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Monday, April 16, 2007
Fortis Healthcare IPO - Abhishek - Our Reader
One of our readers has this to say about Fortis IPO Article that appeared on this site
Am just an NRI interested in subscribing to the Fortis IPO.
In relation to your views expressed in the article I have the following comments: While they are reasoned, I do beleive you grossly overlook the importance of the strong private palcement demand for the stock and the ability of that as a signal to retail investors about the liklihood of any Escorts litigations succeeding against FHL.
It has been reported elsewhere (and possibly in the Hindu) that a number of funds, including McKinsey's VASCO and a Private Equity fund sponsored by George Soros, have bought into the company at a valuation of Rs.144, which is a good Rs.34 above the upper limit of the 92-110 band available to retail investors.
Dont you think these well informed, advised and asture investors would have had their lawyers take a VERY thorough look at the litigation risks and the likelihood of any adverse decision BEFORE any money was committed at a valuation HIGHER than the retail investors?
While you can argue that these guys must have sought to include a caveat in the sale and purchase agreement that they could withdraw in case of an adverse decision in the Escorts litigation, remember that they would also most likely be required by SEBI, as well as contractually via the sale and purchase agreement, to commit to a lock in period.
As such, it would have been prudent of you to inform your readers of the above. It is a very good signal that retail investors can use to guage for themselves the relative risks of the Escorts litigation, which, as the above demonstrates, are arguably low.
In my humble view based on nothing more than common sense, the valuations these institutions bought at clearly points to these institutions taking the view that the litigation claims FHL faces would not be likely to succeed.
I simply feel that, in telling retail investors to wholeheatedly 'avoid' the issue, you have gone too far without telling them about the strong signals that have already been sent by savvy institutional investors who can afford and would have sought opinions from the best legal minds about the likelihood of the Escorts litigation succeeding.
I trust you will take these comments in the right spirit. I am not trying to criticise, but merely pointing out that, when you are in a position of power; when you have the ability to add to or take away from painstakingly built commercial goodwill, you must in good conscience paint a full picture for your readers. You can certainly focus on what you feel deserves the most attention, but paint the full picture.
Market Close: Zooming Gains ! Was it global help. ?
After Friday's rally supported by Infosys result and low Inflation numbers which kept the sentiments in upbeat mode for the day as the market opened on a strong note with buying across all sectors like IT, Metals, Cement, Cap goods and etc. Final hours saw some value buying which pushed sensex to close up over 300 points. Tech sector continued to remain to be the centre of the show. After Infosys another technology giant Tata Consultancy services has reported its Q4 earnings today. These are broadly in line and no negative surprises. Midcaps and Small cap also kept the momentum in the market. Asian markets zoomed to close higher while Europe was trading in green.
Dollar slipped below Rs. 42 for first time in 9 years; RBI has probably taken the view that a strong Rupee is good for controlling inflation. This is negative for the software companies and exporters, while seen positive for the importers.
Sensex ended up by 312 points at 13695.58. It was helped up by gains in ACC (786.55,+5 percent), TISCO (533.4,+4 percent), Grasim (2376.8,+4 percent), RCVL (436.8,+4 percent) and ITC (158.65,+4 percent). Restricting the gains were HDFC Bk (971.5,-1 percent), Satyam (479.35,0 percent).
In yet another attempt to salvage the bleeding oil marketing companies, Planning Commission has suggested withdrawal of subsidized LPG cylinders to taxpayers. This means that PSU oil marketing companies would charge full market rate for cooking gas cylinders from income tax paying households. Thus, a LPG cylinder will cost Rs 475 instead of Rs 298 in Mumbai, an increase of Rs 177, which the government makes up to oil marketing companies. The proposal is a step towards easing the government's mounting subsidy burden on keeping price of kitchen fuels low. The subsidy bill on the LPG front is estimated to go up to around Rs 50000 Cr this fiscal. The panel claimed that since the list of taxpayers and cooking gas consumers were computerized, the plan could be implemented as early as June this year. However, as the majority of gas connections are in the name of housewives, most of whom are unlikely to be on the three crore I-T list, the plan will be difficult to implement. Apart from this, political parties are likely to oppose the move. Domestic LPG is one of the four subsidized products sold by the oil marketing companies, which is leading to significant under recoveries to these companies. Expect the profitability of oil-marketing companies is likely to be subdued due to unclear government policies. This sector is best avoided.
Suzlon surged as it signed a contract with Tierra Energy of Austin, Texas, to provide 42 units of the S88-2.1 megawatt (MW) wind turbine for wind power projects in Texas and Wyoming. It will supply 28 wind turbines to the Ocotillo Windpower Project near Big Spring, Texas; and 14 turbines are designated for the Cheyenne, Wyoming-based Happy Jack Windpower Project, Suzlon's first wind power project in Wyoming. Plus, it will oversee operations, maintenance and service (OMS) of the wind turbines for five years. Suzlon is expanding its base in three ways by signing with a new wind partner by extending project locations westward and equally important by working towards project-based financing for Suzlon turbines. Both projects will take delivery of S88 wind turbines in spring 2008. The stock rallied and was up by 6.8% at close.
Technically Speaking: It was a Bull session for the whole day before closing. Sensex touched intraday high of 13708 and low of 13479. Resistance lies at 13780, 13858. Support lies at 13551, 13400. Market turnover stood good at Rs 4091 Cr. Advances Declines Ratio (2.3:1) favored Advances. Expect the market hold the rally and can cross the 14000 benchmarks.
