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Friday, April 27, 2007
Weekly Stock Ideas
BUY Crompton Greaves (217)
SL 211 T 228, 234
BUY Kotak Bank (522)
SL 514 T 538, 544
BUY Voltas (95)
SL 91 T 102, 106
SELL UTI Bank (455)
SL 466 T 435, 430
SELL R Com (460)
SL 466 T 450, 445
Sharekhan Investor's Eye dated April 27, 2007
Marico
Cluster: Apple Green
Recommendation: Buy
Price target: Rs63.4
Current market price: Rs55
Margins disappoint, but stay on course!!
Result highlights
- In Q4FY2007 the net revenues of Marico grew by 33% year on year (yoy) to Rs396 crore, as per our estimate. The top line growth was higher in this quarter on account of the full contribution from the acquired brands of Nihar, Manjal, Camelia, Aromatic and Fiancée, and the strong growth of 21% in the focused brand portfolio (organic growth).
- The operating profit margin (OPM) declined by 210 basis points to 10.1% on account of an increase in the selling and administrative expenses, and the other expenses as a percentage of sales. Consequently, the operating profit grew by 10% yoy to Rs40.1 crore. The same was below our estimate.
- The interest cost for Q4FY2007 grew to Rs4.68 crore from Rs2.3 crore in Q4FY2006, on account of the debt taken to achieve inorganic growth.
- The net profit after the extraordinary items grew by 17% yoy to Rs28.1 crore and the earnings per share (EPS) grew to Rs0.47 (share split to Rs1).
- Marico has acquired two brands (Fiancée and HairCode) in Egypt; these will generate revenues of Rs90-95 crore in FY2008. Significantly, these brands provide 15-18% of the profit after tax (PAT) margin against that of 7-7.5% for Marico. This indeed will help Marico expand its OPM next year. Higher advertising spend for new brands would help the company to fuel future growth.
- The Kaya business grew by an impressive 52% yoy to Rs22 crore. It managed to achieve a positive profit before tax (PBT) in the current quarter. The Kaya business broke even on a full-year basis. This is a big positive because going forward the business will be contributing to the bottom line and its higher margin profile will contribute to the margin of Marico. For the full year, revenue from the Kaya business stood at Rs75 crore. Marico plans to open roughly 15-20 new Kaya clinics in FY2008 and wants to concentrate on increasing the utilisation and penetration levels of the Kaya products going forward.
- The stock is trading at attractive valuations of a price/earnings ratio (PER) of 22.8x FY2008E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 15.8x FY2008E. We continue to remain bullish on Marico and reiterate a Buy on the stock with a price target of Rs63.4.
SKF India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs406
Current market price: Rs379
Solid performance
Result highlights
- SKF India's Q1CY2007 results are ahead of our estimates because of a strong improvement in its margins. The net sales for the quarter have risen by 21.6% to Rs359.8 crore.
- The margin improvement during the quarter was a positive surprise. We believe that the margin growth is a result of improved product mix, lesser contribution of the direct customer delivery (DCD) business and better utilisation of the new capacities.
- The operating profit margin (OPM) jumped up by 450 basis points to 16.8% during the quarter. Consequently, the OPM has improved by 450 basis points as the operating profit jumped up by 65.7% to Rs60.5 crore.
- A higher interest income and stable depreciation helped the company to post a profit growth of 62.8% to Rs36.7 crore.
- The capacity expansion plans of the company are on schedule. It would also be spending close to Rs150 crore to set up a plant in Uttarakhand. The company would also de-risk its business model going forward, by reducing its dependence on bearings, which currently contribute almost 90% of its sales. In the next three-four years, this proportion is expected to decline to 80%, while the contribution of the other business segments, namely seals, mechanotronics, and services would reach 20%.
- At the current levels, the stock quotes at 12.2x its CY2008E earnings and at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.5x. We maintain our Buy recommendation on the stock with a price target of Rs406.
Bharti Airtel
Cluster: Apple Green
Recommendation: Buy
Price target: Rs900
Current market price: Rs825
Price target revised to Rs900
Result highlights
- Bharti Airtel has announced a robust revenue growth of 9.8% quarter on quarter (qoq) and 58.1% year on year (yoy) to Rs5,393 crore for Q4FY2007. The sequential revenue growth was driven by a 12.9% rise in the mobile revenues whereas the non-mobile businesses grew at relatively lower rate of 5.6% sequentially to Rs1,871 crore.
- The operating profit margin (OPM) at 41.5% is the highest reported in any quarter. The sequential improvement of 70 basis points came as a positive surprise and was driven by a 160-basis-point sequential improvement in the OPM of the mobile business. The ability to boost margins in spite of the adverse impact of the reduction in the roaming charges (adverse impact of Rs50-60 crore) is quite commendable. Consequently, the operating profit grew by 11.8% qoq and 419.4% yoy to Rs2,241 crore.
- The profit before tax (PBT) grew by 4.5% qoq to Rs1,507 crore and was in line with expectations. However, the decline in the effective tax rate to 9% (as compared with 14.8% in Q3) resulted in a higher than expected net profit of Rs1,353 crore (up by 11.4% qoq and 98.3% yoy).
- For the full year, the consolidated revenues and earnings grew by 58.8% to Rs18,520 crore and 88.6% to Rs4,257 crore. The OPM improved by 320 basis points to 40.2% (contributed by a 160-basis-point improvement in the OPM of the mobile business and a 320-basis-point uptick in the margin of the non-mobile business). The total subscriber base grew by 86.4% to over 39 million in FY2007 (including 37.14 million mobile subscriber base, which grew by 89.7% during the year).
- In terms of key highlights, there were a number of regulatory changes introduced during the quarter. The reduction in the roaming charges was negative whereas the introduction of revised access deficit charge (ADC) regime and reduction in the port charges payable to state-owned telecom operators would have a positive impact on the earnings.
- In terms of business environment, the government announced the increase in the limit for foreign direct investment (FDI) from 49% to 74% and steps are being taken to implement the same. Another key development was the entry of Vodafone as a competitor through the acquisition of a controlling stake in Hutch Essar.
- To factor in the better than expected performance, we have revised upwards our earnings estimates by 2.8% for FY2008 and introduced our FY2009 estimates. At the current market price the stock trades at 25.8x FY2008 and 20.2x FY2009 estimated earnings. We maintain our Buy call on the stock with a revised one-year price target of Rs900.
Cadila Healthcare
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs425
Current market price: Rs318
Mixed bag
Result highlights
- The total operating income of Cadila Healthcare increased by 26.4% year on year (yoy) to Rs437.2 crore in Q4FY2007, driven by a 25.8% growth in the formulation exports and a 22.1% rise in the exports of active pharmaceutical ingredients (APIs). The sales growth was ahead of our expectations.
- The 105.1% jump in the formulation exports was driven by the improved performance of the French (growth of 48.8% yoy) and US businesses (growth of 96.4% yoy).
- The operating margins shrank by 270 basis points, largely due to a 35.8% rise in the staff cost and a 54.8% rise in the research and development (R&D) costs. Consequently, the operating profits grew by 8.4% to Rs71.1 crore.
- Cadila's adjusted net profit grew by 27.1% to Rs38.9 crore. The profit growth was slightly below our expectation.
- For FY2007, Cadila's revenues jumped by 23.2% to Rs1,829 crore, driven by a 91% growth in the formulation exports, a 31% growth in the API exports and a 54% rise in the consumer business. The sales growth was ahead of our estimates. The 91% rise in the formulation exports came on the back of a 186% growth in the US business, a 103% growth in France and a 26% surge in the exports to the rest of the world (ROW) markets.
- The net profit for FY2007 increased by 53.7% to Rs233.8 crore. The growth in the profit was slightly below our expectations.
- At the current market price of Rs318, the company is trading at 14.4x its FY2007E and at 11.9x its FY2008E estimated earnings. With all the growth drivers in place and on track, we reiterate our Buy recommendation on Cadila with a price target of Rs425.
