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Friday, March 30, 2007

CRR, repo rate hike to impact corporates, mkts

Price rise and inflation continues to bog the UPA Government. And, these very concerns seem to have prompted the Reserve Bank of India (RBI) to hike the repo rate by 25 basis points to 7.75 per cent and the Cash Reserve Ratio (CRR) by 0.5 percent to 6.50 per cent.

The impact of the decision is many fold. All home and consumer loans across the board are bound to shoot up consequent to the RBI decision.

The latest hike would also impact the corporate sector that is seeking to access the debt market. The cost of funds for India Inc would also go up in a big way especially for small and medium enterprises that have no access to cheap funds abroad.

Further, the RBI Governor Dr Yaga Venugopal Reddy decision ahead of the annual monetary review is also aimed at curbing the appreciation in rupee vis-a-vis' the US dollar thereby hurting the export of goods and services expensive.

Thirdly, the latest round of hike in repo rate would only hit the profitability of banks and financial institutions that were grappling with the issue of rising cost of funds. While most banks are likely to pass the burden on to consumers, others may have to dip into their profits to keep the interest rates at current levels. -00.jpg

Fourthly, the RBI Governor's decision to further target manufacturing-induced inflation at 6.46 percent has come ahead of the crucial Uttar Pradesh assembly elections. The ruling coalition led by UPA Government seems to have clearly gone on defensive especially after the recent reverses faced in Punjab and Uttaranchal where the Congress was unseated.

Opposition led by BJP has launched a massive campaign across the country against the price rise and inflation especially in poll bound states like Uttar Pradesh and Delhi where civic polls are round the corner.

Fifthly, the RBI decision leading to hike in interest rates in the short term is bound to find reverberation in the stock markets beginning April 2. Monday will be the first trading day in the stock markets after expiry of the futures contracts today.

Sixthly, with rising interest rates that would blunt consumer demand, the macro-economic parameters are bound to be adversely impacted. The GDP growth figures may have to be revised downwards. Already most agencies have forecast the GDP growth for 2007-08 at much lower than the 9.2 percent reported for the current financial year.

The only redeeming feature in the decision is that the impact of interest rate hike would be felt on the corporates only in the next financial year.

The decision, according to RBI data, will suck out 19,500 crore from the system. This is definitely a belt tightening measure.

RBI according to sources has appraised the Prime Minister Dr Manmohan Singh before hiking the repo rate.

Interestingly enough the Finance Minister Palaniappan Chidambaram was singing a different tune on another round of interest rates.


Sweet sops for sugar industry
In a potentially controversial move, the Government announced plans to create a sugar buffer besides providing export incentives to help mills combat an anticipated glut and bunching up of payment arrears to cane farmers. Agriculture and Food Minister Sharad Pawar launched the Rs8.5bn relief package for the sugar industry despite concerns that the Election Commission could take the Government to task for the move ahead of next month's assembly polls in Uttar Pradesh. The Government will build a buffer of two million tons of sugar for two years and provide incentives to exporters amid expectations of a record production. India is set to produce more than 25mn tons of sugar in the year ending in September, up 30% from the previous year and higher than earlier estimates.

Pawar said that there was no plan to block sugar exports through freezing of the Release Order (RO) as reported by certain section of the media. Pawar also said that his announcement of a package for the beleaguered sugar industry ahead of next month's assembly polls in Uttar Pradesh would not lead to any problems with the Election Commission. Reports also said that a section of the sugar industry was not happy with the Government's move to introduce differential transportation incentives for coastal and non-coastal regions.

Inflation unchanged at 6.46%

For the third successive week, India's inflation, based on Wholesale Price Index (WPI), stood at 6.46% in the week ended March 17. Though the latest reading was the same as in the previous week, it was slightly lower than average estimates of 6.5%. The annual inflation rate was 3.69% during the corresponding week of the previous year. With this, the Reserve Bank of India (RBI) is all set to miss its annual inflation target of 5-5.5% as only two more weeks data is to be announced. With less than a month to go for the annual credit policy for FY08, the central bank could well go for another monetary tightening measure in a last ditch attempt to check inflation. Finance Minister P Chidambaram hinted as much when he said this week that there may be further tightening on the cards.

Current account deficit narrows

India's current account deficit, a key barometer of a country's trade, declined to US$3.04bn in the quarter ended December 31, 2006 from US$4.78bn a year earlier, the Reserve Bank of India (RBI) said. The fall in the current account deficit was largely due to the doubling of receipts from professional, software, and business services abroad and remittances by non-resident Indians, the central bank said. The deficit was little changed at US$11.8bn in the nine months ended December 31, 2006 from US$11.9bn in the same period a year earlier. Separately, the Finance Ministry said that India's overseas debt increased to US$142.7bn as of December 31, 2006 as companies stepped up their overseas borrowings amid rising local interest rates. India had an external debt of US$136.5bn by the end of September, the Government said in a statement.

Fiscal deficit 80% of target

India's fiscal deficit in the 11 months ended Feb. 28 reached 80% of the Government's target for the fiscal year ending March 31, the Controller General of Accounts said. The deficit was Rs1.21 trillion, compared with the full-year target of Rs1.52 trillion, the Controller General's office said on its Web site on Friday. The deficit was 90.5% of the target a year earlier.

Sasan UMPP sinks deeper into trouble

The controversial Sasan Ultra Mega Power Project (UMPP) is facing fresh troubles. Newspaper reports suggest that the Lanco Infratech-Globeleq consortium will not be allowed to go ahead with the project implementation. Ernst & Young (E&Y), financial consultant to the Sasan UMPP, has asked the Government to annul the contract awarded to the Lanco-Globeleq consortium (now Lanco-Jindal Steel) and invite fresh bids. The Government has reportedly extended the terms of the Deepak Parekh panel to determine the future course of action on the Sasan UMPP. Though it is almost clear that the Lanco-Jindal Steel consortium will be kicked out of the project, the uncertainty is whether new bids be invited or whether the second lowest bidder be awarded the project. Meanwhile, Lanco says that as per the terms of the bidding documents, the LOI cannot be cancelled once it is awarded, since the consortium is willing to satisfy the above conditions.

GAIL unveils major pipeline expansion plan

GAIL India Ltd. said it had received an approval from the Petroleum Ministry to lay five new gas pipelines. The public sector gas transmission major plans to invest Rs180bn over the next five years in new pipeline projects across India. GAIL will build new pipelines totaling 5,000 km to enhance the company's gas transportation capacity to 280mn standard cubic metres per day (mmscmd) from the current 145 mmscmd, Chairman U.D. Choubey said in New Delhi. The investment would boost revenues to Rs58bn by 2011-12 from 20bn in the current year, he said. Choubey said that GAIL would go to the market to fund the expansion. "Details are being worked out," he said without providing details on whether it would be equity, debt or a combination of both.

JVs galore for India Inc

Godrej Consumer Products Ltd. said on Monday that it had signed an agreement with Sweden's SCA Hygiene Products AB (SCA), a 100% subsidiary of the SCA Group, to forms Joint Venture (JV) to manufacture and market paper based absorbent hygiene products, specifically sanitary napkins and baby diapers, in India, Nepal and Bhutan. Godrej Consumer and SCA will be equal partners in the JV incorporated as Godrej SCA Hygiene Ltd. Adi B. Godrej, Chairman of the Godrej group of companies will be the chairman of the new entity, which is being set up with an equity capital of Rs 200mn

Tata Metaliks Ltd. said on Thursday that it had signed a Joint Venture (JV) agreement with Kubota Corporation of Japan for manufacturing Ductile Iron (DI) pipes in the country. Kubota is the world leader in the manufacturing of DI pipes. Kubota and Tata Steel plan to start production early 2009 and target annual sales of 10bn yen (US$85mn) in the first five years of operation.

Amtek Auto Ltd. signed an agreement with Belgium's VCST Industrial Products for setting up a 50:50 Joint Venture with headquarters in Sint Truiden, Belgium.
The JV will set up a manufacturing facility for powertrain components in India. It will primarily focus on the manufacture of gears and shafts for automotive on- and off-road applications. The manufacturing facility under the Joint Venture will be set up near Amtek Auto's cluster of manufacturing plants at Sanaswadi near Pune. It will have an initial installed capacity of about 1.5mn components for exports only. The facility is scheduled to start shipping out finished parts by February 2008.

