter or early in the third quarter.
The outcome of this meeting could give a direction to the global equities markets especially to the emerging markets and more particularly in India.
Investors should wait for the outcome of this meeting to ascertain their future courses of action. Any positive outcome of the Federal Open Market Commitee (FOMC) meeting would be greeted by gains, but weekly inflation data scheduled for Friday would keep big investors at bay, with the market eagerly watching for these numbers. As the harvest season is drawing near, inflationary pressure is likely to ease, but as long as such pressures remain high, inflation is a cause for concern.
Looking forward, the charts show choppiness ahead, with selective buying in some stocks. This means that any further slide on the bourses is not likely to be sharp and that value-buying has started emerging.
An analysis of Nifty futures suggests the building up of fresh short positions, as the discount to Nifty futures increased further on Friday and its open interest rose 1.31% to 37.47 million units. But long positions were built in telecom stocks, which suggest that these stocks could bounce back if the market gets any positive triggers.
Technically also, the market is still in a downward consolidation phase and though it is trading near its short-term support, there is risk even at this level. The only comfort factor for the market was the closing of Sensex above its 200 day simple moving average.
Had the Sensex closed below this level, then the support at 12,288 points would have weakened.
This week, on its way down, the Sensex is likely to test support at 12,288 points. If this support is breached, the next support level is placed at 12,026 points, which is a key support level. Below this, the market may witness a knee-jerk movement, which could see the Sensex briefly touching 11,819 points.
On its way up, the Sensex would test resistance at 12,636 points; but being a minor resistance, this is not likely to pose any threat to the rising Sensex and the next resistance is expected to come up at 12,788 points, which if broken could take the Sensex to 13,059 points. This is a critical resistance level and if this is also breached then it would trigger more buying on bourses.
This week, Hindalco Industries, Reliance Energyand Jet Airways look good on charts.
Hindalco Industries has a strong resistance at Rs132.45. If this resistance is broken, then there could be upward move of over 6%, which can take it upto Rs141 in the short term.However on the downside, the short-term strong support is placed at Rs123.
Reliance Energy, is trading near its strong short-term support level and has the potential to move up to Rs490, if the support level of Rs446 is maintained.
The stock has a strong resistance at Rs493, which, if crossed with rising volumes, could mean that investors can expect even higher levels such as Rs525. The stock is also a good medium-term buy, with the caveat that one needs to watch for the support levels.
Another interesting stock from a technical perspective is Jet Airways. This stock is in a consolidation phase and is signalling breakout on the upper side. On its way up, the stock will have resistance at Rs583 and then at Rs618. Investors can treat the second resistance level as a short-term target also. Jet Airways on its way down may find a rock-bottom support at Rs530.
Sharekhan Investor's Eye dated March 19, 2007
Cadila Healthcare
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs425
Current market price: Rs326
Liva acquisition, US approvals strengthen Cadila
Key points
- Zydus Cadila (Cadila) has acquired a 97.5% stake in Mumbai-based Liva Healthcare (Liva), a mid-sized Indian pharma company, in an all-cash deal. The all-cash transaction will be funded through cash accruals and debt. The size of the deal has not been disclosed.
- The acquisition of Liva will enable Cadila to foray into the Rs1,500-crore dermatology segment in India and thus strengthen its domestic product portfolio, allowing it to offer a more comprehensive product range. With Liva's 325-people sales force, which already has established relationships and strong brand equity amongst the dermatologists, cosmetologists and beauticians, Cadila will be able to make fast in-roads into this rapidly growing segment.
- Cadila has received three product approvals from the US Food and Drug Authority (US FDA) in quick succession. The company has received the final approval to market Azathioprine tablets of 50mg strength and has received tentative approvals for Divalproex Sodium Extended Release tablets in strengths of 250mg and 500mg, and Venlafaxine Hydrochloride tablets in strengths of 25mg, 37.5mg, 50mg, 75mg and 100mg.
- We estimate the above three products would together contribute $13.1 million (approximately Rs40.5 crore) in FY2008E and $15.4 million (approximately Rs69 crore) in FY2009E to Cadila's total revenues. The same three products are likely to contribute approximately Rs0.90 to Cadila's FY2008E earnings and Rs1.10 to its FY2009E earnings.
- At the current market price of Rs326, Cadila is trading at 14.8x its estimated FY2008 earnings and at 12.2x its estimated FY2009 earnings. The stock has underperformed the market in recent times, but we believe that as Cadila's international efforts start translating into gains and growth in the domestic market rebounds, the stock's performance would improve. Considering the strong growth momentum of the company, we maintain our Buy recommendation on the stock with a price target of Rs425.
VIEWPOINT
DS Kulkarni Developers
Strong project pipeline
At present, the company has residential and commercial projects at various locations in Pune (94%), Mumbai (4%) and Bangalore (2%). These cumulatively amount to 17.5 million sf of saleable area that is targeted for development over the next five to seven years. It includes the planned special economic zone (SEZ) project across 250 acre located at the outskirts of Pune on the Pune-Solhapur highway. The company is also planning a 130-acre township project close to its SEZ site
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Close: A bounce from supports.. Can it sustain ?
Indian indices made a recovery today. It was a shaky start. Markets took off from where they ended a week ago. Index made gains in the early session but then saw profit taking with Indices briefly dipping into red. However post a ranged session ended the day in strong positive terrain. Asian and European cues supported the Indices equally to trade in the positive territory. Value buying interest was not just restricted to frontline stocks like Telecom, Energy, Engineering and Software led the advances. Asian indices ended in strong while European indices currently trading in green.
Sensex was up by 215 points at 12644.99. It was helped up by gains in BHEL (2079.25,+6 percent), RCVL (397.1,+5 percent), ONGC (793.05,+4 percent), Guj Ambuja (107.3,+4 percent) and Tata Motors (770.85,+3 percent). Restricting the gains were ITC (142,-2 percent), Hero Honda (640.25,-2 percent), Hindalco (128.6,-1 percent), Dr Reddys (677.65,-1 percent) and TISCO (429.75, 0 percent).
However, the important point was that volumes were muted and hence not much confidence can be taken from the current bounce. The confidence still is shaky.
MTNL showed signs of revival. This was despite negative news. The Telecom tribunal TDSAT directed the state-run MTNL to reduce infrastructure charges collected from private operators and asked sector regulator TRAI to frame guidelines for fixation of such charges. The tribunal also directed MTNL to return the extra amount charged from Reliance Infocom within 30 days. This is clearly negative. There could be something more which seems to have been missed. We would recommend to avoid this one on the long side.