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs370
Q1CY2007 results—first cut analysis
Result highlights
- Ranbaxy Laboratories (Ranbaxy) reported a 78.7% year-on-year (y-o-y) growth in its earnings to Rs127.60 crore for the first quarter ended March 2007. The earnings were marginally below our expectation of Rs131.52 crore.
- On the other hand, the revenues, which were up by 23% to Rs1,553.50 crore, were better than our expectation of Rs1,437.16 crore. The revenue growth was largely driven by the consolidation of Terapia, which resulted in a 78% jump in the European business. The markets in the Commonwealth of Independent States showed a 61% growth while the Asia Pacific and Middle-Eastern markets witnessed a 34% growth. The performance of the domestic business was impressive, with a growth of 26%, which is way ahead of the industry growth of about 9-10% during the quarter.
- The operating profit margin expanded by 150 basis points year on year (yoy), but showed a contraction of 60 basis points on a sequential basis to 10.4% yoy. The pricing pressures in the USA and Europe continued to hit the margins during the quarter. However, the company reported a 43.3% growth in the operating profit to Rs162.2 crore.
- During the quarter, the depreciation was up by 30% and the tax incidence increased to 21.6% from 15.8%. Despite this, the net profit grew by an appreciable 78.7% to Rs127.6 crore in Q1CY2007. The net profit was boosted by a foreign exchange gain of Rs55 crore.
- Based on the performance in Q1CY2007 and the improved outlook for the future, the management has revised its growth guidance upwards to 20% from the earlier 15%.
- At the current price of Rs370, the stock is trading at 17.7x its estimated CY2007 earnings. We maintain our Buy recommendation on Ranbaxy with a price target of Rs558.
Cipla
Cluster: Cannonball
Recommendation: Buy
Price target: Under review
Current market price: Rs217
Q4FY2007 results—first cut analysis
Result highlights
- Cipla reported lower than expected results for Q4FY2007 with a net profit of Rs125.7 crore against the expectation of Rs199.6 crore. The earnings have been lower due to the disappointing exports of active pharmaceutical ingredients (APIs) and significant contraction in the operating profit margin (OPM).
- The revenues were marginally higher by 6.3% to Rs938.5 crore. The sales growth was lower due to a 27% decline in the API exports to Rs141.46 crore mainly on account of higher sales to the regulated markets in the corresponding quarter of the previous year. Also, the formulation exports moderated to 16.8% during the quarter to Rs387.87 crore. The exports growth was the cause for concern during the quarter. However, the only cushion was that the domestic formulation business reported a 14.4% growth to Rs399.70 crore, which was slightly better than the industry's.
- The OPM witnessed a 590-basis-point decline to 15.7% in the quarter. The contraction in the margin was due to a change in the product mix (higher volume of anti-retrovirals where the margins are low) and lower API sales to the regulated markets. Also, a higher other expenditure due to higher factory overhead, selling expenses, professional fees etc affected the margins. Consequently, the operating profit stood at Rs147.0 crore, down by 22.8%.
- Subsequently, the other income was lower by 40%, depreciation higher by 4.3% and the tax incidence up from 4.0% to 11.3%, resulting in a 40.3% decline in the net profit to Rs125.7 crore.
- The full-year numbers reported a 19% growth in the top line at Rs3,438.1 crore, as the domestic formulation sales and exports saw a growth of 16.4% and 17.6% respectively. With the increasing share of the low-margin business of anti-retrovirals, the margins remained almost flat at 20% and resulted in a just 9% rise in the net profit to Rs660.8 crore.
- Though Cipla delivers better than industry growth in the domestic market, it struggles hard to maintain the growth in its exports, particularly of its APIs. While the API exports keep fluctuating, the growth of the formulation exports has moderated. Further, with the increased focus of Cipla on the low-margin business of anti-retrovirals, the OPM has been subdued in past couple of quarters. We believe the margin pressure would also sustain going forward.
- Cipla reported disappointing numbers for both Q4FY2007 and FY2007, largely due to the lower than expected performance of the export business and the decline in the margin. Hence, we are reviewing our FY2008 estimate. We shall downgrade the FY2008 estimate and introduce the FY2009 estimate in a detailed note shortly.
MARKET MOOD
No Ta Ra Rum Pum, Bulls settle down
Bulls would have hoped to have yet another winning week and chill out for the weekend. However, it turned out to be a fatal Friday as the indices wiped off most of the gains for the week. Friday's fall was on account of profit booking and weak Asian markets. Next week we have a shortened trading week (Tuesday and Wednesday are holidays).
Strong global markets, short-covering of positions in the F&O segment due to settlement and encouraging Monetary Policy kept the bulls in good spirits through the week, barring Friday. Strong inflows from FIIs and good quarterly results aided the rally. The main indices managed to squeeze out some gains on a week on week basis keeping their winning streak alive for a third consecutive week.
Index heavyweights helped the indices climb higher in an action-packed week with a slew of corporate earnings, and much hyped RBI meet on credit policy. Dr. YV Reddy decided to take a pause in his long sequence of monetary tightening measures leading to a frantic buying in Bank, Real Estate and Auto stocks, which had been battered a lot over last two months.
Tata Power, ACC, Tata Motors and SBI were major gainers in the 30 Sensex stocks. On the other hand, Cipla, BHEL, Infosys and Dr Reddy's were among the notable losers. Finally, the Sensex added 11 points or 0.08% to close at 13908.58 and the NSE Nifty closed flat at 4083.5.
Real Estate, Construction & property stocks had been on the receiving end in recent times following increase in interest rates by RBI over last two months, got some relief after RBI decided to keep key lending rates unchanged to support slowing economic growth. Also, RBI declared that they would reduce risk-weighting on individual loans to 50% from current 75%, which droved the stock prices higher over the week. Nagarjuna Construction, IVRCL Infra, Parsvnath Developers, Bombay Dyeing and Sobha Developers were among the notable gainers.
Finally, Banking stocks find some taste with the investors following heavy battering over two months across the sector. However, RBI's decision to leave the key Interest rates unchanged propelled the banking stocks higher with Index heavy weight SBI leading from front adding over 2.5% to close at Rs1101. ICICI Bank advanced by 2% to Rs935 and HDFC Bank added 2% to Rs1015. PNB, Union Bank, Indian Bank and Bank of India gained in the range of 4-18%.
Series of rate hikes by RBI had taken its toll on the Auto stocks over last two months. However, Tuesday proved to be an adventurous day for the Auto stocks, as they gained smartly after the RBI left its key overnight lending rate unchanged to spur economic growth. Maruti and Tata Motors led the fight back in Auto stocks as a pause in interest rate increase indicates vehicles would be available at lower interest rates. Tata Motors rose by over 3.5% to Rs749, Maruti added 2.2% to close at 796 and M7M raced ahead by adding 2.4% to Rs762.
Pharma stocks were a mixed bag as Cipla proved to be a major laggard for the Pharma index. The scrip plunged sharply after its Q4 profit fell by 34% to Rs1.26bn on lower earnings from the export of drug-ingredients and operations other than health-care. While Ranbaxy was among the star performers over the week after the company received U.S. approval to sell a generic version of Bristol-Myers Squibb Co.'s Pravachol cholesterol lowering drug with exclusive marketing rights. The scrip added over 7% to close at Rs370.7 and Divis Labs added 2% to end at Rs3565. While STAR, Glenmark and Aurobindo Pharma were among the major losers bring the Pharma index down.
Tech stocks continued to slide lower after Rupee advanced for a fifth day on Thursday, extending a rally to the highest in almost nine years. Concerns regarding control of inflation have led to speculation that the RBI bank will allow the Indian currency to strengthen against the Dollar. Wipro fell by 1% to Rs566, TCS lost over 1.7% to Rs1234, Satyam Computer was down by 1.9% to Rs467 and Infosys lost by 2% to close the week at Rs2007.
May-hem...That sinking feeling again!
Bulls are again getting weary regarding the month of May as it reminds them of the sinking feeling again, which caught the market in a tailspin last year. Historically, markets have peaked in the month of May, thereby giving opportunity for investors to create short positions. In 2006, the month of May saw the Sensex hit record highs and quickly came crashing. With many major results out of the way, not much is in store for the bulls. Any negative news even from the global market could have a cascading effect.
