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Friday, May 11, 2007
Weekly Stock Ideas
BUY Infosys (2001)
SL 1940 T 2090, 2110
BUY Renuka Sugar (527)
SL 510 T 570, 576
BUY IDBI (94)
SL 90 T 100, 102
BUY BHEL (2437)
SL 2390 T 2520, 2530
BUY Kotak Bank (531)
SL 523 T 550, 555
Indiainfoline - Weekly Newsletter
Inflation softens further
The slew of monetary and fiscal measures taken by the Government coupled with a high base effect seems to be paying some dividends as far as inflation is concerned. India's inflation, based on the Wholesale Price Index (WPI), declined further to 5.66% in the week ended April 28, the government said on Friday. The reading on wholesale prices came in ahead of consensus estimates for a fall to 5.71-5.73%. Inflation stood at 5.77% in the previous week and was at 3.9% during the corresponding week of the previous year. If this trend continues for a while, the Reserve Bank of India (RBI) and the Government won't have to unleash new sets of measures to contain spiraling prices in a booming economy. Interest rates may well remain stable at current levels unless there is a renewed spike in inflation.
March industrial output growth at 12.9%
A separate report showed that India's industrial sector continued to be on a high growth path in March. The Index of Industrial Production (IIP) grew by an impressive 12.9% in the last month of FY07 as against 8.9% in the same month last year, data from the Commerce & Industry Ministry showed today. Average expectations among economists ranged between 10-10.5%. The Government revised the IIP growth figure for February, from a provisional estimate of 11% to 10.8%. Manufacturing, the cornerstone of the current boom in the industry, led the expansion in March with a strong 14.1% growth over the 10.1% growth registered in the corresponding month last year. For the whole year (2006-07), the IIP grew by 11.3% compared to 8.2% in the year 2005-06.
Market loses ground
It has been a roller-coaster ride for the bulls yet again. As we have mentioned earlier, liquidity will play an important role in driving the markets forward. After an excellent April driven by strong corporate growth and increase in FII activity, the month of May is turning out to be pretty dull for the bulls. Other than liquidity problem, lack of confidence among the investors is making difficult for bulls to make their presence felt on Dalal Street.
The intra-day reversals in the last few trading sessions pressurized the bulls and made it difficult to hold on to their gains. Over the week, the BSE Sensex lost almost 1% 138 points to close at 13796. The NSE Nifty also shed 1% or 41 points to shut shop at 4077. The weakness was led by selling in IT and Pharma stocks. IT stocks continued to bear the burnt of the rising rupee. Infosys, TCS and Wipro were among the major losers.
Select steel stocks shone brightly following reports that the Government would not intervene to control rising steel prices. Index heavy weight Tata Steel gained 3% to Rs569, SAIL was up by 1% at Rs135, Jindal Steel advanced 3.6% to Rs3030 and Bhushan Steel surged by over 5% to Rs565.
Banking stocks recovered much of the losses suffered earlier during the week. The latest IIP numbers, which were released on Friday afternoon indicated strong industrial growth. India's industrial production growth unexpectedly accelerated in March, output at factories, utilities and mines gained 12.9% from a year ago. Also, reports that Reserve Bank of India may cut the minimum SLR limit from the present level of 25% boosted Banking stocks. The index marginally gained by 0.4%. Frontline stocks like HDFC Bank slipped 1% to Rs997, ICICI Bank were down 0.8% to Rs848. However, SBI rose 1.8% to Rs1149. Others like J&K Bank, Corp Bank and IndusInd Bank were major losers.
Sugar stocks were in action on Friday on speculation that new Government in UP will provide some sops to the sugar companies. Talks of hike in Sugarcane price are already going around in the market. After a long period of time some sweetness returned to the Sugar counter as the Sugar stocks cheered the outcome of UP State elections. Renuka Sugar jumped by over 9% to Rs526, Balrampur Chini advanced 4.3% to Rs68, Bajaj Hindusthan was up 1.7% to Rs169 and Dwarikesh Sugar gained 1.8% to Rs69.
IT stocks continued to be a laggard as concerns of rising rupee played spoilsport in the minds of investors. Heavyweights like Infosys, TCS and Wipro underperformed the key indices. The IT index was the major loser as it lost 3.1% during the week. Front line stocks were the most hit, Wipro lost by over 3.5% to Rs545, Infosys was down by over 3.5% to Rs2000, Satyam Computer declined 3.5% to Rs454 and TCS slipped 1.7% to Rs1252.
Pharma stocks also were in poor health. The index was down 1.7% during the week. Cipla was among the major loser. The scrip lost by over 5.5% to Rs204, Dr Reddy's Lab was down by over 5% to Rs683, Wockhardt declined over 5.5% to Rs399 and Lupin fell 4.1% to Rs707.
Bajaj Auto, India's second biggest motorcycle maker gained momentum after the company announced that the Board of Directors would consider a proposal to split the company. The scrip was the top gainer among the Nifty scrip's gaining nearly 6% to finally close at its week's high of Rs2718 after hitting a low of Rs2391.
Uncertain times for bulls
The market needs fresh impetus to move forward. The Fed meet is out of the way and so is the outcome of the UP elections. When not much on earth is happening, the markets may look towards the sky Gods and the predictors to get a whiff of what lies ahead as far as the monsoon is concerned. The market is likely to consolidate in the near term with no major triggers available at the moment. One may have to wait for a while before the major indexes hit new historic peaks.
Given the volatile movement of the indices, the relatively low confidence of investors at these levels, especially the retail ones we see another volatile trading week and extremely high intra-day gyrations. Global cues will also be watched closely as they have assumed a lot of significance off late. After all, its more of the the weakness across the world indices that has led to the decline in local indices as well.
Rupee snaps 9-week winning streak
The rupee on Friday broke the sequence of nine consecutive weekly gains due to growing dollar demand from importers following the local currency's unprecedented rise this year. A stronger rupee means importers have to convert less to purchase foreign exchange. The rupee lost 0.9% on the week to 41.25 against the dollar. This is the Indian currency's weakest level since April 23 and its biggest weekly loss in almost a year. On Thursday, it fell by nearly 37 paise to shut shop at 41.28/30 as call money rates slumped amid improving liquidity. The partially-convertible currency had touched a nine-year high of 40.5450 on May 7, the strongest since May 1998. The rupee has rallied by 8.4% in the past nine weeks through May 4, its best winning streak since May 2003, due to growing foreign capital flows in Asia's fourth-largest economy, which is estimated to grow by 9.2% in FY07.
UP polls...BSP gains huge lead as SP flounders
The Mayawati-led Bahujan Samaj Party (BSP) dealt a brutal blow to Mulayam Singh Yadav's Samajwadi Party (SP) in the just concluded assembly polls in the country's largest state. Beating all optimistic forecasts, Mayawati's BSP broke the 200-seat barrier in the 403-member UP Assembly with surprising ease and is now all set to form the next government on its own. Mayawati will decide her future course of action after meeting her party legislatures on Saturday evening. She is likely to meet the UP Governor TV Rajeshwar after the meeting to stake her claim to form the next government. Meanwhile, UP chief minister Mulayam Singh Yadav blamed the Election Commission (EC) for his party's defeat after submitting his resignation to the state governor. Yadav accused the EC of running a parallel government and said it was not good for the democracy.
Monsoon sets in over Bay of Bengal: IMD
Southwest monsoon, which is key for the growth of India's agriculture sector, set in over parts of southeast Bay of Bengal, Nicobar islands and Andaman Sea, the India Meteorological Department (IMD) said on May 10. The monsoon arrived about eight days earlier than normal. Rains typically start in the east coast by May 18. "Conditions are favourable for further advance of southwest monsoon over some more parts of Andaman Sea and southeast Bay of Bengal during next 48 hours," the IMD said on its Web site. The monsoon will be 95% of the long-term average, the weather department said in its April 19 forecast. The IMD may forecast the onset of the monsoon over the southern Kerala coast on May 12 or May 14. The four-month rainy season typically begins on June 1.