The Energy sector traded mixed. The country's largest private entity Reliance Industries Ltd will invest more than $9 billion in developing a gas field off the east coast of India and building pipelines to sell the fuel to consumers. The company is expected to spend $5.2 billion in bringing to production Dhirubhai-1 and Dhirubhai-3 fields in block KG-D6 in Krishna Godavari basin by June 2008. It will invest another $4 billion in laying a 1,386-km pipeline from this city in Andhra Pradesh to Bharuch in Gujarat to transport the fuel. It will begin producing about 40 million standard cubic meters per day in June 2008 and raise it to peak output of 80 mmscmd in next five months. Reliance has so far drilled 22 exploratory wells in block KG-D6 (KG-DWN-98/3), off which 17 have resulted in discoveries. Stock traded up 1% marginally.
The Lok Sabha approved the bill to phase out Central Sales Tax. A new bill will also be passed which will empower states to levy over 4% VAT on Tobacco products. ITC remains the worst hit here. Around 60% of the company?s revenue comes from cigarette and over 80% of the profits. The stock has been hit badly for last few days on back of this VAT news. The impact on volumes needs to be seen. Expect a note on this ..
Technically Speaking: It was a smart recovery by Sensex today. Sensex is on its recovery path and is looking for 12725 as a near target. Index touched intraday high of 12655 and low of 12426. Resistance at 12724, 12803 levels and Support lies at 12495, 12347 levels. Market turnover stood low at Rs 2385 Cr. Overall breadth was in favor of Advancers where the Advancers were 1402 against Decliners of 1124.
Sensex ends buoyant above 12600
The market sentiment remained upbeat for the entire session. Firm Asian indices saw the Sensex open with a positive gap of 55 points at 12485. However the market witnessed a bout of selling and the Sensex touched the day's low of 12427 in early trades. Steady to firm buying in communication, energy and technology stocks once again lifted the Sensex past the 12600 mark to an intra-day high of 12655. The Sensex ended the trading session at 12645, up 215 points. The Nifty gained 70 points and closed at 3679.
The breadth of the market was positive. Of the 2,606 stocks traded on the BSE, 1,418 stocks advanced, 1,111 stocks declined and 77 stocks ended unchanged. Among the sectoral indices the BSE PSU Index notched up gains of 2.62% at 5586 followed by the BSE Teck Index (up 2.23% at 3508), the BSE CG Index (up 2.09% at 8509) and the BSE CD Index (up 2% at 4546).
Barring a few counters, most of the heavyweights ended at higher levels. In the technology space i-flex Solutions soared 6% at Rs1,983, Reliance Communications rose 5.36% at Rs397 and Mphasis was up 1.07% at Rs292. Among the Sensex gainers BHEL surged 6.31% at Rs2,079, ONGC jumped 4.05% at Rs793, Gujarat Ambuja Cements added 3.52% at Rs107, Tata Motors gained 2.86% at Rs771, NTPC advanced 2.71% at Rs144 and HDFC Bank was up 2.48% at Rs927. ACC, Wipro, Bharti Airtel and HDFC gained over 2% each. However, ITC at Rs142, Hero Honda at Rs640, Hindalco at Rs129, Dr Reddy's at Rs678 and Tata Steel at Rs430 inched marginally lower.
PSU stocks notched up significant gains during the day. Gail India surged 4.68% at Rs272, Bank of India added 4.34% at Rs143, Balmar Lawrie rose 4.28% at Rs430, MTNL jumped 3.90% at Rs148, Bharat Electricals advanced 3.45% at Rs1,460, HMT gained 2.68% at Rs73 and RCF was up 2.46% at Rs35.
Over 44.97 lakh Idea Cellular shares changed hands on the BSE followed by Reliance Communications (25.88 lakh shares), ITC (24.87 lakh shares), Orchid Chemicals (10.83 lakh shares) and Parsvanath Developers (10.53 lakh shares).
Value-wise Reliance Communications registered a turnover of Rs100 crore on the BSE followed by Reliance Industries (Rs53 crore), Idea Cellular (Rs42 crore), SBI (Rs40 crore) and Infosys (Rs35 crore)
Sensex jumps over 200 points
The Sensex kept on strengthening as the day progressed, barring that odd blip in the early-afternoon session, as buying continued unabated during the session. That markets around the globe were firm, also boosted sentiment. Some short-covering in the derivatives segment provided the much-needed shot of adrenaline to the market.
The 30-shares BSE Sensex settled 214.37 points (1.72%) higher, at 12,644.77, as per a provisional closing. It had opened higher in the morning, at 12,484.64, and surged to 12,655, at the fag end of trading. The Sensex's low for the day has been 12,426.66.
Trading was halted in between, at 11:45 IST, for sun outage. It resumed at 12:30 IST. The trading time was extended till 16:15 IST. Today was the last session with a staggered schedule. From Tuesday (20 March 2007), the market will close as usual (15:30 IST).
The turnover on BSE aggregated Rs 2385 crore, and was very much below the turnover on a regular day. The lacklustre turnover is because of a bank holiday on account of Gudhi Padva today. As a result, the settlement for trading done on Friday (16 March 2007) and today’s was clubbed for 21 March 2007. Brokerages have advised clients that shares purchased on Friday (16 March) should not be sold on 19 March 2007.
The market-breadth, which indicates the overall health of the market, looked strong on BSE. Against 1,402 shares advancing, 1,124 declined. A total of 72 scrips remained unchanged.
Among the 30-Sensex pack, 24 advanced while the rest declined.
State-run Bharat Heavy Electricals (Bhel) surged 6.46% to Rs 2082, and was the top gainer, on reports that the company was in talks with two overseas firms for nuclear technology deals. Bhel also informed BSE that the tentative performance for FY 2007 will be announced on 3 April 2007, at a press conference to be addressed by the chairman & managing director.
Reliance Communications (up 5.56% to Rs 397.85), ONGC (up 3.90% to Rs 791.90) and Gujarat Ambuja Cements (up 3.71% to Rs 107.50) were the other gainers.
Tata Motors edged up 3%, to Rs 772, for the second day in a row today. 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.
Hindustan Lever rose 1.84% to Rs 180.05, on news that the company had hiked prices of its detergent brands, Surf Excel Blue and Surf Excel Quick Wash.
Car maker Maruti Udyog (MUL) rose 1.40% to Rs 790.35, after the Indian government said it will sell its remaining 10.27% stake in the former PSU in the next financial year, beginning 1 April 2007. The cabinet has approved the plan for a stake sale in the firm, which is restricted to participation from banks, financial institutions and Indian mutual funds. MUL is 54.2% owned by Japan's Suzuki Motor Corp. It was an equal joint venture between the Indian government and Suzuki, when the previous NDA-led regime at the Centre began selling the holding as part of efforts to exit non-core sectors of the economy.
Index heavyweight Reliance Industries (RIL) was up 0.96% to Rs 1312.25, on a volume of 3.94 lakh shares.
Cigarette maker ITC declined 2.21% to Rs 141.80, on high volumes of 24.84 lakh shares. It was the top loser. Two block deals of 5 lakh shares each were struck in the counter for an average Rs 142.25 per share by 10:47 IST.
Bike maker Hero Honda down 1.87% to Rs 640, and drug maker Dr Reddy’s Labs was down 1.04% to Rs 675, were the other losers in the Sensex pack.
