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Friday, June 01, 2007

Lakshmi Machine Works, Crompton Greaves, Nagarjuna Constructions, Britannia, Maruti Udyog, Mahindra & Mahindra, Welspun

ENAM on Lakshmi Machine Works,

Revenue growth expected at 35% in FY08E and 22% in FY09E. A stable pricing environment and volume driven operating leverage is expected to deliver earnings growth of 34% CAGR over the next 2 years.

At CMP (Rs 2,636) the stock trades at P/E of 11x FY08E earnings of Rs 229 and 9x FY09E earnings of 298. We continue to maintain our sector Outperformer rating on the stock.

ENAM on Crompton Greaves

CG has acquired Microsol Holdings, a power automation company for an EV of Euro 10.5mn or 8.7x EV/EBIDTA. The acquisition has further strengthened CG’s power T&D product portfolio, making it a total T&D solutions provider, at par with global majors such as ABB, Siemens, etc. CG believes that it can scale up this acquisition by 5-7 fold to Euro 50-70mn over the next 2 years. Globally power automation is ~20% OPM business and going by CG past track record, we estimate that the acquisition will pay off in < 2 years.

Strong growth in global T&D market and surging corporate capex has enhanced visibility across CG’s segments. Hence, we believe that CG will surpass its guidance of 30% revenue growth and maintain its trend of margin expansion. At CMP (Rs 246), the stock trades at 9x FY09E EV/EBIDTA. Maintain sector Outperformer.

ENAM on Nagarjuna Constructions

NCC has guided for Rs 40bn in revenues in FY08 with an OPM of 9.5%. Further, the management has guided for a 30% tax rate in FY08 due to 80 IB benefits in certain projects. This is inline with our estimates and we maintain our FY08E earnings. We believe that the proposed QIP will accelerate earnings growth for NCC and will be a key trigger for re-rating. At CMP (Rs 161), adjusted for Rs 69/share of BOT + real estate value, the stock trades at an EV/EBIDTA of 6.7x FY08E and 5.7xFY09E. Maintain sector Neutral rating on the stock.

Citigroup on Britannia

Britannia had emerged as the third most attractive candidate for a leveraged buyout (LBO) across our regional consumer universe in Feb-07. While the stock is up 50% since then and no longer attractive in our LBO screen, it is still a good fit for companies like HLL and ITC, which are trying to enhance their presence in the foods segment.

Despite factoring in lower raw material costs we are cutting our FY08E-FY09E EPS estimates by 9.2%-23.5%, mainly reflecting 1) lower than expected FY07 and 2) higher ad expenses going forward. However we increase our price target to Rs1, 825 as we roll forward our target 20x P/E 1-year forward to mid-FY09E.

Citigroup on Maruti Udyog

Domestic sales rose modestly c.10% YoY due to slowdown in mid-size segment. High base effect has also led to a moderation in growth. Maruti is offering attractive finance schemes at around 8% in select cities aided by promotions to maintain steady growth.

Key risk factors are rising rates, changing model mix and higher promotional spends/discounts. Target of 945

Citigroup on Mahindra & Mahindra

Bouyed by strong UV sales (+23% YoY) and modest tractor sales (+2% YoY). Strong Scorpio sales (+28% YoY) led to a strong growth in UV sales. UV sales without Scorpio grew by +21% YoY. 3 wheeler sales also grew by a robust +22% YoY after a modest decline in April 07.

Key downside risks are: reduced market value of principal subsidiaries (off which our sum-of-the-parts target price is pegged); rising interest rates – which could curb growth; rise in input costs. Target of 1032 (37% upside)

Macquarie on Welspun

Appreciation of the Indian Rupee (versus US dollar) is a near term concern but should not dampen Welspun’s intention to grow through multiple routes. Its organic growth strategy aims to tap the 5% interest subsidy provided through the technology upgradation fund to fund massive capacity expansion.

The Christy acquisition is in line with the inorganic strategy of driving margins through increased contributions from designer brands. Welspun is currently trading at extremely compelling valuations, considering its multiple growth drivers (PEG is <0.4). Our revised price target of Rs95 provides 34% upside

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Investors ‘renting’ out PAN cards

Call them the ‘Rent-a-PAN-card’ investors.
A flourishing network of investors are emerging in Gujarat, such as in its capital Ahmedabad, who are essentially renting their permanent account numbers, which are required for stock market trades, to brokers in return for a flat, predetermined fee.
This is how the arrangement, dubbed vyaj koshtak or pancard ka bhada, works.
These individual investors apply for shares of an initial public offering (IPO) under the individual investor quota (usually 30% of an offering is set aside for such retail investors) in their own name, using their own PAN cards. But in reality, they are simply acting as a front for a broker who has agreed to pay them a pre-determined flat fee, ranging from Rs1,500 to Rs4,000, depending on the IPO, irrespective of how many shares they are allotted or what happens to the price of the shares once they list. Sometimes that fee, for “renting” the PAN card, is even paid upfront.
The investors then sell their allocated shares on opening day, turning over the profit to the broker, essentially enjoying a risk-free, fixed return for the service provided. Meanwhile, the broker is able to make profits on a significantly larger number of shares than he would get on his own.
Typically, the broker can take a hit if, for some reason, the shares list at lower than the IPO price, somewhat of a rarity in a nation that is obsessed with shares and IPOs, even in recent turbulent times in the markets.
“Since there is a risk of the shares getting listed below the issue price, the broker enters into such arrangement only in those IPOs where there is a high probability of listing at a premium,” says one Ahmedabad-based investor who didn’t want his name used.
For instance, the recent successful IPO of rating agency Icra Ltd as well Mindtree Consulting Ltd saw brokers pay Rs3,000 per application made on their behalf. Icra shares rose from Rs525 a share to Rs1,125 a share between 13 April and 17 April. Mindtree shares jumped from Rs575.20 on 7 March to Rs1,021.80 on 15 March.
On Friday, Mint first wrote about the plain vanilla koshtak, the grey market in cities such as Ahmedabad for IPOs, which usually involves one person promising to buy a stock that is to be listed, at a pre-determined premium on the issue price from someone who has applied for the shares. Mint noted the emerging demand under koshtak for shares of DLF Ltd, which is expected to be the largest IPO in India when it debuts on 11 June.
But the more complicated vyaj koshtak kind of deals highlight the way the retail quotas of IPOs can potentially be misused. Since there is nothing illegal about such applications from investors who are, on the face of it, genuine, it has largely escaped scrutiny by the Securities and Exchange Board of India, or Sebi, the nation’s markets regulator.


BRICS - India Economy

BRICS - India Economy

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund

BRICS - DLF IPO Analysis

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Geojit - Sundaram Finance, Internal Combustion, Cummins, Hind Dorr Oliver, Dishman Pharm

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Weekly Stock Ideas

Buy Satyam (475.5)
SL 467 T 493, 498

Buy LITL (180.5)
SL 174 T 195, 199

Buy BEL (1889)
SL 1870 T 1940, 1950

Buy Cipla (224.5)
SL 218 T 240, 245

Buy MTNL (165.5)
SL 161 T 174, 177

Weekly Newsletter

FY07 GDP tops Govt's estimate
Spurred by strong performance of the industrial and service sectors, the Indian economy grew by 9.4% in the fiscal year ended March 2007 as against 9% in the previous financial year, the Government said. The reading was better than the Government's advance estimate of a 9.2% expansion in the Gross Domestic Product (GDP) for FY07 and was the fastest annual growth in 18 years. The only time the Indian economy grew faster was in 1988-89, when the GDP growth rate touched 10.5%. In 2004-05 it was 7.5% and in 2005-06 it was 9%.

With this, India's economy crossed the trillion dollar mark, only the 12th country in the world to achieve the milestone. India's economy at market prices stood at Rs41,25,724 crores at the end of 2006-07 - which translates to about US$1,020 billion at the current rupee-dollar rate of 40.50. What's heartening is that the per capita income in real terms is estimated to have grown by 8.4% in FY07 to Rs22,483. The Gross Fixed Capital Formation is estimated to have grown by 29.5% (28.1%) at current prices while at constant prices the same expanded by 27.9% (26.7%).

Finance Minister P. Chidambaram said that the CSO data confirmed the Government's belief that the Indian economy had shifted to a higher growth trajectory. Chidambaram emphasised the criticality of growth, saying that high growth generates its own momentum. "With high growth comes high investment, which in turn, reinforces growth itself," he said. "Because we have high growth, we can make bold claim that we would do everything possible to make the growth inclusive."

However, in the fourth quarter, the GDP grew by 9.1% versus 10% in the corresponding quarter of the previous financial year. The fourth quarter growth was a little lower than expectations of 9.5% but was higher than third quarter's revised expansion of 8.7%. Meanwhile, the GDP data for the first quarter and second quarter was revised upwards to 9.6% (8.9%) and 10.2% (9.2%), respectively. Apart from the slowdown in the last couple of quarters, what is also worrying is that farm sector growth has decelerated and service sector growth also appears to be stagnating.