Govt mulling easing 5-yr norm for overseas flights
There is some good news for those who dream of flying in the jumbo Airbus A-380, courtesy Kingfisher Airlines. According to newspaper reports, the Government is toying with the idea of relaxing the mandatory five-year experience limit in the domestic market for local airlines to fly abroad. The Ministry of Civil Aviation is reportedly looking at granting permission to domestic carriers to launch international flights on a case-by-case basis. The Government plans to review, by the end of the year, the current norms for domestic airlines flying abroad, Civil Aviation Minister Praful Patel said. "The issue would be reviewed on the basis of the need of the sector and the ability of the carrier to be able to serve international routes," he added. What's more, soon private airlines such as Jet Airways and Air Sahara will be able to launch flights to the Gulf region as the Centre is planning to open up the sector to private airlines by the beginning of 2008.OVL consortium strikes it big in Persian Gulf
ONGC Videsh Ltd. (OVL), along with Indian Oil Corp. (IOC) and Oil India Ltd. (OIL), struck a large reservoir of oil and gas off the Iran coast in the Persian Gulf. OVL and its public sector peers will prepare a plan in the next three months on commercial production from the field, ONGC Chairman R.S. Sharma was quoted as saying. Gas reserves in the block are estimated to go up to 10 trillion cubic feet, while oil reserves in the block are estimated to be in the region of 1 billion barrels, according to a financial daily. Production from the field is estimated to begin in another five years, the newspaper said. In Dec. 2002, the consortium signed a contract with National Iranian Oil Co. to carry out exploration in the Farsi block. OVL and IOC hold 40% each while OIL holds the rest.
Maha Mumbai SEZ still in Govt cold storage
Smarting from the ugly episodes of violence in West Bengal over the issue of land acquisition for Special Economic Zones (SEZ), the Board of Approvals (BoA) deferred a decision on the controversial Maha Mumbai SEZ promoted by Reliance Industries Ltd. (RIL). Out of the 23 proposals for conversion of in-principle approval to formal approval considered, the BoA granted formal approval in 16 cases. Among the prominent ones that got the go-ahead included SEZs from Suzlon, Vedanta, DLF and Unitech. The May 9th meeting was the first in six months as the Government had put all new SEZ proposals on hold in the wake of the political storm raised by Tata Motors' Singur car project and violence at Nandigram in West Bengal.Govt exits Maruti with Rs23.7bn in pocket
The Government approved the sale of its remaining 10.27% stake in Maruti Udyog Ltd. to banks, financial institutions and insurance companies at an average price of Rs797 per share. The sale would fetch the Government Rs23.68bn, P.V. Bhide, Secretary in the Department of Disinvestment said after a meeting of a Group of Ministers headed by Finance Minister P. Chidambaram. The Government had set a floor price for the bidding at Rs760 a share. The shares were sold to 32 bidders. LIC got the biggest portion of 13mn shares. SBI got 5mn shares. Corporation Bank was the highest bidder at Rs850 and got 588,235 shares. Reliance MF got 2mn shares. HDFC MF got 1mn shares and UTI MF 88,998 shares.DLF IPO gets SEBI nod
DLF received an approval from capital market regulator SEBI for its much-delayed IPO. The real estate giant is expected to raise around Rs136bn according to reports. The approval comes nearly a year after the company first filed the draft red herring prospectus. DLF proposes to enter the capital market with a public issue of 175mn shares of Rs2 each through 100% book building process. Ramesh Sanka, CFO, DLF was quoted as saying that the company has got the nod from SEBI and will update the document and file with the Registrar of Companies (ROC). The IPO is expected to hit the market in three months. The IPO will involve at least 10% of equity dilution, say reports. Kotak Mahindra and DSP Merrill Lynch along with four others are the Lead Book Managers.
Fortis Healthcare makes dull debut
Fortis Healthcare Ltd., a Ranbaxy promoter group company, made a lackluster debut on May 9 with the stock slipping below the Rs100 mark amid talk of high valuation. The stock opened at Rs105 on the BSE as against the issue price of Rs108 per share. It finally ended at Rs100 after touching a high of Rs109.1 and a low of Rs97.9. The stock finished the week at Rs. Fortis had fixed the issue price towards the upper end of the IPO price band of Rs 92-110 per share. The IPO was subscribed 2.78 times with the company receiving bids for over 127.4mn shares as against 45.7mn shares on offer in the public issue.
Rate hikes hit auto sales
Rising interest rates has started to pinch the automobile industry. Though India's passenger car sales grew by 11.3% last month to 82,934 units (74,542), domestic sales of two-wheelers fell 6% to 570,381 units, the Society of Indian Automobile Manufacturers (SIAM) said. Bike sales have been the hardest hit as it is the most price-sensitive segment in the entire industry. Motorcycle sales fell by 9.7% in April to 463,091 units. Sales of commercial vehicles (CV) grew by 6.5% to 30,836 units in April and exports surged by 19.3% to 90,551 units, data released by the New Delhi-based automobile industry body showed. Total automobile vehicle sales were down 3.2% in April at 732,724 units, according SIAM.Bajaj Auto to mull demerger on May 17
Shares of Bajaj Auto Ltd. rose after the company said that its Board will consider the proposal for the demerger on May 17. The demerger involves splitting Bajaj Auto into two separate units - one for manufacturing and the other for financial services business. This is the first formal announcement by Bajaj Auto on the demerger issue and comes four years after founder Rahul Bajaj first talked about it in 2003. Some time back, the Bajaj family patriarch had denied newspaper reports that the split was due to differences between his two sons - Rajiv and Sanjeev, and was aimed at enhancing shareholders value. Some part of the company's huge cash surplus is likely to be transferred to the demerged finance company to fund its growth. The Pune-based two-wheeler major will also consider the audited financial results for the year ended March 31, 2007 and dividend for the said year.
There is no end in sight to the big-ticket mergers and acquisitions. Alcoa Inc. said it had made a US$26.9bn bid for Alcan Inc. after merger talks between the North American rival aluminum producers fell through. Each Alcan share would be exchanged for US$58.60 in cash and 0.4108 of an Alcoa share. That values Alcan at US$73.25, or 20% more than its closing price on May 4, New York-based Alcoa said in a statement. Including debt, the deal would be valued at US$33bn. Montreal-based Alcan said that its board is reviewing the offer and asked shareholders to wait for its recommendation before taking action. Separately, shares of Rio Tinto touched a record high amid market grapevine that bigger rival BHP Billiton had made an unsuccessful takeover bid for the world's third-largest mining firm. BHP shares also hit a record high. But, Rio Tinto denied speculation that BHP had approached it with a takeover proposal.
Thomson to buy Reuters for US$17.6bn
Thomson Corp. on Tuesday confirmed that it was in talks to acquire Reuters Group Plc for about £8.8bn (US$17.6bn) to create a global leader in the business-to-business information markets. Reuters shareholders would get 352.5 pence in cash and 0.16 share of Thomson stock per share under the transaction being discussed, the two companies said. Woodbridge, the Thomson family holding company, would own about 53% of Thomson-Reuters, while other Thomson shareholders will hold about 23% and Reuters shareholders about 24%. The enlarged group would be called Thomson-Reuters and the combined Thomson Financial unit and Reuters financial and media businesses would be called Reuters.
More global deals...
In more news on deals, BAE Systems made its largest acquisition since it sold its stake in Airbus last year. Europe's biggest defence contractor and a key supplier to the Pentagon agreed to pay US $4.1bn for Armor Holdings, which makes, among other things, armaments for Humvees. In addition, UniCredit SpA, Italy's biggest bank, said that it was considering acquisitions of France's Societe Generale SA or Capitalia SpA in a record year for European bank takeovers. Meanwhile, a private-equity consortium conceded defeat in its attempt to buy Qantas Airways. Led by Australia's Macquarie Bank, it missed a deadline to gain the support of 50% of shareholders (though it later claimed that it had collected just enough votes). The Australian airline's directors, who backed the A$11.1bn (US$9.2bn) bid last year, were criticised for not doing enough to get investors on board.
Sharekhan Investor's Eye dated May 11, 2007
Lupin
Cluster: Apple Green
Recommendation: Buy
Price target: Rs840
Current market price: Rs707
Price target revised to Rs840
Result highlights
- Lupin's net sales increased by 22.8% year on year (yoy) to Rs518.1 crore in Q4FY2007. The growth in the top line is above our expectations. The sales growth was driven by a 12% rise in the domestic formulation business to Rs144.3 crore and a 53.4% increase in the formulation exports to Rs165.9 crore.
- Lupin's operating profit margin (OPM) expanded by 460 basis points yoy to 14.5% in Q4FY2007; the same was lower than our expectation of 15.7%. The OPM was below expectations on account of a higher than anticipated rise in the company's raw material cost and higher research and development (R&D) expenses. Consequently, the company's operating profit grew by 80.0% yoy to Rs75.0 crore in Q4FY2007.
- The company's reported net profit stood at Rs137.1 crore, up by 173.1% yoy. However, this includes the one-time income related to the sale of the Perindopril patent. Based on our estimates, the net profit excluding the post-tax consideration received from the sale of the Perindopril patent stood at Rs61.3 crore, a jump of 22% yoy. The same was above our estimate of Rs57.5 crore.
- For FY2007, the company's net sales increased by 22.7% to Rs1,970.9 crore, which was above our estimate. The OPM expanded by 70 basis points to 14.9% as against our estimate of 15.7%, driven largely by higher R&D expenses. The company's reported net profit stood at Rs302.1 crore, up by 65.3% yoy. However, this includes the one-time income related to the sale of the Perindopril patent. Based on our estimates, the net profit excluding the post-tax consideration received from the sale of the Perindopril patent stood at Rs226.2 crore, a jump of 23.8% yoy. The same was in line with our estimate of Rs228.4 crore.
