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Tuesday, April 17, 2007
Market Close: Slips looking at its counterparts..
Indices continued to venture in the negative territory after a green start on the back of selling pressure. The preceding sessions continued to be choppy as the indices recovered back before slipping again in the final hours of trading. TCS results had nothing big to surprise the market which also succumbed to selling adding to this was further weakening of Dollar as Indian Rupee appreciated to Rs 41.71 and later managed to trade at Rs41.85. All IT stocks saw profit booking. Banking stocks surged after the mid session and Cement stocks rallied at the start but later it too witnessed some levels of selling pressure.
India's foreign exchange reserves rose above $200 billion for the first time in April, indicating robust foreign fund inflows, which ultimately had a negative impact on the Dollar sentiment. Demand continued to be strong for the newly listed ICRA which traded high but slipped on profit booking. Midcaps and Small caps too saw selective buying. Lack of support seen from the Asian indices which ended in red while the European markets trading in the negative territory.
Sensex ended lower by 89 points at 13607.04. Weighing on the Sensex were losses in Satyam (455.9,-5 percent), Tata Motors (730.5,-3 percent), TCS (1249.5,-2 percent), Cipla (230,-2 percent) and Infosys (2081.7,-2 percent). While Losses were restricted by gains in Bajaj Auto (2548.2,+3 percent), ACC (806.7,+3 percent), Guj Ambuja (113.75,+1 percent), RIL (1476.05,+1 percent) and L & T (1669.3,+1 percent).
Bharat Electronics ltd. reported its results with net profit at Rs. 714 cr on revenues at Rs. 3960 cr. Defence segment sales were 76% of the total revenue. The company expects a turnover of Rs. 9,000 cr by 2011-12.For financial 2006-07, all nine units of the firm were profitable. Bharat Electronics expects a turnover of Rs. 4,500 cr in 2007-08 (Apr-Mar).Company is well positioned to achieve those targets as the order book of Rs. 9,000 cr, against Rs. 6,600 cr rupees a year ago. Good sign that the company's all segment is profitable and expect good times in coming quarters with huge Order Backlogs. Stocks felt the selling pressure which slipped by obver 5%.
Maruti announced that the company plans to introduce the immobilizer system across all its models. The device, called iCATs (intelligent Computerised Anti-Theft system) works on the principle of multiplexed communication. Under this system, a transponder - inbuilt into the car key - carries a unique electronic identification and a secret code that digitally communicates with the engine computer via a controller. If the secret code matches, the engine starts and in case of a mismatch, the electronic circuitry does not let the car to start, thereby preventing the car from being stolen. Company is expected to pass on the hike in price of the additional device on the consumers. The addition of the security device would increase the cost marginally and would not have much impact on sales numbers. However,It is the impact of interest rate hike that needs to be watched for as that is expected to have an impact on the car sales numbers. Maruti ended 2% lower for the day while the Auto counter ended mixed.
Technically Speaking: Choppy session for the day with no clear direction. Sensex made an intra day high of 13,613 and low of 13,581 with Advances declines ratio of 1:1.3. Sensex Support lies at 13,580-13,480 levels while the Resistance lies at 13,710 levels. Market Volumes were tuning to Rs. 4,547 cr which was quite good.
Sensex slips amid lacklustre trades
The Sensex opened on a positive note at 13733. However it could not hold on to the gains and drifted into negative territory. The market appeared extremely bearish as the trading session progressed. Hectic selling in heavyweight, information technology, metal and consumer durables stocks in the afternoon dragged the index to the day's low of 13581. The Sensex ended the session with losses of 89 points at 13607, while the Nifty shed 28 points to close at 3985.
The breadth of the market was weak. Of the 2,631 stocks traded on the BSE, 1,463 stocks declined, 1,085 stocks advanced and 83 stocks ended unchanged. All the sectoral indices closed on a weak note. The BSE IT Index declined 2.48% followed by the BSE Teck Index (down 1.80%), the BSE Metal Index (down 1.29%) and the BSE CD Index (down 1.15%).
Several index heavyweights ended with losses. Satyam Computers led the slump and tumbled 4.89% at Rs456. Tata Motors dropped 2.64% at Rs731, TCS slumped 2.39% at Rs1,250, Cipla shed 2.34% at Rs236, Infosys lost 2.19% at Rs2,082, Wipro declined 2.11% at Rs574, Maruti slipped 2.02% at Rs762 and ITC was down 1.61% at Rs156. Select counters, however, logged steady gains. Bajaj Auto rose 2.71% at Rs2,548, ACC added 2.56% at Rs807, Gujarat Ambuja gained 1.34% at Rs114 and Reliance Industries was up 1.10% at Rs1,476.
Over 89 lakh ICRA shares changed hands on the BSE followed by IFCI (87.30 lakh shares), GV Films (84.28 lakh shares), Bellary (82.34 lakh shares) and Tata Teleservices (76.83 lakh shares).
Value-wise Reliance Industries clocked a turnover of Rs154 crore on the BSE followed by Tata Steel (Rs116 crore), TCS (Rs85 crore), Infosys (Rs75.83 crore) and Satyam Computers (Rs58.99 crore).
Late sales eliminate 83 points from Sensex
The market was under pressure from sellers in late-afternoon trade. Frontline software scrips and a select few heavyweights led the fall. Volatility was also a key feature of today's trade.
The 30-share BSE Sensex settled 82.54 points lower, at 13,613.04, as per a provisional closing . It had opened higher, at 13,733.18, and surged up to 13,755.76, but was unable to sustain the level and slipped. The benchmark Sensex had also slipped to a low of 13,581.04, due to last minute selling.
After rallying for the past few days, the market-breadth, an indication of the overall health of the market, turned weak, as selling began for smallcap and mid-cap stocks. Against 1,459 stocks that declined on BSE, 1,112 advanced. A total of 78 scrips remained unchanged.
The total turnover on BSE amounted to Rs 4547 crore.