IFCI surged 8.35% to Rs 26.60, on high volumes of 2.01 crore shares, on BSE.
Among Asian benchmarks, Japanese Nikkei 225 Index surged 265.40 points (1.59%) to 17,009.55, the Hang Seng rose 313.24 points (1.65%), to 19,266.74, the Straits Times gained 44.64 points (1.45%) at 3,113.39, the Seoul Composite rose 15.51 points (1.09%), to 1,443.39 and the Taiwan Weighted was up 17.66 points (0.23%), to 7,737.46.
European markets were also trading positive, with gains ranging between 0.28 - 1.50%.
Over the last few weeks, local bourses had slipped due to weakness in global markets.
Meanwhile Finance Minister P Chidambaram said on Monday that India is confident it can moderate inflation, and the aim was to do so without hurting growth.
The next major trigger for the bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Market men will closely watch what company managements have to say about the outlook for FY 2008. Global liquidity still remains strong, and may provide the trigger for a recovery.
An important event being keenly awaited are the meetings this week of the central banks in Japan and the US, to decide on interest rates. The Bank of Japan’s two-day meeting ends on Tuesday (20 March 2007), while the US Federal Reserve’s two-day meeting ends on Wednesday (21 March 2007). The Fed is expected to keep interest rates unchanged. Analysts will eagerly hunt for cues for the US economic outlook in the Fed’s accompanying statement.
Although FIIs resumed buying on Thursday (15 March 2007), their daily volume as reflected in daily gross sales and purchase 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 2007.
An intermittent surge in funds and withdrawal of funds by FIIs has been observed this month. As per provisional data released by the National Stock Exchange (NSE), FIIs were net sellers to the tune of Rs 202 crore on Friday (16 March 2007), the day when the Sensex had lost 113 points.
FIIs were net sellers to the tune of Rs 563 crore in index-based futures on Friday. They were net buyers to the tune of Rs 104 crore in individual stock futures on the same day. Nifty March 2007 futures settled at 3,582.30 on Friday, a discount of 26.25 over the spot Nifty closing of 3,608.55.
US crude oil rose 19 cents to $57.30 a barrel, after falling as far as $56.17 last week on worries of an economic slowdown in top consumer, the United States.
US stocks fell on Friday, as data showing strong consumer price inflation dented hopes for an interest-rate cut any time soon, while fears about the subprime mortgage crisis kept investors on the edge. A government report showed February consumer prices rose faster than analysts estimated, while core CPI, which strips out volatile food and energy costs, matched forecasts.
The Dow Jones industrial average fell 49.27 points, or 0.41%, to end at 12,110.41. The Standard & Poor's 500 Index dropped 5.33 points, or 0.38%, to 1,386.95. The Nasdaq Composite Index slipped 6.04 points, or 0.25%, to 2,372.66.
ICRA Ltd. IPO
Moody’s to be in full control
ICRA, incorporated as Investment Information and Credit Rating Agency of India Ltd in 1991, is one of the recognised credit rating agencies in India with a wide portfolio of products and services. In close association with the Moody’s group of the US, the company is engaged in the business of providing rating and grading services, research-based information services and also outsourcing services.
ICRA has three wholly owned subsidiaries: ICRA Management Consultancy Services (IMaCS), ICRA Techno Analytics Ltd (ICTEAS), and ICRA Online Ltd (ICRA Online). IMaCS provides management consulting services to clients based in India and abroad. ICTEAS provides business solutions and computer-aided engineering services.
The objectives of the offer are to achieve the benefits of the listing on stock exchanges and to provide exit route for existing shareholders: IFCI, Administrator of the Specified Undertaking of the Unit Trust of India, and State Bank of India (SBI). Thus, the company will not receive any proceeds from the offer. However, with the exit of other promoters, Moody’s will be in full control. This will not only help ICRA garner business from SBI (which was not possible earlier due to regulations), but also help it enjoy the full benefits of Moody’s association.
Strengths
- ICRA is the No. 2 credit rating agency in the country with 399 outstanding public issues under its belt. It enjoys a strong market position, brand recognition and creditability.
- Moody’s Group, one of the global credit rating majors, holds a 29% equity stake. This will help ICRA to leverage the US company’s expertise in newer products. Also, ICRA provides certain outsourcing services to Moody’s Investors Service.
- Due to diversification of its revenue stream, the share of the rating fee income in the consolidated revenue has scaled down from as high as 85% in FY 2002 to 58% in FY 2006. This will insulate it from the risk of change in volume of debt securities issued in the domestic market, interest rate volatility and economic slowdown.
Weaknesses
- Personnel cost as a proportion to sales is on the higher side compared with the listed market leader. Higher expense is also partly on account of higher attrition rate of 23%.
- ICRA has arranged for short-term loan facility of Rs 50 crore from banks to fund the ESOS Welfare Trust (ESOSWT) for subscription to the preferential allotment made to it under the employee stock option plan (ESOP). Under the arrangement between the company and ESOSWT, the latter will repay the loan as and when funds become available through the exercise of options by employees. This will involve higher interest burden as well as ESOP amortisation charge.
Valuation
Annualised EPS for the nine months ended December 2006 on the post-issue equity works to Rs 15.9. On the price band of Rs 275-Rs 330, PE is 17.3-20.8. The only listed comparable player is Crisil, currently traded around Rs 2100, giving PE of 23 times FY 2006 consolidated EPS. Crisil deserves higher PE as it is: over four times larger than ICRA, growing at a faster rate than ICRA, perceived to be more aggressive, and has made much more headway in non-rating and international business. Besides, S&P controls a 56.5% stake in Crisil compared with 29% by Moody’s in ICRA.
Orbit Corporation
Promoted by Ravi Kiran Aggarwal and Pujit Aggarwal, Orbit Corporation primarily redevelops projects in Mumbai. The company was initially incorporated to carry out e-commerce business and was called Orbit Cybertech.
Orbit Corporation is currently implementing 16 up-market projects at premium locations. The estimated free sale area for these projects is 6,85,327 sq. ft. Besides, it has successfully bid, at Rs 333 crore, for Gujarat Ambuja Cements’s approximately 8,763.7 square meters of land at Kalina, Santacruz in Mumbai.
The IPO is to finance advances for acquisition of new projects and development of existing projects as well as to invest in wholly owned subsidiaries. The public issue is of 91 lakh shares with one detachable warrant per equity share. The price band has been fixed at Rs 108 to Rs 117. The issue opens on 20 March and closes on 23 March 2007. Warrants are convertible into shares (between 18 to 30 months from the date of allotment at 10% or 30% discount to the average market price depending on whether the market price is higher or lower than the current IPO price).
