Tuesday, April 10, 2007
Citigroup - Fun with Flows
Citigroup - Jaiprakash Associates
Sluggish trading for the day after a strong opening summarises market action. Markets were choppy with every progressive hour as selling conitnued which pushed Indices to trade in negative territory. Fresh buying helped indian indices to recovery earlier losses made in the day. Sliding crude prices fuelled the rally in Energy stocks which closed up. Selective small and mid caps were in demand as investors to book profits. Japan has kept interest rates unchanged. The European indices were supportive after starting in green and continued to trade in the positive territory.
Sensex closed up 5 points at 13182. It was helped up by gains in HDFC (1615,+4 percent), ITC (159.80,+2.8 percent), HLL (209.,+2.6 percent), Tata Motors (718.50+2 percent) and HDFC Bank (992.05,+2 percent). Restricting the gains were Satyam (445.80,-3.5 percent), Wipro (547,-2.6 percent), Infosys (2000,-2 percent), Dr Reddy (716,-1.8 percent) and L&T (1573,-1.5 percent)
Tata motors plans to distribute its trucks through the Italian company Iveco's worldwide distribution network. Tata trucks including the highly successful one tonne Ace will be available through Iveco's sales network in markets like Brazil, Argentina, Russia and other markets where the Indian manufacturer has no significant presence. Tata will also get to use Iveco's established service network in these markets. In return, Iveco will bring its highly successful range of light commercial vehicles and market them through Tata's domestic network. These vehicles are likely to be assembled in the country, though plans have not been firmed up yet. Iveco will also be an engine supplier for the higher end models that Tatas are planning to launch in the next few years.
Educomp Solutions was in demand as the company not only acquired 76% stake in ThreeBrix E-Services Pvt Ltd which owns "The Learning Hour" tutoring service but also bagged an order from Govt of Haryana, for imparting CAL Programme in 716 Govt. Senior Secondary Schools in State of Haryana. The total order size is of Rs 18.30 Crores and over a period of 3 years. The story is interesting here we have a detailed note here. Educomp opened up to get locked up in circuit before closing 4% up. we also have our Wow cals on Educomp which has so far delivered 20% gains in just two weeks.
Bajaj was down by a percent after it announced a reduction in price by Rs. 3000 on its Platina model. Bajaj Platina will now be available at Rs 33,000 (ex-showroom). The price cut was announced by the company after it inaugurated its plant in Uttarakhand yesterday which has the capacity to manufacture a million bikes. Company intends to take on its arch rival Hero Honda head on by reducing the price. Competition is increasing in this segment. Hero Honda and TVS will also start production in the excise free zones and they will cut prices too. We wonder why Bajaj has guided for 10% growth this year.
Technically Speaking: Market churned Rs 4,185 cr. Sensex faces resistance at 13,200-13,400 range which was a major selling area for the bears in the last 2 months. Immediate support lies at 13075 below which the bears are likely to dominate upto 12,825 levels. Overall breadth favored Advances.
Infrastructure Index up 7.2% for February 2007
New Delhi Television
Cluster: Emerging Star
Price target: Rs375
Current market price: Rs330
Price target revised to Rs375
With funding tie-ups in place for its much-awaited entry into the general entertainment space New Delhi Television (NDTV) is all set for the big bang launch of its general entertainment channel (GEC) by the end of the year. NDTV Imagine, the subsidiary that would house the entertainment venture, has roped in Sameer Nair, the ex-CEO Star India who is believed to be the best programming brain in Indian general entertainment business, to make NDTV Imagine a success. Mr Nair's entry follows Karan Johar's new association with NDTV's GEC as a creative consultant and an ambassador for the NDTV brand. Mr Johar is on the board of NDTV Imagine with his production house Dharma Productions having a stake in the company.
The Sensex took a breather as investors remained on the sidelines ahead of the corporate results season that begins this week. The Sensex has gained almost 700 points in the last four sessions on the back of firm international markets. However the market was range-bound through the day. The Sensex resumed 58 points higher at 13236, but eased amid volatile moves on selling in heavyweight and information technology stocks in the afternoon and touched the day's low at 13075. Some late buying at lower levels saw the Sensex shed its losses and close the session on a positive note with marginal gains. The Sensex closed at 13190, up 12 points, while the Nifty gained five points and closed at 3848.
The breadth of the market was positive. Of the 2,649 stocks traded on the BSE, 1,575 stocks advanced, 1,006 stocks declined and 68 stocks ended unchanged. Among the sectoral indices the BSE FMCG Index advanced 2.18% at 1813 followed by the BSE Metal Index (up 1.07% at 9000). However, the BSE IT Index and the BSE Teck Index closed in negative territory.
Select blue chips notched up significant gains. HDFC rose 3.38% at Rs1,608, ITC advanced 2.90% at Rs159, HLL climbed 2.55% at Rs209, Tata Motors surged 2.44% at Rs721, HDFC Bank gained 2.05% at Rs992, Ranbaxy added 1.91% at Rs358, Grasim jumped 1.85% at Rs2,236, BHEL advanced 1.59% at Rs2,463 and ONGC was up 0.79% at Rs874. Among the laggards Satyam Computers tumbled 3.53% at Rs445, Wipro slipped 2.41% at Rs548 and Infosys dropped 2.25% at Rs1,998. TCS, Dr Reddy's, Bajaj Auto, NTPC, L&T, Cipla and Reliance Energy ended with marginal losses.
Fast moving consumer goods stocks were in the limelight. Godrej Consumer Products soared 4.16% at Rs156, Bata India jumped 3.53% at Rs148, United Spirits gained 2.29% at Rs846, Colgate advanced 1.62% at Rs345 and Proctor & Gamble was up 1.22% at Rs786. Glaxo, Britannia and Dabur India ended with marginal gains.
Over 1.87 crore IFCI shares changed hands on the BSE followed by India Bulls (96.25 lakh shares), India Bulls Real Estate (78.79 lakh shares), Tele Data India (39.61 lakh shares) and Himachal Futuristic (35.88 lakh shares).
Value-wise India Bulls registered a turnover of Rs479 crore on the BSE followed by India Bulls Real Estate (Rs221 crore), Tata Steel (Rs167 crore), Mind Tree (Rs146 crore) and Tata Motors (Rs92 crore).
