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Friday, April 13, 2007
Weekly Stock Ideas
Buy UTV Soft at Rs309 with SL of Rs297 and tgt of Rs330, 336
Buy NDTV at Rs331 with SL of Rs323 and tgt of Rs345, 351
Buy Parsvnath at Rs290 with SL of Rs281 and tgt of Rs308, 314
Buy Wockhardt at Rs425 with SL of Rs417 and tgt of Rs442, 449
Buy ABB at Rs3749 with SL of Rs3717 and tgt of Rs3810, 3820
TOP STORIES FOR THE WEEK
Inflation falls below 6%
Finally, there is some good news on inflation which should cheer up the Government and the Reserve Bank of India (RBI) ahead of the annual monetary and credit policy announcement on April 24. India's inflation, based on the Wholesale Price Index (WPI), tumbled to 5.74% in the week ended March 31 as against 6.39% in the previous week, the Commerce & Industry Ministry said on Friday. The final headline inflation reading for FY07, which is subject to a revision, is slightly above the RBI's annual target range of 5-5.5%. What's also heartening is that inflation was much below the average expectations of around 5.8%. The annual inflation rate was 3.98% during the corresponding week of the previous year. In the past few months, the Government has unleashed a slew of monetary tightening steps and slashed import duties on a number of essential products to reign in spiraling prices. The latest data should take some pressure of the policy makers though there are doubts whether the inflation will remain under 6% for long given the renewed upsurge in global commodity prices.
Infosys disappoints slightly
Infosys Technologies Ltd. has posted a consolidated net profit of Rs11.44bn for the fiscal fourth quarter ended March 31, 2007 as against Rs9.83bn in the quarter ended December 31, 2006. This translates into a sequential growth of 16.37%. Consolidated revenues for the fourth quarter are Rs37.72bn compared to Rs36.55bn in the previous quarter, reflecting a quarter on quarter growth of 3.2%. This was lower than the company's guidance of Rs37.9bn. Earnings Per Share (EPS) for the January-March quarter is at Rs20.30 versus Rs17.64 in the third quarter of the financial year 2006-07. Operating Profit Margin (OPM) slid by 100 points due to the impact of the rupee's appreciation versus the dollar and higher SG&A expenses.
For the year ended March 31, 2007, the IT major has reported a consolidated net profit of Rs38.56bn as against Rs24.58bn in the year ended March 31, 2006. Full-year consolidated revenues are at Rs138.93bn versus Rs95.21bn in the previous fiscal year. For the year 2006-07, EPS before exceptional item increased to Rs 69.11 from Rs 45.03 in the previous year; YoY growth was 53.5%. The net profit for the year ended March 31, 2007 included a reversal of tax provisions amounting to Rs1.24bn and Rs1.25bn, respectively. Excluding this reversal, the EPS for the quarter and year ended March 31, 2007 would have been Rs 18.10 and Rs 66.86.
The Board of Infosys has recommended a final dividend of Rs6.5 per share (130%) for FY07, totaling Rs3.71bn. Including the interim dividend of Rs 5 per share (100%) amounting to Rs2.78bn, the total dividend recommended for the year is Rs 11.50 per share (230%), amounting to Rs6.49bn. "Our revenues grew by around US$ 1bn this year," said Nandan M. Nilekani, CEO and Managing Director. "The global IT services industry continues to show strong growth with exciting opportunities, and Infosys is well positioned to take advantage of this."
MARKET MOOD
Bulls rise from ashes
Lights go out and I can't be saved
Tides that I tried to swim against
You've put me down upon my knees
Oh I beg, I beg and plead
Come out of things unsaid, shoot an apple of my head
Trouble that can't be named, tigers (bears) waiting to be tamed
In our last weekly newsletter we asked our readers to watch out for Friday the 13th. But, luckily the day has turned out to be fairly good one for the bulls despite Infosys reporting slightly disappointing Q4 results. The key indices continued their upward journey. Slowly, but slowly markets have risen from the dumps hit in February. Impressive industrial production data and lower inflation figures also aided the recovery.
Index heavyweights led from the front after being at the receiving end for the last 7-8 weeks. Also, mid-cap stocks participated in this week’s rally. Among the new listing ICRA hogged the limelight, as the stock gained Rs500 over the issue price of Rs330.
Capital Goods, Auto, IT, Metals and Banking stocks were the major gainers over the week. Cement stocks were again under a cloud after the first shipment arrived from Pakistan at a much lower prices.
Finally, the BSE Sensex advanced 4.1% or 528 points to close at 13384 and the NSE Nifty gained by over 4.4% or 165 points to close at 3917.
Metal stocks put in a stellar performance amid talk of a fresh price hike and expectations of better results. Tata Steel was in the limelight after the company announced a meet on April 17 to consider fund raising plans for the proposed US$12bn acquisition of UK-based Corus Group Plc. The BSE Metal index rose nearly by 8% during the week. Tata Steel rallied by over 10% to Rs511, JSW Steel jumped by over 11% to Rs553, SAIL surged over 9.5% to Rs125 and Essar Steel added 5% to Rs128.
Capital Goods stocks did well on the back of strong industrial output numbers. Siemens, ABB and BHEL were the star performers on the week. Siemens rose by over 7.5% to Rs1142, BHEL gained over 5% to Rs2479 and ABB advanced by over 4% to Rs3748.
IT shares outperformed the key indices, rising by over 5% after Infosys’ Q4 earnings and FY08 guidance met market expectations though it missed the topline guidance for Q4. Infosys advanced by over 4.5% to Rs2087, Satyam rose over 5.5% to Rs481, TCS climbed over 5% to Rs1262 and Wipro added 3% to Rs567.
Telecom stocks too joined the party on the back of strong monthly subscription numbers. Bharti Airtel added 1.7mn mobile users in March.
The scrip gained 4.7% to Rs781. MTNL was the top gainer. The scrip rose by over 7% to Rs158. Reliance Communication surged by over 6% to Rs421, VSNL advanced 4.8% to Rs421 and TTML added 3.8% to Rs21.
Value buying was seen in auto stocks after the recent hammering. The BSE Auto index gained 4.6% during the week. Tata Motors was up by over 5.5% to Rs26, M&M advanced 4.4% to Rs745, Maruti was up by 2% to Rs771 and Ashok Leyland added 5.7% to Rs37.
Results, inflation to drive sentiment
With the Infosys results out of the way and inflation softening, the market is poised for more gains. But bear in mind that the steep fall in inflation was largely due to a high base effect rather than the Government’s efforts. So, the pressure will continue on this front. The Government and the central bank will continue to be on guard and take steps accordingly. After Infosys its now going to be the turn of other IT giants like TCS and Wipro to deliver the goods next week. There will also be results from other non-IT firms. One should also give due consideration to the global issues like the US economic slowdown, oil prices, other commodity prices, etc. We will see spikes both ways as the market will remain choppy with a positive bias. FT, Indiabulls, TCS, HCL Tech, HDFC Bank, UTI Bank, Praj Industries, Aban Offshore, ACC, Biocon, MRF, Gujarat Ambuja, India Cements, Satyam, Wipro, Renuka Sugar and IDBI are among the major companies announcing their quarterly numbers next week.
Industrial production strong
The slew of monetary and fiscal tightening measures seem to have had little impact on the industrial activity in the country. This is something that the Government and the RBI would surely take note of. India's industrial production grew by 11% in February as against 8.8% in the same month last year, the Commerce & Industry Ministry said. This was slightly lower than January's upwardly revised growth rate of 11.4% (10.9%). Manufacturing output was up at 12.3% in February compared to 9.2% in the year-ago period, and a revised 12.1% annual growth rate in January. Mining output expanded by 6.3% in February versus 3.8% in the same month of last year. However, electricity was a drag, growing at just 3.3% as against 9.1% in February 2006. On a cumulative basis (April-February 2006-07), the Index of Industrial Production (IIP) expanded by 11.1% versus 8.1% in the year-ago period. As many as 15 out of the 17 industry groups showed a positive growth during the month compared to the corresponding month of the previous year. During the month, growth in Basic Goods, Capital Goods and Intermediate Goods was 10.4%, 18.2% and 13.7%, respectively. Consumer Durables and Consumer Non-durables recorded a growth of 1.6% and 9.7% respectively, with the overall growth in Consumer Goods being 7.6%.