Buzz from Deal Street

Glenmark Pharmaceuticals Ltd. said on Monday that its 100% Switzerland subsidiary Glenmark Holdings SA will acquire a majority stake (over 90%) in Medicamenta AS, giving it a commercial foothold in the European market. Under Czech law, a holding of more than 90% shares in a company will trigger a mandatory takeover bid for the remaining shares. This acquisition provides the company with a strategic entry point into two of the fastest growing and attractive markets in Europe, Glenmark said in a statement.
Rain Commodities (USA) Inc. (Rain USA) did not exercise its right to match the sweetened offer by Oxbow Carbon & Minerals Holdings, Inc. (Oxbow) to acquire all the assets of Great Lakes Carbon Income Fund. Rain USA, a wholly-owned subsidiary of Rain Commodities Ltd., had offered C$13.50 per unit for Great Lakes Carbon Income Fund. It had until March 27 to match Oxbow's bid. Great Lakes Carbon Income Fund also said that it will enter into an agreement with Oxbow, which has offered to buy the fund's assets at C$14.00 per unit of the fund in cash. On March 20, the Board of Trustees of Great Lakes Carbon Income Fund said that Oxbow's C$14.00 per unit proposal was a superior proposal. Based on Great Lakes' last quarterly results filing, the company had 51.2mn units outstanding, valuing Oxbow's offer at C$717mn.

Big orders for Man Ind, Patel Eng

Man Industries India Ltd. said that it has recently bagged an order totaling about US$225mn (approximately Rs10bn) from the United States. The company would manufacture and supply 257 Miles of 42 Inch Diameter LSAW and HSAW line pipes with external and internal anti-corrosion coating systems, Man said in a statement. With this new order, the company's order book position will increase to Rs22bn.

Patel Engineering Ltd. announced that it has bagged an order worth Rs8.06bn in joint venture with Gammon Ltd. from the Satluj Jal Vidyut Nigam Ltd. for the 434 MW Rampur Hydro Electric Project. Satluj Jal Vidyut Nigam is a joint venture between the Government of India and Government of Himachal Pradesh. The project is located on the river Satluj in Shimla and Kullu districts of Himachal Pradesh. The project work involves construction of a 15-km-long head race tunnel (HRT), a 140-m deep surge shaft and power house on the right bank of Satluj near village Bael. The project will be completed in the next 54 months.

Advanta IPO subscribed

The Initial Public Offering (IPO) of generic agrochemicals maker Advanta India Ltd., a subsidiary of United Phosphorus Ltd., was subscribed 3.5 times. The company received bids for 11.68mn shares as against the issue size of 3.38mn shares. The price band for the issue was set at Rs600 to Rs650 per share. The IPO opened for subscription on March 26 and closed on March 30. The issue will constitute 20.08% of the post-issue paid-up capital of the company. The company has already allotted 1.7mn shares at Rs625 each to a clutch of investors in a pre-IPO placement. The investors include Morgan Stanley Dean Witter Mauritius Co. Ltd, Morgan Stanley Investments (Mauritius) Ltd., Citigroup Global Markets Mauritius Pvt. Ltd., Deutsche Securities Mauritius Ltd. and Emerging Markets South Asian Stars Fund. Advanta India intends to invest about Rs2.5bn to pay off the dues of its subsidiary Advanta Holdings BV. Post-issue, United Phosphorus' stake in Advanta would fall to just under 50% from 62.43%.

Oil hits 6-month peak on Iran woes

Crude oil prices touched six-month high as tension between Iran and the UK escalated over the capture of British by Tehran last week. A day after closing at a six-month high, light, sweet crude futures rose another 45 cents to US$66.48 a barrel in Asian electronic trading on the New York Mercantile Exchange. Trading settled Thursday at US$66.03 a barrel on the New York Mercantile Exchange - the highest settlement price since Sept. 8, 2006, when crude finished at US$66.25. Brent crude for May gained 64 cents on Friday to US$68.52 a barrel on London's ICE Futures exchange. Oil in New York jumped briefly past US$68 per barrel in after-hours trading on Tuesday on rumors that Iran had fired on a US ship in the Persian Gulf.

The UK Government froze diplomatic links with Iran and sought help from its allies, to rescue its sailors and marines held since March 23. Prime Minister Tony Blair stepped up diplomatic pressure on Iran to release 15 navy personnel. Iranian Foreign Minister Manouchehr Mottaki said that Britain must admit that its marines breached Iranian waters before they will be freed. The UN Security Council expressed grave concern over Iran's seizure of 15 British sailors and marines and called for an early resolution of the escalating dispute.

Fed still worried about inflation

Inflation continues to be the primary concern for US central bankers, but they need more elbow room to structure their monetary policy amid growing risks to the world's largest economy, Ben S. Bernanke, the Chairman of the Federal Reserve said. "Our policy is still oriented towards control of inflation, which we consider to be at this time to be the greater risk," he told the Joint Economic Committee of Congress in Washington. "Still, uncertainties have risen, and therefore a little more flexibility might be desirable." Bernanke's remarks came a week after the Fed policy makers surprised the markets by dropping their bias towards higher borrowing costs, which was taken by most as a signal that the central bank was ready to cut rates. However, much to the dismay of the markets, Bernanke's latest comments contained no reference to a possible interest rate cut, which some economists predict as soon as next quarter. In fact, the Fed chief said that policy makers want to move away from guidance on future rate decisions.

US economic growth improves

The US economy grew at a higher than expected pace in the fourth quarter, spurred by swelling inventories and higher exports even though investments in software were revised slightly lower. The Gross Domestic Product (GDP) grew at a 2.5% annual pace in the final three months of 2006, slightly faster than the previous estimate of 2.2%, the Commerce Department reported. Economists had forecast an unchanged reading of 2.2%. The final revision was up from a 2% GDP growth rate in the third quarter and meant that the world's largest economy expanded by a solid 3.3% during 2006. It was the third straight year that GDP grew by over 3%, following a growth of 3.2% in 2005 and 3.9% in 2004.

Chinese steel output will fall

production China's steel production will slow in the current year due to lower domestic demand as Beijing aims to reduce investment in fixed assets to prevent the world's fourth-largest economy from overheating. Crude steel output in China will grow by 13% in 2007 as against 18% last year, Luo Bingsheng, Executive Vice-Chairman and Secretary General of the China Iron and Steel Association said. Speaking at the Steel Market and Trade Conference in Guangzhou, Luo said that China's crude steel output this year would increase to 472mn tons from around 419mn in 2006. The slower production coupled with the Government's measures to curb surging foreign investment will keep exports at the same level as 2006 or lower, Luo said. China exported 43mn tons of steel products in 2006, up 109.6% while imports fell 28.3% to 18.5mn tons.


Sugar Incentives - A positive move in the short term

Government support for the sector positive in the short term

Government has reportedly announced a series of measures to provide short term support to the sugar industry. These measures include:

ü A subsidy of Rs1.35/kg for coastal states like Maharashtra, Tamil Nadu, Karnataka and Gujarat while a subsidy of Rs1.45/kg for north based mills.

ü Creation of a buffer stock of about 2mn tons

ü With an estimated sugar inventory of about 8mn tons by September 2007, the buffer stock would lower the cost of holding for the companies which would be borne by the government.

Beneficiary Companies

Companies with sizable re-export obligations are expected to take advantage subsidy schemes to partially liquidate their inventories accumulated as a result of bumper cane crop in the current seasons.

For instance, Sakthi Sugars, one of the largest exporters, has an obligation under the Advance License Scheme (ALS) of about 200,000MT to be exported by December 2007. The average import price of raw sugar was about US$200/ton while the company expects export realizations of about US$310/ton which would translate into domestic price of Rs13.2/kg which, coupled with the export subsidy of about Rs1.35/kg, would lead to net export realization of about Rs14.5/kg

No Impact On Larger Players

Larger sugar companies like Bajaj Hindustan, Balrampur Chini Mills and Triveni Engineering and Industries do not have any obligation under ALS hence would remain unaffected by any such scheme. These companies may, however, look at fresh exports if domestic prices tumble further since this would help them liquidate mounting stocks albeit at lower international realizations.


Another mayhem on the cards

It could well be just another Manic Monday. The focus would have been speculation on the results. But the Reserve Bank of India has chosen to deal a nasty blow to the bourses with its tightening measures. In yet another move to curb inflation, the Reserve Bank of India (RBI) on Friday announced that it was raising the repurchase rate (repo rate) by 25 basis points and would hike the Cash Reserve Ratio (CRR) by 50 basis points in two stages. The central bank has increased the repo rate, a key short-term lending rate, from 7.5% to 7.75% with immediate effect. As panic sets in, quality stocks will be available at lower prices. Investors can hope to make some purchases at lower levels. Movement of the rupee, crude oil price and global market movements will play on the investors mind. The truncated week could see some wild swings beginning with a crash on Monday morning. In case you don't have the appetite for choppiness, stay light and watch the show from the sidelines.


