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Wednesday, April 25, 2007
Sharekhan Investor's Eye dated April 25, 2007
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs369
Ranbaxy receives 180-day exclusivity for Pravastatin 80mg
Key points
- Ranbaxy Laboratories (Ranbaxy) has received the US Food and Drug Administration’s (USFDA) approval to manufacture and market Pravastatin sodium tablets (Pravastatin) of strengths 10mg, 20mg, 40mg and 80mg, with 180-day market exclusivity in the US healthcare system for the 80mg strength.
- Pravastatin is the generic version of Bristol Myer Squibb’s Pravachol. The product lost patent protection in April 2006. The total annual market sales for all strengths of Pravastatin were $1.19 billion. The annual sales for the 80mg strength alone stood at $209 million.
- We believe the launch of Pravastatin will generate $45.6 million in revenues and $17.2 million in profits in CY2007E, yielding incremental earnings of Rs1.8 per share for Ranbaxy. This implies a potential price upside of approximately Rs40 from the current levels. We maintain our Buy recommendation on Ranbaxy with a price target of Rs558.
Elder Pharmaceuticals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs508
Current market price: Rs404
Another strong quarter
Result highlights
- Elder Pharmaceuticals (Elder) continued its strong performance during the fourth quarter of FY2007. The company’s net sales rose by 26.6% to Rs118.2 crore in Q4FY2007, on the back of a steady momentum in its core brands, a ramp-up in the sales of the Fairone brand due to the launch of the product in south India and the growing revenues from the in-licenced portfolio. The sales were in line with our estimate.
- Elder reported a 65-basis-point drop in its operating profit margin (OPM) to 19.6% during the quarter, on account of a 35.8% rise in the other expenditure and a 29.7% increase in the staff cost. The other expenditure was higher on account of the higher selling and promotional expenses incurred for its new launches.
- Consequently, the company’s operating profit rose by 25.4% to Rs23.7 crore in Q4FY2007.
- Despite a 26.6% drop in the other income, and an increase in the interest and depreciation costs, Elder’s net profit grew by 17.6% to Rs15.0 crore. The net profit was in line with our estimate.
- For FY2007, Elder’s revenues grew by 26.1% to Rs447.3 crore. The OPM expanded by 190 basis points to 19%, led by an improvement in the raw material cost, causing the operating profit to rise by 40% to Rs84.8 crore. Despite the increases in the depreciation and interest costs, the net profit showed a robust growth of 54.8% to Rs56.8 crore in FY2007. The net profit growth was aided by the sharp drop in the tax incidence (due to the shift of manufacturing to tax-free zones).
- In view of its strong growth potential, we remain positive on Elder’s future growth prospects. At the current market price of Rs404, the stock is quoting at 10.0x its estimated FY2008 earnings. We maintain our Buy recommendation on the stock with a price target of Rs508.
Maruti Udyog
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,050
Current market price: Rs790
Profits impacted due to higher costs
Result highlights
- Maruti Udyog Ltd's (MUL) Q4FY2007 results are ahead of our expectations on the profits front, but below expectations on the operating margins front.
- The net sales for the quarter marked a growth of 35.4% year on year (yoy) led by a volume growth of 30% and a realisation growth of 4.5%.
- On account of higher raw material prices, the losses at the new Manesar plant and higher power and fuel expenses, the operating margins for the quarter declined by 250 basis points to 12.4%. For the quarter under review, the Manesar plant recorded a loss of Rs58.5 crore at the net level.
- However, a higher other income of Rs205 crore and stable depreciation costs saw the company post a net profit growth of 24% to Rs448.6 crore.
- For the year FY2007, the volume growth was 20.1% yoy. The total income grew by 22% to Rs14,654 crore. The operating profit margin (OPM) for the year was stable at 13.6% as compared to 13.5% in FY2006. The profit after tax (PAT) for the year was Rs1,562 crore, registering a growth of 30%.
- The sales volume for H1FY2007 was very low. MUL launched three new products in Q4FY2007. Hence, we do not expect MUL to witness a sharp slowdown in the growth in FY2008. The profitability could be impacted due to rising raw material prices and higher expenditure on account of the new Manesar plant.
- Considering MUL's dominant position in the Indian car market, Suzuki's plans of making India its hub for small cars, and potential of exports, which shall commence in a big way starting FY2009, we maintain our positive view of the company. At the current market price of Rs790, the stock is quoting at 10.7x its FY2009E earnings. We maintain our Buy recommendation on the stock with a price target of Rs1,050.
Tata Tea
Cluster: Apple Green
Recommendation: Buy
Price target: Under review
Current market price: Rs774
Upside from stake in Glac�au
According to Reuters, Coca-Cola Co is in talks to acquire all or part of the vitamin water maker Energy Brands Inc (EBI), valuing the company at about $3 billion. It may be recalled that Tata Tea Ltd (TTL) and Tata Sons Ltd (TSL) have together acquired a 30% stake in EBI for $677 million or Rs3,110 crore, ie at a valuation of $2.2 billion.
SECTOR UPDATE
Information Technology
Rupee pangs
For the front-line information technology (IT) companies, it is likely to be a tough year in terms of margin pressure due to the cumulative impact of wage inflation, higher visa costs and the appreciation of the rupee. Given the tightening supply of quality manpower, the salary hikes are indicated to be aggressive this year too. The average hikes are estimated to be in the range of 13-15% for offshore employees and 4-5% for the onsite workforce. This would translate into an adverse impact of 250-350 basis points on the operating margins. The abnormally high demand for visas this year (application window was closed on the first day itself) would result in higher visa costs.
To factor in a much higher than expected appreciation in the rupee, we have revised downwards the earnings estimates and accordingly the target prices of the front-line IT service companies.