The trend of the Rupee and metal prices would be watched closely. The Rupee is headed towards its biggest monthly gain since the last three decades. While the appreciation may not be bad for the economy as a whole, it certainly spells bad news for the export-centric sectors like IT, Textiles and Gems & Jewellery.
Stay light especially on Monday and when markets open again on Thursday be strictly stock-specificGood Evening - Apr 27 2007
Key indices were up 1% on upbeat sentiment as Jan-Mar results from corporate India continued to be robust. Short covering on expiry of April derivatives contract and overnight rally in U.S. indices also boosted gains. Strength in U.S. and Asian equities also kept sentiment upbeat. At 10:20AM, Sensex was 14342.70, up 124.93 points or 0.9%. Nifty was at 4206.20, up 38.90 points or 0.9%. The CNX Midcap Index was up 0.8% and S&P CNX 500 Index up 1.0%. On the BSE, there were around four advances for every decline in morning. The BSE Healthcare Index, up 1.1%, gained the most among sector indices. The biggest Nifty gainers were: Grasim Industries, up 3.3% at Rs 2,518, Glaxosmithkline Pharmaceuticals, up 2.4% at Rs 1,245, and Zee Entertainment Enterprises, up 1.8% at Rs 293. Grasim gained as the company Wednesday reported Jan-Mar net profit at Rs 4.74 bn, up 81% on year and higher than street expectations. Reliance Industries was up 1.5% at Rs 1,622. The only Nifty laggards were: Hero Honda Motors, down 1.2% at Rs 686, HDFC, down marginally at Rs 1,749 and HCL Technologies nearly flat at Rs 333. Tata Tea shares, which gained 15% Wednesday, were up 6% at Rs 818 extending gains on news. The Coca Cola Company is making a bid for Energy Brands, in which Tata Tea has 30% stake. Technology shares are likely to stay weak and may fall later in the session as the rupee has risen to 40.75 per $1 today against 40.91 per $1 Wednesday. In the mid trading session, indices were up nearly 1%, as the sentiment remained upbeat on robust Jan-Mar corporate earnings. Short covering on the April contract's expiry also boosted gains. At around 1.30PM, Sensex was at 14296.04, up 78.27 points, or 0.6% from Wednesday's Close. NSE Nifty was at 4196.15, up 28.85 points, or 0.7%. ABB was off lows after it reported Jan-Mar net profit of Rs 866 mn, up 69% from a year ago and higher than analysts' average estimate of Rs 731 mn. The stock was down 0.2% at Rs 4,037. Suzlon Energy, up 3% at Rs 1,224, was top Nifty gainer. Hero Honda, down 4% at Rs 669, was worst-hit among Nifty stocks. ABB was trading flat at Rs 4046 despite good results. In Q1, its net profit jumped to Rs 86.6 cr Vs Rs 51.3 cr. Revenue stood at Rs 1327.6 cr Vs Rs 802.91 cr. Vijaya Bank was trading very strong at Rs 50, up 10%. The bank will set up 350 new ATMs during the next fiscal from 170 ATMs now. Hindalco was down 0.3% at Rs 149. As per market report, Hindalco has bid for 88% stake in Bosnia�s aluminium smelter Aluminij Mostar which is valued at $ 104.8 mn. 7 other companies are there in race. Ranbaxy was up 0.5% at Rs 371.50. The company received final USFDA approval to manufacture and market $2.12bn drug Zolpidem tablets in US. Dr. Reddy was trading strong at Rs 723, up 2%. Australia�s Alchemia ties up with Dr. Reddy for marketing synthetic Heparin. The market size of synthetic Heparin is $ 3.7bn. No. of Scrips Value (Crs.) Advances 525 8421 Declines 524 3284 Unchanged 25 40 Total 1074 11745 Key indices ended nearly flat today as investors unwound long positions on the expiry of April derivatives contracts. Shares had opened over 1% higher on the back of firm global equities and earnings optimism as most Jan-Mar results have been ahead of expectations. However, losses in heavyweights ONGC, Reliance Industries, and Tata Steel, dragged the Sensex and Nifty off highs midway through the session. "Indices were volatile today as there was very little short covering left in the market and rollover activity was high Sensex ended at 14228.88, up 11.11 points or 0.1%, after touching a low of 14127.18 and a high of 14383.72 intraday. Nifty ended at 4177.85, up 10.55 points or 0.2%. It moved between a low of 4143.25 and a high of 4217.90 in the session. CNX Midcap Index ended down 0.5% and S&P CNX 500 Index up marginally. The BSE Capital Goods Index was the biggest sectoral gainer, up 1%. HPCL, up 3.6% at Rs 271, and BPCL, up 3.1% at Rs 339, were two of the biggest Nifty gainers as crude oil prices eased 18 cents to $65.66 a barrel on the New York Mercantile Exchange. Grasim Industries ended at Rs 2,509, up 3% after reporting robust March quarter earnings Wednesday. However, the rise in the stock's price is likely to be limited as cement shares are likely to be under pressure this year due to restrictions on pricing freedom. Shares of ABB rose 1.3% to Rs 4,096 after Jan-Mar net profit rose 69% on year to Rs 866 mn. The company's order book stands at a robust 42.60 bn. Cholamandalam DBS Finance shares were at Rs 26, hitting 10% upper circuit after the company's Jan-Mar profit more than trebled to 154.9 mn. HCL Technologies, down 2.4% at Rs 325, and Hero Honda Motors, down 1.9% at Rs 681, were the worst hit in the Nifty. Nifty heavyweight ONGC ended down 1.4% at Rs 958. The company may buy up to 33% in an Egyptian gas block from Royal Dutch Shell, Reliance Industries ended down 0.5% at Rs 1,590 ahead of its Jan-Mar earnings announcement. Tech stocks ended in mixed trend. Infosys was down at Rs 2018.85 with volumes of Rs 292.83 crs, TCS was up at Rs 1240.40 with volumes of Rs 183.34 crs, Satyam was down at Rs 461.40 with volumes of Rs 176.41 crs, and Wipro closed up at Rs 563.65 with volumes of Rs 124.01 crs. Pharma stocks ended positive. Ranbaxy was up at Rs 370.40 with volumes of Rs 98.41 crs, Dr Reddy closed up at Rs 716.65 with volumes of Rs 72.03 crs, Cipla was up at Rs 253.40 with volumes of Rs 64.95 crs, and Sun Pharma closed up at Rs 1072.50 with volumes of Rs 28.88 crs. Banking stocks showed buying opportunity. In the Public Sector banks SBI closed up at Rs 1145.30 with volumes Rs 144.61 crs & PNB closed up at Rs 511.60 with volumes Rs 83.21 crs. In the private sector ICICI Bank closed up at Rs 961.45 with volume of Rs 211.84 crs & HDFC Bank closed up at Rs 1034.45 with volumes of Rs 130.44 crs. Auto Stocks ended up. Tata Motors closed up at Rs 766.60 with volumes of Rs.163.67 crs & M&M closed up at Rs 766.60 with volumes of Rs 82.41 crs. While in the 2 wheeler segment stocks, Baja Auto closed up at Rs 2497 with volumes of Rs 62.21 crs & Hero Honda closed up at Rs 681.15 with volumes of Rs 28.66 crs. Cement Stocks witnessed positivity with exception. India Cement closed up at Rs 184.35 with volumes of Rs 99 crs, GACL closed down at Rs 119.25 with volumes of Rs 81.65 crs, ACC closed up at Rs 830.85 with volumes of Rs 65.62 crs and Birla Jute closed up at Rs 236.55 with volumes of Rs 1.89ss crs. Nifty ended at 4178 up by 11 points
Weekly close: RBI proposes; Reliance desposes !