The struggle continues

Never forget the blood sweat and tears
The uphill struggle over years…

The struggle continued for the bulls even in a truncated trading week. After making a smart comeback last week, we are back in the red thanks to a big fall on Wednesday. However, the bulls did manage to rebound in the last two trading sessions on the back of short covering in the F&O segment. FII inflows too seem to be picking up of late, aiding the rally from the crash in February. After a ferocious February, which saw bulls massacred on Dalal Street, the benchmark BSE Sensex managed to gain 1% from last month. However, on a quarterly basis, the index is down 5.2%, registering its first decline in three quarters.

The rescue act of over last two days failed to help the bulls, from losses sustained at the start of the week caused by global worries. Steep rise in crude oil prices and fears of slowdown in the US had its ill-effects on Dalal Street. US light crude for May delivery jumped to $68.91 a barrel in electronic trading on the back of rising tension between Iran and the UK over the detention of British sailors by Tehran last week. Also, statement by Federal Reserve Chairman Ben Bernanke contributed to the woes.

The Sensex lost 214 points or 1.61% on the week to close at 13,072 and the NSE Nifty fell by 40 points or 1.02% to shut shop at 3822. Tata Motors, Bajaj Auto, TCS and Infosys were among the major losers. Banking, Auto and IT stocks fell sharply. While Pharma, FMCG and select Mid-Cap stocks bucked the negative trend and closed higher.

Sugar stocks were back in action after a long time following the announcement of a relief package by the Government. Agriculture Minister Sharad Pawar said that the Government will build a sugar buffer and provide export incentives to mills to quell the domestic glut amid expectations of a bumper crop this year. Sugar stocks were the star performers of the week. Sakthi Sugar soared 61% in the week to Rs100, Renuka Sugar rose by a whopping 22% to Rs467, Bajaj Hindusthan rallied by over 14% to Rs195 and Balrampur Chini added 7.6% to Rs66.

FMCG stocks also gained momentum. HLL rose over 4% to Rs205, Britannia advanced 1.2% to Rs1254, Colgate gained 1.8% to Rs332 and Nestle added 1.2% to Rs934.

Pharma stocks were back in the reckoning after being under performing the key indices. Dr Reddy's was up over 6.5% to Rs727 and Ranbaxy advanced by nearly by 6% to Rs352. Others like Aurobindo Pharma jumped by over 11% to Rs679. Pfizer rallied by 10% to Rs796 and Wockhardt gained 4.6% to Rs397.

Rising crude oil prices hurt auto stocks. Tata Motors fell by over 9% to Rs727, the scrip also was the top loser, Bajaj Auto fell by over 5.5% to Rs2425, Maruti was down 1.3% to Rs819 and TVS Motors lost 5% to Rs59.

Volatility in the rupee added to the concerns of IT companies. Also, a weak consumer confidence report in the US heightened worries about a slowdown in the world's largest economy. Wipro lost over 6% to Rs558, TCS declined by over 5.5% to Rs1231 and Infosys fell 5% to Rs2012. Patni was down 2.8% to Rs386, HCL Tech fell 1.8% to Rs291 and FT declined 1.5% to Rs1827.


RBI ups repo rate, CRR

In yet another move to curb inflation, the Reserve Bank of India (RBI) on Friday announced that it was raising the repurchase rate (repo rate) by 25 basis points and would hike the Cash Reserve Ratio (CRR) by 50 basis points in two stages. The central bank has increased the repo rate, a key short-term lending rate, from 7.5% to 7.75% with immediate effect. The last time, the RBI hiked the repo rate was during its quarterly review of credit policy on Jan. 31. The RBI said that the CRR will increase from 6% at present to 6.25% from April 14 while the balance 25 basis points hike will be effective from April 28. The central bank said that the CRR hike will drain Rs155bn from banks. The RBI also announced that it was cutting interest rate on CRR balances from 1% to 0.5% from April 14. While interest rates on housing loans, personal loans, etc. will rise further, interest rates on deposits too will go up. Also, credit growth, which has been rising consistently at 30% rate could slow. Stock, bond and foreign exchange markets are expected to fall sharply on Monday following the surprise announcements by the RBI

Volatile rupee almost crosses 43 mark
The rupee was highly volatile this week. On March 28, the partially-convertible Indian currency touched its highest level in more than seven years, almost breaching the 43 mark. This was due to heavy dollar sales by banks, which faced acute cash shortage in the wake of the Rs300bn worth of outflows towards advance tax payments. The next day, the rupee had its biggest fall in 11 years on dollar buying by importers to meet month-end requirements and strong foreign capital inflows. The Indian currency closed at as against 43.58 on March 23. During the week, the rupee touched 43.0350, the highest since June 8, 1999. But on March 29 it suffered a drop of 1.7%, the biggest fall since March 18, 1996, closing at 43.76 per dollar.

Meanwhile, the Reserve Bank of India (RBI) was conspicuous by its absence from the forex market despite the rupee coming close to the 43 mark. The central bank seems quite happy to let the rupee advance as a stronger currency makes imports cheaper, helping stem the rise in inflation. In the past, the RBI absorbed dollars to keep the rupee from rising too much, maintaining the competitiveness of Indian exports. However, with price stability being the topmost priority for the Government, the central bank has given up its hands-on approach, leading to the current strength in the rupee. Faced with a stubborn inflation, the RBI has realised that it is futile to interfere in the forex market to keep exporters happy as price control is of paramount importance.

Citigroup - Interest Rate & Currency Forecasts

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Merrill Lynch - IT Services

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Weekly Close: FY 06-07 ends..what about 2007-08?

It has been a volatile and tough Month of March. Markets have closed virtually flat for the month. The Financial year has been quite good though the fall from the highs seems to have taken the shine off. There are more worries and unanswered questions about the global economies. India seems to be treading along fine but its the impact of slowing US economy which is worrying markets. It has been a year replete with interest rate hikes, inflation, high crude prices and escalating metal prices. Economy witnessed growth of around 9% which is really great but it was followed by worries like inflation. Infrastructure and manufacturing sector showed robust growth for the financial year but agriculture growth was disappointment, mere 1.5-2% growth and was the actually cause of inflation. FM had made some attempt to enhance agriculture growth but time will only tell how successful the attempts were. 2006-07 continued to shower favour on large cap but mid caps and small caps were away from the lime light. We believe that mid caps are the one where the actual value lies..2006-07 was the year of liquidity driven stocks but now its time for value pick particularly mid caps.

This was holiday shortened week. To add to that this was also F&O settlement week which kept session extremely volatile. The markets had recovered almost 1000 points from the lows in week before this week and certainly direction was upward biased ,however, F&O settlement kept the index extremely volatile. The markets have corrected sharply and also recovered from its low in last month. At such time it really requires some strong news flow or trigger which is for now lacking. Today, however, market saw some strength probably on MF buying so as to support prices to prop up NAV at the end of the financial year.

This week was also a disappointment for Indian cricket fans. India was out of world cup and advertisers where the one who put up with big brunt. The telecast rights are with Set Max. Indian team out of world cup certainly means gains in TRP for others. Zee is the main player and our pick here.

Sensex ended down by 1.8% for the week. Weighing on the index were Bank's -4%, IT -3.5%, Auto index -3.5% while FMCG gained +3% and Health care +2%. Ranbaxy +6.97, Zee Tele +6.20%, Dabur +4.2%, ITC +4.2% and Dr.Reddy's +5.57% were the major gainers. Tata Motors -8%, Wipro -7.22%, HDFC bank -6.76%, ICICI Bank -4.7% and HDFC -4.67% lost the shine for the week.

Though the market were hammered badly after the budget some stocks recovered from there worst. HLL gained by 16% for the month. The performance of the stock really did not seemed attractive. Competition is red hot and company is really advertising aggressively to remain at top. Advertising spent has been increased to 15%-20%. Again this makes us more positive on media particularly Zee. ITC was also a worst hit this month on talks of VAT. The bill has been passed and it has been left with the state to levy VAT (and also what %) on cigarettes. But really price hike in cigarette will hit volume is big debate !