Mallya flies higher with Deccan

The flamboyant Vijay Mallya has managed to wrest control of Deccan Aviation Ltd., the troubled low-cost carrier promoted by Capt. GR Gopinath, in his quest for supremacy in the Indian skies. United Breweries Holdings Ltd. (UB Holdings), which owns an 80% stake in Kingfisher Airlines and is the holding company of the UB Group, will buy a 26% stake in Deccan via a preferential allotment for Rs5.5bn. It will pay Rs1.5bn upfront while the balance amount will be paid by the end of next month. UB Holdings will pay Rs155 per share for purchasing the Deccan stake. Later, UB Holdings will also make an open offer for an additional 20% stake in Deccan. The Kingfisher-Deccan combine is likely to hold a 32-34% share in the domestic market. The Jet-Sahara combine have a market share of 31.5% and Indian has a market share of 22%. The two carriers will be run separately. Speaking at a news conference in Bangalore Gopinath said he will be the Executive Chairman of the merged entity while Mallya will be the Vice-Chairman. Both the sides will have equal representation on the new Board of Directors. There will be six independent directors and a CEO, who will report to the Board. Deccan shares gained 6% on the week to shut shop at Rs145 after touching a high of Rs162. UB Holdings rose by 4.8% to finish at Rs692 after hitting a peak of Rs799.

Bulls on Caribbean Cruise

Sail away, it's time to leave
Rainy days are yours to keep

The bulls had a fairly okay sort of a ride this week, barring Wednesday when a meltdown in the Chinese market caused a ripple effect across the globe. The key indices notched up their third consecutive week of gains. With the Indian economy going great guns and inflation under control, the bulls are comfortably placed at the moment. As we enter the monsoon period, traders seem to have left behind the misery of February-March crash, thanks largely to strong corporate results, continuous inflows from FIIs and firm global markets.

A combination of these ors have lifted the Sensex much closer to its previous all time high. Capital Goods, Auto, Banking and Pharma stocks were among the biggest gainers this week. BHEL, L&T and SBI were the prominent index winners. The benchmark BSE Sensex closed at 14571, adding 232 points or 1.6% on the week while the NSE Nifty advanced by 49 points or 1.15% to close at 4297. On Friday, it touched a new all-time high of 4325 before profit booking dragged it lower.

Spurred by strong performance of the industrial and service sectors, the Indian economy grew by 9.4% in the fiscal year ended March 2007 as against 9% in the previous financial year. Also impressive results by L&T, Cummins and Punj Lloyd boosted the Capital Goods stocks. However, concerns continued over the performance of IT stocks, as the Rupee breached the 40.50 per dollar mark. A strong F&O expiry also aided the bulls in their endeavour to push major indexes higher.

Capital Goods stocks hogged the limelight. The index surged nearly by 7%. L&T led from the front. It was the top gainer in the Sensex. The scrip rallied by over 15% to close at Rs2002. L&T climbed to a record after the chairman said more contracts will be secured this financial year. The company’s full year profit was at Rs14.03bn (up 38%) and sales stood at Rs175.79bn (up 19.1%). Punj Lloyd rallied by over 20% to Rs220. BHEL was up 4.5% at Rs1414 and ABB gained over 4.5% to Rs4696.

Auto stocks managed to regain some of the lost ground ahead of monthly sales numbers. The BSE Auto index rose 3.5% on the week. M&M was the major gainer, adding 4% to Rs761. The company’s May auto sales surged 50% to 18116 units. Tata Motors was up 3% to Rs747, Ashok Leyland gained 2.5% to Rs38 and Eicher Motors rose over 14% to Rs348.

Pharma stocks recorded healthy gains. Cipla gained over 9% to Rs224. Wockhardt surged by over 5% to Rs425, Divi’s Lab advanced 5% to Rs4972 and Lupin added 4.6% to Rs722.

IT stocks continued to be laggards amid growing worries about the impact of the rupee's rally versus the dollar. The BSE IT index was down 1% on the week, led by Infosys. The scrip was down 2.3% at Rs1940. However, Satyam and Wipro managed to buck the negative trend. Satyam gained 1.5% to Rs478 and Wipro was up 0.4% at Rs544.

Banking stocks continued their dream run. The BSE Bankex rose by 2.9% during the week. HDFC Bank was the leading gainer. The scrip was up by over 7.5% to Rs1153, SBI gained 6% to Rs1378 and ICICI Bank advanced 2% to Rs930.

The M&A street remained abuzz. Kingfisher Airlines bought 26% stake in Air Deccan, sending Deccan Aviation's shares sharply higher. The scrip rose by 6% to Rs145 after hitting a high of Rs160. Tata Tea was also in focus. The company agreed to buy 10.76% of Mount Everest Mineral Water at Rs140 a share from the founders. The scrip gained by over 4% during the week to Rs952. It had hit a high of Rs990 and a low of Rs870.

Sensex eyes a new all-time high

The Nifty has scaled a new peak. And, slowly but surely the Sensex too is inching closer to its lifetime high. It will crack a new milestone next week given the ongoing momentum in the market and lack of major bad news. FIIs remain bullish on India, which is likely to grow by 8-9% in FY08 after clocking the fastest growth in two decades last year. Inflation has started to soften as well, though there are lingering fears of additional monetary tightening steps from the RBI. Global markets too are on a firm footing, due to improvement in liquidity flows and rising risk appetite for equities. Having said that, the bulls may still have to hunt for new catalysts to stay on top of the bears as the market has rallied quite a bit in the last couple of months. As of now there doesn't appear to be any major threat to the bulls. Though there could be an odd day when the key indices will fall sharply. Stock specific action is expected to continue, though one must remain cautious while investing in small and mid cap shares. Once the Sensex makes a new high, the next target will be 15,000. But, after that valuations will begin to pinch and we may see some shake out before the next move up.

Rupee zooms past 40.50 barrier

Strong dollar inflows into the stock market lifted the rupee past the 40.50 per dollar mark, even as Commerce Minister Kamal Nath expressed concern about the partially-convertible currency's sharp appreciation against the dollar this year. On Monday, the Indian currency rose as high as 40.28, the highest level since May 1998, prompting the Reserve Bank of India (RBI) to resume its dollar purchases. The rupee did fall to 40.85 levels on Wednesday following weakness in other Asian currencies, but rebounded on the following two days to shut shop at 40.52 for the week. The rupee is the best performer currency among 16 most-active currencies in Asia, spurred by relentless foreign capital inflows in a booming economy. According to official data FIIs have pumped in about US$4bn into local equities this year after investing nearly US$8bn in 2006. Plus, a lot of overseas money is waiting in the wings for the blockbuster IPOs of real estate major DLF and banking giant ICICI Bank. JPMorgan Chase expects capital flows to exceed US$5bn in the next eight weeks as companies including DLF and ICICI Bank sell shares. The RBI has allowed the rupee to rise by 9% this year to fight inflation. But, going forward the central bank may check excess gains in the currency to protect exporters.

Inflation falls to 10-month low

India's inflation, based on the Wholesale Price Index (WPI), declined to 5.06% in the week ended May 19 due to a high base of last year and lower food product prices, the Government said. The annual inflation rate was the lowest in nearly 10 months. Inflation matched the figure given by Finance Minister P. Chidambaram on Thursday evening and was in line with a average forecast of 5.06-5.07%. In the previous week, the point-to-point inflation was at 5.27% while the annual inflation rate in the comparable period last year was 5.05%.

Trade gap swells in April

India's trade deficit for April was US$7.06bn, higher than US$3.9bn a year earlier, as imports surged amid rapid economic expansion. Exports rose 23.1% in April from a year earlier to US$10.6bn, while imports rose an annual 40.7% to US$17.64bn. The trade deficit was US$3.8bn in March, US$4.66bn in February and US$5.78bn in January.

CPI (M) wants licensing system in retail
The Communist Party of India (Marxist) reiterated its demand to block the entry of multinational retail giants like Wal-Mart in the country. Not only that the party also sought restrictions on the rapid expansion of local retail majors such as Reliance and Pantaloon. The party, which is a key ally of the Congress, proposed a licensing system for the organised retail sector, and added that there should be a limit on the number of outlets that a company can open in a city or state. The Government should also abandon the move to permit FDI in retail through the back door as in the case of the joint venture between Wal-Mart and Bharti Enterprises, the CPI (M) said. "Several Indian corporate houses have entered the retail sector and are expanding there operations aggressively," the CPI (M) said. "These developments in the retail sector are having an adverse impact on the livelihoods of a large section of people, who are engaged in unorganised retail across the country."

Navi Mumbai SEZ plan put on hold again

With various thorny issues related to it being unresolved, the fate of the Mukesh Ambani-promoted Navi Mumbai multi-product Special Economic Zone (SEZ) continues to hang in balance. The Board of Approval (BoA) for SEZ yet again deferred a decision on clearing the controversial SEZ. Commerce Secretary and BoA Chairman G.K Pillai said that the Government had received a report from the Revenue Department on the Navi Mumbai SEZ, but was awaiting views from the state government and the developers. "We wanted to get comments from the developers and the state government on the report of the Revenue Department," Pillai said, adding that the Revenue Department wanted to know whether arrangements had been made for plugging possible revenue leakages. Meanwhile, the BoA approved the Tata Group's Gopalpur SEZ in Orissa.

BSNL, MTNL cut roaming charges

BSNL and MTNL slashed national roaming charges to Re1 for incoming calls and 40 paise for outgoing calls within any visiting network as part of a new post-paid plan to be launched on June 3. The monthly rental for the plan has been fixed at Rs550. The subscribers will also get 300 minutes of free talk-time for receiving calls. The call rates of Re1 will apply after the free talk-time is exhausted. Outgoing calls to networks outside the visiting state will be charged at Re1. The public sector telecom operators expect 20-25% jump in volume from the new scheme. At present, BSNL charges Rs1.75 per minute for incoming calls and Rs2.40 a minute for outgoing calls while roaming. The move by BSNL and MTNL is likely to put pressure on private players to follow suit. On May 22, Reliance Communications cut roaming tariffs on outgoing calls to 40 paise per minute on select plans and introduced a flat Re1 rate on incoming calls from Rs1.75 earlier.