- Lupin ’s FY2007 profit performance (exclusive of the one-time gain) was just in line with our expectations. Hence, we are maintaining our FY2008 sales and profit estimates at Rs2,600 crore and Rs328.9 crore respectively. For FY2009, we expect the revenue to grow by 18% to Rs3,054.4 crore and the profit to rise by 25% to Rs410.5 crore. As per FY2009 estimates, the revenue and profit (exclusive of the one-time gain from the patent sale) would grow at compounded annual growth rate (CAGR) of 24% and 35% respectively. We have not included the earnings upside from the R&D pipeline in our estimates.
- The management has given an impressive revenue guidance of Rs3,000 crore for FY2008 (a 50% growth) and of Rs4,200 crore (a 40% growth) for FY2009. The growth would be achieved through various initiatives in the USA, Europe and semi-regulated markets. As per the management, a small part of the growth would also come from acquisitions. However, as per our organic growth estimates, at the current price Rs707 the stock is available at Rs19x its FY2008E and 15.2x its FY2009E earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs840 (18x of FY2009E earnings).
Bharat Bijlee
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,730
Current market price: Rs1,637
Q4FY2007 results: first-cut analysis
Result highlights
- The Q4FY2007 results of Bharat Bijlee Ltd (BBL) are much ahead of our expectations.
- The revenue for the quarter grew by 73% to Rs179 crore on the back of a strong order book. The net profit increased by a superb 123% to Rs29.07 crore, much ahead of our expectations.
- The operating profit for the quarter grew by 105% to Rs44.5 crore, as the operating profit margin (OPM) for the quarter improved by 370 basis points to 24.8% against 21.1% on a year-on-year (y-o-y) basis.
- The improvement in the OPM is on account of a lower raw material/sales ratio, which stood at 62.8% as against 64.9% in the same quarter last year. The OPM also improved because of other operational efficiencies as the other expenses/sales ratio declined to 5.9% from 7.6% on a y-o-y basis.
- The interest cost for the quarter decreased by 20% while the depreciation charge increased by 89%.
- The company has declared a dividend of Rs25 (250%) per share.
- The timely expansion of its transformer manufacturing capacity, by 3000MVA to 8000 MVA per annum, has benefited the company. Going forward, the huge investments lined up in the power sector and the continuing activity in the industrial sector will drive BBL's order book.
- At the current market price of Rs1,637, the stock is discounting its FY2007 earnings by 16.3x and earnings before interest, depreciation, tax and amortisation by 8.6x. Excluding the value of the cash and cash equivalents, the stock is trading at 13x its FY2007 earnings. In view of the better than expected results and strong order backlog, we maintain our Buy recommendation on the stock with a price target of Rs1,730. We shall be upgrading our FY2008 earnings estimates and price target after analysing the annual report of the company. Watch this space.
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Sharekhan Riveting Metals dated May 11, 2007
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Bajaj Auto leads Sensex’ recovery
The local indices finished in the green even though the other Asian markets reported losses and witnessed high volatility for a major portion of the trading session. The Sensex plunged nearly 217 points in the early trades on massive selling in front-line stocks. Lower than expected inflation numbers and sustained buying in heavyweights, IT and auto stocks lifted the market sentiment and the Sensex touched an intra-day high of 13864. Thereafter, the market witnessed choppy trades and with some range-bound moves the Sensex slipped into the red in the afternoon again. The market bounced back from its lows towards the close, led by Bajaj Auto, Infosys Technologies, TCS, State Bank of India and NTPC. The Sensex finally ended the session with gains of 25 points at 13796. The Nifty ended the session at 4077 by adding 10 points.
The breadth of the market was neutral. Of the 2,626 stocks traded on the BSE, 1,266 stocks advanced, 1,281 stocks declined and 79 stocks ended unchanged. Among the sectoral indices the BSE IT index advanced by 0.94% at 4924 followed by the BSE Teck index (up 0.81% at 3666) and the BSE PSU index (up 0.62% at 6395). However, the BSE FMCG index, the BSE Metal index, the BSE CG index and the BSE CD index closed in negative territory.
Select blue chips notched up significant gains. Bajaj Auto jumped 4.20% to Rs2,719 on plans to split its business. Reliance Communication rose 2.86% at Rs478, NTPC advanced 2.51% at Rs155, SBI climbed 2.29% at Rs1,149, TCS surged 1.88% at Rs1,253, Infosys scaled up 1.40% at Rs2,000 and Ranbaxy added 1.26% at Rs391 while ICICI Bank, Reliance Industries and Tata Motors ended with marginal gains. Among the laggards ACC tumbled by 2.84% at Rs850 and Grasim dropped 2.42% at Rs2,429 while HLL, Gujarat Ambuja, Cipla, Hindalco, HDFC, Tata Steel, Reliance Energy and Wipro ended with marginal losses.
Over 2.26 crore Reliance Natural Resources shares changed hands on the BSE followed by IFCI (1.34 crore shares), Reliance Petroleum (1.17 crore shares), Nagarjuna Fertilizers (83.28 lakh shares) and Page Industries (65.76 lakh shares).
Value-wise Page Industries registered a turnover of Rs300 crore on the BSE followed by Reliance Industries (Rs209 crore), Reliance Communication (Rs125 crore), India Bulls (Rs121 crore) and Orbit Corporation (Rs111 crore).
Major events keep market under pressure
The market was under pressure throughout the week, weighed by lot of domestic and global events. High degree of volatility was seen throughout the week.
The BSE Sensex lost 1.06% to 13,796.16 while the S&P CNX Nifty was down 0.98% to 4,076.6
The week started on a weak note, with the Sensex declining 55.02 points to 13,879.25, on Monday due renewed selling, led by IT pivotals.
The weak trend continued at day later, as the BSE Sensex lost a further 113.79 points to 13,765.46, due to lack of buying support, as investors watched from the sidelines ahead of major local and global events scheduled later in the week. Subdued Asian and European stocks also were of not much help.
The 30-shares BSE Sensex settled 16.05 points higher on Wednesday at 13,781.51, as buying resumed for index pivotals. Strong global markets also helped the sentiment.
The barometer index lost 10.28 points, to 13,771.23, on Thursday as a late sell-off pulled the market in the red at closing bell.
Sensex gained 24.93 points on Friday to settle at 13,796.16, amidst intense volatility. Global markets, Uttar Pradesh election results, inflation and industrial production figures, made it swing sharply.
Tata Steel was up 2.97% to Rs 569.70. The steel major is seen reporting strong numbers when it unveils its FY 2007 (year ended 31 March 2007) results on 17 May 2007 on higher steel prices.
Ranbaxy Laboratories gained 2.30% to Rs 390.75. The pharma major is planning to invest around Rs 60 crore to upgrade the recently acquired Be-Tabs Pharma units in South Africa. With the revamp of the Be-Tabs facilities, the company expects to lead the way for generics manufacturing in South Africa, says a company statement. The acquisition substantially strengthens the basket of products that Ranbaxy brings to the market, specially in the acute and over the counter product streams.
IT major TCS slipped 1.70% to Rs 1252.70, on renewed selling. TCS, a leading global IT services, business solutions and outsourcing firm, announced its tie-up with Microsoft Corporation to deliver RFID (radio frequency identification) solutions to global companies. It launched an initiative to develop RFID solutions built on Microsoft BizTalk
Bajaj Auto advanced 5.90% to Rs 2718.60, on its proposal to split the company into two. The market has been agog with talks of a split since the last two years. Transferring some of the Rs 6500-crore cash will improve the finance and insurance businesses, chariman Rahul Bajaj had said earlier. Bajaj Auto is in both general as well as life insurance businesses through Bajaj Allianz General Insurance Company and Bajaj Allianz Life Insurance Company, respectively. Bajaj Auto holds a 74% stake in both firms with the rest held by Allianz. Bajaj Auto is also into the business of lending money through Bajaj Auto Finance, a listed entity. Bajaj Auto holds over 38% stake in Bajaj Auto Finance.
Reliance Industries (RIL) rose 0.58% to Rs 1590.25. RIL is silently lining up a Rs 3,000-crore home solutions retail venture. Its retail arm, Reliance Retail, will roll out a chain of 100 stand-alone specialised home solution outlets, each spread over 40,000-60,000 sq ft, over the next three years.
State Bank of India (SBI) edged higher by 1.81% to Rs 1149.20 on expectations of good Q4 ending March 2007 results.
