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Thursday, April 05, 2007

DOMESTIC NEWS & GLOBAL NEWS


Inflation falls to 6.39%

After stubbornly remaining static for three consecutive weeks, India's inflation, based on the Wholesale Price Index (WPI), declined marginally in the week ended March 24. The point-to-point inflation was 6.39% compared with 6.46% in the preceding week. The latest inflation reading is above the average estimate of around 6.25% by economists. The annual inflation rate was 4.06% during the corresponding week of the previous year. The slight dip in inflation may not bring much relief to the Government and the Reserve Bank of India (RBI) till it falls below 6%. Finance Minister P. Chidambaram wants inflation at 4%. The RBI has set a target of 5-5.5% for the year 2006-07. It may be recalled that on March 30, the RBI announced a 25 basis point hike in the repo rate, a key short-term lending rate, besides raising the Cash Reserve Ratio (CRR) by 50 basis points to 6.5% in two stages. The surprising monetary tightening measures by the RBI took most economists by surprise as they had expected the central bank to wait at least till the annual policy meeting, scheduled for April 24, before taking any further steps

February exports up 8% yoy

India's merchandise exports grew by 7.87% in February to US$9.7bn from US$8.99bn in the same month last year, the Government said on Monday. Imports rose 25.11% to US$14.36bn from US$11.48bn in the year-ago period. As a result, the trade deficit in February was US$4.66bn as against US$2.49bn in the corresponding month a year earlier. The trade deficit stood at US$5.78bn in January, US$5.68bn in December 2006 and US$6.2bn in November 2006. During April-February 2006-07 (first 11 months of the fiscal year 2006-07), exports were up 19.26% at US$109.13bn while imports climbed by 27.78% to US$164.98bn. Year-to-date trade gap is up at US$55.86bn from US$37.62bn in the year-ago period.

February core sector growth slows

The production of six infrastructure industries grew by 7.2% in February from a year earlier, the Government said on Thursday. The index for the six key industries increased to 219.9 in February from 205.2 a year earlier. In January, the growth was 8.2% year on year. The six industries - Steel, Cement, Coal, Crude Oil, Refinery and Electricity - account for a quarter of the country's industrial production, which represents a 25% of Asia's fourth-largest economy. On a cumulative basis, the core sector growth in the first 11 months of the current fiscal year stood at 8.3% as against 6.1% in the same period a year earlier, data released today by the Commerce Ministry showed.

Govt ups wheat production forecast

The Government on Wednesday revised its forecast for wheat production this year citing improved cultivation by farmers. Wheat output may reach 73.7mn tons in the year ending June, exceeding 72.5mn tons forecast in February, Agriculture Secretary P.K. Mishra said in New Delhi. India, world's second-biggest wheat producer, produced 69.35mn tons of the grain last year. Wheat was planted in 28.45mn hectares (70.30mn acres), up 7% from a year ago, according to the Agriculture Ministry. India's foodgrain production may rise to 211.78mn tons from 208.6mn tons a year earlier, while output of oilseeds may fall to 23.26mn tons from 27.98mn tons, Mishra said.

Coal India eyes IPO in FY08

Coal India Ltd. (CIL) wants the Government to sell a 5% stake in the company through an Initial Public Offering (IPO) to strengthen its finances and management, its chairman said on April 4. "An IPO is needed as this would bring in a greater degree of financial discipline and...better corporate governance," said Chairman Partha Bhattacharyya. CIL is currently wholly-owned by the Government. "I will take it up with the Government in 2007-08," Bhattacharyya said. Coal India, which produces 85% of India's coal, plans to invest Rs24bn to raise output to 384.5mn toes this fiscal year. Last year, it produced 360.94mn tons. Bhattacharyya said the company expected to sign a 20-year fuel supply agreement with NTPC in a month. It currently supplies 110mn tons of coal every year to NTPC for power generation. CIL will also spend Rs10bn on a planned Rs35-bn joint venture to acquire coal mines abroad.

Five senior executives resign from Jet Airways

In a major blow to Jet Airways India Ltd. five executives of the full service carrier have put in their papers, citing poor management practices, centralised decision making process and lack of empowerment. V Raju, Jet's Vice President (South East Asia); Michal Tan, Head of Training; Nandini Verma, Vice President (Communications); Vijay Sethi, Senior General Manager and Ravindran, Head of Training were among those who have stepped down. The latest round of exits from Jet comes close on the heels of the start of arbitration proceedings on the aborted purchase of Air Sahara. The airline has also seen a steady decline in its market share, which is down from 34.9% at the end of the first quarter of 2006 to 30.4% during the third quarter of 2006.

BHEL, NTPC, BEML, BEL unveil provisional results

NTPC Ltd. announced its provisional financial results for the fiscal fourth quarter and year ended March 2007. The public sector power generation major has reported a net profit of Rs67.26bn for the year 2006-07 as against Rs58.2bn in the previous financial year. This translates into a growth rate of 15.5%. Revenues for the year ended March 2007 are up by 27% at Rs332bn versus Rs261.43bn in the year 2005-06.

Bharat Heavy Electricals Ltd. (BHEL) announced the tentative financial results (flash results) for the year 2006-07. The state-owned power equipment maker has posted provisional net profit of Rs23.85bn in the financial year ended March 31, 2007 as against Rs16.79bn in the previous fiscal year. This represents an increase of 42% year on year. Provisional turnover for the year 2006-07 is up 28.75% at Rs187.02bn.

Bharat Earth Movers Ltd. (BEML) announced provisional results for the fourth quarter and financial year ended March 2007. The public sector heavy equipment maker recorded a fourth quarter net profit of Rs1.55bn while sales for the January-March quarter are more than Rs10bn. For the year 2006-07, BEML has clocked a provisional net profit of Rs3.15bn on an all time high turnover of Rs26bn, which is up 18% over the previous fiscal year.

Bharat Electronics Ltd. (BEL) announced that it has recorded its highest ever turnover of Rs39.6bn (provisional) for the year 2006-07, which is an increase of 12% over last year's turnover of Rs35.36bn. The estimated Profit Before Tax (PBT) is Rs10.42bn as against last year's figure of Rs8.55bn, an increase of 22%.

Fortis sets IPO price band of Rs92-110

Fortis Healthcare Ltd., one of the largest private healthcare companies in India and a Ranbaxy group company, is entering the capital market with an Initial Public Offer (IPO) of 45,996,439 equity shares of Rs10 each for cash at a premium to be decided through a 100% book building process. The company proposes to allot 242,476 equity shares to eligible employees in the firm allotment portion. The price band for the issue has been fixed between Rs92 and Rs110 per share. The issue opens for subscription on April 16 and closes on April 20. The price band set is lower than the highest price at which it made its pre-IPO placements. The New Delhi-based firm had raised 1.54 billion rupees through pre-IPO placements in the range of 135-159.50 rupees per share. Bulk of the proceeds from the issue are to be used to part-fund a hospital to be built in New Delhi and to pay a loan made for an acquisition, Shivinder Singh told reporters. "We believe in pursuing greenfield projects and acquisitions for growth," Singh, who is also the CEO said.

NHPC files DRHP for IPO

National Hydroelectric Power Corporation (NHPC) has filed a Draft Red Herring Prospectus (DRHP) with the capital market regulator SEBI for its Initial Public Offering (IPO). NHPC plans to raise up to Rs25bn (US$580mn) through the IPO, valuing the company at around US$4.25bn. The public sector hydropower major would issue 10% fresh equity, while the Government would divest 5% of its stake in the power PSU. Post IPO, the Government's stake in NHPC would come down to about 86.3%. NHPC has a paid-up capital of Rs106bn and an authorised share capital of Rs150bn. The company is planning to hit the capital market by June this year. The funds from the IPO would finance six planned projects which would have a combined capacity to produce 3,080 MW, on top of the existing capacity of 2,755 MW, according to the offer document. NHPC plans to sell 1.12bn new shares in the IPO, while the Government will sell about 558mn shares.

Mahindra-Renault launch Logan

Mahindra & Mahindra Ltd. (M&M) and Renault SA, France's second-largest automaker, on Tuesday announced that they had launched the Logan entry level sedan in the Indian market through their Joint Venture. M&M has a 51% stake in the JV called Mahindra Renault, while the French auto major has the remaining 49% holding. The Logan will be rolled out nationwide by November. Delivery will start four weeks after the booking. The Logan will be available in both petrol and diesel variants. Customers will have the option of six colours. The price of the 1.4 litre and 1.6 litre Petrol versions of the Logan will range from Rs428,000 (ex-Mumbai) while the 1.5 litre Diesel versions will be available in the range of Rs547,000 and Rs644,000 (ex-Mumbai). The ex-Delhi price of the Logan will be Rs435,000 to Rs576,000 for the two petrol variants and Rs554,000 and Rs651,000 for the two Diesel variants.