Firms rush ESOPs to escape FBT liability
48 companies have given stock options since Budget day.
With the government finalising the guidelines for bringing Employee Stock Option Plans (ESOPs) under the ambit of fringe benefit tax, companies are falling over each other to allot shares to employees under this head, with seven companies creating 73 crorepati employees in the past month.
Finance Minister P Chidambaram had announced while presenting the Union Budget for 2007-08 that fringe benefit tax would be extended to ESOPs.
In the 40 days since then, 281 employees of 48 firms – including the chairman, managing director, director, whole-time director, chief executive officer, manager and whole-time director – have been allotted 66.9 million shares valued at Rs 3,465 crore under ESOPs.
Disclosures to the stock exchanges under Regulation 13(6) of the Sebi (Prohibition of Insider Trading) Regulations, 1992, show that the number of employees holding shares worth more than Rs 1 crore each increased to 192 from 119 in the previous month.
ESOPs have become an important tool in the hands of companies to retain key personnel at a time when there is an acute shortage of managerial talent.
The fringe benefit tax is expected to take the sheen off ESOPs. So companies are rushing to offer ESOPs before the tax is notified by the government.
Of the new 73 crorepati employees, 43 are from the ICICI Bank, 25 are from i-flex solutions and one each is from Larsen and Toubro, NIIT, Dabur Pharmaceuticals, Geometric Software and Aztecsoft.
Heading the individual crorepati list is Vineet Nayyar, managing director of Tech Mahindra. Nayyar holds 1.54 million shares in Tech Mahindra worth Rs 216.11 crore. He is followed by Larsen & Toubro Chairman and Managing Director A M Naik, who holds 1.04 million shares valued at Rs 165.15 crore. (see chart).
Among companies, India’s largest private sector bank, ICICI Bank, has 88 crorepati employees. These include Managing Director & Chief Executive Officer K V Kamath, who holds 6,24,500 shares valued at Rs 53.58 crore. Joint Managing Director Kalpana Morparia (Rs 36.99 crore) and Deputy Managing Director Chanda Kochhar (Rs 23.93 crore) are two other significant ESOP holders.
i-flex has 25 crorepatis, while HDFC Bank has 12 such employees. Larsen & Toubro has 11, Wipro nine and Satyam Computer has seven crorepati employees.
The Finance Bill, 2007, has included ESOPs within the ambit of the fringe benefit tax (FBT), subjecting it to the maximum marginal rate of tax for Indian companies. The proposed legislation will impose an obligation on employers to pay FBT on the fair market value of ESOP when an employee exercises the option.
The impending FBT on ESOPs has been widely criticised as defeating the primary purpose of stock options, which is to offer employees the opportunity to participate in their company’s success.
Market ends buoyant
The Sensex began the trading session on a firm note on positive global cues, a fall in the inflation rate and on expectations that after Infosys another technology giant TCS might post strong earnings. The Sensex posted strong gains of over 212 points in early trades on sustained buying in information technology, oil and banking stocks. The action in several counters held the market firm above the 13600 level in the afternoon. Buoyancy in heavyweight, oil, capital goods, metal and fast moving consumer goods stocks towards the close saw the index surge to an intra-day high of 13708. The Sensex ended the session with gains of 311 points at 13696, while the Nifty added 96 points and closed at 4013.
The breadth of the market was positive. Of the 2,654 stocks traded on the BSE, 1,798 stocks advanced, 780 stocks declined and 76 stocks ended unchanged. Among the sectoral indices the BSE Oil & Gas Index surged 3.11% at 6769 followed by the BSE CG Index (up 2.90% at 9746), the BSE Metal Index (up 2.62% at 9561) and the BSE Teck Index (up 2.16% at 3717).
Except HDFC Bank and Satyam Computers all the Sensex heavyweights ended at higher levels. ACC gained 5.14% at Rs787, Tata Steel soared 4.33% at Rs533, Grasim surged 3.90% at Rs2,377, Reliance Communications advanced 3.63% at Rs437, ITC added 3.56% at Rs159, Reliance Industries gained 3.50% at Rs1,460, Gujarat Ambuja advanced 3.41% at Rs112 and Tata Motors was up 3.40% at Rs750. However HDFC Bank at Rs972 and Satyam Computers at Rs479 closed with small losses.
Oil & Gas stocks closed with strong gains. Petronet LNG gained 3.22% at Rs46, ONGC soared 3.17% at Rs899, Essar Oil surged 2.56% at Rs54 and IOC advanced 2.38% at Rs402. BPCL, HPCL, GAIL, Reliance Natural Resources and Reliance Petroleum were up 1-2% each.
Over 1.03 crore IFCI shares changed hands on the BSE followed by Orbit Corporation (1.01 crore shares), Tata Teleservices (83.64 lakh shares), Reliance Natural Recourses (52.15 lakh shares) and Vishal Exports (50.29 lakh shares).
ICRA clocked a turnover of Rs303 crore on the BSE followed by Orbit Corporation (Rs174 crore), Tata Steel (Rs128 crore), India Bulls (Rs93 crore) and Reliance Industries (Rs93 crore).
Sensex jumps 312 points in global rally
The market’s recovery gathered more steam today with the S&P CNX Nifty hitting the 4,000 mark, and the Sensex achieving its highest level in a month & a half. A rally in global markets and reports that India’s monsoon will be good this year, boosted the bourses. Index heavyweight Reliance Industries (RIL) struck an all-time high, aiding the surge in key indices.
