Good Evening - Wednesday 18th April, 2007

Market was down 0.3% in volatile trade today on profit booking after the over 4% rise in key indices in the last two sessions. Strength in Asian and U.S. markets on robust U.S. retail sales report provided support to indices here. At 10:34AM, Sensex was at 13683.18, down 16.99 points, or 0.1%. Nifty was at 4003.30, down 10 points, or 0.3%. CNX Midcap was up 0.2% and S&P CNX 500 Index was flat. On BSE, advances equaled declines in the morning. Shares of oil retailers were the biggest gainers on Nifty. HPCL and BPCL were up 2-3%. Crude oil prices Monday fell slightly to $63.52 a barrel on reports production in Nigeria will increase. Shares of technology companies were down on profit sales. CNX IT Index, which has risen 7% in the last three sessions, was down 2%. Satyam Computer Services, down 4% at Rs 462, was the worst hit on Nifty. TCS was down 2% at Rs 1,251. TCS Monday reported 44% year-on-year rise in Jan-Mar net profit to Rs 11.95 bn, slightly below analysts' expectations of Rs 12 bn. HCL Technologies was down 1% at Rs 306 ahead of its Jan-Mar earnings due after market hours. In the mid trading session, indices were down 0.5% on profit sales in shares of technology companies. BSE IT Index, down 3%, was the worst hit among BSE indices. At around 12.50PM, Sensex was at 13634.77, down 60.81 points or 0.5%. Nifty was at 3995.05, down 18.30 points or 0.5%. Shares of oil retailers were top gainers on Nifty on hopes crude oil prices would ease, as production from Nigeria is likely to increase. Bharati Shipyard was up 3% at Rs 400, as its buy of Swan Hunter's UK shipyard assets will save the company cost and time, otherwise spent in procuring new machinery for its Mangalore unit. Shares of IT companies were down 2-4% as the rupee strengthened against the dollar. The rupee at 41.77 rupees per dollar is near nine-year highs. It has risen 3.2% since the start of April. Infosys Technologies shares were down 2.6% at Rs 2,072. Poly Medicure was up 1% at Rs 138 on reports the company has tied up with a mid-sized U.S. firm to market its products there. Bharat Electronics was down 2% at Rs 1,732 on profit sales, after rising 7.5% in the last two sessions on expectations of robust Jan-Mar results. Key indices ended near the day's lows, taking a break after rallying 4% in the previous two sessions. Sensex was 13607.04, down 88.54 points or 0.6%. Nifty was at 3984.95, down 28.40 points or 0.7%. Technology shares were the biggest losers as investors booked profits after the rupee strengthened against the dollar. Tech shares have gained 7-10% in the previous three sessions. The BSE Infotech Index was down 2.5%. Oil retailers, HPCL No. of Scrips Value (Crs.) Advances 381 2856 Declines 665 6667 Unchanged 29 60 Total 1075 9583 and BPCL, bucked the weak trend and were up 3-4%. The BSE Oil and Gas Index was up 1%. TCS, which reported earnings after market hours Monday, shed 2%. Tech stocks ended down. Infosys was down at Rs 2082.75 with volumes of Rs 359.42 crs, TCS was down at Rs 1250.25 with volumes of Rs 327.33 crs, Satyam was down at Rs 455.80 with volumes of Rs 279.05 crs, and Tech Mahindra closed down at Rs 1454.25 with volumes of Rs 87.89 crs. Pharma stocks ended in mixed trend. Dr Reddy was up at Rs 716.65 with volumes of Rs 51.52 crs, Glenmark closed up at Rs 644.40 with volumes of Rs 43.70 crs, Ranbaxy was down at Rs 337.50 with volumes of Rs 23.27 crs, and Cipla closed down at Rs 229.55 with volumes of Rs 23.18 crs. Banking stocks ended down with exception. In the Public Sector banks SBI closed down at Rs 1010.20 with volumes Rs 111.37 crs & Bank of India closed down at Rs 183.25 with volumes Rs 86.56 crs. In the private sector ICICI Bank closed up at Rs 894 with volume of Rs 83.19 crs & UTI Bank closed down at Rs 465.10 with volumes of Rs 75.94 crs. Auto Stocks ended negative with exception. Tata Motors closed down at Rs 730.60 with volumes of Rs.184.16 crs & M&M closed down at Rs 749.80 with volumes of Rs 45.59 crs. While in the 2 wheeler segment stocks, Baja Auto closed up at Rs 2546.65 with volumes of Rs 67.06 crs & Hero Honda closed marginally down at Rs 649.90 with volumes of Rs 8.28 crs. Cement Stocks witnessed positive trend with exception. ACC closed up at Rs 808.70 with volumes of Rs 156.74 crs, GACL closed up at Rs 113.75 with volumes of Rs 84.01 crs, India Cement closed down at Rs 169.40 with volumes of Rs 75.16 crs and Prism Cement closed up at Rs 34.85 with volumes of Rs 6.80 crs. Nifty ended at 3985 down by 28 points.

Sharekhan Investor's Eye dated April 18, 2007

Q4FY2007 Media earnings preview

• The fourth quarter is the best quarter for the media industry as corporates exhaust their remaining ad budgets in this quarter.
• For the news channels, specifically the business news channels, the Union Budget is the major event that takes place in the fourth quarter, bringing in more ad revenues.
• The ICC Cricket World Cup West Indies 2007 was seen as a major event that was expected to affect the revenues of the general entertainment channels (GECs) but India's early exit is believed to have negated this to a certain extent.
• This was the first quarter of the roll-out of the conditional access system (CAS) in parts of Mumbai, Delhi and Kolkata. While 1.63 million cable homes fall under these CAS mandated zones, about 29% were estimated to have opted for set top boxes (STBs) till February 15, 2007 (source: FICCI- PWC Frames-2007).
• The penetration of CAS is expected to improve over a period of time with better subscriber awareness, the availability of STBs and its implementation in the other cities. CAS also provides an opportunity to alternative digital distribution platforms such as direct-to-home (DTH) and Internet Protocol TV to expand faster. We expect CAS to bring in transparency and curb under-reporting of subscriber base, thereby improving the profitability of broadcasters and MSOs.

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STOCK UPDATE

Genus Overseas Electronics
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs380
Current market price: Rs293

Price target revised to Rs380

Result highlights

• The Q4FY2007 results of Genus Overseas are ahead of our expectations.
• The net sales for the quarter grew by 35% to Rs152 crore on the back of a strong order book of Rs470 crore at the end of previous quarter. The net profit grew by 58% to Rs12.7 crore.
• The operating profit for the quarter grew by 55% to Rs19.9 crore. The operating profit margin (OPM) for the quarter improved by 170 basis points to 13.1% as against 11.4% on a year-on-year (y-o-y) basis as the raw material cost as a percentage of sales declined to 73.1% from 77.2%.
• The interest expense for the quarter rose by 34% while the depreciation cost declined by 33% to Rs0.67 crore.
• The order book of the company stood at Rs403 crore (including export orders worth Rs15 crore) at the end of March 2007.