Among the 30-Sensex pack, 22 declined while the rest advanced.
Frontline IT stocks were trading with sharp losses, as selling gripped their counters on fears of a rising rupee against the dollar.
Software major Satyam Computers was the top-loser, down 4.66% to Rs 457, on a volume of 12.75 lakh shares. It had slipped to a low of Rs 454.10.
TCS slipped 2.15% to Rs 1253, as 6.77 lakh shares changed hands in the counter on BSE. An anticipated increase in core operating profit margins did not fructify in Q4 March 2007.
TCS reported 6.16% growth in sequential consolidated net profit as per US GAAP for Q4 March 2007 at Rs 1172.77 crore, compared to a net profit of Rs 1104.70 crore in Q3 December 2006. However, operating profit margin (OPM) did not rise. Analysts had bet on an increase in the IT major's OPM, which was steady at 28.3%. Consolidated US GAAP revenue rose 5.88% to Rs 5146.37 crore.
“The significant number of large wins in FY 2007 that will ramp up during the next fiscal year makes us confident of continuing sustained, profitable growth," S Ramadorai, chief executive and managing director, said in a statement.
TCS added 43 new clients during the January-March quarter, taking their total number to 218. TCS also hired 5,827 new employees during the quarter. The company plans to give 12 - 15% pay hike to its staff based in India, while overseas employees will see their salaries increase 3 - 5% this year.
The rupee’s surge is a cause of concern for IT firms, as it directly impacts their revenue and profits, a lion’s share of which is accounted for by exports. IT companies use hedging tools to mitigate risks associated with currency movements. TCS is said to have obtained a $1 billion hedge at a price range of 43.50 - 44.
Infosys (down 2.30% to Rs 2079.80) and Wipro (down 1.91% to Rs 575.40) were also unable to win favour.
The BSE IT Index shed 127.38 points (2.47%), to 5,022.90, and was the biggest loser among the sectoral indices on BSE.
The rupee continued its upward march and appreciated further to 41.85/87 against the dollar following sustained portfolio inflows amid absence of intervention from the central bank. In volatile trade at the Interbank Foreign Exchange (Forex) market, the Indian unit opened steady at 41.91/93 per dollar from Monday's close of 41.90/92 a dollar.
India's foreign exchange reserves rose above $200 billion for the first time in April, indicating robust foreign fund inflows, which ultimately had a negative impact on the dollar sentiment.
Maruti Udyog (down 1.92% to Rs 762.40), Cipla (down 2.12% to Rs 230.50), and Tata Motors (down 2.65% to Rs 730.50) were the other losers.
Bajaj Auto was the top-gainer, up 2.95% to Rs 2554, on a volume of 49,896 shares. The bike-maker surged sharply from a low of Rs 2460.20.
Previously battered cement pivotals are back in the reckoning, on expectations of a strong performance from cement firms in the March 2007 quarter.
ACC was up 2.85% to Rs 809, on a volume of 5.97 lakh shares, while Gujarat Ambuja Cements rose 1.47% to Rs 113.90.
Cement shares were hammered in the last few months after the government took steps to rein in cement prices to fight inflation. Most brokerages have a 'buy' on Grasim, as it is a diversified firm not relying solely on cement, unlike many others.
Index heavyweight Reliance Industries (RIL) was up 1.24% to Rs 1478.10, on volumes of 10.45 lakh shares. It had surged to an all-time high of Rs 1487.80, in intra-day trade.
The Nikkei average slipped 0.77% on Tuesday, as investors took profits in Kyocera Corp and other recent gainers while Casio Computer Co. Ltd. tumbled after Goldman Saches downgraded the stock. The Nikkei lost 136.38 points at 17,491.92
US stocks edged up on Monday, buoyed by a $25 billion buyout of student-lender, Sallie Mae, and following strong retail sales in March renewing optimism about economic growth. The Dow Jones industrial average shot up 108.33 points, or 0.86%, to end at 12,720.46 -- within shouting distance of its record-high of 12,795.93 set on 20 February 2007. The S&P 500 gained 15.62 points, or 1.08%, to close at 1,468.47. The Nasdaq Composite Index advanced 26.39 points, or 1.06%, to finish at 2,518.33.
The release of US retail sales data, which slightly exceeded forecasts for March, and were much higher in February, gave investors another reason to return to riskier assets like stocks. The data indicated that consumer spending, a pillar of strength in the US economy, remained strong.
Stocks across the globe have surged in the past few weeks amid growing confidence that the benign backdrop of solid global economic growth and moderate inflation will continue.
As per provisional figures, FIIs were net buyers to the tune of Rs 308 crore on Monday.
Oil prices were flat in Asian trading on Tuesday on a lack of driving factors ahead of the expiry of the contract this week. Traders were looking ahead to the midweek US petroleum inventory report, which is likely to show rising crude stocks and falling gasoline and distillate supplies, according to a Dow Jones Newswires survey of analysts.
Light, sweet crude for May delivery was down just 3 cents to $63.58 a barrel in Asian electronic trading on the New York Mercantile Exchange. Slow trading is not unusual ahead of a contract's expiration. The May futures contract expires on Friday.
The Brent contract for June delivery, on London's ICE Futures exchange, was showing more movement Tuesday, up 32 cents to $67.57 a barrel.
From Monday (16 April), stock exchanges have also started releasing provisional data of daily activity of domestic institutional investors (DIIs) which include mutual funds, insurance companies, development financial institutional investors and banks. DIIs were net buyers to the tune of Rs 18 crore on Monday.
Sharekhan & Kotak Reports
Sharekhan Highnoon dated April 17, 2007
Kotak - Market Morning - 17 Apr 2007
Kotak - Derivatives: 17 Apr 2007
Kotak - Daily Morning Brief - 17 Apr 2007 - TCS, GAEL, Honeywell Automation
Sharekhan Commodities Buzz dated April 17, 2007
Sharekhan Eagle Eye (commodities) for April 17, 2007
Sharekhan Daring Derivatives for April 17, 2007
Emkay - Mid-April '07 - F&O Review
Market Outlook:
- Nifty and Sensex both gained 3.1% during first half of April series.