The 30-share BSE Sensex jumped 311.50 points (2.33%), to settle at 13,695.58. It was the Sensex’s highest closing since 22 February 2007.
The S&P CNX Nifty advanced 96 points (2.45%), to end at 4,013.35. It had last closed above the 4,000 level on 22 February 2007.
The Sensex rose 581.77 points (4.43%) in the past two trading sessions. Strong FY 2008 forecast by Infosys in dollar terms announced on Friday (13 April) and some cooling of inflation, aided the surge. From a low of 12,455.37 on 2 April 2007, the Sensex has gained 1,240.21 points (9.95%) in a short while. Firm global bourses and continued FII-buying, have boosted the bourses over the past few days after the Sensex tanked 617 points in a single trading session on 2 April following the Reserve Bank of India (RBI)’s surprise hike in interest rates announced after trading hours on 30 March 2007.
World stock markets hit record peaks on Monday (16 April) after top policymakers highlighted the strength and improving balance of global economic growth, encouraging already bullish investors to increase their appetite for risk. The G7 leaders said the US economy remained solid despite the weight of a housing slump, while Europe was showing a healthy upswing and Japan's economic recovery was on track.
Stocks marked out fresh peaks amid growing confidence that the benign backdrop of solid global economic growth and moderate inflation will continue. MSCI's All-Country World Index rose 0.5% to a life high of 387.55 points, a gain of almost 5% so far this year, on top of almost 19% last year. The FTSEurofirst 300 traded up around 0.7% at 1,564.8 points, its highest level since December 2000.
In Asia, Japan's Nikkei average rose 1.5% as the weaker yen boosted exporters' shares. Other regional bourses also rose, with China, South Korea and Australia hitting record highs.
Back home, the market-breadth was strong. Against 1,804 stocks advanced on BSE compared to 776 that declined. Also, 75 scrips were unchanged. Gainers outpaced losers by a ratio of 2.3:1.
Small-cap and mid-cap shares extended their recovery. The BSE Small-Cap Index added 127.67 points (1.89%), to settle at 6,884.13. The BSE Mid-Cap Index gained 89.45 points (1.6%), to finish at 5,665.95.
All sectoral indices on BSE ended in the green. The top-gainer was the BSE Oil & Gas Index, which rose 203.99 points (3.11%), to settle at 6,769.44. The BSE Capital Goods Index rose 274.85 points (2.9%), to settle at 9,745.82. The BSE Metal Index advanced 256.93 points (2.76%), to end at 9,560.58.
The BSE FMCG Index added 46.52 points (2.6%), to end at 1,820.48. The BSE Tech Index, which is a free-float index comprising of IT, telecom and media shares, gained 78.44 points (2.16%), to end at 3,716.58. The BSE IT Index advanced 78.56 points (1.55%), to finish at 5,150.28.
The BSE clocked a turnover of Rs 4054 crore compared to Friday (13 April)’s Rs 4724 crore.
RIL gained 3.5% to Rs 1460, a lifetime closing high. A strong 6.3 lakh shares changed hands in the counter on BSE. Reliance Industries sees robust demand for petrochemicals over the next 12-18 months, Chairman, Mukesh Ambani, said on Monday. The petrochemicals cycle has not peaked as yet, he added.
Meanwhile, RIL had allotted 12 crore warrants on a preferential basis to entities belonging to the promoter group, entitling the holders to apply for an equivalent number of fully paid-up equity shares of Rs 10 each at Rs 1402 per share, within 18 months from the date of issue.
Tata Steel jumped 4.4% to Rs 534, ahead of its board meeting on 17 April 2007, to consider a proposal for raising equity funds for investment in a special purpose vehicle (SPV) for the acquisition of Corus Group.
FMCG giant Hindustan Lever (HLL) gained 3% to Rs 213.70, on reports that the annual June-September monsoon rains were expected to be close to 100% of the long-term average this year. The Meteorological Department is likely to announce its first official forecast for 2007, later this week.
Buying was also conspicuous in cement shares, which are closely linked to rural demand. ACC gained 4.7% to Rs 783.90, Grasim rose 3.8% to Rs 2375 and Gujarat Ambuja Cements advanced 3.5% to Rs 112.40. Expectations of strong Q4 March 2007, also aided the recovery in cement scrips.
Cement firms are seen reporting strong Q4 March 2006 results due to higher prices. ACC unveils March 2007 quarter results on 19 April 2007, followed by Gujarat Ambuja Cements on 20 April 2007.
Credit rating agency ICRA jumped 20% to Rs 957.10. There were outstanding buy orders for 80,510 shares at the upper limit on BSE. A strong 32.5 lakh shares changed hands in the counter. The stock made a robust debut on Friday, settling at Rs 797.60 on that day, a premium of 142% over the IPO price of Rs 330.
Oil exploration major, ONGC, surged 3.6% to Rs 903.75. ONGC is looking at raising up to Rs 7000 crore over the next six months, to fund the expansion of its Mangalore refinery, the state-run firm's chairman said on Monday. The project will raise the refinery's capacity to an annual 15 million tonnes by 2010.
IT shares extended Friday’s gains. Wipro gained 3.5% to Rs 587.50, Infosys rose 1.9% to Rs 2127 and i-flex Solutions gained 4% to Rs 2336. Infosys, on Friday (13 April), gave a strong guidance for FY 2008 in dollar terms.