Auto sales

For the years ended 2006-07, Bajaj Auto's total vehicle sales rose 19% to 2,721,178 units. Motorcycle sales for FY07 climbed 24% to 2,376,518 from 1,912,224 units last year. The motorcycle market share improved from 30.8% in FY06 to 33.5% in FY07. Total two-wheeler sales were up 18% at 2,399,400 units while 3-wheeler sales jumped 28% to 321,778 units.

For FY07, Hero Honda clocked an impressive cumulative tally of 3,336,756 units compared to cumulative sales of 3,000,751 units in the previous fiscal year. TVS Motors clocked motorcycle sales of 924,813 units compared to 806,708 units in 2005-06, translating into a growth of 14.6%. Total two wheeler sales grew by 13.85% to 1,528,214 units from 1,342,204 in the previous financial year.

Maruti sold 635,629 vehicles in the domestic market in 2006-07, the highest ever annual sales in the company's history. This marked a growth of 21% over domestic sales in 2005-06. In all, the company sold 674,924 vehicles during the year, including exports of 39,295 vehicles. Exports grew by 13% over 2006-07.

For the fiscal year 2006-07, Tata Motors Ltd. reported record sales of 579,378 vehicles (including exports), up 28% over 454,345 in 2005-06. For the financial year 2006-07, Ashok Leyland's overall sales climbed by 34.8% to 83,101 vehicles from 61,655 units in the previous fiscal year. While domestic sales were up 35.75% at 77,076 exports grew by 23.5% to 6,025 units.

Tata Steel completes Corus acquisition

Tata Steel Ltd. on Monday announced that it had completed its £6.2bn (US$12bn) acquisition of Corus Group Plc at 608 pence per share in cash. The completion of the transaction is pursuant to the Scheme of Arrangement being declared effective by the High Court of Justice in England and Wales on April 2. The enlarged company will have a pro forma crude steel production of 27mn tons in 2007 and will be the world's fifth largest steel producer with 84,000 employees across four continents. The combination of Tata Steel and Corus with a high value added product range and strong positions in auto, construction and packaging, will create the world's second most global steel producer with a combined presence in 45 countries.
S&P keeps Tata Steel rating under scanner

Deals continue to pour in

Indian Hotels Company Ltd., along with financial investors, is set to acquire the San Francisco-based 110-room Hotel Campton Place for US$60mn, subject to approvals. The boutique Campton Place exudes European ambience and comprises two early 20th century buildings in the shopping and financial districts of San Francisco, California.

Hindustan Lever Ltd. (HLL) said on Wednesday that Unilever India Exports Ltd. (UIEL) will sell its home delivery retail business Sangam to Wadhawan Foods Retail (WFR) on a slump sale basis with effect from March 31. UIEL is a 100% subsidiary of HLL. Although Sangam has met many of its business milestones successfully, the company believes that it is not in its strategic interest to continue to be present in this format of organised retail, HLL said.

Hershey Co. will buy a 51% stake in Godrej Beverages & Foods Ltd. for US$54mn. Hershey has received the green signal from the Foreign Investment Promotion Board (FIPB) for the purchase. Hershey plans to buy 40% from IL&FS, 5% from Godrej Industries ( which holds a 48% stake in Godrej Beverages), and 6% from A Mahendran, Managing Director of Godrej Beverages.

Financial Technologies India Ltd. (FT) on Tuesday announced that Dubai Multi Commodities Centre (DMCC) had purchased an additional 1% stake in the Dubai Gold and Commodities Exchange (DGCX) for US$12.5mn. Following the latest purchase, DMCC now holds 51% in DGCX and FT holds the balance 49%.

Sherwin-Williams Co., the largest US paint retailer, agreed to buy Nitco Paints for an undisclosed consideration to enter the Indian market. The terms of the purchase were not disclosed. Nitco Paints is a privately owned manufacturer and distributor based in Mumbai with sales of about US$18mn, Cleveland-based company said.

Oil prices dip as Iran releases UK sailors

Oil prices fell on marginally on Thursday after Iran decided to release the 15 British navy personnel after holding them captive for nearly two weeks. Light, sweet crude for May delivery rose 14 cents to US $64.52 a barrel in mid afternoon Asian electronic trading on the New York Mercantile Exchange. This followed a drop of 26 cents the day before after the Iranian president announced he would release the UK sailors. On London's ICE Futures, Brent crude for May rose 22 cents to US $68.62 a barrel. The standoff had raised fears of a disruption in oil supplies and caused a nearly US $5 jump in prices. But crude is still trading higher than before the March 23 detention, fueled by concerns about tight US domestic supplies. A weekly report released Wednesday by the US Energy Information Administration showed that gasoline inventories declined for the eighth straight week and that demand is still strong.

China to hike reserve requirement again

The People's Bank of China announced that it will boost the reserve requirement ratio of banks to slow inflation and investment in the fastest-growing major economy. The move is the third increase in reserve requirement this year and follows a 27 basis point hike in short-term interest rates on March 18. The reserve ratio will increase by 0.5% to 10.5% starting April 16, the People's Bank of China said in a statement. "The central bank will continue to carry out prudent monetary policies, use multiple tools to strengthen liquidity controls to maintain liquidity at a moderate level and to prevent money supply and lending from growing too rapidly," the People's Bank of China said.

Japanese companies plan higher capex

Japanese companies plan to step up investment, underscoring their optimism about the outlook for growth at home and abroad. The Tankan, Japan's most closely watched business survey, showed that large companies plan to increase spending by 2.9% in the year that began on April 1, beating economists' estimates. However, sentiment among Japan's largest manufacturers slipped from a two-year high, the Bank of Japan said. The Tankan showed that manufacturer confidence declined to 23 points in March from a two-year high of 25 in December. The average estimate had pegged the reading at 24. Sentiment among large non-manufacturers stayed at a 16-year high of 22 points in March, below the 23 point forecast. Japanese companies tend to be conservative in their capital expenditure estimates in the March survey and upgrade them later. In March last year companies planned to boost spending 2.7%. That increased to an estimated 11.9%, the fastest in more than 15 years, the survey showed.

Yen hits 5-week low vs dollar

The yen touched its lowest level in five weeks against the dollar as traders across the world resumed the so-called "carry trade" amid optimism that interest rates in Japan will remain the lowest among the G8 nations. The dollar hit a five-week high versus the yen, at 119.08 yen, before retreating against the Japanese currency. The euro also hit a 5-week high at 159.05 yen. The recent gains in global stock markets are giving investors more confidence to step up trades with money borrowed with the Japanese currency. But gains in the dollar were capped ahead of key US employment data. Markets were nervous ahead of a keenly-watched US non-farm payrolls report on April 6 and the G7 finance ministers meeting next week, which may yield some comments on currencies. The dollar came under pressure after data showed that growth in the US service sector slowed to a four-year low in March, reinforcing the view that US interest rates could be cut later this year. The jobs data will provide more clues on whether the Federal Reserve will lower rates from the current 5.25% to support the economy.

US, South Korea reach deal on FTA

The United States and South Korea reached a free trade agreement (FTA) that would be America's biggest such accord in more than a decade and could boost bilateral trade by as much as US$20bn. The negotiations, reached just minutes before the final deadline was to expire, were difficult to conclude due to differences over such sensitive sectors as rice, beef, automobiles and pharmaceuticals. Details were not announced. The FTA will eliminate duties on products like South Korean autos and apparel, and cut investment barriers for US insurers and financial companies. South Korea will abolish its 40% tariff on US beef over 15 years and the pork tariff over 10 years. Rice wasn't included in the FTA. Seoul and Washington had been in talks over the last 10 months to try and meet the ambitious timetable for sealing the deal, which could see annual bilateral trade rise from US $70bn to US $90bn a year. For the US, the deal is the largest trade since the North America FTA accord was signed with Canada and Mexico more than a decade ago. On the other hand, South Korea would get much greater access to the markets of its second-largest trading partner.

DaimlerChrysler admits talks to sell Chrysler

DaimlerChrysler finally confirmed that it was looking at parting ways with Chrysler, which lost US $1.5bn last year. We are talking with some of the potential partners who have shown a clear interest," DaimlerChrysler CEO Dieter Zetsche told shareholders on April 4. "So far, I am satisfied with the process. Everything is going according to plan." Zetsche, however did not identify the suitors. Nor did he guarantee that the talks would end in a sale. "We need to keep all options open," he said. "We need to keep maximum scope for maneuver." But reports said that three bidders had submitted preliminary offers for Chrysler two private equity firms - the Blackstone Group and Cerberus Capital Management - and a Canadian auto parts supplier, Magna International. Chrysler has around US $20bn in health care obligations for retired workers. Some estimate it may fetch no more than US $5bn to US $7bn, or even a naught. Daimler shares have soared nearly 25% ever since talk of the company contemplating selling Chrysler broke in February. But, they dipped 1.4% on April 4 as investors were frustrated that Zetsche did not offer more details.