- We expect Nifty to remain strong and witness further upside move in the coming days as remarkable build up of positions with improvement in CoC is seen across the board.
- Implied Volatility of Nifty March options is currently trading in range of 22-23% compared to high levels of 26-28% during the first half of april series; this indicates decline in uncertainty and expectation of stable markets in the coming days.
- PCR (OI) of Nifty has also improved to 1.18x due to build up in Nifty Put options suggesting development of support in the markets.
F&O Cues:
- April total futures open interest at Rs 36025 Crs compared to Rs.28780 Crs at the beginning of April series; increase of 25.2%
- Stock futures's OI for April series currently at Rs.22720 Crs compared to Rs.17460 Crs beginning of series; sharp rise of 30%.
- Open Interest in April stock futures, in terms of number of shares, is nearly 93.75 Crore shares compared to 79 Crore shares at the beginning of April series; increase of 18.7%.
- OI in Nifty April futures currently at 3.4 crore shares v/s 2.97 crore shares at the beginning of April series. In value terms, currently Nifty April OI is nearly Rs.13300 crores v/s Rs.11300 crores at the beginning of April series.
- Huge build up of over 41 lakh shares seen in Nifty 3800 Put options; indicating that players may be looking at 3800 levels to offer strong support in the coming days.
SECTORAL OUTLOOK:
Auto & Auto Ancillary : HeroHonda, M&M & Maruti expected to trade with negative bias.
Banking & Finance: Heavyweights like SBI, ICICI Bank, HDFC Bank, HDFC and other stocks like IFCI, Reliance Capital, Kotak Bank & IDFC look strong.
Cement & Construction : Cement Stocks like ACC, Guj Ambuja and Construction stocks like Parsvnath Developers & Sobha Developers are looking strong.
FMCG: ITC & HLL look strong
IT & Telecom: Infosys, TCS, Satyam, Wipro, RCOM & Bharti are looking strong. Mid-cap IT stocks like I-flex, Polaris & HCL Tech are also looking strong.
Metals: Bullish on Sterlite & SAIL. Jindal Stainless look strong. Short covering seen in TataSteel.
Oil, Gas & Refinery : Bullish on Reliance, ONGC, RPL & GAIL looks strong.
Pharma: Ranbaxy, Orchid Chem, Dr.Reddy, Divis Lab, Cipla, Sun Pharma, Glaxo and Lupin are looking strong.
Power & Engineering : We like BHEL, NTPC, Suzlon, Praj, CESC, ABB and TataPower.
Others: We like Zee, Titan, NDTV, Voltas, BILT and Guj Alkali
Emkay - Mid-April '07 - F&O Review
Sharekhan's top equity fund picks: Sharekhan Mutual Funds Report dated April 16, 2007
MUTUAL GAINS Sharekhan's top equity fund picks |
The past performance is measured by the returns generated by the scheme. Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.
FAMA measures the returns generated through selectivity, ie the returns generated because of the fund manager's ability to pick the right stocks. A higher value of net selectivity is always preferred as it reflects the stock picking ability of the fund manager
Get it
Sharekhan's top equity fund picks: Sharekhan Mutual Funds Report dated April 16, 2007
Sharekhan Investor's Eye dated April 16, 2007
SHAREKHAN SPECIAL
Q4FY2007 Pharma earnings preview
Key points
- We remain positive on the Indian pharmaceutical sector on account of the continued domestic growth, steady contributions from exports and synergies arising out of integration of acquisitions. Further, the increased focus on drug discovery and collaborative research with the global players enhances the medium-term earnings visibility for the sector.
- In line with the business trend, the growth of the domestic market moderated to around 9% in Q4FY2007 from over 15% in the previous couple of quarters. But the ramp-up in the formulation export segment continues to be robust and the successful integration of acquisitions (viz Ranbaxy Laboratories’ Terapia, Wockhardt’s Pinewood and Nicholas Piramal’s Morpeth) would drive the revenue growth for the sector. Further, Dr Reddy’s Laboratories’ 180-day exclusivity for Ondansetron would also boost the overall industry growth. We expect the pharmaceutical companies under our coverage to report a revenue growth of 20.3% in Q4FY2007.
- With a greater number of players entering the generic space in the USA and the European Union, pricing pressures are likely to continue. But thanks to the cost-cutting efforts, improvement in the product mix and larger thrust on branded formulation business by the local players, stable margins are likely to be ensured. The pharmaceutical companies under our coverage are expected to report a 420-basis-point expansion in the operating profit margin (OPM), leading to a 30% growth in their net profit in Q4FY2007.
- Research and development (R&D) was the highlight of the fourth quarter as Indian pharma space witnessed impressive developments on the R&D front. Sun Pharmaceuticals de-merged its R&D unit into a separate entity called Sun Pharma Advance Research Company and unveiled its new chemical entity (NCE)/novel drug delivery system (NDDS) pipeline (comprising four NCEs and four NDDS). Alongside, Ranbaxy Laboratories has expanded its collaborative research partnership with GlaxoSmithKline Plc (GSK), as per which the Indian company would identify the new chemical leads and take them up to Phase-II proof of concept study. The Ranbaxy Laboratories-GSK alliance would focus on therapies like anti-infectives, metabolic disorders, respiratory and oncology. As per the deal, Ranbaxy Laboratories could receive over $100 million in potential milestone payments for a single product. We expect further positive news flow on the innovative R&D front from Lupin, Dr Reddy’s Laboratories and Glenmark Pharmaceuticals in the coming quarters, which would act as a strong growth trigger in the medium to long term.
Q4FY2007 Banking earnings preview
We expect the interest income on advances in the last quarter to show a strong growth on the back of above 28% year-on-year (y-o-y) credit growth and the full impact of the hike in the prime lending rates (PLRs) effected by the banks in the fag end of December 2006 or early January as well as in mid-February 2007.