TCS rose 1.2% to Rs 1279, ahead of its Q4 results due later today. Eight brokerages expect 4.8 - 9.9%, sequential growth in TCS’ consolidated net profit as per US GAAP, between Rs 1157.30 crore and Rs 1213.70 crore, as compared to a net profit of Rs 1104.70 crore in the December 2006 quarter. They expect 5 - 7.1% growth in consolidated revenue as per US GAAP, between Rs 5105.30 crore and Rs 5206.20 crore, compared to Rs 4860.50 crore in the December 2006 quarter.
Cigarette maker ITC rose 3.3% to Rs 158, on reports that it plans to invest about Rs 15,000 crore in the next 5 - 7 years in hotels, agri-business and FMCG to transform itself into a diversified corporate conglomerate.
Telecom shares rose on continued strong growth in new subscriptions in March 2007. Bharti Airtel gained 2.8% to Rs 803, and Reliance Communications added 3.6% to Rs 436.70.
Copper makers were in demand on the back of firm global copper prices. While Hindalco rose 3.5% to Rs 145, Sterlite Industries gained 4% to Rs 526. Copper ended firm on Friday, underpinned by a fall in inventories and a strong demand outlook. Copper for delivery in three months on the London Metal Exchange (LME) closed at $7,705 a tonne, up $15.
Punj Lloyd jumped 8.8% to Rs 181.30, after the firm said it had won a Rs 530 crore pipeline order from Oman Gas Co.
Sun TV Network rose 3.6% to Rs 1718, on news that the company's board will meet on 24 April 2007, to consider a bonus issue.
Welspun Gujarat Stahl Rohren gained 1.4% to Rs 126.20, on securing orders worth Rs 1089 crore. The company's board also approved raising $50 million through issue of convertible or non-convertible securities or warrants to the promoter group to fund operations and investments.
Indiabulls Financial Services rose 1.8% to Rs 513, after the securities and broking firm posted a 95% jump in March-quarter consolidated net profit to Rs 1.57 billion.
Suzlon Energy jumped 6.4% to Rs 1175. On 12 April 2007, Suzlon Energy signed a contract with Tierra Energy of Austin, Texas, to provide 42 units of the S88-2.1 megawatt (Mw) wind turbine for wind power projects in Texas and Wyoming. Suzlon is also in a bidding war with France’s Areva for acquiring control over German wind turbine maker REpower.
Voltas rose 2.5% to Rs 87, after the company said on Saturday it had clocked a growth of over 30% in sales of its room air conditioner business in 2006/07, ahead of the industry growth rate of 20%. Voltas has set a target growth rate of over 30% in 2007/08, much in excess of the expected market growth rate.
Precision Containers gained almost 3% to Rs 17.60, after the company said on Monday it had bagged an export order worth Rs 11.32 crore from Swift Inter Trade for its recently developed packaging products.
Two-wheeler maker LML rose 5% to Rs 12.69, after the company said on Monday the strike at its plant had been withdrawn and the lockout would be lifted on 15 April 2007. It said in a statement that operations will resume shortly.
Praj Industries rose nearly 6% to Rs 463.50, ahead of its board meeting on 18 April 2007, to consider a bonus issue.
Bharati Shipyard rose 1.2% to Rs 389.10, after the company said on Monday it had bought all shipyard machinery and equipment of Swan Hunter (Tyneside) Shipyard for a sum, which the company did not disclose.
Apollo Tyres rose 1.8% to Rs 284.80, after the company said it expects its branded retread tyres business to contribute Rs 500 crore to annual revenues in three years. The company, on Friday, said its board will consider a stock-split along with FY-2007 results on 1 May 2007.
CMC dropped 4% to Rs 1205. CMC has reported a surge in net profit for the quarter ended March 2007, to Rs 19.55 crore (Rs 8.55 crore). Total income has declined to Rs 251.11 crore from Rs 259.72 crore.
IFCI lost nearly 2% to Rs 37.50, after NSE today said the derivative contracts in the counter had reached 95% of market-wide position limit and no fresh positions could be allowed in it on BSE.
Titan Industries jumped nearly 8% to Rs 1024. High networth individual and stockbroker Rakesh Jhunjhunwala has acquired 50,000 shares of Titan Industries on 12 April 2007. After the latest acquisition, the shareholding of Jhunjhunwala and that of persons acting in concert with him, has risen from the earlier 9.93% to 10.04%.
The season for earnings reportage has just begun. Overall, 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). Citigroup expects overall corporate earnings growth to moderate to 15 - 16% in the current and next year, while FY 2007 (year ended 31 March 2007) could be the fifth straight year of 25 - 30% earnings growth.
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.
Hardening of interest rates and strengthening of the rupee is likely to moderate India’s economic growth to 8.5% in 2007-08 from 9.2% in the last fiscal, the Confederation of Indian Industry (CII) has said.
WOW - Cinemax, ITC
Rapid expansion mode taken while focusing in Gaming Business with limited interest in Mall development? In its report dated 13th April, 2007 Emkay Research (Emkay) initiates a Buy coverage on Cinemax India Ltd (CIL) at its current price of Rs.126 with a target price of Rs. 193.