VIEWPOINT
Allcargo Global Logistics
Interesting times aheadAllcargo Global Logistics (Allcargo) had hosted an analyst meet on Tuesday (April 24, 2007) to discuss its Q1CY2007 performance. We attended the same and present the key takeaways.
Sharekhan Investor's Eye dated April 25, 2007
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Good Evening - Apr 25 2007
Key indices were down marginally amid choppy trade as investors booked profits at every rise ahead of RBI's monetary policy announcement around noon. The RBI is expected to hold rates steady in its annual monetary policy meet as the current cycle of rate hikes has not completely seeped into the economy. However, some investors are worried that a rise in inflation rate to 6% again may force the central bank's hand otherwise. At 10:16AM, Sensex was 13939.83, up 11.50 points or 0.1%. Nifty was at 4091.10, up 6.00 points or 0.1%. The CNX Midcap and S&P CNX 500 indices were nearly flat. On the BSE, there were 659 advances and 375 declines in the morning session. The biggest Nifty gainers were Zee Entertainment Enterprises, up 1.8% at Rs 278, Tata Motors, up 1.7% at Rs 731, and Suzlon Energy, up 1.4% at Rs 1,161. Tata Motors gained on a report the company may set up a car unit in Egypt. Maruti Udyog was up 1.1% at Rs 775 ahead of its Jan-Mar earnings, which will be detailed today. The company's net profit for the fourth quarter is seen growing 18% to Rs 4.28 bn. Among losers, Siemens India was down 2.5% at Rs 1,038, and BHEL fell 1.2% to Rs 2,509. Siemens fell after it reported lower-thanexpected net profit in the quarter ended March. The company's second quarter net profit fell 8% on year to Rs 1.08 bn. HPCL and BPCL were down 1% each as crude oil prices Monday gained 3% on New York Mercantile Exchange. Sesa Goa shares were down 2.2% at Rs 1,702.85 despite reports of U.K.-based Vedanta acquiring Mitsui's 51% stake in the company for $981 mn (Rs 41 bn). Tata Motors was up 2.2% at Rs 734 on report the company is planning to set up a car making unit in Egypt. In the mid trading session, indices rose 1% led by gains in bank shares after the Reserve Bank of India today left key rates unchanged at its annual monetary policy review. Key indices were up 0.4% ahead of the policy. At around 12.10PM, Sensex was at 14053.36, up 125.03 points or 0.9%. Nifty was at 4126.80, up 41.70 points or 1.0%. Bank shares surged 6% after the Reserve Bank of India today left key rates unchanged and reduced risk weight on various small loans. PNB, up 4.5% at Rs 495, was the top Nifty gainer. SBI rose 4% to Rs 1,102 and ICICI Bank was up 3% at Rs 940. Oriental Bank of Commerce rose 7% and State bank of India was up 6.5%. CNX Bank Nifty was up 3%. BHEL, down 2.5% at Rs 2,477, was the worst hit on Nifty. Shares of automobile makers surged 2-5% after the Reserve Bank of India today kept key interest rates unchanged, which eased fears of further slowdown in sales volume due to higher financing costs. Construction shares were mixed after Reserve Bank of India today left its key rates unchanged in the monetary and credit policy for 2007-08 (Apr-Mar). However, real estate shares surged 2-4%. Maruti No. of Scrips Value (Crs.) Advances 512 7884 Declines 531 2727 Unchanged 29 43 Total 1072 10654 Udyog was off the day's highs after the company reported Jan-Mar net profit at Rs 4.48 bn against street expectations of Rs 4.28 bn. Key indices ended over 1% higher led by gains in bank shares after Reserve Bank of India kept key rates unchanged at its Annual Policy statement for 2007-08 (Apr-Mar). Despite a poor start and bouts of profit-booking in early trade, Sensex and Nifty gained strength towards noon ahead of the RBI policy. "Expect the unexpected from the RBI. The market rallied as interest rates have a linkage effect. Other sectors like capital goods, real estate and auto also gained because of this. However, the central bank said it will keep a close eye on inflation and money supply. Sensex ended at 14136.72, up 208.39 points or 1.5% from Monday, after touching a low of 13850.07 and a high of 14197.32 points intraday. The Nifty closed at 4141.80, up 56.70 points, or 1.4%. It moved between a low of 4057.70 and a high of 4162.15 points during the session. The Sensex closed above the 14000-level for the first time since Feb 22, while the Nifty ended above 4100 for first time since Feb 20. The turnover on BSE and NSE combined was Rs 151 bn, up 35% from Monday. The CNX Midcap Index ended up 1%, while the S&P CNX 500 Index rose 1.2%. Bank shares surged on value buying after RBI kept interest rates steady. SBI rose 7.4% at Rs 1,139, while PNB gained 7% at Rs 507. The CNX Bank Nifty ended 4.7% up. HDFC Bank ended at Rs 1,014, up 2.7%, ahead of its Jan-Mar earnings expected later today. The bank is seen reporting a net profit of 3.14 bn, up 195% on year. Zee Entertainment ended up 7.8% at Rs 295 on value buying after robust Jan-Mar results. Maruti Udyog ended at Rs 796, up 3.8%, after reporting March quarter earnings that exceeded analysts' expectations. Siemens, which opened weak on disappointing earnings reported late Monday, gained on value buying as brokerages have upgraded the stock. The worst-hit among Nifty stocks were MTNL, down 7.2% at Rs 150, Wipro, down 2.2% at Rs 555, and TCS, down 1.7% at Rs 1,226. MTNL shares fell, as its Jan-Mar net earnings fell short of analysts' expectations. The company's net profit rose 47% to Rs 2.06 bn, against expectations of a 15% rise, driven by other income. IT shares slipped today on concerns that overseas revenue will be hit if the rupee continues to strengthen against the dollar. Today, the Indian unit appreciated to as much as Rs 41.05 per $1, against Rs 41.67 per $1 on