ACC declined 1.01% to Rs 850.35. Swiss cement maker Holcim had acquired an additional 3% stake in ACC, bringing its total stake to around 41%. Holcim today acquired 58.59 lakh shares of ACC, constituting a little above 3% equity of the company through a block deal executed on NSE for a weighted average price of Rs 899.07, on 8 May.
Maruti Udyog (MUL) slipped 1.37% to Rs 795.30. The Union government exited the country’s largest car maker on Thursday, 10 May 2007,selling its residual stake for Rs 2,360 crore to a clutch of financial institutions led by Life Insurance Corporation (LIC). The government had offered 2.96 crore shares in the company, representing 10.27% stake. Of this, LIC got all the 1.3 crore shares it had bid for at a price of Rs 800 per share. LIC now controls 12.5% and has become the second-largest shareholder in the company.
In all, 32 financial institutions and mutual funds have been alloted shares. State Bank of India (SBI) emerged as the second most successful bidder with 83 lakh shares at Rs 775 each. Corporation Bank and Exim Bank submitted the highest bids at Rs 850 per share. Both were granted 5.88 lakh and 1.18 lakh shares respectively.
Among mutual funds, Reliance Mutual Fund and HDFC Mutual Fund got 20 lakh and 10 lakh shares, respectively. SBI MF also got 49.76 lakh shares at Rs 775 per share and Punjab National Bank 12.29 lakh shares at Rs 815 per share.
Tech Mahindra lost 8.43% to Rs 1511. Tech Mahindra’s consolidated net profit (excluding exceptional items) jumped 120% in Q4 March 2007 at Rs 196.1 crore compared with Rs 89.1 crore in the corresponding quarter of the previous financial year. Revenue surged 108% to Rs 874.5 crore compared with Rs 421.2 crore in the fourth quarter of the previous year. Tech Mahindra incurred a one-time exceptional charge towards an upfront payment of Rs 524.9 crore to a customer and has reported a net loss of Rs 328.9 crore in Q4 March 2007.
Fortis Healthcare, which listed on 9 May, settled at Rs 100, a discount over the IPO price of Rs 108 per share. The stock debuted at Rs 105, and surged to a high of Rs 109.10. Its low for the day was Rs 97.90.
Fortis Healthcare had priced its 4.59-crore equity shares at Rs 108. The price band for the IPO was Rs 92 to Rs 110 per share. The issue, which had opened for subscription on 16 April 2007 and closed on 20 April 2007, was subscribed 2.78 times. The qualified institutional buyers (QIB) portion was subscribed 2.72 times, non-institutional portion 1.74 times and the retail portion 3.26 times
On 9 May 2007, US Federal Reserve’s decision kept interest rates steady. On that very day, the European Central bank (ECB) held its rates steady at 3.75%
The Bank of England raised interest rates to a six-year high of 5.5% on 10 May 2007, as it voiced concern that diminishing spare capacity in the UK economy and greater pricing power skewed inflation risks to the upside. On the same day, the European Central Bank kept its key lending rate unchanged at 3.75%
India's industrial production rose 12.9% per annum in March 2007, from a year earlier, higher than downwardly revised annual growth of 10.8% in February, due to strong manufacturing output, government data showed on Friday, 11 May 2007. Analysts had forecast annual industrial output growth of 10.40%.
Full year 2006-07 industrial output jumped 11.3% from the same period a year earlier. Manufacturing production, which represents more than 75% of industrial output, surged 14.1%per annum in March 2007, from March 2006 compared with a 12.30% annual growth in February 2007. Annual industrial output growth in March 2006 was 8.9%. Annual manufacturing growth in March 2006 was 10.10%.
India's wholesale price index rose 5.66% in the 12 months to 28 April 2007, lower than the previous week's increase of 5.77% per annum due to a decline in some food prices, data released showed on 11 May. The figure was lower than a forecast of 5.73% in analyst poll.
India’s largest real estate developer DLF said on Monday (7 May) an initial public offering of 10.2% of the company should take place in the next three months as it had received regulatory approval for the sale. In 2006, the New Delhi-based DLF had dropped plans for what would have been India's biggest IPO due to a sharp market fall. At that time, the IPO was expected to raise up to $3.5 billion.
Global markets, next batch of Q4 results to dictate trend
The market may edge higher next week as Mayawati’s Bahujan Samaj Party (BSP) is set to emerge as the single largest party in the Utar Pradesh (UP) assembly contrary to fears of a hung assembly.
As a result, domestic bourses shrugged off the impact of weak global equities on Friday 11 May 2007, as the trend of UP polls filtered during trading hours. Data showing moderating inflation and strong industrial output in March 2007 aided the recovery on that day.
The market will take direction next week from trends in global equities. It will also take its cue from some prominent Q4 March 2007 results. The key result this weekend (Saturday, 12 May 2007)is that of State Bank of India.
Suzlon Energy and LIC Housing Finance unveil Q4 results on Monday, 14 May 2007. Bajaj Auto and Tata Steel report Q4 results on Thursday, 17 May 2007. The board of Bajaj Auto will also consider proposal to split the company into two along with results. Tata Motors and Dr Reddy’s Laboratories unveil Q4 results on Friday 18 May 2007.
Some of the other Q4 results scheduled next week are Welspun-Gujarat Stahl Rohren, Shree Cement, Sobha Developers and Voltas on Monday,14 May 2007; Sun Pharma, Havell’s India and JK Lakshmi Cement on Tuesday,15 May 2007; ICI (India), Balaji Telefilms, J B Chemicals and Pharmaceuticals on Wednesday, 16 May 2007; and Federal Bank on Friday, 17 May 2007.
US stocks underwent correction on Thursday, 10 May 2007, and Asian stocks followed suit on Friday, 11 May 2007, as disappointing US retail sales and a widening US trade deficit renewed worries about the economic outlook for the world’s biggest economy. In recent days, a spate of merger and acquisition activity as well as increasingly eye-popping takeover bids have helped propel many global indices to record highs. However, the sharp and swift surge has raised concerns of a steep correction.
A strong rebound on the domestic bourses had materialized, last month as the initial Q4 March 2007 results were strong and Infosys issued a strong guidance for FY 2008 on 13 April 2007. From 12,455.37 on 2 April 2007, the Sensex had surged 1,773.51 points (14.2%) to 14,228.88 on 26 April 2007. It has since turned volatile.
India’s long-term growth prospects remain strong. The long-term growth drivers are a favourable demography (large share of young population), robust domestic consumption and acceleration in infrastructure creation.
Sensex settles a little under 13,800
Intense volatility characterised trading today (11 May 2007). Global markets, Uttar Pradesh election results, inflation and industrial production figures, apart from regular institutional activity were the key events that made the market oscillate either way. Fresh shorting was seen at every rise, with value buying emerging at every fall.
Battered down sugar stocks bounced back on strong buying interest in anticipation of fiscal sops from the new government in the Uttar Pradesh, where most of the sugar companies have their production facilities.
The 30-shares BSE Sensex gained 24.93 points, or 0.18%, to settle at 13,796.16. After opening at 13,691.86, the Sensex had slumped to a low of 13,562.95, as selling continued, tracking weak global markets.
However, the index recovered as some buying resumed at lower levels. It surged to a high of 13,864.18, when inflation and industrial production data were released at noon.
The Sensex gyrated 301.23 points during the course of day’s trading session.
The S&P CNX Nifty gained 9.85 points or 0.24% at 4076.65.
Meanwhile. Mayawati-led Bahujan Samaj Party (BSP) was way ahead of the ruling Samajwadi Party and the Bharatiya Janata Party as the latest trends in the 403-member Uttar Pradesh assembly polls indicated.
Out of 304 trends available at the state election headquarters, BSP was leading in 145 seats while the SP and BJP followed with 70 and 45, respectively. The Congress was ahead in 23 seats, while Ajit Singh-led RLD's candidates leading in 7 seats.
Independents were in lead in 8 seats, while JD(U) and Loktantrik Congress were ahead on one seat each.
Technically, the Sensex seems stuck in a trading range of 13,700 and 14,300 points since the past few weeks. Traders are waiting for a breakout either way, which is likely to provide future direction.
The Sensex had rebounded after noon on good economic numbers. India's industrial production rose 12.9% per annum in March 2007, from a year earlier, higher than downwardly revised annual growth of 10.8% in February, due to strong manufacturing output, government data showed on Friday, 11 May 2007. Analysts had forecast annual industrial output growth of 10.40%.
But eventually the Sensex could not sustain at the higher levels. The muted rise of the Sensex was party due to weak Asian and European markets. The Nikkei average sank 1.03% on Friday, 11 May 2007, as Casio Computer Co. tumbled on a downbeat forecast and broker downgrades, and investors sold high-tech exporters such as Sony Corp. on growing concerns about the U.S. economic outlook. The Nikkei closed down 183.24 points at 17,553.72.
