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Tuesday, May 22, 2007
Edelweiss - Tata Motors, Bajaj Auto
Tata Motors's Q4FY07 results were marginally ahead of our expectations primarily on higher-than-expected other income. Net profit, without adjusting for foreign exchange gains, increased 28.4% Y-o-Y to INR 5.77 bn. The company booked a forex gain of INR 602 mn, on hedging its export receivables and translation of its outstanding FCCB issue. Adjusted for forex gains (considering hedging gains as operating income), EBITDA margins declined steeply by 145bps Q-o-Q to 11.3% in Q4FY07. We believe that Tata Motors faced margin pressures following slow down in CV sales and therefore, the sales mix had a higher proportion of passenger vehicles.
The basic demand drivers for CV sales i.e., freight generation from improved industrial activity and stable freight operator profitability rates, remain intact. However, in context of the recent rise in interest rates we are cautious on the volume growth outlook in the near term. Sales for the first quarter may decline by 6-8%. We continue to like the stock on back the of stable CV volume growth expectation for FY08, improved volume outlook for the car business on new model launches in the next few months, steady margins, and value in the balance sheet. The stock, at 11.6x FY08E and 10.2x FY09E consolidated earnings, looks attractive in relation to the rest of the automobile space. We reiterate 'BUY' recommendation.
Edelweiss - Tata Motors, Bajaj Auto
Bajaj Auto (BAL) announced its plan to demerge its financial assets from the automotive business, along with its Q4 and FY07 results. It also provided details of the arrangement it has with Allianz regarding transfer of its stake in the life and general insurance ventures.
Given that the options provide for Allianz to acquire Bajaj Auto's stake in the two joint ventures at a nominal price, the valuations assigned to these businesses need to be revised significantly downwards. We have valued these ventures considering an effective 26% stake in the life insurance venture and an effective 50% stake in the general insurance venture. On this basis, we estimate the value of Bajaj Auto's holdings in the life and general insurance businesses at INR 446 and INR 114 per share, respectively.
We believe the demerger structure is effectively value-neutral as a large chunk of the surplus funds will remain with the holding company and continue to be deployed in liquid investments (market value of INR 63 bn). The management intends to make these funds available to the two demerged companies (primarily the financial services business in our view) for their strategic needs, such as for pursuing large acquisitions or new business opportunities, on arm's length basis, as well as to pursue new businesses for the holding company. Till such time as the funds are put to productive use, the holding company will continue to attract a significant discount to its underlying value.
At current price, we believe the stock is fairly priced given the significant reduction in our estimate of the value of the company's insurance holdings. While we remain non-consensually positive on the outlook of the core business, both on volume and margin fronts, we are downgrading our recommendation on the stock to 'REDUCE' from 'BUY'. We will review our recommendation on a further decline in the price.
Edelweiss - Tata Motors, Bajaj Auto
Market Close: Profit booking cannot be ruled out at high !
Global cues provided full support as the Indian indices started in green. The momentum could not be continued for long and the indices slipped in the negative territory. There was lack of news flow both positive as well as negative. As there was no negative cues which is considered as positive and was the reason for positive start. However, such rally always sees profit booking and situation was no different today. Session continued to be ranged and choppy. The impact of higher crude was particularly witnessed on Airline and Oil marketing counters which ended in red. Profit booking was witnessed in pharma, Cement and Power stocks along with small and mid caps which ended marginally higher in line with major sectoral indices. European indices are trading mixed after starting in red.
Sensex closed higher by 35 points at 14453.72. It was helped up by gains in HDFC (1794.45,+4 percent), RCVL (523.35,+3 percent), ACC (890.75,+2 percent), BHEL (2676.05,+2 percent) and HDFC Bk (1116.8,+1 percent). Restricting the gains were Bajaj Auto (2195.05,-2 percent), Guj Ambuja (116.3,-2 percent), SBI (1324.65,-2 percent), ICICI Bk (929.35,-1 percent) and NTPC (154.55,-1 percent).
Bank of India ended 2% higher after the company?s results were announced. Company has posted a consolidated Net Profit of Rs 1108.03 cr for the year as compared to Rs 724.63 cr, up by 53% on yearly comparison. Total Income for the year increased by 31% from Rs 8220 cr for the year ended to Rs 10752 cr for the year. The continuity of such numbers is an issue as the increased interest rates have impacted the credit off take for housing as well as auto. Inflation is shown the sign of ease and that is good for banks?But things are still not under control completely. Liquidity crunch is there and one needs to see how long this prolongs.
Bharat Forge ended a percent higher after its results were announced. Net profit of the company for the quarter improved by 21% at Rs.64 cr against Rs.53 cr. The sales numbers for the quarter were at Rs.241 cr against Rs.206 cr. The Company had been focusing on ramping up its forging capacities in the country. Company expects the growth to continue from its existing customers and the efforts to increase product inventory are progressing as planned. Plans are in place to manufacture aircraft parts and landing gears along with other aircraft engine parts form the Baramati plant which is expected to start by April 2009. Company plans to counter the threat coming from the slowdown of auto industry by expanding its product inventory. However, Company would face tough competition from renowned global competitors like GE, Rolls Royce etc for their plans regarding the manufacturing of Aircraft parts who are already in the business form a long time. Bharat Forge plans to increase its revenues from the non automotive business from 17% at present to 40% in the next 5 years.