India Inc steps up buying spree

Shares of Tata Tea Ltd. and Mount Everest Mineral Water Ltd. climbed after a business news channel reported that the Tata Group firm will buy a majority stake in the maker of 'Himalayan' brand of bottled water. Last week, Tata Tea agreed to sell its 30% stake in US-based enhanced water maker Glaceau to Coca-Cola Co. for US$1.2bn. In August 2006, the company had acquired the stake for US$677mn.

Tata Consultancy Services Ltd. (TCS) announced it had increased its stake from 51% to 100% in the joint venture IT services company TCS do Brasil. The company acquired Group TBA's 49% stake for US$33.4mn. TCS do Brasil recorded a top line of US$66.5mn for the year ended March 2007 and has over 1700 employees.

Crompton Greaves Ltd. said it has concluded an arrangement for the acquisition of Microsol Holdings Ltd. together with other companies in the Microsol Group. The approximate enterprise value of this acquisition is €10.5mn. Microsol is based in Ireland with operations in the UK, USA and Ireland, and is engaged in the business of providing sub-station automation for MV and HV sub-stations.

Ranbaxy Laboratories Ltd. announced that its wholly owned subsidiary Ranbaxy Laboratories Inc. has acquired from Bristol-Myers Squibb Co. (BMS) the US rights to a group of 13 dermatology products. The US dermatology market value is estimated at US$10bn and has experienced growth of 10% per annum.

Strides Arcolab Ltd. said that it has agreed with the shareholders of Diaspa SpA to acquire their fermentation assets near Milan, Italy. The acquisition would be carried out through a Special Purpose Vehicle (SPV) incorporated in Italy, which will be owned by Strides Arcolab International Ltd.

3i Infotech Ltd. announced the acquisition of a 50.5% stake in Aok In-house BPO Services Ltd. and Aok In-house Factoring Services Pvt. Ltd. and a 60% stake in KNM Services Pvt Ltd.

Sintex Industries Ltd. said it will acquire 81% of the shareholding of Wausaukee Composites Inc (WCI). The company has acquired 81% of the shareholding of WCI in the first tranche and the balance shareholding will be bought subsequently.

BNP Paribas bought a 50% stake in the infrastructure equipment finance arm of SREI Infrastructure Finance for Rs7.75bn. SREI will demerge its equipment finance business and BNP Paribas Lease Group (BPLG) will pick up equity in the new entity, SREI Infrastructure Development Finance. SREI will chip in with Rs250mn.

Lipitor...Ranbaxy wins legal battle in Norway

Ranbaxy Laboratories Ltd. announced that the Norwegian Appeals Court has given a favorable decision in its case against Pfizer Inc., involving key patents on Atorvastatin in Norway. The court ruled that Pfizer's four patents are either invalid or not infringed upon by a proposed generic product from Ranbaxy. Three patents covering intermediate compounds used to make Atorvastatin, the active ingredient in Lipitor, would not be infringed by the sale of a Ranbaxy generic product in Norway, the court ruled. Cholesterol-buster Lipitor is the world's top-selling drug. The Oslo City Court had previously ruled in favour of Ranbaxy saying its generic drug did not infringe on two of Pfizer's Norwegian patents. It had, however, denied Ranbaxy's claim of non-infringement on another of Pfizer's Norwegian patent, which was then appealed by the company. The favourable ruling clears the decks for Ranbaxy to launch a generic version of Lipitor in Norway.

DLF launches US$2.4bn IPO

DLF Ltd., the largest real estate development company in India, proposes to enter the capital market on 11th June with a public issue of 175,000,000 equity shares of Rs.2 each through 100% book building process. The issue closes on 14th June and the price band has been fixed at Rs.500 to Rs.550 per share. The issue will constitute 10.26% of the fully diluted post-issue capital of the company. Out of the net proceeds of the issue, DLF proposes to utilize Rs35bn for acquisition of land and development rights, Rs34.93bn for development and construction costs for existing projects and the remaining amount for prepayment of loans of the company. Meanwhile, reports said that the order book for India's biggest ever IPO was fully covered with huge demand coming from Indian and overseas institutional investors. The offer price values DLF at over US$23bn at the upper end of the band, and will make the company eighth largest in terms of market cap ahead of ICICI Bank and Wipro.

Dr. Naresh Trehan to join Apollo Hospitals

he recent confrontation between noted heart surgeon Dr. Naresh Trehan and the management of Fortis Healthcare Ltd. prompted the former to join rival Apollo Hospitals Enterprise Ltd. Shares of Apollo Hospitals rose on the news while Fortis shares fell. In a separate statement, Fortis said that Dr. Trehan, Executive Director of Escorts Heart Institute and Research Centre Ltd., a subsidiary of the company, has resigned from the services. The resignation will be effective from June 1. Over the weekend Dr. Trehan and Fortis promoters reached an out of court settlement over the unceremonious removal of the veteran cardiologist from Escorts Heart Institute earlier this month. Meanwhile, reports suggested that 70 medical personnel submitted their resignations post Dr. Trehan's exit, a spokesperson of Fortis said that only 12 doctors and 12 paramedics had resigned. Fortis management maintained that less than 15 doctors will leave the hospital and there was no need to panic.

Binani Cement slips, MIC Elec shines on debut

Shares of Binani Cement Ltd. and Insecticides India Ltd. fell below the issue price while that of MIC Electronics Ltd. and McDowell Holdings Ltd. climbed on their stock market debut. Binani Cement opened at Rs75 per share on the BSE, the same as the issue price. It closed the week at Rs67 after touching a high of Rs79 and a low of Rs66.35. Insecticides India was not lucky either. The stock opened at Rs105 on the BSE versus the issue price of Rs115. The scrip ended the week at Rs113 after being as low as Rs101 and as high as Rs127. MIC Electronics listed at Rs210.25 on the BSE, up 40% over its issue price of Rs150 per share. It finished the week at Rs380 after hitting a high of Rs439 and a low of Rs210. McDowell Holdings opened at Rs195.60 on the BSE as against the base price of around Rs157. The scrip ended the week at Rs282 after being as low as Rs196.

China stocks tumble on higher stamp duty
Chinese shares plunged after the government tripled stamp duty on securities transactions to cool down possible speculative activity in the stock market that could lead to a bubble. "Stamp duty on share trades has been increased to 0.3% from 0.1%, to promote the healthy development of the securities market," the Chinese Finance Ministry said. The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, dropped 4.6% this week, the first decline in 11 weeks. It's up 86% this year, the most among 90 global benchmarks. This year's spurt has made Chinese shares the most expensive in the Asia-Pacific region, with the CSI 300 Index trading at 48 times reported earnings. That's more than double valuations in Japan and India, the region's next most expensive markets. Central bank officials, former US Federal Reserve Chairman Alan Greenspan and Li Ka-shing, Asia's richest man, have all warned of an impending correction this month. The CSI 300 yesterday rallied to a new high, its 11th record this month. Concerns that the government will take further action grew today after figures released by the clearing house showed more than 400,000 new accounts were opened the day that the stamp duty was raised. The daily average for the quarter is 300,000.

US economy crawls in first quarter

The US economy nearly came to a grinding halt in the first quarter, clocking its weakest expansion in more than four years, as housing slumped, the trade deficit widened and businesses slashed inventories. The world's largest economy grew at a 0.6% annualised pace in the January-March quarter, the Commerce Department said in its second estimate of quarterly GDP. It was the slowest growth since late 2002 and was much lower than the preliminary forecast of 1.3%.
But, some economists feel that last quarter could turn out to be the low point for the US economy as recent reports have shown a rebound in business spending. Also, lower inventories have prompted factories to lift production. Having said that, hopes for a reversal of fortunes for the beleaguered housing sector have diminished by further declines in key indicators. Besides, consumer spending has kicked off the second quarter on a weak note.

Japanese industrial production falls in April

Japan's industrial output surprisingly declined in April from a month earlier as a steep downturn in the US economy, the nation's biggest export destination, led to lower sales of cars and consumer electronics. According to preliminary data from the Ministry of Economy, Trade & Industry, the index on the output of factories and mines last month fell by a seasonally-adjusted 0.1% to 107.5 points from March, the second monthly fall. The index had reached a record 109.6 points in December. Economists had been looking for a rise of 0.5% month-on-month in April. Industrial production declined by 0.3% in March, the Ministry of Economy, Trade and Industry said. Year-on-year, industrial output in April was up 2.3%, rising for the 21st consecutive month.

Inflows to emerging markets gather pace: EPFR

Looks like global investors are beginning to get a little more comfortable in terms of taking more risks as equity markets across the globe has shown tremendous resilience post the crash in February and March. As a result, emerging market equity funds attracted strong inflows in the fourth week of May, says global fund tracker Emerging Portfolio Funds Research (EPFR). Latin America and Global Emerging Markets (GEM) equity funds had their best week in over a year while EMEA (Europe Middle East Africa) equity funds posted inflows for the first time in six weeks, says the Boston-based EPFR. Meanwhile, investors continued to avoid Chinese and Japanese dedicated funds, though the pace of outflows slowed.