The market was highly volatile throughout the day. A whopping turnover was another marked feature of the day's trading. The aggregate turnover on BSE amounted to Rs 4190.71 crore, as compared to Rs 3093 crore on Monday (9 April). The high turnover is attributed to a series of block deals executed in a number of stocks.
The markets settled with gains, as fresh buying happened at the fag end of trading. Strength was seen in FMCG and metal stocks, while IT and banking stocks dragged the market lower.
The 30-share BSE Sensex gained 11.80 points, to settle at 13,189.54. It had opened firm, at 13,185.85, and struck a high of 13,222.14. The benchmark index also fell to a low of 13,075.48, in the afternoon session. The NSE Nifty gained 4.65 points (0.12%), at 3,848.15.
As per provisional figures, FIIs were net buyers to the tune of Rs 350 crore today.
Even as the market flattened out, its breadth remained firm. Buying kept happening in small-cap and midcap stocks. Against 1,539 advancing, 1015 had declined. Also, 76 scrips remained unchanged.
The BSE Mid-Cap Index ended at 5461.51, up 42 points (0.77%), while the BSE Small-Cap Index settled at 6656.74, a gain of 71 points (1.08%).
Among the 30-Sensex pack, 18 advanced while the rest declined.
Housing finance major HDFC was the top-gainer, up 3.83% to Rs 1615, on a volume of 1.15 lakh shares.
Tata Motors advanced 2.15% to Rs 718.50, on total volumes of 13 lakh shares. Four block deals of 2.53 lakh shares were struck in the counter for an average Rs 708.37 per share. Tata Motors, which had signed an agreement with Iveco in February, is planning to distribute its trucks through the Italian company's worldwide distribution network. As a reciprocal arrangement, dealers of Tata Motors will sell select Iveco models, especially their light commercial vehicles in India. Reports say that though a definite agreement is still a few months away, in principle, the mutual marketing arrangement will be in place shortly. "In the last fiscal, we sold 1500 Fiat branded cars and this year we hope to sell more than 3000 cars through our distribution network," said Mudit Gupta, senior manager (passenger car unit), Tata Motors.
The BSE FMCG Index gained 2.2%, to settle at 1,812.72. Cigarette major ITC gained 2.86% to Rs 159.80, while FMCG major HLL advanced 2.63% to Rs 209.
Index heavyweight Reliance Industries (RIL) was down 0.13% to Rs 1382, as 3.23 lakh shares changed hands in the counter on BSE.
Frontline IT stocks were in correction mode ahead of their March quarter results. The BSE IT Index had slipped 2.07%, and was the biggest loser among sectoral indices on BSE.
Satyam Computers was the top-loser, down 3.40% to Rs 445.95, on a volume of 6.83 lakh shares. Infosys (down 2.15% to Rs 2000), Wipro (down 2.63% to Rs 547) and TCS (down 1.50% to Rs 1198) also suffered under concerns pertaining to results.
Infosys’ FY 2008 guidance is the next major trigger for the market. The rupee’s sharp surge in late-March 2007 - early April 2007, an uncertain US economic outlook and certain client-specific risks, have raised concerns that the FY 2008 guidance by Infosys Technologies may turn out conservative. Infosys unveils the full year guidance at the beginning of the financial year along with Q4 March 2007 results, on Friday, 13 April 2007.
For Q4 March 2007, Infosys has given a guidance of income to be in the range of Rs 3789 crore and Rs 3798 crore; indicating a Y-o-Y growth of 44.4% - 44.7%. The EPS is expected to be Rs 17.88; showing Y-o-Y growth of 46.3%.
For the full year ending March 2007, Infosys’ income is expected to be in the range of Rs 13,910 crore and Rs 13,919 crore; Y-o-Y growth of 46.1% - 46.2%. EPS before exceptional items is expected to be Rs 66.63, a Y-o-Y growth of 48%.
Since 2001, when the practice of coming out with a guidance started, Infosys has disappointed every alternate year on that front. And in five of the last six times, Infosys' stock and the broader market have declined on the results' day (or in the first trading session after results, in case the markets were closed) - no matter what the guidance.
The sole exception was 14 April 2006, when Infosys beat street estimates by guiding revenue growth of 30.7% and EPS growth of 28.4% for the last financial year. But on that Friday, the market was closed for Ambedkar Jayanti. When they opened on Monday, 17 April 2007, the Infosys stock zoomed 6.93%, and the Sensex ended with a gain of 302 points (2.69%).
Another IT major, Satyam Computer’s guidance for Q4 March 2007 suggests that revenues will be in the range of Rs 1,728 and 1,736 crore, a growth 4 - 4.5% over Q3. For FY-2007, revenues are expected to be in the range of Rs 6434 - Rs 6442 crore, a growth of 34.3 -34.4% over FY-2006.
Bajaj Auto slipped 1% to Rs 2275. The bike maker announced a Rs 3000 price cut on Bajaj Platina, given the intense competition in the 100cc space. The Platina may be Bajaj Auto's last 100cc bike but still remains a large volume player. This has become possible, thanks to the opening of Bajaj Auto's new plant at Pantnagar, Uttarakhand. The plant enjoys tax-cuts and excise-sops from the state government. It has 1 million units of annual capacity, which can be scaled up to 3 million in a few years.
Indian Hotels surged 3.35% to Rs 149.75, on high volumes of 23.53 lakh shares, after a block deal of 20 lakh shares was executed in the counter at Rs 148 per share.
Shares from the metal pack, saw fresh buying after reports that steel companies have hiked Hot Rolled (HR) coil prices by Rs 1000 per tonne. The BSE Metal Index closed at 9000.01, up 1%. JSW Steel (up 5% to Rs 534.40), Tata Steel (up 0.66% to Rs 469.55), Jindal Stainless (up 2.70% to Rs 127.50), Sesa Goa (up 2.40% to Rs 1757), Jindal Steel & Power (up 2.54% to Rs 2489) and Hindustan Zinc (up 1.74% to Rs 679.35) edged higher.
Everest Kanto Cylinder surged 11.64% to Rs 974.30, on renewed buying, due to strong growth prospects for the firm. Everest Kanto Cylinder is on a major expansion spree to cater to the lucrative Chinese market even though its China project has been delayed. The company is setting up a plant in China, having an initial annual capacity of 2 lakh cylinders. The project is slated to start production in the third quarter of the current financial year. The plant was earlier scheduled to begin production by July 2007.