INVESTMENT STRATEGY


Watch out for Friday the 13th

With the results season kicking off from next week and the undertone still weak, investors should be careful. The trend is likely to remain lackluster ahead of the Infosys results on April 13. Software firms are likely to be impacted by the rupee's surge against the dollar. A lot will hinge on the guidance given by the IT major, as TCS doesn't provide any outlook. Till then, the market may remain range bound and choppy depending on the global cues. We maintain our stance that there is more downside risk to the market than upside given the string of monetary tightening measures in a short span of time. Also, global factors like the health of the US economy, Chinese' Government's efforts to engineer a smooth landing and the "carry trades" will continue to play a role in our markets. Oil is another factor one has to keep an eye on. Though the bulls managed to fight their way back this week after a depressing start, all's still not well. The current volatility is here to stay, at least for the next couple of months. Against this background, being selective and keeping cash handy could pay rich dividends.

MARKET MOOD


RBI casts its spell on D-Street

Everything falls apart, even the people who never frown eventually break down…
Everything has to end, you'll soon find we're out of time left to watch it all unwind…

The surprise hike in Repo Rate and CRR last week took everyone by surprise. The impact of the RBI's offensive against inflation was seen on Monday as everything fell apart with the Sensex plunging by over 600 points, notching up its second biggest intra-day fall in history. However, with positive cues coming from the global markets, the local bulls staged a smart recovery after Monday's mayhem. Crude oil prices also fell later in the week after Iran released the 15 British sailors.

After yet another manic Monday, the main indices slowly clawed their way up, recouping some of the big losses. Interestingly, the fall in February and March is more due to the culmination of all the internal factors rather than international triggers which led to the carnage in May 2006. Despite the recovery in the last two trading sessions, key benchmarks closed lower for the second week in a row. Banking, Auto, Capital Goods, FMCG and IT stocks were the biggest losers. However, metal and sugar stocks bucked the negative trend to close higher over the week. The benchmark BSE Sensex lost 216 points or 1.6% during the week to close at 12,856 while the NSE Nifty fell by 70 points or 1.8% to close at 3752.

The tussle between the Government and cement makers got worse. In the latest saga, the Government scrapped 16% Countervailing Duty and 4% Special Additional Duty on portland cement. However, the Centre is willing to consider rolling back the dual excise duty structure. Cement stocks were mixed. Grasim was up by 2.7% to Rs2108, Gujarat Ambuja rose 1.3% to Rs105. However, ACC declined 1.7% to Rs721 and Kakatiya Cement fell 2.5% to Rs72.

Banking and real estate stocks were at the receiving end after the RBI raised the repo rate by 25 basis points to 7.75% and hiked the CRR by 50 basis points in two stages to 6.5%. The move will suck out liquidity worth over Rs150bn and would impact loan growth as well as spending. Profitability of banks would also be impacted, as cost of funds would increase. As a result, banking stocks fell sharply over the week. SBI fell nearly by 4% to Rs947, ICICI Bank dropped 2% to Rs838 and PNB declined over 6.5% to Rs440. However, HDFC Bank gained 1% to Rs943. In the real estate pack, Sobha Developers fell by over 6% to Rs750 and Parsvnath dropped over 6% to Rs149. However, Mahindra Gesco advanced by over 4% to Rs593.

Rising crude oil prices and hardening rates brought about a downfall in auto stocks. Hero Honda was the top loser in the Nifty. It was down by over 7% to Rs632, Maruti was in reverse gear during the week. The scrip fell by over 7% to Rs755, M&M lost over 5.5% to Rs713 despite the launch of the Logan. Tata Motors declined 4.2% to Rs686. Among the mid-cap stocks, Ashok Leyland, Eicher Motors and Hindustan Motors were the major losers.

IT stocks continued to get a harsh treatment after the rupee rose to the strongest in eight years against the dollar amid tight money market liquidity and lack of intervention from the RBI. Financial Technology lost by over 4% to Rs1803 and HCL-Tech was down by over 3.6% to Rs287. Among the heavy weights, TCS fell 4.2% to Rs1193, Wipro declined 2.5% to Rs551 and Satyam dropped 1.3% to Rs455.

Firm metal prices on LME and expectations of a price hike by steel makers pushed steel stocks higher. SAIL and Tata Steel were the notable gainers. Tata Steel rose nearly by 6% to Rs465, JSW Steel surged by over 5% to Rs498, SAIL advanced by 2.5% to Rs114 and Jindal Steel added 2.3% to Rs122.

BHEL was in the limelight during the week. The scrip rose by over 3.5% to Rs2359. It was among the top three gainers in the Sensex, hitting week's high of Rs2410 and a low of Rs2145. The company plans to more than double sales in the next five years by building more power stations. The PSU reported a 42% jump in provisional net profit for FY07 on revenues that grew by nearly 29%.

NTPC was another star performer of the week. The scrip was the top gainer in the Nifty. It rallied by over 9% to Rs158 hitting the week's high of Rs163 and a low of Rs146. The public sector power generation major has reported a net profit of Rs67.26bn for the year 2006-07 as against Rs58.2bn in the previous financial year. This translates into a growth rate of 15.5%. Revenues for the year ended March 2007 are up by 27% at Rs332bn versus Rs261.43bn in the year 2005-06..


TOP STORIES


Govt fires another salvo at cement makers

In yet another twist to the ongoing spat between the Government and the cement manufacturers, the Centre announced that it was doing away with 16% Countervailing Duty (CVD) and 4% Special Additional Duty (SAD) on Portland Cement. "The Government expects that the cement manufacturers, in the larger interests of consumers and for checking inflation, will take appropriate measures for moderating cement prices,'' the Finance Ministry said in a statement. The move is likely to make imported cement cheaper than domestic cement by Rs25-35 per bag. At present, imported cement is slightly expensive than local cement. Average cement prices increased to Rs220 per 50-kg bag in March from Rs165 in January and Rs209 in February, the Government said. The Government, with a view to keep prices of cement in check, had fully exempted basic customs duty on portland cement in January. The cement industry was requested to moderate prices in the interest of the consumer. However, the industry is of the view that prevailing high prices are a consequence of a demand-supply mismatch. "It is expected that the present move will improve supply situation in the country," the Finance Ministry said. The Government has already invited cement manufacturers to come forward with proposals to moderate the price of cement. The move could be aimed at ensuring that cement manufacturers pass on the benefits in case the Government rolls back the differential excise duty structure.

Govt won't buy land for SEZs
Desperate to clean up its public image post Nandigram violence, the Government on Thursday announced that it will not get involved in land acquisition for Special Economic Zones (SEZs) and will the shrink the size of such zones to a maximum of 5,000 hectares. The Empowered Group of Ministers (EGoM) on SEZ also cleared 83 SEZs with the requisite development land besides increasing the processing area of the SEZs to 50% of the land size. "The decision will be applicable to all SEZs including those which have already been notified," Commerce and Industry Minister Kamal Nath told reporters after the meeting of the EGoM in New Delhi today. In its last meeting, on January 22, the high-powered ministerial panel on SEZ had put a freeze on fresh approvals and notification amid rising protests against the Government's policy on land acquisition for such enclaves.

In the face of protests by farmers in some parts of the country, the EGoM decided that there was no need for compulsory acquisition of land for SEZs by the states, leaving it to private developers to deal with the land owners. Also, the states would be empowered to reduce the size of SEZs below the 5,000 hectare limit set by the EGoM. Under the new Relief and Rehabilitation Policy, which would be finalised soon, at least one member of the displaced family would have to be employed in the SEZ, Commerce Minister said. This would be in addition to the compensation paid to the land owners, he said. Of the 234 SEZs with formal approvals, 63 have already been notified, while 83 more were cleared today for notification. The Board of Approvals for SEZs will now take up 162 SEZs with in-principle approval and 140 pending applications.


Indiainfoline - From Research Desk


KPIT Cummins Infosystems Ltd.
Visit Note

We met Mr. Sanjay Sinha, Head – Business Development & Investor Relations and Karthik Krishnan, Manager – Investor Relations to get an update of the recent business developments and to check management’s preparedness and confidence for achieving revenue and earnings target under its Mission 2010.