Cabinet allows import of 1.5mn tons pulses
The Government continues its fire fighting efforts against rising prices. In a bid to boost local supplies and arrest spiraling prices, the Cabinet Committee on Economic Affairs (CCEA) decided to import of 1.5mn tons of pulses. NAFED, STC, MMTC and PEC will import 0.75mn tons of urad, tur, moong, masur and gram, and 0.75mn tons of yellow peas and other pulses. The announcement was made by Information & Broadcasting Minister Priya Ranjan Dasmunsi after the CCEA meeting in New Delhi. "This will hopefully stabilise prices of pulses," Dasmunsi said. The entire quantity is likely to be imported over 6-8 months, the I&B Minister said. The Government will subsidise losses incurred on import of pulses by the four public sector agencies up to a limit of 15%, Dasmunsi said. The Centre would consider further imports, if needed, he said. Meanwhile, Dasmunsi clarified that the CCEA did not take any decision on cutting edible oil import duty. Earlier, Rural Development Minister Raghuvansh Prasad had said that the Government had decided to cut the import duty on edible oils.
Car sales hit low gear
India's domestic passenger car sales grew by just 2.9% in March but for the year 2006-07 the automobile industry has set a new annual record, the Society of Indian Automobile Manufacturers (SIAM) said. Domestic passenger car sales stood at 114,195 units last month as against 110,978 units in the same month a year ago, data released today by the body of automakers showed. For the year ended March 31, 2007, car sales were up 22% at 1.076mn units, a new record. Maruti saw its March car sales rise by 7% at 55,623 units as against 51,951 units in the same month last year. Tata Motors posted a growth of 11.3% at 19,651 units compared to 17,655 units in the year-ago period. Industry analysts said the hardening of interest rates in the past few months could have hurt sales in March. Moreover, in March last year sales had surged on the back of a reduction in excise duty on compact cars. Meanwhile, motorcycle sales in March declined by 3.5%, as Bajaj Auto and TVS Motor sales declined, even as market leader Hero Honda managed to clock a growth of 6% from the same month last year, the SIAM data revealed.
GSM subscriber numbers impress again
The country's GSM-based mobile telephone operators added a record 6.1mn new subscribers in March, taking their total user base to 121.4mn, data released by the Cellular Operators' Association of India (COAI) shows. At the end of February, total GSM customers stood at 115.3mn. The March increase was the highest-ever monthly rise and was higher than the 4.9mn new user additions in February, the body representing the GSM service providers said in a statement released late on Wednesday. Bharti Airtel added 1.7mn customers in March, taking its total to 37.14mn. BSNL added 1.98mn new users, taking its user base to 27.43mn. Hutchison Essar added 1.1mn new customers, taking its total to 26.44mn. Idea Cellular added only 370,551 subscribers in March as against 568,051 mobile phone users added in February, boosting its user base to 14.01mn. MTNL added 167,992 mobile phone users to take its subscriber base at the end of March to 2.75mn.
TRAI urges infra sharing to reduce rollout cost
With the telecom sector set to grow exponentially, the Telecom Regulatory Authority of India (TRAI) asked wireless telecom operators to share passive, active and back haul infrastructure to cut the cost of expansion. License conditions should be amended to allow mobile phone service providers to use each other's equipment, including relay towers and antennas, the telecom regulator said in its proposals to the DoT. No sharing of spectrum at access network side is permitted, it said. The exponential growth in wireless telecom services calls for massive investment in infrastructure, TRAI said. The country would require about 3.3 lakh towers by 2010 against the present 1 lakh towers, TRAI said. Apart from huge investments needed, the time taken to roll out wireless services could be a major bottleneck in the achievement of 500mn subscribers by 2010, TRAI said. Even if the target is achieved it will only be about 50% of the tele-density with major gaps in the rural areas, it said.
Pak cement shipment hits Indian shore
Ten days after the Government scrapped the Countervailing Duty (CVD) and Special Additional Duty (SAD) on portland cement, the country received its first batch of imported cement from neighbouring Pakistan. Agency reports said a 200-ton consignment of cement has landed in Mumbai from Pakistan last weekend. The landed cost of the imported cement is US$70 per ton or Rs155 per 50 kg considering an exchange rate of Rs44 for one dollar. The bad news is that prices in Pakistan have climbed to US$75 per ton (Rs165 per 50 kg bag) after the dispatch of the first shipment and could go up further in anticipation of rising demand from India. But, what is debatable is what is the actual quantity of excess capacity in Pakistan, and how much can be exported to India. Also, what will happen if prices of cement keep rising in Pakistan.
Jet-Air Sahara deal takes off again
After 10 months of public spat over a failed deal last year, Jet Airways India Ltd. agreed to acquire Sahara Airlines for Rs19.5bn. Jet has already paid Rs5bn as part of the previous deal. It will pay Rs4bn before April 20 while the balance Rs5.5bn is payable in four interest free annual equal installments commencing on or before March 30, 2008. At the current interest rate, the Net Present Value (NPV) of the lumpsum price is in the vicinity of Rs12bn. But, despite the 40% discount that Naresh Goyal managed to get on a new deal, industry analysts still view this as an expensive transaction. Plus, Sahara Airlines doesn't really bring in any substantial benefits for Jet in terms of assets, as all its aircraft are leased. The only real gains for Jet are the landing slots and parking bays allotted to Sahara Airlines at key airports across the country. The industry is likely to benefit as Sahara Airlines had of late turned desperate and was giving huge discounts on tickets. It had also converted its planes into a single economy class configuration. The industry will also gain from consolidation as lesser players will mean less competition, better efficiency and reduced losses, though ticket fares may not fall much.
ICRA skyrockets on debut
Shares of ICRA Ltd., a local credit rating agency partly owned by Moody's Investors Service, surged on the first day of trading on Friday. The stock more than doubled in a broad market rally. ICRA opened at Rs525 on the Bombay Stock Exchange (BSE) as against the issue price of Rs330, translating into a premium of 59%. It touched a high of Rs880.10 and finished at Rs797.60 with traded volume of 12.43mn shares. The company entered capital market with an Initial Public Offering (IPO) of 2,581,100 shares of Rs 10 each, through a 100% book building process. The issue was subscribed 75 times.
Moody's has a 29% stake in ICRA. The balance stake is held by leading financial institutions and banks like SBI, LIC, IFCI etc. About 26% of ICRA was sold by current shareholders, and significant portion of it was from IFCI. The objects of the offer were to achieve the benefits of listing on the stock exchanges and provide liquidity to existing shareholders and employees. Book running lead managers to the issue are SBI Capital Markets & Kotak Mahindra Capital and registrar is Intime Spectrum Registry.
UTV unveils recast plans
UTV Software Communications Ltd. announced that it was breaking itself up into three separate units - Movie, Broadcasting and New Media. UTV Broadcasting Ltd., a wholly-owned subsidiary, will look after the broadcasting initiatives. It will include GenX Ltd. - the youth subsidiary which houses the Brand Bindass, and its related channels and businesses relating to the youth activity including Web, Gaming, Events, etc. V&S Broadcasting Ltd. will launch and run Variety, Entertainment and Speciality Channels. UTV UK Ltd., a 100% subsidiary, will house all of UTV's New Media initiatives including its animation (UTV Toons), Post Production and SFX (UTV Post) as well as the recent controlling investment in Ignition UK (Console Gaming) and India Games (Mobile and Online Gaming). UTV said it will transfer all film production business to a wholly owned subsidiary and seek a listing on any overseas stock exchange, possibly the AIM of the London Stock Exchange. The Ronnie Screwvala-promoted company will come out with an IPO or issue fresh shares in the overseas subsidiary to one or more private investors, not exceeding 25% of the shareholding.