Educomp Solutions rose 2.85% to Rs 1208, after acquiring 76% stake in ThreeBrix E-Services, a high-quality tutoring service provider in the Middle East. ThreeBrix e-Services owns "The Learning Hour" tutoring service and was started in 2005. The acquired company provides high quality tutoring service in the Middle East and Dubai markets. The partnership between the company and ThreeBrix will leverage the company's large content library and pedagogical materials, to provide tutoring in several ways, online, offline and through learning centers, and will mainly focus on Indian students.
ABG Shipyard surged for the second day in a row on the eve of the scrip’s listing on the National Stock Exchange (NSE). The stock of ABG Shipyard was up 2.50% to Rs 364. ABG Shipyard also secured a major order for constructing four 54,000 DWT Supramax bulk carriers, worth $ 139 million (Rs 618 crore) from Essar Shipping & Logistics, Cyprus, as a part of its ship acquisition programme. Following the order, the order-book position of ABG Shipyard, as on date, stands at about Rs 40,737.7 Mio (US$ 915.5 Mio).
Suzlon Energy dropped 0.13% to Rs 986, on concerns of a bidding war, for acquiring Germany's REpower. The stock had slipped to a low of Rs 961.05. Suzlon Energy has raised the bid for acquiring the German wind-turbine maker. Suzlon Energy today said it had acquired 6,27,000 shares, constituting 7.7% of the share capital of REpower at a price of up to Euro 150 per share. As a result of this acquisition, the voluntary offer for acquiring up to 100% stake in Repower stands revised upwards, to Euro 150 per share.
Balaji Telefilms jumped 11.3% to Rs 142.15, on reports that NDTV was in talks with television content providers, including Balaji Telefilms, for content. NDTV is negotiating with production houses for entertainment-related content to be aired on their upcoming channel, NDTV Imagine.
Moser Baer vaulted 10.4% to Rs 332.70, on renewed buying. It ushered in Telugu films in the home video market, with the launch of 101 popular Telugu titles on 7 April 2007.
iGate Global Solutions soared 5.6% to Rs 402.55. The stock surged for the second day in a row on expectation of strong FY 2007 (year ended 31 March 2007) results. iGate’s board meets tomorrow to consider FY 2007 results.
Construction firm Subhash Projects & Marketing jumped 5% to Rs 193, on bagging orders worth Rs 309 crore for various power projects in Karnataka.
The Nikkei Average fell 0.45% on Tuesday, after US stocks failed to rise despite a strong jobs data, prompting investors to sell recent gainers such as Advantest Corp after the benchmark logged its highest close in nearly six weeks in the previous session. The Nikkei 225 index was trading down 79.07 points, at 17,664.69. On Monday, the benchmark booked its highest closing since 27 February 2007.
Hong Kong’s Hang Seng Index was up 138.16 points (0.68%), to 20,347.87.
Oil prices bounced back slightly on Tuesday, as Asian traders reacted to a slide the day before pulling prices down by $3. Light, sweet crude for May delivery rose 30 cents to $61.81 in mid-morning Asian electronic trading on the New York Mercantile Exchange.
US stocks closed flat on Monday (9 April), as news that billionaire investor Warren Buffett had purchased stakes in the railroad sector and strong jobs data offset worries about earnings and subprime loans. The Dow Jones Industrial Average rose 8.94 points, or 0.07%, to end at 12,569.14. The Standard & Poor's 500 Index gained 0.85 of a point, or 0.06%, to finish at 1,444.61. But the Nasdaq Composite Index dipped 2.16 points, or 0.09%, to close at 2469.18.
The Bank of Japan kept interest rates unchanged for a second month after consumer prices fell and recent data signaled US economic growth may slow. Governor Toshihiko Fukui and his policy board colleagues voted unanimously to hold the key overnight lending rate at 0.5%, the lowest among major economies, the bank said in a statement today in Tokyo.
Sun Pharmaceuticals (SUNPHA)
Price: Rs 1,057 PERFORMER
Sun Pharma is a leading domestic pharma company with a strong presence in chronic segments such as cardiology, neurology and diabetology. The
company's turnover has doubled and net profit tripled in the last 4 years. Its net margins have been consistently higher than its peers (the top 10
Indian pharma companies) and it boasts one of the highest operating margins in the sector. It established its first research center, Sun Pharma Advanced
Research Center (SPARC), in 1993. The company has used a combination of internal growth and acquisitions to drive growth. The most important
acquisition was in 1997, that of Detroit-based Caraco Pharm Labs in the US.
The company plans to demerge areas related to new molecular entities and drug delivery systems into SPARC and list the company. The fair value of the
newly formed company works out to US$620 million (around 13% of the current market price). We believe the de-merger and listing of the newly formed
subsidiary will unlock value both for the company and its shareholders.
The stock is currently trading at Rs 1,057, 18.51x FY09E EPS of Rs 57.11 and 23.16x FY08E EPS of Rs 45.63. Given the superior fundamentals in terms of RoNW, ROCE, margins, product mix (95% chronic space) and almost debt-free status, we believe that the stock should trade at a premium to its peers. At
the current levels, its peers are at an average PE of 16.44x FY09E EPS, while Sun Pharma is trading at a premium of 12.60%, at a P/E of 18.51x its
FY09E EPS. We rate the stock a PERFORMER.
Price: Rs 640 Target: Rs 837
Sanghvi Movers, India's largest crane-hiring company, is a proxy on the industrial and infrastructure boom in the country. Its aggressive ramp- up in crane capacity has coincided with a severe shortage of cranes globally, which should lead to robust growth in revenue and profits over the next few years. We initiate coverage on the company with an OUTPERFORMER rating.
Thrust on infrastructure to spur demand for cranes: Cranes are an essential component for infrastructure building. The government has unveiled several initiatives to boost infrastructure and investment amounting to Rs 1,400,000 crore have been planned over FY07-12E. We believe this will create huge demand for cranes and Sanghvi Movers will be a major beneficiary.