Bush picks Robert Zoellick as new WB President

President George W. Bush tapped former US trade chief Robert Zoellick, to run the World Bank, following the controversial exit of outgoing president Paul Wolfowitz. Zoellick, 53, would succeed Wolfowitz, who is stepping down June 30 after a special bank panel found that he broke rules when he arranged a hefty compensation package in 2005 for his girlfriend, Shaha Riza, a bank employee. Bush's selection of Zoellick must be approved by the World Bank's 24-member board. Zoellick said his biggest challenge would be to calm the waters following the storm over outgoing president Wolfowitz. "One of the issues will be to try to calm the waters, but also then try and get a sense from people about how we can build some consensus about the direction of the institution," Zoellick told reporters soon after Bush's announcement.

Dell, Motorola, IBM unveil job reductions

Dell said it would slash 10% of its workforce, or about 8,800 jobs, in an attempt to cut costs and regain market share lost to the likes of rival Hewlett-Packard. The world's second-largest personal-computer maker didn't say how much money it intends to save with the job cuts. In a statement, Chief Executive Michael Dell said the headcount reductions were "difficult," but that they were necessary for the company to proceed with its restructuring efforts.

Motorola also said it plans to trim an additional 4,000 jobs this year, bringing the total cuts for 2007 to more than 11% of its work force, as the world's No. 2 mobile phone maker reduces costs to return to profitability. Motorola, which had already planned to complete 3,500 job reductions by June 30, forecast restructuring charges of about US $300mn, or about 8 cents per share, over the rest of 2007 as a result of the latest lay-offs.

IBM, the world's largest IT services company, cut about 1,570 jobs mainly in its technology services unit, where profit fell 19% in the latest quarter. Most of the reductions were in North America and workers were notified. The division accounted for more than a third of IBM's US$22bn in sales in the first quarter. The cuts are equal to about 1.2% of the US workforce. This month IBM also slashed about 1,300 jobs at its global services unit, which incorporates the technology division, to help reduce expenses in the US, where IBM has about 128,000 employees.

Market Watch Screener- World Indices, BSE-Sectoral Indices, Nifty Technical as on 01-06-2007

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Weekly Close: Nearing New High But is it possible..

Indices across saw a chain of events which saw mixed interest in the Markets. China created the shock wave which was felt across the global. As it increases its interest rates and action on the currency saw Asian markets wobble remembering the earlier experience in February. The regulators trebled the tax on stock trades and that had the markets down by over 6%. However, the US markets performance has been exemplary, where mergers and acquisitions continue to drive up the indices. Slower US GDP growth of 0.6% against an earlier estimate of 1.3% for the 1Q of 2007 was shrugged off by the markets. This is data for the past after all. Even the broad based S&P 500 closed at an all time high this week. Constant restructuring, streamlining of businesses and higher earnings from exports with a weak dollar is the positive. The hopes for interest rate cut in the US have increased.

India?s GDP for FY07 has been placed at 9.4% on the back of revised growth numbers for Q1 and Q2 growth being revised upwards. The manufacturing and Services Sectors contributed to the jump in GDP number. Interesting to note that the growth revision is front ended and recent growth numbers are around estimates. Market to see large IPO?s including the top banks wanting to shore up their Capital adequacy ratio ahead of the Basle II implementation and also the real estate companies and many others wanting to strike when the iron is hot. What this will do is bring in huge FII flows and our guess is that the RBI will do something to keep the rupee from breaching Rs 40. We believe it a futile exercise for now as the FII money flow and interest as thats really the trend. However, to neutralise that the chance of a CRR hike has increased. The GDP growth of 9%+ is another reason to expect some more tightening (CRR). Logically this should not happen given the upbeat growth revision and most importantly the Inflation numbers at much comfortable levels of 5.06% for the week ended 19th May as compared to 5.27% for the previous week. So that wait and watch attitude is where we think the bias will lie. Banks will remain lacklustre we believe for now and will underperform as the worries of the CRR will act like a Damocles sword.

Sensex Gained 1.6% for the week and the Nifty gained 1.1%. Capital Goods Index Gained 6.8% for the week.

Major gainers from sensex were LNT (+15.30%), Cipla (+9.29%), HDFC bank (8.33%), SBI (+5.9%), Hero Honda (+ 5.30%). Sensex Losers were NTPC (-3.36%), ITC ltd (-3.24%), Infosys (-2.48%), Hindalco (-2.32%), Reliance Energy (-2.29%).

We had the FNO expiry which had nothing to surprise as was expected to be but kept the market volatile for the week. Tech companies got hit with the Rupee turning stronger against dollar at 40.28 before RBI's intervention saw the Rupee to slip as it closed Rs 40.53 a Dollar. RBI went in for Buying of Dollars worth 11000Crs. The surge of rupee was attributed to absence of dollar demand from oil companies at the month-end. Major Software stocks continued to dip down as the rupee hitting new highs.

LNT came out with splendid Results and surged to touch its new high of Rs 2058. LNT numbers were Fantastic on standalone and consolidated basis. Order inflow for the year stood at Rs.25,429 cr while the total order book of the company at present is at Rs.35,300 cr. Engineering and Construction segment reported a revenue of Rs.13,400 cr contributing 75% of the top line. LnT with its huge order booked and expertise in its core segments looks good. The stock is trading at new levels Keep a Stoploss of 1725 for Long term if take for delivery from current levels. The Tractor major MNM too rallied with subdued numbers for the Results. The bottom line slip due to increased input cost which could not be passed on the customer. Company had also launched its new model "Logan" which is being manufactured in partnership with Renault Ltd. The increased advertisement expenses also had an impact in deflating the bottom line. The increased interest rates also had an impact on the company's performance as it acted in halting the sales of its cars. The impact of higher interest rates has had its impact on all the other players in industry.

Greenply has launched 13 laminates categories under their Greenlam range targeting the growing interior infrastructure space. The laminations are available in the price range of Rs 600 to Rs 2,000 a sheet. The products would be marketed through its network of 27 branches and more than 3,700 dealers and stockists across the country. Company is well placed in the industry where 90% of the market is with the unorganized players. Brand name of the company is its key factor for success in the business. Implementation of VAT has been a big positive as it hits the unorganised sector and makes it more competitive. One can accumulate the stock at this level for long term investments. The story is damn good and we are bullish here. We have a note here to as well as call running here.

MIC electronics trades at Rs 400 which is more than double the offer rate of its IPO. The company has a couple of LED driven Bill boards which can Display media content and that too in broad daylight. Valuations may appear excessive now given the sharp rise.. but the potential is what drives it. From here we believe it would be better to wait for the company to deliver. We think valuations are now getting into excessive territory. After all its only a hardware company though it has its core competencies of software in its product.

It would be interesting to look at Adlabs, Mid day, ENIL in that sense as they have some outdoor media exposure. We remain bullish on the advertising business. Zee News is another company in this space with a regional bias. FII limits have been reached here. Zee has pulled out of the agreement with BCCI for the 25 Indian Team matches on neutral avenues. Thats not good news for the stock at least on sentiment. In pure economics we like this as cricket has lost its charm and second the mandatory sharing with Government broadcasting company takes away a big USP of being able to capitalize on the huge investment. This pulling out really brings in an event risk in terms of litigation. On the business front the company continues to extend its marketshare and that?s reflected in the stock.

Tata Tea the Indian tea majors went in for 11% stake in Mount Everst Mineral water which is also a listed company. Mount Everst Mineral water Ltd has its Mineral water Brand Himalaya which is prefered by the Shopping Mall, Multiplexes and Hotels. The Mineral wate company has total reveune of Rs 16 Cr for the FY06. And the company has already made Rs 16.5 Crs for 9 months of FY07. With CMp of Rs 128 the Market capitalisation comes to Rs 370 Cr. Tata tea acquiring 11% Values at Rs 155 Cr seems to be on the higher side. Tata Tea has some strategy and has put his hands in this company. Let?s wait and watch.

And there were Many news in the week like the CromptonGreaves the Electrical equipment maker intends to acquire Ireland-based Microsol Holdings for an enterprise value of around 10.50 million Euro (over Rs 57 crore). MHL is a part of the Microsol Group and has operations in the UK, US and Ireland. It provides sub-station automation for MV and HV to new sub-station and retro-fitting solutions for existing sub-stations. Cromton is well establised company in this field and this acquisition will help to strengthen in the area of high-end engineering and sub-station automation capabilities. There was news of Stock-Split in Hind Rectifier, we tracked this company which into making of Locomotive Transformers, Power Electronics component and Equipment manufacturer based out of Mumbai. It manufactures diodes and thyristors (types of semiconductor devices), rectifiers and inverters and Transformers which are used in Locomotives.

Technically speaking: Sensex made high of 14682 and was expected to see new high. Sensex Day low was 14540. The Turnover was good at Rs 4669 Cr. The breadth was taken over by Advances. Sensex Support lies at 14300 and sustenance above 14700 levels could take us to new high.

Uptrend may continue

The domestic bourses are likely to take cue from global markets in the near term. Domestic bourses have been closely following global bourses since the past two years. 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.

FII inflow remains healthy on the back of strong global liquidity. However, there are apprehensions that too much money will lead to inflated prices of assets and cause volatility in asset prices.

There are concerns among some of the market participants that two large IPOs - DLF and ICICI Bank, which are slated to hit the market this month, may suck out liquidity from the secondary market. The response to these IPOs also holds key in the near term.

Balkrishna Industries, NOCIL, VIP Industries and Mcleod Russel India will unveil Q4 March 2007 results on Monday 4 June 2007. The next day IT education major NIIT will unveil Q4 results. On Wednesday, 5 June 2007, PVR, Ispat Industries and BASF India are slated to unveil Q4 results.