HCL Technologies
Cluster: Apple Green
Recommendation: Buy
Price target: Rs425
Current market price: Rs316

Price target revised to Rs425

Result highlights

• HCL Technologies (HCL Tech) has reported a revenue growth of 7.6% quarter on quarter (qoq) and 39% year on year (yoy) to Rs1,577.1 crore for the third quarter ended March 2007. This is the third consecutive quarter of close to double-digit sequential growth in revenues (a 9.4% growth in dollar terms) which is far ahead of street expectations. The sequential growth was contributed by a 16.4% growth in the business process outsourcing (BPO) revenues. On the other hand, the infrastructure management service (IMS) and core software service businesses grew at a relatively lower rate of 6.4% and 6.5% respectively, on a sequential basis.
• The earnings before interest, tax, depreciation and amortisation (EBITDA) margin improved by 115 basis points to 23.3% on a sequential basis, despite the adverse impact of the steep appreciation of the rupee (1.6% appreciation in the average realised exchange rate against the US Dollar). The sequential improvement in the margin was largely aided by the cumulative impact of better realisations (including non-effort based gains), higher utilisation (especially in the BPO business) and a 70-basis-point saving in the selling, general and administration (SG&A) cost as a percentage of sales.
• In terms of segments, the EBITDA margin in all the three business lines improved on a sequential basis. The BPO business reported second consecutive quarter of a robust improvement in the margin, which was up by 360 basis points to 26.5%. The software service and IMS businesses reported an improvement of 85 basis points and 13 basis points respectively.
• The earnings grew at a robust rate of 15.9% qoq and 72.1% yoy to Rs331.8 crore (ahead of our expectation of Rs290 crore and the consensus estimate of a flat or negative growth sequentially, especially after the higher base resulting from the robust performance in the previous two quarters). The growth in the earnings was also aided by the foreign exchange (forex) gains of Rs41.8 crore on the open forward contracts, up from Rs34.7 crore reported in Q2FY2007.
• In terms of operational highlights, the ramp-up in the large deals is beginning to make a material impact on the overall performance. Moreover, the company continues to bag new multi-million, multi-year, multi-service deals and has announced six new deals in Q3�five in the range of $25-50 million each and one worth over $50 million.
• To factor in the higher than expected performance in the past three quarters and the continued traction in the intake of large deals, we have revised upwards the estimates for the FY2007 and FY2008 earnings per share (EPS) by 6.1% and 3.1% respectively. At the current market price the stock trades at 14.9x FY2008 and 12.6x FY2009 estimates. We maintain our Buy recommendation on the stock with a revised price target of Rs425 (17x FY2009E earnings on a diluted equity base).

SKF India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs406
Current market price: Rs332

Annual report review

On the back of the buoyant expectations of the growth in the economy, and increased impetus for the automobile industry with the development of the Golden Quadrilateral and NSEW corridor, the company expects the demand environment for the bearings industry to remain strong. The growth in the automotive sector is expected to continue with excise cuts and the ambitious Automotive Mission Plan (AMP) undertaken by the government. The company also sees good growth in the capital goods industry, and strong potential in sectors like wind energy and the textile industry. All these factors are expected to accelerate the growth for the company going forward.

At the current market price of Rs332 the stock is discounting its CY2008 earnings estimate by 10.7x and its earnings before interest, depreciation, tax and amortisation estimate by 5.7x. We maintain our Buy recommendation on the stock with a price target of Rs406.

Sharekhan Investor's Eye dated April 18, 2007

Citigroup - ABAN Offshore , ASK RJ - HCL Tech, Mutual Funds, Media Earnings, Eagle Eye

Citigroup - ABAN Offshore

ASK RJ - HCL Tech

Funds for volatile times: Sharekhan Mutual Funds Report dated April 18, 2007

Q4FY2007 Media earnings preview: Sharekhan Special dated April 18, 2007

Sharekhan Daring Derivatives for April 19, 2007

Sharekhan Eagle Eye (equities) & Derivatives Info Kit for April 19, 2007

Market Close: Consolidation creeps in but the midcaps are in good mood

Market started the day on a positive note but traded in ranged manner. The indices couldn?t sustain the momentum and volatility crept in the mid sessions as investors preferred to book profits at higher levels while on the other hand sustained buying interest in the index heavyweights kept the market in green. But the market witnessed some intense selling pressure in the final sessions as it pared some of their early morning gains but ended in the positive territory. Not much support was seen from global cues as Asian markets ended mixed while European indices were in red. Metal sector extended its gains tracking firm global metal prices as most of the stocks ended in green. Selective Auto, Energy, Engineering and Power stocks bore the brunt of selling pressure, while buying interest was seen in Pharma, Banking and Telecom stocks. Small and mid caps saw some value buying.

Sensex is closed up by 65 points at 13672.19. It was helped up by gains in NTPC (162,+3 percent), SBI (1035.45,+3 percent), Wipro (586.2,+2 percent), Bharti Tele (812.65,+2 percent) and ONGC (905.5,+2 percent). Restricting the gains were TISCO (511.35,-3 percent), Bajaj Auto (2496.8501,-2 percent), Grasim (2342.55,-1 percent), HLL (208.3,-1 percent) and Tata Motors (721.85,-1 percent).

Zee Group's demerged direct-to-home (DTH) business debuted on the bourses at Rs 114, discount to its base price of Rs 115. The stock could not sustain above base price throughout the day as valuations seems to be expensive at current price as per the market. However the stock touched an intraday high of Rs 120 and low of Rs 100 on BSE but closed at Rs 102.55 down nearly 11% to its issue price. Dish TV has also raised about Rs 500 cr and the amount would be invested in Dish TV and WWIL's distribution business. The company is targeting a user base of 10 million by 2010, from the current two million.

Prithvi Information Solutions reported a healthy set of results for the fourth quarter ended March 2007. PISL posted a net profit of Rs 26.6 crore in the fourth quarter ended March 2007, against Rs 23.4 crore in the corresponding quarter of the previous year with growth of 13.67%. Its revenues increased to Rs 259 crore from Rs 199 Cr up by 30.15%. The numbers were above market expectation. The company is really focused into the core information solutions businesses which give the strength to grow further. The stock moved up by 6%.

Bharat Electronics Ltd aims to capture 20-30% of the $10-billion defence offsets pie. The defence PSU, which ended 2006-07 with a provisional turnover of Rs 3,960 crore, has identified offsets and contract manufacturing in defence and hi-end electronics as growth drivers. It signed MoUs with Lockheed Martin, Boeing, EADS and Northrop Grumman during the February air-show and is talking to other companies. There is an estimated $10-billion offsets opportunity over six years. Offsets and contract manufacturing facilities (that have 20 per cent spare capacity) should propel BEL to become a $1-billion (Rs 4,500-crore) company during the current fiscal and double that turnover by 2011-12. The stock closed up by more than 1% while its peer also closed in green.

Technically Speaking: Markets traded in green but within a narrow range. Sensex touched an intraday high of 13762 levels and low of 13602 levels. Volumes were decent at Rs. 3757 cr. Overall breadth was in favor of Advances, where the Advance were 1324 against Decliners of 1243. Sensex is in continuous uptrend since the start of April. We see some profit booking taking place as it is approaching the key level of 13800. More upside will come after consolidation. Good Support is seen at 13550 levels.

Anand Rathi - Praj Industries & SSKI -Aban Offshore

Anand Rathi - Praj Industries

SSKI -Aban Offshore

Prabhudas Lilladher - CRISIL

Prabhudas Lilladher - CRISIL

Sensex ends on a bullish note

After yesterday’s fall the market saw an upmove during the day on sustained buying in heavyweight, banking and pharma stocks. The Sensex opened with a negative gap of four points but soon gained momentum and moved into positive territory. The Sensex gyrated by over 100 points in early trades and surged to touch the day's high of 13763. However, the market eased towards the close on selling in auto, engineering and metal stocks. The Sensex ended the session with gains of 65 points at 13672 while the Nifty closed at 4012, up 27 points.