Dominant player in the crane-hiring business: Sanghvi enjoys a leadership position in the domestic crane-hiring market with an almost 50% market share. It is India's largest crane operator and among the top 5 largest crane hiring companies in Asia. It is ranked 15th globally by Cranes International, a UK based leading magazine tracking the global crane
Aggressive ramp up in crane capacity: To capitalise on the rising demand, the company has been adding capacities and ramping-up its fleet size. It has lined up capex of Rs 330 crore for FY07-08E, to further boost its fleet by another 60-65 cranes. Of this it has completed expansion of Rs 180 crore in FY07.
Valuations: At the current price of Rs 640, the stock is trading at a P/E multiple of 12.5x its FY07E EPS of Rs 50.9 and 10.7x its FY08E EPS of Rs 59.7. On an EV/EBIDTA basis, the stock is available at 6.3x FY07E earnings and 5.4x FY08E earnings. Given the company's dominant position in the crane-hiring market and the capex boom in India, we believe that the stock
is undervalued. We rate the stock an OUTPERFORMER with a 12-month price target of Rs 837, at 14x FY08E earnings, an upside potential of 40%.
UltraTech Cement (ULTCEM)
Price: Rs 715 Target: Rs 890
UltraTech Cement, a subsidiary of Grasim Industries, is one of the leading cement manufacturers in the western and southern regions. The company has undertaken a Rs 2,700 crore capex plan over the next three years (FY07-09) to increase its production capacity. It is also replacing its high-cost naptha-based power plant in Gujarat with an efficient lignite-based plant. The stock is currently available at a attractive enterprise value per tonne of $140 per tonne. We initiate coverage on the company with an OUTPERFORMER rating.
Capex to drive growth: The company has undertaken a Rs 2,700 crore expansion plan over the next three years (FY07-09). It will scale-up its production capacity by 4 million tpa from the current 17 million tpa by Mar FY08. We expect net sales to grow at a CAGR of 25% to Rs 6, 587.15 crore in FY09E from Rs 3,339.33 crore in FY06.
Captive power plant to cut costs: UltraTech's earnings were impacted due to its high power costs. It is now setting up captive power plants at its units in Gujarat and Chhattisgarh. In Gujarat, it will replace its naptha-based power plant by a more efficient lignite-based plant. We expect savings of Rs 170 crore per annum FY09 onwards which would boost the company's EBIDTA margins to 33.8%, in line with other major cement players.
Low cement clinker ratio, more scope for blending: Currently, the company's cement clinker conversion ratio is low at 1.14, below the industry average of 1.45. We expect company will reach to 60-65% of blended cement as against 40% currently of blended cement. This should help it to reduce costs and improve profitability.
Strong presence in fast-growing markets: UltraTech has a strong presence in the southern and western regions. These markets are expected to grow at a faster pace than other regions. With the demand-supply mismatch expected to continue till FY09, the company's additional capacity of 4 million tpa will get easily absorbed.
Valuations: At the current price of Rs 715, the stock trades at an EV/EBIDTA of 6.40x FY08E and 5.03 x FY09E respectively. We have taken the average of various valuations like EV/EBITDA, P/E and P/BV to arrive at a target price of Rs 890. At the target price, the stock would be valued at $140 EV/tonne for FY09E at an increased capacity of 21 million tonnes.
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Finolex Industries (FININD)Price: Rs 68.50
Target: Rs 95OUTPERFORMERFinolex Industries,
India's second largest polyvinyl chloride (PVC)manufacturer, is well placed to capitalise on the demand-supply mismatch inthe domestic PVC industry. It is also planning to foray into the real estatebusiness by developing its 78 acres of land at Chinchwad, outside Pune. Weinitiate coverage on the company with an OUTPERFORMER rating.Demand-supply mismatch: PVC producers in India are currently in a sweet spotas there has been a shift from excess supply to shortage in the last fewyears. For the period 2001-06, capacity addition grew at a CAGR of just 2%,whereas demand continued to surge in double digits at a CAGR of 11%. Thishas resulted in firm PVC prices and high capacity utilisation rates fordomestic manufacturers.Capacity expansions, cost reduction initiatives: Finolex has doubled its PVCresin capacity to 260,000 tpa and is in the process of expanding its PVCpipes capacity from 65,000 tonnes to 85,000 tonnes. It is also undertakingInitiatives like setting up of a 43 MW captive power plant and convertingits jetty into an all-weather jetty, which will expand margins goingforward.Real estate foray to stabilize earnings: The company has 78 acres of land inChinchwad, which it plans to monetize in partnership with a developer. Ithas been in negotiations for the last one-year and we expect an announcementfrom the company shortly. We expect the company to go for a lease modelwherein its share of the income would be Rs 72 crore per year.Valuations: We have used the sum of parts methodology to arrive at a fairvaluation for Finolex Industries. We estimate the value of its core PVCbusiness at Rs 58 per share, value of its 14.5% shareholding in FinolexCables at Rs 12 per share and value of its real estate business at Rs 25 pershare. Our target price works out to Rs 95 per share, which offers a 39%upside from the current price of Rs 68.50.
Tata Power Company (TATPOW)
Current Price: Rs 501 Target Price: Rs 610
Tata Power Company is India's largest private sector electricity generating company with an installed generation capacity of over 2,300 MW. The company has a presence in all areas of power sector generation (thermal, hydro, solar and wind), transmission and distribution. Its thermal power stations are located at Trombay in Mumbai, Jojobera in Jharkhand and Belgaum in Karnataka. The hydro stations are located in the Western Ghats of
Maharashtra and the wind farm in Ahmednagar.
An optimum mix of hydel and thermal capacity enables the company to supply
power at competitive tariffs to its customers. Among its achievements, the
company has to its credit the installation of India's first 500 MW unit at
Trombay, the first 150 MW pumped storage unit at Bhira, and a flue gas
desulphurization plant for pollution control at Trombay. The company's
growth momentum is expected to intensify after it was awarded the bid for
the Mundra ultra mega power project. It is also expanding capacity and has
taken stakes in Indonesian coal companies to secure fuel supplies.
We expect sales to grow from Rs 5,740 crore in FY06 to Rs 7,890 crore in
FY08E. Net profit is expected to rise from Rs 637 crore to Rs 790 crore. We
expect the company to earn a RoE of 14% on its investments in the Mundra
ultra mega power project assuming a 70:30 debt-equity mix. We estimate FY08E
EPS at Rs 40.10 and set a price target of Rs 610. At this price, the stock
will trade at P/E of 15.21x, giving an upside potential of 22% from the
current price of Rs 501 within a 12-15 month time horizon.