AIA Engineering, NRB Bearings and Sundaram Brake Linings will unveil Q4 results on Thursday, 7 June 2007 and Yuken India will declare Q4 results on Friday, 8 June 2007.

The Q1 June 2007 corporate earnings season will kickstart from about a month & a half and, over the next few days, traders are likely to build positions based on Q1 results expectations. The Q4 corporate earnings were strong which had helped trigger a solid surge in domestic bourses since early April 2007.

Over the next few months, the progress of the July-September monsoon will hold key. The weather office said in April 2007 that this year’s monsoon was likely to be 95% of the long-term average, with a 5% margin of error. The annual monsoon is vital for India’s economic health as it is the main source of water for agriculture, which generates more than a fifth of the gross domestic product

Fund buying, short covering in derivatives boost bourses

Continued institutional buying, firm global markets and short covering in derivatives took the S&P CNX Nifty to all time high and BSE Sensex to its highest level in nearly 4 months, last week. The market has been on an uptrend since early April 2007.

The 30-share BSE Sensex rose 232.30 points or 1.62% to 14,570.75 in the week ended Friday, 1 June 2007. This was its highest closing in nearly four months since 9 February 2007. The S&P CNX Nifty gained 48.90 points or 1.15% to 4297.05, a lifetime closing high.

Small-cap and mid-cap stocks which have been rising for a while now extended gains. The BSE Small-Cap index jumped 207.95 points or 2.86% to settle at 7,473.87. BSE Mid-Cap index rose 121.14 points or 1.97% to 6,264.28.

Positive cues from US and Asian markets took Sensex up 59 points on Monday 28 May 2007. The S&P CNX Nifty struck all time high.

The benchmark index, BSE Sensex, which stayed lacklustre for most part of the day, surged 110 points to cross the 14,500 level on Tuesday, 29 May 2007, led by gain in index heavyweight Reliance Industries (RIL). The rally was partly due to short covering ahead of expiry of May 2007 derivatives contracts on Thursday, 31 May 2007. Nifty struck a fresh record high.

Weakness in global markets pulled Sensex down 97 points on Wednesday, 30 May 2007. Chinese stocks tumbled 6.50% on that day after the government tripled a share-trading tax to cool its red-hot market, buffeting Asian and European markets. Nevertheless, the sharp fall in Chinese markets failed to trigger a broad rout in global markets which some had feared.

China's Ministry of Finance raised stamp duty on share transactions to 0.3% from 0.1% in what was seen as the strongest attempt yet to curb speculation in a market that had risen more than 60% so far this year.

A rebound in Asian markets, strong January-March 2007 quarter GDP growth data and short-covering in derivatives ahead of expiry of May 2007 derivatives contracts lifted Sensex 133 points on Thursday, 31 May 2007. Asian shares rebounded after a record close on Wall Street on Wednesday helped soothe worries about a slump in Chinese mainland stocks.

The market posted small gains in volatile trading on Friday, 1 June 2007. Sensex rose 26 points.

FIIs made heavy purchases in the month of May 2007. FII inflow for May 2007, till 30 May 2007, aggregated Rs 3959.70 crore. Mutual funds, too, were in buying mode. Their inflow in May 2007, till 30 May 2007, totaled Rs 1783 crore.

Engineering & construction major L&T surged in two trading sessions on Tuesday and Wednesday, after it reported robust Q4 results during trading hours on Tuesday. It reported 50% rise in net profit to Rs 701 crore in Q4 March 2007 from Rs 467 crore in Q4 March 2006. Sales rose 35.01% to Rs 6248.24 crore in the Q4 March 2007 as against Rs 4627.87 crore in Q4 March 2006. The company has strong order book of over Rs 35,000 crore.

Bhel continued its uptrend that began early this month ahead of record date for bonus issue. The company had set 1 June 2007 as record date for a 1:1 bonus issue. The stock turned ex-bonus from Thursday, 31 May 2007.

IT shares which have underperformed in the market latest rally, found support at lower level. Over the past few weeks, IT shares have been hit by stronger rupee. 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.

Bank pivotals found buying support at lower level. RBI had, on 16 May 2007, released the long-awaited draft guidelines for banks and dealers to begin trading credit default swaps in the country – derivatives that allow banks to hedge against the risk of default. The move will enable banks in India to step up lending to the corporate sector by allowing them to offload some of the risk to third-party investors.

Tata Tea gained in volatile trade after selling its stake in US-based Glaceau to Coca-Cola. It announced after market hours on Friday, 25 May 2007, that it would receive about $1.2 billion for selling its 30% stake in vitamin water maker Glaceau to Coca-Cola. This is nearly twice what it paid for it.

India Infoline spurted after four top officials from a rival brokerage joined the firm. The market believes that inducting top officials from rival brokerage would help the firm significantly expand its client base.

On Monday, 28 May 2007, Binani Cement settled at Rs 68.65 on BSE, a discount of 8.40% over IPO price of Rs 75 per share. The Binani Cement IPO was subscribed 1.36 times.

On Wednesday, 30 May 2007, Insecticides India settled at Rs 109.50, a discount of almost 5% over IPO price of Rs 115. The company had priced its IPO at the top end of the Rs 97 to Rs 115 price band.

On the same day, MIC Electronics settled at Rs 335.65 on BSE, a premium of nearly 124% over IPO price of Rs 150 per share. The company had priced its IPO at the top end of Rs 129 to Rs 150 price band, following overwhelming investor response to the IPO.

McDowell Holdings jumped 20% to 195.60, compared to base price of Rs 163, on its listing on BSE on 30 May 2007. The listing McDowell Holdings (MHL) on the bourses follows a restructuring scheme undertaken at United Spirits (USL) whereby investment business of USL was transferred to MHL as a going concern. The listing McDowell Holdings (MHL) on the bourses took place following a restructuring scheme undertaken at United Spirits (USL) whereby investment business of USL was transferred to MHL as a going concern.

BSE shifted a total of 25 scrips to trade-to-trade segment from 1 June 2007. The scrips transferred to trade-to-trade segment include Raj Television Network, Autolite (India), KIC Metaliks, S and Mukat Pipes, among others.

On 28 May 2007, The Securities and Exchange Board of India (Sebi) barred promoters of the Adani group from accessing the equity markets and dealing in securities for two years. The market regulator has found that the promoters aided and abetted Ketan Parekh (KP) entities in manipulating the share price of Adani Exports, now known as Adani Enterprises.

The GDP grew 9.4% in FY 2007 as against 9.2% in the previous fiscal as robust growth in manufacturing and services sector more than made up for a slowdown in agriculture and construction sector.

However, GDP growth slowed down to 9.1% in Q4 FY 2007 (Jan-March) as against 10% in the same quarter of the previous fiscal, pulled down by slow agriculture, construction, financial and social services growth.

Manufacturing grew 12.3% in FY 2007 as against 9.1% in the previous year, while trade, hotels, transport and communication grew 13% as against 10.4%. Agriculture and allied sector's growth, however, slowed down to 2.7% as against 6% in the previous fiscal and construction to 10.7% as against 14.2%.

The Communist Party of India (Marxist), which supports the ruling coalition, urged the government on Wednesday, 30 May 2007, to establish a licensing system for organised retail business and prevent the entry of foreign players like Wal-Mart. It also reiterated that the government should abandon moves to permit foreign investment in the retail sector through what it said was the "backdoor".

Indian Meteorological Department declared onset of southwest monsoon over Kerala Tuesday, 28 May 2007. The annual monsoon rains have hit the country's southern coast four days ahead of the normal date of 1 June 2007. An early monsoon would help several crops - cotton, soybean, groundnut and rice -- if rains were evenly spread over the next two months. The distribution of rains is crucial for agricultural yield. Good rains also spur rural spending on a wide range of industrial products, from soaps to motorcycles.

Nifty strikes at all time high

The Sensex started the day on strong note, but settled with marginal gains, amid high degree of volatility. A smooth rollover of positions in the derivatives market and firm Asian markets triggered a rally in first half of the day, taking the Sensex to highest level in nearly four months since 9 February 2007. However, sustained selling since afternoon on profit taking at higher levels capped gains. IT and banking stocks saw buying interest, while FMCG stocks came under selling pressure.

The 30-share BSE Sensex gained 26.29 points or 0.18% at 14,570.75. It opened higher above the 14,600 mark at 14,610.28 tracking firm Asian markets and also surged to strike an intra-day high of 14,682.10, by noon trade. This is its highest level in nearly four months since 9 February 2007. The Sensex was not able to strike all time high. It had hit an all-time high of 14,723.88 on 9 February 2007.

However, the S&P CNX Nifty, managed to strike all time high of 4,325.80 by afternoon trade today. It settled with gain of 1.25 points or 0.03% at 4,297.05, an all time closing high.

As per market data, marketwide rollover in the derivatives market was 82.8% from May 2007 contracts to June 2007 contracts. This is slightly higher than 82.5% during the April 2007 expiry. Nifty futures rollover was 75% as compared to 71.7% in the previous expiry. Higher rollover of positions indicates a bullish trend.

The total turnover on BSE amounted to Rs 4,678.12 crore.

The breadth, which indicates the overall health of the market, was positive on BSE, with 1,377 shares advancing as compared to 1218 that declined. 94 stocks remained unchanged. In the opening session, the breadth was strong when 1,141 shares had advanced as compared to 436 that had declined.

The BSE Mid-Cap Index rose 41.88 points or 0.67% to 6,264.28. The BSE Small-Cap Index ended at 7,473.87, up 60.84 points or 0.82%, from its previous close.