Monday. The BSE Infotech Index, down 0.6%, was the only sectoral index to end weak. Tech stocks ended in mixed trend. Infosys was up at Rs 2057.90 with volumes of Rs 269.01 crs, TCS was down at Rs 1224.85 with volumes of Rs 215.25 crs, Rolta was up at Rs 420 with volumes of Rs 194.32 crs, and Satyam closed down at Rs 474.55 with volumes of Rs 127.12 crs. Pharma stocks ended in mixed trend. Sun Pharma was down at Rs 1061.70 with volumes of Rs 51.64 crs, Ranbaxy closed up at Rs 349 with volumes of Rs 40.47 crs, Dr Reddy was down at Rs 713.50 with volumes of Rs 35.07 crs, and Cipla closed up at Rs 238.80 with volumes of Rs 30.96 crs. Banking stocks showed buying opportunity. In the Public Sector banks SBI closed up at Rs 1133.30 with volumes Rs 348.23 crs & Bank of India closed up at Rs 197.15 with volumes Rs 119.63 crs. In the private sector ICICI Bank closed up at Rs 950.10 with volume of Rs 209.64 crs & HDFC Bank closed up at Rs 1013.75 with volumes of Rs 173.65 crs. Auto Stocks ended up. Tata Motors closed up at Rs 741.60 with volumes of Rs.154.76 crs & M&M closed up at Rs 744.35 with volumes of Rs 44.67 crs. While in the 2 wheeler segment stocks, Baja Auto closed up at Rs 2442.70 with volumes of Rs 35.21 crs & Hero Honda closed up at Rs 665.95 with volumes of Rs 19.91 crs. Cement Stocks witnessed positivity. ACC closed up at Rs 816.95 with volumes of Rs 83.02 crs, GACL closed up at Rs 119.35 with volumes of Rs 80.50 crs, India Cement closed marginally up at Rs 170.80 with volumes of Rs 40.63 crs and Birla Jute closed up at Rs 233.65 with volumes of Rs 1.83 crs. Nifty ended at 4142 up by 57 points
Market Close : Smart recovery amids volatile sessions..
Weak play in the market from the start and had no support from global cues. Asian markets slipped into red while Europe trading mixed. Sensex saw some value buying in the mid sessions but couldn't sustain the momentum and selling crept in as investors played cautious ahead of FNO expiry. But bounced back as it witnessed some intense buying in the index heavyweights like SBI, RIL in the final sessions to trade and close high. Metal sector extended its gains tracking firm global metal prices as most of the stocks ended in green. Selective Pharma, Banking and FMCG stocks were in favor amongst the investors while Software and Telecom stocks bore the brunt of selling pressure. Real estate stocks were on fire as they rallied in the final session and ended with strong gains.
IT stocks came under selling pressure as the Indian Rupee rose to a fresh nine year high with the central bank not intervening to keep a check on it. The Rupee was seen at 40.84 per Dollar in the early sessions, strongest since May 1998 and last traded at 40.90. Rupee appreciating is a cause of concern for major IT companies as it directly impacts their revenue and profits as a major chunk of revenue is accounted by the exports.
Sensex ended up by 81 points at 14217.77. It was helped up by gains in Ranbaxy (369.1,+6 percent), Cipla (252.25,+5 percent), Hero Honda (687.35,+4 percent), ITC (161.75,+3 percent) and Grasim (2441.7,+3 percent). Restricting the gains were Infosys (2017.9,-2 percent), Satyam (466.45,-2 percent), TISCO (570.8,-1 percent), Bharti Tele (862.8,-1 percent) and NTPC (156.8,-1 percent)
Indian Bank reported strong Q4 March 2007 results with 69.1% growth in net profit for Q4 March 2007 at Rs 235 cr against Rs 139 cr the previous year. Total Income rose by 43.2% to Rs 1564 cr against Rs 1092 cr the previous year. The state run bank also claimed that its net non performing assets (NPA) declined to 0.35% as on 31 March 2007 from 0.79% as on March 2006. The gross NPA declined by 1.85% at end of March 2007 compared with 2.91% at end of March 2006. The stock rallied yesterday also as the RBI kept key rates unchanged at its monetary policy meeting and the stock rallied to close up by almost 17%.
As per some news, Tata Tea negotiations with Glaceau are going on and that some points of the deal still needed resolving. The news also said that Coke may also want to announce the deal with the same company when its North American bottlers meet in Atlanta next month or before that. The valuation of Glaceau is rumored to be at $3 billion up from a mere $2.2 billion just 8 months ago. Tata Tea had bought almost 30% stake in Glaceau for $677 million in August 2006 and also had valued Glaceau at $2.2 billion. Nothing to comment here till ther is more clearity here.
Jubilant Organosys informed that the company will acquire US based Hollister-Stier Laboratories LLC for $122.5 million to gain a foothold in the injectable drugs segment. The company also said that it would reimburse $16 million that Hollister had already spent on an on going capacity expansion which was expected to be completed by 2008. as per the calculation goes, Jubilant Organosys would be paying 11.2 times Hollister's fiscal 2006 normalized earnings before interest, tax, depreciation and amorti
Market rallies past 14200
The market witnessed a sharp pullback, as short covering triggered a major rally in heavyweight, fast moving consumer goods, banking and auto stocks. After yesterday's rally, the market opened on a weak note tracking the mixed global indices at 14142, down five points. As the rupee strengthened against the dollar, information technology stocks came under selling pressure, dragging down the Sensex to an intra-day low of 14052. However, the resumption of buying in late afternoon trades saw the index move into positive territory and gain strength thereafter. The index surpassed the 14200 level in the afternoon and touched an intra-day high of 14238. The Sensex closed at 14218, up 81 points. The Nifty closed with gains of 25 points at 4167.