GLOBAL NEWS
Global economy still going strong
The global economy looks all set for continued robust growth in 2007 and 2008 despite a downturn in the US, according to a new IMF forecast. Global economic growth is expected to moderate to 4.9% in 2007 and 2008, after hitting 5.4% in 2006, the IMF says in its latest World Economic Outlook. While the US economy has slowed more than was expected earlier, spillovers have been limited, growth around the world looks well sustained, and inflation risks have moderated, the IMF says. The risks to the growth outlook are less threatening than the September 2006 World Economic Outlook, but are still tilted to the downside, the IMF feels. Particular uncertainties include the potential for a sharper slowdown in the US; the risk of a retrenchment from risky assets; the risk that inflation pressures could revive as output gaps continue to close, particularly if oil prices spike and the low probability but high cost risk of a disorderly unwinding of large global imbalances.
BOJ, ECB leave key rates unchanged
As expected, the Bank of Japan (BOJ) left its benchmark interest rate unchanged for the second month running as the world's second-biggest economy is still grappling with years of declining prices or deflation. Weakness in the US, Japan's largest trading partner, could also have influenced the BOJ's move. Central Bank Governor Toshihiko Fukui and his policy colleagues voted unanimously to hold the key overnight lending rate at 0.5%, the lowest among major economies. The decision was widely expected by economists. The BOJ raised its key policy rate to 0.5% from 0.25% in February, saying that the Japanese economy was on track for a steady growth and that prices will rise at a modest pace. Analysts say the BOJ could put off a rate hike till it gathers enough clues about the health of the Japanese economy as well as that of the US economy, the world's largest. That may mean no increase in interest rate at least in the next few months.
No rate cuts yet as inflation still looming: Fed
Ben S. Bernanke and Co. are not quite as prepared to tart cutting rates as they still see inflation as a danger despite clear signs of a slowdown in the world's largest economy. In its last policy meeting, Federal Reserve policy makers maintained that further rate hikes may be necessary in the event of inflation picking up, even as they altered the statement to give themselves more flexibility. "Further policy firming might prove necessary to foster lower inflation," the Fed said in minutes of the Federal Open Market Committee's (FOMC) March 20-21 meeting released this week. "But in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming," the FOMC said. At the end of its meeting, the FOMC kept the benchmark fed funds rate unchanged at 5.25%, the sixth straight meeting with no change in rates.
No headway in WTO talks
The world's six major economies agreed to speed up the beleaguered WTO trade talks and sign a new multilateral trade agreement by the end of the year. Ministers from Brazil, EU, India, US, Australia and Japan, the so-called G6, met in New Delhi to try and arrive at some consensus in the crucial areas of agriculture and industrial goods and services. The Doha round of negotiations to reduce the barriers to trade has missed several deadlines owing to differences among the WTO members, mostly on farm subsidies, but also on market access for industrial goods and services. The WTO negotiations all but faltered last year over the continuing differences, particularly in agriculture. But, the Doha round of trade talks were relaunched at the end of January. The New Delhi meeting is the first time they have sat at the same table to negotiate since last July. The key is how far the US and the EU are prepared to go in cutting farm subsidies and how far developing nations like India and Brazil will allow access to their markets in agriculture and industrial products.
Uptrend may continue
The season of earnings reportage has just began. Q4 results are expected to remain strong. Stock-specific buying is likely to continue during the earnings season. Analysts will be closely watching what company managements say about the outlook for the current financial year (FY 2008).
On 24 April 2007, the Reserve Bank of India (RBI) will announce an Annual Policy Statement for FY 2007-08. There are concerns among market men that interest rates may go up further since inflation remains above the RBI’s target range of 5 - 5.5%. Higher interest rates raise borrowing costs and impact corporate profits.
Global liquidity still remains strong. It has helped global markets recover quickly from recent steep corrections. However, there are concerns that too much money will lead to inflated prices of assets and volatility.
The key Q4 results scheduled next week are TCS, HCL Tech and Wipro. TCS announces results on 16 April, followed by HCL Tech on 17 April and Wipro on 20 April.
The board of Tata Steel meets on 17 April 2007, to consider proposals for raising equity funds to finance its investment in a special purpose vehicle (SPV) for the acquisition of steel maker Corus Group.
Sensex surges 528 points
The market settled with gains for the week, after posting losses for the previous two weeks, as buying resumed. A decline in inflation, firm global markets, steady industrial production data also were the key factors contributing to the rally.
The BSE 30-share Sensex surged 528 points (4.11%) for the week ended 13 April, to 13,384.08, while the S&P CNX Nifty gained 165 points (4.43%), to end at 3,917.35.
The week began on highly bullish, with the Sensex vaulting 321.66 points, to settle at 13,177.74. A combination of factors like declining crude oil prices, firm global markets, and a report that Indian corporates remain bullish regarding the growth prospects boosted domestic bourses. Shares from metal, FMCG, IT, cement, banking, telecom and auto sectors edged higher.
The barometer index rose a marginal 11.80 points, a day later, to settle at 13,189.54, after remaining highly volatile throughout the day.
On 11 April, the Sensex settled with a 6.30 points loss, at 13,183.24, as selling began in the latter half of the day’s trading session. However, losses were marginal. While metal and capital goods lifted the market, banking and IT shares pulled it lower.
The BSE lost a further 69.43 points, to 13,113.81, the next day, as caution gripped the bourses before IT bellwether Infosys’ results. A weak trend in global markets also pulled the domestic bourses lower.
The 30-share BSE Sensex jumped 270.27 points, to 13,384.08, on 13 April, powered by IT bellwether Infosys, whose results and guidance put street estimates to shame. Stocks from the auto and banking sector had also joined in the rally.
Infosys Technologies advanced 4.75% to Rs 2087.60. The IT bellwether also reported 16.3% sequential growth in net profit for Q4 March 2007, at Rs 1144 crore compared to Rs 983 crore in Q3 December 2006. The net profit for Q3 March 2007, was boosted by extra-ordinary income of Rs 124 crore, arising from a reversal of tax provisions. Revenue rose 3.2% to Rs 3772 crore from Rs 3655 crore in the previous year's quarter.
As per Indian GAAP, Infosys predicted an EPS of Rs 80.29 to Rs 81.58 for FY 2008, a growth of 20 - 22%, compared to an EPS of Rs 66.86 in FY 2007. The company had forecast 22.6 - 24.6% growth in revenue for FY 2008, between Rs 17038 crore and Rs 17308 crore. Infosys has considered the rupee-dollar conversion rate at 43.10.
Infosys added 34 new clients during the quarter. There was a gross addition of 5,992 employees (net 2,809) for the quarter and 30,946 employees (net 19,526) for the year by Infosys along with its subsidiaries.
The Infosys effect boosted frontline IT pivotals. Satyam Computer gained 5.60% to Rs 481.55 and TCS rose 5.53% to Rs 1262.65.
Reliance Communications advanced 6.24% to Rs 421.50. RCL added 1.2 million new wireless subscribers in March 2007. The company said its ARPU (average revenue per user) was expected to increase by 12%, as a result of the re-verification exercise, making it one of the top-three players in India in terms of ARPU.
India’s largest private sector steel manufacturer, Tata Steel, surged 9.79% to Rs 511.25. Reports appeared in the media that the Tata group firm is likely to launch a rights issue of nearly Rs 3500 crore to part-finance its $ 12.15 billion acquisition of Anglo-Dutch steelmaker Corus Group, the payment for which is to be done today. The rights issue may be priced at around Rs 400 a share. If approved, this will be the third rights issue by Tata Steel in the last 22 years. The company issued a 1:3 rights offer in 1988 and 2:5 offer in 1993.
