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Tuesday, June 05, 2007
Market Commentary
The BSE Sensex ended the session on a positive note as it grew by 39.24 points to close at 14,535.01 while Nifty closed at 4,281.20 up by 17.6 points. Of the 2,677 stocks actively traded on BSE, 1,325 stocks advanced while 1,279 stocks declined. The BSE Mid cap and Small cap closed higher by 27.44 points and 19.90 points at 6,261.02 and 7,486.67 respectively.
BSE Capital goods index closed higher by 51.40 points at 11,154.27 as BHEL (0.78%) closed in positive while L&T (1.26%), ABB (0.73%) and Siemens (0.19%) closed in negative.
BSE bank index closed higher by 82.41 points at 7,823.97 as IDBI bank (5.58%), SBI (2.10%), PNB (0.87%) and ICICI bank (0.63%) closed in green while HDFC bank (0.46%) closed in red.
BSE Metal index closed at 10,648.83 advanced by 14.66 points as Tata Steel (0.68%) and SAIL (0.14%) closed higher while Hindalco (0.41%) closed lower.
BSE IT index closed at 4,884.93 inclined by 38.43 points as Infosys (1.32%), Wipro (0.22%) and HCL Tech (0.10%) closed in green while Satyam (0.86%) and TCS (0.08%) closed in red.
BSE Auto Index closed in positive at 4,960.25 up by 11.88 points as Bajaj Auto (1.35%), Hero Honda (0.48%) and M&M (0.23%) closed in green while Maruti Udyog (0.82%) closed in red.
BSE Health Care Index closed marginally up by 7.40 points at 3,847.99 as Ranbaxy labs (1.12%) and Sun pharma (0.97%) closed higher while Glaxosmithkline (1%) and Cipla (0.78%) closed lower.
BSE FMCG index closed at 1,869.87 down by 24.04 points as ITC (1.79%) and HLL (0.46%) closed in red while Dabur (0.69%) closed in green.
BSE oil & gas index closed higher by 20.94 points at 7,712.08 as Reliance petroleum (4.36%) and GAIL (1.22%) closed higher while HPCL (3.03%), BPCL (1.65%) and ONGC (0.74%) closed lower.
About Eggs & Baskets by Sanjeev Pandiya
You cannot start on diversification without a clear understanding of the risks you are seeking to manage. That is why I spent some time commenting on the definition and nature of risk and the ways to measure risk management performance. In layman's terms, the usual term is return, the opposite of risk. Most investors are focused on return, realising risk only when it happens.
I defined risk as the probability of things going wrong. Once things have gone wrong, they cannot go right. Older investors will remember this feeling they have after their losses, of wanting to turn the clock back. It is the same feeling you get after losing a loved one, when you want to reach out and touch the person after she is gone.
Risk management, therefore, is a bit of an oxymoron. If risk is managed, it is not there, i.e., things go 'right'. The whole point is, that if risk is still there, risk cannot be 'managed'. Think about this for a long time, you might agree that this is a very significant observation.
Risk can only be anticipated, avoided/ obviated, measured (in an imperfect manner). The management of risk has two dimensions: curative and preventive. The curative part is really about surviving risk, which is not the subject of this article. The preventive part is all about 'diversification', almost the only way to manage risk as defined in financial markets. Both risk measurement and diversification (a.k.a. Portfolio Theory) lend themselves to mathematical and statistical analysis, giving classical finance its biases.
Value investors and behavioural economists tend to focus on a philosophy towards risk, which is softer and more nebulous than the normative approach in classical finance. I will try and lay out some of these elements for you.
Double or Quits?
Quite simply, never (either double or quit). You must remember that in Russian Roulette, you cannot keep playing. Even if you are right five times in a row, the sixth time you have to be wrong. And the only time you are wrong, you will be dead. In the same manner, you should never assume that you will always be right on the stock market. Mature investors always play the markets with their worst case scenario clearly laid out.
One takes a long time to figure this out. You take a long time to try out different trading strategies, then you get a high ratio of successful trades. This time you start to make good money. Now greed takes over and you start to believe that you will always get it right. This is the time when you are most prone to play the “double or quits” game. I know someone who got 814 trades right (successively) in a single run, then went on to lose everything in the next five trades (when Ketan Parekh went bankrupt). Please pay attention to this principle, especially if you already have a good right-to-wrong ratio.
Mind you, this is not to be confused with the philosophy of 'stop loss'. Short-term traders exit the market when the momentum turns against them, mainly because they are basically 'momentum' riders. Stop loss is the point at which you can't take any more loss, or you don't trust the momentum (reversal) any more.
Value investors do the opposite. They add to their positions as a scrip goes down, playing to be the 'last man standing', i.e. trying to buy the last falling share as sellers depart the stock. The more of these 'last' shares they can pick up, the better their returns, provided of course, they have bought a safe, steady business at a great price, and the business recovers subsequently.
Correlation & Diversification
Like buying a truck and car company together. That should be obvious to everyone, but how about a truck and a housing construction company together? In hindsight, you might realize that they are both linked to the interest rate cycle.
Sometimes people diversify into other assets that are themselves correlated with each other. In the above example, trucking and housing look different, but the underlying drivers of demand (in this case, credit availability) may be the same.