The Hang Seng declined 1.34% to 20,468.21
The total turnover on BSE amounted to Rs 4435.78 crore while the NSE F&O turnover was Rs 38697.93 crore. Total marketwide turnover was at Rs 52526.24 crore, which was much higher compared to the turnover of Rs 44,614.97 crore on Thursday, 10 May 2007.
The market breadth ended positive on alternate bouts of weakness and firmness. On BSE 1,311 shares advanced as compared to 1,258 that declined, while 83 remained unchanged.
The BSE Mid-Cap index ended at 5,851.27, rising 35.15 points, or 0.6%. The BSE Small-Cap Index rose 33 points, or 0.47%, to finish at 6,984.40.
Among the Sensex pack, 16 advanced while the rest declined.
Bajaj Auto rose 4.22% to Rs 2719, and was the top gainer from the pack, on its proposal to split the company into two. It had struck a high of Rs 2724.90. The market has been agog with talks of a split since the last two years. Transferring some of the Rs 6500-crore cash will improve the finance and insurance businesses, chariman Rahul Bajaj had said earlier.
Bajaj Auto is in both general as well as life insurance businesses through Bajaj Allianz General Insurance Company and Bajaj Allianz Life Insurance Company, respectively. Bajaj Auto holds a 74% stake in both firms with the rest held by Allianz. Bajaj Auto is also into the business of lending money through Bajaj Auto Finance, a listed entity. Bajaj Auto holds over 38% stake in Bajaj Auto Finance.
The Pune-based company will also announce its FY 2007 results on 17 May 2007.
Other group company Bajaj Auto Finance surged 4.98% to Rs 450. Promoters (Bajaj’s) hold 50% stake in this company.
Index heavyweight Reliance Industries (RIL) rose 0.61% to Rs 1591.05, after recovering sharply from its low of Rs 1555.05. On BSE, a high 13.25 lakh shares were traded. It was the second most traded counter on BSE with turnover of Rs 209.66 crore
Reliance Communications (up 3.28% to Rs 480), and NTPC (up 2.71% to Rs 155.20) were the other gainers.
The BSE Bankex was up 0.6% at 6,905.10, Banking stocks advanced on renewed buying interest after the latest set of data released noon today, showed strong industrial growth and fall in inflation.
ICICI Bank rose 0.90% to Rs 850 and State Bank of India (SBI) edged higher by 3.60% to Rs 1164. Expectations of good Q4 ending March 2007 results supported SBI. SBI unveils Q4 and FY 2007 results on Saturday, 12 May 2007.
Analysts expects SBI to post strong Q4 March 2007 results due to a low base effect. Merrill Lynch has projected a 72% growth in SBI’s net profit to Rs 1465.60 crore in Q4 March 2007, from Rs 853.29 crore in Q4 March 2006, due to much lower hit on its bond portfolio and lower taxes (SBI had accounted for whole year’s fringe benefit tax in Q4 March 2006).
Reportedly, SBI has decided to embrace advanced risk-management techniques under the Basel II standards by September 2007, well ahead of RBI's March 2008 deadline.
Stocks from the banking pack had started rising since a few days ago on speculation that that the Reserve Bank of India may be close to cutting the minimum SLR limit from the present level of 25%. SLR refers to the minimum amount of their deposits that banks must invest in government bonds. Currently, it is 25% and the market is expecting the central bank to cut to 23% in a month's time.
RBI expects deposits to grow by Rs 4,90,000 crore this year. This means banks will need 1,22,000 crore of government bonds this year. However, the government's borrowing program shows it will issue only 1,09,000 crore of fresh bonds this year. Clearly there is a mismatch.
Inflation is expected to slip to 5% by the end of May 2007, primarily because of the base effect. Together this would leave the RBI with little defense against an SLR cut.
Among other PSU banks, Bank of Baroda rose 4.07% to Rs 261 and Punjab National Bank advanced 1.66% to Rs 514.
IT stocks, which were hit over the past few days due to the rupee’s continued surge, edged up as the rupee backed away from the nine-year high hit on Monday 7 May 2007. The BSE IT Index up 0.94% at 4,924.12, and was the top gainer among the sectoral indices on BSE. Infosys (up 1.39% to Rs 2000), and TCS (up 2.47% to Rs 1260), MphasiS (up 2.25% to Rs 320), HCL Technologies (up 1.61% to Rs 330.35), and i-flex Solutions (up 1.49% to Rs 2350) were the other gainers from the pack.
In early trade, the partially convertible rupee was at 41.43/44, a level last traded on 30 April 2007, weaker than Thursday's (10 May) close of 41.28/30. It had hit a nine-year high of 40.53 on Monday, 7 May 2007, but has fallen 2% since then.
Due to the sharp swings in IT pivotals, the BSE IT index had turned volatile over the past few weeks, slipping to 4878.17 on 10 May 2007 from a recent peak of 5124.21 on 3 May 2007.
A rise in rupee directly impacts revenue and profits of IT firms, which derive a lion’s share of revenue from exports to the US. Brokerage CLSA said in a recent report that rupee earnings of software services firms were cut by 1.6% for every 1% rise in the currency.
ACC was the top loser, down 4.03% to Rs 840 on 3.79 lakh shares. Grasim (down 2.58% to Rs 2425), and HDFC (down 1.49% to Rs 1655), also declined.
The BSE FMCG Index lost the most among sectoral indices: down 1.1% to 1,798.86. Colgate (down 1.85% to Rs 369.50), HLL (down 1.84% to Rs 186.50) and ITC (down 0.70% to Rs 162.30) were the major losers
Maruti Udyog (MUL) slipped 0.20% to Rs 793. The Union government exited the country’s largest car maker on Thursday, 10 May 2007,selling its residual stake for Rs 2,360 crore to a clutch of financial institutions led by Life Insurance Corporation (LIC). The government had offered 2.96 crore shares in the company, representing 10.27% stake. Of this, LIC got all the 1.3 crore shares it had bid for at a price of Rs 800 per share. LIC now controls 12.5% and has become the second-largest shareholder in the company.
In all, 32 financial institutions and mutual funds have been alloted shares. State Bank of India (SBI) emerged as the second most successful bidder with 83 lakh shares at Rs 775 each. Corporation Bank and Exim Bank submitted the highest bids at Rs 850 per share. Both were granted 5.88 lakh and 1.18 lakh shares respectively.
Among mutual funds, Reliance Mutual Fund and HDFC Mutual Fund got 20 lakh and 10 lakh shares, respectively. SBI MF also got 49.76 lakh shares at Rs 775 per share and Punjab National Bank 12.29 lakh shares at Rs 815 per share.
Hindalco Industries lost 1.02% to Rs 145.10, after Novelis Inc. said its shareholders have approved acquisition by Indian aluminum producer. About 99.8% of the votes cast by shareholders were in favor of the transaction. Hindalco is buying Novelis for an estimated $5.9 billion, including debt.
Jockey inner wear licensee Page Industries was the top traded counter on BSE with total turnover of Rs 300.25 crore. The stock vaulted 8.93% to Rs 458.10 on huge volumes of 65.74 lakh shares, riding on back of strong set of results, declared on 9 May 2007 after market hours, for the second straight day. It has surged 15% to Rs 420.55 since 10 May 2007.
Page Industries posted a 49% jump in its net profit to Rs. 17.02 crore in the year ended March 2007 compared to Rs 11.39 crore in FY 2006. Net sales shot up 34% to Rs 135.94 crore, from Rs 101.18 crore. A lot of institutional buying has been happening on this counter post result.
Sugar shares surged as punters bet on sops from the new government in Uttar Pradesh. Most of the companies have sugar mills in the cane-rich state of UP. Balrampur Chini Mills (up 12.40% to Rs 70.30), Bajaj Hindustan (up 9.34% to Rs 171.50), Dhampur Sugar (up 9% to Rs 76.80), Shree Reunka Sugars (up 12.3% to Rs 70.30), Sakthi Sugars (up 10% to Rs 94.50) and Mawana Sugars (up 6.7% to Rs 40.55).
Domestic sugar prices have fallen 28% in the past six months, mirroring decline in sugar traded in London in the period as global production is heading for a surplus for the first time in four years.
Production of sugar in India, the world’s second largest producer after Brazil, is slated to surge to around 265 lakh tonnes in the current season ending September 2007 against 192.6 lakh tonnes the previous year, according to industry estimates. Sugar producers reported dismal financial performance in the March 2007 quarter amdi fall in sugar prices.