Emkay Research (Emkay) states that Cinemax India (CIL) is a part of the Mumbai based Kanakia Group, which has developed over five million square feet of residential and commercial real estate. Emkay points out that CIL is focused on the exhibition and gaming business with limited interest in mall development. Emkay also adds that the Company is also one of the largest owner of multiplex properties in India with 33 screens spread over 155,000 square feet area. Emkay says that CIL also operates Giggles-The Gaming Zone, at Eternity mall in Thane which is spread over 13,000 square feet and offers 50 games. CIL has also developed over 200,000 square feet of mall area at Eternity mall with tenants including Globus, Proline, Planet M and Archies Gallery.
Emkay highlights that CIL''s exhibition chain is a combination of high-end multiplexes and budget retrofit single-screens. According to Emkay, CIL has established itself in Mumbai, Thane and Nashik with over 12000 seats housed in 33 screens across 10 properties and now plans to expand its operations on a pan India basis across 42 locations in 11 states by the end of FY 2009E.
Emkay further points out that CIL stock trades at EV/EBITDA 7x FY08E and 5x, FY09E and on a relative valuation basis, CIL trades at 13.5x FY08E and 9x FY09E, which is at a discount of around 58% to PVR and 21% to Inox Leisure based on FY08E.
Emkay initiates a BUY on the stock with a price target of Rs 193 based on the DCF approach, at their target price the stock will be valued at 8x EV/ EBITDA FY09E
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Increasing price to protect Bottom line but thats negative ! In its report dated April 12,2007 Merrill Lynch (ML) downgrades Indian Tobacco Company (ITC) to Neutral at its current price of Rs. 159.85.
Merrill Lynch (ML) reports that Indian Tobacco Company (ITC) has recently hiked filter cigarette prices by avg. 25% to pass on the 12.5% new VAT levy and 5% excise hike in the Budget. There is no change in ML''s forecasts and ML expects cigarette volumes to fall by 11% in FY08 and the sharp price increase to protect margins. Since ITC''s P&L is far more sensitive to price changes than to volume changes, ML believes passing on tax increases is more appropriate
versus protecting volumes.
ML informs that market has reacted positively to ITC''s sharp cig. price hikes. According to ML, expectations are also running high on cigarette volume decline not likely to be harsh given the growing income levels. Indeed volume decline may be lower than ML''s forecast of 11% in FY08, but nonetheless, ML expects FY08 to be a difficult year with earnings growth at best in single digits. This would not support further stock performance, adds ML.
ML believes ITC remains a quality play on India''s growing consumption. Though the cigarette volume growth story for now is dented ML believes recovery should set in FY09 as was the case last time in FY02 when excise increased 15%.
ITC is close to ML''s PO of Rs165/sh. and is now trading at P/E of 20xFY08E & 17xFY09E. ML believe there is now limited further stock upside as ML expects the steep VAT levy (12.5%) on cigarettes to cripple EPS growth to merely 5.5% in FY08. Looking beyond into FY09, ML forecasts EPS growth of 17% which implies PEG of 1x. which is historically been ITC''s peak valuation.
Intraday Stock Ideas
Nifty (3917) Sup 3876 Res 3965
Buy UTV Soft at Rs309 with SL of Rs297 and target of Rs330, 336
Buy NDTV at Rs331 with SL of Rs323 and target of Rs345, 351
Buy Parsvnath at Rs290 with SL of Rs281 and target of Rs308, 314
Buy Wockhardt at Rs425 with SL of Rs417 and target of Rs442, 449
Buy ABB at Rs3749 with SL of Rs3717 and target of Rs3810, 3820
STRATEGY INPUTS FOR THE DAY
Nothing much to do
If people never did silly things, nothing intelligent would ever get done.
In the market, this principle doesn't hold very good as every silly mistake costs a fortune. The intelligent way would be to think who is selling when everyone is buying. Surprisingly, the bulls didn't see red in Infosys' rather subdued performance and muted guidance. In fact, they pushed the stock and the entire market sharply higher on April 13th. A steep drop in inflation also helped the matters as did a strong industrial production data earlier in the week. Nothing much has changed over the weekend.
Today, we expect a positive opening given the positive finish on Wall Street on Friday and a largely firm trend in the Asian markets. Though things may look stable at the moment, going ahead there may be fresh bumps. The near to medium term outlook is not certain. Hence, investors should as usual remain cautious and be stock specific.
Things may be okay for the bulls this week too, as more and more earnings pour in. Having said that, the intra-day volatility will continue. The market will also have to deal with the upcoming annual policy meeting of the RBI on April 24th. Inflation is likely to remain high as it is more due to supply side constraints. Any remedy on this front will take time to work its way through to the numbers. In the meantime, there may be some more pain in terms of fresh monetary/fiscal tightening measures. Already India Inc has voiced its concerns on the excessive tightening by the RBI. We also have worries over the imminent slowdown in the US, the state of the Chinese economy, high global commodity prices (especially crude oil and metals) and the currency fluctuations.
The GDP growth projection for 2007-08 has been pegged at 8.5% by the CII. According to the industry chamber, the elements in the economy, which have started surfacing towards the latter part of the fiscal 2006-07 are likely to play a moderating role on the growth prospects of the economy.
TCS will announce its results today. There is not much excitement as far as TCS results are concerned as the company doesn't believe in giving EPS or Revenue guidance. Though the recruitment numbers for the new year and any possible upside in billing rates could give one an indication of signs of things to come. Among the worries of course are on account of the rupee-dollar exchange rate and a possible recession in the US. Still, its not that the sky is about to fall for the Indian software companies, not at least for the top ones. Among the other stocks to watch out for is Mount Everest Mineral Water. A financial daily says that Nestle is also interested in the company.