Under the Mission 2010, the company has set a target of achieving US$250mn in revenues and US$40mn in earnings by FY10. This calls for a CAGR of ~35.5% in revenues from FY07E US$100mn and ~50.5% in earnings from FY07E US$11.6mn over FY07-10. Management has clarified that it should not be construed as a formal guidance as it actually defines the general direction of growth of the company.

RBI continues monetary tightening- Hikes CRR and LAF Repo rate

Major highlights

  • CRR hiked by 50 bps in 2 stages effective from 14th and 28th April 2007
  • Cut in interest paid on excess CRR above 3% to 0.5% from 1% earlier
  • Repo rate hiked by 25bps to 7.75% widening interest rate corridor to 175bps

India’s Central Bank once again hiked policy rates to contain inflationary pressures in the economy. This is sighting high credit growth of 29.4% and inflation, which has sustained over 6% for 11 weeks in a row (currently at 6.46%). While the hike in CRR (by 50bps in 2 stages) and Repo rate (by 25bps with immediate effect) is not unwarranted, the timing of the move certainly is; as the Monetary Policy Review is scheduled on April 24, 2007. RBI has also reduced the rate of interest paid on excess CRR (above 3%) maintained with itself from 1% to 0.5%. While inflation is expected to come down from May 2007 due to the high base effect and impact of monetary measures, sustainable drop is likely with structural changes through capacity additions and better food grain supplies.

All the monetary measures are expected to make money dearer and we expect Banks to once again increase lending and deposit rates. The drop in interest rate on CRR is likely to impact margins marginally by around 2bps, which we expect this to be recovered through lending rates. Sharp rise in interest rates over the past 12 months has seen affordability reduce and could impact asset quality in the future. We maintain our neutral stance on the sector. PNB, BOI and BOB are our top picks, while Canara Bank is our top SELL in our coverage. We are in the process of updating our ratings and will realease it soon.

Sugar Incentives - positive move in 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:

  1. 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.
  2. Creation of a buffer stock of about 2mn tons.
  3. 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.

ICRA IPO Allotment


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Close: Markets withstood many shocks this week; giving confidence !


It was an eventful week. Sensex ended the week down about 1.7% losing about 250 points. The losses were restricted thankfully to global positives. Sentiment in markets were ready for all time lows. The RBI shook the market. Over the weekend RBI pressed the panic button by increasing CRR by 50 basis points and repo rate by 25 basis points. The move really was a big surprise. It resulted in second largest absolute loss by the Sensex ever to start the week. However the bigger reason for the loss was the poor numbers by the two wheelers bringing in worries whether the Indian growth story was ending. Bajajs Guidance of only 10% growth for next year sxet the cat among the pigeons and that had the markets biting dust. The market then managed some recovery helped by global cues. In fact Asian Markets hit all time highs but Indian markets struggled to be in positives. Sensex is down 2000 points or 15% from the highs and still struggling to find a foothold. There was another shock from the Finance Ministry this time for the cement companies where all duties on imported cement were cut to make them more competitive. Cement stocks started on the backfoot as expected but then made a smart comeback as markets realised that the imports were not feasible. However the actions of the Finance Ministry have raised questions on the intentions. There is a doubt that even exports could be banned.

The rupee kissed an eight-year high against the US dollar at Rs 42.84 per dollar. It closed at 43.09 on reports of RBI Intervention. The view is that the rupee would remain between 42.75 - 43.25 range for now. It was a holiday shortened week and Thursday saw a ranged trading session ahead of a long holiday. Crude at $ 64 + is still not comfortable but better than $ 65+. Luckily the world is headed towards a diplomatic solution to the Iran issue of capture of 15 British soldiers. The utilities did well as expected.. NTPC, Gail in such violent times.

The big gainers this week were BHEL +5%, Gail +10%, Zee +7%, SBI +4%. Losers were the two wheelers Hero Honda, - 7%, Bajaj Auto - 5% Maruti -8%. PNB - 8%, Rel Com -5%, Tata Motors -5%.

The RBI was waiting for the fiscal year end to ensure that banks bottomlines dont get hit badly. This is in a way bad news. Inflation target is 5-5.5% for the year and a number at 6.5% is not alarmingly high when economists know that the base effect will wear off in next 2-3 weeks. Does the RBI know something more than what the market does not see. We believe that it was the Government was acting in panic ahead of UP elections. We fail to see the logic of hiking rates and to the extent that was done.

The cement stocks withstood the shocks. We expected sentimental negatives. The stocks started deep negative only to recover later in the week. Clearly the scrapping of the CVD and SAD made imports competitive but the infrastructural bottlenecks makes it extremely tough to import cement. The industry has not decided to go back on the one-year price freeze commitment given to government in March. The big question is, whether the Government still wants to push it further. We believe that the risk reward is in favour of the cement stocks for now though they will not see heady upsides as earlier.

The two wheeler numbers this week were a disaster. March sales growth rates were down 2%. However what was more disappointing was the dowgrades of growth in sales by Bajaj Auto to 10% for the year from around 20%. This is a big let down specifically in the case of Bajaj Auto. March normally is a push month given the last month of the fiscal. However there was inventory correction which had all the two wheelers reporting disappointing sales. May be thats also the impact of the increasing interest rates. If thats the case, the sensitive nature of this market surprises us. An EMI increase of a couple of 100 rupees should not slow demand. The environment remains competitive. We were less concerned earlier on slower growth as we thought that the market is smart and the expectation of lower priced bikes from excise free zones was delaying demand. Spefically in the case of Bajaj Auto too we expected sales to be slower ahead of the new platform launch. Growth for FY07 is placed at just over 18% for Bajaj Auto. We still believe that Bajaj Auto's guidance of 10% is extremely conservative. But for now the stock will stick by that. The plant inauguration in the tax free zone may give it some bounce.

Four senior executives of Jet Airways have quit the airline. The ones to put in their papers are top managers V Raja, vice-president and general manager (south east Asia), Michal Chang, head of training, Nandini Verma, vice-president (communications) and senior general manager Vijay Sethi. The company says that this has not happened on a single day and has been spread out and not as serious as media makes it out to be. We attended a conference call of Spicejet yesterday. Spice is one of the leading LCCs in India and seemingly going as per plans. They have the reserves in terms of cash which was raised about a year ago. Interesting takeaway was that the consolidation has hit with Indigo having shelved 6 out 11 aircraft for not being able to pay the lease rentals. They were not lucky in raising money at the right time. Even Kingfisher had delayed couple of planes. The Management said that the airlines business was starting to see consolidationand that by March next year the struggle should ease. Also the infrastructure bottlenecks are expected to ease. The Ministry also was taking a hard view on new entrants to ensure they have much larger capital. Passenger growth was over 45% and thats attractive. However for now its still the moneyburn and shakeout time. LCCs would be the preferred model.

The Reserve Bank of India forecast a GDP growth of 8-8.5% for FY08, which is lower than the estimated growth rate of 8.5-9% for 2006-07. The Reserve Bank of India's deputy governor Rakesh Mohan stressed that reduction in inflation and inflationary expectations was the only way to raise the prospect of higher investment and economic in the country. "For the maintenance of high growth, we need to ensure inflation and inflation expectations are well-anchored, Low and stable inflation is necessary for growth. We are moving to a sustained growth path of 8-8.5%." This comes in the backdrop of expectations of 9%+ growth. Sustainable growth targets are being lowered and thats the mindset which alarms us. This is a mindset that high growth necessarily means high inflation. This is not true really. This means that government will tend to ensure that growth remains slower and we worry that in their eagerness to do so they may slow it considerably more. The impact of interest rate increases in such a short period is killing demand already. We dont think Indian Markets are ready to make new highs as rest of Asia yet.

However our strategy in the current scenario.. do we expect a bounce back for the Sensex. ? No we dont think the Sensex would bounce back in the broad based way it used to. Large order books are unlikely to excite the investors. Markets likely to become stock specific. Mid caps will be dependent on performance but that will be unlikely till there is stability. Sectors where we think action will be the Cement, Telecom where the numbers will be good and growth will be seen. Banks will make a bounce from here on lower inflation going ahead. Utilities as defensives have already run up. Performance will draw in interest from FIIs in the mid caps and thats where interest will flow to. Next week starts the results season. Watch out as we cover them.

Edelweiss - Banking Result Preview


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WOW Broker Rap


Broking House - Prabhudas Liladher
Recommendation - Buy



Healthy profits with an attractive valuation...
In its report dated 4th April 2007, Prabhudas Lilladher (Prabhu) Recommends Buy on Yes Bank at its Cmp of Rs 140 With Target of Rs 185.