Tata Motors advanced 5.83% to Rs 726. The company is planning to distribute 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. It also received an order for supplying 500 buses to the Delhi Transport Corporation. The order from Delhi Transport Corporation is for supplying low-floor, CNG-run buses. The delivery will begin from the second half of 2007, Tata Motors said.
Suzlon Energy jumped 13.78% to Rs 1104.30. It has raised the bid for acquiring the German wind-turbine maker. Suzlon Energy also 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.
On 11 April, Gremach Infrastructure Equipments & Projects settled at Rs 83.95, a discount over the IPO price of Rs 86. The stock debuted at Rs 92 on BSE, hit a low of Rs 80.70 and also a high of Rs 100. The counter clocked high volumes of 1.03 crore shares on BSE, on that day. The company had priced its IPO at the higher end of the revised price band of Rs 72 - Rs 86 per share.
Real estate developer, Orbit Corporation, settled at Rs 127.95, on BSE on 12 April 2007. The scrip debuted at Rs 90 compared to the IPO price of Rs 110. It also hit a low of Rs 90 and a high of Rs 137. As many as 1.44 crore shares changed hands in the counter on BSE on that day.
On 13 April, Credit rating agency ICRA settled at a huge premium, at Rs 797.60, on BSE. ICRA's issue price was Rs 330 per share. The stock listed on BSE at Rs 550, which was also the day's low. The debuting stock then shot up to a high of Rs 880.10. As many as 1.24 crore shares changed hands in the ICRA counter on BSE on the day of debut itself.
India's wholesale price index rose 5.74% in the 12 months to 31 March 2007, lower than previous week's increase of 6.39%, data showed on Friday, 13 April. The figure was below forecast of an annual 5.81% in an analyst poll. The annual inflation rate was 3.98% during the corresponding week of the previous year.
Also the European Central Bank (ECB) kept key interest rates unchanged as expected on Thursday (12 April) in Frankfurt, but ECB President Jean-Claude Trichet signaled an increase in June. The ECB's 19-member governing council decided to hold interest rates unchanged after raising its main refinancing rate to 3.75% from 3.50% on 8 March 2007.
However, Trichet signaled another rate rise due to inflation risks. His remarks were in line with analysts' expectations that another rate hike was likely in June. Trichet reiterated that the 13-nation euro region is in a period of robust growth and the central bank's monetary policy remains "on the accommodative side." Trichet warned that higher oil prices and a hike in wages can pose risks to price stability. Euro region inflation stood at 1.9% in March, well within ECB's 2% target.
In an important development, more than 500 member brokers have agreed to sell a part of their holdings in the Bombay Stock Exchange (BSE) to bring it down to 49%, as per the demutualisation guidelines.
The BSE also announced receiving overwhelming interest from investors around the globe and the country, to purchase the remaining 41% stake. Two foreign exchanges, Deutsche Borse and Singapore Stock Exchange (SGX), picked up 5% each in Asia’s oldest exchange earlier this year.
The BSE has received interest from over 20 domestic financial institutions, foreign funds, domestic corporates and HNIs, for substantially more than what is required for achieving the demutualisation of BSE, the exchange said in a release. LIC, SBI, Exim Bank and Carlyle are said to be among 20, who have agreed to pick up stake in the bourse. Post-placement, the BSE will go in for an initial public offer to list its shares on the bourses, reports added.
It was widely believed that BSE will have to issue new shares to a clutch of investors to meet the deadline of 17 May 2007, set for broker-members of the exchange to dilute at least 51% stake set by the government. BSE also will go for a public issue later this year.
Upon reviewing the interest received, the BSE proposes to finalise the sale of 41% shares to select investors at Rs 5200 per share, the same price at which it sold shares to strategic partners, in order to widen the profile of stakeholders.
As per data released on 11 April, industrial production rose 11% in February 2007 from a year earlier, slightly lower than upwardly revised annual growth of 11.4% in January 2007. Manufacturing production, which represents more than 75% of industrial output, rose 12.3% in February from a year earlier, compared with a revised 12.1% annual growth in January.
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 key overnight lending rate at 0.5%, the lowest among major economies, the bank said in a statement today in Tokyo on 10 April 2007.
Sensex jumps 270 points on buying in IT, auto, banking
Leaving behind a previous two lacklustre sessions, the BSE Sensex went on a rampage today, powered by IT bellwether Infosys whose results and guidance beat street estimates. Stocks from the auto and banking sector had also participated in the rally.
The Sensex remained strong throughout the day, and crossed the 13,400 mark on the back of improving inflation, the data for which was released at noon.
The 30-share BSE Sensex jumped 270.27 points (2.06%), to 13,384.08. The benchmark index had opened higher, at 13,163.02, and surged to 13,421.05. The Sensex's low for the day was at 13,119.88.
The NSE Nifty surged 87.50 points (2.28%), at 3,917.35.
As per provisional data, FIIs were net buyers to the tune of Rs 238.50 crore today.
The market-breadth was strong and as much in sync with the overall market. Buying had spilled over to small-cap and mid-cap counters. For 1,566 shares advancing, 997 had declined. As many as 85 scrips remained unchanged.
The BSE Mid-Cap Index ended at 5,576.50, up 64.1 points (1.16%), while the BSE Small-Cap Index settled at 6,756.46, a gain of 74 points (1.11%).
In the 'A' group, 162 shares advanced and 49 shares declined, while two scrips remained unchanged. In the 'B1' Group, 448 shares advanced and 247 shares declined, while 21 shares remained unchanged. The 'B2' group had 482 shares which had gained, 341 that had lost, and 35 shares which were unchanged.
While only 80 shares advanced, 20 shares declined from the BSE 100 Index.
In the BSE 200 Index, against 157 stocks that advanced, 42 had declined. Just one scrip remained unchanged from this pack.
The BSE 500 Index showed 349 advancers and 147 decliners. A total of four scrips also remained unchanged in this pack.
The total turnover on BSE amounted to Rs 4713 crore. Total market turnover increased to Rs 47655.98 crore compared to Rs 30,270.22 crore on Thursday.
Among the 30-Sensex pack, 24 advanced while the rest declined.
The Infosys effect boosted frontline IT pivotals. The BSE IT Index surged 3.94%, to 5,071.72, and was the top-gainer among the sectoral indices on BSE. The top-gainer among the lot was Satyam Computer, up 8.50% to Rs 484, on high volumes of 22.10 lakh shares. Wipro rose 5.20% to Rs 568, and TCS gained 5.66% to Rs 1269.
Infosys Technologies advanced 1.83% to Rs 2081, on a volume of 13.54 lakh shares. Infosys Technologies struck a high of Rs 2121, and a low of Rs 2027.10, so far in the day. The IT bellwether also reported 16.3% sequential growth in net profit for Q4 March 2007, at Rs 1144 crore compared to Rs 983 crore in Q3 December 2006. The net profit for Q3 March 2007, was boosted by extra-ordinary income of Rs 124 crore, arising from a reversal of tax provisions. Revenue rose 3.2% to Rs 3772 crore from Rs 3655 crore in the previous year quarter.
As per Indian GAAP, Infosys has predicted an EPS of Rs 80.29 to Rs 81.58 for FY 2008, a growth of 20 - 22%, compared to an EPS of Rs 66.86 in FY 2007. The company had forecast 22.6 - 24.6% growth in revenue for FY 2008, between Rs 17038 crore and Rs 17308 crore. Infosys has considered the rupee-dollar conversion rate at 43.10.
For Q1 June 2007, Infosys Technologies expects an EPS of Rs 17.84, an year-on-year growth of 24.2%. It also expects the revenue of Rs 3896 crore - Rs 3913 crore, a year-on-year growth of 29.2 – 29.8%.