This week was a watershed for the Rupee. It did play out largely as we imagined though the RBI even surprised us holding out to as much as Rs 43.05 to a Dollar and then the jump was sharp amidst all the short covering. So now the point of Rs 43.05 will be the touch me not point for a couple of months. We, however, are getting more bullish on the Rupee. India's energy dependence on Imports will reduce over the next couple of years. At one point in the week we wondered whether the RBI had changed stance to a strong Rupee policy. That would have been good news really.. but its certainly not the case. The love for the greenback remains embedded strongly in the Indian Administration mind. IT stocks were the worst hit, as the Dollar slipped till Rs 43.05 versus the Rupee, its lowest since June 1999. Also to add to this was the weak consumer confidence report with brought in concerns about a slowdown in the US Economy where these companies generate their maximum revenue. The report has compounded the woes of Indian IT companies just after the new found strength of the Rupee. However, RBI intervened at 43.05 and some weakness was seen in Rupee against the Dollar.

Crude was hot commodity for the week...Iran's capture of 15 British sailors and marines on March 23 was the prime catalyst which moved crude prices higher every day since. The transport counter and Refineries who were seeking some relief for low crude price where once again under pressure. Technically crude is headed towards $ 70.. pressure may continue here unless and until Iran tension eases. Things ahead depends on time. Till then wait and watch !

However, high crude prices will help alternate fuel. Sugar will be the one to be watched on back of Ethanol. Some news papers have reported that Sugar production will be bumper.. however, there was also news that the Government is bailing out the sugar manufacturers in a big way to help the farmers in UP where the payments have not been going. As per reports the Government would create a buffer stock for the next two years and also provide subsidy for exports. Govt. sweet attitude towards the stock helped this counter to trade firm for the week. High crude may keep interest buoyant.

Sensex has closed at 13072, yet it failed to hold above previous week's close. The support for the sensex lie at 12800 and 12650. On the higher side it is likely to face resistance at 13400. With the result season to start in the 2nd week of next month, we might see some stock specific movement. Markets likely to remain in the current range unless and otherwise we have any major development. The News which came out late in the eveing on Friday wa that the RBI has raised the CRR by 0.50 bps to 6.50% which will be in two phases and Repo Rate by 0.25 bps to 7.75%. This is bad news for the banks and the shortage of Liquidity in the market could be see.

Hexaware Technologies: Sharekhan Stock Idea dated March 30, 2007

Hexaware Technologies
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs220
Current market price: Rs159

Growth at attractive valuations

Key points

  • Strong presence in niche areas: Hexaware Technologies Ltd (HTL) is a mid-cap company with a differentiated strategy of focusing on the fast-growing niche areas of enterprise package implementation and HR IT services. It has dominant share in the PeopleSoft implementation market and is growing its presence in Oracle and SAP space. Even in terms of verticals, it is focused on three key industry domains—transportation, BSFI and manufacturing—that account for over 95% of its revenues.
  • Better mining of clients by expanding portfolio of service offerings: HTL is using a combination of organic and inorganic initiatives to expand its portfolio of service offerings that would enable it to enhance the share of business from its existing clients. One such initiative has been to build capabilities in the fast growing testing and quality assurance service practice, by developing manual testing services in-house and gaining a foothold in automated testing solution and consulting business through acquisition of US-based FocusFrame Inc. HTL aims to scale up the revenues from this practice to over $100 million per year in the next three years.
  • Strong growth visibility with sustainable margins: The strong order book position of $250 million (of this $170 million is executable in CY2007), improving range of service offerings and a growing support for PeopleSoft by Oracle are some of the key drivers of the significant improvement in HTL's revenue growth visibility. Moreover, it has a number of levers to cushion it against the severe cost pressures and is expected to maintain its OPM in a narrow band of 15.5-16% over the next two years.
  • Attractive valuations: The consolidated revenues and earnings are estimated to grow at a healthy rate of 31.6% and 28.5% respectively but the same is not reflected in the stock's prevailing valuations of 14.2x CY2007E and 11.2x CY2008E earnings. We recommend Buy on HTL with a price target of Rs220.
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Sensex gains amid volatility

The Sensex began the trading session above the 13000 mark at 13018, up 38 points, and moved up in early trades on buying in several heavyweights to touch an early high of 13070. However, the Sensex eased on profit booking in oil & metal stocks and touched an intra-day low of 12984. The market moved up on reports that the inflation was unchanged for the third week in a row at 6.46%. The Sensex surged and touched an intra-day high of 13112 on substantial buying in pharma, fast moving consumer goods, metal and auto stocks. The Sensex settled at 13072, up 92 points. The Nifty ended the session at 3822, up 23 points.

The breadth of the market was positive. Of the 2,610 stocks traded on the BSE, 1,676 stocks advanced, 864 stocks declined and 70 stocks ended unchanged. Among the sectoral indices the BSE HC Index advanced 1.89% at 3649 followed by the BSE Metal Index (up 1.71% at 8488), the BSE FMCG Index (up 1.57% at 1739) and the BSE Auto Index (up 1.36% at 4869).

Most of the heavyweights ended in positive territory. Dr Reddy's rose 3.13% at Rs728, NTPC advanced 3.06% at Rs150, ITC climbed 2.49% at Rs150, Ranbaxy surged 2.13% at Rs353, Gujarat Ambuja gained 2.01% at Rs107, Tata Steel added 1.88% at Rs450, Satyam Computers jumped 1.86% at Rs470, Grasim advanced 1.78% at Rs2,091, Tata Motors added 1.77% at Rs728 and HDFC Bank was up 1.75% at Rs949. Among the laggards Wipro shed 1.27% at Rs558 and TCS slipped 1.27% at Rs1,231. HDFC, BHEL, ICICI Bank, Cipla and ACC ended with marginal losses.

Pharma stocks were in the limelight. Lupin soared 4.82% at Rs606, Aurobindo Pharma advanced 4.68% at Rs679, Sun Pharma added 4.08% at Rs1,059 and Matrix Labs gained 3.36% at Rs175. Biocon, Cadila, Wockhardt and Glaxo gained 2-3% each.

Over 32.16 lakh Idea Cellular shares changed hands on the BSE followed by Reliance Petro (23.53 lakh shares), SAIL (20.27 lakh shares), HLL (19 lakh shares) and ITC (17.64 lakh shares).

Value-wise Reliance Industries registered a turnover of Rs77 crore on the BSE followed by ICICI Bank (Rs50 crore), Tata Steel (Rs49 crore), Bajaj Auto (Rs46 crore) and Infosys (Rs43 crore).

Rate, CRR hikes may puncture the sentiment

The Reserve Bank of India (RBI) on Friday (30 March 2007) evening raised its short-term lending rate, the repo rate by 25 basis points, to 7.75% with immediate effect. Its cash reserve ratio (CRR) has also been hiked by half a percentage point. The cash reserve ratio will rise to 6.50% in two tranches, the first on 14 April and the second on 28 April.

The latest move by the central bank is expected to impact banking scrips directly and all other interest rate sensitive sectors indirectly.

"In the light of the current macroeconomic, monetary and anticipated liquidity conditions, and with a view to contain inflationary expectations, it is critical to take demonstrable and determined action on an urgent basis," RBI said in its statement on Friday.

Crude oil rose prices have surged near the $68 per barrel mark. Any sharp move from here may hurt the market very badly. On the other hand, inflation has been a nightmare for the last few months. Inspite of taking several measures to rein in prices, the government has not been able to bring it down. India's wholesale price index rose 6.46% in the 12 months to 17 March 2007, matching the previous week's increase, latest data released on 30 March 2007 showed.

A lot will depend on how the global markets pan out. Over a past few months, local bourses have been tracking global cues in the similar direction. Any sharp correction will lead to a fall here as well.

The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008

Market ends nearly 214 points in deficit

The market settled with losses for the week due to concerns about weak global markets, and soaring global crude oil prices, which were trading near $67 per barrel mark. Prior to this week, the markets had settled with weekly losses five straight times.

The BSE Sensex lost 213.8 points (1.6%) for the week ended 30 March 2007, to settle at 13,072.10, while the S&P CNX Nifty lost 39.50 points (1%), to end at 3,821.55.

The week started bearish, with the Sensex declining 161.61 points on 26 March, to 13,124.32, as banking and auto shares succumbed to selling pressure.

The markets remained closed on 27 March 2007, for Ram Navmi.

The 30-share BSE Sensex plunged 239.98 points, a day later, to 12,884.34, as stocks across the board were severely pounded. The market collapsed partly due to weak global markets, and partly due to unwinding in the derivatives market. All BSE sectoral indices settled with losses, and shares from IT, auto and banking space had to beat a hasty retreat.

On 29 March 2007, the Sensex advanced 95.32 points, to 12,979.66, on account of short covering in the derivatives segment. Shares from FMCG, Capital goods and IT sectors were in demand.