However, the cost of funds may have an upward bias, thereby putting some pressure on the margins of the banks with lower current and savings deposit account (CASA) balances as the deposit costs, especially the bulk deposit rates, have moved up sharply. However, the one-time cash reserve ratio (CRR) income that banks are expected to get in this quarter with retrospective effect should help them to tide over the increased deposit costs.
STOCK UPDATE
Tata Consultancy Services
Cluster: Evergreen
Recommendation: Buy
Price target: Rs1,508
Current market price: Rs1,285
Q4FY2007—fist cut analysis
Result highlight
- Tata Consultancy Services (TCS) has reported a growth of 5.9% quarter on quarter (qoq) and 38.2% year on year (yoy) in its consolidated revenues to Rs5,146.4 crore. The sequential revenue growth was largely driven by a 6.42% growth in the volumes and a 1.33% improvement in the billing rates and productivity. On the other hand, the appreciation of the rupee adversely impacted the revenue growth by 1.87% sequentially.
- The earnings before interest and tax (EBIT) margins declined by 47 basis points to 25.6% sequentially, largely due to the adverse impact of the appreciation in the rupee.
- The other income stood at Rs89.8 crore and included one-time extraordinary income of Rs66.3 crore from the sale of stake in Sitel. Excluding the one-time income (adjusted for tax), the consolidated earnings have grown at a disappointing rate of 1.1% qoq to Rs1,116.8 crore, which is much lower than the consensus estimates of around Rs1,185 crore.
- In terms of the outlook, the company reiterated that the demand environment continues to be robust and it expects to maintain the margins in FY2008 (at the level of 24.9% reported in FY2007). The company doesn't give any specific growth guidance. However, it has indicated that the gross employee addition would be higher than 32,500 reported in FY2007.
- The key operational highlights for Q4 are: addition of 43 clients; healthy growth of 9.3% qoq in the Top 10 clients; closing of two large deals worth over $50 million each and one deal worth $35 million; attrition rate at a comfortable level of 10.6% and a slowdown in banking, financial services and insurance (BFSI) and manufacturing industry verticals.
- Given the lower-than-expected performance and the steep appreciation in the rupee, we would review our FY2008 estimates and introduce the FY2009 estimates in the detailed report. We maintain our Buy call on the stock with a price target of Rs1,508.
MUTUAL GAINS
Sharekhan's top equity fund picks
We have identified the best equity-oriented schemes available in the market today based on the following 3 parameters: the past performance as indicated by the returns, the Sharpe ratio and Fama (net selectivity).
The past performance is measured by the returns generated by the scheme. Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.
FAMA measures the returns generated through selectivity, ie the returns generated because of the fund manager's ability to pick the right stocks. A higher value of net selectivity is always preferred as it reflects the stock picking ability of the fund manager.
MUTUAL FUNDS: WHAT’S IN—WHAT’S OUT
Fund Analysis: April 2007
An analysis has been undertaken on equity and mid-cap funds' portfolios, indicating the favourite picks of fund managers for the month of March 2007. Equity funds comprise of all diversified, index, sector and tax planning funds, whereas mid-cap funds include a universe of 18 funds such as Reliance Growth, Franklin India Prima Fund, HDFC Capital Builder, Birla Mid-cap Fund etc.
Dish TV India lists on bourses on 18 April
Previously ASC Enterprises, Dish TV India got demerged from Zee Entertainment Enterprises (ZEEL) with effect from 12 February 2007
Dish TV India lists on the bourses on Wednesday (18 April 2007). Dish TV India, previously known as ASC Enterprises, got demerged from Zee Entertainment Enterprises (ZEEL) with effect from 12 February 2007 as part of the Zee group’s restructuring exercise.
The listing of Dish TV, which was earlier expected in late-March 2007, was delayed by regulatory approvals.
Dish TV commenced its operations in May 2005 by launching DTH services and was the first private Indian company to initiate DTH satellite broadcast operations in the country.
The shareholders of ZEEL were allotted 5.75 shares of Dish TV for every 10 shares held in ZEEL.
The paid-up equity capital of Dish TV India is Rs 42.82 crore. The face value per share is Re 1.
ENAM India Research, in a curtain raiser, has issued 'buy' rating on the scrip at Rs 120. Citigroup has estimated a fair value of Rs 90 - Rs 120 for Dish TV.
Trading Calls
Deepak Mohoni
Sell Maruti above Rs 776 with stop loss above Rs 787. This is a day-trading recommendation.
Buy Yes Bank below Rs 154 with stop loss below Rs 152.50. This is a day-trading recommendation.
Ashwani Gujral
Buy Suzlon Energy with stop loss of Rs 1100 for target of Rs 1340.
Buy Lupin Labs with stop loss of Rs 630 for target of Rs 770.
Rajat K Bose
Buy IVRCL Infrastructure with a stop loss below Rs 280 for a target of Rs 291, 299 & 307. This is a day-trading recommendation.
Buy HLL with a stop loss below Rs 206.80 for a target of Rs 219.50, 223 & 227. This is a day-trading recommendation.
Kotak - TCS, Petronet LNG, Aventis Pharma, Jet Airways, CESC
Kotak - TCS, Petronet LNG, Aventis Pharma, Jet Airways, CESC
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Edelweiss - Daily Market Outlook 17th April, 07
Market Snapshot
Following the robust performance of last week, the Sensex opened with a positive gap of 95 points at 13,479, and moved higher as the day progressed touching a high of 13,708 before settling with a significant gain of 312 points (2.3%) at 13,696. Nifty Settled at 4,013 (up 96 points).
The NSE and BSE cash volumes were lower compared to the previous day at INR 89 bn and INR 41 bn respectively. The F&O volumes were also lower at INR 297 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has increased to 24-27% levels. The WPCR of Nifty Options has increased to 1.25 while the 5 day average is 1.06.