Among the sectoral indices the BSE FMCG Index notched up gains of 2.52% at 1838 followed by the BSE HC Index (up 1.72% at 3832), the BSE Oil & Gas Index (up 1.38% at 7303), the BSE Auto Index (up 1.22 at 4942) and the BSE Bankex (up 1.06% at 7237). However, the BSE IT Index, the BSE Metal Index and the BSE Tech Index closed in negative territory. The market breadth was positive. Of the 2,599 scrips traded on the BSE 1,460 stocks advanced, 1,061stocks declined and 78 stocks ended unchanged.
Out of the 30 Sensex stocks, 18 stocks ended in the green. Pharma major Ranbaxy was the major gainer and soared 5.71% at Rs369. Cipla advanced 5.41% at Rs252, Hero Honda added 3.98% at Rs687, ITC jumped 3.39% at Rs162, Grasim surged 2.58% at Rs2,442, ONGC added 2.55% at Rs973, HDFC was up 2.45% at Rs1,752, Tata Motors rose 2.14% at Rs759, HLL gained 1.96% at Rs211 and ACC was up 1.91% at Rs833. Among the laggards Infosys dropped 1.96% at Rs2,018, Satyam Computer shed 1.79% at Rs466, Tata Steel declined 1.43% at Rs571 and Bharti Airtel lost 1.25% at Rs863.
Among the fast moving consumer goods stocks, Tata Tea vaulted 14.79% at Rs773, Marico surged 2.56% at Rs58, Colgate added 1.96% at Rs211, Nestle advanced 1.56% at Rs1,001, Britannia gained 1.47% at Rs1,280.
Over 1.93 crore IFCI shares changed hands on the BSE followed by Reliance Natural Resources (1.07 crore shares), GV Films (83.57 lakh shares), Tata Teleservices (75.97 lakh shares) and Nagarjuna Fertiliser (73.22 lakh shares).
TCS registered a turnover of Rs330 crore on the BSE followed by Reliance Industries (Rs138 crore), GTL (Rs121 crore), Hexaware (Rs118 crore) and Tata Steel (Rs106 crore).
Sensex pulls off a coup towards the end
The BSE Sensex abandoned the weak trend during the first half of trading, towards the later part of the day. The late burst is attributed to index heavyweight, Reliance Industries, which had surged to an all time high of Rs 1605.15. A possibility of short-covering ahead of expiry of the April contracts could also cannot be ruled out. Profound interest for index pivotals from auto, pharma as well as select other blue-chips kept the Sensex going.
The 30-share BSE Sensex advanced 91.70 points, at 14,228.42, as per a provisional closing. It had opened firm, at 14,141.70, and had advanced to a high of 14,238.29. Its low for the day was 14,052.17.
Most of the gains came on the back of volatility, which is expected to remain high ahead of Thursday (26 April 2007)'s expiry of the April 2007 derivative contracts.
The Sensex had been weak since the opening, after a strong previous session (24 April 2007), when it had surged a steep 208 points, following the Reserve Bank of India (RBI’s) decision to keep key rates unchanged at its monetary policy meeting.
The market-breadth, which indicates the overall health of the market, was strong indicating buying interest for smallcap and midcap stocks. On BSE 1,468 scrips advanced compared to 1,081 that declined. A total of 88 scrips remained unchanged.
The total turnover on BSE amounted to a healthy Rs 5175 crore, boosted by two huge block deals of 12.50 lakh shares each, at an average Rs 1209 per share in early trade, in the TCS counter. The stock was down 0.15% to Rs 1224, on total volumes of 27.27 lakh shares. Undoubtedly, it was the top-traded counter on BSE with a turnover of Rs 330 crore.
Among the 30-Sensex pack, 19 advanced while the rest declined.
Pharma major Ranbaxy Laboratories was the top-gainer, up 5.93% to Rs 369.85, on a volume of 7.91 lakh shares. The company said on Wednesday that it had been granted a 180-day market exclusivity in the US for the 80-mg dosage of the drug pravastatin sodium tablets, which is used to treat cardiac diseases. The 80-mg tablet had annual sales of $209 million, while the market for all dosages of the drug was $1.19 billion a year, Ranbaxy said in a statement. Pravastatin is the generic version of Bristol-Myers Squibb's cholesterol-fighter Pravachol.
Other pharma stocks Cipla (up 5.12% to Rs 251.55) and Dr Reddy’s (up 0.85% to Rs 720) also gained.
Auto stocks Tata Motors (up 2.36% to Rs 760) and Hero Honda (up 3.93% to Rs 687) gained on renewed buying.
HDFC Bank rose 1.62% to Rs 1030, on reporting 30.5% growth in net profit for Q4 March 2007.
The private sector bank posted a net profit of Rs 343.57 crore in the quarter ended 31 March 2007, against Rs 263.21 crore for the March 2006 quarter. Total Income increased to Rs 2384.19 crore compared with Rs 1682.65 crore in the March 2006 quarter.
Index heavyweight Reliance Industries (RIL) advanced 1.11% to Rs 1598, on a volume of 8.69 lakh shares. It had recovered from a low of Rs 1560, and had surged to a high of Rs 1605.15.
IT stocks came under selling pressure. Infosys Technologies lost 1.85% to Rs 2020 and was the top loser.
Satyam Computer dropped 1.67% to Rs 467, on a volume of 10.93 lakh shares. All these pivotals had lost 0.45 - 2.2% on Tuesday (24 April) as well, due to the rupee’s surge, and in the face of a strong rally in the market.