Markets closed flat this week after turning the tables on sentiment twice over. It was the global positives which had many markets scaling all time highs. This was fuelled by an appreciating Rupee which brought in even more flows. Its been the result flows which are driving up specific stock movement. However, the key story this week was the credit policy which had the markets taking wings. There was no hike in CRR and no tinkering with the provisions. Markets seemingly and surprisingly were worried about a rate hike. We had been saying for some time that nothing was to come as the CRR hike implementation is still to be implemented this week end and the fact that it impacts with a lag. The Rupee continued to appreciate hitting a 9 year high and is now close to $ 40 and headed there given the FII flows which were very very strong.
Inflation number again is above 6% and thats becoming a concern. Markets are reacting to that and also the Reliance net profit numbers. Reliance had been rallying in anticipation of super profits but the numbers were just in line. The valuation for Reliance is now pricing in optimism from its retail initiatives, SEZ and also the gas find. However, Reliance was the big man down as the stock came in for profit taking on the disappointment. Steel stocks had a ball of a time this week but these gains fizzled out by the end of the week.
There is a view that with UP elections coming to an end on May 8th, the Government will either cut excise duty on fuels or raise fuel prices. That had the rally in HPCL, BPCL and IOC. It was the MNC power stocks which rallied. ABB posted decent numbers and that had the stock running.The change in accounting policy added to the positives. Siemens numbers were not bad but the stock had fallen ahead of that brought in short covering. There was also talk of buybacks this week. Alfa Laval is well above its offer price of Rs 875,. Mico had an open offer at Rs 4000.
Sensex closed almost flat this week ending at 13908. The gainers of the Nifty this week included ABB +7%, Bharat Petroleum +4%, Oriental Bank 10%,PNB +4%, Ranbaxy +8%, Zee +7%, Tata Power +7%, Tata Motors +4%, Siemens +10%, There were many which were down but the big one was MTNL was down 8% and also Cipla down 7%.
Asian Electronics was a wow call we booked this week within 4 days of the call with over 8% gains. The company has businesses related to energy saving equipment. This includes capacitors leased earlier to states and now the retrofit tubelights which saves significant energy. The reports are that the company will post extremely bouyant numbers helped by a new product in the energy space. The proof is in the pudding while our clients enjoyed super profits in the wow calls.
Indo Tech transformers was a wow call we booked this week with over 10% gains and two calls really. The company is into transformers and given the demand supply situation here, the company has done extremely well. We were cautious ahead of the numbers. Another wow call which brought in profits for clients. RTS power was another one booked in the transformer space. Our wow calls have the certainty levels of good research that they will deliver.
We booked Castrol this week in wow calls. Castrol is an old time blue chip and one time component of the Sensex. however, higher crude had taken the bite out of the company as it struggled to pass on the increased raw material prices. The company benefits from an appreciating rupee as most base stock is imported. The company is more of an FMCG play and could see more gains in the next couple of months. Keep watch. Part of the call is still open. Our clients had to wait some time but then the returns in the uncertain environment were worth it.
We booked India Cement this week with good gains as well. We had a research initiated on it couple of weeks ago and that has delivered. We covered results too. Do read them. Among the wow calls also we booked Wockhardt another pharma company.. which we dont need to say much about. SKF was a research note carried couple of months ago and the stock is up almost 50%.. We had a wow call and that covered up a significant part of that gains. Clearly.. Wow calls is something which clients would do well to subscribe to with an investment viewpoint. We pick the entry points and more importantly tell you when to exit.
Technically Speaking: Wow had a technical view given for targets of 14390 and that was indicated quite often. That was where the Sensex actually has turned from. Technically 13726 are support levels and thats where the markets could see next week. The bias is down.
We are concerned on the gains in the global markets and Indian markets rallying in imitation. Crude is close to $ 65 and that will have its impact on inflation. Higher fuel prices are on cards unless Government decides to cut excise. In such a scenario the risk of another interest rate has increased. The RBI has indicated the tolerance for inflation to 4.5% and that means that they could go overboard to do this. We maintain that it would be good to take some cash of the table for now. Better to play safe !
Market slips below 14000
After yesterday's marginal gains the market began the trading session on a weak note tracking the mixed global indices. The Sensex opened with a negative gap of ten points at 14219 and slipped below 14000 on sustained selling in heavyweight, oil, banking and metal stocks. The market received a breather as the inflation for the week ended April 14 remained unchanged from the week ended April 7 and the Sensex regained the 14000 level. However, unabated selling in pharma, oil and metal stocks dragged the Sensex to the day's low of 13885. The Sensex finally closed with losses of 320 points at 13909 while the Nifty shed 94 points and closed at 4083.
The broader market was extremely weak. Of the 2,572 stocks traded on the BSE, 1,682 stocks declined, 819 stocks advanced and 71 stocks ended unchanged. All the sectoral indices ended in negative territory. The BSE HC Index dropped 3.93% at 3696, the BSE Oil & Gas Index shed 3.04% at 7078, the BSE Bankex slipped 2.34% at 7087 and the BSE Metal Index was down 2.32% at 9726.
Among the major losers Cipla slumped 14.27% at Rs217, Bharti Airtel dipped (despite strong quarterly numbers) by 4.15% at Rs826, SBI declined 4.12% at Rs1,099, Tata Steel shed 4.07% at Rs538, Reliance Industries lost 3.67% at Rs1,538, ONGC declined 3.23% at Rs929 and ICICI Bank was down 3.15% at Rs934. However, Satyam Computer notched up gains of 1.52% at Rs467, Wipro rose 0.52% at Rs566 and NTPC added 0.25% at Rs159.
Pharma stocks came under sharp selling pressure. Glenmark Pharma tumbled 4.53% at Rs638, Sun Pharma slipped 3.25% at Rs1,036, Glaxo slumped 3.22% at Rs1,162, Matrix Labs fell 3.02% at Rs195, Orchid Chemicals lost 2.82% at Rs259, Aventis declined 2.51% at Rs1,235, Wockhardt shed 2.31% at Rs419 and Cadila was down 2.17% at Rs319.
Over 2.06 crore IFCI shares changed hands on the BSE followed by Tata Teleservices (1.02 crore shares), Cipla (66.62 lakh shares), Orbit Corporation (59.81 lakh shares) and Reliance Natural Resources (41.82 lakh shares).
Value-wise Reliance Industries registered a turnover of Rs187 crore on the BSE followed by Cipla (Rs144 crore), Indiabulls Real Estate (Rs115 crore), Orbit Corporation (Rs111 crore) and Bharti Airtel (Rs82 crore).
Market ends flat amid volatile trade
Local bourses ended the week flat after suffering high volatility throughout the week. A lot of significant events kept pulling the key indices either ways.
For the week ended 27 April 2007, the BSE Sensex was up 11.59 points, at 13,908.58, while the NSE Nifty was down marginally by 0.05 points, to 4,083.50.
The week started mildly bullish with the Sensex rising 30.92 points, to 13,928.33 on Monday. The market chose to remain cautious on the first day of the week, ahead of the Reserve Bank of India (RBI)’s monetary policy.
On Tuesday, the 30-share BSE Sensex jumped 208.39 points to finish at 14,136.72, after the Reserve Bank of India (RBI)’s decided to keep all policy rates - the CRR, repo, reverse repo and bank rates -- unchanged. Speculative buying, as well as short-covering in the derivatives aided the surge, especially in banking shares.
On Wednesday, the benchmark Sensex gained 81.05 points to 14,217.77, as it abandoned a weak intraday trend, towards the later part of the day, led by index heavyweight, Reliance Industries. Short-covering ahead of expiry of the April contracts also happened in the later half of the day.
On Thursday, the Sensex rose marginally by 11.11 points to 14,228.88, after highly a volatile session, due to the scheduled expiry of the April 2007 derivative contracts.
But the Sensex was not able to sustain the higher levels, for the last day of the week, and hence plunged 320.30 points, to 13,908.58, as index pivotals were being offloaded, tracking weak global markets and profit-booking.
Reliance Industries (RIL) lost 3.05% to Rs 1538.20. RIL reported 14% growth in net profit in Q4 March 2007 at Rs 2853 crore compared to Rs 2520 crore in Q4 March 2006, on the back of strong refining margins. The company said refining margins for the March 2007 quarter were $13 a barrel, higher than the benchmark Asian Dubai crack margin, which averaged less than $7 in the quarter. Net sales rose 5.5% to Rs 25895 crore from Rs 24542 crore.