Outlook
The markets will open on a positive note taking cues from strong US markets. The positive run will continue as the TCS results were good and in line with the street expectations. After consolidating seen during the last few weeks, the Nifty has inched upwards in a new trading territory breaking some strong resistance levels. This is a good signal for the bulls taking over bears for a long run.
The Rupee appreciation will bring IT sector under some pressure even when the major players have considerable hedges against the dollar fall. Textile might face some continued pressure due to their low margins and high forex exposure. Cement counters can have some buying opportunities at current levels after recent fall. ACC is our top buy pick which saw a 6% OI increase with 5% price rise in the cement stocks.
FII’s were net buyers of INR 1472 cr Index futures and INR 31 cr in single stock futures. This buying, along with OI build seen for FII numbers signals new interest in the broader market.
Nifty built on the bullish momentum after breaking the 3901 level on Friday. The market breadth was clearly on the side of the bulls and this adds to the intermediate bullishness of the market. The market has retraced 67% of the February fall and we expect the market to consolidate and move northwards from the current levels. The intermediate support is now at 3984 followed by 3962, while the resistance is at 4057 followed by 4099.
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Edelweiss - Daily Market Outlook 17th April, 07
Edelweiss - Auto Sales Update
Two wheelers: Flat
Two-wheeler sales for March were flat Y-o-Y, lowering the annual growth to 11.9% for FY07. Motorcycle sales growth was negative for the first time in three years. Higher interest rates have increased cost of ownership, discouraging buyers. Dealers had indicated an inventory build up last month. However, we believe that the sharp fall is mainly due to the fact that buyers had advanced their purchases during the festive months in the third quarter. Bajaj Auto has scaled down industry growth estimates for the next year to 5-6%. We have scaled down our volume growth estimates as well, following the recent trend. Total motorcycle sales stood at 565,283 units and 7,099,551 units for March 2007 and FY07, respectively. Scooters and mopeds sales for March stood at 89,625 units and 37,393 units, up 4.8% and 7.6% Y-o-Y, respectively. Bajaj Auto remains our top pick in the sector given its strong export focus and robust product line up.
* Commercial vehicles: Weak
Commercial vehicle sales growth was weak at 14.6%, albeit on a higher base. Both Tata Motors and Ashok Leyland sales showed similar M&HCV sales growth M-o-M of around 8.2-8.4%. LCV's sales were stronger at 19.9%. CV sales have been hit by rising interest rates and growth is expected to moderate to about 10-15% as the base effect kicks in. We have a positive outlook on both Tata Motors and Ashok Leyland. Tata Motors is our top pick in the automobile space, following expected growth in commercial vehicle sales due to continued robust industrial activity.
* Passenger vehicles: Muted
Passenger vehicles recorded muted sales in March with passenger cars growing at an dismal 6.1% Y-o-Y to 1,31,845 units. A spike in interest rates and expected launch of several new models in April 2007 has taken its toll on volumes. The executive segment recorded a healthy growth of 70.8%, primarily driven by the Honda Civic. A slew of new launches including Mahindra Logan, Chevrolet Spark, Fiat Palio and the new Hyundai Getz are expected to drive industry sales growth by increasing consumer choice.
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Intra-day Stock Ideas
NIFTY (4013) SUP 3968 RES 4061
BUY KESORAMIND (328.40) SL 323 T 338, 341
BUY IOC (402.60) SL 397 T 412, 415
BUY BIRLAJUTE (208.45) SL 204 T 216, 218
SELL RAJTV (196.85) @ 198 SL 202 T 190, 187
SELL AKRUTI (392.45) @ 395 SL 399 T 385, 382
STRATEGY INPUTS FOR THE DAY
Heat is on, but cooling likely
Ability will never catch up with the demand for it.
The bears are sweating and getting dehydrated as the bulls have turned the heat on them. Another sunny day on the bourses is more than welcome but the fear of an unexpected meltdown still haunts investors. For the day, indicators from the global markets are mixed. We could see the indices slipping into the red for one sole reason...PROFIT BOOKING.
FII inflows have improved of late but having said that one should remain cautious as some cooling is not ruled out at higher levels. Results will continue to be the focus of attention at least for this month. After that it will be once again inflation, interest rates, monsoon and the economy.
With the rupee crossing the 42 levels and nearing a nine-year high, IT shares may remain in focus. TCS has come out with its Q4 and FY07 results that are more or less in line with expectations. The company is also bullish going ahead despite the currency fluctuations and simmering talk of a slowdown in the US. It is sufficiently hedged with a forward cover of $1bn at 43.50-44.
FIIs were net buyers of Rs3.08bn (provisional) in the cash segment yesterday. In the F&O segment they were net buyers of Rs18.41bn.
US stocks rallied overnight on the back of strong earnings from Citigroup, M&As and encouraging data on retail sales. The Standard & Poor's 500 Index surged to its highest in more than six years. The Dow Jones Industrial Average erased losses from the Feb. 27 global sell-off.
Former Fed Chairman Alan Greenspan also added to positive sentiment by downplaying the risk problems in subprime mortgages pose to the US economy.
The S&P 500 added 15.62, or 1.1%, to 1468.47, its highest since September 2000. The Dow rose 108.33, or 0.9%, to 12,720.46. The 30-stock benchmark is 0.5% shy of matching its record close set Feb. 20. The Nasdaq Composite Index increased 26.39, or 1.1%, to 2518.33, its highest since Feb. 22.
US light crude oil for May edged higher, gaining 27 cents to settle at $63.90 a barrel on the New York Mercantile Exchange. The front-month contract was quoting at $63.60 per barrel in extended trading in Asia.
Treasury prices rose, taking the yield on the 10-year note to 4.73% from 4.76% late on Friday. COMEX gold for June delivery rose $4.60 to 694.50. In currency trading, the dollar fell against the euro and rose against the yen.
European shares rose to fresh multi-year highs. The pan-European Dow Jones Stoxx 600 index rose 1.2% to 387.72 - a level not seen since November 2000. The German DAX Xetra 30 added 1.8% to 7,338.06 and the French CAC-40 advanced 1.3% to 5,861.97. The UK's FTSE 100 rose 0.8% to 6,516.20.