Infosys gave a strong guidance in dollar terms as per US GAAP. It expects the consolidated earnings per American Depositary Share (excluding tax reversal of $29 million in fiscal 2007), between $1.86 and $1.89 for FY 2008, an year-on-year growth of 25.7 - 27.7%. Infosys expects consolidated revenue between $3.95 billion and $4.02 billion, a year-on-year growth of 28 - 30%.
For Q1 June 2007, Infosys expects the consolidated earnings per American Depositary Share at $0.41, a year-on-year growth of 28.2%. It expects revenue between $904 million and $908 million, a year-on- year growth of 37 - 37.6%.
Infosys added 34 new clients during the quarter. There was a gross addition of 5,992 employees (net 2,809) for the quarter and 30,946 employees (net 19,526) for the year by Infosys along with its subsidiaries.
Second line IT counters also came to the party. While Geometric Software rose 7.82% to Rs 125.45, HCL Technologies advanced 7.30% to Rs 308.05.
Tata Motors gained 2.31% to Rs 726, after the company said on Friday it had received an order for supplying 500 buses to the Delhi Transport Corporation. The order from Delhi Transport Corporation is for supplying low-floor, CNG-run buses. The delivery will begin from the second half of 2007, Tata Motors said.
Index heavyweight, Reliance Industries (RIL), advanced 1.97% to Rs 1415, on a volume of 4.99 lakh shares. It had recovered sharply from an early low of Rs 1381.85.
Cigarette major ITC was the top-loser, down 1.67% to Rs 153.50, on a volume of 19.77 lakh shares.
NTPC slumped 1.63% to Rs 157.30, while Cipla lost 0.37% to Rs 231.75.
Credit rating agency ICRA settled at a huge premium, at Rs 797.60, on BSE. ICRA's issue price was Rs 330 per share. The stock listed on BSE at Rs 550, which was also the day's low. The debuting stock then shot up to a high of Rs 880.10. As many as 1.24 crore shares changed hands in the ICRA counter on BSE.
The ICRA IPO had received an overwhelming investor response. It was subscribed 75 times. The IPO met with strong response from a cross section of market participants, institutional investors, retail investors and high networth individuals.
Ratings firm CRISIL jumped to its maximum permissible level of 5%, to Rs 2913.55, following an eye-catching debut by rival ICRA. The debutante scrip settled at a huge 142% premium today. The current price of Rs 797.60 discounts its April-December (9-month) 2006 annualised EPS of Rs 15.90, by a PE multiple of 50.18.
CRISIL deserves higher PE multiple than ICRA due to its strong parentage and its top-position in the credit ratings business. Based on Thursday (12 April)’s closing price of Rs 2774.85, CRISIL’s PE multiple as per its FY 2006 (year ended December 2006) EPS of Rs 91.80, stood at 30.2. The US ratings agency, Standard & Poor’s, holds 55.08% stake in CRISIL.
Also CRISIL is over four times larger than ICRA, is growing at a faster rate than ICRA, and perceived as more aggressive. CRISIL has made greater headway in non-rating and international business.
Another sector to strike a chord with the investors was the banking sector, which had been pummelled in the past few months. The drop in inflation triggered a rally in banking stocks. The BSE Bankex was up 2.6%, at 6,639.84. State-run State Bank of India (SBI) gained 3.40% to Rs 1000.80, on a volume of 5.80 lakh shares on BSE. ICICI Bank (up 2.60% to Rs 871), HDFC Bank (up 2.30% to Rs 980), Bank of India (up 4.02% to Rs 180), PNB (up 3.95% to Rs 459.60), Canara Bank (up 3% to Rs 196), Federal Bank (up 2.03% to Rs 234) were the other gainers from the banking space.
The BSE Auto Index closed at 4,818.16, up 3%. M&M (up 3.81% to Rs 746), Bajaj Auto (up 4.28% to Rs 2450) and Hero Honda (up 2.80% to Rs 646) advanced.
Agro-chemicals maker Rallis India surged 7.50% to Rs 281, on reporting strong Q4 March 2007 results. Rallis India posted a surge in net profit for the March 2007 quarter to Rs 9.78 crore (Rs 3.07 crore). Net sales rose 11.1% to Rs 131.23 crore from Rs 118.05 crore in the year ago quarter.
Apollo Tyres rose 1.05% to Rs 279.10, after the company said its board will consider a stock-split proposal along with FY 2007 results on 1 May 2007.
Pyramid Saimira Theatre (PSTL) surged 10% to Rs 331.65, after the company announced RM 10 million investment plans to digitialize about 50 theatre screens in Malaysia. The company also announced that it would be producing its first Tamil film in Malaysia, which will be released internationally.
India's wholesale price index rose 5.74% in the 12 months to 31 March 2007, lower than previous week's increase of 6.39%, data showed on Friday. The figure was below forecast of an annual 5.81% in an analyst poll. The annual inflation rate was 3.98% during the corresponding week of the previous year.
The Nikkei Average lost 1.01% on Friday, as Fast Retailing Co., and other retailing scrips fell following their earnings reports, while auto shares such as Toyota Motor Corp., slid amid concerns about the US economy. The Nikkei was down 176.47 points, at 17,363.95.
The European Central Bank (ECB) kept key interest rates unchanged as expected on Thursday (12 April) in Frankfurt, but ECB President Jean-Claude Trichet signaled an increase in June. The ECB's 19-member governing council decided to hold interest rates unchanged after raising its main refinancing rate to 3.75% from 3.50% on 8 March 2007.
However, Trichet signaled another rate rise due to inflation risks. His remarks were in line with analysts' expectations that another rate hike was likely in June. Trichet reiterated that the 13-nation euro region is in a period of robust growth and the central bank's monetary policy remains "on the accommodative side." Trichet warned that higher oil prices and a hike in wages could pose risks to price stability. Euro region inflation stood at 1.9% in March, within the ECB's 2% target.
As per data released on Thursday (12 April), industrial production rose 11% in February 2007 from a year earlier, slightly lower than an upwardly revised annual growth of 11.4% in January 2007. Manufacturing production, which represents more than 75% of industrial output, rose 12.3% in February from a year earlier, compared with a revised 12.1% annual growth in January.
US stocks rose on Friday, after biotechnology company, MedImmune Inc.'s, announced it was seeking a buyer, fanning speculation of more deals in the sector. The Nasdaq Composite Index rose 21.01 points, or 0.85%, to close at 2,480.32, with biotechnology shares rising strongly. The Dow Jones Industrial ended up 68.34 points (0.55%), at 12,552.96, and the S&P 500 Index finished up 8.93 points (0.62%), to 1,447.80.
Oil prices rose above $64 a barrel in Asian trading on Friday, after a surge in the previous session, reacting to warnings that OPEC production was at its lowest point in two years. Light, sweet crude for May delivery rose 19 cents, to $64.04 a barrel in electronic trading on the New York Mercantile Exchange (NYMEX) midmorning in Singapore.
The contract rose almost $2 on Thursday, to close at $63.85 a barrel, after the International Energy Agency (IEA) warned output by the Organisation of Petroleum Exporting Countries (OPEC) had slid to its lowest level in more than two years on production outages and self-imposed cuts.
In an important development, more than 500 member brokers have agreed to sell part of their holdings in the Bombay Stock Exchange (BSE) to bring it down to 49%, as per the demutualisation guidelines.
The BSE also announced receiving overwhelming interest from investors around the globe and the country, to purchase the remaining 41% stake. Two foreign exchanges, Deutsche Borse and Singapore Stock Exchange (SGX), picked up 5% each in Asia’s oldest exchange earlier this year.