Reliance Communication ended 3% higher after the company announced that it has slashed roaming charges by 70%. According to the new scheme the outgoing costs on roaming would be as low as 40 paise per min in its selective plans. The incoming charges have been slashed to Rs.1 per min against Rs.1.75 per min in selective plans. The move was planned by the company after its arch rival in the telecom space Bharati Airtel who lowered their roaming charges yesterday. Reliance was able to add a million customers in just a week after it launched its 777 scheme. Company, is also in talks with ?Qualcomm? regarding the lowering of royalty for the use of CDMA technology which is 5% for the company compared to 2% for Chinese companies and nil for the American service provides. Competition has made cellular industry an volume game. The fight is tough..lets see who wins !
Technically Speaking: Sensex was trading between an intraday high of 14,484 and low of 14,348. The breadth was in favor of decline as there were 1,464 declines against 1,115 advances. The resistance lies at 14,470 levels while the support is at 14,335 levels. The volume for the day stood at Rs.5,180 cr. Market is near its all time high?14470 is a crucial level. If this level is breached then market will certainly see upside trade.
Market closes marginally above 14450
In a listless trading session, the market displayed a range-bound trend with alternate bouts of buying and selling. After opening above its previous close the Sensex moved up to touch an intra-day high of 14484. However the sentiment turned bearish during the day and the index dipped to the day's low of 14348. The Sensex recouped its losses on selective buying interest and ended the trading session at 14454, up 35 points. The Nifty advanced 17 points to close at 4278. The market breadth was negative on the BSE. Of the 2,647 stocks traded, 1,123 stocks advanced, 1,438 stocks declined and the remaining stocks ended unchanged.
The sectoral indices were mixed. The BSE Bankex, the BSE IT index and the BSE PSU index exhibited weakness. On the other hand the BSE Auto, the BSE CG index, the BSE FMCG index, the BSE HC index, the BSE Metal index, the BSE Oil & Gas index and the BSE Teck index ended in positive territory.
Among the gainers HDFC surged 4.44% at Rs1,794, Reliance Communication gained 3.37% at Rs523, ACC jumped 2.21% at Rs891, BHEL added 1.52% at Rs2,676, HDFC Bank advanced 1.25% at Rs1,117, Maruti Udyog was up 1.16% at Rs830 and Bharti Airtel advanced 1.01% at Rs859. Hero Honda, Reliance and Grasim reported steady gains. However, Bajaj Auto dropped 2.37% at Rs2,195, Gujarat Ambuja shed 2.23% at Rs116, SBI tumbled 1.64% at Rs1,325 and ICICI Bank dipped 1.12% at Rs929. BHEL, NTPC and Hindalco closed with marginal losses.
Raj Television at Rs288.30 and Networking Finance at Rs599.65 hit the upper circuit on the BSE. On the other hand, Dhanalaxmi Roto at Rs16.80 hit the lower circuit.
Over 1.42 crore Reliance Energy shares changed hands on the BSE followed by Cairn (71.92 lakh shares), Reliance Petro (62.16 lakh shares) and SAIL (50.03 lakh shares).
Nifty settles at lifetime high
Even as volatility prevented the 30-share BSE Sensex from swiftly reachin a new high, the broader index S&P CNX Nifty wriggled past its previous high of 4,269.35 points struck on Monday, 21 May 2007, to reach a fresh all-time high of 4,281.60 on strong buying demand for frontline pivotals.
The all-time high level for the benchmark Sensex is 270 points away from 14,723.88 hit on 9 February 2007.
Even as the Sensex is trailing, the Nifty managed to scale new peaks due to its composition. While 30 shares form the base of the Sensex, the Nifty is made of 50 stocks. Apart from the 30 scrips, which are common in both, the other 20 stocks in Nifty have registered brisk gains in the last three months.
Broad-based buying by FIIs continued fuelling the rally and domestic institutions too were not too far behind. Last week, the markets absorbed Rs 1,518-crore net investments from FIIs and Rs 1,006 crore from domestic institutional investors. Though the valuations look a bit stretched owing to robust liquidity in the market, the ongoing momentum is expected to continue in line with the firm global markets.
Meawhile, the market that stayed in losses for most part of the day, recovered in late afternoon session of trade as buying resumed at lower levels. The Sensex rose 35.12 points, or 0.24%, to 14,453.72
The S&P CNX Nifty gained 17.20 points, or 0.40%, to 4,278.10, also an all-time closing high.
Zee Entertainment Enterprises (ZEE) (up 4.48% to Rs 312.25), HDFC (up 4.34% to Rs 1792.80), Reliance Communications (up 3.08% to Rs 523.30), VSNL (up 2.87% to Rs 473.25), and Tata Power (up 2.33% to Rs 611.55) were the top five gainers from the Nifty pack.