The 30-share BSE Sensex settled 92.44 points higher, at 13,072.10, on 30 March 2007, as investors built fresh positions, following the smooth rollover of open positions in the derivatives segment, from March to April, and anticipating robust Q4 and FY 2007 results from India Inc.

Reliance Industries (RIL) was down 0.44% to Rs 1372.60. Reports suggest that RIL was scouting for partners in Europe and the United States, to help speed up retail expansion in the country. RIL will be interested in partnering with a US specialty retailer. The company aims to open about 2,000 fresh stores over five years.

According to another report, RIL is likely to join the race for the $1-billion Vizhinjam port on the Kerala coastline. The state government has decided to call fresh tenders from private players interested in developing the port. RIL, which was eyeing participation in a major port project on the west coast capable of competing with Colombo, is showing early interest in Vizhinjam International Seaport (VISL).

Bajaj Auto was down 4% to Rs 2425.45. Chairman Rahul Bajaj reportedly said the company may build cars to ward off the prospective threat Tatas' Rs 1-lakh car poses to the two-wheeler market. Tata Motors’ Rs 1 lakh 'people's car' will hit the roads in 2008, denting top-end motorcycle sales, provided the firm gets the product right.

Bajaj's statement was the first confirmation that the country's top three-wheeler and second-largest motorcycle maker was interested in developing a low-cost car. Bajaj Auto had earlier announced it was developing a four-wheeler goods carrier, which is scheduled for launch in 2009.

Tata Motors declined 7.70% to Rs 727.75. Tata Motors intends to set up one more automobile plant in the country within two years. This will be a commercial vehicle facility for which the process of identifying a suitable site is under way. The company’s decision to set up a commercial vehicle plant was prompted by significant growth the segment has witnessed over the past couple of years.

ICICI Bank slipped 4.30% to Rs 853.10. It announced its Singapore branch, successfully priced the Euro 500 million Reg S Floating Rate Note under its Medium Term Note Programme (MTN). It is the first Indian bank to offer a benchmark sized two-year floating rate note in the Euro market. The offering had an Euro 862 million order-book with a total of 71 investors. New investors accounted for more than 50% of the deal size. The two-year floating rate notes of Euro 500 million were priced at a spread of 40 basis points over the three-month LIBOR.

Tata Consultancy Services (TCS) was down 4.21% to Rs 1231.20. There were reports that TCS may get a stake of up to 10% in Deutsche Telekom unit T-Systems for executing $1 billion worth of orders.

Tata Consultancy Services (TCS) and Sitel, a global Business Process Outsourcing (BPO) leader, announced that the two parties had concluded an agreement to transfer the ownership of the TCS' 40% stake in SITEL India to US-based Sitel Corporation for a consideration of $17.732 million. Sitel India is a joint venture between the Tata Group and Sitel Corp, formed in 2000, with both parties holding 50% stake.

Tata International, which holds a 10% stake in the JV, has also agreed to sell its stake. This joint venture company provides voice-based contact center BPO services from India. The JV is a provider of fully-integrated, customer care and back office processing services operating from five centers.

Tata Steel, fresh from its takeover of Anglo-Dutch giant Corus, gained 2.51% to Rs 449.60. The private sector steel behemoth has now entered into talks with the world's second-largest steelmaker Nippon of Japan for jointly producing an alloy for automakers and other companies. The two firms are reportedly said to be in the process of finalising the terms of the venture.

Going by media reports in Japan, the two companies are likely to spend about $423 million (about Rs 2,000 crore) to make thin-sheet steel chiefly used in automotives in joint venture, which will use Nippon's technology. The plant will be able to produce about 1 million metric tonnes of steel a year.

Shares from the sugar sector were the stars of the week’s trading session. They surged on high volumes, as these companies seem to be benefiting from the soaring crude oil prices. Earlier this week, there were reports that the government will give export incentives worth Rs 1,350-1,450 a tonne to mills. Shree Renuka Sugars surged 19%, Bajaj Hindustan jumped 16% while Sakthi Sugars soared 57%.

On 26 March 2007, Sparsh BPO Services settled at Rs 104.75. Sparsh BPO Services’ listing on BSE followed a restructuring scheme of Spanco Telesystems and Solutions. A day ahead of its listing, BSE had set Rs 130.90 as base price for Sparsh, with 20% daily circuit filters.

As per the scheme of arrangement between Spanco Telesystems and Solutions (Spanco) and Sparsh BPO Services (Sparsh), formerly known as Intelenet BPO Services, the domestic call center division of Spanco was demerged and vested into Sparsh on a going concern basis. As a part of the scheme, Sparsh allotted 79,12,275 equity shares of Rs 10 each to shareholders of Spanco in the ratio of an equity share of Rs 10 each for every three equity shares of Rs 10 each held by the shareholders in Spanco on the record date. The equity capital of Sparsh is Rs 16.14 crore and the face value per share Rs 10.

The Securities and Exchange Board of India (Sebi) decided to allow short selling by institutional investors only in such stocks which are also traded in the derivatives segment. A clarification was made by M Damodaran, Chairman, Sebi, at a press conference in Mumbai on Wednesday (28 March). At present, there are 159 stocks for which derivatives are available.

Damodaran added that institutional investors will be allowed to sell short only in these 159 stocks. According to the Sebi chief, short selling by institutional investors cannot be expanded to other stocks as the decision was based on experience gained in the matter. Even the list of 159 stocks was not small, and more stocks could be covered in due course, Damodaran informed.

On the issue of IPO grading, Damodaran said the scope of grading wouldl be expanded gradually to even rights issue and follow-on public offerings (FPOs). Later, companies will also be graded on the basis of previous issues made by them. However, with the introduction of grading, the merchant banker will not be shorn off his responsibility. Merchant bankers will continue to be responsible for all disclosures made in the prospectus and issue related processes.

On the issue of imposing the circuit filters on the first day of listing, Damodaran said, the Surveillance Committee comprising the representatives of the exchange and Sebi, was seized of the matter and some concrete decisions would be taken soon. However, on the issue of imposing ciruit filters on the day of re-listing of securities, Damodaran pointed to an already existing provision for imposing 20% circuit filter.

India's wholesale price index rose 6.46% in the 12 months to 17 March, matching the previous week's increase, data released on 30 March showed. The figure was slightly below a forecast of 6.50%.

India's current account deficit in the October-December quarter was $3.04 billion, compared with a revised deficit of $4.68 billion in the July-September quarter, the central bank said on Friday. Data from the Reserve Bank of India (RBI) showed the October-December merchandise trade deficit widening to $19.02 billion from a revised $16.06 billion in the July-September quarter. The RBI said the balance of payments (BoP) surplus in the October-December quarter was $7.51 billion, compared with a surplus of $2.27 billion in the July-September quarter.

India's foreign exchange reserves rose to a record $197.746 billion on 23 March, from $195.957 billion a week earlier, the Reserve Bank of India (RBI) said in its weekly statistical supplement on Friday. Analysts attribute part of the increase in the reserves to the central bank's aggressive dollar purchases to protect the rupee's export-competitiveness against other currencies.

RBI said foreign currency assets expressed in US dollar terms included the effect of appreciation or depreciation of other currencies held in its reserves such as the euro, pound sterling and yen. The foreign exchange reserves include India's reserve tranche position in the International Monetary Fund (IMF).

Market makes over 90 points; all sectoral indices end in green

The market held firm for the entire session, as buying continued following the smooth rollover of open positions in the derivatives segment, from March to April. Of more interest today, was the contribution made by small-cap and mid-cap shares to the rally. All sectoral indices on BSE closed in the green. A slower-than-expected rise in inflation also brightened the sentiment. The surge is also attributed to building up of fresh positions, anticipating robust set of Q4 and FY 2007 results from India Inc.

The 30-share BSE Sensex settled 92.44 points (0.71%) higher, at 13,072.10. The benchmark index had opened higher, at 13,018.21. It also spurted above the 13,100 level in the late-afternoon session of trade, to touch a high of 13,111.87. Fresh buying, especially in metal producing and FMCG stocks, was the cause of this renewed zest in the Sensex, which had also stooped to a low of 13,000.12.

The financial year 2006- 07 is the fourth year on-the-trot of gains for the Sensex, which added 15.9% to last fiscal's tally.

The S&P CNX Nifty gained 23.45 points (0.62%), to close at 3,821.55. It had settled FY-2007, up 12.3%.

The total turnover on BSE amounted to Rs 2974 crore.

The market-breadth was also strong on BSE. There were close to 1.7 gainers for every loser. Against 1,672 shares advancing, 899 declined and 68 shares remained unchanged on BSE.