Orbit Corporation has voluntarily opted for IPO grading from Credit Rating Information Services of India Limited (CARE). It has received IPO Grade 1, indicating poor fundamentals. The low grade was primarily due to the short track record and low corporate governance
Strengths
- Out of 16 projects, Orbit Corporation’s sales process commenced from 31 December 2006 for five projects involving an area of 5,26,200 sq. ft. Of this, 3,84,706 sq. ft. have been sold for Rs 624.37 crore, and Rs 70.1 crore recognised. The balance 1,41,494 sq. ft. remains unsold.
- According to available estimates, the current potential for redevelopment in Mumbai is about 60 million sq ft. The company is likely to be a key beneficiary as one of the major players in redevelopment of properties.
Weaknesses
- Gestation period for redevelopment projects is long, and involves higher scope for delays and litigation.
- Development Control Regulations for redeveloping properties are being reviewed under court orders.
- The Income-Tax department had conducted a search and seizure on the company, its subsidiaries and its promoters. The company has undertaken to pay an advance tax of Rs 10 crore. For the nine months ended December 2006, the company had made a tax provision of Rs 2.54 core on profit before tax (PBT) of Rs 15.37 crore. Also, a promoter of the company, Pujit Aggarwal, has declared an additional personal income of Rs 15 crore (an amount higher than the net profit of Orbit Corporation!) including cash seized of Rs. 3.07 crore.
- The aggressive bidding for Gujarat Ambuja Cements’s plot is likely to make the company vulnerable to softening of real-estate prices as compared with companies with bank of land. It had put in a bid of Rs 333 crore, whereas its consolidated net worth was Rs 162.98 crore end 31 December 2006. However, the second highest bid was for Rs 331 crore.
- Since the beginning of 2006, banks have increased the lending rates on housing loans by about 300-500 basis points. This is bound to slow down the growth in housing demand.
Valuation
Between FY 2004 – FY 2006, net profit shot up from Rs 1.23 crore to Rs 5.95 crore. In the nine months ended December 2006, net profit further increased to Rs 12.83 crore. Interestingly, Orbit Corporation changed its revenue recognition policy since 1 April 2006, from Completion of Project Method to Percentage Completion Method. This has led to increase in cumulative profit by 11.19 crore.
On the basis of annualised nine months earnings, EPS works out to Rs 3.8 (post-issue and post-warrant exercise). At the price band of Rs 108-Rs117, PE works out to 28.7 and 31, respectively. Comparable companies are currently traded at half these PEs.
ICRA Ltd.
Background:
- ICRA Ltd. was incorporated in year 1991 as a credit rating agency by a consortium of financial/investment institutions, commercial banks and financial services companies. Moody’s India, a part of Moody’s Group is the promoter of the ICRA Ltd.
- The company is engaged in the business of providing rating and grading services. The company also provides consulting, information technology based and outsourcing services.
- The Company has three subsidiaries, namely, IMaCS, ICTEAS and ICRA Online. ICTEAS provides business solutions and computer aided engineering services. ICRA Online provides mutual fund based information and outsourcing services while IMACS provides management consulting services.
- Rating services, consulting services and information technology based services contributed 55.97%, 21.70% and 14.00% of total revenues respectively in FY06 and 55.64%, 17.08% and 15.84% respectively for the 9 months ended December 2006.
- In fiscal 2006, volume of debt rated by the company was Rs. 1,389.49 billion and the number of published issuers outstanding as on March 31, 2006 were 398. For the nine months period ended December 31, 2006, the volume of debt rated by the company was Rs. 988.64 billion and the number of published issuers rated outstanding as on December 31, 2006 was 399.
- The company has entered into an agreement with ICRA Online for ranking of mutual funds. For this purpose, ICRA Ltd pays ICRA Online a sum of Rs. 70, 000 per month and revenues from these services are shared in ratio of 85:15 by ICRA Ltd and ICRA Online.
- To achieve the benefits of listing
- To carry out the sale of equity shares upto 2581100 shares.
- The company has developed in depth knowledge in several sectors supplemented by knowledge management system. This has enabled company to develop a comprehensive range of products and thus enabling company to obtain additional business from existing clients as well as address a larger base of potential clients.
- The net sales of the company has increased at a CAGR of 28.55% to Rs. 543.21 million in FY06 from Rs. 328.69 million in FY04. The net profit has increased at a CAGR of 13.35% to Rs. 142.08 million from Rs. 110.58 million for the same period. For the nine months ended net sales stood at Rs. 495.41 million and net profit was Rs. 135.87 million.
- The company has consistently high EBITDA margin. Its EBITDA margin improved marginally from 33.79% in FY04 to 33.93% in FY06. For the nine months ended December’06 it has EBITDA margin of 35.70%.
- Since 97% of the debt offers in India are rated, expected increase in corporate take off and the potential for new businesses from a variety of issuers and debt instruments, prospects for its rating business is expected to increase.
- The company has high debtors turnover ratio. The same has increased from 77 days in 2004 to 86 days in 2006. Further, it has increased to 144 days for the 9 months ended December 2006.
- The company operates in an industry where retaining skilled personnel with particular industry domain knowledge for performing credit and financial analysis is essential. The company has high attrition rate of 23% and 22% for FY06 and for the nine months ended respectively. This can have a negative impact on company’s margin.
- The company had declining operating profit from FY02 to FY05. It has declined from Rs. 121.63 million in FY02 to Rs. 87.03 million in FY05. However, its operating profit increased to Rs. 164.87 million for FY06.
Valuations:
- The results of FY06 are not comparable with FY05 as ICRA Online and ICTEAS both become its subsidiary during FY06 and data is given on consolidated basis.
- Return on net worth (RONW) has increased from 9.66% in FY05 to 15.23% in FY06. For the nine months ended RONW stood at 12.75%.
- Book value per share as on December 31, 2006 is Rs. 120.98/-.
- Post issue annualised EPS based on December 2006 earning is Rs. 18.16. The shared are being offered in a price band of Rs. 275/- to Rs. 330/-. POST issue PE ranges from 15.17 to 18.21. Industry average PE is 43.8.