Index heavyweight Reliance Industries (RIL) saw a trend reversal from the morning session and recovered from its low of Rs 1738.50 to settle 0.66% higher at Rs 1773.25 on 10.88 lakh shares. RIL also struck an all-time high of Rs 1780 in intra-day trade. It had reached this all-time high of Rs 1780 on 21 May 2007 as well.
RIL has been hitting record highs in the past three sessions and has advanced over 34% to Rs 1761.55 since its close of Rs 1313.50 on 2 April 2007. It has been major drivers of the recent rally.
The RIL stock entered a sharp uptrend after it said on Tuesday, 15 May 2007, it had made two gas discoveries in separate blocks off the east and west coasts of the country. The commerciality of the above discoveries is currently under evaluation.
It had opened at 14,457.26, and struck a high of 14,483.59, as buying continued. But it was not able to sustain at the higher level and succumbed to selling pressure. This selling continued till it touched a low of 14,348.26
Led by index heavyweight RIL, other shares from the Reliance pack were not left out either. Reliance Capital surged 4.89% to Rs 1017 after striking an all time high of Rs 1046.40 today. It clocked high volumes of 44.10 lakh shares on BSE, and was the top traded counter on BSE with a total turnover of Rs 446.52 crore.
Reliance Natural Resources (up 5.90% to Rs 33.25), Reliance Communications (up 2.75% to Rs 520.20), and IPCL (up 1.38% to Rs 352.50) advanced.
Most of the BSE sectoral indices settled on a flat note. Banking and IT indices finished lower, while FMCG, capital goods and pharma shares saw buying.
The market breadth, which indicates the overall health of the market, was weak on BSE, with 1,464 shares declining as compared to 1,115 that advanced, while 85 remained unchanged. This is in contrast to the positive market breadth at 10:30 IST, when 837 shares advanced as compared to 759 that declined.
The BSE Small-Cap index closed at 7,286.77, down 0.1%, while the BSE Mid-Cap index rose 0.25% to 6,144.88.
The total turnover on BSE amounted to Rs 5270.18 crore, while the NSE F&O turnover was Rs 33,440.2 crore.
The total market wide turnover has been advancing in the past three trading sessions. It crossed Rs 50,000 crore to net Rs 50,069.21 crore today, which is higher than total marketwide turnover of Rs 46,560.99 crore on 21 May 2007, and Rs 44,316.68 crore on 18 May 2007.
Among the Sensex pack, 16 advanced while 15 declined.
For the fourth straight day, Bajaj Auto was on a losing streak, declining 2.77% to Rs 2186.10, as its demerger scheme, announced during trading hours on 17 May 2007, triggered a flurry of rating downgrades by brokerage houses. It was the top loser.
Disappointment about the post-demerger structure and lack of clarity about future business plans were cited as the main reasons for the downgrades.
Bajaj Auto shares slumped 16% in the past two trading sessions after the surprise revelation that Allianz — Bajaj’s partner in its two insurance ventures — has a ‘call option’ to buy up to 74% at a nominal price. This was the biggest disappointment in the demerger plan.
Most analysts expected Bajaj Auto to remain the majority partner, while allowing Allianz to raise its stake up to 49%. They see a high possibility of the government raising foreign investment limit in insurance sector to 74% and Allianz exercising the option to hike the stake.
The insurance business of Bajaj Auto was valued at around Rs 800 per share. But going by the new structure, the value has been trimmed to Rs 300 per share. So the fall was more of a realignment to its fair value of Rs 2,250.
Gujarat Ambuja Cements (down 2.10% to Rs 116.45), SBI (down 1.91% to Rs 1321), and ICICI Bank (down 1.38% to Rs 926.90) were the other losers.
IT pivotals, which have been underperforming the market of late, were left behind as the rupee struck a fresh nine-year high. Appreciating further against the US currency, the rupee again neared the crucial 40.50 level in late morning deals. The appreciation was seen following fresh dollar selling amid absence of buyers.
The interbank foreign exchange (forex) market today, 22 May 2007, witnessed fairly active trade in the initial stages of trading. The domestic unit resumed firm at 40.60/62 a dollar over last close of 40.67/68 a dollar. It later traded at 40.5850/5950 a dollar in late morning deals on some dollar selling. The rupee strengthened in the absence of any dollar demand from oil corporates.
A rise in the rupee directly impacts revenue and profit of IT firms, which derive a lion’s share of revenue from exports to the US.
The BSE IT Index closed at 4,849.51 down 0.4%. Infosys (down 1.26% to Rs 1936), HCL Technologies (down 1.42% to Rs 342.25), and Tata Consultancy Services (down 0.56% to Rs 1230) contributed to its decline.
However, Satyam Computer Services was up marginally by 0.06% to Rs 448.55 after it signed a multiyear, multi-disciplinary service agreement with Hawker Beechcraft Corporation (HBC) on Monday, 21 May 2007.