The breadth of the market was positive. Of the 2,661 stocks traded on the BSE, 1,337 stocks advanced, 1,234 stocks declined and 90 stocks ended unchanged. Among the sectoral indices the BSE HC Index gained 1.56%, the BSE PSU Index rose 1.40% and the BSE Bankex was up 1.07%.

Most of the Sensex stocks ended at higher levels. NTPC surged 3.12% at Rs162, SBI soared 2.65% at Rs1,035, Wipro gained 2.09% at Rs586, Bharti Airtel added 1.64% at Rs813, ONGC advanced 1.64% at Rs906, Cipla gained 1.39% at Rs233, Hindalco jumped 1.33% at Rs145 and ACC was up 1.25% at Rs817.

Pharma stocks were in demand and attracted strong buying support. Sterling Biotech spurted 16.13% at Rs167, Sun Pharma gained 3.40% at Rs1,151, Glenmark Pharma added 3.23% at Rs665 and Biocon advanced 2.24% at Rs524. Matrix, Wyeth Lab, Divis Lab and Wockhardt gained around 1% each.

Over 1.88 crore Dish TV shares changed hands on the BSE followed by IFCI (77.13 lakh shares), Himachal Futuristic (75.45 lakh shares), Tata Steel (47.55 lakh shares) and Hindustan Oil Exploration (47.09 lakh shares).

Value-wise ICRA clocked a turnover of Rs391 crore followed by Tata Steel (Rs241 crore), Dish TV (Rs201 crore), Reliance Industries (Rs80 crore) and Page Industries (Rs79 crore).

Sensex pares gain from two-month high

The market edged higher today, extending a recent solid rebound but profit-taking at the higher levels capped gains. Although market-breadth ended positive, it had weakened in the latter part of trading. Subdued European markets pulled the Sensex down from a near two-month peak in afternoon trade.

Tata Steel dropped due to concerns of equity dilution after they unveiled funding plans for the Corus acquisition. PSU banks extended their uptrend. Auto and cement shares dropped. IT pivotals were mixed. Index heavyweight Reliance Industries (RIL) struck a new all-time high.

The 30-share BSE Sensex gained 65.15 points (0.48%), to 13,672.19. It had come off the higher level after surging as many as 155.88 points, to 13,762.92 at 13:15 IST, its highest level since 23 February 2007.

The S&P CNX Nifty advanced 26.65 points (0.67%), to settle at 4,011.60.

Against 1,324 stocks that rose on BSE compared to 1,243 that declined. Just 93 scrips were unchanged. Gainers outpaced losers by a ratio of 1.06:1. In early-afternoon trade, the advance-decline ratio was a 1.65:1.

European markets opened on a subdued note today despite gains in Asian markets. Key benchmark indices in London, Germany and France were down between 0.2 - 0.5%. Asian markets edged up after data eased fears over inflation in the United States, a key export market for the region. Key benchmark indices in Japan, South Korea, and Taiwan were up between 0.4 - 0.8%.

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. From a low of 12,455.37 on 2 April 2007, the Sensex has gained 1,216.82 points (9.76%) in a short while.

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. Global liquidity still remains strong. It has helped global markets recover quickly from recent steep corrections.

FII inflows have picked up after Infosys gave a strong guidance for FY 2008 in dollar terms, putting to rest concerns of the impact of a slowdown in the US on India's IT sector. FIIs were net buyers to the tune of Rs 788.30 crore on Monday (16 April), the day when the Sensex had surged 312 points in a global rally. They were net buyers to the tune of Rs 648.50 crore on Tuesday (17 April). FII inflows for the first few days of April 2007, stand at Rs 3804.30 crore (till 17 April).

Stock-specific activity is likely on the bourses in the near-term, as the earnings reportage season has just begun. On 24 April 2007, the Reserve Bank of India (RBI) will announce an Annual Policy Statement for FY 2007-08. There are concerns among market men that interest rates may go up further since inflation remains above the RBI’s target range of 5 - 5.5%. Higher interest rates raise borrowing costs and impact corporate profits.

In today’s trade, sectoral indices on BSE were mixed. The BSE Healthcare Index added 57.68 points (1.56%), to end at 3,762.60. It was the top-gainer among sectoral indices on BSE. The banking sector index, the BSE Bankex, advanced 72.22 points (1.07%), to 6,810.72. The BSE Tech Index, which is a free-float index comprising IT, telecom and media shares rose 31.14 points (0.85%), to end at 3,677.68

The BSE Auto Index lost 21.74 points (0.45%), to finish 4,843.53. The BSE Metal Index lost 22.29 points (0.24%), to end at 9,415.02.

The BSE clocked a turnover of Rs 3961 crore, compared to Tuesday’s Rs 4565 crore.

Infosys shed 0.3% to Rs 2075. The stock had declined 2.1% to Rs 2081.70 on Tuesday (17 April) after the rupee struck a nine-year high against the US dollar. 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.

At the time of announcing Q4 March 2007 results, Infosys had pointed out that its operating margins would be impacted by about 150-160 basis points (bps) due to rupee inflation and by 300 bps on account of wage inflation. The company plans to compensate the impact through improved utilisations, lower losses in subsidiaries and scaled benefit from selling & general as well as administration expenses.

Tata Steel dropped 3% to Rs 511.60. However, the stock came off the lower level attained on losing as much as 6.1% to Rs 496.35, at the onset of the trading session. A whopping 47.4 lakh shares changed hands in the counter on BSE.

Tata Steel said on Tuesday it will raise Rs 3655 crore ($872 million) from a rights issue, to fund a $12-billion acquisition of Anglo-Dutch steelmaker Corus Group. The Indian steelmaker will offer a rights share at Rs 300 each in 1:5 ratio. Tata Steel also plans to raise Rs 4350 crore from the rights issue of preference shares, the company said. It was also looking at a foreign issue of an equity-related instrument to raise up to $500 million, with an issue of global depositary receipts being an option.

Automobile makers slipped. Bajaj Auto lost 3% to Rs 2471. The stock had surged 4.2% in the past two trading sessions following reports that India will enjoy a healthy monsoon. Tata Motors shed 1.1% to Rs 722.

Cement pivotals slipped on profit-taking. Grasim shed 1.5% to Rs 2336 and Gujarat Ambuja Cements (GACL) shed 0.7% to Rs 112.90. Cement scrips had recovered from a lower level over the past few days on expectations of strong March 2007 quarter results from cement firms. ACC unveils results on 19 April 2007, followed by GACL on 20 April 2007.

ONGC gained 1.6% to Rs 905.50. Recently, the company had unveiled its expansion plans.

PSU banks extended gains, triggered by data showing cooling of inflation for the week ended 31 March 2007. State Bank of India gained nearly 3% to Rs 1037, Andhra Bank rose 5% to Rs 82.75, Corporation Bank rose 3% to Rs 312, Bank of India advanced 2.8% to Rs 188.25, and Punjab National Bank gained 1.9% to Rs 476.90. India's wholesale price index rose 5.74% in the 12 months to 31 March 2007, lower than an increase of 6.39% a week earlier, data showed on Friday (13 April 2007).