The Indian rupee rose to a fresh nine-year high on Wednesday, as investors bet on continued capital inflows into the country, and also on the central bank not intervening to check the gains. At 9:02 IST the rupee was at 41 per dollar, its strongest since May 1998. It had ended at 41.10/12 on Tuesday.
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.
Private sector steelmaker Tata Steel was down 1.31% to Rs 571.50, on 18.48 lakh shares.
Bharti Airtel (down 1.33% to Rs 862), NTPC (down 1% to Rs 156.80) and L&T (down 1.20% to Rs 1683) slipped.
The Nikkei 225 Index was down 1.24%, while the Hang Seng Index lost 0.18%.
FII inflow will dictate the trend. After a heavy inflow of the past few days, FIIs turned sellers on Monday (23 April 2007). They were net sellers to the tune of Rs 68.50 crore on that day. Their inflow for April 2007 (till 23 April) reached Rs 5051.20 crore.
As per provisional data, FIIs were net buyers to the tune of Rs 340 crore on Tuesday (24 April 2007), the day when the Sensex had surged 208 points following the central bank's decision to hold rates steady. Domestic institutional investors were net buyers to the tune of Rs 184 crore on Tuesday.
In its monetary policy announced Tuesday, RBI forecast that annual wholesale price inflation, which was running just above 6% in early April 2007, will be close to 5% at end-March 2008. The RBI forecast GDP growth at 8.5% in the fiscal year ending March 2008, lower than the 9.2% expected for 2006/07.
The outcome of the ongoing seven-phased Uttar Pradesh assembly elections, is a key political event to watch out for. The UP vote is seen as a barometer of national political trends.
The Dow Jones industrial average rose on Tuesday, as IBM boosted its dividend by a third and as companies such as DuPont Co posted strong earnings. But weak economic data weighed on the broader market and tempered the Dow's late surge toward the 13,000 milestone.
The Dow hit an intraday record of 12,989.86, but pared gains in the last hour of trade. It ended up 34.54 points, or 0.27%, at 12,953.94. The Standard & Poor's 500 Index slipped 0.52 points, or 0.04%, to close at 1,480.41. The Nasdaq Composite Index ended up 0.87 point, or 0.03%, at 2,524.54.
Oil prices were little changed on Wednesday ahead of the release of a weekly US petroleum supply snapshot, which is expected to show domestic gasoline stocks rose.
Light, sweet crude for June delivery rose just 6 cents in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract on Tuesday fell $1.31 to settle at $64.58 a barrel.
Nymex crude oil rose $1.78 to $65.89 a barrel on Monday, on fears that escalating violence after a presidential election in Nigeria, which is Africa's largest producer and a main oil supplier to the United States, interrupted supplies.
ILFS - KEC Intl. Q4FY07 Result Update , ILFS - HDFC Bank Q4FY07 Result Update (Reduce) , ILFS - Monnet Ispat & Energy Q4FY07 Result Update (Accumulate
ILFS - Monnet Ispat & Energy Q4FY07 Result Update (Accumulate)
ABN Amro - Andhra Sugar, ACC, Edelweiss - Praj, KEC International, Siemens
ABN Amro - Andhra Sugar
Edelweiss - Praj Industries - equinox; result update Q4FY07; upgrade to Reduce
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Daily Morning Call
Market Grape Wine :
In House :
Credit policy a big Booster for the Markets with Banks leading all the way . Policy took ever one by surprise .
RBI gave forecast of 8.5% against 9.25% growth target of our GDP a negetive .
Petrol & Diesel prices may increase after election rumours in the market .
Nifty at a support of 4114 & 4085 levels with resistance at 4169 , 4180 and 4210 levels .
Buy : HCC above 106.8 target 114 s/l of 103
Buy : BOB above 239.6 target of 246 s/l 236
Buy : JP in F&O above 612 target 628 s/l of 605
Book profits at higher levels with weak Intl markets and weak US house hold data .
Out House :
Markets at a support of 14014 & 13959 levels with resistance at 14243 & 14352 levels .
Buy : RIL & RElCap
Buy : Satyam & Rolta
Buy : IDFC & FSL
Buy : Praj & GlenMark
Buy : ICRA , IDEA & Bharti
Buy : JSW & Sail
Buy : Rcomm & ABAN
Dark Horse : Glenmark ,FSL, Praj , Tisco , ABAN , JSW , IDBI, & Lupin
Bullet for the Day : Titan & Divis & HindZinc with strict stop loss
Morning Reports
Anagram - Daily Call - Apr 25
Emkay - Morning Notes, Ultratech Cement, Satyam Computer
Nifty and Sensex have exhibited a bullish candlestick.
Technically, one may use the level of 4050 (Nifty) and 13850 (Sensex) as the stop loss level.
Nifty faces resistance at 4200 and Sensex at 14200.
BSE Smallcap and BSE Midcap exhibited a bullish candlestick.
CNX IT has lost ground.
In the Punter's zone we have a BUY in I8VRCL INFRA , MARUTI & BANK OF INDIA.
In the Technical call section, we have a BUY in GAMMON INDUSTRIES , NALCO & GESCO CORP.
Anand Rathi - Daily Technical Note - Apr 25
Anand Rathi - Daily Fundamental Snippets - Apr 25
The NIFTY futures saw a rise in OI to the tune 3.03% with prices coming up significantly after credit policy announcement of no CRR hike indicating heavy short covering coming in the market and fresh built up in long positions .The discount in nifty futures narrowed and disappeared on closing basis . The FII bought index futures to the tune of 424 crs and buyers in index options to the tune of 302 crs indicating hedged positions built by them. The PCR has come up from 1.28 to 1.32 indicates that some buying support may emerge in the market.