The contract calls for the company to provide high-end design, computer-aided engineering (CAE), analysis, product lifecycle management, and other services for the world's reading business, special mission, and trainer aircraft manufacturer.
The arrangement will enable HBC to fulfill orders more quickly and within appropriated budgets, while maintaining exacting quality standards. However, the deal size was not disclosed.
HDFC was the top gainer, up 4.76% to Rs 1800 on 2.31 lakh shares.
HDFC Bank (up 1.54% to Rs 1120), ACC (up 1.55% to Rs 885) and Hero Honda (up 0.85% to Rs 686.25) advanced.
The BSE Capital Goods Index advanced 0.56% at 9,934.06, and was the top gainer among sectoral indices on BSE. Thermax (up 7.46%), Punj Lloyd (up 1.33%), and Siemens India (up 1.39%) ended higher.
PSU engineering major Bhel rose 1.30% to Rs 2,670, on 1.35 lakh shares. The stock is rallying ahead of its record date of 1 June 2007 for the proposed 1:1 bonus issue. The company has earmarked about Rs 3,200 crore for investment in the Eleventh Five-Year Plan period to increase manufacturing capacity from the current 6,000 Mega Watt (MW) to 15,000 MW per annum.
ABB rose 1.23% to Rs 4341 after it bagged an order worth Rs 289 crore from Delhi Metro Rail Corporation (DMRC). As part of this project, the company will supply the turnkey electrification package for Phase II of the Metro line spanning ten corridors across parts of New Delhi and surrounding areas of Gurgaon and NOIDA.
Auto major Maruti Udyog rose 0.80% to Rs 827. On 10 May 2007, the government had sold its residual stake of 10.27% in the company to a group of financial institutions, banks and mutual funds for Rs. 2,368 crore, which works out to Rs. 797 a share.
The purchase consideration varies among bidders. For instance, LIC, which successfully bid for 130 lakh shares, by far the largest number, is paying Rs 800 for a share. On the other side, Corporation Bank is shelling out Rs 850 a share for its acquisition of 5.88 lakh shares. Two mutual funds, Reliance MF and HDFC MF, have also acquired chunks of Maruti shares.
The BSE FMCG Index gained 0.5% at 1,920.35. ITC (up %), HLL (up 0.36%), Tata Tea (up 4.36%), Britannia (up 2.69%), advanced.
United Spirits jumped 6.33% to Rs 1248 after 58,168 shares of the company changed hands at Rs 1,199 shares in a block deal on NSE. The counter clocked total volumes of 11.82 lakh shares on BSE.
From Rs 837.60 on 15 May 2007, the United Spirits stock has risen a staggering 34% in the past four trading sessions, boosted by the company’s acquisition of Whyte & Mackay (W&M), announced during trading hours on 16 May 2007.
The acquisition of Whyte & Mackay (W&M) allows the new owners to promote the company's Whyte & Mackay Scotch and Jura single malt brands in India and China, the focus of operations of United Spirits and the world's two fastest-growing major markets for Scotch.
The company will borrow £325m against W&M's assets to help finance the purchase. W&M expects to have an operating profit of 50 million pounds this year and this is expected to take care of the interest costs for the acquisition.
Refinery stocks HPCL (down 2.25% to Rs 298), BPCL (down 0.61% to Rs 389), and Indian Oil Corporation (down 0.58% to Rs 500) slipped as crude oil prices soared today and crossed $66 per barrel. Reports of fresh violence at Nigeria, Israel and Lebanon coupled with US refineries increasing production to meet the coming gasoline summer demand perked up crude prices.
Crude-oil futures for light sweet crude for June delivery closed at $66.27 per barrel (higher by $1.33 per barrel or 2.05%) on the New York Mercantile Exchange. The expiration of the June crude futures contract tomorrow also likely helped exaggerate the move in oil.
Everest Kanto Cylinder (EKC) saw high volatility. It had plunged 9.55% to Rs 1,045, due to sell-off following poor set of results from the company. However it recovered sharply and was down only 0.255 to Rs 1142. EKC posted a 50% fall in net profit in the March 2007 quarter. Everest Kanto Cylinder’s board approved a stock split in face value of equity shares from the current Rs 10 per share to Rs 2 per share.
The company has also embarked on an expansion and modernisation scheme with a projected outlay of approximately US$ 60 million. Net profit fell 49.90% to Rs 5.12 crore in Q4 2007 as compared to Rs 10.2 crore in Q4 March 2006. Net sales were almost flat at Rs 80.08 crore (Rs 80.15 crore)
Budget airliner SpiceJet added 2.97% to Rs.46.95 on expectation of break even in the next quarter. The company posted loss of Rs.21.37 crore in Q3 February 2007 compared to profit of Rs.4.30 crore in Q3 February 2006. Sales surged 86.3% to Rs.246.04 crore in Q3 February 2007. SpiceJet anounced today, 22 May 2007, that it is likely to break even in the the April-June 2007 quarter and will become the first of the new entrants in the domestic civil aviation space to achieve this feat, two years after it started operations.