HCL Tech jumped 6.6% to Rs 322, after reporting strong Q3 March 2007 numbers on completion of trading on Tuesday. The consolidated net profit as per US GAAP rose 15.9% on a sequential basis to Rs 331.80 crore from Rs 286.20 crore in Q2 December 2006. Revenue rose 7.6% to Rs 1577.10 crore from Rs 1465.10 crore.

Dish TV settled at Rs 102.55 on BSE. The stock debuted at Rs 120, which is also its high so far. Dish TV also hit a low of Rs 100. Volumes in the scrip were a huge 1.88 crore shares on BSE. Dish TV has nearly 2 million subscribers and competes with a joint venture between Tata group and News Corp as well as state-owned Prasar Bharti.

Index heavyweight Reliance Industries rose 0.6% to Rs 1485. The stock hit a high of Rs 1495, which is a lifetime high for the scrip. The stock has surged this month after Chairman Mukesh Ambani had said on Monday that the petrochemicals cycle was yet to peak.

NTPC surged 3% to Rs 161.90. The stock hit a high of Rs 163.55, which is a lifetime high for the scrip. A strong 16.8 lakh shares changed hands in the counter on BSE

Telecom stocks advanced on strong growth in new subscriptions in March 2007. Bharti Airtel rose 1.7% to Rs 813 and Reliance Communications gained 0.5% to Rs 435

Siemens dropped 4% to Rs 1065. Siemens announces Q2 March 2007 results on 23 April 2007.

Metal shares extended gains tracking firm global metal prices. Hindalco gained 1.3% to Rs 145.20, Sterlite Industries rose 2.8% to Rs 522.95 and Hindustan Zinc advanced 4% to Rs 667. Copper, zinc and aluminium futures rose 2.5 - 6% on London Metal Exchange (LME) on Tuesday.

Praj Industries dropped 2.3% to Rs 451.75, even as the company announced a liberal 1:1 bonus during trading hours.

GTL jumped nearly 17% to Rs 163, on rumours that the company will announce a buy-back of shares. As many as 28 lakh shares changed hands in the counter on BSE.

Godavari Fertilisers rose 0.9% to Rs 124. The company reported 44% fall in net profit in the March 2007 quarter, to Rs 6.20 crore (Rs 11.07 crore).

Genus Overseas Electronics surged nearly 3% to Rs 290, after reporting a 58% surge in net profit in the March 2007 quarter at Rs 12.63 crore (Rs 8 crore).

Construction firm Valecha Engineering dropped 1.4% to Rs 228.40, even as the company secured orders worth Rs 100 crore, the new set of contract taking the company's order-book close to Rs 1000 crore.

Infotech Enterprises plunged 5% to Rs 366, after the company today reported a surge in net profit in the March 2007 quarter to Rs 20.90 crore from Rs 10.60 crore. Net sales surged to Rs 96.58 crore from Rs 65.20 crore.

Software services firm Prithvi Information Solutions gained nearly 3% to Rs 293, on reporting 49% growth in net profit in the March 2007 quarter to Rs 26.01 crore from Rs 17.50 crore in the March 2006 quarter. Net sales surged 89% to Rs 259.22 crore from Rs 136.97 crore.

TV Today gained 5% to Rs 147.30, as Reliance Capital announced an open offer worth up to Rs 151 crore to raise its stake in the news broadcaster by up to 20%.

Petron Engineering Construction jumped 5.4% to Rs 148, after the company said on Wednesday it had won a contract worth Rs 37.76 crore from China's Sichuan Fortune Project Management Company.

Alfa Laval India dropped nearly 4% to Rs 944, after its Swedish parent shot down rumours that it would revise upwards the open offer price of Rs 875 per share for raising its stake in the Indian subsidiary. The scrip had spurted 9.3% to Rs 981.60 on Tuesday (17 April).

ICRA lost 2% to Rs 889. The stock had dropped on Tuesday after a solid surge since the debut on Friday (13 April). Pent-up demand for the scrip from the IPO, which was subscribed 75 times, had kept the counter ticking.

Wall Street traded mostly higher on Tuesday, briefly pushing the Dow Jones industrials into record territory, after a rise in home construction and a mild reading on consumer inflation encouraged investors to buy. The Dow traded as high as 12,790.02, passing its closing high of 12,786.64 set on 20 February 2007, and approached its trading high of 12,795.93, attained on the same day. Dow Average settled 52.58 points, or 0.41%, up at 12,773.04. Broader stock indicators were mixed. The Standard & Poor's 500 Index rose 3.01 points, or 0.20%, to finish at 1,471.48, while the Nasdaq Composite Index fell 1.38%, or 0.05%, to 2,516.95.

US March housing stats rose 0.8% -- a feeble rise compared with February's 7.6% advance, but much better than the drop investors expected. Building permits also rose. US stocks have had many tumultuous weeks this year due to worries about the financial troubles of the subprime lending sector spilling into the already sluggish housing market.

The US Labour Department's core consumer price index rose 0.1% in March, less than expected, and alleviating some anxiety about the Federal Reserve's need to raise interest rates to curb costs. The overall consumer price index, which takes into account energy and food, rose 0.6% in March -- the largest increase in 11 months -- and was in line with expectations.

Edelweiss - TCS - big, and looking even bigger; result update Q4FY07; maintain Buy

TCS (TCS IN, INR 1,250, maintain Buy)

Tata Consultancy Services' (TCS) Q4FY07 results were in line with our expectations. Revenues came in at INR 51.5 bn, up 5.9% Q-o-Q, and net profit was at INR 11.7 bn, up 6.2% Q-o-Q. On Y-o-Y basis, revenue and net profit growth stood at 37.9% and 44.9%, respectively.

TCS closed FY07 with revenues of USD 4.3 bn and net income of USD 950 mn, a growth of 41% and 43%, respectively, in USD terms. The company crossed the USD 2 bn and USD 1 bn revenue mark from North America and Europe, respectively, attesting to its scale and geographic spread. TCS' existing realizations have room for expansion.

Recent services such as business intelligence, remote infrastructure management, BPO, and assurance services are seeing strong traction. We expect these services to continue to lead healthy growth in FY08E. We believe that TCS has sufficient levers to sustain margins in FY08E given the continuing trend towards offshore and improving realizations on account of pricing and productivity gains.

Our EPS forecasts of INR 55.4 in FY08 and INR 69.7 in FY09 imply an EPS CAGR of 28.4% over 2007-09. At the CMP of INR 1,250 the stock trades at a P/E of 22.6x and 17.9x for our FY08E and FY09E earnings respectively. We reiterate our 'BUY' recommendation on the stock.