Among the Big guns, ONGC saw 6.67% drop in OI with prices coming up 1.99% indicating shorts covered their positions and fresh long positions being built up in the counter indicating strength in the counter. Whereas RELIANCE saw 0.96% drop in OI with prices rising indicating strength but some profit booking is advisable in the counter.
In the TECH front, INOFSYSTCH, WIPRO, TCS & SATYAMCOMP saw liquidation of positions by both bulls as rupee appreciation is putting pressure on IT pack indicating uncertainty expected by participants in IT counters. One should avoid positions in IT pack unless some clarity comes.
In the BANKING counters, SBIN saw rise in OI to the tune of 1.04% with rise in prices to the tune of 7.20% indicating heavy short covering seen in the counter after announcement and fresh long positions built up in the counter suggesting further strength in the counter.ICICIBANK, HDFCBANK saw drop in OI with rise in price indicating short covering seen in the counter.
In the metal pack TATASTEEL saw drop in OI to the tune of 2.55% with price up significantly indicating heavy short covering in the counter as counter crossed its resistance levels which may result in further strength in the counter whereas SAIL saw drop in OI with drop in prices indicating liquidation of positions by bulls indicating profit booking seen in the counter .HINDALCO saw liquidation of positions by bulls and bears whereas STER saw short covering in the counter suggesting further strength in the counter.
Considering the overall scenario and the markets movement after announcement market followed a direction showing signs of further strength .We feel that as the volume and built up in OI suggests that market may show further strength with some minor profit booking may come in market .One should trade in long side with strict stop losses to be adhered too.
Anand Rathi - Daily Strategist - Apr 25
Intra-day Stock Ideas
NIFTY (4141) SUP 4109 RES 4194
BUY HINDLEVER (208.15)
SL 204 T 216,218
BUY AKRUTI (394.1)
SL 388 T 406,409
BUY HEROHONDA (665.95)
SL 660 T 677,679
SELL MPHASIS (300.15)
@ 303 SL 307 T 291,289
SELL RENUKA (434.80)
@ 437 SL 442 T 426,423
STRATEGY INPUTS FOR THE DAY
No pause as yet for bulls
The right word may be effective, but no word was ever as effective as a rightly timed pause.
As expected by us, RBI Governor Dr. YV Reddy has decided to take a pause in his long sequence of monetary tightening measures. All markets - stock, bond and currency - have given him a thumbs up. The biggest movement was seen in the forex market where the rupee touched a new nine-year peak of 41.04 to the dollar on an intra-day basis. This certainly spells bad news for the export-centric sectors like IT, Textiles and Gems & Jewellery. Having said that the deliberate attempt to let the rupee appreciate is expected to help the central bank in monetary management and containing inflation over the medium to long term. The RBI's medium-term inflation target of 4-4.5% has even surprised the Finance Minister. It remains to be seen if Dr. Reddy manages to attain his monetary targets for FY08. It won't be a smooth sailing for the central bank governor that's for sure given the ongoing boom in the economy.
Coming to today's session, the twin factor of short-covering ahead of tomorrow's F&O expiry and the encouraging Monetary & Credit Policy may keep the bulls in good spirits for some more time. India Inc's report card for the latest quarter has been good if not spectacular with some negative surprises. What has been really strong is the inflows from the FIIs. They have pumped in close to a billion dollars in the cash segment this month with three more trading days still to go. Having said that, the weak global markets could see cooling at higher levels. Also, with the key indices having rallied so much in the past 2-3 weeks, there is a case for some cooling from higher levels. Real estate stocks surged yesterday after the RBI slashed the risk weight for housing loans of up to Rs2mn. However, one should be careful as most these players are into large projects in big cities. The same caveat holds for banking and auto shares as well.
The Dow Jones Industrial Average moved closer to the 13,000 mark on Tuesday, but the broader market struggled as upbeat corporate earnings and lower oil prices countered weaker reports on housing and consumer confidence.
The Dow was up 34.54 points or 0.3% at 12,953.94, retreating after hitting an intraday record of 12,989.86 during the session. It ended just a few points shy of the record closing high of 12,961.98 reached on Friday.
The S&P 500 index finished flat at 1,480.41 and is within striking distance of a new six-year high. The Nasdaq too closed flat at 2,524.54, and is not far from a six-year high either.
Texas Instruments, Altera and DuPont all reported solid earnings or issued bullish forecasts. Meanwhile, IBM's $15bn share buyback plan made the stock the Dow's biggest gainer.
Existing home sales came in lower than expected, falling to a 6.12mn unit annual rate in March from a 6.69mn unit rate in February. Economists had forecast sales would fall to a 6.45mn unit rate. The Consumer Confidence index fell to 104 in April from a revised 108.2 in March. Economists had projected a decline to 105. Both reports fueled worries about the imminent economic slowdown, ahead of the first-quarter GDP report due on Friday.
US light crude oil for June delivery fell $1.31 to $64.58 a barrel on the New York Mercantile Exchange. The front-month contract was trading unchanged in extended hours of trading in Asia.
COMEX gold for June delivery fell $6.50 to $687.70 an ounce. Treasury prices rose, lowering the yield on the 10-year note to 4.62% from 4.65% late on Monday. In currency trading, the dollar fell against the euro and was barely changed versus the yen.
European shares slipped on Tuesday. The pan-European Dow Jones Stoxx 600 index lost 0.9% to 386.71. The UK's FTSE 100 closed down 0.8% at 6,429.50, the German DAX Xetra 30 lost 0.9% at 7,270.32 and the French CAC-40 slipped 0.5% to 5,886.03.
Stocks in Brazil and Mexico also fell. Brazil's Bovespa and Mexico's IPC stock indexes each finished with a loss of 0.2%. In Sao Paulo, the Bovespa lost 91 points to close at 49,070.86. In Mexico, the IPC fell 50 points, or 0.2%, at 29,554.18.