The BSE Mid-Cap Index rose 64.95 points (1.22%), to end at 5,384.12, while the BSE Small-Cap index ended 92.72 points (1.45%) higher, at 6,470.51.

Among the 30-Sensex pack, 19 advanced while the rest declined.

Power sector PSU, NTPC, was the top-gainer, up 2.86% to Rs 149.45, on volumes of 9.39 lakh shares. NTPC said it had signed an agreement with KFW, Germany, for a term-loan of $100 million. The loan agreement, which state-run NTPC signed, is an unsecured facility without sovereign guarantee bearing variable interest linked to LIBOR, and has a maturity of 10 years. The loan will part-finance renovation and modernisation (R&M) of NTPC's power plants.

Pharma major Dr Reddy’s Labs advanced 2.76% to Rs 724.90, while another pharma giant Ranbaxy Laboratories edged up 2.24% to Rs 353. The BSE Healthcare Index advanced 67.61 points (1.89%), to 3,649.43. Orchid Chemicals (up 5.52% to Rs 262.80), Lupin (up 4.55% to Rs 604), Sun Pharma (up 3.72% to Rs 1055), and Matrix Labs (up 3.68% to Rs 176) also rose.

Shares from the FMCG sector were also in demand. The BSE FMCG Index added 26.89 points (1.57%), to finish at 1,739.10. Cigarette major ITC surged 2.41% to Rs 150.25, on high volumes of 17.55 lakh shares. ITC had earlier hit a high of Rs 152.75.

Dabur India (up 5.59% to Rs 95.40), Britannia (up 2.32% to Rs 1250), P&G (up 7.62% to Rs 834.90) and Nirma (up 1.64% to Rs 160.85), were the other gainers from the FMCG pack.

Tata Motors rose 1.56% to Rs 726. Tata Motors intends to set up one more automobile plant in the country within two years. This will be a commercial vehicle facility for which the process of identifying a suitable site is under way. The company’s decision to set up a commercial vehicle plant was prompted by significant growth the segment has witnessed over the past couple of years.

Index heavyweight Reliance Industries (RIL) advanced 1.22% to Rs 1372.60, as 5.66 lakh shares got transacted. The scrip also attained a high of Rs 1373.50.

IT major Wipro was the top-loser, down 1.42% to Rs 557.50, on a volume of 2.16 lakh shares.

HDFC (down 1% to Rs 1520), TCS (down 1.20% to Rs 1332) and Bhel (down 1.14% to Rs 2253) were the other losers.

Indiabulls Real Estate was the top-traded counter, grossing Rs 184.35 crore on BSE, followed by Shree Renuka Sugars (Rs 77.79 crore), Reliance Industries (Rs 77.25 crore) and Bharti Airtel (Rs 63.15 crore).

Sugar stocks were the star performers for the day. They surged on high volumes on expectations of benefiting from soaring crude oil prices. Earlier this week, there were reports that the government will offer export incentives worth Rs 1350 - Rs 1450 a tonne to sugar mills. Shree Renuka Sugars surged 11.40% to Rs 478, on a volume of 17.35 lakh shares. Bajaj Hindustan jumped 9% to Rs 197.40, on a volume of 23.65 lakh shares, while Sakthi Sugars soared 19.10% to Rs 105.45, on a volume of 48.40 lakh shares.

The BSE Metal Index rose 1.71%. SAIL (up 2.05%), JSW Steel (up 4%), Jindal Steel (up 1.30%), Hindustan Zinc (up 3.11%) and Hindalco (up 1.79%) are some of the notable gainers in the metals pack.

Oil exploration as well as offshore services firms were in demand after crude price surged. Hindustan Oil Exploration jumped 5.68% to Rs 67.90, while Cairn India surged 4.53% to Rs 132.60.

Among offshore oil services comapanies, Great Offshore surged 2.78% to Rs 606.15, Dolphin Offshore gained 5.06% to Rs 193.25 and South East Asia Marine Engineering & Construction rose 2.30% to Rs 181. A recent survey by Lehman Brothers notes the global spend on exploration and production will rise 13% in 2007. Exploration and production (E&P) companies increased their spending 20 - 30%, in 2005 and 2006.

Cinema chain operator Pyramid Saimira Theatre jumped 5% to Rs 269.10, after the company on Thursday joined hands with Baderwals Infraprojects, to build 200 malls in four years. Pyramid Saimira will hold 49% in this joint venture, Baderwals Pyramid Development, and will invest about Rs 250 crore in the next two years on the project estimated to cost Rs 12000 crore. The joint venture will include 100 larger format malls covering 3,00,000 sq ft each and budget hotels. By 2010, Pyramid Saimira hopes to have malls in 300 locations across India through such partnerships.

Private sector IndusInd Bank jumped 5.67% to Rs 41.95, on raising $33.83 million by issuing 29.49 million GDRs. IndusInd Bank said on Friday it had sold each GDR representing a share, at $1.147. Based on the current rupee rate of 43.55 per dollar, the price works out to about Rs 50 per share compared to Thursday (29 March)’s closing price of Rs 39.70 on BSE. Following the GDR issue, the equity capital of IndusInd Bank has gone up from Rs 290.32 crore to about Rs 320 crore.

Patel Engineering rose 2.11% to Rs 339, after the company said its joint venture with Gammon India had bagged an order worth Rs 806 crore for a 434-Megawatt hydroelectric project. The work involves construction of a 15-kilometre head race tunnel, a 140-metre deep surge shaft and a power house, Patel Engineering said in a statement.

The Himachal project, to come up on the Satluj river, has to be completed in 54 months. Patel Engineering also said its current order-book stands at Rs 4800 crore. Of these, 50% of the orders are in hydro division, 28% in irrigation and 22% in transportation and other sectors.

Pig iron producer Tata Metaliks gained 0.66% to Rs 84.10, after the company formed a joint venture with Japan's Kubota Corporation for making ductile iron pipes. The joint venture agreement between both parties has already been signed, Tata Metaliks said on Thursday.

The joint venture will be a subsidiary of Tata Metaliks. The project cost will be funded through an equal mix of debt and equity. Of the equity portion of Rs 75 crore, Tata Metaliks will pick up 51% and Kubota Corporation 44%, while the balance 5% will be held by Metal One of Japan. The manufacturing unit will come up on 40 acres in Kharagpur, West Bengal, which is adjacent to Tata Metaliks’ existing foundry grade pig iron facility. The new venture will use liquid pig iron from Tata Metaliks and is likely to become operational by 2009.

India's wholesale price index rose 6.46% in the 12 months to 17 March, matching the previous week's increase, data released a little while ago showed. The figure was slightly below a forecast of 6.50%.

India's current account deficit in the October-December quarter was $3.04 billion, compared with a revised deficit of $4.68 billion in the July-September quarter, the central bank said on Friday. Data from the Reserve Bank of India (RBI) showed the October-December merchandise trade deficit widening to $19.02 billion from a revised $16.06 billion in the July-September quarter. The RBI said the balance of payments (BoP) surplus in the October-December quarter was $7.51 billion, compared with a surplus of $2.27 billion in the July-September quarter.

India's foreign exchange reserves rose to a record $197.746 billion on 23 March, from $195.957 billion a week earlier, the Reserve Bank of India (RBI) said in its weekly statistical supplement on Friday. Analysts attribute part of the increase in the reserves to the central bank's aggressive dollar purchases to protect the rupee's export-competitiveness against other currencies.

RBI said foreign currency assets expressed in US dollar terms included the effect of appreciation or depreciation of other currencies held in its reserves such as the euro, pound sterling and yen. The foreign exchange reserves include India's Reserve Tranche Position in the International Monetary Fund.

The Nikkei Average edged up 0.14% on Friday, as Honda Motor Co rebounded along with other manufacturers, after data showed industrial output fell less-than-expected last month, and due to a weaker yen. The Nikkei was up 23.71 points, at 17,287.65. Hong Kong’s Hang Seng Index lost 20.85 points (0.11%), to 19,800.93.

The mutual funds were expected to support stocks in order to prop up their year-end net asset values (NAVs) on the last trading session of the financial year FY 2007 (year ending 31 March 2007) today.

Exchanges have clubbed the settlement of trading done today with that of Monday (2 April)’s, as banks will remain closed that day for the financial year closing.

The market-wide rollover of March futures to April was at 70-72%, as against 78-80% during the previous expiry. Rollover in Nifty March futures to April was at 65%, against 74% in the previous expiry, according to estimates. A large portion of the rollover to April was of short positions, due to weak sentiment.

As per provisional data, FIIs were net buyers to the tune of Rs 639.68 crore in today's trade.