Gujarat Mineral Development Corporation jumped almost 10% to Rs 707.65 extending its recent rally fuelled by plans of 1:5 stock split and strong Q4 results
Television content provider Balaji Telefilms advanced 8.6% to Rs 179.35 as traders built positions on expectation of strong Q4 March 2007 results. Balaji Telefilms unveils Q4 March 2007 results on 16 May 2007. Analysts expect good Q4 numbers from the media firm. Merrill Lynch expects a 54.4% growth in Balaji’s net profit to Rs 23.90 crore in Q4 March 2007, from Rs 15.50 crore in Q4 March 2006. It estimates a 16.3% growth in revenue to Rs 89.50 crore, from Rs 76.90 crore.
Reliance Petroleum soared 7.7% to Rs 86.35 on renewed buying. On BSE, a massive 1.17 crore shares changed hands in the stock. Late last month, Reliance Petroleum (RPL) said it had made remarkable progress on all implementation fronts for its global sized, complex refinery coming up in a Special Economic Zone at Jamnagar in Gujarat with the overall project completion nearing 50%, in just 15 months since commencement of the project.
Sterlite Optical Technologies surged 6.5% to Rs 194.65. The stock had risen 3.5% to Rs 182.70 on Thursday, 10 May 2007, with the company reporting after trading hours on Wednesday, 9 May 2007, that it had a strong order backlog of $62 million for power transmission conductors and expected to complete deliveries within the next 6-8 months.
Britannia Industries slumped 4.75% to Rs 1501, breaking its winning streak since the last five trading sessions. It had advanced from Rs 1310.40 on 4 May, to Rs 1573.25 by 10 May 2007.
Britannia Industries controls over 38% of the Indian biscuit consumption by value, and has grossed annualised revenue in excess of Rs 200 crore from its non-biscuit basket led by bread, cakes and rusks rivaling the food businesses of Godrej and Dabur in size. The biscuit major has probably emerged on top of India's bread market reporting depletion of over 250 million loaves annually.
The company doubled the turnover from around Rs 100 crore in the last two years, and is looking for a repeat act by 2010. And, this figure does not include Daily Bread, a high-end bakery products chain serving European breads amongst others. Britannia acquired a strategic 50% stake in the boutique-manufacturer last year.
Cairn India rose 2.68% to Rs 134 after it had announced two new oil and gas discoveries in its Rajasthan block on Thursday. It also said it had received a six month extension from the government for exploration of the northern appraisal area of the block.
Fact advanced 3.70% to Rs 23.80 after the Union government approved a package of Rs 2,200 crore for the revival plan of the loss-making Kochi-based fertiliser company The revival package put-forward by the management of Fact includes capacity expansion of urea and caprolactum plants. New proposals include setting up a Rs 300 crore Nylon plant, which will utilise 25 % the caprolactum production.
Domestic brokerage and financial services firm Indiabulls Financial Services lost 2.04% to Rs 532 after it priced its $275 million global depository receipt (GDR) offering at a slight discount to its prevailing market price in India. The GDR, is priced at $13.06 (Rs 535.46 calculated at Rs 41 a dollar).
Piramyd Retail jumped 10% to Rs 72.70 after reports that said Aditya Birla group was in talks to acquire the company.
Finolex Cables slumped 5.85% to Rs 88.75 after reporting a 58% fall in net profit to Rs 8.83 crore in Q4 March 2007. Sales rose 30.90% to Rs 292.22 crore. Net profit jumped 36.97% to Rs 68.99 crore in the year ending March 2007. Sales were up 38.14% to Rs 1033.02 crore.
US stocks suffered their steepest fall in two months on Thursday, 10 May 2007, as disappointing retail sales and a widening trade deficit renewed worries about the economic outlook. The Dow Jones Industrial Average lost 147.74 points, or 1.1%, to 13,215.13. Tech laden Nasdaq Composite Index lost 42.60 points, or 1.65%, to 2,533.74.
The Bank of England raised interest rates to a six-year high of 5.5% on Thursday, 10 May 2007, as it voiced concern that diminishing spare capacity in the UK economy and greater pricing power skewed inflation risks to the upside. On the same day, the European Central Bank kept its key lending rate unchanged at 3.75%
As per provisional figures, FIIs were net sellers to the tune of Rs 514.26 crore while Domestic Institutional Investors (DIIs) were net buyers of Rs 440.05 crore today.
Oil prices showed little movement on Friday as a lack of fresh news kept the market within a tight range. Light, sweet crude for June delivery fell 6 cents to $61.75 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange. A day earlier, prices rose 26 cents amid broader gains in energy futures as traders noticed a gas supply imbalance in Wednesday's government inventory report.
China's monthly trade surplus more than doubled in April to nearly $17 billion, the government said on Friday, adding to pressure on Beijing ahead of closely watched talks with Washington on its swollen trade gap.
The April trade gap of $16.88 billion was below February's $23.7 billion, the second-highest level on record, but in line with steady increases in monthly trade surpluses over the past year.
Exports in April rose 26.8%, while imports rose 21.3%, the General Administration of Customs said on its Web site. The government reported a monthly trade surplus of just $6.9 billion in March.
China reported a global trade surplus in 2006 of $177.5 billion. The Asian Development Bank said in a report in March that figure could balloon to more than $250 billion next year.
Last year, the United States reported a record $232.5 billion trade deficit with China. China's gap with the United States is bigger than its global surplus because it runs deficits with other countries.
Morning Call - May 11 2007
Market Grape Wine :
In House :
Nifty at a support of 4020 , 3982 and 3933 levels with resistance 4080 and 4111 levels .
Nifty might try 4000 levels today .
Sell : Satyam below 456 target of 442 s/l of 463
Maintain strict stop loss as markets to be very choppy and volatile .
Out House :
Markets at a support of 13656 & 13575 levels with resistance at 13818 & 13898 levels .
Maintain strict stop loss as markets to be very choppy and volatile .
Buy : Hp & IOC at dips
Buy : SBIN & KotakBank at dips
Buy : IDBI at dips
Buy : LUPIN at dips
Buy : DIVIS at dips
Buy : JSW &Tisco at dips
Buy : Ibulls
Dark Horse : IBUlls , ACC , Unitech , Divis , HDFC & Ranbaxy
TGIF : Thank God Its Friday : Markets to correct book profits at higher levels .
Bullet for the day : SKumar , EKC , Educomp & Rolta with strict stop loss
Anand Rathi - Daily Strategist - May 11 2007
The NIFTY futures saw a rise in OI to the tune 2.93% with prices coming down from high and closing near day's low indicating short positions being built up aggressively in the market at higher levels which forced bulls to liquidate their positions .The premium in nifty futures narrowed and nifty futures closed at 22 points discount to spot nifty indicating aggressive long liquidation seen in the market and fresh short positions built up in the market . The FII bought index futures to the tune of 82crs and buyers in index options to the tune of 103crs. The PCR has come up from 1.12 to 1.14 indicates some buying may emerge at lower levels in the market. The IV is around 24.80 levels indicating some volatile trading sessions ahead.
Among the Big guns, ONGC saw 10.03% rise in OI with prices coming down sharply and closing near day's low indicating heavy short positions being built up in the counter indicating weakness in the counter. Whereas RELIANCE saw 0.55% rise in OI with prices coming down from high indicating selling pressure again emerging in this counter which may further weaken the counter. The counter may see further built up of positions before taking any sharp and directional move which in turn may help to get clue about market's direction.
In the TECH front, INOFSYSTCH& TCS saw significant rise in OI with prices coming down indicating selling pressure emerging and short positions built up in these counters indicating some weakness may be seen in these counters .SATYAMCOMP saw drop in OI with prices almost flat indicating buying emerging in this counter at lower levels .WIPRO saw addition in OI with prices coming down indicating selling pressure coming in this counter suggesting some weakness may be seen in this counter.
In the BANKING counters, all the majors saw rise in OI significantly with prices coming down from high indicating this sector also saw selling pressure emerging at higher levels thus may result in sharp movement on either side in these counters .SBIN saw 3.61% with prices closing almost flat indicating short positions built up at higher levels. ICICIBANK saw rise in OI 3.48 % with prices coming down indicating weakness in this counter .HDFCBANK saw rise in OI with prices up indicating strength in the counter.
In the metal pack TATASTEEL saw drop in OI to the tune of 6.86% with price coming down from high indicating long positions liquidated in the counter as market reacted form higher levels. SAIL saw liquidation of long positions as counter saw drop in OI with fall in prices .HINDALCO saw drop in OI with prices coming down indicating liquidation of long positions STER saw rise in OI with prices going up indicating huge buying seen in the counter indicating further strength in the counter.