Edelweiss - TCS - big, and looking even bigger; result update Q4FY07; maintain Buy

I-SEC - Automobiles

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I-SEC - Automobiles

Sharekhan High Noon & Commodities & Kotak Derivatives

Sharekhan Highnoon dated April 18, 2007

Sharekhan Commodities Buzz dated April 18, 2007

Sharekhan Eagle Eye (commodities) for April 18, 2007

Kotak - Derivatives: 18 Apr 2007

Kotak Reports - Apr 18

Kotak - Daily Morning Brief - 18 Apr 2007 - HCL (Buy)

Kotak - Market Mornking - 18 Apr 2007

Edelweiss - Daily Market Outlook 18th April, 07

Edelweiss - Daily Market Outlook 18th April, 07

Edelweiss - Daily Trading Note & Anand Rathi - Daily Fundamental Snippets

Edelweiss - Daily Trading Note

Anand Rathi - Daily Fundamental Snippets - Apr 18

Kotak - Indian Bank, HCL Tech, UTI Bank, Tata Steel, Telecom

Kotak Reports

Indian Bank

HCL Tech

UTI Bank

Tata Steel

Telecom

Religare - Daily Market Outlook & Futures

Religare - Daily Market Outlook & Futures

Market may exhibit caution

The market may exhibit cautious trend after taking a dip in yesterday's trades. Also the strengthening rupee against dollar may dampen the market sprit. On the positive side, FII have turned net buyers in the equities in the last few sessions and Asian indices are trading higher in current trades. Among the local indices, the Nifty has a support at 3945 and on the break below 3945 the next support is at 3920, while on the upside the Nifty could move towards the 4055-4075 range. The Sensex has a likely support at 13400 and may face resistance at 13855.

Among US indices Dow closed just below the record high on Tuesday as investors welcomed lower oil prices and strong earnings numbers from Coca-Cola and Johnson & Johnson. While the Dow Jones gained by 53 points to close at 12773, the Nasdaq ended a point lower at 2517.

Indian ADR losers pipped gainers on the US bourses. Patni fell sharply and tumbled over 3% while Satyam, Tata Motors, MTNL, and VSNL declined over 1-2% each, while Infosys and ICICI bank ended with steady gains.

The Nymex light crude oil for May delivery slipped by 51 cents to close at $63.10. In the commodity space, the Comex gold for June series declined $2 to settle at $692.50 a troy ounce.

Intra-day Stock Ideas

NIFTY (3984.95) SUP 3967 RES 4004

BUY CANBK (206)
SL 202 T 214, 216

BUY GAMMONIND (338.8)
SL 334 T 348, 350

BUY SCI (173.5)
SL 169 T 181, 183

SELL COLGATE (348)
@ 352 SL 356 T 342, 340

SELL ROLTA (351.8)
@ 355, 359 T 341, 339

STRATEGY INPUTS FOR THE DAY

Encouragement for bulls, but bear in mind profit booking

There are high spots in all of our lives and most of them have come about through encouragement from someone else.

Things are looking encouraging for the bulls as the results so far have been fairly good though the IT companies' earnings have lacked the usual spark. That may well have something to do with the rupee's remarkable appreciation against the dollar. Still, the numbers from software firms are not bad by any means. The outlook also appears to be strong despite currency fluctuations and the US slowdown. Talking about IT results, HCL Tech has surprised the market with much improved show in the third quarter. The stock may see some action on the up side.

Meanwhile, the rupee closed at 41.97 to the dollar yesterday after touching an intra-day high of 41.62. It may gain some more ground before the central bank steps in to check the rally. Some experts feel the Indian currency will eventually slide to 43 in the medium term. Right now though, exporters are feeling the heat while importers are rejoicing.

On to the markets now. We expect a higher opening, buoyed by the gains in the US blue chips overnight and firm trend in the Asian markets. But, as the bulls found out to their dismay, there could be selling pressure at higher levels. Apart from the barrage of corporate results, the market is awaiting the outcome of the RBI's policy meeting on April 24 as well as the weekly inflation data.

The IPO of Bhagwati Banquets & Hotels Ltd. opens today. Hilton Metal Forgings is entering capital market with an IPO of 54.5 lakh equity shares of Rs 10 each at a price Rs 70 per equity share. The IPO of Fortis Healthcare has been subscribed by just 0.7 times. The issue closed on April 20.

Shares of Dish TV, the DTH arm of Zee Entertainment will get listed on the bourses today. Watch out for TV Today as well as Reliance Capital has made an open offer for an additional 20% in the company at Rs30 per share. TV Today closed at Rs140 yesterday. Pritish Nandy too may attract some attention amid reports that it is looking to offload a part of its stake to PE funds.

There is a buzz in the market that Idea Cellular may be targeting BPL Mobile, which operates in the lucrative Mumbai circle. Pioneer Embroideries may get a large order from retail giant Wal-Mart, according to market grapevine. Tata Steel will also be in focus after announcing the funding mix for the acquisition of Corus. CESC is another stock to keep an eye on as it has declared a share swap ratio for the merger with Spencer's Retail parent.

Alfa Laval is expected to be in the limelight amid news that its Swedish parent could hike the open offer price, though Alfa Laval AB has denied such a move. Praj Industries will announce a bonus issue and results today.

FIIs were net buyers of Rs3.05bn (provisional) in the cash segment yesterday while the domestic institutional investors (including Mutual Funds) offloaded stocks worth Rs3.1bn, according to the NSE. The data is provisional in nature and is subject to changes. In the F&O space, FIIs pumped in Rs6.56bn yesterday. As per SEBI data, FIIs were net buyers of Rs7.88bn on Monday. Mutual Funds poured in Rs2.05bn on the same day.

US stocks closed mixed on Tuesday. The Dow Jones Industrial Average almost made a new record, spurred by better-than-expected economic and earnings reports. The Standard & Poor's 500 Index closed at the highest level since September 2000.

The Dow gained 52.58, or 0.4%, to 12,773.04. The blue chip benchmark rose as high as 12,790.02, above its all- time closing high of 12,786.64 on Feb. 20. Yesterday, the Dow erased losses spurred by the Feb. 27 sell-off in global equities, one day after the S&P 500 did the same.

The S&P 500 climbed 3.01, or 0.2%, to 1471.48, bringing its advance this month to 3.6%. The Nasdaq Composite Index fell 1.38, or 0.1%, to 2516.95.

Treasury prices rose, lowering the corresponding yields. The dollar fell versus the euro, yen and sterling - which hit a 15-year record versus the greenback. Oil prices slipped.

European shares held steady. The pan-European Dow Jones Stoxx 600 index finished a fraction of a percentage point higher at 387.86.

The UK's FTSE 100 was down 0.3% at 6,497.80 as the pound rose by over $2 for the first time in 15 years against the greenback after stronger-than-expected inflation data, potentially forcing the Bank of England's hand on interest rates.

The German DAX Xetra 30 rose 0.2% to 7,348.83, while the French CAC-40 lost 0.1% to 5,858.14.

Mexican and Brazilian stocks closed lower. Mexico's IPC index fell 120 points, or 0.4%, to 29,598.99. In Sao Paulo, the Bovespa, which also climbed earlier in the session, fell 166 points, or 0.3%, to end at 48,755.73.

Asian markets are mixed. The Nikkei in Tokyo was up 79 points at 17,606 while the Hang Seng in Hong Kong declined by 27 points to 20,761. The Kospi in Seoul rose 6 points to 1535 and the Straits Times in Singapore shed 3 points to 3411.

HOW MARKET FARED

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Bulls take a pause

Bulls took a breather after rallying in previous couple of trading sessions. After opening in green markets immediately pared its gains as profit booking was witnessed all over the bourses; except for Banking and Oil & Gas index all the key sectoral indices lost ground. The Technology index was the major loser other like Metal and FMCG index followed suit. Even Mid-Cap and the small cap index fell over 0.5% each dragging the NSE Nifty below the 4000mark.