Asian stocks declined for the first time in four days on Wednesday on the back of disappointing US home sales and consumer confidence data fueled concern about the state of the region's biggest export market.
The Nikkei in Tokyo slumped by 167 points to 17,284 while he Hang Seng in Hong Kong is down 37 points to 20,535. The Kospi in Seoul declined by 10 points to 1545 and the Straits Times in Singapore shed 7 points to 3366.
The Morgan Stanley Capital International Asia-Pacific Index lost 0.6% to 146.97 as of 12:09 p.m. in Tokyo, ending a three-day, 0.6% advance. Benchmarks fell across the region, with the exception of the Philippines and Hong Kong while Malaysia's was little changed. Markets in Australia and New Zealand are closed for holidays today.
HOW MARKET FAREDProfit booking likely
Credit policy set the direction for the markets after declaring its decision to keep all the key interest rates untouched favoring the bulls. Markets ended with healthy gains as the blue chip stocks like SBI, Bharti Airtel, Tata Steel and HLL led from front lifting the benchmark index Sensex to hit an intra-day high of14197.32. Even, Mid-Cap and small cap stocks participated in the rally. However, Technology stocks lost grip as rupee strengthened against the US Dollar dragging them down. Finally, the 30-share benchmark Sensex surged 208 points to close at 14136. NSE Nifty was up by 56 points to close at 4141.
Sesa Goa slipped 2.4% to Rs1699. Vedanta agreed to buy Mitsui & Co.'s entire stake in Sesa Goa for $981mn, beating rivals including Arcelor Mittal to secure supplies of the steel-making raw material. The scrip touched an intra-day high of Rs1850 and a low of Rs1676 and recorded volumes of over 17,00,000 shares on NSE.
SUN TV lost 1% to Rs1633 after the company approved giving one free share for each held. The scrip touched an intra-day high of Rs1672 and a low of Rs1621 and recorded volumes of over 1,00,000 shares on NSE.
Bajaj Hindusthan gained 0.4% to Rs164. The Company announced its Q2 result with net profit at Rs36.6mn (down 94%) and sales at Rs5.14bn (up 30%). The scrip touched an intra-day high of Rs167 and a low of Rs160 and recorded volumes of over 30,00,000 shares on NSE.
MTNL declined by over 6% to Rs152. The company announced its Q4 result with net profit at Rs2.06bn (up 47%) and revenue at Rs13.86bn (down 13%). The scrip touched an intra-day high of Rs165 and a low of Rs150 and recorded volumes of over 52,00,000 shares on NSE.
Maruti paced ahead 3.8% to Rs796 after the company announced its Q4 result with net sales at Rs44.13bn (up 35%) and net income at Rs4.49bn (up 24%) and also to pay Rs4.5 per share as dividend. The scrip touched an intra-day high of Rs810 and a low of Rs762 and recorded volumes of over 23,00,000 shares on NSE.
Banking stocks were the star performers of the day following RBI’s decision to leave Interest rates unchanged. Index heavy weight SBI surged over 6.5% to Rs1133, ICICI Bank advanced 3.6% to Rs950 and HDFC Bank added 2.8% to Rs1013. Canara Bank, OBC and Syndicate Bank were the major gainers among the Mid-Cap stocks.
Auto stocks are among the major gainers. Maruti has surged by over 4.5% to Rs802, Tata Motors has advanced by 4.2% to Rs748, Bajaj Auto has gained by 3% to Rs2474 and Hero Honda has added 1.5% to Rs665.
Power stocks advanced further led by gains in PFC and Tata Power. PFC surged by over 5% to Rs123, Suzlon advanced by 2% to Rs1168 and Tata Power added 2.3% to Rs581.
Cement stocks ended with gains. Gujarat Ambuja surged by 3.5% to Rs119, ACC advanced by 2.5% to Rs816, Mangalam Cement gained 0.3% to Rs146 and India Cement added 0.8% to Rs170. However, Grasim pared its gains on back of profit booking, the scrip fell 1% to Rs2378.Insider Trades:
ABB Ltd: Life Insurance Corporation of India has purchased from open market 12480 equity shares of ABB Limited on 12th April, 2007.
Petronet LNG Ltd: T. Rowe Price Associates, Inc. & its affiliates has sold in open market 6264026 of Petronet LNG Limited on 17th April, 2007.
Market Volumes:
The turnover on NSE was up by 41% to Rs108.9bn. BSE Bank index was the major gainer and gained 4.06%. BSE Auto index (up 1.65%), BSE Metal index (up 1.49%) and BSE Oil & Gas index (up 1.42%) were among the other major gainers. However, BSE IT index lost 0.70%.
Volume Toppers:
IFCI, RNRL, Tata Steel, IB Real Estate, Unitech, ITC, Indian Bank, Bank of India, IDFC, Idea, PFC, Parsvnath, MTNL, R Com, Rolta, Ashok Leyland, HCC, NTPC and IVRCL Infrastructure.
Upper Circuit:
Ramco Systems, Dawn Mills, Ansal Infrastructure, Eicher Motors, Godrej Industries, Tanla, Tulip IT, Penland Ltd, Auto Industries, GTC Industries, Nirlon, Swan Mills and Teledata Informatics.
Results Today:
3i Infotech, Alfa Laval, Glenmark, Grasim, GTL, IDFC, Mahindra Gesco, Maharashtra Seamless, Nalco and Tulip IT.
Delivery Delight:
ABB, Aptech, Bank of Baroda, Bharti Airtel, Bombay Dyeing, Canara Bank, Century Textiles, CESC, Corporation Bank, HCC, HDFC, ICICI Bank, IVRCL Infrastructures, Jaiprakash Associates, Maharashtra Seamless, Maruti Udyog, Patel Engineering, Ranbaxy Laboratories, Reliance Capital, Siemens, SBI and Tata Motors.