Prabhudas Lilladher (Prabhu) mentions that Yes Bank was started on a green field platform in August 2004. This was the time when interest rates had fallen considerably and banking sector started witnessing high growth in credit off take. Prabhu highlights that this not only helped Yes Bank in establishing itself in a highly competitive environment but gave it an edge over other banks in terms of starting with a clean balance sheet. Yes bank started with focusing on corporate loan book to leverage on its corporate relationships and stayed away from venturing into retail assets.

Prabhu throws light that in a rising rate environment, when most of the banks face higher level of uncertainty on bottom line due to depreciation losses on investment book as well as higher provisioning cost due to probable increase in delinquencies; Yes bank offers a safer bet as it is newly set up on green field platform. This gets complemented by professional and well skilled manpower supported with state of the art technology platform, says Prabhu.

Prabhu highlights that Yes Bank doesn''t carry any legacy of bad loans; so far Yes Bank has focused on corporate and SME loans where it has reported aggressive loan growth. This is the segment which in comparison to retail segment has better absorbed the various interest rate hikes without any meaningful slowdown in credit demand or increase in delinquencies. Green filed platform coupled with robust risk management system in place has resulted in zero level of net as well as gross NPAs.

Prabhu states that Yes Bank is growing its branch network quite aggressively. Out of 60 branch licenses, it has set up 29 branches as on Q3 FY 07 and expected to roll out the remaining branches in next couple of months and it is expected to reach 100 mark by end FY 08.

Parabhu believes that Yes Bank given its green field platform, superior infrastructure and high growth potential offers attractive investment opportunity. Give its strong balance sheet and healthy profitability it could be one of the prime acquisition target as well. Prabhudas recommends BUY on the stock with a price target of Rs 185, which translates to 3.5x FY09 ABV.
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Broking House - Citigroup Global Markets Inc
Recommendation - Buy




Capacity expanding with high level of gearing.
In its report dated 4th April 4, 2007 Citigroup Global Markets Inc (Citi) recommends a "Buy" on Aban Offshore Ltd (Aban) at its current price of Rs. 2,052 with a target price of Rs. 2,850.

Citigroup Global Markets Inc (Citi) mentions that Aban Offshore Ltd (Aban) is the flagship company of the Aban group which was established in 1986 as an Indo-US joint venture in offshore drilling. Aban is the largest offshore oilfield service provider in the private sector in India, says Citi.

Citi states that Aban''s acquisition of Sinvest has created a material, leveraged play on the tight market for offshore drilling services. Citi further adds that re-pricing of existing rigs and a significant pipeline of 9 drilling assets coming on-stream over the next 2 years will help Aban grow consolidated earnings 20.5x over FY06-FY09E.

Citi points out that Aban''s consolidated net debt of US$210 m presents a very high level of gearing given its equity base of US$65 m. Citi also initiates that gearing will come off very rapidly with strong cash flows from operations (US$130 m over FY08- 10E) and further equity infusion in the parent entity (with consequent dilution) cannot be ruled out.

Citi maintains that the capacity is expanding across all offshore asset classes, but there is no evidence that additions have exceeded demand growth. Citi forecasts E&P spending to rise by 7% in CY07, following a 26% growth in 2006. Spending plans are now building in higher long-term oil prices (US$53.7/bbl); however, sensitivity to oil price changes has declined.

Citi makes us aware that slowdown in offshore services demand growth could have a huge impact on Aban given its high gearing. Citi further states that re-pricing of 3 of Aban''s domestic rigs, due this quarter, will be a short-term trigger for the stock.

Hence, Citi raises target price for Aban to Rs2850, from its earlier price of Rs1700 based on 8x FY09E consolidated EPS, in-line with target multiples for global peers. Citi reiterates Buy, but raise the risk rating on the stock to High from Medium due to Aban''s high financial leverage.
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Broking House - HSBC Securities
Recommendation - Overweight




Newspaper industry to achieve vertical growth
In its report dated 30th March, 2007 HSBC securities and capital Markets (HSBC) upgrades HT Media Ltd. (HT) to "Overweight" at its CMP of Rs.178 with target price of Rs.230.

HSBC mentions that the profile of HT Media is transforming from a print company to a comprehensive media offering with the addition of radio and internet businesses. HSBC believes that the media channel and geographical diversification will increase exposure to fast growing radio and on-line segments, and also insulate earnings from shifts in spend by medium and advertising category.

HSBC expects the traditional print business to keep on growing ad revenues by over 20% pa and also anticipates that new ventures in radio and the internet will provide an additional leg of growth. HSBC expects a 28.7% in top line CAGR FY06-08e as the group''s strategy of bundling ad space accelerates HT Media''s ability to garner revenues from geographical expansion and new media formats.

HSBC highlights that HT''s new business newspaper, Mint produced in association with the Wall Street Journal has been successfully launched with an initial print order of 80,000 copies achieving a No.2 position in Delhi and Mumbai market combined. The group also plans expansion into other cities making Mint an important weapon in HT media''s arsenal.

HSBC mentions that HT''s new internet venture plans to leverage on its newspaper business to achieve verticals in matrimonial, real estate and recruitment. HSBC estimates on-line revenues of INR 25 cr in FY08E and growing to INR 130 cr by FY11E.

HSBC points out that HT Media''s "Fever 104 FM" gives the company exposure to FM radio, one of the fastest growing media markets in India and estimates revenue generation of INR 40 cr in FY08E and EBIT break even by FY10E.

HSBC anticipates that HT''s high operating leverage will ensure that profit grows much faster than revenues, driving 126% EPS growth FY07-FY09E. HT media''s FY08E PE multiple of 24.0x is lower than Indian TV stocks'' average PE of 30.8x, but the stock offers superior EPS growth of 62.4%, compared to the 30.4% average in the TV sector. HSBC mentions 12-month PE multiple/DCF price target emerges at INR 230, implying 29.7% absolute upside and upgrades rating to Overweight

Citigroup - National Thermal Power (NTPC.BO): FY07 - Good Year, But Could Have Been Better


  • Recurring PAT up 18% YoY — NTPC reported its FY07 un-audited results at a press conference today. Recurring PAT at Rs65.6bn up 18% YoY was 5% below our estimate of Rs69.2bn. This was a disappointing given that after growing 19.5% YoY in the first 9mFY07, full-year numbers imply that 4QFY07 recurring PAT grew a tepid a 4–5%. We await the audited FY07 numbers for clarity.
  • 5,710MW added in the Xth Plan — NTPC added 5,710MW in the Xth Plan period, acquired the 705MW Badarpur TPS, and took a 28.33% equity stake in Ratnagiri TPS. Slippages into the next plan include the 1,000MW Sipat II and 500MW of Kahalgaon Stage II, which is likely to be added in FY08E along with 660MW of Sipat I and 500MW of the SAIL Bhilai expansion.
  • Capacity increasing 2x in 5 years and 3x in 10 years — We would not be unduly concerned with a weak 4QFY07 as NTPC aims to double its capacity by FY12E and triple capacity to 76GW by FY17E. Its capex is well funded with low current gearing of 0.45x, it has high current cash levels of Rs84.7bn, a strong credit rating and a high annual cash flow from operations of Rs175bn for FY07E-15E.
  • Our top pick among the Indian electric utilities — NTPC is our top pick in the Indian Electric Utility space for its defensiveness (particularly for investors who are benchmarked against broad market indices), large market capitalization, regulated earnings stream and secular growth.
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Sharekhan Highnoon dated April 05, 2007


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Edelweiss - Infomedia


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Sensex gains 69 points


A day after the Sensex gained over 160 points on sustained all-round buying, the market witnessed a range-bound trend during intra-day trades. The market opened marginally above yesterday's close, but soon eased on selling pressure in several front-line stocks and touched an intra-day low of 12712. However, buying at lower levels in select stocks lifted the index into positive territory. The mood was cautious, as the Sensex remained subdued in the afternoon. The inflation numbers came in a little higher than expected, although the inflation declined to 6.39% in the week ended March 24 as compared to 6.46% in the previous week. A smart bounce back and buoyancy in heavyweight, metal and banking stocks towards the close saw the index surge to an intra-day high of 12899. The Sensex finally ended the session with gains of 69 points at 12856, while the Nifty added 19 points to close at 3752.

The breadth of the market was overwhelmingly positive. Of the 2,578 stocks traded on the BSE, 1,651 stocks advanced, 856 stocks declined and 71 stocks ended unchanged. Except the BSE Oil & Gas Index the remaining sectoral indices closed higher. The BSE Metal Index rose 3.07% at 8624 followed by the BSE Bankex (up 1.89% at 6372) and the BSE CD Index (up 0.82% at 3604).