Oil rose from a six-month high after Iran, the Middle East's second-largest exporter, refused to free 15 British sailors and marines, adding to concern that its souring relations with the UK and US may disrupt supplies.

Crude oil for May delivery rose 68 cents, or 1%, to $66.71 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $66.70 in Singapore. On Thursday (29 March), the contract rose 3% to $66.03, the highest closing since 8 September 2007.

In London, Brent crude oil for May settlement rose 86 cents, or 1.3%, to $68.74 a barrel in electronic trading on the ICE Futures exchange. It was at $68.68 in Singapore.

US blue chips edged higher on Thursday, after data showed the economy in the United States grew at a faster clip than previously thought in the final quarter of 2006. The Dow Jones Industrial Average rose 48.39 points, or 0.39%, to 12,348.75, rebounding after a three-day losing streak. The broader Standard & Poor's (S&P) 500 Index gained 5.30 points, or 0.37%, to 1,422.53. The Nasdaq Composite Index edged up 0.78 point, or 0.03%, to 2,417.88.

Finquest - Sunil Hitech Engineers

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First Global - Pfizer & Cummins

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First Global - Cement Sector

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BRICS - Daily Tech Analysis

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IISL - Hindustan Lever Visit Note (Neutral)

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Kotak reports

Kotak - Daily Morning Brief - 30 Mar 2007 - Offshore Support
Kotak - Derivatives: 30 Mar 2007
Kotak - Market Morning - 30 Mar 2007

Pranav Securities - Market Preview

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ICICI - Glaxo

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PowerYourTrade Trading Calls

Ashwani Gujral
Buy Tata Steel with stop loss of Rs 425 for target of Rs Rs 480. Call valid for maximum 1 week
Buy Glenmark Pharma with stop loss of Rs 570 for target of Rs 670. Call valid for maximum 1 week.

Deepak Mohoni
Buy IFCI below Rs 33.25 with stop loss of Rs 32.50. This is a day-trading recommendation
Buy Oriental Bank below Rs 189, sl Rs 185. This is a day-trading recommendation.

Rajat K Bose
Buy L&T with stop loss below Rs 1607 for target of Rs 1657-1678-1698; This is a day-trading recommendation
Buy ABB with stop loss below Rs 3489 for target of Rs 3575-3598-3616. This is a day-trading recommendation.

Citigroup - Fun with Flows

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Credit Suisse - Emerging Markets Quarterly - Fixed Income Research

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Anand Rathi - Daily Fundamental Snippets

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Edelweiss - Daily Market Outlook 30th March, 07

Market Snapshot

Despite yesterday's fall and overnight weakness in the US markets the indices managed to open in green. However the indices could not sustain with selling in banking stocks and slipped to a low of 12,833. Some short-covering towards the end saw the index rally to a high of 13,004. The Sensex finally settled with a gain of 95 points at 12,980. Nifty finally settled with a gain of 30 points to close at 3798.

The NSE cash volumes were higher compared to the previous day at INR 100 bn but BSE was lower at INR 36 bn. The F&O volumes were a higher at INR 513 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has increased to 28% levels. The WPCR of Nifty Options decreased to 0.88 compared to the previous day while the 5 day average is 1.03.


The markets are expected to have a tepid opening on account of VWAP adjustment of the expiry of the March series. Currently there are no major positive triggers in the market and we expect the Nifty to be rangebound before the weekend. IT sector can see some action taking cues from the INR USD movement.

Rollovers picked up momentum lately on the expiration day to 83% of the total D-5 positions in the Nifty and 82% in the broader market .

Pharma stocks can have good buying opportunities with stocks like Ranbaxy and AurobindoPharma as our top buy picks. With crude oil inching up again above levels of $66, OMC counters can see some selling pressure.

Technical charts indicate that the bearish tone in the market will continue. Any pullback will not be sustained beyond the opening session. The immediate supportfor the Nifty is at 3789 followed by 3757. On the upper side the next important resistance is 3808 and 3820.

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Angel - Bharti Airtel

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Macquaire - India Banking

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HSBC - India Watch

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Anagram - Energy & Metals Update

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Anand Rathi - Daily Strategist

The NIFTY futures saw a rise in OI 16% with prices up by 0.25% indicating that both bulls and bears were aggressive in building their positions as market showing volatility and not giving clear directions. .We feel that till the market doesn't go above 3850 levels we may not see aggressive short covering in the nifty futures and longs building fresh positions in the market. The nifty futures showed a rollover of 70 % i.e. is below average rollover of 75 % indicating less positions built up in April contract as compared to previous contracts. The FIIs sold index futures marginally to the tune of 15.15 crs whereas heavy buyers in index options indicating hedged positions built up by them against their long positions and investments in cash market .The PCR has remained unchanged to 0.93 levels indicating some consolidation may take place here before any sharp movemtn in the market ..The volatility has come down from 32.95 to 29.30 levels indicating some buying support in the market.

Among the Big guns, ONGC saw rise in OI to the tune of 0.23% with prices positive to the tune of 1.18% indicating shorts covering there positions and fresh buying happening in the counter indicating strength in the counter . whereas RELIANCE saw drop of OI to the tune of 1.26 % with prices positive indicating short covering in the counter.

On the TECH front, TCS, SATYAMCOMP saw fall of OI with rise in prices indicating lot of short covering are seen in these counters indicating further short covering may result in rise in prices in these counters whereas INFOSYSTCH saw rise in OI with prices almost flat indicating that both bulls and bears are aggressive in the counter .WIPRO saw rise in OI with rise in price indicating fresh buying happening in the counter.

In the BANKING counters, BIN saw rise in OI with rise in prices indicating that longs are building positions in this counter , HDFCBANK, & ICICIBANK saw rise in OI with fall in price indicating selling pressure in these counters indicating weakness in these counters may prevail.

In the metal pack TATASTEEL, Saw fall in OI with price negative indicating longs liquidation in these counters whereas heavy short positions buit up in HINDALCO and STER indicating weakness in these counters.

Considering the overall scenario and the markets behavior the market may show some consolidation before taking any sharp movement on either side .Traders are advised not to go aggressively short on the market unless important support level of 3750 is breached and any position taken today should be with strict stop losses to be adhered too.

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Wednesday Telefolio Plus - Zee Entertainment Enterprises

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Market may edge higher as mutual funds may provide support

The market may remain firm today as mutual funds are likely to support prices to prop up their year-end net asset values (NAVs). Today is last trading session of the financial year FY 2007 (year ending 31 March 2007).

The key data due today is the weekly inflation date which will be released at about 12:00 IST. Wholesale price inflation is forecast at 6.50 percent for the 12 months to March 17, little changed from an annual rise of 6.46 percent a week earlier. Annual inflation hit a peak of 6.73 percent in early February, its highest rate in more than 2 years.

Stock exchanges have clubbed settlement of trading done today with that of Monday (2 April)’s trading as banks remain closed on Monday for financial year closing.

The market-wide rollover of March futures to April was at 70-72%, as against 78-80% during the previous expiry. Rollover in Nifty March futures to April was at 65%, as against 74% in the previous expiry, according to estimates. A large portion of the rollover to April was short positions due to the existing weak investor sentiment.

Asian markets were mostly in the red on Friday (30 March 2007). Key benchmark indices in Hong Kong, China, Singapore, South Korea and Taiwan were down by between 0.03% to 0.15%. Japan’s Nikkei was up 0.07%.

US blue chips edged higher on Thursday after data showed the economy in the United States grew at a faster clip than previously thought in the final quarter of 2006. The Dow Jones Industrial Average rose 48.39 points, or 0.39 percent, to 12,348.75, rebounding after a three-day losing streak. The broader Standard & Poor's 500 index gained 5.30 points, or 0.37 percent, to 1,422.53. The Nasdaq Composite Index edged up 0.78 point, or 0.03 percent, to 2,417.88.

Oil rose nearly 1 percent, building on a 3 percent surge on Thursday, as a stand-off over the capture of British sailors and marines by Iran escalated and US naval exercises in the Gulf continued to ratchet up tension between Tehran and the West. Iran, the world's No. 4 oil exporter, had suspended an offer to release the only woman among the 15 British personnel it is holding. Their capture last week occurred just before the United Nations imposed new sanctions over Iran's nuclear programme. US oil rose 64 cents to $66.67 a barrel.

FIIs were net buyers to the tune of Rs 520 crore on Wednesday 28 March 2007, the day when Sensex had lost 240 points due to weak global markets. As per provisional data, FIIs were net sellers to the tune of Rs 172 crore on Thursday 29 March, the day when Sensex had risen 95 points tracking Asian recovery.