California Software Company was up 9.36% to Rs 69.10 after it signed an agreement to acquire 51% stake in Aspire Communications. The company has offices in Mysore, Bangalore, and San Jose. Aspire is expected to add about $ 3 million in revenue and $ 400,000 in net profit to the Calsoft Group on a consolidated basis in the ye ar ending March 2008.
Motherson Sumi Systems surged 20% to Rs 133.55 after the auto parts maker said its board would meet on 26 May to consider a bonus issue of shares.
Kalpataru Power Transmission advanced 4.83% to Rs 1345 after reporting robust Q4 March 2007 results. KPTL's net profit spurted 105.90% to Rs 64.45 crore in Q4 March 2007 as compared to Rs 31.30 crore in Q4 March 2006. Net sales jumped 44.50% to Rs 522.15 crore (Rs 361.38 crore).
Raj Television soared 10% to Rs 288.30 after 272,149 shares of the company changed hands at Rs 288.30 in a block deal on the BSE. Raj TV rose almost 6% to close at Rs 262.10 on Monday, 21 May 2007. after announcing the launch of new channel with DMK (Dravida Munnetra Kazhagam) logo
ABG Shipyard declined 1.80% to Rs 423 after scotching rumors of bagging a Rs 900-1000-crore order from a European company.
Asian and European markets were trading mixed. Hang Seng down 0.40% while the Nikkei 225 Index was up 0.70%.
The Standard & Poor's 500, the broadest measure of the US stock market and the one most closely followed by professionals on Wall Street, closed just shy of a record high Monday, 21 May 2007, as fresh takeover announcements lifted US stocks. It gained 2.35 points, or 0.2%, to end at 1,525.10 points. Earlier, the index temporarily topped its 24 March 2000 record close of 1,527.35, breaching 1,529.
The blue-chip Dow Jones Industrial Average fell 13.65 points, or 0.1%, to 13,542.88. The technology-heavy Nasdaq Composite Index jumped 20.34, or 0.8%, to 2,578.79.
Anand Rathi - Daily Strategist - May 22 2007
The NIFTY futures saw a rise in OI to the 1.43% with prices opened high but thereafter remaining in a narrow range indicating aggressive on the part of bulls and bears .Market managed to remain above the 4200 levels which may give support to the market. Nifty futures premium disappeared due to liquidation of positions. The FII buyers index futures to the tune of 430 crs and buyers in index options to the tune of 192 crs. The PCR has come up from 1.44 to 1.47 indicates some buying may emerge in the market. The IV is around 21.60 levels indicating some volatile trading sessions ahead.
Among the Big guns, ONGC saw 0.24% drop in OI with prices finally coming out of the range thus forcing bears to cover their positions aggressively with fresh money also coming on the long side suggesting further strength in the counter. Whereas RELIANCE saw 4.03% rise in OI with prices moved up sharply and closed near day's high thus suggesting strength in the counter. The built up suggests that the overall rise in the price was mainly driven by long positions built up in the counter.
In the TECH counters, all the majors saw selling with OI either going up or down indicating we saw short selling as well long positions liquidating in the IT counters .INFOSYSTCH saw 2.08% rise in OI with prices closing on lower side indicating built of short positions in the counter. TCS, SATYAMCOMP & WIPRO saw built up in positions with prices coming down indicating short positions built up in these counters suggesting weakness in these counters.
In the BANKING counters, all the majors saw fall in the positions with prices coming down from highs indicating selling pressure emerging in these counters which signals of caution in the BANKING pack .The built up suggests that one should book profits in the BANKING counters.
In the Metal pack, TATASTEEL saw drop in OI with prices up significantly indicating aggressive short covering seen in the counter and fresh buying emerging in the counter suggesting strength in the counter. SAIL saw gain in OI to the tune of 5.21% with prices up indicating long positions built up in the counter suggesting strength in the counter. HINDALCO & NALCO saw marginal rise n OI with prices coming down indicating selling pressure emerging in the counters.STER saw marginal drop in OI with prices up indicating short covering seen in the counter.
We feel that the volume and built up in OI suggests that market may show some directional movement as there is good built up in open interest. Market may show further strength and we may see fresh buying emerging in the market if market sustains above 4240 levels One should trade with strict stop losses to be adhered too.
Anand Rathi - Daily Strategist - May 22 2007
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4214 and 4177 . Book profits at opening bell. Outlook positive till nifty stays above 4177
Intra day:: Buy CenTextile above 629 with aTGT of 642 and a SL of 623
Buy ING VYSYA above 241.30 with a TGT of 252 and a SL of 236
Positional call: Buy Dena bank with a TGT of 65
Out House :
Markets at a support of 14325 & 14241 levels with resistance at 14494 & 14546 levels .