Essar Steel should see some action (could even be on the downside) amid reports that it has acquired Canadian steel company Algoma for C$1.85bn. Real estate companies with majority focus in Maharashtra may attract some attention. There are reports that the state government is most likely to go ahead with the repeal of the Urban Land Ceiling Act. Though there are expectations of a dip in soaring property prices if this does materialise, it remains to be seen how the ground realities will pan out. The IPO of Fortis Healthcare opens today for subscription. Gujarat Alkalies is expected to gain amid expectations of good results and disinvestment. One of our past recommendations, Gayatri Projects is also likely to do well due to strong growth potential.
US stocks rose modestly on Friday, buoyed by upbeat results from General Electric, McDoland's and Merck. The day's economic reports were mixed, with a mild reading on inflation and a surprise narrowing of the trade gap offseting a bigger-than-expected drop in a key consumer sentiment index. Treasury prices fell, raising the corresponding yields, while the dollar was pretty flat against the yen and fell against the euro. Oil dipped slightly and gold hit a six-week high.
US light crude oil for May delivery fell 22 cents to $63.63 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 7 cents higher at $63.70 a barrel. In currency trading, the dollar was little changed versus the yen and fell versus the euro.
European stocks gained ground. The pan-European Dow Jones Stoxx 600 index rose 0.6% to 382.95. The UK's FTSE 100 closed up 0.7% at 6,462.40, the German DAX Xetra 30 advanced 1% to 7,212.07 and the French CAC-40 gained 0.7% to 5,789.34.
Asian markets are mostly on a strong footing this morning. The Nikkei in Tokyo is up 291 points at 17,665 while the Hang Seng in Hong Kong were up 216 points at 20,557. The Straits Times in Singapore gained 24 points to 3397 while the Kospi in Seoul put on 6 points to 1527.
Higher opening likely
Friday the 13th turned out to be lucky for the bulls as Infosys result announcement lifted the key indices to close on a strong note. The markets further gained ground after India Inflation figures were recorded under the 6% barrier which was less than expectations. India's inflation figures for week ended 31st March was at 5.74% against expectation of 5.78%. NSE Nifty closed over 3900mark as buying interest was witnessed across the board.
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. 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%. After Infosys, it's 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.
The BSE Technology index was the major gainer, others like Bank, Metal and Auto indexes followed suit. The Mid-Cap and the small cap index also participated in the rally. The frontline stocks like BHEL, ACC, Bharti Airtel and Tata Steel were the major gainers among the 50-scrip's of NSE Nifty.
Finally, the 30-share benchmark Sensex rallied 270 points to close at 13384. NSE Nifty also surged 86 points to close at 3916.
VSNL gained by 1.4% to Rs421 following reports that they would buy South Africa's Transtel Telecom for Rs1.38bn. The scrip touched an intra-day high of Rs423 and a low of Rs417 and recorded volumes of over 2,00,000 shares on NSE.
Infosys gained by 2% to Rs2086 after the company announced its Q4 result with net profit up 16.4% QoQ to Rs11.44bn and consolidated revenues are at Rs37.22bn compared to Rs36.55bn in the previous quarter, reflecting a quarter on quarter growth of 3.2%. The scrip touched an intra-day high of Rs2132 and a low of Rs2026 and recorded volumes of over 46,00,000 shares on NSE.
Tata Motors gained by 2% to Rs726 after the company announced that they have secured order for 500 buses from Delhi Transport Corp. The scrip touched an intra-day high of Rs727 and a low of Rs704 and recorded volumes of over 16,00,000 shares on NSE.
Technology stocks gained momentum after IT bellwether Infosys announced its impressive Q4 result. Satyam Computer surged nearly by 8% to Rs481, TCS spurred 5% to Rs1262, Wipro gained by 5% to Rs567. Polaris, HCL Tech and NIIT Ltd were the major gainers among the 50-scrip's of NSE Nifty.
Banking stocks also recorded smart gains. The index heavy weight SBI spurred by over 3% to Rs997, ICICI Bank advanced by 2.8% to Rs873 and HDFC Bank added 2.3% to Rs981.
Auto stocks were on a run. Bajaj Auto paced ahead by over 3.5% to Rs2433, M&M surged 3.6% to Rs745, Maruti advanced by 1.7% to Rs771 and Tata Motors added 2% to Rs726.
Capital Good stocks also gained ground. L&T advanced 3% to Rs1614, ABB gained by 2.5% to Rs3745, BHEL gained by 0.5% to Rs2479 and Siemens added 2.3% to Rs1146.
Market volumes:
The turnover on NSE was up by 37% to Rs97.35bn. BSE Technology index was the major gainer and gained 3.19%. BSE Auto index (up 2.94%), BSE Bank index (up 2.62%), BSE Capital Good index (up 2.15%) and BSE Metal index (up 1.99%) were among the other major gainers. However, FMCG index lost 0.81%.