Satyam Computer, SAIL and Tata Motors were the major losers, however HPCL, BPCL and ACC were the major gainers among the 50-scrip’s of NSE Nifty. Finally, the 30-share benchmark Sensex fell 88 points to close at 13607. NSE Nifty was down 28 points to close at 3984.

UTI Bank edged lower by 0.9% to Rs465. The Company announced its Q4 result with net profit at Rs2.12bn (up 39%) and revenue at Rs16.68bn (up 57%) and would pay Rs4.5 per share as dividend. The scrip touched an intra-day high of Rs475 and a low of Rs463 and recorded volumes of over 16,00,000 shares on NSE.

Petronet LNG fell 1.2% to Rs45. The company announced yearly result with net income at Rs3.13bn (up 60%) and Sales at RsRs55.45bn (up 44%). The scrip touched an intra-day high of Rs49 and a low of Rs45 and recorded volumes of over 51,00,000 shares on NSE.

JSW Steel slipped by 3.3% to Rs559. The company announced that they have restarted Furnace on April 12, it had shutdown Furnace after fire for almost 2 months. The scrip touched an intra-day high of Rs584 and a low of Rs555 and recorded volumes of over 7,00,000 shares on NSE.

Newly listed scrip ICRA was the show stopper the scrip witnessed huge intra-day gyrations. The scrip dropped by to a low of Rs880 after rallying over 17% hitting an intra-day high of Rs1135 and recorded volumes of over 1,00,00,000 shares on NSE.

Sunil Hitech gained 1.6% to Rs98 after the company secured orders worth Rs8.2bn. The scrip touched an intra-day high of Rs102 and a low of Rs92 and recorded volumes of over 2,00,000 shares on NSE.

Technology stocks were the worst hit sector as rupee strengthened against the dollar. Satyam Computer declined by over 5% to Rs455, Wipro was down by over 2% to Rs573 and Infosys dropped 2.4% to Rs2082. Polaris, Moser Baer and NIIT Ltd were the major losers among the Midp-Cap stocks.

Metal stocks lost their shine on back of profit booking. SAIL slipped by 3.2% to Rs123, Sterlite Industries dropped by 3.5% to Rs507, Tata Steel fell 1.2% to Rs527 and Hindustan Zinc was down 3.2% to Rs639.

Pharma stocks also ended on the receiving end. Cipla slipped 2.5% to Rs229, Cadila down 1.3% to Rs336, Lupin lost 1.5% to Rs657 and Wockhardt dropped 2% to Rs415.

Cement stocks continued its upward trend. ACC advanced by 2.8% to Rs807, Gujarat Ambuja gained by 1.4% to Rs113 and Mangalam Cement added 0.4% to Rs148.

Insider Trades:

XL Telecom Limited: Mr. Dinesh Kumar, Managing Director has purchased from open market 29610 equity shares of XL Telecom Limited on 5th April, 2007.

Titan Industries Ltd: Mr. Rakesh Jhunjhunwala and persons acting in concert with him has purchased from open market 50000 equity shares of Titan Industries Ltd on 12th April, 2007.

Market Volumes:

The turnover on NSE was up by 7.3% to Rs96.11bn. BSE Technology index was the major loser and lost 1.88%. BSE Metal index (down 1.29%), BSE Consumer Durable index (down 1.15%), BSE FMCG index (down 1.10%) and BSE Capital Good index (down 0.58%) were among the other major losers.

Volume Toppers:

SAIL, Satyam Computer, Dabur Pharma, Idea, Petronet LNG, RNRL, Bank of India, IDFC, India Cement, Orbit Corp, R Com, Reliance Industries, Essar Oil, PFC, Ashok Leyland and Ashok Leyland.

Lower Circuit:

Dhanlakshmi Bank, KEW Industries, Mefcom Agro, Godrej Industries and BF Utilities.

Results Today:

Praj Industries, Plethico Pharma, Genus Overseas, Greaves Cotton, Infotech Enterprises, Prithvi Information Solutions, Sujana Metal and South East Asia Marine.

Delivery Delight:

Alfa-Laval, ACC, Bharat Forge, Bharati Shipyard, Bombay Dyeing, Dabur India, Glenmark Pharmaceuticals, Gujarat Ambuja Cements, HDFC Bank, HCC, ICICI Bank, Punj Lloyd and Reliance Industries.

Abnormal Delivery:

Colgate, Steel Authority of India Ltd, Dr Reddys Laboratories Ltd, Indian Petrochemicals Corporation Ltd, Andhra Bank and Thermax Ltd.

Stock Futures with Largest Increases in OI:

UTI Bank, Bank of India, Satyam Comp, Cummins, Bombay Dyeing, Bajaj Hind, Ultra Tech Cement, GE Ship, PFC and Chennai Petroleum.

Stock Futures with Largest Decreases in OI:

IFCI, Sun TV, Divis Labs, Syndicate Bank, Guj Ambuja Cement, GMR Infra, IOB, Punj Lloyd and Bajaj Auto.

Brokers Recommendation:

TCS – Overweight from JP Morgan with target of Rs1650.

Long Term investment:

Patel Engineering

Results Corner:

BEL full year Profit at Rs7.1bn (up 22%) and sales at Rs39.6bn (up 12%)

HCL Tech Q4 profit at Rs2.39bn (up 77%), net sales at Rs9.59bn (up 35%)

UTI Bank Q4 profit at Rs2.12bn (up 39%), total income at Rs16.68bn (up 57%) and to pay Rs4.5 per share as dividend

Major News Headlines:

Tata Steel make a rights offer at Rs300 each; to sell 1 share for every 5 shares held to fund Corus acquisition

CESC to merge with holding company of Spencer’s retail; to give 1 share for every 1.98 shares of Spencer’s Retail

JSW Steel restarts furnace on April 12; it had shutdown the furnace after fire for almost 2 months

Sunil Hitech gets orders worth Rs8.2bn

Gemini Communication bags order worth Rs576mn

Alfa-Laval won't increase Offer Price for Indian unit's shares, buyback offer opens on April 19 and ends on May 8.

ENAM - UTI Bank, HCL Tech, Tata Steel

ENAM Reports

UTI Bank

HCL Tech

Tata Steel

Uptrend may resume on strong FII inflow

Firm global markets, and strong FII inflow may trigger recovery on the bourses after Tuesday’s slide. After trading hours on Tuesday (17 April), HCL Tech reported strong Q3 March 2007 results. There is no big ticket Q4 result today.

Stock specific activity is likely to rule the roost on the bourses in the near term as the earnings reporting season has just begun.

FII inflow has picked after Infosys gave strong guidance for FY 2008 in dollar terms putting to rest concerns of the impact of a slowdown in the US on India's IT sector. FIIs were net buyers to the tune of Rs 788.30 crore on Monday 16 April, the day when Sensex had surged 312 points in global rally. FII inflow by the first few days of April 2007 reached Rs 3155.80 crore (till 16 April).

As per provisional data, FIIs were net buyers to the tune of Rs 305 crore on Tuesday 17 April, the day when Sensex had lost 89 points due to fall in IT stocks caused by rupee’s surge. The provisional data also showed that domestic institutional investors were net sellers to the tune of Rs 310 crore on that day.

Asia-Pacific stocks were mostly in the green on Wednesday (18 February) following favourable US economic data. Key benchmark indices in Japan, Australia, South Korea and Taiwan were up by between 0.34% to 1%.