Most of the Sensex stocks finished with gains. Tata Steel soared 6.16% at Rs465, Reliance Energy jumped 2.73% at Rs501, Grasim surged 2.38% at Rs2,113, ICICI Bank added 2.19% at Rs839, HDFC advanced 2.18% at Rs1,530, HDFC Bank gained 1.87% at Rs943, Cipla advanced 1.40% at Rs232, Maruti Udyog added 1.38% at Rs756 and Hindalco was up 1.34% at Rs132. However, Dr Reddy's shed 2.19% at Rs729, Hero Honda was down 1.78% at Rs632 and NTPC fell 1.37% at 159. Reliance Industries, ITC, ONGC, TCS, Bharti Airtel, L&T and Bajaj Auto closed with marginal losses.

Steel stocks were in the limelight. Among the metal stocks JSW Steel surged 4.91% at Rs497, Hindustan Zinc spurted 4.70% at Rs648, Jindal Steel jumped 3.87% at Rs2,386, Jindal Stainless added 2.91% at Rs122, SAIL gained 2.23% at Rs115 and Jindal Saw was up 1.12% at Rs470.

Over 4.25 crore IFCI shares changed hands on the BSE followed by India Bulls Retail (66.43 lakh shares), Balrampur Chini (39.15 lakh shares), NTPC (28.92 lakh shares) and Tata Steel (24.83 lakh shares).

Tata Steel registered a turnover of Rs114 crore on the BSE followed by Reliance Communication (Rs61 crore), Reliance Capital (Rs48 crore), Reliance Industries (Rs47 crore) and SBI (Rs47 crore).

Sensex sheds 216 points on hike interest rate


The market staged a recovery from Monday’s steep fall that was caused by RBI’s surprise hike in short term interest rate and cash reserve ratio announced after the markets had closed on Friday 30 March 2007. Firm global markets and cooling off oil prices aided the recovery from lower level in the short trading week.

But the market ended the week in the red. The 30-share BSE Sensex lost 216.02 points or 1.6% to 12856.08 in the week ended Thursday 4 April 2007. The S&P CNX Nifty shed 69.55 points or 1.8% to 3752 in the week.

BSE Mid-Cap index lost 64.17 points or 1.1% to 5319.95 whereas BSE Small-Cap index lost 14.14 points or 0.2% to 6456.37 in the week.

A surprise hike in the repo rate and the cash reserve ratio (CRR) announced by the Reserve Bank of India (RBI) after trading hours on Friday (30 March 2007) spooked the bourses on Monday (2 April). The Sensex plunged 616.73 points (4.72%), to settle at 12,455.37. Bank and auto shares led the sharp fall on the day. Sensex’s intra-day fall of 646.58 points on that day was its biggest intra-day point fall since 28 February 2007.

The latest rate hike reignited concerns that economic growth will slowdown due to sustained rate rises. The RBI raised its short-term lending rate, the repo rate, by 25 basis points to 7.75%. The central bank also raised the cash reserve ratio (CRR) by half a percentage point. The CRR will rise to 6.50% in two tranches, the first on 14 April 2007 and the other on 28 April 2007, and will drain Rs 15500 crore from the banking system.

The market recovered on Tuesday (3 April) taking support from steady to firm Asian and European bourses. Sensex jumped 170 points. All sectoral indices on BSE settled with gains, and shares from the IT sector led the uptrend on that day.

The market extended its recovery on Wednesday (4 April) tracking firm Asian stocks. Sensex added 162 points. Asian stocks extended their rally on Wednesday, with Australia, Singapore and South Korea hitting record highs, inspired by a reassuring US housing data and falling oil prices.

The recovery continued on Friday (5 April) when the barometer index Sensex advanced 69 points. Buying in metal, banking and cement sectors lifted the bourses on that day. The market remains closed on Friday (6 April) on account of Good Friday.

Foreign institutional investors (FIIs) were in selling mode. They pressed sales worth a net Rs 643.40 crore in two trading sessions between Monday and Tuesday. Mutual funds were net buyers to the tune of Rs 63.30 crore on Monday. On Tuesday, they pressed sales worth a net Rs 105 crore.

Shares of two-wheeler makers slipped following disappointing sales for the month just gone by. Hero Honda shed 7.6% to Rs 632.45 in the week.

Cement shares recovered from lower level as cement producers did not cut cement prices despite the government abolishing import duties. The government late on Tuesday (3 April) abolished the 16% countervailing duty (CVD) and an additional 4% customs duty on portland cement. It may be recalled that in late-January 2007, the government had already abolished 12.5% basic import duty on cement.

IT bellwether Infosys witnessed alternate bouts of buying and selling. Infosys’ FY 2008, which it will unveil along with Q4 March 2007 results, on 13 April 2007, is the next major trigger for the market. In a recent pre-guidance report on Infosys, Merrill Lynch placed a short-term 'sell' on the Sensex heavyweight, expecting a conservative guidance from the company due to an uncertain US economic outlook, the appreciation of the rupee versus the dollar and other client-specific issues. Merill Lynch expects Infosys to give an EPS growth guidance in the early 20s.

Bank shares recovered during the latter part of the week after Monday’s steel fall caused by RBI’s surprise rate hike. The rise in lending rates is expected to slowdown loan growth which has been running at about 30%. ICICI Bank raised its benchmark lending rate by 100 basis points to 15.75%, effective 1 April 2007. ICICI Bank also raised its floating reference rate for consumer loans, including home loans, by 100 basis points to 12.75%. Yes Bank raised its prime lending rate by 75 basis points, to 14.75%.

Tata Steel surged after the company on Monday reported strong sales and production for FY 2007. The scrip rose 3.4% to Rs 465.20 in the week. Tata Steel’s sales in FY 2007 were record-breaking for both flat and long products.

PSU power equipment major Bhel witnessed renewed buying after the company during trading hours on Tuesday reported 42% growth in provisional net profit for FY 2007. Bhel's net profit rose 42% to Rs 2385 crore in FY 2007 (year ended 31 March 2007) from Rs 1679 crore in FY 2006. Turnover rose 28.7% to Rs 18702 crore from Rs 14525 crore in the year ago period.

Metal prices Sterlite Industries, Hindustan Zinc and Hindalco recovered tracking rally in metal prices on the London Metal Exchange (LME).

The market regulator Securities & Exchange Board of India proposed applying circuit filter on the day of relisting in a scrip. Sebi has proposed that 20% price band would be levied on commencement/re-commencement of trading in a scrip which would include all the cases of commencement/ re-commencement of trading due to de-merger, amalgamation, capital reduction, scheme of arrangements, revocation of suspension, etc. as decided by the exchanges from time to time.

On Wednesday, Sebi banned 28 stock broking firms and eight individuals from trading in shares for five years for their role in the Ketan Parekh securities scam. These entities have also been debarred from accessing capital market and associating with any intermediary in capital market for five years.

The empowered group of ministers (GoM) on special economic zones (SEZs) on Thursday cleared 83 proposals, and capped the maximum area of an SEZ at 5,000 hectares. The maximum area is for multi-product zones, and the state governments can prescribe a lower limit if needed. GoM has also decided to lift the freeze on approving new special economic zones. It may be recalled that the GoM at its last meeting in January 2007 put a freeze on fresh notifications and approvals due to widespread protests against land acquisition for SEZs, especially at Nandigram in West Bengal.

China's central bank has ordered commercial banks to set aside money as reserves for the sixth time in 10 months, in an aim to further control liquidity and curb lending. The bank raised the reserve ratio by another 0.5 percentage point to 10.5 percent, effective from April 16, the People's Bank of China said on Thursday.

On the same day, Bank of England held British interest rates steady at 5.25 percent.

Market to consolidate


The market is expected to consolidate at current levels, before making any big move further. IT bellwether Infosys which is set to kickstart the earnings season with Q4 March 2007 results, on 13 April 2007, may provide the trigger for the market. In a recent pre-guidance report on Infosys, Merrill Lynch placed a short-term 'sell' on the Sensex heavyweight, expecting a conservative guidance from the company due to an uncertain US economic outlook, the appreciation of the rupee versus the dollar and other client-specific issues. Merill Lynch expects Infosys to give an EPS growth guidance in the early 20s.

The next major trigger for the domestic bourses is Q4 March 2007 earnings. Analysts expect Q4 results to be strong. The higher advance tax paid by frontline companies support their views. Market men will also closely watching what company managements have to say about the outlook for FY 2008

Inflation has been a cause of concern for quite a while now. 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 6.39% in the 12 months to 24 March, lower than the previous week's increase of 6.46%, as per latest data released on Thursday (5 April) showed.

Crude oil prices steadied near $64 per barrel mark, drawing support from a big drop in U.S. gasoline inventories ahead of peak summer demand in the world's top consumer. Any sharp upmove from this levels, may trigger fresh selling.

A lot will also 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.