RIL posted a net profit of Rs 10908 crore for FY 2007, compared with a net profit of Rs 9069 crore in FY 2006. Net sales rose to Rs 105363.30 crore from Rs 81211 crore. The company's earnings per share (EPS) rose to Rs 78.3 in FY 2007 from Rs 65.10 in FY 2006.
RIL targets sales of more than $24 billion by 2011 from the retail business. RIL has set up 135 retail stores in 16 cities during FY-2007, the company said on Thursday.
Car major Maruti Udyog (MUL) rose 2.41% to Rs 795. MUL reported 24% growth in net profit in Q4 March 2007, at Rs 449 crore against Rs 361 crore in the corresponding quarter a year ago.
Grasim advanced 1.27% to Rs 2421.35. It reported 80.5% growth in net profit in Q4 March 2007 at Rs 474.49 crore (Rs 262.74 crore). Net sales surged 36.2% to Rs 2493.75 crore (Rs 1829.78 crore).
Pharma major Cipla plunged 7.64% to Rs 217.10, after it reported 34% fall in net profit in Q4 March 2007 at Rs 126 crore from Rs 191 crore, mainly due to a sharp decline in active pharmaceutical ingredient (APIs) exports and rising material costs. Net sales for the quarter were up 6.3% to Rs 938.5 crore, on the back of a 14.4% growth in domestic revenues to Rs 399.7 crore. Exports were flat at Rs 529.3 crore in the quarter ended 31 March 2007, from Rs 526.6 crore in last year’s corresponding quarter. A change in the product mix also contributed to the decrease in profits.
Cipla reported a 8% increase in net profit at Rs 660.82 crore for the year ended 31 March 2007, as compared to Rs 607.64 crore in FY 2006. Net sales were up at Rs 3572.1 crore compared to Rs 2985.9 crore in the year ended 31 March 2006. The results were declared after trading hours on Thursday.
Bharti Airtel declined 2.28% to Rs 826.25, even as it posted a stronger-than-expected 98% surge in net profit for Q4 March 2007. Its consolidated net profit as per US GAAP, jumped 98% in Q4 March 2007 at Rs 1353.09 crore (Rs 682.31 crore). Revenue rose 58% to Rs 5393.18 crore from Rs 3411.33 crore. Bharti Airtel said it had added a net 53 lakh customers in Q4 March 2007. It also had an ever-net addition of 1.8 crore customers in FY 2007.
Hinduja TMT plunged to Rs 599.35, following resumption of trading in the scrip from 24 April 2007.
Data released on Friday, showed India's wholesale price index rose 6.09% in the 12 months to 14 April 2007, unchanged from the previous week, and analysts said they expect it to dip below 6% in the coming weeks. This figure matched street expectations.
Bank of Japan (BoJ) on the same day left its key interest rate unchanged at 0.5% for the third meeting in a row, as expected, against a backdrop of lingering deflationary pressures.
A report from Credit Suisse pointed out that the development was largely a result of the rapid appreciation in the rupee, which strengthened to below 41 against the dollar on Wednesday. The Bombay Stock Exchange (BSE), with a capitalisation of $944 billion, is also inching toward the magic $1 trillion mark.
The other countries in the trillion-dollar club are the US, UK, Japan, Germany, China, France, Italy, Spain, Canada, Brazil and Russia.
“The UK is the only economy to stop being a trillion-dollar economy for a while after attaining the status for the first time,” the report said.
Credit Suisse said that for 10 economies that crossed the $1 trillion mark in GDP, stock markets rose the year afterward in eight.
FII inflows to dictate trend
The market may remain range-bound next week, as traders may not take fresh positions due to an abridged week that lies ahead. The market will enjoy holidays on Tuesday and Wednesday.
FII inflow has picked up in April 2007 in the backdrop of strong global liquidity. Stock-specific activity will continue in the near-term, as a number of companies are yet to announce their Q4 March 2007 results.
FIIs have pumped money heavily into Indian stocks, this month. Their buying picked up after IT major Infosys on 13 April 2007, issued a strong guidance for FY 2008, putting to rest concerns of a US economic slowdown on the IT sector. FII inflow for April 2007 (till 26 April) reached Rs 6874 crore. FIIs had pulled out a net Rs 1082 crore in March 2007.
The major Q4 results scheduled next week are Reliance Communications (RCL) and Hindustan Lever on Monday, i-flex Solutions on Tuesday, HDFC on Thursday, and Hindalco on Friday.
The outcome of the ongoing seven-phased Uttar Pradesh assembly elections is a key political event to watch out for. The assembly poll gets over in early-May 2007, and the vote is seen as a barometer of national political trends. With global oil price surging in recent weeks, there are talks that the government may hike retail prices of petrol and diesel once the UP elections are over.
Although the Reserve Bank of India (RBI) has kept rates steady, market men feel that the pause may just be a temporary measure. Inflation remains high at around 6%.
Sensex loses 320 points; drops below 14K
After a steady rally in the past few days, the BSE Sensex had a tough time today due to heavy selling from across the board. The market was weak right from the word go, as index pivotals were offloaded, tracking weak global markets. The weakness may also be attributed to an abridged week that lies ahead on account of two public holidays, on Tuesday (1 May) and Wednesday (2 May). Although the Sensex slipped below the 14,000 mark, the S&P CNX Nifty slipped below the 4,000 mark.
All sectoral indices on BSE settled with losses, with shares from banking, healthcare, and oil & gas space plunging the most.
The 30-share BSE Sensex plunged 320.30 points (2.25%), to 13,908.58. It had opened lower, at 14,219.25, and started declining immediately after. The benchmark index also touched a low of 13,884.53.
The NSE Nifty slumped 94.35 points (2.26%), at 4,083.5.
The market-breadth suffered as small-cap and mid-cap shares came under pressure. There were over two losers for every gainer on BSE. Against 1,703 shares that declined, only 840 had advanced. A total of 82 scrips remained unchanged. The BSE Small-Cap Index closed at 6,941.48, down 1.08% while the BSE Mid-Cap Index slipped 0.94%, to 5,733.53.
The total turnover on BSE amounted to Rs 3753.36 crore, while the NSE F&O turnover was Rs 28172.44 crore. The total market-wide turnover amounted to Rs 40138.26 crore.
Among the 30-Sensex pack, 28 declined while only 2 of them survived the bloodbath.
Pharma major Cipla plunged 14.57% to Rs 216.35, on high volumes of 66.45 lakh shares. Cipla reported 34% fall in net profit in Q4 March 2007 at Rs 126 crore from Rs 191 crore, mainly due to a sharp decline in active pharmaceutical ingredient (APIs) exports and rising material costs. The company's performance in the corresponding quarter last year, was exceptionally good because of strong sales in western markets. Net sales for the quarter were up 6.3% to Rs 938.5 crore, on the back of a 14.4% growth in domestic revenues to Rs 399.7 crore. Exports were flat at Rs 529.3 crore in the quarter ended 31 March 2007, from Rs 526.6 crore in last year’s corresponding quarter. A change in the product mix also contributed to the decrease in profits.
Cipla reported a 8% increase in net profit at Rs 660.82 crore for the year ended 31 March 2007, as compared to Rs 607.64 crore in FY 2006. Net sales were up at Rs 3572.1 crore compared to Rs 2985.9 crore in the year ended 31 March 2006. The results were declared after trading hours on Thursday.
Cipla expects its exports business to show modest growth in the next two quarters, on account of ever-rising pricing pressure in the US.
With Cipla bearing the brunt, the BSE Health Care Index plunged 3.9% to 3,696.05, the most among BSE's sectoral indices. Glenmark (down 4.37%), Sun Pharma (down 3.52%), Matrix Laboratories (down 3.22%) and Orchid Chemical (down 2.31%) had slipped.
Bharti Airtel plunged 4.24% to Rs 825.50, on profit-taking, even as it posted a stronger-than-expected 98% surge in net profit for Q4 March 2007.