Intra-day Stock Ideas

NIFTY (3798) RES 3825 SUP 3778

SL 181 T 193, 195

SL 117 T 127, 129

BUY XLTL (106.15)
SL 103 T 112, 114

@ 140 SL 143 T 130, 128

@ 258 SL 262 T 248, 246

Market Watch & Insider Trades

Insider Trades:
Gujarat Ambuja Cement Ltd: Shri P B Kulkarni, Director has sold in open market 70000 equity shares of Gujarat Ambuja Cement Ltd on 21st March and 22nd March, 2007.
Amara Raja Batteries Ltd: Franklin Templeton Mutual Fund (through its various schemes) has purchased from open market 51165 equity shares of Amara Raja Batteries Ltd on 26th March, 2007.

Market Volumes:
The turnover on NSE was up by 19.5% to Rs100bn. BSE FMCG index was the major gainer and gained 2.08%. BSE Consumer Durable index (up 1.45%), BSE Capital Good index (up 1.22%), BSE Pharma index (up 1.00%) and BSE Technology index (up 0.79%) were among the other major gainers.

Volume Toppers:
IFCI, Idea, ITC, IB Real estate, Sakhti Sugar, Gujarat Ambuja, TTML, IDFC, HLL, HCL Tech, Tata Motors, Bajaj Hindusthan, Arvind Mills, India Cement, Satyam Computer, NTPC and Infosys

Upper Circuit:
BPL, GMR Industries, Harrison Malyalam, Shah Alloys, KLG Systel, Goldstone Technology, BSEL Infrastructure, McLeod Russel, KEW Industries, Nirlon, Vypar Industries, IOL Broadband and BF Utilities.

Delivery Delight:
Amtek Auto, ACC, Bharti Airtel, CESC, Divis Laboratories, Gujarat Ambuja Cements, HCL Technologies, Hero Honda, India Cements, India Infoline, IPCL, IDFC, ITC, Jet Airways, Maruti, McDowell & Co, NDTV, Orchid Chemicals, Praj Industries, PNB, Reliance Capital, Reliance Industries, Sun Pharma and Tata Power.

Brokers Recommendations:
Dr Reddy’s Laboratories – Buy from Merrill Lynch

Aventis Pharma – Buy from Kotak.

Long Term investment:

Major News Headlines:

S&P affirms ratings on RIL at 'BBB'

Gitanjali Gems to foray into luxury retail market; to spend Rs1bn

i-flex wins order from First Bank Nigeria

Sterling Biotech Q4 net at Rs375.2mn (up 16%), sales at RS1.68bn (up 30%)

Aurobindo Pharma receives US FDA approval to sell Ceftriaxone

Ranbaxy to pay Rs6 per share as mid-year dividend

Man Industries gets Rs10bn order from USA


Marching ahead with less baggage!

It is the dull man who is always sure, and the sure man who is always dull.

As expected, short covering in the F&O segment on the settlement day led to a rally in the cash segment. A steep fall in the rupee against the dollar make bring some smiles to the IT counters. Volatile Asian markets and lack of conviction among the bulls could make the markets dull and choppy. The indices may manage to close in the green as fresh positions are taken.

Volume was up sharply yesterday due to the F&O expiry. The market breadth was positive. The last six reported figure by SEBI on FII inflows has been good. But, the NSE's provisional data for Thursday shows foreign funds being net sellers of Rs1.72bn in the cash segment on a day when the Sensex gained 95 points.

Another concern is the lower than usual rollover in the derivative segment and a high cost of carry. Having said that one should take these short-term indicators with a pinch of salt as they are not quite consistent and reliable. Given the fact that companies will soon come out with their latest quarterly numbers, we expect the market to remain lackluster with intra-day volatility. Watch out for the inflation data at noon as it might unnecessarily swing the mood.

US stocks managed to rebound on Thursday, with blue chips leading the pack at the end of a choppy session. A stronger-than-expected reading on fourth-quarter GDP growth offset a 3% spike in oil prices. The Dow Jones was up 48.39 at 12,348.75, and the broader S&P 500 gained 5.30 to 1,422.53. The Nasdaq Composite ended nearly unchanged, recovering after briefly dipping into negative territory for the year.

America's fourth-quarter GDP grew at a 2.5% annual rate, up from the previous estimate of 2.2% and a reading of 2% in the third quarter. Another encouraging report showed a surprise drop in the number of Americans filing new claims for unemployment last week.

US light crude oil for May delivery rose $1.95 to settle at $66.03 a barrel in New York. Prices have been on the rise recently amid worries about the conflict with Iran, the world's No. 4 exporter. The front-month contract was trading 61 cents higher at $66.64 a barrel in extended trading in Asia.

COMEX gold for April delivery fell $5.30 to settle at $667.60 an ounce. Treasury prices slipped, raising the yield on the 10-year note to about 4.64% from 4.61% on Wednesday. In currency trading, the dollar fell versus the euro and rose versus the yen.

European shares rose on Thursday. The pan-European Dow Jones Stoxx 600 index rose 1.1% to 374.29. The UK's FTSE 100 added 0.91% to 6,324.20, Germany's DAX Xetra 30 moved 1.15% higher to 6,895.27 and France's CAC-40 gained 1.42% to 5,131.53.

Stocks in Latin American finished higher, aided by a jump in international oil prices. Brazil's benchmark Ibovespa stocks index rose 871 points, or 2%, to 45,355.13. Mexican stocks rose on stronger than expected US fourth-quarter economic growth. The market's IPC index closed up 606 points, or 2.1%, at 28,704.24, breaking a three-session losing streak.

Asian markets are mixed this morning. The Nikkei in Tokyo was up 27 points at 17,291 while the Hang Seng in Hong Kong lost 93 points to 19,728. The Straits Times in Singapore declined 7 points to 3221 and the Kospi in Seoul was almost unchanged at 1449.


Bulls roll over smoothly

The markets managed to make a come back after falling for three consecutive trading sessions as short covering towards the fag end lifted the key indices to close in green terrain. The FMCG index was the major gainer and gained 2.08%, others like Capital Good, Pharma and Technology followed suit. HLL, ITC and Suzlon were at the limelight. Finally, the 30-share benchmark Sensex advanced 95 points to close at 12979. NSE Nifty rose 37 points to close at 3798.

Ranbaxy gained by 1% to Rs341 after the company declared that they would pay Rs6 per share as mid-year dividend. The scrip has touched an intra-day high of Rs343 and a low of Rs336 and has recorded volumes of over 6,00,000 shares on NSE.

ONGC continued to trade firm as crude oil prices still hovers above $64 a barrel on the New York Mercantile Exchange. Prices have been on the rise amid worries about the conflict with Iran, the No. 4 oil exporter. The scrip gained by 1% to Rs874 touching an intra-day high of Rs881 and a low of Rs858 and recorded volumes of over 18,00,000 shares on NSE.

Man Industries was the star of the day although profit booking dragged it lower, however the scrip rallied by over 8% to Rs199 after the company secured Rs10bn order for Pipes. The scrip touched an intra-day high of Rs220 and a low of Rs192 and recorded volumes of over 1,00,000 shares on NSE.

FMCG stocks ended with smart gains. FMCG major HLL advanced over 3.5% to Rs205, ITC surged 2.5% to Rs146, Marico spurred 4.7% to Rs61, and McDowell was up 1.6% to Rs821.

Sugar stocks run was bought to an end in mid afternoon after following reports that government has stopped fresh sugar export permits under open license. Balrampur Chini dropped 2.9% to Rs64, Renuka Sugar declined 6% to Rs428, Dhampur Sugar slipped 1% to Rs71 and Bajaj Hindusthan edged lower 0.7% to Rs181. However, Sakhti Sugar rallied by over 12% to Rs88.

Pharma stocks were in the pink of health. Dr Reddy’s Lab advanced by 2.1% to Rs706, Ranbaxy was up by 1.8% to Rs345, Cipla gained by 1% to Rs236 and Sun Pharma added 1.5% to Rs1014.

Telecom stocks were a mixed bag. VSNL advanced 1.7% to Rs402 and Bharti Airtel recovered all its intra-day losses, the scrip gained 0.8% to Rs763. However, MTNL declined 1.7% to Rs146 and Reliance Communication edged lower by 0.3% to Rs418.

Select Auto stocks were in the reverse gear. Bajaj Auto declined 1.9% to Rs2421, TVS Motors declined over 3% to Rs59 and Tata Motors was down 0.5% to Rs716. However, Hero Honda advanced 2.8% to Rs676 and Maruti added 2% to Rs812