All the European markets, except Italy’s MIBTel index (down 0.01%) were trading with gains, while most of Asian markets advanced. The Nikkei average rose 0.47% to close at its highest in three months on Friday, 1 June 2007, as trading firms rose on Morgan Stanley's higher target prices and retail investors bought steel and other value stocks. The Nikkei added 83.13 points to 17,958.88, the highest close since 27 February 2007.

The Hang Seng index was down 0.15% or 31.60 points to 20,602.87

Among the 30-member Sensex pack, 17 advanced while the rest declined.

Pharma major Cipla advanced 2.92% to Rs 224 on 10.88 lakh shares, and was the top gainer. Buying interest seems to be returning in the stock after it had plunged sharply, when it had announced poor results late last month.

Shares from banking sector advanced despite market rumors of hike in CRR, due to easy liquidity in the money market and the RBI’s latest predisposition to use this blunt tool to suck out liquidity. BSE's banking sector index Bankex advanced 75.29 points or 0.99% at 7,682.64.

ICICI Bank (up 1% to Rs 928), State Bank of India (up 1.67% to Rs 1375), and HDFC Bank (up 1.65% to Rs 1158.50) advanced from banking and financial space.

Analysts expect a CRR hike of 25-50 basis points (100 basis points make 1%) from RBI to suck out liquidity in June 2007, when the equity market will see big issues (DLF and ICICI Bank) and high foreign inflows are expected.

They see Reserve Bank of India (RBI) continuing to tighten its fists on the monetary side, after the government, on Thursday, 31 May 2007, announced sparkling gross domestic product (GDP) growth of 9.4% in the year ended March 2007

IT pivotals posted gains for the second straight day today on renewed buying despite rupee inching towards its recent high. The BSE IT index surged 56.95 points or 1.17% at 4908.38, and was the top gainer among sectoral indices on BSE.

IT scrips had remained weak over the last few weeks. Satyam Computers (up 1.15% to Rs 475), TCS (up 0.89% to Rs 1219.35) and Infosys (up 0.87% to Rs 1937) rose.

IT stock have not performed in the market's recent surge due to stronger rupee. 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.

Rupee inched towards a recent a nine-year high today, 1 June 2007, as traders anticipated a burst of capital inflows into local equities, but was blocked again by state-run banks which bought dollars.

State-run engineering major Bharat Heavy Electricals advanced 0.86% to Rs 1,411. It had turned ex-bonus (bonus ratio 1:1) yesterday, 31 May 2007. Buoyed by liberal bonus issue and capex of Rs 3,200 crore to increase manufacturing capacity from the current 6,000 Mega Watt (MW) to 15,000 MW per annum, the stock has been buzzing on the bourses since the past few days.

Index heavyweight Reliance Industries (RIL) shed 0.76% at Rs 1,746.85 on 4.55 lakh shares. It surged to an intra-day high of Rs 1779, while its low for the day was Rs 1,745.30. It’s all-time high is at Rs 1,785.

Auto stocks were under selling pressure. A rise in crude oil prices coupled with margin pressure concerns pulled these stocks lower. Hero Honda declined 2.63% to Rs 713.10, on 1.14 lakh shares. Tata Motors (down 1.40% to Rs 747), and Maruti Udyog (down 0.91% to Rs 810.20) edged lower.

Car marker Maruti Udyog slipped 0.10% to Rs 817, after it said today, 1 June 2007, it had sold 59,400 vehicles in May 2007, up 11.2% from 53,396 units sold in May 2006. Earlier during the day, the stock had hit a high of Rs 830.50. Maruti sold 55,952 units in the domestic market in May 2007, up 9.9% from 50,904 units a year earlier. Its exports gained 38.4% to 3,448 units, from 2,492 units a year earlier.

The BSE FMCG index lost 16.85 points or 0.88% at 1890.53. ITC (down 1.41% to Rs 161.30), Hindustan Lever (down 1.23% to Rs 201), Nirma (down 2.53% to Rs 192.80), and Dabur India (down 1.86% to Rs 97.60), were the losers from the pack.

MIC Electronics was the top traded counter on BSE with total turnover of Rs 281.40 crore followed by Indiabulls Real Estate (Rs 243 crore), State Bank of India (Rs 99.20 crore), Unitech (Rs 86 crore) and Reliance Industries (Rs 80.35 crore).

Reliance Natural Resources (RNRL) topped in terms of volumes with 75.40 lakh shares changing hands on BSE. RNRL was followed by MIC Electronics (70 lakh shares), Petronet LNG (68.45 lakh shares), Himachal Futuristic Communications (HFCL) (60.25 lakh shares) and Indiabulls Real Estate (59.80 lakh shares).

Shares of some fertiliser manufacturers rallied, after staying flat in the recent market rally. Mangalore Chemicals (up 9.69% to Rs 18), Deepak Fertisilers (up 6.16% to Rs 92.25), RCF (up 4.01% to Rs 40.25), National Fertisilers (up 1.58% to Rs 22.45), GSFC (up 4.42% to Rs 182) and Chambal Fertilisers (up 2.94% to Rs 35.05) advanced. These shares generally come into action during the monsoon season when the demand for fertisilers goes up.

Shreyas Shipping & Logistics surged 7.39% to Rs 122 after it today, 1 June 2007, reported 82.3% surge in net profit in Q4 March 2007 to Rs 13.2 crore as against Rs 7.24 crore in Q4 March 2006. Total income increased 28.7% to Rs 40.82 crore (Rs 31.71 crore).

Sanghvi Movers advanced 5% to Rs 834.70 on renewed buying after the company came out with robust Q4 March 2007 results, on 29 May 2007. Sanghvi Movers’ net profit jumped 70.16% to Rs 15.11 crore in Q4 March 2007 as against Rs 8.88 crore Q4 March 2006. Sales rose 23.62% to Rs 52.13 crore (Rs 42.17 crore). The net profit jumped 99.81% to Rs 64.30 crore in FY 2007 as against Rs 32.18 crore FY 2006. Sales moved up 19.85% to Rs 178.63 crore (Rs 149.05 crore). At the time of announcement of results on 29 May 2007, the company had also announced a stock split in the ratio of five equity shares of Rs 2 each for every existing equity share of Rs 10.

SREI Infrastructure Finance surged 20% to Rs 86.15 as strong buying momentum continued after the company announced the tie-up with BNP Paribas, for equipment finance in India during trading hours, on 31 May 2007. The alliance involves setting up of a new 50:50 joint venture (JV) company. The current infrastructure equipment financing business of SREI Infrastructure Finance along with its insurance broking activity will be transferred to this new JV. The joint venture would be formed with an initial networth of Rs 800 crore.

For the third straight day, McDowell Holdings (MHL) rose. The stock jumped 20% to Rs 281.60. Listed on 30 May 2007, MHL had hit the roof on the first day of its debut to Rs 195.60, surging 20%, compared to the base price of Rs 163.

The listing of MHL on the bourses took place following a restructuring scheme undertaken at United Spirits (USL): the investment business of USL was transferred to MHL as a going concern.

TVS Motor Company spurted 5.86% to Rs 69.55 even though its two-wheeler sales declined 13.3% in May 2007. TVS Motor sold 1.08 lakh units in May 2007 compared to 1.24 lakh units sold in May 2006. Motorcycle sales fell 36.6% to 49,651 units from 78,271 units, but those of scooterettes rose 24% to 25,280 units from 20,396 units. Exports jumped 15% to 9,849 units.

TVS Electronics soared for the second straight session to Rs 60.20. The share price had jumped 20% to Rs 50.20 on Thursday, 31 May 2007, when TVS Electronics announced during market hours, that it has executed the business transfer agreement for transfer of the Contract Manufacturing Services Business at Tumkur (CMS Business) for a consideration of Rs 41.12 crore with Incap Contract Manufacturing Services (subsidiary of Incap Corporation, Finland).

Punj Lloyd rose 2.17% to Rs 220.95. It posted a 22% growth in net profit to Rs 23.18 crore in Q4 March 2007, from Rs 18.99 crore in Q4 March 2006. Sales spurted 91.06% to Rs 798.26 crore (Rs 417.81 crore).

Net profit surged 75.22% to Rs 61.59 crore in the year ended March 2007 from Rs 35.15 crore in FY 2006. Sales jumped 63.63% to Rs 2238.85 crore (Rs 1368.22 crore). The results were announced after trading hours on Thursday, 31 May 2007.

Sintex Industries slipped 0.02% to Rs 226.10, after surging to a high of Rs 237.50. It acquired 81% shareholding of US based Wausaukee composites Inc, a company organized under the laws of the State of Wisconsin. The acquisition of the shares of WCI is being undertaken by the company's step down subsidiary Sintex Holding USA, Inc.

WCI has an established presence in the medical imaging, mass transit, industrial/agricultural equipment, wind energy, commercial furnishings, recreation and corrosion-resistant materials handling sectors.

Cummins India was up 2.71% to Rs 313 after reporting a 21% rise in net profit in Q4 March 2007 to Rs 65.68 crore as against Rs 54.10 crore Q4 March 2006. Sales surged 30.25% to Rs 504.91 crore (Rs 387.66 crore). Net profit soared 37.76% to Rs 242.05 crore in the year ending March 2007 as against 175.70 crore in FY 2006. Sales flared up 25.84% to Rs 1840.78 crore (Rs 1462.77 crore). The results were announced after trading hours on Thursday, 31 May 2007.