Bharti Airtel’s consolidated net profit as per US GAAP, jumped 98% in Q4 March 2007 at Rs 1353.09 crore (Rs 682.31 crore). Revenue rose 58% to Rs 5393.18 crore from Rs 3411.33 crore. The net profit growth exceeded expectations, while revenue growth was in line with estimates.
Bharti Airtel said it had added a net 53 lakh customers in Q4 March 2007. It also had an ever-net addition of 1.8 crore customers in FY 2007.
As on 31 March 2007, Bharti Airtel had over 3.9 crore customers, an increase in the total customer base of 86% over the last year.
"The demand for telecom services across all segments remains buoyant and we believe that the growth momentum can be sustained," Bharti Chairman Sunil Mittal said in a statement.
Index heavyweight Reliance Industries (RIL) lost 4% to Rs 1532.60, on a volume of 12.05 lakh shares. After trading hours on Thursday, Reliance Industries (RIL) reported Q4 results that beat market expectations. RIL reported 14% growth in net profit in Q4 March 2007 at Rs 2853 crore compared to Rs 2520 crore in Q4 March 2006, on the back of strong refining margins. The company said refining margins for the March 2007 quarter were $13 a barrel, higher than the benchmark Asian Dubai crack margin, which averaged less than $7 in the quarter. Net sales rose 5.5% to Rs 25895 crore from Rs 24542 crore.
In its key refining division, Reliance Industries (RIL) processed 8.1 million tonnes of crude in Q4 March 2007, which was nearly 4% higher y-o-y.
RIL posted a net profit of Rs 10908 crore for FY 2007, compared with a net profit of Rs 9069 crore in FY 2006. Net sales rose to Rs 105363.30 crore from Rs 81211 crore. The company's earnings per share (EPS) rose to Rs 78.3 in FY 2007 from Rs 65.10 in FY 2006.
RIL targets sales of more than $24 billion by 2011 from the retail business. RIL has set up 135 retail stores in 16 cities during FY-2007, the company said on Thursday.
PSU oil exploration major ONGC slumped 3.15% to Rs 930 on 1.03 lakh shares. The BSE Oil and Gas Index closed at 7,077.96, down 3%.
Banking shares edged lower due to weekly inflation data. ICICI Bank lost 3.34% to Rs 932, State Bank of India was down 4.54% to Rs 1094 while HDFC Bank was down 1.25% to Rs 1017.80. The BSE Bankex lost 2.3% at 7,086.88.
Ranbaxy was down 0.6% to Rs 369.75, but the stock had recovered from the day’s low of Rs 362.55. The pharma major reported 79% surge in consolidated net profit in Q1 March 2007 to Rs 128 crore from Rs 71.80 crore. Ranbaxy Laboratories raised its FY 2007 (for the year ending 31 December 2007) sales growth forecast from 15% to 20%.
IT major Satyam Computers was the top-gainer, up 1.16% to Rs 465.60, on a volume of 14.05 lakh shares. It had surged to a high of Rs 473. Another software exporter, Wipro, also rose 0.52% to Rs 566.
Motor Industries Company jumped 11.55%, to Rs 3820, after German parent, Robert Bosch, launched an open offer to buy an additional 20% stake in the firm. Robert Bosch proposed to buy the stake at Rs 4000 per share. The offer is a part of Robert Bosch’s investment plan of Rs 900 crore in its Indian subsidiaries, over the next two years. A bulk of the investment will flow into MICO. As of 31 March 2007, Robert Bosch already owns 60.55% stake in MICO.
HCL Infosystems rose 7.39% to Rs 145.35, after the company today reported 4% growth in consolidated net profit in Q3 March 2007, at Rs 87.98 crore (Rs 84.44 crore). HCL Infosystem's total income declined 8.8% to Rs 2916.48 crore from Rs 3200.70 crore.
Paper maker Ballarpur Industries rose 4.61% to Rs 114.70. On 12 April 2007, Ballarpur Industries reported 22% growth in net profit in the March 2007 quarter at Rs 64.06 crore. The company is expanding its pulping capacity by about 1 lakh tonne and paper capacity by about 60,000 tonne over the next two years.
All six new listings, which the market regulator Securities & Exchange Board of India alleged were manipulated on debut day, tumbled. Pyramid Saimira was 10% limit down at Rs 321.80. AI Champdany (Rs 111.45), and Shree Ashtavinayak Cine Vision (Rs 161.55) were also 5% limit down. Pochiraju Industries was down 6.42% to Rs 22.60, Cambridge Technologies was down 7% to Rs 58.65 and Mindtree Consulting was down 0.85% to Rs 777.
The Securities & Exchange Board of India (Sebi) also disallowed seven entities from dealing in securities after they were found to be involved in creating abnormally large order-books on the first day of the newly-listed initial public offerings (IPOs) mentioned above. The investigations showed that there was an artificial enhancement of the order-book by these entities by placing orders for a large amount of shares at a price much below the prevailing market price.
The entities that have been included in this order are Latesh Chheda, Viren Kenia, Bhavin Chheda, Chetan Rathod, Neptune Fincot, Dhiren Pajwani and RSS Investment, who allegedly played a lead role in manipulating stocks on their listing day.
Budget carrier Deccan Aviation tumbled by 5% lower limit to Rs 109.05, after it reported a huge loss in Q3 March 2007, after trading hours on Thursday. Bangalore-based low cost carrier Air Deccan has posted a loss of Rs 213 crore for Q3 March 2007, attributing it to high operational costs and oversupply leading to weak domestic yield. Revenue for the quarter was up 66.34% to Rs 457.45 crore over the corresponding quarter of last year. The airline improved its load factor to 83% from 71.75%, flew 1.7 million passengers against 1.07 million and operated 350 flights per day against 230 of the corresponding period last year.
The Deccan Aviation board also decided to hive off the charter services into a separate entity through a wholly-owned subsidiary and transfer the maintenance and repair facility to this body to be newly created.
Consumer products and services firm, Marico, dropped 3.63% to Rs 55.70, after the company reported 17.3% growth in its net profit in Q4 March 2007 after trading hours on Thursday. It recorded a 17.3% increase in consolidated net profit for the Q4 March 2007 at Rs 28.12 crore against Rs 23.97 crore in the year-ago period. Consolidated revenues for the company during the quarter rose 36.2% to Rs 405.6 crore. For the full year, consolidated net profit increased 29.9% to Rs 112.9 crore while sales revenues increased 36.5% to Rs 1567.08 crore.
Deccan Chronicle Holdings rose 6.81% to Rs 185.90, after declaring a hefty 153.12% net profit growth for the March 2007 quarter to Rs 25.59 crore against Rs 10.11 crore during the quarter ended March 2006. Sales rose 64.86% to Rs 147.55 crore (Rs 89.50 crore).
India's wholesale price index rose 6.09% in the 12 months to 14 April 2007, unchanged from the previous week, and analysts said they expect it to dip below 6% in the coming weeks. This figure matched street expectations.
The market-wide rollover of the April derivative contracts to May contracts was around 70-72%, which is almost the same as for the previous expiry, but lower than the 12-month average. Many investors let their long positions expire as they do not expect the market to sustain its recent gains. Corporate results, FII inflows, RBI’s pause on rate hike and firm global markets helped the Sensex gain 1,773.51 points (14.2%) from a low of 12,455.37 on 2 April 2007. The Sensex had tanked 617 points in a single trading session, on 2 April 2007, following the Reserve Bank of India (RBI)’s surprise hike in interest rates after trading hours on 30 March 2007.
Bank of Japan (BoJ) on Friday left its key interest rate unchanged at 0.5% for the third meeting in a row, as expected, against a backdrop of lingering deflationary pressures.
Markets from Asia and Europe were trading weak. The Nikkei 225 Index was down 0.17% on Friday, as investors booked profits on tech shares such as Fanuc and other gainers ahead of holidays, offsetting gains in automakers that benefitted from a weaker yen. The Nikkei closed down 28.76 points, at 17,400.41. The Nikkei was little changed on the week, edging down just 0.3%. The Hang Seng Index lost 0.68%.