We feel that the volume and built up in OI suggests that market may show some short positions being built up and long positions liquidation as uncertainty prevail in the market. Market may show weakness if it closes below 4025 levels where we may see fresh short positions built up in the market and long liquidation in the market .One should trade with strict stop losses to be adhered too
Anand Rathi - Daily Strategist - May 11 2007
SSKINFO (10 May 2007): Sensex down 10 points
From the Dealing Room: With the bulls firmly in control for almost the entire trading session, stocks from across sectors posted smart gains and the market appeared to be heading towards a firm close. But that was before a strong bout of profit taking towards the close shaved off nearly 206 points from the day's high. The Sensex witnessed strong optimism after resuming with a positive gap of 41 points at 13823. The US Fed's decision to keep interest rates unchanged turned sentiments from cautious to bullish. While the action in several counters held the market firm above the 13900 levels in the first half of the trading session, the index notched up further gains in the afternoon to touch the day's high of 13977. However, the market slipped towards the close as the weakness in select heavyweight, oil, capital goods and public sector stocks dragged the index to an intra-day low of 13745. The Sensex finally ended the session with a loss of ten points at 13771, while the Nifty shed 12 points to close at 4067.
SSKINFO (10 May 2007): Sensex down 10 points
Market to lose ground on weak global equities
The market is likely to lose ground today tracking sharp fall in global markets. Domestic bourses have been closely following global markets in recent years. Volatility may rise due to major local events scheduled today.
The counting of assembly polls in Uttar Pradesh has begun today. The BSP took an early lead in 66 seats while the Samajwadi Party and BJP were locked in a close battle for the second slot in trends available for 155 of 402 seats. The ruling Samajwadi Party and BJP were ahead in 36 and 31 seats respectively. The Congress was leading in 11 seats while independents and others were ahead in as many constituencies
The state is headed for a hung assembly, exit polls said on Wednesday, 9 May 2007, and ebbing support for Congress, which rules nationally, could see it delay reforms.
Key economic data due today is industrial production in March 2007. The market expects between 9% to 11% per annum growth in industrial production in the month. Industrial production had risen 11% per annum in February 2007, which was slightly lower than the 11.4% per annum growth in January 2007.
Another important data due today is inflation. India's wholesale price inflation rate is forecast at 5.73% for the 12 months to April 28, lower than the annual 5.77% a week before. The data will be released at about 12:00 IST.
Asian equities declined sharply on Friday 11 May 2007 taking their cue from a sell off on Wall Street on Thursday. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore, Taiwan and China were down by between 0.76% to 1.3%.
US stocks suffered their steepest fall in two months on Thursday 10 May 2007 as disappointing retail sales and a widening trade deficit renewed worries about the economic outlook. The Dow Jones Industrial Average lost 147.74 points or 1.1% to 13,215.13. Tech laden Nasdaq Composite Index lost 42.60 points or 1.65% to 2,533.74.
The Bank of England raised interest rates to a six-year high of 5.5% on Thursday as it voiced concern that diminishing spare capacity in the UK economy and greater pricing power skewed inflation risks to the upside. On the same day European Central Bank kept its key lending rate unchanged at 3.75%
FIIs resumed buying on Indian bourses on Wednesday 9 May 2007. But their inflow was a tiny Rs 23.30 crore. FIIs had turned net sellers for the first time this month with an outflow of Rs 222.10 crore on Tuesday 8 May 2007. As per provisional data, FIIs were net buyers to the tune of Rs 153.27 crore on Thursday 10 May 2007.
FIIs had made heavy purchases in the month of April 2007 that helped the market stage a solid rebound from lower level. Their inflow in April 2007 totaled Rs 6679.20 crore.
Anand Rathi - Daily Technical - May 11 2007
Nifty and Sensex have exhibited a candlestick with a longer upper shadow.
Technically, one may use the level of 4030 (Nifty) and 13600 (Sensex) as the stop loss level.
Nifty faces resistance at 4150 and Sensex at 14000.
BSE Smallcap and BSE Midcap have exhibited a grave stone doji.
CNX IT has lost ground.
In the Punter's zone we have a Sell in Polaris , Infosys Tech & Reliance Ind.
In the Technical call section, we have a Buy in Bharat Forge & Sell in ONGC and Bajaj Hindustan.
Anand Rathi - Daily Technical - May 11 2007
Market may move in tune with global markets
Overnight fall in US and European indices coupled with subdued Asian markets in morning trades may weigh on the local indices in early trades and thereafter could exhibit volatility during intra-day trades. Nervousness in the market is likely to continue following a slump in the yesterday's trades after a seep rise. However, the prevailing bullish trend may add to the market advantage and help the sentiment turn positive. Among the domestic indices, the Nifty could test 4050 and below this level next support is in 4040-4025 range, while on the upside it could edge higher to 4085. The Sensex has a likely support at 13700 and may face resistance at 14300.
US indices ended weak on Thursday, as investors eyed higher oil prices, weak economic news and lackluster April retail sales. While the Dow Jones dropped by 148 points to close at 13215, the Nasdaq ended 43 points lower at 2534.
All Indian ADRs had a weak outing on the US bourses. MTNL fell sharply and tumbled around 4% and ICICI Bank by 3% while Tata Motors, Infosys Patni Computers, Satyam, Wipro, HDFC Bank and Rediff declined over 1-2% each.
Crude oil prices gained strength. The Nymex light crude oil for June delivery rose by 23 cents to close at $61.81. In the commodity space, the Comex gold for June series declined $15.50 to settle at $667 a troy ounce.
Indiainfoline - Intraday Stock Ideas
NIFTY (4066.8) SUP 4028 RES 4096
BUY HEROHONDA (706.95)
SL 700 T 717, 719
BUY TATACHEM (235)
SL 230 T 244, 247
BUY KPIT (136.45)
SL 132 T 145, 147
SELL JSTAINLESS (148.80)
@ 150 SL 153 T 142, 140
@ 134 SL 137 T 126, 124
STRATEGY INPUTS FOR THE DAY
Bears set to enjoy weak end
Dig where the gold is…unless you just need some exercise.
While you were sleeping, the US indices came crashing down. So after a topsy turvy ride so far in the week, the bulls should brace for a big jolt early in the morning. Given the fact that we have to contend with UP election results and inflation today we expect the key indices to open sharply lower. Unless the regional indices recover, we fear that bears may just have an upper hand ahead of the weekend.
Gold diggers can keep their list and cash handy as opportunities will come in today to buy your picks at lower rates. But don’t pick up counters simply because they are falling. Be prudent in your investments.
Wider than anticipated trade deficit, weaker than expected retail sales and higher oil prices led to the US indices ending in the red. Other global markets in Europe, Latin America and Asia have taken their cues from Wall Street and have fallen sharply.
Investors should remain cautious as the undertone seems to have turned a little weak. Fresh buying should be avoided unless one is a long-term investor. The market needs fresh impetus to move forward. One may have to wait for a while before the major indexes hit new historic peaks.
As we have mentioned in our recent editions, FII inflows have slowed considerably after a bumper April. Plus, we have a volatile rupee to deal with. There are no major triggers on the horizon for a tired market to look forward to except for the monsoon and weekly inflation figures.
The Indian economy is likely to slow in FY08 following the series of monetary tightening steps. One such signal is the slowdown in automobile sales in the month of April. The industrial output numbers to be released shortly may also confirm a slowdown. Corporate earnings are also likely to fall as interest and other costs are on their way up.
Airline companies like Air Deccan, SpiceJet, Kingfisher Airlines (UB Holdings) and GoAir (Bombay Burmah Trading) will be in the limelight amid reports that the Government is considering relaxing the five-year limit for local carriers to fly abroad. Jet Airways may also gain from reports that the Gulf sector will be opened up soon for private airlines. Piramyd Retail could attract some attention as a financial daily states that the Aditya Birla Group is looking to buy the Mumbai-based organised retail player. Reliance Communications is another stock to keep an eye on. The company says that it has sold a million handsets after launching the Rs777 scheme last week.
FirstSource is also expected to be in action amid reports that Khemkas of Sun Group are likely to buy a 9% stake in the BPO major from Sequoia Capital. Bajaj Auto will also be in the spotlight as it will consider the much-awaited demerger plan on May 17. UB may gain amid reports that beer consumption rose 27% in FY07 to around 137mn cases. Maruti is another stock to keep an eye on as the Government has sold its remaining 10.27% stake in the car major at an average price of Rs796.
US stocks tumbled on Thursday, with the Dow Jones Industrial Average leading the way a day after ending at an all-time high. Higher oil prices, weak economic news and lackluster April retail sales spooked investor sentiment.
Citigroup and JPMorgan dragged the Standard & Poor's 500 Index from its six-year high and the Dow Jones from a record on concern that a weaker economy will hurt credit demand. Retailers like Wal-Mart and Federated Department Stores reported drop in April sales.
The trade gap widened more than market expectations in March on higher oil imports, fueling fears that the government may slash its first-quarter GDP estimate. The report came a day after the Fed kept its benchmark interest rate unchanged and said that inflation remains a bigger threat than economic downturn.