India's inflation fell to its lowest level in nearly 10 months in mid-May 2007, data released today noon showed. The wholesale price index rose 5.06% in the 12 months to 19 May 2007, slowing from 5.27% a week earlier and well below a two-year high of 6.69% of late January 2007.

The central bank aims to keep inflation close to 5% this fiscal year, and bring it down to 4%-4.5% over the medium term.

On Thursday, 31 May 2007, the Dow Jones industrial average slipped 5.44 points, or 0.04%, to 13,627.64, after reaching a new all time high of 13,673.07. On Wednesday, 30 May 2007, the Dow had surged over 111 points and set a new closing high of 13,633.08.

However, the broader stock indices managed gains. The Standard & Poor's 500 index advanced 0.39 point, or 0.03%, to 1,530.62, after soaring to a record close Wednesday, 30 May 2007, for the first time since March 2000. The technology-dominated Nasdaq composite index showed more pronounced movement, rising 11.93 points, or 0.46%, to 2,604.52.

Crude oil prices rose on Friday, 1 June 2007, after a US government weekly fuel supply report showed an unexpected decline in crude oil stockpiles. Light, sweet crude for July 2007 delivery added 17 cents to $64.18 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-morning in Singapore.

Sterling performances by services and manufacturing sectors helped Indian economy grow 9.4% in 2006-07, the fastest rate in 18 years.

The growth even exceeded the government’s projection of 9.2% and is next only to 10.5% GDP expansion achieved in 1988-89. The figures were impressive also from the point of view that it is on the high base of 9% growth in 2005-06.

FIIs were net buyers to the tune of Rs 310.40 crore on 31 May 2007.

Sensex gains 26 points

The key indices today touched new record highs with the Nifty touching an all-time high of 4325 and the Sensex crossing its 14600 level again. The market resumed at 14610 on firm global cues with the fall in inflation rates lending further support. While the mood remained upbeat on strong buying in information technology (IT), banking and capital goods stocks, the rally gathered more steam in the afternoon trades as the Sensex touched the high of 14682. The market witnessed a steady decline towards the closing hours to slip below the 14600 mark and touched an intra-day low of 14540. The Sensex finally closed the session with marginal gains of 26 points at 14571, while the Nifty ended the session by adding one point at 4297.

The market breadth was positive. Of the 2,655 stocks traded on the BSE 1,369 stocks advanced, 1,190 stocks declined and 96 stocks ended unchanged. Among the sectoral indices, the BSE IT Index was the major gainer and rose 1.17% followed by the BSE Bankex Index that added 0.99%. The BSE CD Index lost 1.05%, the BSE FMCG Index slipped 0.88% and the BSE Oil & Gas Index shed 0.21%.

Among the major gainers, Cipla flared up 3.01% at Rs224, Satyam Computer added 1.90% at Rs479, SBI shot up by 1.90% at Rs1,378, HDFC Bank flared up 1.65% at Rs1,159, Gujarat Ambuja Cement moved up 1.28% at Rs115, BHEL advanced 1.10% at Rs1,414, Infosys scaled up 1.03% at Rs1,940 and ICICI Bank surged 1% at Rs928. However, Hero Honda dropped 2.08% at Rs717, Tata Motors slipped 1.37% at Rs747 and ITC shed 1.31% at Rs161.

IT stocks were in the limelight today. GTL flared up 7.67% to Rs210, Geometric Software rose 6.06% at Rs125, EduComp scaled up 5.59% at Rs1,876, Four Software added 5.21% at Rs58 and Subex Azure added 5.04% at Rs607.

Over 75.43 lakh Reliance Natural Resources shares changed hands on the BSE followed by MIC Electric (70.14 lakh shares), Petronet LNG (68.44 lakh shares), Himachal Futuristic (60.35 lakh shares) and Indiabulls Real Estate (59.82 lakh shares).

Value-wise MIC Electric clocked a turnover of Rs281 crore followed by Indiabulls Real Estate (Rs243 crore), SBI (Rs99 crore), Unitech (Rs86 crore) and Reliance Industries (Rs80 crore).

Daily Trading Calls

Buy Deccan Chronicle above Rs 220. Stop Loss at Rs 215. Target of Rs 229-245 (Intra-day Call)
Buy Dishman Pharma above Rs 291. Stop Loss at Rs 286 (Intra-day call)
Buy Gujarat NRE Coke above Rs 61.30. Stop Loss at Rs 60 (Intra-day Call)
Buy HT Media around Rs 221.35. Stop Loss at Rs 218 (Intra-day Call)

India Telecom, Punj LLoyd,Zee, Jet Airways, India Economy

Kotak on Indian Telecom Companies

• Valuations at severe risk if pricing continues to decline
• Recent tariff cuts may be a precursor to further price reductions
• High industry profitability and returns leaves scope for significant price reduction
• Pricing issue perhaps lost in restructuring euphoria, M&A-related speculation

We note that valuations of Indian wireless stocks are highly vulnerable to price declines
and see the recent decline in wireless pricing as a precursor to more aggressive price
competition. In our view, the super-normal profitability and returns of the wireless industryoffer ample scope for further reductions in tariffs. We believe Idea Cellular may be most vulnerable in the emerging environment

Kotak on Punj LLoyd

Punj lloyd has reported standalone revenues for full year of Rs22.4 bn (up 64% yoy) and PAT of Rs616 mn (up 75% yoy) while EBITDA margin has declined 100 bps to 8.3%. On a consolidated basis Punj Lloyd has reported full year revenues of Rs51.2 bn and PAT of Rs1.96 bn while Sembawang has contributed revenues of Rs21.5 bn and PAT of Rs286 mn. Order inflows are exceptionally strong led by stronger pre-qualifications and the order backlog stands at Rs159 bn at the end of FY2007. We have revised our FY2008E and FY2009E EPS estimate to Rs10.7 and Rs14.7 versus Rs10.9 and Rs14.5 earlier based on (a) consolidation of Sembawang, (b) full dilution of FCCB issue, (c) higher capital expenditure and debt levels, (d) lower margins for the stand alone company. We revise our target price to Rs239 per share (from Rs182/share earlier) as we roll our target price to March 09 basis. Maintain inline rating as we await clarity on working capital, equity dilution, likely margins in the conference call.

Kotak on Zee Entertainment Enterprises

We see ZEEL's decision to abandon its telecast contract with BCCI for matches in neutral venues as a modest positive for ZEEL's DCF valuation but a large positive for FY2008EFY2011E earnings. We are not sure whether ZEEL can unilaterally abandon the contract without any legal and financial impact. We have modified our model to assume that it is able to do so successfully. However, this has little impact on cash flows and our 12-month forward DCF valuation, which increases to Rs215 from Rs210 previously; we model savings of net undiscounted cash flow over the next four years of Rs4 bn (Rs9/share). However, our EPS estimate for FY2008E, FY2009E, FY2010E and FY2011E has increased to Rs8.6, Rs11.3, Rs13.9 and Rs16.5, respectively, versus Rs7.6, Rs9.9, Rs12.1 and Rs11.6, respectively, previously. Key upside risk to our target price is continued hugely positive sentiment for media sector.

Kotak on Jet Airways

The UB group, operator of Kingfisher Airlines, will buy 26% stake in Air Deccan through
preferential allotment, paying Rs155 per share for 35 mn shares. It will make an open offer to buy a further 20% stake from the public, as per SEBI guidelines. This alliance continues the consolidation trend in the aviation industry. We view this structural change in the industry as necessary for making it profitable - rationalization of competition, higher yields and cost savings. Hence, in our view it will have a positive impact on all players, including Jet Airways. The combine may potentially realize cost savings from synergies in ground handling, aircraft maintenance and route rationalization. However possible gains may be limited as independent characters of both the airlines will be maintained. We maintain our Underperform rating on Jet Airways with the price target of Rs400 as our concerns on stiff competition in the domestic sector, losses on international operations and high fuel costs in the medium term remain.

Kotak on Shriram Transport Finance

Post the management call, we rollover our target price to Rs180 (based on FY2009) from Rs155 (based on FY2008) and tweak our earnings estimates by (0.2%) for FY2008 and (3%) for FY2009 to factor the following: (a) marginally lower asset growth and NIMs, (b) higher income from securitized assets, (b) higher NPL write-off / provisions and (c) lower operating expenses. STFC has discussed some of its new initiatives. However, we do not expect these initiatives to materially impact its earnings. The stock trades at 2.1X PBR FY2009 and we believe that despite lower growth expectations, the stock continues to provide value to investors given its high profitablility.

Kotak on Indian Economy

We expect the Indian economy to softland in FY2008E to an 8.2% real GDP growth rate (and 5% inflation) . 9.4% FY2007E real GDP growth rate was broadly in alignment with case of sexpectations. Exhibit 2 demonstrates the dominance of consumption strengthening the India story case in fact og an nrtr. Critical to our softlanding scenario is a normal monsoon that permits monetary policy to top at a reasonably neutral interest rate regime perhaps with a 50bp CRR hike. Even with no further RBI action, real lending rates ‘ currently 7.25% - will likely close in on the 7.8% potential real GDP growth rate on the back of a persistent credit gap . Excessive monetary tightening remains a key risk, especially in case of an inclement monsoon. Unlike
his predecessor, Jalan, who used to resolutely ignore agro supply shocks, Governor Reddy has panicked into frentic tightening at ‘ and actually slightly past - the peak of both the episodes of supply-shock driven inflation - mid-2004 and 2HFY07 - during his tenure

The Center's FY07 gross fiscal deficit (GFD) improved to 3.5% of GDP from 4.1% last year (Exhibit 1). We expect the Center to better its FY08E GFD target of 3.3% of GDP. This is because the underlying nominal GDP growth assumption of 11% is far more conservative than our 13.2%. The Center is clearly well on track to achieve a GFD of 3.0% of GDP by FY2009 in alignment with the Fiscal Responsibility and Budget Management Act, 2003. The Center sometimes borrows ways and means advances from the RBI around this time before its borrowing program fully takes off. By May 18, it had nevertheless vacated occasional drawals from the RBI. States continue to park Rs287 bn/ US$ 7 bn in intermediate 14-day Treasury Bills suggesting an improvement in state finances as well.States actually hold Rs620 bn in all categories of Treasury Bills.