FIIs have pumped money heavily into Indian stocks, this month. Their inflow picked up after IT major Infosys on 13 April 2007, issued a strong guidance for FY 2008, putting to rest concerns of a US economic slowdown on the IT sector. FII inflow for April 2007 (till 25 April) reached Rs 6514.20 crore. FIIs had pulled out a net Rs 1082 crore in March 2007.
As per provisional data, FIIs were net sellers to the tune of Rs 89 crore on Thursday (26 April). Domestic institutional investors were net sellers to the tune of Rs 178 crore on Thursday.
US stocks gained on Thursday, as better-than-expected profits from such companies as 3M Co and Exxon Mobil Corp propelled the blue-chip Dow Jones Industrial Average to its second straight close above 13,000. The Dow finished up 15.61 points, or 0.12%, at 13,105.50. The Standard & Poor's 500 Index ended down 1.17 points, or 0.08%, at 1,494.25. The Nasdaq Composite Index closed up 6.57 points, or 0.26%, at 2,554.46.
London Brent crude, currently seen as most representative of global oil prices, was up 17 cents at $67.82, supported by a slew of refinery outages in the United States that have thinned gasoline stocks.
Meanwhile, India joined the elite trillion-dollar economy club this week, but a danger of overheating remains. Some analysts believe it may not remain a member of the rarefied pack for long, at least in the short run.
A report from Credit Suisse pointed out that the development was largely a result of the rapid appreciation in the rupee, which strengthened to below 41 against the dollar on Wednesday. The Bombay Stock Exchange (BSE), with a capitalisation of $944 billion, is also inching toward the magic $1 trillion mark.
The other countries in the trillion-dollar club are the US, UK, Japan, Germany, China, France, Italy, Spain, Canada, Brazil and Russia.
“The UK is the only economy to stop being a trillion-dollar economy for a while after attaining the status for the first time,” the report said.
Credit Suisse said that for 10 economies that crossed the $1 trillion mark in GDP, stock markets rose the year afterward in eight.
Market may remain range bound
The market may remain sideways with negative bias, as traders may refrain from building fresh positions ahead of slew of holidays next week and due to subdued to weak trend in Asian markets. Next week is a curtailed trading week as the market remains closed for two days in a row on Tuesday (1 May) and Wednesday (2 May) on account of a public holiday.
Corporate results announced so far, have been strong. After trading hours on Thursday, Reliance Industries (RIL) reported Q4 results that beat market expectations. RIL reported 14% growth in net profit in Q4 March 2007 at Rs 2853 crore compared to Rs 2520 crore in Q4 March 2006, on the back of strong refining margins. The company said refining margins for the March 2007 quarter were $13 a barrel, higher than the benchmark Asian Dubai crack margin, which averaged less than $7 in the quarter.
The market wide rollover of April derivatives contracts to May contracts was around 70-72%, which is almost the same as was witnessed during the previous expiry but lower than the 12-month average. Many investors let their long positions expire as they do not expect the market to sustain its recent gains. Corporate results, FII inflow, RBI's pause on rate hike and firm global markets helped the Sensex gain 1773.51 points (14.2%) from a low of 12,455.37 on 2 April 2007. The Sensex had tanked 617 points in a single trading session on 2 April 2007, following the Reserve Bank of India (RBI)'s surprise hike in interest rates announced after trading hours on 30 March 2007.
The major March 2007 quarter results today are that of Bharti Airtel and Ranbaxy Laboratories.
The key economic data due today is the weekly inflation data. India's wholesale price inflation rate is forecast at 6.09% for the 12 months to 14 April 2007, unchanged from a week earlier. The data will be released around noon on Friday (27 April). The annual rate hit 6.69% on 27 January 2007, its highest in more than two years, but has moderated after the central bank tightened policy and the government cut duties on a range of items to rein in prices.
FIIs have pumped money heavily into Indian stocks, this month. Their inflow picked up after IT major Infosys on 13 April 2007, issued a strong guidance for FY 2008, putting to rest concerns of a US economic slowdown on the IT sector. FII inflow for April 2007 (till 25 April) reached Rs 6514.20 crore. FIIs had pulled out a net Rs 1082 crore in March 2007.
As per provisional data FIIs were net sellers to the tune of Rs 89 crore on Thursday (26 April). Domestic institutional investors were net sellers to the tune of Rs 178 crore on Thursday.
Asian stocks nudged lower on Friday (27 April) as caution prevailed ahead of first-quarter US economic growth numbers later this session. Key benchmark indices in Hong Kong, Japan, China, South Korea, Singapore and Taiwan were down by between 0.1% to 1.1%. US data later on Friday is expected to show that the world's biggest economy expanded at an annualised rate of 1.8 percent in the first quarter, slowing from a 2.5 percent pace in the fourth quarter of 2006.
US stocks gained on Thursday, as better-than-expected profits from such companies as 3M Co. and Exxon Mobil Corp. propelled the blue-chip Dow Jones Industrial Average to its second straight close above 13,000. The Dow finished up 15.61 points, or 0.12 percent, at 13,105.50. The Standard & Poor's 500 Index ended down 1.17 points, or 0.08 percent, at 1,494.25. The Nasdaq Composite Index closed up 6.57 points, or 0.26 percent, at 2,554.46.
London Brent crude, currently seen as most representative of global oil prices, was up 17 cents at $67.82, supported by a slew of refinery outages in the United States that have thinned gasoline stocks.
Intraday Stock Ideas
NIFTY (4177) SUP 4140 RES 4215
BUY WIPRO (563.65)
SL 658 T 573, 576
BUY SHIV-VANI (321.10)
SL 316 T 331, 334
SELL STAR (325.90)
@ 328 SL 332 T 317, 315
SELL GMRINFRA (408)
@ 410 SL 415 T 398, 394
SELL RELCAPITAL (731)
@ 734 SL 738 T 723, 720
STRATEGY INPUTS FOR THE DAY
Stay light, enjoy the weekend
Turbulence is life force. It is opportunity. Let's love turbulence and use it for change.
The turbulence in the latter half of the day was more or less expected. The bulls and bears may well adopt a wait and watch approach. Next week is a shortened week (Tuesday and Wednesday will be holidays) and investors would not like to carry any heavy positions over the weekend, given that Monday mornings quite often bring in the blues. Stay light and book profits in counters that have run up too fast.
The global cues are mixed. The Dow Jones Industrial Average made a new high, rising by 0.1% while the Nasdaq gained 0.2%. Most Asian markets are in the red this morning. Japan has led the decline in regional stocks as a higher than forecast fall in consumer prices coupled with a surprising drop in industrial production fueled concerns about the world's second-largest economy. Sliding metals prices dragged mining shares lower in the region. Crude oil remains above $65 per barrel. The rollover in the F&O segment has been good, though reports suggest squaring up of some long positions for the April contracts and creation of some short positions in the May contracts. What's more, May Nifty futures yesterday ended at a discount of 15 points to the Spot Nifty.
Reliance Industries announced its results after the market closed for trading. As has been the trend in the past couple of quarters, this time too better than expected show by its refining business has managed to offset a subdued performance from the petrochemicals business. Going forward, the trend will continue to be similar for RIL, with major upsides likely from FY09 once the company kicks off the sale of gas from the KG Basin. The full effect of the new refinery being set up by RPL will kick in from FY10. What will be the contribution from the retail business is still unclear at the moment as the business is still at a nascent stage. The stock has already run up quite a bit in recent times along with the market. So, one may not see a big movement on the upside from RIL today.
FIIs were net sellers to the tune of Rs890.4mn (provisional) in the cash segment yesterday while the domestic institutions offloaded shares worth Rs1.78bn. In the F&O segment, FIIs were net buyers of Rs5.6bn yesterday. On Wednesday, FIIs were net buyers of Rs9.62bn, taking their net buying in April to $1288.6mn. Year-to-date, the net inflows from the foreign funds is now close to $3bn. Mutual Funds pumped in Rs2.59bn in the cash segment on Wednesday.
With the rupee rising past 41 against the dollar, the Indian economy has crossed the $1 trillion mark. But, Moody's says that India needs to boost productivity to meet demand and check inflation.