The S&P 500 fell 21.11, or 1.4%, to 1491.47, its steepest drop since March 13. The Dow Jones Industrial Average lost 147.74, or 1.1%, to 13,215.13. The Nasdaq Composite Index decreased 42.60, or 1.7%, to 2533.74.
US light crude oil for June delivery rose 26 cents to $61.81 a barrel on the New York Mercantile Exchange. The front-month contract was 6 cents down at $61.75 a barrel in extended hours of trading in Asia.
COMEX gold for June delivery fell $15.50 to settle at $667 an ounce. Treasury prices rose, lowering the yield on the 10-year note to 4.64% from roughly 4.66$ late on Wednesday. In currency trading, the dollar gained against the euro and slipped versus the yen.
European shares too closed in the red. The pan-European Dow Jones Stoxx 600 index slipped 0.5% to 388.49. The UK's FTSE 100 closed down 0.4% at 6,524.10, the German DAX Xetra 30 slipped 0.8% to 7,415.33 and the French CAC-40 lost 0.6% at 6,012.76.
Major Latin American markets declined as well. In Brazil, the Ibovespa stocks index closed 1,065 points, or 2.1%, at 50,234.68 points. Mexico's IPC index of 35 most-traded issues fell 339 points, or 1.1%, to 29,653.82.
Key Asian stock indices are bleeding profusely this morning after raw-material prices dropped and reports showed falling retail sales and a wider trade deficit in the US, the region's largest export market.
All 10 industry groups making up the Morgan Stanley Capital International Asia-Pacific Index retreated. BHP Billiton posted its biggest drop in two weeks as copper and zinc declined. Canon slid by the most in two months on concern that demand for its digital cameras will falter as the US economy slows.
The Nikkei is down 243 points at 17,493 while the Hang Seng in Hong Kong is down 289 points at 20,456. The Kospi in Seoul is down 11 points at 1587 and the Straits Times in Singapore is down 27 points at 3441.
Key indices ended in the red as uncertainty was witnessed ahead of outcome of UP election and Inflation numbers tomorrow. Cautious investors favored to book profits dragging the benchmark index Sensex to close in negative terrain.
Markets registered strong opening after The FOMC left its key overnight lending rate unchanged at 5.25% for a seventh consecutive meeting. Buying interest in the frontline stocks like Tata Steel, ITC, Bajaj Auto, Reliance Communication and ABB also aided benchmark Sensex to hit day’s high of 13976.79. However, markets pared all its gains in the second half of the session as the Oil & Gas, Technology and Capital Good stocks was hammered out on back of profit booking.
Finally, the 30-share benchmark Sensex slipped 10 points to close at 13771. NSE Nifty was down 12 points to close at 4066.
Subex Azure declined by over 3% to Rs608. The company announced that it has won a contract to provide fraud management and revenue assurance solutions for MCEL, the largest GSM operator in Mozambique. The scrip touched intra- day high of Rs649 and a low of Rs608 and recorded volumes of over 41,000 shares on NSE.
Autoline Industries was frozen at 10% upper circuit to Rs237.90 after the company executed an agreement with the promoters of Detroit Engineered Products INC. USA to acquire 51% stake in the Company as strategic investor. The scrip touched intra-day high of Rs237.90 and a low of Rs217 and recorded volumes of over 77,000 shares on NSE.
GVK Power also locked 10% upper circuit to Rs366.15 after the company announced its plans to raise Rs12.21bn through an issue of shares priced at Rs325 each. The company would raise the money through a Qualified Institutional Placement (QIP). The scrip has touched intra-day high of Rs366.15 and a low of Rs335 and recorded volumes of over 1,00,000 shares on NSE.
Ansal Properties also saw only buyers as the scrip was locked at 5% upper circuit to Rs298.15 after the company announced that a MOU has been entered between the Company and Deyaar Development PSC, a real estate Company in UAE, with head quarters in Dubai, (in short Deyaar), for developing a mega mixed use township comprising of residential, commercial, institutional and industrial properties in India. The scrip touched intra-day high of Rs298.15 and a low of Rs293 and recorded volumes of over 3,00,000 shares on NSE.
Steel stocks shined today as reports stated that Government announced that it would not intervene to control rising steel prices. Tata Steel surged 2.5% to Rs576 SAIL was up 0.7% to Rs134 and Jindal Steel gained 1% to Rs2929.
FMCG stocks stood firm till the end. ITC surged 2% to Rs163, Britannia surged over 6% to Rs1586, Marico advanced 1.3% to Rs57 and Colgate added 0.8% to Rs376. However HLL was down 0.5% to Rs190.
Select Technology stocks continued to be on the receiving end. Mphasis BFL, Polaris and HCL tech were the major losers among the Mid-Cap stocks. Infosys was the major losers among the IT heavy weights, the scrip fell 0.5% to Rs1974. However, However Satyam Computer and Wipro each gained 0.5%.
Select Consumer Durable stocks again ended with smart gains. Titan rose over 2.5% to Rs998, Rajesh Exports advanced by over 4.5% to Rs393.
Insider Trades:
Micro Technologies (India) Limited: Goldman Sachs Investments (Mauritius) I Limited ("GSIMI") has purchased from open market 174328 equity shares of Micro Technologies (India) Limited on 4th May, 2007.
ACC Limited: Ambuja Cement India Private Limited has purchased from open market 7691499 equity shares of ACC Limited on 9th May, 2007.
Indiabulls Financial Services Limited: Goldman Sachs Investments (Mauritius) I Limited ("GSIMI") has purchased from open market 227500 equity shares of Indiabulls Financial Services Limited on 4th May, 2007.
Index Moves:
BSE Oil & gas index was the major loser and lost 1.03%. BSE PSU index (down 0.98%), BSE Capital Good index (down 0.72%), BSE IT index (down 0.27%) and Auto index (down 0.19) were among the other major losers. However, BSE Metal index gained 1.40%.
Volume Toppers:
IFCI, RNRL, IDBI, TTML, PFC, IDFC, Tele Data Informatics, HFCL, SAIL, RPL, IBREAL, Tata Steel, ITC, Orbit Corp, Rolta, IDEA, IVRCL Infrastructures, Dena Bank and Bank of India.
Upper Circuit:
Tele Data Informatics, GVK Power, Ansal Infrastructure, Deccan Aviation, Autoline Industries, PSTL, Ess Dee Aluminum Educomp Solutions, Amara Raja, Saksoft, Tanla, Pantaloon and Patel Engineering.
Delivery Delight:
Alstom Projects, Andhra Bank, Apollo Tyres, Aurobindo Pharma, Bank of India, Bharat Forge, Colgate, HDFC Bank, Hindalco, HDFC, Tata Chemicals, Tata Steel, UTI Bank and Wipro.
Abnormal Delivery:
Corporation Bank, Bank of Baroda, Indian Overseas Bank, Century Textiles, Lupin, Union Bank, MTNL and Kotak Mahindra Bank.
Results Today:
Chennai Petro, Dalmia Cement, Eveready Industries, Hero Honda, MRPL and Novartis India.
Brokers Recommendations:
R Comm – Outperform from CLSA with target of Rs486
DCHL – Buy from CLSA with target of Rs217.
Long Term investment:
BHEL
Major News Headlines:
Govt won't intervene to control rising steel prices
Govt sells 10.27% stake in Maruti at an average price of Rs797
ONGC finds Oil & Gas in Iran
Bajaj Auto to mull demerger on 17th May
Pratibha Industries gets Rs2.23bn contract from BMC
Cairn makes two new discoveries in Rajasthan
BSEL Infra to sell convertible securities at Rs77 to promoters
RESEARCH
Dabur India Ltd (FY07)
CMP: Rs94 May 10, 2007
Consolidated revenues grew 18% yoy to Rs22bn driven by healthy double-digit growth
witnessed across segments.
Operating margins improved marginally to 15.7% due to firm raw material prices.
Adjusted net profit rose by 32% yoy to Rs2.8bn.
Dabur plans to enter into country's US $12bn organized retail market by setting up retail outlets based on the health and beauty platform, across the country. The company plans to open 350 stores (first store is expected to open in Q1 FY08) and targets to generate revenues of Rs17bn in the next five years. The company plans to infuse Rs1.4bn as
equity into the wholly-owned subsidiary (H&B Stores Ltd under a separate brand name) and may look for additional debt after a couple of years.
The company expects its retail venture to breakeven by the third year and generate profit
in the fourth year of operations.
Dabur is aggressively expanding its homecare portfolio and has a full pipeline of new products to be launched. The international business division contributes 13% to the total revenues and the company expects it to increase to 16% by 2010. The company plans to scale up presence in skin category and built up OTC portfolio, which is currently very small. At the current market price of Rs94, the stock is trading at 23.3x FY08E consolidated EPS of Rs4 per share. We recommend a ‘Market Performer’ rating on the stock.
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