Buy : RIL & RelCap
Buy : SBIN & KotakBank
Buy : IDBI , Nagarjuna & IDFC
Buy : Titan & Divis
Buy : Aban & Educomp
Buy : JSW , Tisco & sail
Buy : IBulls , IbullReal , RNRL & EKC
Dark Horse : IBUlls , Adlabs , Praj , EKC , EduComp , Kotak , Sail , RIL , IFCI & IDBI
Bullet for the day : Sail , EKC & IDBI with strict stop loss
Nifty eyeing 4,300
The markets are likely to scale higher levels, as overall sentiment optimistic. The markets opened on bullish note on 21 May and settled with strong gains with the Nifty striking all time high of 4,269.35. It settled 46.40 points higher at 4,260.90. The gains came on the back of higher turnover, which indicates that fresh buying is taking place at higher level, which will keep the sentiment positive. The total marketwide turnover on 21 May was Rs 46,560.99 crore, higher than Rs 44,316.68 crore on Friday (18 May).
From here, the Nifty is likely to witness resistance in 4,275 to 4,300 range. While support emerges at 4,225 and 4,200 levels, on the lower side. A rally from here onwards must be accompanied by higher volumes and increased open interest if the upmove is to sustain in the near term.
Local bourses tracking global markets in similar direction over the past few months. These is ample liquidity in markers across the globe.
Asian markets opened on a firm note. The Nikkei share average rose 0.60% or 105.10 points at 17,661.97 soon after the start of trade on Tuesday as Sony Corp. continued its recent rally but KDDI Corp. and others trimmed recent gains.
Taiwan's Taiwan Weighted advanced 0.64% or 52.07 points at 8,193.66, while Singapore's Straits Times gained 0.71% or 24.97 points at 3,539.46. South Korea's Seoul Composite rose 0.45% or 7.34 points at 1,635.54
The Standard & Poor's 500, the broadest measure of the US stock market and the one most closely followed by the professionals on Wall Street, closed just shy of a record high Monday as fresh takeover announcements lifted US stocks. It gained 2.35 points, or 0.2%, to end at 1,525.10 points. Earlier, the index temporarily topped its 24 March 2000 record close of 1,527.35, breaching 1,529.
The blue-chip Dow Jones Industrial Average fell 13.65 points, or 0.1%, to 13,542.88. The technology-heavy Nasdaq Composite Index rose 20.34, or 0.8%, to 2,578.79. The dollar rose to 74.24 euro cents from 74.04 at Friday's close in New York, and to 121.50 Japanese yen from 121.12. Crude prices soared today and crossed $66 per barrel. Reports of fresh violence at Nigeria, Israel and Lebanon coupled with US refineries increasing production to meet the coming gasoline summer demand perked up crude prices. Crude-oil futures for light sweet crude for June delivery closed at $66.27 per barrel (higher by $1.33 per barrel or 2.05%) on the New York Mercantile Exchange. The expiration of the June crude futures contract tomorrow also likely helped exaggerate the move in oil. Any sharp rise from these level, may put brakes to the ongoing rally.
However profit booking in the later half of the day’s trading session, cannot be ruled out, after the Nifty’s smart rally of around 17.25% from a recent low of 3633.60 on 2 April 2006.
Indiainfoline - Intraday Stock Ideas
NIFTY (4061) SUP 4243 RES 4287
BUY UNIONBANK (124.85)
SL 120 T 132, 134
BUY BIOCON (472.15)
SL 467 T 482, 485
BUY JYOTISTRUC (202.05)
SL 198 T 210, 212
SELL NATIONALUM (242.65)
@ 245 SL 249 T 233, 231
SELL GITANJALI (196.75)
@ 199 SL 201 T 190, 188
STRATEGY INPUTS FOR THE DAY
Cool at the top!
“The heights charm us, but the steps do not; with the mountain in our view we love to walk the plains.”
The heat is increasing on the bourses too and after reaching a certain height, expect some cooling. It’s a well known fact now that the NSE has upstaged the BSE, Asia's largest exchange, as a leading exchange in the country. The NSE added another feather in its cap yesterday with its benchmark NIFTY making a new all-time high ahead of BSE's SENSEX, which still has some 200 points to go before it hits a new historic peak. Given the current momentum the SENSEX could also achieve the new milestone this week itself. What's been heartening about the rally in the last few days is that there is broad base participation, and even the generally subdued Small-Cap and Mid-Cap indices are moving up.
Another encouraging thing to note yesterday was that the turnover was better than Friday. Generally, on the first day of the week, the turnover is lower than the last trading day of the previous week. Market breadth was also positive. Though FII inflows are not spectacular like in April, they seem to be still holding up. Barring an odd negative surprise, results have been pretty good.
Inflation has cooled off substantially from a two-year high hit in early part of February. There is talk that the RBI may in fact roll back the previous CRR hikes and cut SLR as well. As a result, we expect the market to remain firm and a major crack is ruled out at least in the near term. However, there may just be a few bumps ahead before the SENSEX hits a new high. And, even after that expensive valuations and lack of further buying support from FIIs may make it tough for the bulls to sustain the rally.