Volume Toppers:
IFCI, ICRA, SAIL, Idea, Satyam Computer, Tata Steel, Infosys, Unitech, Bank of India, R Com, NTPC, Orbit, TTML, India Cement, Parsvnath, Marico, MTNL and TCS
Upper Circuit filters:
Crisil, Infomedia, Marksons, Teledata Informatics, Educomp, Deccan Aviation, KEW Industries, Atlanta, Shree Ashtvinavak, Vyapar Industries, Bhushan Steel, India Infoline, Tulip It, HOV Services, KS Oils and Maxwell
Results Today:
Aventis Pharma, Country Club India, Financial Tech, Indiabulls Financial, KS Oils Petronet LNG, TCS and Tele Data Informatics
Delivery Delight:
ABB, APIL, Aptech, ACC, Canara Bank, Century Textiles, Cummins India, Divis Laboratories, Glenmark Pharmaceuticals, HDFC Bank, ICICI Bank, I-Flex, Infosys Technologies, M&M, Maruti Udyog, NDTV, Praj Industries, PNB, Reliance Capital, Satyam, SBI, TCS and Tata Motors.
F&O Cues:
Stock Futures with Largest Increases in OI:
Ranbaxy, Bank of India, UTI Bank, HCl Tech, BEML, Polaris, NTPC, Crompton Greaves, Sobha Developers and Tata Chemicals
Stock Futures with Largest Decreases in OI:
M&M, Nicholas Piramal, CESC, Bajaj Auto, Aban Offshore, Jet Airways, Cairn, India, Tata Power, L&T and MTNL.
Major News
Inflation for week ended March 31 at 5.74% vs expectations of 5.78%
Infosys Q4 net (up 16.4%) QoQ to Rs11.44bn and revenues at Rs37.22bn (up 3.2%)
Apollo Tyres to mull results and stock split on 1st May
Tata Motors gets order for 500 buses from Delhi Transport Corp
Garware Offshore to buy Anchor Handling Tug
Overseas funds reach 24% limit in Indiabulls Financial
Brokers Recommendations:
M&M – Buy from CLSA
Cinemax – Buy from Emkay
Long Term investment:
Reliance Capital
Infosys Technologies (Q4 FY07): "More disappointment than cheer"
After an ordinary Q3 FY07, Infosys delivers a below ordinary performance in Q4 FY07 missing its revenue guidance for the quarter, believe it or not. As if this was not enough, the operating margin declined qoq by 100 bps mainly impacted by the Rupee appreciation. If not for the exceptional reversal in tax provisions amounting Rs1250mn, the net profit would have grown just 3.7% qoq. The sequential EPS growth was further depressed by exercise of majority of outstanding options at the start of the quarter. Company has guided for a muted Q1 FY08 (in line with traditional pattern) and below expected FY08 revenue and EPS growth.
Outlook
In the light of poor Q4 FY07 result and below expected FY08 guidance, we are revising our FY08 EPS estimate downwards by 4% from Rs87.1 to Rs83.6. However, we maintain BUY on the company as our 1-year target price of Rs2,509 (based on 30x FY08E EPS) indicates 19.5% upside from present levels. The stock returns remain attractive even post the EPS downgrade due to significant price fall in the last 3 months (~12%) especially since the Budget (~9%).
Edelweiss - Daily Market Outlook 16th April, 07
Market Snapshot
Despite weakness in other Asian markets, the Sensex opened with a positive gap of 49 points at 13,163 on the back of Infosys numbers. Late in the day more good news came in from the inflation front which dropped below the 6%-mark to 5.74%. Stocks from auto, banking and metal sector joined the party which led the index rally to a high of 13,421. BSE Sensex closed at 13,389 (up 275 points) while the NSE Nifty closed at 3,916 (up 86 points).
The NSE and BSE cash volumes were higher compared to the previous day at INR 97 bn and INR 47 bn respectively. The F&O volumes were also higher at INR 334 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has increased to 25-27% levels. The WPCR of Nifty Options has increased to 1.20 while the 5 day average is 1.07.
Outlook
The market seems to have formed a direction post the Infosys results which were broadly in line with expectations. The broad based rally on Friday has ensured that the market has broken out of the range. All these factors, coupled with positive cues from global indices will ensure a positive opening for the market today.
We can expect sectors such as banking to outperform on the back of interest shown in the previous few trading sessions. The IT sector will also see some strength due to Infosys results which will form a benchmark. Metals and telecom should also outperform today.
The nifty broke and closed above the crucial 3901 level which was last support for the bears. The immediate outlook for the Nifty has turned bullish and the next resistance is at 3950 followed by 3986, while the immediate support is at 3901 followed by 3847. The bullishness is strengthened by a fresh round of buying visible in IT & Auto stocks.