The BSE has received interest from over 20 domestic financial institutions, foreign funds, domestic corporates and HNIs, for substantially more than what is required for achieving the demutualisation of BSE, the exchange said in a release. LIC, SBI, Exim Bank and Carlyle are said to be among 20, who have agreed to pick up stake in the bourse. Post-placement, the BSE will go in for an initial public offer to list its shares on the bourses, reports added.
It was widely believed that BSE will have to issue new shares to a clutch of investors to meet the deadline of 17 May 2007, set for broker-members of the exchange to dilute at least 51% stake set by the government. BSE also will go for a public issue later this year.
Upon reviewing the interest received, the BSE proposes to finalise the sale of 41% shares to select investors at Rs 5200 per share, the same price at which it sold shares to strategic partners, in order to widen the profile of stakeholders.
Infosys marches ahead despite modest guidance
Infosys rose nearly 3% to Rs 2102, in early but volatile trade, even as it offered a muted EPS growth guidance for FY 2008.
Infosys' guidance, however, was much better as per the US accounting standards.
The stock initially firmed up but soon slipped into the red, to reach a low of Rs 2,027.10 at 10:14 IST, a fall of 0.8% for the day. As many as 6.1 lakh shares changed hands in the counter on BSE.
Infosys reported a 16.3% sequential growth in net profit for Q4 March 2007, at Rs 1144 crore compared to Rs 983 crore in Q3 December 2006. The net profit for Q3 March 2007, was boosted by extra-ordinary income of Rs 124 crore arising from a reversal of tax provisions. Revenue rose 3.2% to Rs 3772 crore from Rs 3655 crore in the previous year quarter.
As per Indian GAAP, Infosys has predicted an EPS of Rs 80.29 to Rs 81.58 for FY 2008, a growth of 20 - 22%, compared to an EPS of Rs 66.86 in FY 2007. The company has forecast 22.6 - 24.6% growth in revenue for FY 2008, between Rs 17038 crore and Rs 17308 crore. Infosys has considered rupee-dollar conversion rate at 43.10.
For Q1 June 2007, Infosys expects an EPS of Rs 17.84, an year-on- year growth of 24.2%. It also expects a revenue of Rs 3896 crore to Rs 3913 crore, a year-on-year growth of 29.2 – 29.8%
Infosys gave a strong guidance in dollar terms as per US GAAP. It expects the consolidated earnings per American Depositary Share (excluding tax reversal of $29 million in fiscal 2007), between $1.86 and $1.89 for FY 2008, an year-on-year growth of 25.7 - 27.7%. It expects consolidated revenue between $3.95 billion and $4.02 billion, a year-on-year growth of 28 - 30%.
For Q1 June 2007, Infosys expects the consolidated earnings per American Depositary Share at $0.41, a year-on-year growth of 28.2%. It expects revenue between $904 million and $908 million, a year-on- year growth of 37 - 37.6%.
Infosys added 34 new clients during the quarter. There was a gross addition of 5992 employees (net 2,809) for the quarter and 30946 employees (net 19,526) for the year by Infosys and its subsidiaries.
PowerYourTrade Trading Calls
Ashwani Gujral
Buy Rolta with stop loss of Rs 325 for target of Rs 380/460. Calls valid for max 1 week
Buy CESC with stop loss of Rs 370 for target of Rs 460. Call valid for maximum 1 week.
Deepak Mohoni
Sell Hero Honda above Rs 631 with stop loss above Rs 637. This is a day-trading recommendation.
Buy Educomp Solution below Rs 1285 with stop loss below Rs 1255; This is a day-trading recommendation
Rajat K Bose
Buy Biocon with stop loss below Rs 482 for target of Rs 510. This is a day-trading recommendation.
Buy GE Shipping with stop loss below Rs 223 for target of Rs 234–237. This is a day-trading recommendation.
SSKI - ONGC, Jet Airways, Ballarpur Industries
Jet Airways (CMP: Rs628)
Mkt Cap: Rs54.2bn; US$1.2bn
After calling off merger talks in June 2006, Jet Airways and Air Sahara have inked their deal today. In 2006, we had a negative bias on Jet Airways bid to buy Sahara Airlines, given the valuations (Rs22bn). However, we see merit in the deal being struck this time round at NPV of Rs12.5bn on following counts:
· The agreed EV of Rs14.5bn (NPV of Rs12.5bn given the staggered payment terms) is at significant discount to the earlier price. Sahara Airlines is valued at less than 1x revenues vis-Ã -vis Jet Airways valuations of 2x
· We always believed that Jet Airways was on a poor footing in the arbitration process and would have to do away with atleast Rs7bn. Rather, we believe that Jet Airways has effectively got an incremental market share of 8% at a value of Rs5.5bn.
· With capacity addition slowing down in the domestic market and yields improving, we see market dynamics also turning favourable then what they were in 2006.
· It also strengthens Jet Airways' international operations, as Sahara Airlines has permit to operate in Gulf market and operations are expected to commence in early 2008.
After three years of bearish call on Jet Airways, we had turned positive in January 2007, as we believe that the worst is over in the domestic operations and profitability in the business will be driven by rapidly surging international operations. Acquisition of Sahara, we believe, strengthens the case for Jet Airways in the domestic market. Reiterate Outperformer.Download here
Ballarpur Industries
(CMP: Rs109)
Mkt Cap: Rs17.7bn; US$399m
BILT's Q3FY07 results are in line with our estimates. Revenues grew by 16.6% yoy in the quarter owing to paper price hike effected in January and February 2007, and improvement in paper volumes post consolidation of APR Packaging. Paper prices continue to rise on account of strong demand as also due to passing on of cost pressure arising from higher coal prices. We retain our fully diluted FY07 and FY08 earnings estimates for at Rs12.4and Rs12.5 as the price environment is robust and the company is expected to witness moderate volume growth in the medium term. Reiterate Outperformer with a price target of Rs150.
ONGC has long been treated as a poor cousin of domestic and global E&P players. The stock trades at a steep discount to global/ domestic earnings as well as reserve valuations, which reflects highly pessimistic estimates on loss sharing, APM deregulation and growth. However, with a 21-32% increase expected in ultimate (recoverable) reserves over the next 18-24 months, low earnings sensitivity to international crude prices and falling proportion of APM gas, we see the valuation gap narrowing significantly. Recommend Outperformer with a DCF-based SOTP target price of Rs1130.
Significant reserve accretion on the anvil: Significant reserve accretion over the next 2-3 years would likely drive ONGC's performance on the bourses. We expect at least a 21-32% increase in ultimate (recoverable) reserves over the next 18-24 months from domestic new gas finds, redevelopment gains and overseas discovered assets currently under appraisal.
Concerns recede: APM gas pricing and subsidy sharing have been the key issues impacting ONGC's valuations. ONGC's APM gas volumes are set to fall by 60% over the next 4-5 years. We expect gas prices to be fully deregulated by FY11-12. Also, crude price discount on account of loss sharing narrows to just 11.6% at a crude price of US $50/bbl (FY09E) and 15.8% at $55/bbl (FY08E) from as high as 33.3% at $75/bbl.
We expect discount to global valuations to narrow: Despite a superior return profile and more conservative (1P vs 2P) reserve base, ONGC trades at a discount to domestic benchmarks. At 9.5x FY08E earnings and an EV/boe of US $5.6, ONGC also trades at a steep 22% and 38-60% discount respectively to global valuations. We believe valuations build in highly pessimistic estimates on loss sharing, APM deregulation and growth. However, given the reserve accretion, production growth and falling proportion of APM gas, we expect the discount to narrow significantly. Recommend Outperformer with a DCF-based SOTP target price of Rs1130, an upside of 32% from here.
Download hereBias may remain positive
Today Infosys will be declaring the forth quarter results and if guidelines will be on the positive side then market will get the direction for the next few days. A bullish sentiment is likely to persist as decent earning numbers are expected from Infosys. The market bias may remain positive on strong fund buying into the local market and surging international indices. Among the local indices, the Nifty could test 3850 and 3880 on the upside and may slip to 3775 on the downside. The Sensex has a likely support at 13050 and may face resistance at 13200.