Global markets continue to remain on a strong wicket despite a few worries like the health of key economies of the US, Japan and China. Every day we hear about a few multi-billion-dollar deals, indicating that global liquidity remains strong. But, a major concern is the recent spurt in oil prices with the benchmark Brent crude crossing the $70 per barrel mark yesterday. Today, we expect the market to open cautious to slightly higher. Thereafter we may see some profit booking at higher levels.
On Wall Street, the S&P 500 briefly crossed its record close on Monday, but stocks ended mixed with the Dow Jones Industrial Average slipping from its peak. The S&P 500 added 2.35, or 0.2%, to 1525.10. The index rose as high as 1529.87, above its closing record of 1527.46. The Nasdaq Composite Index gained 20.34, or 0.8%, to 2578.79. The Dow Jones Industrial Average decreased 13.65, or 0.1%, to 13,542.88.
In the day's biggest deal, wireless telecom Alltel agreed to a private equity buyout worth almost $25bn. Alltel shares jumped 7%. General Electric confirmed that it was selling its plastics business to Saudi Basic Industries for around $11.6bn. GE shares rose modestly. Hologic said it would buy women's health care provider Cytyc for $6.2bn in cash and stock. Shares of Hologic, which makes medical equipment, slumped 7%, while Cytyc shares gained 23%. But, Yahoo shares slipped after The Wall Street Journal reported the company was considering paying up to $1bn for social networking site Bebo.
US light crude oil for June delivery rose $1.33 to settle at $66.27 a barrel on the New York Mercantile Exchange. The front-month contract was trading 2 cents higher at $66.89 a barrel in extended trading in Asia. A report showed that gasoline prices are now at an all-time high, even when adjusted for inflation.
COMEX gold for June delivery added $1.80 to $663.80 an ounce. Treasury prices ticked higher, lowering the yield on the 10-year note to 4.78% from 4.81% late on Friday. In currency trading, the dollar gained versus the euro and the yen.
European shares slipped. The pan-European Dow Jones Stoxx 600 index fell 0.2% to 393.35, after hitting a fresh multi-year high of 395.28 in the session. The German DAX Xetra 30 closed up 0.2% at 7,619.31, the UK's FTSE 100 slipped 0.1% to 6,636.80 and the French CAC-40 lost 0.2% at 6,089.91.
In the emerging markets, the Ibovespa in Brazil advanced 0.7% to 52,423 while the IPC index in Mexico added 0.1% at 30,708 and the RTS index in Russia gained 0.4% to 1866.
Asian markets are trading a bit mixed this morning, with the Hang Seng declining by 67 points to 20,860 while the Nikkei in Tokyo is up 72 points at 17,629. The Kospi in Seoul is up 3 points at 1631 while the Straits Times in Singapore rose by 25 points to 3540 and the Taiex in Taiwan advanced 40 points to 8182.
Celebration were back on Dalal Street as Bulls were back to its record breaking habit as NSE Nifty closed at new all time high. The Oil & Gas index led from front with FMCG and PSU stocks following smoothly. The Sugar stocks today again were back in action as it attracted buying interest. Even the small cap index was in line with the frontline indices gaining 1.1%. However, Technology and select Auto stocks dragged.
Tata Steel, BPCL and Reliance Industries were among the major gainers and Tata Motors, Wipro and Satyam Computer were the major losers among the 50-scrip’s of NSE Nifty. Finally, the 30-share Sensex surged 115 points to close at 14418. NSE-50 Nifty gained 46 points ending at 4260 adding 46 points.
Jindal Steel declined 1.2% to Rs3162. The company announced its Q4 result with net profit at Rs2.03bn (up 35%) and sales (up 56%) at Rs10.54bn. The scrip touched intra- high of Rs3227 and a low of Rs3110 and recorded volumes of over 51,000 shares on NSE.
Opto Circuit spurred by over 3.5% to Rs360 after the company declared that they would consider sale of shares to select investors on 24th May. The scrip touched intra- high of Rs363 and a low of Rs329 and recorded volumes of over 1,00,000 shares on NSE.
IVRCL Infrastructure was down by Rs331. The company announced that they have secured orders worth Rs5.51bn. The scrip touched intra- high of Rs338 and a low of Rs326 and recorded volumes of over 23,00,000 shares on NSE.
i-flex's dropped by 1.5% to Rs22179 Its unit Mantas secured order from Korea Exchange Bank. The scrip touched intra-high of Rs2249 and a low of Rs2156 and recorded volumes of over 53,000 shares on NSE.
Ranbaxy gained by 0.5% to Rs400 after the company receives approval to market Ran-Pravastatin in Canada. The scrip touched intra- high of Rs405 and a low of Rs399 and recorded volumes of over 4,00,000 shares on NSE.
Banking stocks continued its firm trend led by gains in the index heavy weight HDFC Bank the scrip gained by 3.5% to Rs1106, SBI was up over 1.6% to Rs1348. OBC, Corp bank and Canara Bank were the major gainers among the Mid-Cap stocks.