Buy Reliance Communication with stop loss of Rs 390 for target of Rs 433/492. Call valid for maximum 1 week
Buy UTI Bank with stop loss of Rs 435 for target of Rs 546/614. Call valid for maximum 1 week
Buy Bajaj Hindustan below Rs 208.50 with stop loss of Rs 204.50; This is a day-trading recommendation
Buy CESC below Rs 396 with stop loss of Rs 390; This is a day-trading recommendation.
Rajat K Bose
Buy Reliance Energy with stop loss below Rs 503 for target of Rs 535-546. This is a day-trading recommendation.
Buy India Cement with stop loss below Rs 157 for target of Rs 173; This is a day-trading recommendation.
Markets dance to local tunes
- Uncertainty and risk in the market have sharply risen in the recent past. In addition to the global uncertainties the market now has to grapple with domestic interest rate related risks as well.
- There are widespread concerns that the tightening of money supply has been excessive and could lead to a significant slowdown in the economy, especially in the interest rate sensitive sectors such as automobiles and housing.
- We are still maintaining our views that (1) inflation will moderate going forward and (2) the US economy will slow down but not go in recession. As these events unfold, concerns should ease and the environment for equities should improve. However, the risks around our base case have certainly risen.
- Volatility is likely to peak in the next four weeks. We expect inflation to ease by the end of this month. End April shall also bring the initial monsoon forecast as well as the credit policy of the Reserve Bank of India (RBI). While the fourth quarter results of Indian companies may not be a trigger, the market will keenly await the guidance on the FY2008 prospects of the corporate sector, especially that of automobiles, banks and the other interest rate sensitive sectors.
The NIFTY futures saw a rise in OI 0.51% with prices positive indicating that as market recovered shorts covered their positions aggressively and fresh long positions built up in the market as market crossed its immediate resistance level of 3800 .If market goes below 3750 levels we may see fresh short positions being built up in the. The FIIs bought index futures to the tune of 430crs indicating long positions built up by them as well as buyers in index options indicating hedged positions built up by them. The PCR has come up form 0.86 to 0.95 levels indicating strength in the market. The volatility has come up from 26.80 to 26.90 levels indicating volatile trading sessions ahead as historical volatility is also on higher side.
Among the Big guns, ONGC saw rise in OI to the tune of 0.44% with prices up indicating heavy short covering in the counter and fresh buying emerging in the counter indicating strength in the counter whereas RELIANCE saw rise of OI to the tune of 0.16 % with prices up performing in line with the market.
In the TECH front, INFOSYSTCH, TCS, SATYAMCOMP, WIPRO saw drop in OI with prices up indicating shorts covered their positions and fresh buying emerging in IT pack indicating strength in the sector.
In the BANKING counters, SBIN, HDFCBANK, ICICIBANK saw rise in OI with prices going up indicating that long positions built up in these counters indicating strength in these counters.
In the metal pack TATASTEEL, SAIL saw fresh built up in OI with rise in price indicating fresh buying emerging in the counter indicating further strength in these counters. HINDALCO saw drop in OI with prices up indicating short covering in the counter whereas STER saw rise in OI with prices up indicating some fresh buying emerging in the counter indicating strength in the counter.
Considering the overall scenario and the markets behavior the market may show some volatility before taking any sharp and directional movement .If it remains above 3800 levels we may see fresh long positions being built up in the market. 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.
Wireless subscriber base in India is soaring. Whereas 4.6m subscribers were added per month over H1CY06, 6.3m subscribers have been coming to the fold since then. Traditionally a price sensitive market, India has broken the mould with subscriber additions stepping up even sans tariff cuts. With infrastructure sharing facilitating rapid rollouts and thus wider coverage, increasing affordability would drive market expansion. We expect the wireless subscriber base to reach 504m by 2012. But for a tariff cut due to lower regulatory costs, we do not see any tariff wars in the offing despite Vodafone’s acquisition of Hutch. Hence, profitability of operators is likely to remain intact with an estimated 40% earnings CAGR for our wireless universe over FY07-09. However, spectrum unavailability could be a dampener. We rate Bharti Airtel and Reliance Communications as Outperformers and Idea Cellular as Neutral.
Indian wireless market – the floodgates have opened: The government has set a stiff target of expanding the current wireless subscriber base of 159m to 584m by 2012. While regulatory costs are set to fall and make tariffs more affordable, infrastructure sharing, still at a nascent stage, would facilitate faster coverage of rural areas. We expect India to have 504m subscribers by 2012 (25% CAGR from the current base).
Operators to see sustained profitability: The incremental 345m subscribers would largely come from rural areas. Though ARPU in rural areas would be lower, we believe coverage would induce increased usage from existing subscribers. Thus, we expect EBITDA margins to expand by 200bp over FY07-09 for our wireless universe on the back of higher outgoing usage and cost benefits arising from infrastructure sharing.Buy Bharti and RCOM; Neutral on Idea: While lower tariffs make usage more affordable, rapid population coverage would increase the addressable market. At an estimated EBITDA CAGR of 40% over FY07-09 for Bharti and RCOM, the stocks trade at 10.1x and 8.5x FY09E EBITDA respectively. While Idea trades at a 28% premium to RCOM, we find the premium unjustified given that operations are restricted to 11 circles and NLD business would be fully operational only by end-FY08. Thus, we rate Bharti and RCOM as Outperformers and Idea as Neutral.
Markets had opened the week's proceedings on a positive note, mirroring the firm trend in other Asian markets, Sensex opened with a positive gap of 49 points at 12,905 with buying being witnessed across all the sectors. Markets continued with their uni-directional journey as further gains were witnessed in the final hour of trade. The BSE Sensex closed at 13,178 (up 322 points) while the Nifty closed at 3,844 (up 92 points).
The NSE and BSE cash volumes were slightly lower compared to the previous day at INR 62 bn and INR 30 bn respectively. The F&O volumes were also lower at INR 237 bn.
The Implied Volatility (IV) across Nifty strikes has increased to 26-28% levels. The WPCR of Nifty Options increased to 1.15 compared to the previous 5 day average which is 0.77.