Chinese central bank said it would raise the amount that lenders must hold in reserve for the sixth time in 10 months time since last June, in an aim to further control liquidity and curb lending. The 0.5% point increase in the reserve requirement ratio would take effect 16 April, the People's Bank of China added. This may dampen sentiment globally.

Raj Television Network, Prism Cements, i-Gate Global Solutions, Mastek, Honeywell Automation India, Ballarpur Industries, Infosys Technologies and CMC will be announcing their March 2007 quarterly results.

Third straight day of gains


The markets advanced for the third straight day, backed by firm buying interest for shares from metal, banking and cement sectors.

The 30-shares BSE Sensex settled 69.31 points or 0.54% higher at 12856.08. It opened slightly higher at 12791.60, but immediately began declining until it touched a low of 12,711.50 in opening session itself. However it kept on advancing from this level, as buying emerged, to hit a high of 12899.31. With today’s gains, the market posted gains for the third straight day.

The S&P CNX Nifty closed with a gain of 18.75 points (0.50%), at 3,752. The Nifty April 2007 futures settled at 3,711, a sharp discount of 41 points over the spot closing.

As per provisional data, FIIs were net sellers to the tune of Rs 85.80 crore today.

The BSE cash turnover amounted to Rs 3173.79 crore. Total market wide turnover was at Rs 35074.25 crore. The NSE cash turnover was at Rs 6939.06 crore while the NSE F&O turnover was at Rs 24961.4 crore.

Market breadth was positive on BSE, with over 1.5 gainers for every loser. 1628 shares advanced as compared to 901 that declined, while 71 remained unchanged. The BSE Mid-Cap Index ended at 5,319.95, up 39.88 points or 0.76% while the BSE Small-Cap Index surged 69.89 points or 1.1% to 6,456.37

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

Tata Steel was the top gainer, up 5.75 % to Rs 463.40 on high volumes of 24.79 lakh shares. Steel companies have reportedly hiked product prices. Late on Monday (2 April), Tata Steel said it had completed its $11.3 billion acquisition of European steel maker Corus Group PLC, a takeover that makes the Indian company the world's fifth-largest steel producer. Tata Steel’s crude steel production for the year 2006-07, crossed 5 million tonnes. The production of hot metal touched 5.55 million tonnes, crude steel at 5.05 million tonnes and saleable steel at 4.93 million tonnes.

Led by Tata Steel, the BSE Metal Index surged 3.1% to 8,623.65, and was the top gainer among the BSE sectoral indices. JSW Steel (up 4.45%), Hindustan Zinc (up 4.95%) and Jindal Steel & Power (up 3.61%), moved higher.

HDFC (up 2.20% to Rs 1529.90), ICICI Bank (up 2.02% to Rs 837.10) and REL (up 2% to Rs 497.10) were the other gainers.

Index heavyweight RIL was down 0.60% to Rs 1355 on 3.50 lakh shares. It moved in a range of Rs 1368.90 –1353.10

State run oil exploration major Oil and Natural Gas Corporation (ONGC) rose 0.10% to Rs 848 after reports that it has entered into service contracts for development of 14 onshore marginal fields with M/s Hydrocarbon Resources Development, M/s Deep Industries, M/s B G Shirke Construction Technology, M/s KEI - RSOS Maritime and M/s Shiv Vani Oil and Gas Exploration. By this process, ONGC has initiated action to put about 96% reserves of marginal fields on production in the XI plan period.

Simultaneously, ONGC is continuing its efforts to develop the new and marginal fields through in-house efforts, both in offshore and onshore, and large number of fields have been put on production / are in the process of being developed and put on production.

Also it plans to set up a new 15 million tonnes per year refinery on the east coast at a cost of 200 billion rupees ($4.65 billion), its chairman said on Thursday.

Dr Reddy’s was the top loser, down 2.43% to Rs 727.50 on 72,319 shares

Hero Honda declined 1.69% to Rs 633 while Bharti Airtel lost 1.15% to Rs 739

State-run power generation firm NTPC was down 1.52% to Rs 158.50 on 28.90 lakh shares, recorded a net profit of Rs 6,726.4 crore in 2006-07 as against Rs 5,820.2 crore in the previous fiscal, translating into an increase of 15.57%. Net sales during the period under review rose 17.20% to Rs 30,638.7 crore compared to Rs 26,142.9 crore in 2005-06. Gross revenue increased 15.81% to Rs 33,299.7 crore in 2006-07 from Rs 28,753 crore in 2005-06.

The company generated 188.67 Billion Units (BUs) of power during the year, showing an increase of 10.41% over the previous year's generation.

With a share of 20.18% in the total installed capacity of the country, NTPC generated 28.50% electricity during 2006-07. Capital expenditure in 2006-07 on various capital schemes increased to Rs 7,820.5 crore as against Rs 7,018.9 crore in the previous year. The company has earmarked capex plans amounting to Rs 12,792 crore for 2007-08.

Meanwhile, shares from cement sector advanced after declining on Wednesday, as buying resumed at lower levels. The fall came after the government announced cut in import duties. Analysts opine that imports would not be feasible due to high transport costs and lack of infrastructure at the port to handle bulk cement.

Grasim Industries (up 2.10% to Rs 2,106), Gujarat Ambuja Cements (up 1.10% to Rs 106.10), ACC (up 1.06% to Rs 722), and UltraTech Cement Company (up 2.26% to Rs 693) advanced.

Bank shares witnessed a broad-based rally today, with the BSE Bankex gaining 1.9% to 6,371.69. State run Union Bank of India gained 6.3% to Rs 102.70. Oriental Bank of Commerce rose 5% to Rs 186.25. Bank shares rose after the latest data showed slight cooling in inflation.

Shares of offshore and onshore exploration services advanced for the second straight day, on expectations of winning orders from exploration firms. Dolphin Offshore (up 6% to Rs 200), Jindal Drilling (up 2.10% to Rs 500), Deep Industries (up 3.11% to Rs 53.10) and South East Asia Marine Engineering & Construction which rose 5% to Rs 194.45.

IFCI jumped nearly 10% to Rs 34.90 after the term lending institution said late on Wednesday that it had received large part of proceeds of sales of its 7% stake in NSE in January 2007. The scrip jumped on heavy volume of 4.24 crore shares on BSE.

Gujarat Ambuja Exports surged 14.62% to Rs 29.80 after the company today issued a public announcement regarding its proposed buy-back programme. The company said it has set aside Rs 26.25 crore for buy-back of its shares through the open market purchases route. The maximum price at which it will buy-back its own shares is set at Rs 38. The buy-back will begin on 16 April 2007.

Bulk drug manufacturer Lupin advanced 2.11% to Rs 630 after it finalised a patent sale agreement with Servier. As per the agreement, Lupin has received Euro 20 million from Laboratories Servier of France for the sale of certain patent applications and other related Intellectual Property for Perindopril for multiple countries.

Television broadcaster Sun TV rose 2.72% to Rs 1540 after the company’s board today approved a 2-for-1 stock split. As a result, the face value of the scrip will become Rs 5 from Rs 10.

Utility vehicle and tractor maker, Mahindra & Mahindra rose 0.21% to Rs 715 on reports that it is open to more alliances, but will avoid tying up with too many partners. Mahindra, which has forayed into cars with a joint venture with France's Renault , also has an alliance with Renault and Nissan Motor Co for a greenfield project in southern India to make 400,000 vehicles in seven years.

Shoppers Stop plunged 4.45% to Rs 590. The retailer said its joint venture with Germany's Nuance Group AG had won a contract to operate retail business at the upcoming Hyderabad international airport. The joint venture is expected to have revenues of $240 million in seven years.

An important set of data that analysts was unleveled. India's wholesale price index rose 6.39% in the 12 months to 24 March, lower than the previous week's increase of 6.46%, data showed on Thursday. The figure was slightly above a forecast of 6.29% in an analyst poll.

Meanwhile annual inflation for the week ended 27 January was revised to 6.69% from 6.58%. Annual inflation stood at 4.06% in the corresponding week a year ago.

The Nikkei share average slipped 0.30% on Thursday following a two-day rise, with Fast Retailing Co. Ltd. and other recent gainers dropping and lower oil prices weighing on energy stocks such as Nippon Oil Corp. The Nikkei fell 52.67 points to 17,491.42. The benchmark had booked more than 500 points in the last two sessions and saw its highest close since 28 February on Wednesday.

Hong Kong’s Hang Seng index finished 1.03% or 207.01 points higher at 20209.71

Markets will remain closed on Friday (6 April 2007) on account of Good Friday. Low volumes indicate that many market participants are on the sidelines.