Pharma stocks also were in god health. Lupin advanced by 0.5% to Rs718, Ranbaxy edged higher by 0.5% to Rs400, Wockhardt rose over 2% to Rs415. However, Dr Reddy’s Lab lost 1.1% to Rs659.
Technology stocks continued to be on the receiving end. Satyam Computer dropped by 2% to Rs448, Wipro declined 1.7% to Rs534 and Infosys was down by over 1% to Rs1960. Mphasis BFL, Rolta and HCL Tech were the major losers among the Mid-Cap stocks.
Select Auto stocks also witnessed selling pressure. Tata Motors fell 2.2% to Rs725, Bajaj Auto further dropped by 1.7% to Rs2248, Hero Honda dropped 0.6% to Rs681 and Ashok Leyland edged lower by 0.5% to Rs37.
Insider Trades:
Mercator Lines Limited: Mr. Anil Khanna, Director has sold in open market 6000 equity shares of Mercator Lines Limited on 16th and 17th May, 2007.
Adlabs Films Limited: Manmohan Shetty has purchased from open market 200000 equity shares of Adlabs Films Limited on 15th May, 2007.
Sector Movements:
BSE Oil & Gas index was the major gainer and gained 3.05%. BSE Metal index (up 2.46%), BSE FMCG index (up 2.01%) and BSE PSU index (up 1.60%) were among the other major gainers. However, BSE Auto index lost 0.48%.
Volume Toppers:
TTML, IFCI, RNRL, RPL, SAIL, Cairn, NTPC, Ashok Leyland, Dena Bank, Hotel Leela, Tata Steel, R Com, Gujarat NRE, Idea, Reliance Capital, ITC and Dish TV.
Upper Circuit:
Marg Construction, Tripex Overseas, Mefcom Agro, Oudh Sugar, Vyapar Industries, GHCL, Teledata Eicher Motors, GTC Industries, GMR Industries, Sical Logistics and VIP Industries.
Delivery Delight:
APIL, Balrampur Chini Mills, Bank of Baroda, BPCL, CEAT, Colgate, HDFC, ITC, ONGC, PNB, RIL, SBI, Tisco and VSNL.
Abnormal Delivery:
Reliance Capital, National Aluminium, Federal Bank, Century Textiles, Dr Reddys Labs, OBC, IDBI, GNFC, Kesoram Industries, Nagarjuna Fertilizers and CEAT.
Stock Futures with largest increases in OI:
TCS, Tata Power, Tata Tea, Titan, Tata Motors, TVS Motors and Union Bank of India.
Stock Futures with largest decreases in OI:
Federal Bank, Rolta, Nicholas Piramal, Kotak bank, Kesoram Industries, Deccan Aviation, IDFC and Indian Bank.
Results Today:
Alembic, Adhunik Metalik, Automotive Stampings, NDTV, Mukand, Pidilite Industries, Punjab Tractors and Transport Corporation of India and ZF Steering.
Results Corner:
Parsvnath Q4 profit at Rs1.3bn (up 251%), revenues at Rs4.1bn (up 68%)
Jindal Steel Q4 profit at Rs2.03bn (up 35%) and sales (up 56%) at Rs10.54bn
SAIL Q4 profit at Rs19.02bn (up 72%) and net sales at Rs99.84bn (up 13.7%
Brokers Recommendation:
Dr Reddy’s Labs – Outperform with target of Rs840.
Long Term investment:
Financial Technologies
Major News Headlines:
Satyam signs multiyear contract with Hawker Beechcraft
Gammon signs MOU with Macquarie for Chennai Airport bid
Ranbaxy gets nod to market Ran-Pravastatin in Canada
I-Flex's Mantas gets order from Korea Exchange Bank
IVRCL Infra gets orders worth Rs5.51bn
Dwarikesh Sugar to mull issuing warrants to founders on 28th May
Turkish Regulator to approve Refinery construction at CEYHAN, to be build by CALIK, IOC
Opto Circuits to mull sale of shares to select investors on 24th May
Twilight Litaka buys brands from Sami Labs.
Market may remain volatile
The market may witness cautious trend as US indices ended on a flat note yesterday and Asian indices are exhibiting upward trends in morning trades. Although the bias remains positive, investors should maintain caution as profit-taking at higher levels may pull down the market. Among the local indices the Nifty could test 4245 and 4220 on the downside while on the upper side it may move up to 4300. The Sensex has a likely support at 14000 and may face resistance at 14600.
US indices finished on a flate note on Monday. While the Dow Jones ended in negative at 13543 declined by 14 points, the Nasdaq up by 20 points at 2579.
Indian floats trading on the US bourses were traded mixed. HDFC Banf was the lead performer and soared 4.93% while Patni Computers rose over 4.03%. Dr Reddy and VSNL ended up each. However, Tata Motors, Satyam, Wipro, ICICI Bank, Rediff, infosys and MTNL ended with steady losses.
Crude oil prices inched higher in the US market, with the Nymex light crude oil for June delivery adding $ 1.33 to close at $66.27 a barrel. In the commodity space, the Comex gold for June series fell $1.80 to settle at $663.80.
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