The market will open flattish today in line with global markets and absence of any major news trigger. The Nifty is expected to cool down after the 200 point rally seen in last few trading sessions. We can see some profit booking to come in at current levels as markets continue to look for strong event before any movement.
Metals continued to gain strength at the LME and we continue to believe that metal stocks will continue to be market out performer. Auto stocks especially in the Four wheeler segment can show some weakness on the interest rate rise disturbing the demand coupled with increased raw material cost. After recovering yesterday, one can go short on Four-Wheeler counters at current levels today.
The Nifty is currently taking a resistance at the 60 DMA at 3843 and has shown a tendency of reversing from that average in the previous rally. Considering the volatility in the current phase of the market and the fact that the Nifty has already appreciated 210 points in the last four trading sessions, the probability of a profit booking in the coming days is high. We believe that it makes sense to chalk out an exit strategy within this pullback.
The Nifty has a resistance at 3865 followed by 3890 and the support levels are at 3820 followed by 3801
NIFTY (3843) SUP 3799 RES 3878
BUY CANBK (193.40) SL 189 T 200, 202
BUY PUNJLLOYD (160.30) SL 156 T 168, 170
BUY ADANIENT (218.25) SL 214 T 226, 229
SELL SAKTISUGAR (98.05) @ 99 SL 102 T 93, 91
SELL ZEETELE (267.50) @ 269 SL 273 T 259, 256
Shree Renuka Sugars Limited: 1) Morgan Stanley & Co. International Limited A/C Morgan Stanley Dean Witter Mauritius Co. Ltd. 2) Morgan Stanley & Co. International Limited A/C Morgan Stanley Investment Mauritius Ltd has purchased from open market 90000 equity shares of Shree Renuka Sugars Limited on 2nd April, 2007.
Ruchi Soya Industries Ltd: Macquarie Bank Limited (with no PAC) has purchased from open market 283637 equity shares Ruchi Soya Industries Ltd on 4th April, 2007.
Mercator Lines Limited: AHM Investments Pvt. Ltd. ( in capacity as Person Acting in Concert/Group Company with Mr. H. K. Mittal, Chairman & Managing Director) has purchased from open market 300000 equity shars of Mercator Lines Limited on 5th April, 2007.
The turnover on NSE was down by 9.5% to Rs62.87bn. BSE Banking index was the major gainer and gained 3.28%. BSE Metal index (up 3.26%), BSE FMCG index (up 3.11%), BSE Capital Good index (up 2.89%) and BSE Consumer Durable index (up 2.75%) were among the other major gainers.
IFCI, SAIL, IDFC, Tata Steel, IB Real Estate, R Com, Gujarat NRE, Balrampur Chini, SRF, India Cement, ITC, HLL, Idea, Gujarat Ambuja, Praj Industries, Bajaj Hind, Ashok Leyland, Parsvnath and Bank of India
Ansal Infrastructure, Gujarat Fluro, Harrison Malyalam, Mangalam Cement, Penland Ltd, Nirlon, Educomp Solution, Gitanjali Gems, India Infoline, McLeod Russel, Swan Mills, Shree Precoated, Aurionpro Solutions, Garware Offshore, Dolphine Offshore, KEI Industries and KLG Systel
Accentia Technologies, Core Projects, Raj Television, and Prism Cement.
Sesa Goa, Saregama, Jet Airways, Bharti Airtel, Patni Computer, Unitech and Corporation Bank.
3i Infotech, ABG Shipyard, Bajaj Hindustan, Bank of Baroda, Bharati Shipyard, Divis Laboratories, Gammon India, Grasim Industries, Gujarat Alkalies, Infosys, IDFC, ITC, LIC Housing Finance, M&M, Praj Industries, Reliance Industries, SBI, SAIL, Titan, VSNL and Wockhardt.
Stock Futures with Largest Increases in OI:
Crompton Greaves, Karnataka Bank, Bharat Earth Mover, Sobha Developers, Strides Arcolab, Gujarat Alkalies, Divi's Laboratories, Kotak Mahindra Bank and BILT.
Stock Futures with Largest Decreases in OI:
Wockhardt, Bajaj Hindusthan, Reliance Communications, Nagarjuna Construction, Gateway Distripark, Great Eastern Shipping and IFCI
Tata Power – Buy from Emkay Research with target of Rs758
RPL – Buy from CLSA with target of Rs90
Long Term investment:
Major News Headlines:
Bajaj Auto cuts prices of Platina by Rs3000
Dolphin Offshore, L&T get $24mn order from ONGC
Dhanlakshmi Bank to consider rights issue on 16th April
HCC to recommend dividend on 27th April
Stone India receives order worth Rs140mn from Defence Ministry
Gitanjali Gems sets up unit in Dubai
Kirloskar Brother gets order worth Rs2.55bn from IVRCL
Orient Bank of Commerce to sell Rs5bn of bonds
Aban Offshore's subsidiary gets contract from GSPC
Resurrection revives bulls
The beautiful spring came; and when Nature resumes her loveliness, the human soul is apt to revive also.
We haven't seen any of the 'Men in Blues' hit a big century for a while on the cricket field. But the bulls surely haven't lost their touch despite the recent weakness. This was evident on Monday, when the Sensex struck a triple ton, buoyed by good global cues and some moderation in inflation. FIIs too seem to have capitalised on the recent crash by pumping fresh money in the past couple of days. After being net sellers for three days, foreign funds bought stocks worth Rs5.68bn on April 3. Yesterday's provisional figures show that FIIs poured in Rs4.93bn in the cash segment. In the F&O segment too, they were net buyers of Rs7.96bn. Mutual funds bought Rs410.2mn on April 5.
But, today is another day. US stocks finished flat overnight. European markets were shut for Easter. Asian markets are mixed. What may be heartening for the bulls is that oil has cooled off further, falling below the $62 per barrel mark. As far as local factors go, results will drive the sentiment at least for a month or two. IT stocks will remain in focus ahead of Infy results on Friday. Aside from the earnings for the latest quarter, the market will pay a lot of attention to what the software major has to say about FY08. That will set the tone for other IT results and perhaps for the market. Till then the market may remain rangebound and volatile with a positive bias. What the market has to watch out for is inflation numbers and possibility of further monetary tightening.