Major US indices registered significant gains on Thursday as tech shares rose after biotechnology company MedImmune Inc. put itself up for sale, lifting other shares in the sector, while blue chips erased earlier losses. The Dow Jones flared up by 68 points at 12553, the Nasdaq moved up by 21 points to close at 2480.
Barring Patni all the Indian ADRs traded firm on the US bourses. Infosys led the pack with gains of 3% while Infosys, Satyam, Wipro, MTNL, VSNL, Dr Reddy's and Rediff jumped over 1-2% each. While Tata Motors and HDFC Bank closed with the marginal gains.
Crude oil prices moved up, with the Nymex light crude oil for May delivery gaining by $1.84 to close at $62.01 a barrel. In the commodity space, the Comex gold for June delivery slipped $2 to settle at $679.70 an ounce.
Anand Rathi - Daily Technical Note & Anand Rathi Daily Strategist
Nifty and Sensex have exhibited bearish candlesticks.
Technically, one may use the level of 3745 (Nifty) and 12900 (Sensex) as the stop loss level.
Nifty faces resistance at 3745 and Sensex at 13400.
BSE Smallcap and BSE Midcap Indices have exhibited a bearish candlestick.
CNX IT has gained ground.
In the Punter's zone we have a sell in JSW Steel & Ranbaxy and buy in Sail.
In the technical zone we have a sell in Tata Steel & Mcdowell's and buy in Cesc.
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The NIFTY futures saw a rise in OI to the tune 2.19% with prices opened down as global markets melt down but market took support around 3790 levels indicating that market participants are not building aggressive short positions till INFOSYS result come. If market goes below 3750 levels we may see aggressive fresh short positions being built up in the market. The FIIs sold index futures to the tune of 792crs indicating that they are liquidating their long positions as lot of uncertainty prevail in the market. The PCR has come up for1.00 to 1.02 levels indicating some buying support may emerge in the market. The volatility has come up from 26.80 to 27.50 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 4.81% with prices coming down indicating that the fall in market has given strength to bears to have upper hand on the stock indicating further weakness in the counter .whereas RELIANCE saw marginal rise in OI with prices almost flat indicating liquidation of positions by both bulls and bears.
In the TECH front, INFOSYSTCH, TCS saw rise in OI with prices going up indicating speculative long positions being built up in these counters in expectation of good results of INFOSYS. SATYAMCOMP saw fall in OI with prices up indicating short covering happening in the counter. Whereas WIPRO saw rise in OI with fall in prices indicating short positions being built up in this counter indicating further weakness in the counter.
In the BANKING counters, SBIN saw rise in OI with prices coming down indicating built up of short positions in this counter indicating weakness in the counter. HDFCBANK saw significant built up in OI with prices coming down indicating built up of short positions in the counter. ICICIBANK saw rise in OI with prices coming down indicating weakness in the counter.
In the metal pack TATASTEEL, SAIL saw flat OI with prices coming down indicating longs liquidating or profit booking happening in the counter after a sharp rally in prices. HINDALCO& NALCO saw drop in OI with prices coming down indicating long liquidation happening in the counters. STER saw marginal built up in OI with prices coming down indicating liquidation of old positions and built up of fresh positions happening in the counter indicating some buying support may emerge in the counter.
Considering the overall scenario and the markets behavior the market may show direction today as INFOSYS result will come today and their will be sharp movement in the market. If NIFTY futures goes below 3750 levels we may see fresh short positions being built up in the market and further weakness may prevail 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.
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Intra-day Stock Ideas
NIFTY (3829) SUP 3804 RES 3846
BUY MPHASIS (281.20)
SL 276 T 290, 293
BUY WOCKPHARMA (412.65)
SL 407 T 421, 424
SELL ITC (156.25)
@ 158 SL 161 T 149, 146
SELL CROMPGREAV (202.10)
@ 204 SL 208 T 197, 195
SELL GUJALKALI (120.40)
@ 122 SL 126 T 114, 112
STRATEGY INPUTS FOR THE DAY
Please Refresh for Infosys' Results
In-for gains and pains!
“Once men are caught up in an event, they cease to be afraid. Only the unknown frightens men.”
It’s Infosys, inflation and ICRA listing for today. Time for that event of the year again when the known and the unknown are frightened till the market gives its verdict. Software giant Infosys will unveil its results for the fourth quarter and full fiscal year besides announcing its guidance for the new financial year. As always, the market expects Infosys' report card and even the outlook to be better than expectations. The focus on Infosys and other IT bellwethers is greater this time due to the sharp rise in the rupee versus the dollar and the slowdown in the US. IT shares have been under pressure in the past few weeks amid concerns over the impact of the currency fluctuations on their financials. But, there is a school of thought that believes that the selloff has been overdone and things may not be as bad as anticipated.
India Infoline expects Infosys' Q4 FY07 revenues and profits growing by 6.3% and 5.7% on a sequential basis. For FY08, Infosys is expected to give a guidance of 25-30% growth in topline and 22-25% on the bottomline. The stock was up 2.6% yesterday but is down about 3% in a month. (The results will be included in the Daily Market Strategy. Kindly refresh the link after 9:30 am).
As for the market, it will take its cues, at least initially from the Infosys numbers and the management talk from the company's Bangalore headquarters. Other software shares, especially the likes of TCS and Wipro will move accordingly. The results and the guidance will be out well before the market opens. So, one should hope for the best and prepare for the worst (though we feel there is a very remote chance of any big negative surprise from Infosys). Plus of course, there are a whole host of issues to consider: like the industrial production numbers, inflation data, movements in the currency and money markets and the uncertainty surrounding the next move from the RBI later this month.
Global cues are mixed. US stocks closed higher, while key markets in Asia are flat to marginally up or down. Crude oil prices have crossed the $64 per barrel mark. FIIs were net sellers of Rs1.74bn (provisional) in the cash segment yesterday. In the F&O segment, they offloaded securities worth Rs7.5bn. On Wednesday, foreign funds pumped in Rs1.02bn. Mutual Funds were net buyers of Rs2.89bn on the same day.
Bharat Seats' Board will meet today to recommend bonus issue, stock split and final dividend.
Global cues are mixed. US stocks closed higher, while key markets in Asia are flat to marginally up or down. Crude oil prices have crossed the $64 per barrel mark.
FIIs were net sellers of Rs1.74bn (provisional) in the cash segment yesterday. In the F&O segment, they offloaded securities worth Rs7.5bn. On Wednesday, foreign funds pumped in Rs1.02bn. Mutual Funds were net buyers of Rs2.89bn on the same day.
Shares of credit rating agency ICRA will list on the bourses today. Bharat Seats' Board will meet today to recommend bonus issue, stock split and final dividend.
US stocks jumped on Thursday, with the technology pack leading from the front. Investors brushed aside worries about the day's weak economic news and decided to go in for some bargain hunting.
The Dow added 68.34, or 0.6%, to 12,552.96. The Standard & Poor's 500 Index rose 8.93, or 0.6%, to 1447.80. The Nasdaq Composite Index advanced 21.01, or 0.9%, to 2480.32. For the month, the Dow has gained 1.6%, the S&P 500 has risen by 1.9% and the Nasdaq has climbed 2.4%.
Crude oil futures were up 3% in New York, the biggest gain in two weeks, after the International Energy Agency (IEA) said that OPEC has slashed supplies to a two-year low to cut world stockpiles.
US light crude oil for May delivery rose $1.84 to settle at $63.85 a barrel after the government reported a big drop in gasoline supplies on Wednesday. The front- contract was 18 cents higher at $64.03 a barrel in extended trading in Asia.