Asian markets have slipped into the red after being higher early in the morning. Key indices in Tokyo, Hong Kong, Seoul and Singapore are all in the red, but only marginally.
Latin American markets closed mixed. Stock benchmark in Brazil was up over 2% at 48,921.21, its third record closing in a row. Mexican stocks slipped amid a downgrade of the market by Citigroup. Mexico's IPC slipped 0.2% to close at 29,718.66, taking a breather from its recent run of record closings.
HOW MARKET FARED
Profit booking likely
The markets had a spectacular rally today as bulls marched ahead with full force. The blue chip stocks led from front with ACC, Tisco, HLL, ITC, ONGC and Reliance Industries being the major gainers. Strong global cues boosted the key indices at open from there on upward trend prolonged as all round buying was witnessed on the bourses. Recently listed scrip’s were in the limelight as ICRA, Blue Bird and Abhishek Mills all surged over 10% each. Suzlon was also the star performer as the scrip rose over 7%.
Oil exploration major Reliance Industries was also on a run hitting its all time high. The Mid-Cap and small cap stocks also participated in the rally. The Cement, telecom, FMCG and Oil & Gas indexes were among the major gainers. Finally, the 30-share benchmark Sensex rallied 311 points to close at 13695. NSE Nifty also surged 96 points to close at 4013.
Oil exploration major ONGC spurred by over 3% to Rs900 after the company would spend Rs180bn on exploration. The scrip touched an intra-day high of Rs903 and a low of Rs875 and has recorded volumes of over 8,00,000 shares on NSE.
Punj Lloyd surged by over 8% to Rs180 after the company announced that they have secured contract valued at Rs5.30bn for construction of pipeline from OGC (Oman Gas Company) on EPC basis in Oman. The scrip touched an intra-day high of Rs182 and a low of Rs168 and recorded volumes of over 21,00,000 shares on NSE.
SUN TV surged by over 3.5% to Rs1716 after the company announced that they would consider bonus issue on 24Th April. The scrip touched an intra-day high of Rs1734 and a low of Rs1621 and recorded volumes of over 1,00,000 shares on NSE.
Welspun Gujarat gained 1.2% to Rs125 after the company secured orders worth Rs10.89bn. The scrip touched an intra-day high of Rs132 and a low of Rs125 and recorded volumes of over 23,00,000 shares on NSE.
Bharti Shipyard edged higher by 0.2% to Rs387 after the company announced that they have purchased Machinery and equipment of Swan Hunter. The scrip touched an intra-day high of Rs398 and a low of Rs363 and recorded volumes of over 51,000 shares on NSE.
Auto stocks were in top gear. Tata Motors advanced 3.3% to Rs750, M&M gained 2.4% to Rs763, Maruti was up by 0.8% to Rs778, Bajaj Auto added 2.2% to Rs2487 and LML was locked at 5% upper circuit to Rs12.65 after the company announced that a year-long strike at its Kanpur factory is over after it signed an agreement with the workers. The lockout was lifted on April 15 and the operations will resume shortly
Banking stocks also recorded smart gains. Mid-Cap stocks led from front Canara Bank surged by over 4% to Rs204, PNB advanced by 2.5% to Rs468, Corp Bank gained by 2.9% to Rs290. ICICI Bank, SBI and HDFC Bank were the major gainers among the heavy weights.
FMCG stocks also ended with smart gains. Tata Tea surged by over 3.5% to Rs664, ITC advanced by 3.2% to Rs163, HLL gained 3.4% to Rs213, others like Britannia, McDowell and Nirma are also witnessing uptrend.
Telecom stocks also rang with gains. R Com spurred by over 4% to Rs438, Bharti Airtel advanced 2.7% to Rs802, VSNL gained 3.1% to Rs434 and MTNL added 2.1% to Rs161.
Insider Trades:
Bharati Shipyard Limited: Reliance Regular Savings Fund - Schemes of Reliance Mutual Fund has purchased from open market 40000 equity shares of Bharati Shipyard Limited on 11th April, 2007.
Market Volumes:
The turnover on NSE was down by 8% to Rs89.5bn. BSE Oil & Gas index was the major gainer and gained 3.11%. BSE Capital Good index (up 2.90%), BSE Metal index (up 2.76%), BSE FMCG index (up 2.62%) and BSE Technology index (up 2.16%) were among the other major gainers.
Volume Toppers:
TTML, Orbit, Idea, SAIL, Tata Steel, Satyam Computer, Yes Bank, IDBI, ICRA, R Com, Indiabulls, ITC, Balrampur Chini, Ashok Leyland, India Cement, MTNL and Bajaj Hindusthan.
Upper Circuit:
Ansal Infrastructure, Crisil, Avaya Global, Classic Diamond, Nilkamal, Marksans, Crest Animation, Nuclues Software, Goldstone Technology, Tanla, Goderej Industries, Accel Frontline, Country Club, Gayatri Project, Dhanlakshmi Bank, KS Oils, HOV Services, IOL Broadband and Atlanta.
Results Today:
HCL Tech, HDFC Bank, Supreme Inds and UTI Bank.
Delivery Delight:
Bajaj Auto, Bharat Forge, BHEL, Bharti Airtel, Bombay Dyeing, CEAT, Gateway Distriparks, Gujarat Alkalies, HCC, I-Flex Solutions, IDBI, Jaiprakash Associates, ONGC, Orchid Chemicals, Sterlite Industries, Tata Motors, Titan and VSNL.
Abnormal Delivery:
GlaxoSmithKline Pharma, Bank of Baroda, State Bank of India, Dr Reddy's, HCL Tech, Ashok Leyland and Indian Hotels.
Stock Futures with Largest Increases in OI:
BEML, Bajaj Hind, Siemens, IDEA, Lupin, Patni, Balram[ur Chini, Indian Hotels and Indian Bank.