Edelweiss - Air Deccan

Edelweiss - Air Deccan

Edelweiss - Rollover Analysis & SREI Infrastructure

Edelweiss - Rollover Analysis & SREI Infrastructure

Morgna Stanley on IDEA, SPICE Merger

Morgan Stanley on IDEA-SPICE Merger

Quick Comment: Recent articles in the press (Economic Times) and on news channels (CNBC TV18) have suggested that Idea Cellular will merge with Spice Communications Ltd.

Our key takeaways, assuming that these as yet unconfirmed reports turn out to be correct: For the sector as a whole, we believe that consolidation is good news; in this case, it would reduce the number of players by one. The merged entity would have 17.4mn subscribers and a market share of 10.2%. Such a merger would enhance Idea’s coverage from 11 circles currently to 13 circles and increase effective population coverage from 59% to 66%. However, this entity would not displace any of the top four players in the Indian wireless market.

We believe that EV/EBITDA multiple is a superior valuation tool, but we use EV/sub for our estimates, since Spice is not a listed entity. Based on our estimates, Idea trades at an EV/Sub of US$583, which is close to the industry average. We believe the deal would be value-accretive for Idea if done at under a 15% discount to this EV/Sub, i.e., at approximately US$500. This would imply an EV of US$1.4bn for Spice. Spice had recently filed its draft documents with the Securities and Exchange Board of India (SEBI) for an Initial Public Offering (IPO). This leads us to believe that the merger may not happen unless the Modi Group (promoters) withdraws the document.

Morgan Stanley - ECB/FCCBs Hit New High in March 2007

Morgan Stanley in their report on Inflows,

ECB/FCCBs at US$5.1bn in March 2007: External Commercial Borrowing (ECB)/Foreign Currency Convertible Bonds (FCCB) hit a new high of US$5.1bn
in Mar-07. This compares with US$3.2bn in February and US$1.3bn in January. In March, almost the entire amount was in the form of ECBs (US$4.8bn), while in
February, a large part of the borrowing was in the form of FCCBs (US$1.9bn).

Mukesh Ambani group companies, ADAE Group, Bharti Airtel and Jaiprakash Group were top borrowers: In March 2007, a bulk of the borrowing (53% of total) was accounted for by a few main players such as Mukesh Ambani-led companies – Reliance
Ports & Terminals (US$0.5bn) and Reliance Utilities Ltd (US$0.4bn); Anil Dhirubhai Ambani Enterprises (ADAE) group companies – Reliance Telecom Ltd (US$0.6bn)
and Reliance Communications Infrastructure Ltd (US$0.6bn); Bharti Airtel Ltd. (US$0.3bn); and Jaiprakash Associates Ltd. (US$0.3bn)

ECB/FCCB aggregated at US$25.4bn in F2007 (12 months ending March 2007): This compared with US$17.1bn in F2006, a growth of 48%YoY. This was well above the internal cap of US$22bn fixed by the government for F2007. Breaking down, borrowing via ECB route aggregated to US$20bn in F2007, while those through the FCCB route totaled US$5.2bn (compared with US$12bn and US$5.1bn, respectively,
in F2006).

Policymakers’ concern justified: We think this data justifies policymakers’ concern on capital inflows in the past few months. If this intensity of flows is maintained in
the upcoming period, policymakers may choose to reduce the overall cap on ECB/FCCBs and/or impose selective sectoral caps on such borrowing.

Infotech Enterprises, IVRCL, Aban Offshore, Gujarat Ambuja Exports

Merrill Lynch in their report on Infotech Enterprises

Infotech proposes to offer 13.1% stake (7.14m fully converted shares) to an entity of General Atlantic Partners. Simultaneously it plans to issue 1.17m shares to a Pratt and Whitney entity to maintain stake at 14.4%. On a full conversion basis it would raise US$73m by issuing 8.3m equity shares at Rs360/share, at market, including 2.72m Compulsorily Convertible Preference Shares, 1.77m equity shares & 3.81m shares as underlying for ADRs. EGM is scheduled for Jun 23, 07. Believe this could spur acquisition plans & help branding. Buy with PO of Rs450.

Emkay on IVRCL

Value of real estate business at Rs 160 per share
IVRCL has 80% holding in its real estate subsidiary IVRCL Prime Urban Developers
Ltd. (IVRPUDL). IVRPUDL has total land reserves of 2298.75 acres (56.63 mn sq.ft
developable land) spread over 20 locations in cities of Hyderabad, Chennai, Bangalore,
and Pune & Noida. Cushman & Wakefield have valued the net value of developable
land after deducting developer’s margins at a NPV between Rs 28,898 million & Rs
31,940 million. We estimate the net present value of the land at Rs 160 per share at
a 10% discount to Cushman & Wakefield’s valuation.

Business Outlook
We believe the IVRCL to be a good long term investment in the construction space
especially in the water segment where the company is a leader, and the stock is
expected to outperform the broader market in the long term. Order backlog for the
company currently stands at Rs 8000 crore which is a YoY increase of 27% of which
water based projects account for about 56%. With growing urbanization infrastructure needs in the water segment is expected to increase which would hold good for the company. IVRCL’s holding in Hindustan Dorr Oliver would enable the company to synergise its engineering capabilities and bid for higher value added projects. IVRPUDL’s IPO would be a trigger resulting into value unlocking for the parent company.

At the current price of Rs 351, the stock quotes at P/E of 26x FY08E and 20xFY09E.
We believe the stock to be a good long-term investment in the construction space.
We value the business of the company on Sum of the parts method.

We recommend a BUY call at the current price of Rs 351 with a target price of Rs
437 which is an upside of 25% from the current levels. At the target price the stock
trades at an EV/EBITDA of 14.4x FY09E & a PE of 25.4xFY09E.

Emkay on Aban Offshore

We initiate coverage on Aban Offshore (Aban) with a BUY rating and a price target of Rs3355. With exploration activity set to rise amid soaring energy prices and acute supply constraints for new rigs in view of the long gestation period of 3-4 years, day rates for offshore drilling rigs, are expected to remian highly remunerative going forward. Aban Offshore, is a direct beneficiary of this buoyant demand for offshore rigs and the firm day rates for them. With 100% acquisition of Sinvest ASA, Aban now boasts of an arsenal of 20 offshore drilling assets. With this, Aban is all set to chart a steep growth trajectory on the back of the highest volume growth globally. Rigs in the standalone entity, which are due for contract renewal by March 2008, are likely to lock in a 3 fold increase in charter rates, giving a significant boost to its earnings. Aban
earnings are expected to register a CAGR of 177% over FY2007-10E with EPS of Rs324 in FY2009E and Rs451 in FY2010E. The stock is discounting its FY2009E earnings by 7.8 and FY2009E EBIDTA by 5.6 X . We initiate coverage on Aban with a BUY rating and DCF based price target of Rs3355.

SSKI on Tata Power

Tata Power's 4QFY07 pre-exceptional earnings were sharply ahead of our estimates at Rs2.93bn, primarily due to lower tax rate and sharply higher other income. However, the reported earnings fell by 33% Rs927mn as TPC passed on surplus profits generated in earlier years of Rs2.24bn to customers during the quarter. TPC, in pursuit of its new growth opportunities, is setting up 250MW thermal power plant & 100MW DG power plant for Mumbai circle and is also exploring nearly 4000MW of thermal power projects in Maharashtra, West Bengal and Uttar Pradesh. Moreover, TPC has recently won the bid for 4000MW Mundra power plant at a levelised tariff of Rs2.26/unit, which we believe would be value accretive over a longer run. Moreover, in order to tie up the coal for the Mundra power plant, TPC has acquired 30% stake in Bumi Resources, Indonesia at US$1.1bn. We believe the acquisition is value accretive for TPC over the long run. TPC is currently trading at 20x FY08E earnings and 7.8x FY08 EV/EBITDA, which we believe are attractive considering its huge cash reserves and focus on the core power business to exploit new value accretive growth opportunities across the entire value chain of power business. We maintain our Outperformer rating on the stock.

Kotak on Gujarat Ambuja Exports

We recently met the management of GAEL and are very positive about the growth prospects of the company. We are introducing our FY09 estimates on higher earnings visibility due to a clear understanding of the expansions plans of the company. In FY09, we expect GAEL to report net sales of Rs.21.1 bn, EBIDTA margins of 9.8% and PAT of Rs.957 mn, thereby translating into an EPS of Rs.6.9 and CEPS of Rs.9.9.

We have also done our one year forward rolling band analysis for GAEL, which revealed that most of the time the stock has traded around 6x one year forward
estimates. Our FY09E EPS of Rs.6.9 suggests that GAEL's fair value is 6 x 6.9,
that is, a price target of Rs.42.