COMEX gold for June delivery fell $2 to settle at $679.70 an ounce. Treasury prices slipped, lifting the yield on the benchmark 10-year note to 4.73%, little changed from late on Wednesday. In currency trading, The dollar dropped to a two-year low against the euro.
European shares finished lower. The pan-European Dow Jones Stoxx 600 index declined 0.4% to stand at 380.86. The UK's FTSE 100 closed virtually flat at 6,416.40, while the German DAX Xetra 30 was down 0.1% at 7,142.95 and the French CAC-40 slipped 0.1% to 5,748.94. All three benchmarks had been much lower earlier in the day, but they got a last-minute boost as Wall Street turned positive.
As expected, the European Central Bank held rates steady at 3.75%, as expected, after a quarter-point hike in March.
Asian stocks are headed for a second straight weekly gain.
The Morgan Stanley Capital International Asia-Pacific Index added 0.1% to 147.58 as of 10:50 a.m. in Tokyo. The benchmark is set to gain 0.9% this week, after last week's 1.1% rise.
Markets elsewhere in the region gained, except in South Korea, where the Kospi index fell from a record, China and Taiwan. Thailand was closed for a holiday.
Japan's Nikkei 225 Stock Average advanced 24 points to 17,566 while the Hang Seng in Hong Kong declined 12 points to 20,367. The Kospi in Seoul was down 5 points to 1519 while the Straits Times in Singapore was flat at 3372.
The yen fell to a record low against the euro.
In the emerging markets, the Bovespa in Brazil gained 0.9% to end at 47,346 while the IPC index in Mexico climbed 1.1% to 29,606 and the RTS index in Russia slid 0.9% to 1967.
HOW MARKET FARED
All eyes on Infosys
Markets ended on a weak note led by selling pressure in the frontline stocks like ICICI Bank, ONGC, Tata Steel, ITC, Tata Motors and BHEL. The Metal, Bank and Oil & Gas stocks were the top losers, with Mid-Cap and the small cap stocks also dragging the key indices to close in red.
However, Technology stocks bucked some negative trend as the index stood firm through out the trading session aiding the key indices with support ahead of Infosys result announcement to be made tomorrow. Finally, the 30-share benchmark Sensex fell 69 points to close at 13113. NSE Nifty was down 32 points to close at 3829.
TCS gained by 0.9% to Rs1200 as reports stated that the company is looking at an overseas listing. The scrip touched an intra-day high of Rs1209 and a low of Rs1172 and recorded volumes of over 9,00,000 shares on NSE.
Lupin advanced 1.9% to Rs626 after the company announced that the U.S. Food and Drug Administration approved the Company's application for Suprax® Cefixime for oral suspension 200mg/5ml. The scrip touched an intra-day high of Rs637 and a low of Rs608 and recorded volumes of over 1,00,000 shares on NSE.
Cigarette major ITC dropped over 2.5% to Rs156. The company signed a new franchise accord for Starwood Brands. The scrip touched an intra-day high of Rs160 and a low of Rs155 and recorded volumes of over 35,00,000 shares on NSE.
VSNL also lost ground towards the end, the scrip was down 1.2% to Rs415. According to reports the company would buy South Africa's Transtel Telecom for Rs1.38bn. The scrip touched an intra-day high of Rs423 and a low of Rs402 and recorded volumes of over 2,00,000 shares on NSE.
IOL Broadband finished lower, the scrip fell 1.5% to Rs426. The company announced that it will launch its e-Learning initiative via Interactive broadband Services very shortly. The scrip touched an intra-day high of Rs438 and a low of Rs421 and recorded volumes of over 1,00,000 shares on NSE.
Technology stocks stood firm in a weak market. Infosys advanced 2.2% to Rs2039 and Satyam Computer gained 1.2% to Rs446. Rolta, i-Flex and Mphasis were among the major gainers.
Profit booking dragged the Metal stocks lower after being in the limelight in couple of trading sessions. Nalco dropped by over 2.7% to Rs241, Sterlite Industries was down 2.1% to Rs496, Hindalco slipped 1.5% to Rs140 and Tata Steel lost 3% to Rs496.
Telecom stocks were on the receiving end. Bharti Airtel was down by 0.7% to Rs769, R Com fell 0.7% to Rs409 and MTNL lost 1% to Rs151.
FMCG stocks also took a beating in today’s session. Marico fell over 2% to Rs59, McDowell was down 1.8% to Rs838, Colgate dropped 1.2% to Rs353 and Tata Tea edged lower by 0.3% to Rs632.
Select Auto stocks also witnessed profit booking. Maruti fell 3% to Rs758, Hero Honda was down 1.7% to Rs629, Tata Motors declined 1.5% to Rs712 and M&M slipped 0.9% to Rs718.
Market volumes:
The turnover on NSE was down by 8.6% to Rs79.84bn. BSE Metal index was the major loser and lost 2.24%. BSE PSU index (down 1.31%), BSE FMCG index (down 1.28%), BSE Bank index (down 1.26) and BSE Oil & Gas index (down 1.04%) were among the other major losers. However, BSE Technology index gained 0.63%.
Volume Toppers:
IFCI, SAIL, Idea, IB Real Estate, Gujarat Ambuja, Tata Syeel, TTML, Hindalco, Parsvnath, NTPC, Indiabulls, Jet Airways, Cairn, HCC, Satyam Computer, SRF and Infosys
Upper Circuit:
Marksons, Radha Madhav, Deccan Aviation, KEW Industries, Atlanta, ACE, Pantaloon Retail, Country Club, HOV Services and Steel Stripes
Stock Futures with Largest Increases in OI:
Parsvnath, Ranbaxy, Aban Offshore, Jet Airways, PFC, Sesa Goa, Tata Power, HDFC Bank, Nagarjuna Construction and SCI.
Stock Futures with Largest Decreases in OI:
Federal Bank, GE Ship, Jaiprakash Associates, JSW Steel, Ultra Tech Cement, Wockhardt, Cairn India, Colgate and Polaris
Brokers Recommendation:
Sasken Communications – Buy from Merrill Lynch
Idea Cellular – Buy from Citigroup
Long Term Investment:
Wockhardt Pharma
Major News Headlines
BILT Q3 profit at Rs640.6mn (up 21.9%) and revenue at Rs5.53bn (up 16.7%)
JSW Steel denies report it may bid for Canada’s Algoma Steel
M&M to consider raising funds on 20th April
Hindustan Zinc raises lead prices by 2.16%
Lupin gets USFDA nod for novel Formulation of Suprax
VSNL to buy South Africa's Transtel Telecom for Rs1.38bn – Reports
Starwood, ITC sign new franchise accord for Starwood Brands
Ranbaxy gets nod to Market Cefprozil Tablets & Cefprozil Powder for Oral Suspension in Canada
Jet Air buys Air Sahara for Rs14.5bn, has already paid Rs5bn to Sahara
IT Services Q4 FY07 Preview
“Not weak as expected”
We expect decent results from sector companies in Q4 FY07 with revenues and profits of our estimated universe growing 7.4% and 6.3% on qoq basis. Infosys FY08 guidance would be the key thing to watch out for, as usual. The excitement and anxiety levels surrounding it are higher this time with Rupee at its 8-year high and concerns over US economic slowdown. We feel that Infosys FY08 guidance will neither please (as for FY07 guidance) nor disappoint (as
for FY06 guidance) in extreme with its growth range being in line with current market expectations. Market seems to have already factored a lower growth guidance yoy from the company.
The Rupee has appreciated sharply over the past 3-6 months with RBI strongly focusing on containing inflation and thereby not being able to actively manage the Re/$ rate as before. At the current Rs42.9/$ (April 5, 2007), Rupee stands near its 8-year high of Rs42.6/$. Rupee has been above Rs43/$ mark since June 11, 1999, till it breached the
same recently on April 4. With inflation control becoming a key imperative for the Government and the central bank, strength in the Rupee is likely to sustain in the short-term.
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