US stocks finished nearly unchanged on Monday as investors welcomed falling oil prices, a strong employment report and some deals but were not prepared to take undue risks ahead of the earnings season. The Dow Jones Industrial Average was up 8.94 points at 12,569.14, ending higher for the seventh session in a row, while the broader S&P 500 index closed flat at 1,444.61. The Nasdaq Composite index ended just in the red, breaking a six-session winning streak.
US stock markets were closed for Good Friday. Investors got the opportunity to react to last week's better than expected jobs report. But the reaction was pretty muted, may be because a healthy labour market means rate cuts will still take a while.
US light crude oil for May delivery fell $2.73 to settle at $61.55 a barrel on the New York Mercantile Exchange on fund selling and relief about the developments in Iran. The front-contract was quoting 36 cents lower at $61.87 a barrel in extended trading in Asia.
COMEX gold for June delivery fell $2.50 to settle at $676.90 an ounce. Treasury prices were little changed, with the yield on the 10-year note at 4.75%, just above where it was on Friday. In currency trading, the dollar inched higher versus the euro and held near a six-week high versus the yen, hit last week.
Major Latin American markets rose on Monday. Mexico's IPC rose 261 points, or 0.9%, to 29,632.20, breaking a record set last Wednesday. The IPC is now up 12% since the start of the year. Brazil's Bovespa stock index picked up 208 points, or 0.5%, to 46,854.71.
Asian markets are mixed this morning. The Nikkei in Tokyo is down 103 points at 17,640 while the Hang Seng in Hong Kong gained 104 points at 20,314. The Kospi in Seoul declined 7 points to 1493 and the Straits Times in Singapore shed 18 points to 3380.
Cambridge Solutions could gain amid reports that private equity firm Carlyle may team up with Ramesh Vangal to bid for the BPO firm. Sesa Goa might be in action amid an ongoing bidding war, where Arcelor Mittal still seems to be the frontrunner. Indiabulls Financial is another stock to keep an eye on. Reports suggest that the securities broking firm has asked some of its employees to leave and shut some offices. The company has denied any such development.
UTV is looking at a business reorganisation by splitting three core operations into three separate wholly-owned units. Bajaj Auto has launched operations at its Pantnagar plant and has slashed the price of 100cc Platina by as much as Rs3000. RPG Cables is on an expansion spree.
Essar Oil has got its first Clean Development Mechanism (CDM) project registered with the UN. Steel shares may benefit after Baoshan Iron & Steel Co., China's largest maker of the alloy, said it expects first-quarter profit to more than double.
Profit booking likely at peaks
The markets ended on a strong note led by buying in scrip’s across the sectors. Strong Asian markets boosted the key indices at open and buying momentum in Banking and the Metal stocks led the rally from the front. Others like the Auto, Capital Good and FMCG stocks also followed suit lifting the benchmark index Sensex to hit an intra-day high of 13194. All the key sectoral indices finished in green even the Mid-Cap and the small cap indexes participated in the rally aiding the markets to close near its day’s peak.
Technology stocks also were on the move after U.S. unemployment rate unexpectedly dropped, easing concern that demand will slow in the world's largest economy. Frontline stocks like Tata Steel, R Com and ITC were the major gainers; however Dabur, Zee Telefilms and Nalco were among the major losers. Finally, the 30-share benchmark Sensex rallied 321 points to close at 13177. NSE Nifty also surged 91 points to close at 3843.
Reliance Industries gained by 1.8% to Rs1384 as the company declared that it will finalise sales agreements in the next few months for natural gas from its Krishna Godavari basin. The scrip touched an intra-day high of Rs1388 and a low of Rs1362 and recorded volumes of over 11,00,000 shares on NSE.
HCC advanced by 3.6% to Rs93 after the company announced that they would recommend dividend on 27th April. The scrip touched an intra-day high of Rs93 and a low of Rs91 and recorded volumes of over 10,00,000 shares on NSE
Reliance Communications surged nearly by 5% to Rs416 after the company announced that they acquired over 1.2mn wireless subscribers in the month of March 2007. The scrip touched an intra-day high of Rs418 and a low of Rs400 and recorded volumes of over 51,00,000 shares on NSE.
Hindustan Zinc spurred by over 3% to Rs670 after the company raises lead price by 2.2%. The scrip touched an intra-day high of Rs674 and a low of Rs656 and recorded volumes of over 1,00,000 shares on NSE.
SRF rallied by over 17% to Rs139 amid reports that it has raised Rs5bn through the sale of carbon credits in FY07. The scrip touched an intra-day high of Rs142 and a low of Rs118 and recorded volumes of over 46,00,000 shares on NSE
Banking stocks also ended firm. Heavy weight SBI gained 4.1% to Rs987, HDFC Bank was up 3.3% to Rs974 and ICICI bank added 2.9% to Rs863. Bank of Baroda, PNB and Canara Bank were the major gainers among the Mid-Cap stocks.
Technology stocks also were on the move after U.S. unemployment rate unexpectedly dropped, easing concern that demand will slow in the world's largest economy. Infosys gained 2.8% to Rs2047, Wipro was up 1.8% to Rs562 and Satyam Computer added 1.5% to Rs462. Rolta, Mphasis and HCL Tech were the major gainers among the Mid-Cap stocks.
Cement stocks recorded concrete gains. Heavy weights ACC advanced 2.7% to Rs741, Grasim rose over 4% to Rs2205, Gujarat Ambuja gained 2.4% to Rs108 and India Cement spurred by over 7% to Rs163.
Telecom stocks also rang with gains. Bharti Airtel advanced 2% to Rs761, VSNL was up by 2% to Rs409 and MTNL added 3.9% to Rs153.
Market may resume on a weak note on the back of weak Asian indices in the early trades and mixed US markets in overnight trades. However, optimism in the market likely to persist on strong bullish sentiment and the market may turn positive in the afternoon trades. Among the local indices, the Nifty could face resistance around 3885 and has a likely support at 3775.
US indices struggled for direction on Monday as investors welcomed falling oil prices, a strong employment report and some company deals but showed reluctance after last week's rally. While the Dow Jones gained 9 points at 12569, the Nasdaq shed two points to close at 2469.