Board Meetings - March 22 2007
| Mar 22 2007 | Advani Hotels & Resorts (India) Ltd | Advani Hotels & Resorts India Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to consider, the payment of Interim Dividend on the Equity Share Capital of the Company. |
| Mar 22 2007 | Bartronics India Ltd | Bartronics India Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to consider, the proposal for Issue of Foreign Currency Convertible Bonds (FCCBs) / Global Depository Receipts (GDRs) / American Depository Receipts (ADRs) by the Company. |
| Mar 22 2007 | Bimetal Bearings Ltd | Bimetal Bearings Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007 to consider declaration of Interim Dividend for the year ending March 31, 2007. |
| Mar 22 2007 | FCS Software Solutions Ltd | FCS Software Solutions Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to consider payment of Interim Dividend if any declared for the financial year 2006-07. |
| Mar 22 2007 | Garware Offshore Services Ltd | Garware Offshore Services Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, for consideration of Audited Annual Accounts for the year ended December 31, 2006 and recommendation of final dividend. |
| Mar 22 2007 | GTC Industries Ltd | GTC Industries Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to consider and discuss the development of surplus land of the Company in the State of Andhra Pradesh. |
| Mar 22 2007 | Harita Seating Systems Ltd | Harita Seating Systems Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, for the purpose of considering declaration of interim dividend to the shareholders of the Company for the financial year ending March 31, 2007. |
| Mar 22 2007 | KSB Pumps Ltd | KSB Pumps Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, to consider the following:1. Annual Accounts for the year ended December 31, 2006.2. Final Dividend for the said accounting year. |
| Mar 22 2007 | Mahalaxmi Rubtech Ltd | Mahalaxmi Rubtech Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to transact the following:1. To consider and fix the Record date for the purpose of issue of Bonus shares.2. To consider and decide about to avail the fund by way of Borrowings from Bank for the ongoing expansion plan of the Company.3. To discuss and review the activities of the Company. |
| Mar 22 2007 | Nucleus Netsoft & G I S India Ltd | Interim DividendNucleus Netsoft & GIS India Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to consider the payment of Interim Dividend on the Equity Capital for the financial year ending on March 31, 2007.(As Per BSE Announcement Website Dated on 06/03/2007) |
| Mar 22 2007 | Panchmahal Steel Ltd | Accounts Nine Months |
| Mar 22 2007 | Pfizer Ltd | Pfizer Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, to consider the Unaudited Financial Results of the Company for the 1st Quarter ended February 28, 2007 (Q1). |
| Mar 22 2007 | Rane Brake Linings Ltd | Rane Brake Linings Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, inter alia, to consider, the payment of 2nd Interim Dividend proposed for the year ended March 31, 2007. |
| Mar 22 2007 | S & S Power Switchgear Ltd | S&S Power Switchgear Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007, to consider and approve the Annual Accounts for the year ended September 30, 2006 and to convene the 29th Annual General Meeting of the Company on April 23, 2007. |
| Mar 22 2007 | Tulsyan NEC Ltd | Tulsyan NEC Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on March 22, 2007 to consider and declare Interim Dividend. |
Edelweisss -Daily Market Outlook
Market Snapshot
On Friday, the Sensex opened with a positive gap of 26 points at 12,570. It advanced to a high of 12,639 in early trades, but soon slipped into red owing to selling pressure at higher levels. Persistent selling in bank, cement and engineering stocks forced the index drop to a low of 12,316. Selective buying towards the end helped the index recoup some losses. The Sensex finally settled with a loss of 113 points at 12,430. In the process, the index ended the week with a loss of 455 points. Nifty Lost 35 points to close at 3608.
The NSE and BSE cash volumes were slightly lower compared to the previous day at INR 70 bn and INR 35 bn respectively. The F&O volumes were higher at INR 249 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has slightly decreased to 31% levels. The WPCR of Nifty Options increased to 1.19 compared to the previous day while the 5 day average is 0.95.
Outlook
The markets are expected to remain range-bound in today’s trading session with participation expected to remain lackluster as seen in the last few trading sessions. On the domestic front, higher than expected inflation numbers led to a decline in the market.
Nifty has found support at 200 DMA at the 3580 levels. Though there has been continuous addition of fresh shorts in Nifty futures.
Banking sector will be an underperformer as worries over credit growth, high inflation which might see further tightening of liquidity by the RBI. IT sector is expected to remain an out performer and position in the sector against Nifty could be taken.
In shorter term the Nifty has a support at 3584 followed by 3568 and 3554 while the resistance is at 3643 followed by 3683.
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Ashish Chugh - HIDDEN GEMS
March 19, 2007
Market View
The markets witnessed yet another volatile week with stocks and indices going down further. At the current sensex level of 12400, we may be close to a short term bottom as far as the markets are concerned. As mentioned in our report last week, we believe that in a bad scenario, the sensex may go down to around 12000 levels, however drop below 12000 in the short term atleast looks unlikely.
We had so many negative news all of a sudden - terminologies which was unheard of earlier - Yen Carry Trade, US Sub-prime Home Loan problem. Moreover, The Economist carrying the cover story "India Overheats" and Business Week carrying the cover story " The Trouble with India" took their toll on the already not so good sentiment.
Apart from this, March being generally a month when speculators like to be light on their positions and the brokerages reduce their leverage positions to clients, there is a complete absence of any major buying. The major force FIIs are also shying to make investments, primarily on account of global factors and may be looking for further falls to make an entry.
So, as of now, the sentiment looks hugely negative with no one willing to make major financial commitments to Equities.
The stock prices however have reached attractive levels. Investors may choose to buy selectively - however on a staggered basis. We feel the markets may consolidate around these levels for a while and may go up starting mid April.
Here are a few investment ideas :-
Bambino Agro
CMP - Rs. 12.50 BSE Code -519295
Bambino Agro is into food processing and manufactures Pastas, Macroni and Vermicilli. The company has been facing a tough time over the past few years, primarily on account of huge debt on its balance sheet, which it found difficult to service. The company has reached a settlement with the lenders and the debts have been restructured. The promoters have also agreed to bring in fresh funds into the company.
What we like about the company is its strong Brand and excellent distribution network. Infact, we could find the product occupying shelf space at not just big malls and supermarkets but was available at the neighbourhood "Kirana" stores too. (atleast in Delhi)
In the recent past, we have seen deals happening in the food processing sector at good valuations. Orkla Foods, Norway deal to buy MTR Foods is rumoured to have valued MTR at around Rs.400 crores. Similarly, Private equity players have taken stakes in Capital Foods (manufacturing Ching's Secret brand of sauces & Noodles), and Cremica Foods and these have received rich valuations.
Bambino has already achieved Sales of Rs.100 crores for first 9-months (Incidentally MTR Foods does Sales Revenue of Rs.150 crores).
Bambino with its market cap at just Rs. 8 crores looks attractive. The company of course had been bogged down with its own problems but now seems to be recovering. A stock for someone with High Risk appetite - however a potential multibagger.
Hind Industries
CMP - Rs. 24 BSE Code -526307
Hind Industries was recommended to our subscribers earlier is available at around Rs. 24. Even though the volatility in company's earnings on a quarter to quarter basis is a cause of concern, the potential of the business looks good.
The company being the largest and one of the only organized players and the huge scales on which the company (alongwith its subsidiary) operates has the potential to attract the Institutional Investor at a later stage.
CMP - Rs. 98 BSE Code -523007
The smallest of the three construction companies from the Ansal stable, Ansal Buildwell is undertaking housing & commercial projects primarily in Gurgaon and Kochi with the bulk of its revenues currently coming from Gurgaon.
Some of the projects of the company include Florence Marvel, Florence Elite, Navkriti Arcade, Royal Casa, Club Florence to name a few. The company's ability to acquire land banks at attractive rates is the key strength. Besides, the company is also doing projects in Nepal and Moradabad.
With revenues in excess of Rs.75 crores and PAT of Rs.6.4 crores for first 9-months, the stock looks attractive at the current market cap of Rs.75 crores and is available close to its 52-week low.