Stock Futures with Largest Decreases in OI:
Crompton Greaves, Zee Tele, Sobha, Canara bank, VSNL, IFCI, Voltas, Glaxo, Nicholas Piramal and ITC.
Brokers Recommendations:
Bharti Shipyard - Buy from Citigroup with target of Rs525.
Gayatri Projects - Outperformer from Prabhudas Liladher with target of Rs343.
Long Term investment:
Bharti Airtel
Major News Headlines:
TCS Q4 net at Rs11.95bn (up 8.2%) QoQ, sales at Rs51.62bn
Punj Lloyd to construct pipeline for Oman Gas Company of Rs5.3bn
ONGC to spend Rs180bn this fiscal year on exploration
Jet to raise $400mn selling shares and to begin Cargo Airline this year
FT to pay dividend of Rs3.6 per share
Sun TV Board to consider bonus issue on April 24
Bharti Shipyard buys Machinery, equipment of Swan Hunter
Goldstone Tech signs agreement with Asia Today Ltd, Mauritius
Micro Tech to expand its operations in Middle East
Teledata Info to spend Rs2.5bn for setting up PC manufacturing unit at Baddi.
SSKI - TCS Q4FY07 results (Outperformer): Disappointing quarter; maintains positive stance on demand environment
TCS (CMP: Rs1280)
Mkt Cap: Rs1,253bn; US$28.6bn
TCS results were lackluster given the fact that expectations were high based on the management commentary over the last couple of quarters. While the top client continued to fire growing by 20.6% qoq, it was disappointing to note that pricing remained stable (Infosys’ billing rates continued to grow) and volume growth was modest at 5.2% qoq. While hiring continued to be strong, the lack of data on pricing and volume not only poses a risk on the upside but also on the downside. The increase in attrition rate at the experienced level also creates some nervousness. We are cutting our above-consensus estimates due to marginally lower volume growth and using an exchange rate of Rs42/US$. We are lowering our earnings forecast by 6.1% in FY08E and 4.7% in FY09E due to lower revenue and margin expectations. It is trading at 24x FY08E and 19.3x FY09E earnings (which is same as Infosys’ valuation). We maintain Out performer but retain Infosys as our top pick in the sector.Download here
Profit taking may cap upside
The market may extend gains but upside may be capped as higher levels may attract profit taking. TCS’ results announced after trading hours on Monday were in line with market expectations. The major March 2007 quarter result due today is that of another IT firm HCL Technologies.
Asia-Pacific markets were mostly in the red on Tuesday after US stocks surged on Monday. Key benchmark indices in South Korea, Australia, Singapore, Taiwan and Hong Kong and were down by between 0.08% to 0.77%. Australian and South Korean stocks came off after hitting record highs earlier during the day
US stocks edged up on Monday buoyed by a $25 billion buyout of student lender Sallie Mae and following strong retail sales in March that renewed optimism about economic growth. The Dow Jones industrial average shot up 108.33 points, or 0.86 percent, to end at 12,720.46 -- within shouting distance of its record high of 12,795.93 set on Feb. 20. The S&P 500 gained 15.62 points, or 1.08 percent, to close at 1,468.47. The Nasdaq Composite Index advanced 26.39 points, or 1.06 percent, to finish at at 2,518.33.
The release of US retail sales, which slightly exceeded forecasts for March and were much higher in February, gave investors another reason to return to riskier assets like stocks. The data indicated that consumer spending, a pillar of strength in the US economy, remained strong.
Stocks across the globe have surged over the past few weeks amid growing confidence that the benign backdrop of solid global economic growth and moderate inflation will continue.
As per provisional figures, FIIs were net buyers to the tune of Rs 308 crore on Monday.
From Monday 16 April, stock exchanges have also started releasing provisional data of daily activity of domestic institutional investors (DIIs) which include mutual funds, insurance companies, development financial institutional investors and banks. DIIs were net buyers to the tune of Rs 18 crore on Monday.
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.
Anand Rathi - Daily Strategist & Technical Note - Apr 17
The NIFTY futures saw a rise in OI to the tune 0.16% with prices opened high and closed near to day's high indicating heavy buying by bulls and shorts covering their positions aggressively resulted in narrowing down of discount in NIFTY spot and future from 20 points to 7 points on closing basis which may work in favor of bulls .Market crossed its immediate resistance of 3980 levels which may force bears to cover their positions aggressively.. The FIIs bought index futures to the tune of 355crs indicating that they bought back some of the positions they liquidated on Thursday. The PCR has come up for1.05 to 1.06 levels indicating further strength in the market and buying support may be seen in future .The volatility has come down from 25.70 to 24.65 levels indicating some direction may be seen in the market in coming few days.
Among the Big guns, ONGC saw 3.70% drop in OI with prices coming up indicating shorts covered their positions aggressively and fresh long positions being built up in the counter indicating further strength in the counter whereas RELIANCE saw 1.96% rise in OI with prices rising indicating further strength in the counter may prevail.
In the TECH front, , TCS saw rise in OI with prices rising indicating speculative buying positions being seen in the counter whereas SATYAMCOMP saw rise in OI with prices flat to negative indicating that both bulls and bears were aggressive in the counter and selling pressure emerging in the counter at higher levels indicating some weakness in the counter. Whereas WIPRO and INFOSYSTCH saw fall in OI with rise in prices indicating short covering in the counter and fresh long positions being built up in the counter indicating strength in the counter.
In the BANKING counters, SBIN saw drop in OI with rise in price indicating short covering seen in the counter ICICIBANK saw rise in OI with prices up indicating built up of long positions in this counter indicating strength in the counter. HDFCBANK saw fall in OI with prices coming down indicating profit booking happening in the counter.