Crude oil prices eased further, with the Nymex light crude oil slipping by $2.77 at $61.51 per barrel. In the metals segment, the Comex gold for June series slumped $2.50 to settle at $679.40 an ounce.
Profit booking may take place after Monday’s 322-point surge in the Sensex. Market men say the undertone remains cautious. Caution on the bourses is due to concerns that rising interest rates will slow economic growth. Late last month, RBI had announced a surprise rate hike. Nevertheless, a poll carried by a newspaper on Monday showed that corporate chieftains are bullish on business prospects for the current financial year (FY 2008), rising interest rates notwithstanding. That in turn aided Sensex’s rally on Monday. The rally was also part of a global rally triggered by strong US job data.
Asian markets were mixed on Tuesday (10 April). Key benchmark indices in China, Japan, South Korea and Taiwan were down by between 0.3% to 0.5%. Key benchmark indices in Hong Kong and Singapore were up by between 0.01% to 0.4%
Bank of Japan (BoJ)’s two-day policy meeting concludes today. The BoJ is seen keeping the overnight call rate unchanged at 0.5% at the meeting. Investors will look for clues about the BoJ's view on prices, as well as the health of the economy, in comments from BoJ Governor Toshihiko Fukui at a post-meeting news conference.
US stocks closed flat on Monday (9 April) as news that billionaire investor Warren Buffett had bought stakes in the railroad sector and strong jobs data offset worries about earnings and subprime loans. The Dow Jones industrial average rose 8.94 points, or 0.07 percent, to end at 12,569.14. The Standard & Poor's 500 Index gained 0.85 of a point, or 0.06 percent, to finish at 1,444.61. But the Nasdaq Composite Index dipped 2.16 points, or 0.09 percent, to close at 2,469.18.
US crude oil for May delivery fell $2.77 to settle at $61.51 a barrel on Monday on some profit-taking after Iran's release last week of captured British sailors and marines.
FIIs resumed buying of equities on Thursday 5 April. FIIs bought shares worth a net Rs 567.50 crore on Thursday. Earlier, FIIs were net sellers for three days in a row from Monday 2 April to Wednesday 4 April. As per provisional data, FIIs were net buyers to the tune of Rs 493 crore on Monday 9 April, the day when Sensex had surged 322 points in global rally.
FIIs were net buyers to the tune of Rs 430 crore in index-based futures on Monday. They were net buyers to the tune of Rs 181 crore in individual stock futures on that day.
Infosys’ FY 2008 guidance is the next major trigger for the market. The rupee’s sharp surge in late-March 2007 - early April 2007, and mixed reports from the US economy, have raised concerns that the FY 2008 guidance by Infosys Technologies may turn out conservative. Infosys unveils full year guidance at the beginning of the financial year along with Q4 March results, due on 13 April 2007.
Nifty faces resistance at 3900 and Sensex at 13400.
BSE Smallcap and BSE Midcap exhibited a bullish candlestick.
In the Punter's zone we have a BUY in KTK BANK , CROMPTON GREAVES & SELL in TATA STEEL.
US Market posted its first seven-straight day gains in current year on Monday. While Dow was up for the 7th consecutive day, S&P 500 was up for the 5th consecutive day. Crude oil futures tanked almost 4.3% in a single day but the Energy sector's resilience in the face of falling oil prices for a fourth consecutive session acted as a source of market support. Ongoing mergers and acquisition activity also remained the key factor behind the market's momentum.
After today’s close, Dow is 220 points below its record close on 20 February. The last time the Dow had seven higher closes in a row was in June, 2005.
20 out of 30 stocks closed higher on Monday. For the day (9 April, Friday) the Dow Jones Industrial Average closed higher by 8.94 points at 12539.14, Nasdaq lower by 2.16 points at 2469.18 and S&P 500 higher by 0.86 points at 1444.61. Mc Donalads, Intel, DuPont, Alcoa and American Express were the main Dow winners while Altria, H-P, Exxon Mobil and Boeing were the main Dow losers.
With this continuous 7 days of winning streak, Dow is up by 2.2% on these 7 days. S&P 500 is up by 1.7%.
Of the six sectors closing higher today, Materials paced the way following reports that Dow Chemical was being acquired by private investors at a $50 bln offer. The stock jumped 4.9% to close at $49.63. Among other major stocks, Exxon Mobil closed lower by 0.5% as crude oil plunged.
Tech shares were hit early after Advanced Micro Devices lowered its first-quarter revenue forecast and said it would aim to cut $500 million in capital spending in 2007. The scrip which has already shed almost 40% since 2007 rebounded 3.8% today to close at $13.35. Wall Street's enthusiasm for AMD also helped arch-rival Intel whose shares were up 2.7% to $20.10. Intel was responsible for almost 5 point gain of Dow.
Friday’s upbeat jobs data gives an early boost to market but reminds that rate cut is far away
When market opened in the morning, stocks got the pending lift from Friday’s job market report. The Labor Department released a surprisingly positive March jobs report on Friday where it said 180,000 jobs were added in March, more than the expected 168,000, and the jobless rate fell to 4.4% from 4.5% in February. But the data also served as another reminder that the Fed won't be cutting interest rates anytime soon,
The Industrials sector was in focus after Berkshire Hathaway disclosed that it took a 10.9% stake in Burlington Northern Santa Fe. The news earmarked Railroads as the day's best performer and also charged up transportation stocks which also benefited from oil's biggest decline in three months.
Crude futures witnessed their biggest slide in 3 months as risk premium unwounded on the first trading day at Nymex after Iran released the British hostages last Thursday. Crude-oil futures for light sweet crude for May delivery closed at $61.51/barrel (lower by $2.77/barrel or 4.31%) on the New York Mercantile Exchange. Crude prices fell today on speculation that an Energy Department report will show U.S. inventories jumped last week as refiners unexpectedly shut units. The rollover from the May contract to the June contract is believed to have started early and is further weakening crude prices.
Trading volumes were light with 1.260 billion shares exchanging hands on the New York Stock Exchange and 1.761 billion on the Nasdaq stock market. Declining issues slightly outpaced gainers on the NYSE, and by 16 to 13 on the Nasdaq.
No major economic reports are on the schedule for this week. Market's focus will be on quarterly results with Alcoa's earning report after Tuesday's closing bell.