SEBI has barred five traders and two brokerages for alleged price manipulation in the shares of recent new listings such as Mindtree, Shree Asthavinayak Cinevision, Pyramid Saimira, Pochiraju Industries, Cambridge Technologies and Al Champdany.
US stocks gained on Thursday with the Dow Jones Industrial Average closing at a record high for the second day in a row on the back of upbeat earnings from 3M, Apple and others.
The S&P 500 Index closed flat at 1494.25. The Dow, which closed above 13,000 for the first time on Wednesday, added 15.61 points to 13,105.50. The Nasdaq Composite Index rose 6.57 points to 2554.46, supported by a rally in Apple to a record.
After the close, software giant Microsoft reported higher quarterly sales and earnings that topped estimates. The company's shares gained 5% in extended-hours trading. Microsoft should give the broader market a lift Friday morning. However, any advance could be challenged by the first-quarter GDP report, due out before the start of trading.
US light crude oil for June delivery dropped 78 cents to $65.06 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 23 cents higher at $65.29 per barrel in after-hours trading in Asia.
Treasury prices slumped, raising the yield on the 10-year note to 4.69% from 4.64% late on Wednesday. In currency trading, the dollar gained against the euro and yen, rebounding after several down sessions. The greenback's strength dragged on dollar-denominated assets like gold and silver. COMEX gold for June delivery fell $9.40 to settle at $678 an ounce.
European stocks hit new six-and-half-year highs. The pan-European Dow Jones Stoxx 600 index rose 0.15% to trade at 388.40. The German DAX Xetra 30 rose 0.6% to 7,387.02 while the French CAC 40 closed just in the red at 5,944.44. The UK's FTSE 100 advanced 0.1% to 6,469.40.
Stocks in Brazil and Mexico fell on profit-taking and slipping commodity prices. In Brazil, the benchmark Ibovespa stocks index closed 608 points, or 1.2%, lower at 49,067.69, down from Wednesday's record-high close at 49,676. Mexico's stocks closed lower for a fourth consecutive session. The IPC index of 35 most-traded issues fell 101 points, or 0.3%, to 29,342.70.
Asian stocks fell this morning. The Nikkei in Tokyo was down 69 points to 17,360 while the Hang Seng in Hong Kong slumped 164 points to 20,502. The Kospi in Seoul slid 14 points to 1538 and the Straits Times in Singapore dropped 25 points to 3381.
HOW MARKET FAREDGlobal cues to dictate trend
With over 8% gains in last two weeks, the bulls slowed down today after a spectacular opening buoyed by strong global markets. However, bulls succumbed to profit taking at peaks, dragging the indices in negative territory in afternoon trades. Finally, after alternate bouts of buying & selling, NSE Nifty closed at 4177.85, adding 11 points to its previous close. While BSE 30-share Sensex added 11 points to end at 14229 after touching an intra-day peak of 14383.72 and a low of 14127.18.
HPCL, Bajaj Auto, BPCL, HLL and Tata Motors were the major gainers among the Nifty 50 stocks. While, HCL and Tisco were among the notable losers.
Earlier, indices opened higher with a huge gap taking cues from strong US market overnight with Dow Jones hitting an all-time high of 13,107, before closing at a record 13,090, up 136 points. Nasdaq added 23 points to close at 2548. Among the Indian ADRs HDFC Bank rose nearly 3% to $74.92 while ICICI Bank added 2.6% to close at $46.52. VSNL, Infosys, Satyam, Wipro and Dr.Reddy's gained between 1-2% each to $21.47, $53.59, $25.38, $16.49 and $17.40, respectively.
ABB added over 1.9% to Rs4096 after the company announced strong sets of Q1 numbers with net profit at Rs866mn (up 68.8%) and net sales at Rs13.12bn (up 63%).
Cement stocks advanced further for second trading session. India Cement was up by 2% to Rs184 and Grasim was up by over 2% to Rs2509 after the company announced impressive Q4 results with profit up 80% to Rs4.74bn, sales up 36% to Rs24.94bn.
Tech stocks closed lower after Rupee climbed for a fifth day on speculation that RBI will allow the currency to strengthen to curb inflation. Income from US constitutes around 60% for the tech companies. Rupee touched a high of 40.87 against the Dollar. Frontline stock Infosys closed flat at Rs2019, HCL Tech fell by over 2% to Rs326 and Satyam Computer was down by over 1% to Rs461.
Profit booking was seen in Real Estate and Property stocks after rallying in last two trading sessions. Parsvnath lost by over 3% to Rs326, Sobha Developers declined by over 3% to Rs889 and Nagarjuna Construction was down by 2% to Rs180.
Insider Trades:
BEML: Rakesh Jhunjhunwala on 23rd April 2007, sold 122833 & 177167 equity shares in market of BEML. Total Holding of Rakesh Jhunjhunwala and persons acting in concert after sale is 2,11,750 shares which is 0.576%.
Market Volumes:
The turnover on NSE was up by 7% to Rs118bn. BSE Capital Good index was the major gainer and gained 0.91%. BSE Auto index (up 0.75%), BSE Bank index (up 0.27%) and BSE PSU index (up 0.52%) were among the other major gainers. However, BSE Consumer Durable index lost 0.90%.
Volume Toppers:
IFCI, TTML, Nagarjuna Fertilizers, Tele Data Info, IDFC, RNRL, RPL, IBREAL, SAIL, ITC, Idea, RIL, Vijaya Bank, Ashok Leyland, NTPC, IVRCL Infra, Hindalco, Arvind Mills and PFC.
Upper Circuit:
Tanla, Swan Mills, Mirza Intern, Sujana Metal and Saregama.
Results Today:
Aptech, Bharti Airtel, Cairn India, CRISIL, Educomp, Era Constructions, Esab India, HCL Info, HCC, Jubilant Organosys and Ranbaxy.
Delivery Delight:
Bajaj Auto, Bank of India, Bharat Forge, BHEL, BPCL, Grasim Industries, HLL, HPCL, I-Flex, PNB, Ranbaxy and Siemens.
Abnormal Delivery:
Wipro, Sterling Biotech, National Aluminium Company Ltd, Godrej Consumer Products Ltd, VSNL, APIL, Crompton Greaves, Moser Baer, SRF, HCL Technologies and GlaxoSmithkline.
Stock Futures with Largest Increases in OI:
BILT, Guj Alkalies, Dr Reddy's Labs, Ultratech cement, Mangalore Refinery, OBC, Indian Hotels, i-Flex and Amtek Auto.
Stock Futures with Largest Decreases in OI:
Patni, Guj Narmada Valley, Aurobindo Pharma, BEL, Corp Bank, HPCL, IOC, Bombay Dyeing, Polaris and STAR.
Results Corner:
RIL Q4 net income (up 14%) to Rs28.5bn and sales (up 5.5%) to Rs258.95bn
Balrampur Chini Q2 profit at Rs199.7mn (down 74.8%), sales at Rs3.96bn (up 19%)
Nicholas Piramal Q4 group profit at Rs560.3mn ( 257%), net sales at Rs6.45bn (up 51.7%)
ABB Q1 net profit at Rs866mn (up 68.8%), net sales at Rs13.12bn (up 63%)
Marico Q4 profit (up 17%) to Rs281.2mn and sales (up 33%) to Rs3.97bn
Wockhardt Q1 profit rises to Rs663mn from a loss of Rs37mn, revenues (up 48%) to Rs5.25bn
Brokers Recommendation:
IDEA – Buy from CLSA with target of Rs126
Long Term investment:
HPCL
Major News Headlines
Moody's says classic signs of overheating in India; must boost production to curb overheating
Liberty Shoes plans to raise funds by selling securities
Ranbaxy gets final USFDA approval to manufacture & market Zolpidem Tablets
Dr Reddy's signs pact with Alchemia for Herapin - Reports
Opto Circuits to buy Devon Innovations and Ormed Chemical
Tata Tea buys Vitax & Flosana Trademarks in Poland
Hindalco bids for majority stake in Bosnian Smelter - Reports.
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