The undercurrent remains cautious on concerns that economic growth will slowdown following RBI’s rate hike campaign. With inflation a percentage point above the central bank’s forecast, RBI late last week unexpectedly raised cash reserve ratio along with hike in short term interest rate.

Infosys’ FY 2008, which it will unveil along with Q4 March 2007 results, on 13 April 2007, is the next major trigger for the market. In a recent pre-guidance report on Infosys, Merrill Lynch placed a short-term 'sell' on the Sensex heavyweight, expecting a conservative guidance from the company due to an uncertain US economic outlook, the appreciation of the rupee versus the dollar and other client-specific issues. Merill Lynch expects Infosys to give an EPS growth guidance in the early 20s.

US stocks managed slim gains Wednesday, following the previous session's big rally, as investors eyed lower oil prices and weaker than expected economic reports The Dow Jones industrial average (up 19.75 to 12,530.05) and the broader S&P 500 (up 1.60 to 1,439.37) index both added a few points. The Nasdaq composite added 0.3 percent.

US light crude oil for May delivery fell 26 cents to settle at $64.38 a barrel on the New York Mercantile Exchange on Wednesday after Iran's president pardoned and pledged to release the 15 British sailors and marines being held. Concerns about the standoff between the two nations had driven up the price of oil over the past week. Iran is the No. 4 oil exporter.

Meanwhile, China's central bank said on Thursday that it would raise the amount that lenders must hold in reserve for the sixth time in 10 months time since last June, in an aim to further control liquidity and curb lending. The 0.5% point increase in the reserve requirement ratio would take effect 16 April, the People's Bank of China added.

India's infrastructure sector output grew 7.2% in February from a year earlier, slower than revised 8.2% growth in January, government data showed on Thursday. Output rose an annual 9.1% in February 2006. Infrastructure output in the April-February period rose 8.3% from a year earlier.

The Union trade minister Kamal Nath is scheduled to announce the annual foreign trade policy some time this month. India's export of services is expected to touch $310.9 billion by 2011/12, powered by the booming software, consultancy, engineering and tourism sectors, showed a report. Services exports could even surpass merchandise exports, which are expected to more than double to $305.5 billion in the next five years, said the survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI).

India exported goods worth $112.4 billion during 2005/06 while export of services was $71.6 billion. Services exports are estimated at $91.5 billion this fiscal, and merchandise exports at $132.7 billion.

India's service exports grew at 28% annually for the last five years, faster than the 22% growth in goods exports during the same period.

"With the current rate of growth in services to continue in the medium term, India's exports of services will be close to $311 billion by 2012, overtaking the expected level of merchandise exports of $305.5 billion by that year," said the FICCI survey.

During the first nine months of 2006/07, a buoyant service exports helped India cut current account deficit to $3 billion from $4.8 billion during April-Dec. 2005, the survey said citing government figures.

Software services was the highest foreign exchange earner at $21.8 billion during April-December 2006, followed by business and management consultancy at $16.5 billion and travel services at $6.4 billion, it said.

ILFS - Q4FY07 Preview


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ASK RJ - Tech Mahindra


We have given TechM a target PE multiple of 21x (5% premium to Satyam and 11% to HCL Tech) mainly on account of better revenue visibility, superior

management quality and higher return ratios. On FY09E fully diluted earnings of Rs86.4, the target price works out to Rs1,815 implying an upside of 27% from the current levels. We initiate coverage on TechM with a Buy recommendation.

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Edelweiss - Daily Trading Notes


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HDFC Sec Morning Reports


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Kotak - Ashok Leyland, Technology, Economy


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IFSL - Autoline Industries Visit Note


Autoline Industries Ltd. (AIL), a Pune-based fast growing supplier of sheet
metal components and assemblies has been growing at CAGR 65% over the last
four years. We expect the company to grow at a CAGR of 55% in the next two
years, on the back of strong order book and export potential. Presently,
the stock quotes at a PER of 11.7x FYo8E. We believe that at the current
price, the stock is fairly valued.

Though the company has shown robust growth and the management is confident
of growing at the same pace going forward, we are slightly cautious on
growth prospects on back of rising interest rates & softening of demand in
the overall auto sector compared to what was seen in FY07. At CMP of Rs210
the stock is fairly valued as it is trading at 11.7x FY08E earning. At
present we do not have a rating on this stock.

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Market may remain volatile


Market may open on a weak note as Asian indices are trading in the mix in morning trades followed by overnight gains in the US markets may keep the market volatile. Pressure on the liquidity front due to institutional investors are net sellers of equity could make the investors jittery. On the upside, the Nifty could test the recent high around the 3750 level and may witness support around the 3600 level. The Sensex has a likely support at 12500 and may test higher levels of 12800.

US indices edged up on Wednesday as Iran's plans to release captured British troops which led to a decline in oil prices, with the Dow Jones adding 20 points to close at 12530 while the Nasdaq gaining by 8 points at 22459.

Losers outpaced the gainers among the Indian stocks trading on the US bourses. Among the major losers Wipro, Dr Reddy's, Tata Motors, HDFC Bank, MTNL and VSNL fell around 1% each, while Infosys, ICICI Bank, Rediff and Patni Computers were marginally up.

Crude oil prices in the global market declined yesterday. The Nymex light crude oil for May series slipped by 26 cents at $64.38 per barrel. In the commodity segment, the Comex gold for June delivery rose by $7.70 to settle at $677.40 an ounce.

Anand Rathi - Daily Fundamental Snippets


Wipro Technologies, a subsidiary of Wipro Limited, has merged its telecom service provider and product engineering services divisions. The new entity, to be known as Telecom & Product Engineering Solution (TPE), will contribute $1 billion to Wipro's $3.2 billion top line.

Hexaware Technologies is planning to acquire an IT company in the US or Europe for $20-40 million (around Rs 85-170 crore). They intend to penetrate the European markets quickly and are are looking for a suitable fit in the enterprise resource planning (ERP) space for verticals such as banking and financial services or transportation domains.

Steel Authority of India (SAIL) has approved a major modernisation and expansion programme for its Bhilai Steel Plant (BSP).

Cagiva has reached an agreement with Kinetic Engineering where the latter is likely to start manufacturing single-cylinder Cagiva models developed in Italy.

Mahindra-Renault, a 51:49 joint venture between Mahindra & Mahindra (M&M) and French carmaker Renault, commissioned its Logan manufacturing plant, adjacent to its state-of-the-art facility in Nashik.

Shakti Pumps (India) Ltd is planning to set up a four-lakh submersible pumps and motors manufacturing facility near its existing plant at Pithampur.

Bharat Heavy Electricals Limited (BHEL), Trichy, garnered a record turnover of Rs 4,575 crore during the year ended on March 31, 2007, registering 30 per cent growth over the last year.

Chhattisgarh Mineral Development Corporation (CMDC) and National Mineral Development Corporation (NMDC)-will form a joint venture company (JVC) for supplying raw material to the local steel industries in the state.



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Edelweiss - Daily Market Outlook 5th April, 07


Market Snapshot

Taking cues from its global counterparts, the Indian indices also opened yesterday's proceedings on a strong note. With bulls managing to clock further gains during the final hour of trade, Markets closed well inside the positive territory for the second day running. The BSE Sensex closed at 12,787 while the NSE Nifty closed at 3,733.

The NSE and BSE cash volumes were slightly higher compared to the previous day at INR 70 and INR 32 bn respectively. The F&O volumes were lower at INR 220 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has increased to 27-28% levels. The WPCR of Nifty Options decreased to 0.72 compared to the previous day while the 5 day average is 0.83.

Outlook

We expect market to open slightly positive taking strength from yesterday’s gains. However, over the course of day, we expect that markets should see some selling pressure around the levels of 3725-35, and remain range-bound as volatility has dropped and the investors are cautious before the long weekend.

The metals stocks are expected to exhibit strength on the back of strong base metal prices. IT stocks, however, are expected to turn negative again because of strong appreciation in the rupee. Automobile stocks are expected to continue their weak run, following weak growth in the sales and the rising interest rates.

Nifty has a strong resistance at 3750 followed by 3763, and finds support at 3726 and 3695. We would recommend creating subtle short positions on Nifty futures, if it fails to cross the resistance levels of 3750.

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Citigroup - India Equity Strategy


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ENAM - CRAM Sector


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Intra-day Stock Ideas


NIFTY (3733) SUP 3720 RES 3764

BUY CROMPGREAV (196.40)
SL 192 T 204, 206

BUY ADANIENT (210.95)
SL 206 T 218, 221

BUY TATASTEEL (438)
SL 432 T 448, 451

SELL PRITHVI (253.45)
@ 256 SL 260 T 246, 243

SELL M&M (711.80)
@ 714 SL 719 T 704, 701