Eldeco Housing
CMP - Rs. 200 BSE Code -523329
Another small cap stock from the Housing construction space, Eldeco Housing is undertaking development of housing projects primarily in Lucknow. As per the Balance Sheet of 31.3.2006, the company has an inventory of Rs. 228 crores. This inventory will eventually get translated into sales in the coming years.
In the latest Annual report, the management also talks about having tied up new projects in Lucknow with an estimated value of more than Rs. 500 Crores.
The market cap of the company - just Rs.40 crores. Besides the value which is available at the current price, a big trigger for the stock could be that incase the management decides to merge its unlisted group company - Eldeco Infrastructure, which is several times bigger than Eldeco Housing - this would lead to formation of a much bigger entity and the interest of large market players in the company's stock.
(We wish to clarify here that there has been no confirmation or communication from the management regarding the merger of Eldeco Housing & Eldeco Infrastructure)
One of the negatives in the housing construction stocks however is the uncertainty regarding Sales numbers quarter on quarter since as per the accounting norms being followed by most of them, Sales are booked when possession of the unit is handed over. So in one quarter the company may hand over possession of hundreds of units and in the next quarter none, which leads to confusion in the minds of investors as to why the Sales have dropped or gone up suddenly. This may lead to huge buying and selling and hence huge price volatility in these stocks.
Jolly Board
CMP - Rs. 1000 BSE Code -502335
The company's 2 million square feet IT Park coming up at Kanjur Marg in Mumbai could ring in cash registers for the company. The company has entered into an agreement with Lodha Developers and out of the 2 million square feet of construction, the company's share would be 50%. Assuming the most conservative rental estimate for the space at Rs.30-40 per sq.ft., this would lead to a rental income of Rs.3-4 crore every month for the company. (not to mention the value of the property which could be between Rs.600-800 crores assuming a rate of Rs.6000 to 8000 per square feet).
The company currently trades at a market cap of Rs.90 crores, which is less than three years of its expected rental income. The downside looks restricted from here. The catch here is liquidity since the Equity Capital is just Rs.91 lacs out of which 90% is held by the promoters.
Electrotherm India
CMP - Rs. 435 BSE Code -526608
Electrotherm , our old favourite seems to be now getting the attention it deserves. Recently, India Advantage Fund (through its Investment Manager ICICI Venture) has taken close to 14% stake in the company at Rs.600 per share. The promoters have also taken warrants convertible into shares at Rs.600 per share, which shows the confidence of the management in the future of the company.
Having started as a manufacturer of Induction Heating furnaces, the company went on into backward integration and set up facilities for manufacture of Stainless Steel, Construction Steel/ TMT Bars, Structural & Alloy Steel, Ductile Iron Pipes, and has set up an automotive division manufacturing
The company's journey from Steel to Wheels is definitely exciting and augurs for its Shareholders. With the launch of Yo-Bykes, the company is now gearing up for the launch of Electric Three-Wheelers and Hybrid Buses.
With the world's focus on Alternative Energy, the products would have potential not just in India but also overseas.
Cement Sector
As regard, Cement sector, the entire cement pack is looking good for investment. Most of these stocks have given up almost 30-50% in the last 2 months. Many analysts have started comparing cement sector with the sugar sector arguing what government interference did to sugar can happen to cement too and we see more SELL reports today rather than BUY reports. We believe the comparison is unfair on account of the demand supply mechanics and the fact that the International Trading mechanics for the two commodities are entirely different.
I believe that for an investor having cement stocks in his portfolio, this is certainly not the time to get out. These sell reports are coming in after the event has happened and most cement stocks have already lost significantly.
With ACC near Rs.700, Ultratech at Rs.750, Gujarat Ambuja at close to Rs.100 levels, Birla Corp at Rs.200 & Mangalam at Rs.150, these could be levels to rather buy into these stocks. We feel what Mr. Chidambaram has done has been out of political compulsions rather than economic sense. We feel the decision could see a reversal once the Delhi Municipal Corporation Elections & UP Elections are out of the way. The fundamentals of the sector remain robust and the demand supply situation favours the manufacturers, atleast for the next 2-3 years. Even if the price of cement is frozen at the current levels, the companies would continue to make healthy profits. Another thing the market has probably forgotten is the fact that the whole production by cement companies is not sold in 50kg bags. A large part of the production goes to the Institutional or the bulk buyers. For long term investors, this could be an opportunity though a further fall from these levels not ruled out. If at all there is a further fall, it could be on account of the other factors and the extent of fall from these levels may not be large (5 to 10% at the maximum) .
ICICIDirect - Initiating coverage - Entertainment Network (Buy: Rs 315, Target: Rs 419)
Entertainment Network (ENTNET)
Price: Rs 315 Target: Rs 419 OUTPERFORMER
Entertainment Network (India) Ltd (ENIL) is well geared to capitalize on the
upturn in the radio industry through its pan-India expansion and
complimenting city-centric businesses. Considering its dominance in the
industry along with fillip from the other businesses, we expect the stock to
show significant upside in next 2-3 years.
Radio - biggest growth opportunity: Radio advertisement in India is
estimated to grow at a CAGR of 32% to Rs 1,200 crore by 2010 with the
revenue share policy being the key growth trigger. With more than 40 players
entering this market, we believe radio presents the biggest opportunity in
the media space.
Radio Mirchi - A clear winner: The company is the undisputed leader in the
10 cities it currently operates in. It has also acquired 22 licenses in key
markets. We rate Radio Mirchi as a clear winner among the players.
Part of India’s largest media conglomerate: ENIL is part of the Bennett
Coleman Group (Times Group), the largest media player in India having a
heritage over 150 years with presence across the value chain in the sector.
Along with strong management and execution capabilities the company has an
edge over the competitors with innovative themes and ideas to run the show
and continue to be market leaders.
OOH and 360° on steady growth path: On back of long term rights for
hoardings at airport, metro rail and bus shelters in Delhi, Mumbai and
Kolkata for OOH business along with big ticket events in the live
entertainment space we expect the subsidiary revenues to grow at a CAGR of
128.38% by FY09.
Valuations: There are no benchmarks for valuating ENIL as there are no other
players having the dominance and reach that it commands. However, globally
we can compare it to Clear Channel, Citadel, Austereo and Cox Radio, which
are trading at 10x-13x EV/EBIDTA. Growth in these companies is slowing down
and considering the growth which Indian market offers, we expect ENIL to
command a fair premium over the peers. We value the stock at 13x EV/EBITDA
and arrive at a fair value of Rs 419, an upside potential of 33%.
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Thanks Manish
Intra-day Stock Ideas
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
SL 308 T 330, 334
STRATEGY INPUTS FOR THE DAY
Sun outage to end…Bulls hope for sunshine
Keep your face to the sunshine and you cannot see the shadow.