Wall Street traded mostly higher Tuesday, briefly pushing the Dow Jones industrials into record territory after a rise in home construction and a mild reading on consumer inflation encouraged investors to buy. The Dow traded as high as 12,790.02, passing its closing high of 12,786.64 set Feb. 20, and approached its trading high of 12,795.93, reached the same day. It settled 52.58, or 0.41 percent up at 12,773.04. Broader stock indicators were mixed. The Standard & Poor's 500 index rose 3.01, or 0.20 percent, to 1,471.48, while the Nasdaq composite index fell 1.38, or 0.05 percent, to 2,516.95.

US March housing starts rose 0.8 percent -- a feeble rise compared with February's 7.6 percent advance, but much better than the drop investors expected. Building permits also rose. US stocks have had many tumultuous weeks this year due to worries about the financial troubles of the subprime lending sector spilling into the already sluggish housing market.

The Labor Department's core consumer price index rose 0.1 percent in March, less than expected, and alleviating some anxiety about the Federal Reserve's need to raise interest rates to curb costs. The overall consumer price index, which takes into account energy and food, rose 0.6 percent in March -- the largest increase in 11 months -- and was in line with expectations.

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.

Emkay - Morning Notes, TCS

Emkay - Morning Notes, TCS

Anand Rathi - Daily Technical Note & Anand Rathi Daily Strategist & Anagram Daily Call

Nifty and Sensex have exhibited a downward bar reversal.

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 bearish candlestick.

CNX IT has lost ground.

In the Punter's zone we have a BUY in Crompton Greaves & SELL in State Bank and TCS.

In the Technical call section, we have a BUY in Glenmark Pharma & SELL in Tata Motors and Tata Steel.

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The NIFTY futures saw a increase in OI 3.40% with prices closing down indicating that lot of shorts positions were built. The discount in nifty futures decreased indicating that bears aggressively covered & the bulls got them cornered , but at the higher end the market could not hold its weight and tumbled as profits were taken .We feel that till the market sustains above 3925 levels we shall see aggressive short covering and fresh money coming in the market .The FIIs were buyers in futures to the tune of 656 crores of which they bought nifty futures alone to the tune of 398 crs and options worth 362 crs , while they sold stock futures to the tune of 106 crores .The PCR is in a range of 1.12 indicating the trend in the market. .The volatility has remained in the range of 23.90 levels indicating the feel in the market.

Among the Big guns, ONGC saw a loss of 1.01 OI with prices going down by 0.73% indicating that fresh shorts being built in the counter along with fresh genuine profit booking while RELIANCE lost OI and the price was moving up indicating short covering at the historical high in the counter.

On the TECH front, INFOSYSTCH, SATYAM, TCS & WIPRO saw decrease in prices showing weakness in the markets, and forced long positions to sell with some fresh shorts formed there. This meant that TCS results were already taken into account by players.

On the other hand the BANKING counters we saw open interest gaining with loss in value in P.S.U majors. Also we saw the genuine selling coming in P.S.U banks like S.B.I & P.N.B and across the board prices loosing value in the sector .The rest like ICICI BANK & HDFC BANK saw short positions being cut and prices remaining positive.

In the METALS there across the board selling or profit booking be it TATA STEEL , HINDALCO , NALCO , JSW STEEL OR STERLITE after the sector had a massive positive run over the last couple of days.

Considering the market data, it suggests the most awaited expected trend has been curtailed by profit booking today and finally set the decorum in the week for the settlement of un-certainty, for the same it is advisable to traders to have strict stop losses.

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Anagram Daily Call

Motilal Oswal - Derivatives, Daily Margin, Corporate News, Market Diary, Market Action - Apr 18

Motilal Oswal

Derivatives

Daily Margin

Corporate News

Market Diary

Market Action

J P Morgan - Jet Airways & Moser Baer & SSKI - Dish TV: 'Sky' can limit

J P Morgan Reports

Jet Airways

Moser Baer

SSKI - Dish TV: 'Sky' can limit

Q4FY2007 Capital Goods earnings preview: Sharekhan Special dated April 17, 2007

Q4FY2007 Capital Goods earnings preview

The Working Group on Power for the 11th Five-Year Plan has envisaged an addition of around 69,000 megawatt (MW) of power generation capacity during the plan period (FY2007-12) and an additional capacity of 86,500MW during the 12th Five-Year Plan. Looking at the current status of the 10th Five-Year Plan's (FY2002-07) capacity addition programme, these targets looks quite aggressive since the government had planned a capacity addition of 41,110MW during the 10th Plan period whereas the actual achievement is likely to be around 25,000MW (only 61% of the target). Out of this about 17,995MW of capacity had already been commissioned till December 31, 2006. However the fact that a total of 31,345MW of capacity is already under construction gives the panel's plan a lot of credibility.

Looking at the huge power generation capacity addition programme of the government (totaling to around 155,000MW in the next ten years), the order flow momentum for the capital goods companies engaged in the power sector, such as Bharat Heavy Electricals Ltd (BHEL), Crompton Greaves, Bharat Bijlee, Indo Tech Transformers, KEI Industries and Genus Overseas, is expected to be robust. Going by the recently announced provisional results of BHEL, wherein its order flow for the full year ended March 2007 registered an increase of 88% to Rs35,633 crore and the order backlog stood at an all-time high of Rs55,000 crore, the time ahead for power ancillary companies appears even more promising.

Q4FY2007 Capital Goods earnings preview: Sharekhan Special dated April 17, 2007

Sharekhan Investor's Eye dated April 17, 2007

SHAREKHAN SPECIAL

Q4FY2007 Capital Goods earnings preview

The Working Group on Power for the 11th Five-Year Plan has envisaged an addition of around 69,000 megawatt (MW) of power generation capacity during the plan period (FY2007-12) and an additional capacity of 86,500MW during the 12th Five-Year Plan. Looking at the current status of the 10th Five-Year Plan’s (FY2002-07) capacity addition programme, these targets looks quite aggressive since the government had planned a capacity addition of 41,110MW during the 10th Plan period whereas the actual achievement is likely to be around 25,000MW (only 61% of the target). Out of this about 17,995MW of capacity had already been commissioned till December 31, 2006. However the fact that a total of 31,345MW of capacity is already under construction gives the panel's plan a lot of credibility.

Looking at the huge power generation capacity addition programme of the government (totaling to around 155,000MW in the next ten years), the order flow momentum for the capital goods companies engaged in the power sector, such as Bharat Heavy Electricals Ltd (BHEL), Crompton Greaves, Bharat Bijlee, Indo Tech Transformers, KEI Industries and Genus Overseas, is expected to be robust. Going by the recently announced provisional results of BHEL, wherein its order flow for the full year ended March 2007 registered an increase of 88% to Rs35,633 crore and the order backlog stood at an all-time high of Rs55,000 crore, the time ahead for power ancillary companies appears even more promising.