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Cham Chama Cham Recos
| SCRIP CODE |
| SCRIP | EQUITY PRICE Rs. | APPROX. Holding Period | Target PRICE Rs. | ||
| 9 Apr 2007 | 524828 | BDH Ind | 25 | 12 Month | 150 |
| 9 Apr 2007 | 532643 | Shree Ganesh Forging | 27.75 | 12 Month | 100 |
| 3 Apr 2007 | 513173 | Steel Strips and Tubes | 19.46(avg) | 12 Month | 250 |
| 2 Apr 2007 | 531898 | Sanguine Media | 43.5(avg) | 12 Month | 200 |
| 30 Mar 2007 | 509567 | Goa Carbon | 56 | 3 Month | 100 |
| 29 Mar 2007 | 523628 | Wearology | 83 | 6 Month | 250 |
| 26 Mar 2007 | 504629 | Anil Spl Steel | 26(avg) | 3 Month | 100 |
| 23 Mar 2007 | VIP Ind | 114(avg) | 3 Month | 140 | |
| 16 Mar 2007 | 505426 | Dagger Forst | 63(avg) | 6 Month | 110 |
| 15 Mar 2007 | 506003 | Sudal Ind | 18.50 | 12 Month | 70 |
| 13 Mar 2007 | 532624 | Jindal Photo | 90 | 12 Month | 300 |
| 9 Mar 2007 | 500003 | Aegis Logistic | 157(avg) | 3 Month | 240 |
| 7 Mar 2007 | Birla VXL | 16.75 | 12 Month | 100 | |
| 6 Mar 2007 | 524731 | Jenburkt Pharma | 29 | 12 Month | 150 |
| 6 Mar 2007 | 523558 | Network Ltd | 34.50 (avg) | 12 Month | 500 |
| 23 Feb 2007 | 532730 | SGL | 43.50 | 12 Month | 250 |
| 15 Feb 2007 | 523523 | Rainbow Paper | 94 (avg) | 6 Month | 190 |
| 9 Feb 2007 | 531556 | Coral Housing | 24.50 | 12 Month | 70 |
| 8 Feb 2007 | 507180 | Kesar Enterprises | 120 | 12 Month | 575 |
| 8 Feb 2007 | 513142 | Balasore Alloys | 9.65 | 12 Month | 50 |
| DATE |
| SCRIP CODE | SCRIP | EQUITY PRICE Rs. | APPROX. Holding Period | Target PRICE Rs. | |
| 7 Feb 2007 | 524276 | Dujodwala Paper | 23 (avg) | 12 Month | 90 |
| 7 Feb 2007 | Uttam Sugar | 165 (avg) | 6 Month | 450 | |
| 6 Feb 2007 | 524522 | Laffans Petro | 29 | 12 Month | 100 |
| 6 Feb 2007 | 500357 | Rama Paper | 42 | 12 Month | 125 |
| 5 Feb 2007 | 531091 | United Credit | 42 | 12 Month | 250 |
| 5 Feb 2007 | 500356 | Rama Newsprint | 40.50 | 3 Month | 60 |
| 2 Feb 2007 | 523606 | SIKA Interplast | 87 | 12 Month | 350 |
| 1 Feb 2007 | 590028 | Nicco Corp | 26 | 12 Month | 100 |
| 29 Jan 2007 | 504908 | SS Duncan | 192.5(avg) | 9 Month | 425 |
| 25 Jan 2007 | 500101 | Arvind Mills | 61 | 6 Month | 120 |
| 24 Jan 2007 | 500139 | Fedders LLyood | 125 | 12 Month | 350 |
| 24 Jan 2007 | 532722 | Nitco Tiles | 250 | 12 Month | 450 |
| 23 Jan 2007 | 521240 | Samband Spinning i | 128 | 12 Month | 250 |
| 23 Jan 2007 | 505185 | Bosch Chasis | 960 | 3 Month | 1400 |
| 23 Jan 2007 | Videocon Ind | 450 | 12 Month | 1100 | |
| 23 Jan 2007 | 532493 | Astra Micro | 173.50 (avg) | 9 Month | 450 |
| 17 Jan 2007 | 532686 | Kernex Micro | 200 | 12 Month | 500 |
| 17 Jan 2007 | K Sera Sera | 32 | 12 Month | 80 | |
| 16 Jan 2007 | 506985 | TwiLitaka Pharma | 51 (avg) | 12 Month | 200 |
| 15 Jan 2007 | 530615 | Garg Furnace | 64 | 3 Month | 150 |
| DATE |
| SCRIP CODE | SCRIP | EQUITY PRICE Rs. | APPROX. Holding Period | Target PRICE Rs. | |
| 8 Jan 2007 | 506803 | Fulford | 632 | 3 Month | 800 |
| 3 Jan 2007 | 502281 | Triveni Glass | 49 (avg) | 12 Month | 100 |
| 3 Jan 2007 | 513709 | Shilp Gru | 49 | 12 Month | 175 |
| 2 Jan 2007 | 500246 | Envair Electrodyne | 44 | 12 Month | 300 |
| 29 Dec 2006 | 526481 | Phonex Int | 31 | 12 Month | 100 |
| 27 Dec 2006 | 523850 | Axtel | 14.50 | 12 Month | 50 |
| 27 Dec 2006 | 505978 | Triton Valves | 1500 | 12 Month | 10000 |
| 22 Dec 2006 | 532641 | Nandan Exim | 4.75 (avg ex) | 12 Month | 15 |
| 22 Dec 2006 | 526723 | RDB Ind | 217 | 12 Month | 900 |
| 20 Dec 2006 | 530369 | Vamshi Rubber | 12.80 | 12 Month | 50 |
| 19 Dec 2006 | 523323 | Kovai Medi | 59 | 12 Month | 200 |
| 1 Dec 2006 | City Union Bank | 180 | 12 Month | 300 | |
| 21 Nov 2006 | 526335 | Shreyas Intermediaries | 63 | 12 Month | 150 |
| 7 Nov 2006 | 524727 | Span Dignostic | 64 | 12 Month | 200 |
| 3 Nov 2006 | 520008 | Rico Auto | 72 | 12 Month | 150 |
| 31 Oct 2006 | 531750 | Encore Software | 42 | 12 Month | 200 |
| 22 Sep 2006 | 532716 | Gillander Arb | 136(Avg) | 12 Month | 500 |
| 20 Sep 2006 | 517096 | Aplab | 126 | 3 Month | 200 |
| 15 Sep 2006 | 526247 | Premier Explosive | 73(Avg) | 12 Month | 125 |
| 14 Sep 2006 | 590041 | Kaveri Telecom | 59 | 3 Month | 100 |
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