A Happy New year. Gudhi Padwa heralds the advent of a prosperous new year and is considered as one of the most auspicious days by Hindus. The bulls will hope that the 'Muhurat'. Today, which is the first day, "shuddha pratipada", of the month of Chaitra will bring in sunshine after five weeks of darkness.
The Asian market cues promise a better open. However, a good start cannot always guarantee a good close. On the brighter side, the sun outage, which is usually a weak lackluster time for the markets ends today.
Be on the guard for some cooling as the undertone still remains jittery. Investors should refrain from taking too many bets immediately. If one cannot resist the temptation, stick to only large caps (A group), and avoid small- and mid-caps for a while. Volume has dived, turning the market fairly choppy. This trend may continue as next week we'll have the F&O expiry.
In a major development, the People's Bank of China has raised interest rates to check heavy inflow of foreign investment and slow down the world's fourth-largest economy. Next month, we will have the annual policy meeting of the Reserve Bank of India (RBI), and going by the latest data on inflation, industrial production, money supply and credit growth, the central bank may be forced to take more monetary tightening step(s). Some reports suggest that inflation may remain high for long, if supply side constraints are not eliminated soon. That may prove to be a dampener for earnings growth and the stock market.
Global factors have taken center stage nowadays. The domestic story remains intact but we cannot isolate ourselves too much from the global market. The trend is unlikely to change for a while. This week we'll have policy decisions from Bank of Japan (on Tuesday) and from the Federal Reserve (on Wednesday). As a result, the markets across the world will be keenly awaiting the outcomes from the two key events. We expect both the central banks to keep interest rates unchanged. That may give some relief to global equity markets that have been in the doldrums over the past few weeks.
FIIs were net sellers to the tune of Rs2.02bn (provisional) in the cash segment. In the F&O segment, they offloaded stocks worth Rs3.79bn. On Thursday, foreign funds were net buyers of Rs185mn in the cash segment. Mutual Funds pulled out Rs2.06bn on the same day.
AMD Metplast, Jagjanani Textiles, Lawreshwar Polymers and Abhishek Mills will make their stock market debut today. Expect these shares to be under pressure going by the recent trend on new listings.
RSWM's Board will meet on March 19 to consider investment proposals. OCL India's Board will meet on March 19, to consider the Scheme(s) of Arrangement for the demerger of Sponge Iron & Steel and Real Estate operations of the company.
Bayer Diagnostics India's Board will meet on March 19, to approve and take on record the Annual Audited Financial Results and to recommend dividend, if any.
US stocks closed lower on Friday as a mixed set of economic reports prompted investors to remain cautious ahead of the Fed meeting. An increase in consumer prices in February dashed hopes that the central bank will cut interest rates to give a fillip to the world's largest economy amid growing worries over subprime mortgages.
The Dow Jones Industrial Average had its sixth weekly loss this year and worst start since 2003. The Dow fell 49.27 points, or 0.4%, to 12,110.41. The S&P 500 declined by 5.33 points, or 0.4%, to 1386.95, while the Nasdaq shed 6 points, or 0.3%, to 2372.66.
The S&P 500 has slipped 1.1% since March 9, erasing the previous week's rebound from a worldwide selloff. The Dow is down 1.4% on the week and the Nasdaq dropped 0.6%. The Dow has lost 2.8% since the end of 2006, the worst start to a year since 2003.
European shares ended lower on Friday. German DAX 30 closed down 0.07% at 6,580.78, the French CAC 40 lost 0.1% at 5,382.16 and the UK's FTSE 100 gave up 0.04% at 6,130.60. The pan-European Dow Jones Stoxx 600 index slipped 0.2% at 358.48.
Most Asian markets were trading up this morning. NTT DoCoMo and Takeda Pharmaceutical led gains on speculation they will pay higher dividends. The Morgan Stanley Capital International Asia-Pacific Index added 0.2% to 141.58 as of 10:56 a.m. in Tokyo. The benchmark dropped 4.6% over the past three weeks, its longest stretch of weekly slides in almost six months.
Japan's Nikkei 225 Stock Average climbed 0.8%, rallying from a third weekly drop. Markets elsewhere rose, except for in China and the Philippines. Australia's S&P/ASX 200 Index gained, led by regional banks after Bank of Queensland made a A$2.4 billion ($1.9 billion) offer for Bendigo Bank Ltd.
Market Watch & Insider Trades
Market Volumes:
The turnover on NSE was down by 10% to Rs70.58bn. BSE Capital Good index was the major loser and lost 2.60%. BSE Bank index (down 1.35%), BSE Consumer Durable index (down 1.29%), BSE Technology index (down 1.20%) and BSE PSU index (down 1.01%) were among the other major losers.
Volume Toppers:
Idea Cellular, R Com, SAIL, Mind Tree, ITC, India Cements, Indiabulls, Unitech, Gujarat Ambuja, Bank of India, TTML, Hindalco, Parsvnath, Reliance Industries, Rolta, Ashok Leyland, Century Textile, Bajaj Hindusthan and SBI.
Lower Circuit:
Crisil, Simplex Infrastructure, Atlanta, Evinix, Vyapar Industries, Mefcom Agro, Swan Mills, Gemini Communication, Vakran Software and Anant Raj Industries.
Delivery Delight:
BEML, Escorts, Essar Oil, GDL, HPCL, Hotel Leela Venture, India Infoline, Indian Overseas Bank, Jet Airways, McDowell, Orchid Chemicals, TCS, UCO Bank, Union Bank of India, Unitech and Wipro.
Major News Headlines
Inflation was 6.46% in week ended March 3 against expectation of 6.31%
Punj Lloyd group to construct UK's First World Scale Bio-ethanol Plant
Parsvnath to build Rs2.5bn shopping mall in Ahmedabad
Tata Motors Singur plant site attacked by Villagers – Reports
Thomas Cook to consider rights issue & recommend dividend on 23rd March
Chidambaram expects Average FY07 inflation at 5.4%
United Phosphorous to pay Rs1.2 per share as mid-year dividend
Karur KCP Packagings gets orders worth Rs184.2mn
Pfizer sells Chandigarh property for Rs2.78bn
Cadila Healthcare has acquired Liva Healthcare
Brokers Recommendation:
Sun Pharma – Buy from CLSA with target of Rs1204
Long Term investment:
BEL
HOW MARKET FARED
Fifth straight weekly loss
Markets ended in red for fifth consecutive week with both the key indices slipping over 3% each in the week. This is turning out to be a bad patch for the markets as it does not take a lot for the markets to fall as from the start of this year the Sensex has already fallen over 15%. Investors are vigilant as rising Inflation rates, global happenings and prospect of further monetary tightening by RBI are dampening the sentiments of the players.
After recording a firm start the key indices immediately slipped in to negative territory led by fall in the Capital Good Bank and Technology stocks. All the sectoral indexes including the Mid-Cap and the Small Cap indexes fell sharply dragging the benchmark Sensex to hit a low of 12316.10. Finally, the 30-share benchmark Sensex fell 113 points to close at 12430. NSE Nifty was down 35 points to close at 3608. Hero Honda, Dabur and GAIL were the major losers, however, Tata Motors, Dr Reddy’s Lab and Zee Tele were the major gainers among the 50-scrip’s of NSE Nifty.