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STOCK UPDATE

Tata Consultancy Services
Cluster: Evergreen
Recommendation: Buy
Price target: Rs1,508
Current market price: Rs1,250

Disappointing performance

Result highlights

• 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 during Q4FY2007. The sequential revenue growth was largely driven by a 6.42% growth in the volumes and a cummulative growth of 1.33% in the billing rates (0.89%) and employee productivity (0.44%). On the other hand, the appreciation of the rupee adversely affected the revenue growth by 1.87% sequentially.
• The earnings before interest and tax (EBIT) margin declined by 47 basis points to 25.6% sequentially, largely due to the adverse impact of the rupee's appreciation.
• The other income stood at Rs89.8 crore and included a one-time extraordinary income of Rs66.3 crore from the sale of the 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 estimate of around Rs1,185 crore.
• In terms of the outlook, the company doesn't give any specific growth guidance. However, it has indicated that the demand environment continues to be robust and the gross employee addition would be higher than 32,462 reported in FY2007 (12,000 campus offers have been made). The TCS management also expects to maintain the margins around the level of 25% reported in FY2007, in spite of the aggressive salary hikes in FY2008 (13-15% for the offshore employees and 3-5% for the onsite employees).
• The key operational highlights for Q4 are: an addition of 43 clients; a healthy sequential growth of 9.3% in revenues from the Top 10 clients; the attrition rate in the information technology service sector at a comfortable level of 10.6%; closure of two large deals worth over $50 million each and one deal of $35 million; and a healthy pipeline of large deals. On the flip side, there has been a slowdown in the sequential growth of revenues from the banking, financial services and insurance (BFSI) and manufacturing industry verticals.
• Given the lower than expected performance and the steep appreciation in the rupee, we have revised down our FY2008 earnings estimate by 0.5% and have also introduced the FY2009 estimates. We maintain the Buy call on the stock with a price target of Rs1,508 (around 23x FY2009 earnings per share).

UTI Bank
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs575
Current market price: Rs465

Robust growth continues

Result highlights

• UTI Bank’s Q4FY2007 profit after tax (PAT) was better than our expectations at Rs211.9 crore, up 39.6% year on year (yoy) compared to our estimate of Rs186.2 crore mainly due to a higher than expected net income and lower operating expenses during the quarter.
• The net interest income (NII) was up by 48.4% to Rs464.2 crore compared to our estimate of Rs435.9 crore. UTI Bank's reported net interest margins (NIMs) expanded by 10 basis points yoy and by 6 basis points quarter on quarter (qoq). However the same included a one-time cash reserve ratio (CRR) interest of around Rs22 crore received during the quarter otherwise the NIMs would have had a downward bias on a quarter-on-quarter (q-o-q) basis.
• The non-interest income was up 32% yoy and 8% qoq to Rs301.1 crore and the fee income growth remained robust at 58.8% yoy and 29% qoq. However the treasury income declined by 34.3% yoy and 46% qoq.
• The operating expenses grew in line with the overall business growth; however the provisions were up 56.3% yoy and 40% qoq mainly due to the increased provisioning requirement on the standard assets for Rs68.1 crore, which is a one-off item.
• Although UTI Bank has grown at a robust pace in the last couple of years there are no visible signs in the deterioration of its asset quality yet. The net non-performing asset (NPA) level (as a percentage of its net customer assets) improved to 0.61% from 0.68% in Q3FY2007.
• Currently the bank’s capital adequacy ratio (CAR) is at 11.57% with Tier-I at 6.42%. The bank has also aggressively raised its hybrid capital and has left itself very little headroom to grow its balance sheet. The bank plans to come out with a follow-on offer in FY2008 to boost its CAR. We have factored in an equity dilution of 3.6 crore shares (12.8%) of the pre-issue equity capital at an issue price of Rs500 per share.
• The bank opened 80 new branches during the quarter. Its deposits grew by 46.5% to Rs58,785.6 crore of which savings and current deposits grew by 50.3% and 41.8% respectively. The current and savings account (CASA) ratio remained stable on a year-on-year (y-o-y) basis but improved on a q-o-q basis to 40% from 37.1% reported in Q3FY2007 mainly due to an increase in the current account deposits, which as a proportion of deposits increased from 16.6% in Q3FY2007 to 19.2% in Q4FY2007. Advances reported a strong growth of 65.3% to Rs36,876 crore of which the retail advances were up by 37.6% to Rs8,928 crore. However on a q-o-q basis the retail advances have declined by 2.7% mainly due to a sell down in the personal loan portfolio.
• The actual PAT for FY2007 was 4% above our estimates at Rs659 crore and we have upgraded our FY2008 numbers by 4.8% to Rs851.1 crore mainly on account of lower operating expenses estimated for FY2008. At the current market price of Rs465 the stock is quoting at 17.4x its FY2008E earnings per share (EPS), 8.5x its FY2008E pre-provisioning profits (PPP) and 2.5x its FY2008E book value (BV). We feel the dilution would be book value accretive and maintain our Buy recommendation on the stock with a price target of Rs575.

HCL Technologies
Cluster: Apple Green
Recommendation: Buy
Price target: Rs410
Current market price: Rs301

Q3FY2007—first cut analysis

Result highlights

• HCL Technologies has reported a revenue growth of 7.6% quarter on quarter (qoq) and 39% year on year (yoy) to Rs1,577.1 crore for the third quarter ended March 2007. This is the third consecutive quarter of close to double-digit sequential growth in the revenues (in dollar terms) and far ahead of the street expectations. The sequential growth was contributed by a 16.4% growth in the business process outsourcing (BPO) revenues. On the other hand, the infrastructure management service (IMS) and software services businesses grew at a relatively lower rate of 6.4% and 6.5% respectively, on a sequential basis.
• The earnings before interest, tax, depreciation and amortisation (EBITDA) margins improved by 115 basis points to 23.3% on a sequential basis, despite the adverse impact of the steep appreciation of the rupee (1.6% appreciation in the average realised exchange rate against the US dollar). The sequential improvement in the margins was largely aided by the cumulative impact of better realisations (including non-effort-based gains from the output-based priced projects), higher utilisation (especially in the BPO business) and a 70-basis-point saving in the selling, general and administration (SG&A) cost as a percentage of sales.
• In terms of the segments, the EBITDA margins of all the three business lines improved on a sequential basis. The BPO business reported a second consecutive quarter of robust improvement in its margins, up by 360 basis points to 26.5%. The software services and IMS businesses reported an 85-basis-point and a 13-basis-point improvement respectively.
• The earnings grew at a robust rate of 15.9% qoq and 72.1% yoy to Rs331.8 crore (ahead of our expectations of Rs290 crore and the consensus estimates of a flat or negative growth sequentially, especially after the higher base resulting from the robust performance in the previous two quarters). The growth in the earnings was also aided by the foreign exchange (forex) gains of Rs41.8 crore on the open forward contracts, up from Rs34.7 crore reported in Q2FY2007.
• In terms of the operational highlights, the ramp-up in the large deals is beginning to make a material impact on the overall performance. Moreover, the company continues to bag new multi-million, multi-year, multi-services deals and has announced six new deals in Q3--five in the range of $25-50 million each and one over $50 million.
• Given the company's higher-than-expected performance for the past three consecutive quarters and the continued traction in the intake of large deals, we would upgrade our estimates for FY2007 and FY2008 and introduce FY2009 estimates in the detailed result analysis report. At the current market price the stock trades at 18x FY2007 and 14.5x FY2008 estimated earnings. We maintain our Buy recommendation on the stock with a price target of Rs410.

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MUTUAL FUND: INDUSTRY UPDATE

Equity AUMs rise in line with market movement

The AUM for equity funds rose by 1.3% to Rs139,147 crore in March 2007. The rise in the AUM was more or less in line with the market movement of 1%.

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Sharekhan Investor's Eye dated April 17, 2007