In the metal pack TATASTEEL saw drop OI with prices coming up indicating shorts covering their positions and fresh buying emerging in the counter as counter crossed its resistance of 520 levels whereas SAIL saw fall in OI with prices coming up indicating shorts covering their positions .HINDALCO saw fall in OI to the tune of 3.86 % with prices rising indicating that finally bulls got upper hand in the counter which may result in fresh buying emerging in the counter and bears covering their positions aggressively . NALCO saw rise in OI to the tune of 0.16% with prices coming up indicating short covering seen in the counter. STER saw drop in OI with prices coming up indicating short covering seen in the counter and which may further result in some upward price movement in the counter.
Considering the overall scenario and the markets behavior, market has taken positive direction after INFOSYS result which acted as trend decider. Unless market goes below 3900 levels (nifty futures) we may see fresh buying emerging in the market and shorts covering their positions. Traders are advised not to go aggressively short on the market unless important support level of 3900 is breached and any position taken should be with strict stop losses to be adhered too.
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Nifty and Sensex have exhibited a bullish candlestick.
Technically, one may use the level of 3920 (Nifty) and 13475 (Sensex) as the stop loss level.
Nifty faces resistance at 4050 and Sensex at 13700.
BSE Smallcap and BSE Midcap exhibited a bullish candlestick.
CNX IT has gained ground.
In the Punter's zone we have a BUY in Jindal Stainless , A.C.C. & Tata Motors.
In the Technical call section, we have a BUY in UTV , Bharat Forge & SBI.
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Market may move sideways
While decent earnings numbers from Infosys and TCS helped the market register gains in the last two sessions, the sentiment is expected to be driven by earnings expectations and movement in the global indices. Also strong fund inflows for last few sessions may help the sentiment remain bullish. However, the market may witness sideways movement during intra-day trades on the back of overnight gains in US markets and mixed Asian markets in the morning trades. Among the indices, the Nifty has a resistance at 4025 while on the downside the index has a support 3961. The Sensex has a likely support at 13400 and may face resistance at 13855.
US indices rallied on Monday on the back of strong results in the financial sector, merger activity and an economic report that underscored the resilience of U.S. consumers. While the Dow Jones surged 108 points at 12720, the Nasdaq ended 26 points higher at 2518.
Indian floats ended with gains on the US bourses. Patni was the leading gainer and rose over 7% while VSNL, MTNL, HDFC Bank, ICICI Bank and Tata Motors gained over 3-5% each. However, Infosys, Styam, Dr Reddy's and Wipro managed to add 1-2% each.
While the Nymex light crude oil for May delivery moved down by two cents at $63.61 a barrel. In the commodity space, the Comex gold for June series jumped by $4.60 to settle at $689.90 a troy ounce
Emkay - Morning Notes, Federal Mogul Goetze (India) Limited , Anagram Daily Call & Weekly Watch
Emkay - Morning Notes, Federal Mogul Goetze (India) Limited
Anagram - Weekly Watch
Anagram - Daily Call - Apr 17
Q4FY2007 Banking earnings preview: Sharekhan Special dated April 16, 2007
SHAREKHAN SPECIAL
Q4FY2007 Banking earnings preview
We expect the interest income on advances in the last quarter to show a strong growth on the back of above 28% year-on-year (y-o-y) credit growth and the full impact of the hike in the prime lending rates (PLRs) effected by the banks in the fag end of December 2006 or early January as well as in mid-February 2007.
However, the cost of funds may have an upward bias, thereby putting some pressure on the margins of the banks with lower current and savings deposit account (CASA) balances as the deposit costs, especially the bulk deposit rates, have moved up sharply. However, the one-time cash reserve ratio (CRR) income that banks are expected to get in this quarter with retrospective effect should help them to tide over the increased deposit costs.
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Q4FY2007 Pharma earnings preview: Sharekhan Special dated April 16, 2007
SHAREKHAN SPECIAL
Q4FY2007 Pharma earnings preview
Key points
- We remain positive on the Indian pharmaceutical sector on account of the continued domestic growth, steady contributions from exports and synergies arising out of integration of acquisitions. Further, the increased focus on drug discovery and collaborative research with the global players enhances the medium-term earnings visibility for the sector.
- In line with the business trend, the growth of the domestic market moderated to around 9% in Q4FY2007 from over 15% in the previous couple of quarters. But the ramp-up in the formulation export segment continues to be robust and the successful integration of acquisitions (viz Ranbaxy Laboratories' Terapia, Wockhardt's Pinewood and Nicholas Piramal's Morpeth) would drive the revenue growth for the sector. Further, Dr Reddy's Laboratories' 180-day exclusivity for Ondansetron would also boost the overall industry growth. We expect the pharmaceutical companies under our coverage to report a revenue growth of 20.3% in Q4FY2007.
- With a greater number of players entering the generic space in the USA and the European Union, pricing pressures are likely to continue. But thanks to the cost-cutting efforts, improvement in the product mix and larger thrust on branded formulation business by the local players, stable margins are likely to be ensured. The pharmaceutical companies under our coverage are expected to report a 420-basis-point expansion in the operating profit margin (OPM), leading to a 30% growth in their net profit in Q4FY2007.
- Research and development (R&D) was the highlight of the fourth quarter as Indian pharma space witnessed impressive developments on the R&D front. Sun Pharmaceuticals de-merged its R&D unit into a separate entity called Sun Pharma Advance Research Company and unveiled its new chemical entity (NCE)/novel drug delivery system (NDDS) pipeline (comprising four NCEs and four NDDS). Alongside, Ranbaxy Laboratories has expanded its collaborative research partnership with GlaxoSmithKline Plc (GSK), as per which the Indian company would identify the new chemical leads and take them up to Phase-II proof of concept study. The Ranbaxy Laboratories-GSK alliance would focus on therapies like anti-infectives, metabolic disorders, respiratory and oncology. As per the deal, Ranbaxy Laboratories could receive over $100 million in potential milestone payments for a single product. We expect further positive news flow on the innovative R&D front from Lupin, Dr Reddy's Laboratories and Glenmark Pharmaceuticals in the coming quarters, which would act as a strong growth trigger in the medium to long term.
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