Satyam Computer dropped 1.3% to Rs429. According to reports the company planned to spend as much as $50mn to buy a company in the U.S. or Europe. The scrip touched an intra-day high of Rs446 and a low of Rs425 and recorded volumes of over 14,00,000 shares on NSE.
TCS gained 0.5% to Rs1237 after the company yesterday announced that they have won order from Temasek. The scrip touched an intra-day high of Rs1257 and a low of Rs1215 and recorded volumes of over 10,00,000 shares on NSE.
Metal stocks lost their shine on back of selling pressure. Nalco lost 1.3% to Rs230, SAIL was down 0.7% to Rs102, Tata Steel declined 0.7% to Rs430 and Hindalco slipped 0.8% to Rs129.
Cement stocks also were on the receiving end. Gujarat Ambuja slipped 2.1% to Rs103, ACC was down 1.8% to Rs723, Grasim declined 0.5% to Rs2013 and Mangalam Cement lost 4% to Rs143.
Real Estate stocks witnessed profit booking after recent gains. Century Textile declined 4.7% to Rs507, Mahindra Gesco lost 3.5% to Rs602, Bombay Dyeing was down 2.1% to Rs531 and Parsvnath has lost 1.5% to Rs271.
Auto stock ended lower on back selling pressure. Maruti slipped 2.1% to Rs780, Hero Honda was down 3.4% to Rs650, M&M dropped 2.1% to Rs730 and TVS Motors declined 0.3% to Rs61.
ICICIDirect - Pick of the Week - Union Bank of India (Buy: Rs 93, Target: Rs 116)
Union Bank of India (UNIBAN)
Price: Rs 93 Target: Rs 116
Union Bank of India is witnessing robust growth in business supported by
rising non-interest income and a well-diversified loan portfolio.
At the current price of Rs 93, the stock trades at 4.5x its FY08E EPS of Rs
20.7. The bank is poised to sustain healthy earnings growth momentum and is
available at attractive valuations of 1x its FY08E ABV. We believe its RoA
at 0.9% and sustainable RoE at 19 -20% in FY08.
The bank a de-risked investment portfolio with 94% of SLR in HTM category
leading to lower future provisioning requirement on the same. Based on
theoretical P/BV multiple of 1.4x, we get a fair value of Rs 138 on FY08E.
However, considering current market conditions we expect the stock to trade
at 1.2x its FY08E ABV, giving us a target price of Rs 116, an upside of 25%
over a 9-12 month period.
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Thanks Manish
Market may remain volatile
The market is likely to remain volatile and witness sideways movement during intra-days. The overnight fall in US market could drag down the local indices in early trades. However, with bullish Asian Indices trend might lift the investors sentiment and may lead to buying. On the technical side, the Nifty may get support at 3575 and could test higher levels of 3640, while the Sensex may face resistance at 12550 and has a support at 12300 on the downside.
US indices posted loss on Friday. While the Dow Jones delined 49 points at 12110 levels and the Nasdaq ended 6 points lower at 2373.
Indian floats largely had a mixed outing on the US bourses. Patni Computers was the major gainer and rose 1.96% followed by Dr Reddy's advanced 1.12% and MTNL ended with steady gains. Among the laggards ICICI Bank, and Rediff slumped over 2% each while Infosys, Satyam and HDFC Bank, were down over 1% each. However, Wipro, Tata Motors and VSNL were marginaly down.
Crude oil prices in the US market edged lower, with the Nymex light crude oil for April delivery loosing 44 cents to close at $57.11 a barrel and in the commodity space, the Comex gold for April series flared up $6.80 to settle at $653.90 a troy ounce.
Market may recover on firm Asian equities
The market may edge higher tracking Asian markets which were mostly in the green. However, upside may be capped due to data showing lacklustre FII activity over the past two trading sessions.
Although FIIs resumed buying on Thursday (15 March 2007), 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 on Friday 16 March, the day when Sensex had lost 113 points.
FIIs were net sellers to the tune of Rs 563 crore in index-based futures on Friday. They were net buyers to the tune of Rs 104 crore in individual stock futures on that day. Nifty March 2007 futures settled at 3582.30 on Friday, a discount of 26.25 over spot Nifty closing of 3608.55.
The settlement for trading done on Friday 16 March and today’s trading has been clubbed on 21 March 2007 due to bank holiday today on account Gudhi Padva. Therefore, brokerages have advised clients that shares bought on Friday 16 March should not be sold on 19 March 2007.
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.
High inflation remains a cause for concern. 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.
Asian stocks nudged higher on Monday with the markets shrugging of a hike in interest rate by China’s central bank on Saturday 17 March 2007. China's main share index opened down more than 2 percent, but soon regained its poise to trade in positive territory. It was up 1.6%. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.38% to 0.83%.
US crude oil rose 19 cents to $57.30 a barrel, after falling as far as $56.17 last week on worries of an economic slowdown in top consumer the United States.
US stocks fell on Friday as data showing strong consumer price inflation dented hopes for an interest-rate cut any time soon, while fears about the subprime mortgage crisis kept investors on edge. A government report showed overall February consumer prices rose faster than analysts estimated, while core CPI, which strips out volatile food and energy costs, matched forecasts. The Dow Jones industrial average fell 49.27 points, or 0.41 percent, to end at 12,110.41. The Standard & Poor's 500 Index dropped 5.33 points, or 0.38 percent, to 1,386.95. The Nasdaq Composite Index slipped 6.04 points, or 0.25 percent, to 2,372.66.
Central banks in Japan and US meet this week to decide on interest rates. Bank of Japan’s two-day meeting ends on Tuesday while US Federal Reserve’s two-day meeting ends on Wednesday. Fed is expected to keep interest rates unchanged. Analysts are keenly awaiting Fed’s accompanying statement for cues about US economic outlook.
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty above 3785 to give a signal of Trend reversal .
Nifty at a support of 3517 & 3450 levels with resistance at 3685 & 3660 &
3613 levels .
Sell : BajaAuto below 2468 target of 2415 s/l of 2495
Buy : RComm above 385.7 s/l 380.75
Buy : UltraCemco aove 796 target of 820 s/l of 785
Sell : BHEL below 1960 target of 1915 s/l of 1975
Out House :
Sensex at a support of 12354 & 12313 levels with resistance at 12595 &
12786 levels .
Buy : RIL & RelCap
Buy : Ongc & Gail
Buy : Polaris & Mphasis
Buy : Bharti & IciciBank
Buy : PRAJ & Skumarsyn
Buy : INFY & Satyam at dips
Buy : EKC , IBulls , ACC & Aban at dips short covering not ruled out
Dark Horse : PRAJ , Bharti , Skumar , Aban , Polaris , IBulls & IciciBank
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