Abnormal Delivery:
SAIL, BEL, UTI Bank, Kotak Mahindra Bank, Aurobindo Pharma, National Aluminium, SRF and BEML.
Stock Futures with Largest Increases in OI:
Sun Pharmaceuticals, Indian Bank, Jindal Steel & Power, PNB, Satyam Computer, Bank of Baroda, Canara Bank, RPL, BHEL and Tata Chemicals.
Stock Futures with Largest Decreases in OI:
Jet Airways, Balrampur Chini, Tata Steel, Zee Telefilms, Siemens, Bajaj Auto, ACC and Aban Offshore.
Results Corner:
HDFC Bank Q4 profit at Rs3.44bn (up 31%), revenues at Rs23.84bn (up 41%)
MTNL Q4 profit at Rs2.06bn (up 47%), revenue at Rs13.86bn (down 13%)
Maruti Q4 sales at Rs44.13bn (up 35%), net income at Rs4.49bn (up 24%) and to pay Rs4.5 per share as dividend
Bajaj Hindusthan Q2 profit at Rs36.6mn (down 94%), sales at Rs5.14bn (up 30%)
Brokers Recommendations:
Reliance Capital – Buy from Merrill Lynch with target of Rs850
Wipro - Underperform from CLSA with target of Rs575.
Long Term investment:
Infosys
Major News Headlines:
RBI slashes risk weight on housing loans of up to Rs20 lakh from 75% to 50%
Wockhardt gets US FDA approval for marketing Lisinopril
Parsvnath to Develop Metro Station Cum Mall at Common Wealth Games Village
SUN TV approves 1:1 bonus
Vedanta agrees to buy Mitsui's 51% stake in Sesa Goa for $981mn
Alok Industries signs agreement with Peacock Alley
SpiceJet Board approves plan to purchase 10 Boeing planes.
Volatility expected ahead of F&O contracts expiry
The market may take a deep breath after Tuesday’s 208-point surge triggered by Reserve Bank of India (RBI) keeping all policy rates unchanged at its annual monetary policy review. Weak Asian markets may weigh on the domestic bourses today. Volatility is likely to remain high ahead of the expiry of the April 2007 derivative contracts on Thursday (26 April 2007).
Corporate results announced so far have been strong. The key Q4 results of Grasim, Reliance Energy, National Aluminium Company and Infrastructure Development Finance Company (IDFC) will be declared today.
FII inflow will dictate the trend. After a heavy inflow of the past few days, FIIs turned sellers on Monday (23 April 2007). They were net sellers to the tune of Rs 68.50 crore on that day. Their inflow for April 2007 (till 23 April) reached Rs 5051.20 crore.
As per provisional data, FIIs were net buyers to the tune of Rs 340 crore on Tuesday (24 April 2007), the day when the Sensex had surged 208 points following RBI’s decision to hold rates steady. Domestic institutional investors were net buyers to the tune of Rs 184 crore on Tuesday.
In its monetary policy announced Tuesday, RBI forecast that annual wholesale price inflation, which was running just above 6% in early April 2007, will be close to 5% at the end of March 2008. The RBI forecast GDP growth at 8.5% in the fiscal year ending March 2008, lower than the 9.2% expected for 2006/07.
The outcome of the ongoing seven-phased Uttar Pradesh assembly elections, is a key political event to watch out for. The UP vote is seen as a barometer of national political trends.
Asian stocks fell on Wednesday and the dollar stuck near a two-year low to the euro after data suggested economic growth in the United States, the top overseas market for Asian firms, will keep slowing. The latest data showed US existing home sales posted their biggest monthly drop in 18 years and consumer sentiment hit an eight-month low. Key benchmark indices in Japan, South Korea, Singapore and Taiwan were down between 0.15 - 0.96%.
The Dow Jones industrial average rose on Tuesday, as IBM boosted its dividend by a third and as companies such as DuPont Co posted strong earnings. But weak economic data weighed on the broader market and tempered the Dow's late surge toward the 13,000 milestone. The Dow hit an intraday record of 12,989.86, but pared gains in the last hour of trade. It ended up 34.54 points, or 0.27%, at 12,953.94. The Standard & Poor's 500 Index slipped 0.52 point, or 0.04%, to close at 1,480.41. The Nasdaq Composite Index ended up 0.87 point, or 0.03%, at 2,524.54.
IBM's surge accounted for more than 26 points of the Dow's rise of 34.54 points, which also was boosted by a 3.3% gain in the shares of Honeywell International Inc.
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Monetary policy review: Sharekhan Special dated April 24, 2007
Monetary policy review
The Reserve Bank of India (RBI) has kept the key interest rates, like the reverse repo rate, the repo rate and the bank rate, as well as the cash reserve ratio (CRR) unchanged in its Annual Monetary Policy for the year 2007-08. The policy is in line with our expectations. It continues to remain focused on maintaining price stability and anchoring inflation. However the importance of growth is once again visible in the RBI's statements and that is the key positive takeaway from this policy. The salient features of the policy are given below.
- The reverse repo rate and the repo rate have been kept unchanged at 6% and 7.75% respectively.
- The bank rate has been kept unchanged at 6%.
- The CRR has been kept unchanged at 6.5%.
- The risk weightage on residential housing loans has been reduced to 50% from 75% for home loans up to Rs20 lakh.
- The non-resident Indian deposit rate on foreign currency non-resident bank deposits and non-resident (external) rupee account deposits has been reduced by 50 basis points as per expectations. However the apex bank has made capital account outflows more relaxed for all categories, from corporates to individuals.
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