Diversify What You Do
Fewer people do this than you would imagine. In the stock market, most retail investors are usually only buying shares, never short-sold on the market. As a general principle, there is much to recommend this strategy…I feel that if you get a short-sold position wrong, your risk is unlimited. Imagine short-selling Infosys in 1998! But if you take a somewhat correlated portfolio, you can achieve a genuine reduction in risk levels. Recently, I was short on the Nifty, but was bought on a low-Beta portfolio comprising the likes of Reliance Energy, Tata Steel, Tata Power, Hero Honda and ITC. On the downside, the portfolio had a Beta of 0.3, but on the up, it outperformed the Nifty. Overall, when the market dropped 15 per cent, I lost a maximum of 5 per cent, but when the market came up, the portfolio outperformed the Nifty. I call this phenomenon Beta Migration. I was able to make money on both legs, by shorting the Nifty and by the increase in value of my bought portfolio.
Over short periods of time, this is mostly an art, not suitable for everyone. But over long periods of time (say, 5-10 years) it is a well-known principle that almost any portfolio constructed of low-Beta stocks will outperform a portfolio of high-Beta stocks. This should be obvious to any believer in human irrationality. High beta is usually achieved with high volatility, lots of froth, glaring media attention (remember the IT boom)…and we know how that went!
In this strategy, you should try to trade a correlated pair as part of your diversification strategy. Like buying the market leader and short- selling the market laggard. A caution here is that if you are buying at the bottom of the cycle, then the laggards gain more than the market leaders. In a bull market, buying the market leader and short-selling the laggard may be a good trading strategy. Make sure that you don't make a mistake in reading the market………for example, is this a bull market or a bear? I looked at the Interest rate cycle and thought it was the start of a bear market, but somebody argued that India is the only major country in the world with high and rising costs of capital. Across the world, the cost of capital will soon start to drop. That would suggest a very shallow bear market, if we see one at all. Even a normally 'bearish' person like me is not willing to take a stand.
Other Comments
Statistically one thing is clear - traditional means of diversification won't save you. Remember one common mistake: mindlessly diversifying into, say, 100-200 stocks, which then go unmonitored for entry and exit points. Since the investor no longer knows enough about these businesses, he is prone to fall prey to rumours. In effect, the act of 'diversifying' will actually increase the probability of losses rather than reduce it.
True diversification includes far more investment choices than just stocks and bonds. It includes other non-correlating asset classes that don't intrinsically involve either speculation or timing. I recommend keeping up to 15 per cent of your portfolio in cash, if you have devoted 60 per cent of your net worth to stocks, including derivatives. The rest can be in real estate and personal effects. Aggressive investors like the readers of this magazine must be having more than 50 per cent of their net worth in equities, especially if they are below 40.
With each investment be sure to invest no more than you can afford to lose, so you can sleep at night. And use rupee cost averaging - taking a fixed proportion of your personal savings each month to add to your investment holdings, so that volatility becomes an advantage over a long time horizon. Only then will diversification begin to make statistical sense.
Market Close: India rebounces looking at China..
Indian indices witnessed a subdued start on account of Global cues and slipped into negative territory. Since then the sessions were extremely choppy and volatile. Shanghai recovered and ended up by 3% after trading down by 7% for the whole day. This gave a total turnaround to investors sentiment. Buying activity was witnessed in Banking, Software and Engineering counters along with selective small and mid caps. A new member in BSE family, Nitin Fire Protection, received warm well. The impact of increasing crude was witnessed on oil marketing companies.
Sensex closed up by 39 points at 14535.01. It was helped up by gains in SBI (1436.25,+2 percent), Rel Energy (550.55,+2 percent), Bajaj Auto (2249.1001,+1 percent), Infosys (1941.8,+1 percent) and Bharti Tele (837.25,+1 percent). Restricting the gains were ITC (161.8,-2 percent), L & T (1945.05,-1 percent), Guj Ambuja (112.75,-1 percent), Satyam (463.35,-1 percent) and Maruti (799.75,-1 percent).
Balkrishna Industries ended a percent lower after delivering results. The top line for the quarter stood at Rs.269 cr against Rs.187 cr, up by 44% YoY. The EBITDA margins for the quarter stood at 21%. The operating margin for the quarter stood at Rs.55 cr against Rs.45 cr higher by 24% YoY. The bottom line for the quarter was marginally higher at Rs.25 cr against Rs.24 cr. Company has decided to hive off its Paper and textile business. This segments contributes only 3% of the turnover rest comes from tyre...so really nothing much to talk about this. Company is mainly into the manufacturing of OTR (Off the road Tyres) which id just 4% of the industry. However, higher margins enjoyed by the company have attracted the attention of other bigger players of the industry like J.K.Tyres and MRF. Apreciating Rupee is expected to have an impact on the company's profits in the coming quarters as 77% of the company's revenues are from exports. We find Apollo better play in this space.
Greenply Ind ended 4% lower despite delivering good results. The top line for the quarter improved by 76% YoY. The sales numbers for the quarter stood at Rs.111 cr against Rs.63 cr. The EBIDTA margin for the quarter was at 12%. The bottom line for the quarter stood at Rs.7 against Rs.4 cr up by 78% YoY. Company recently launched 13 laminates categories under their Greenlam range targeting the growing interior infrastructure space.Company is well placed in the industry where 90% of the market is with the unorganized players. Brand name is 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. We are positive on this one.
Technically Speaking : Ranged play in the market as indices made an intra day high of 14,571 and low of 14,433 levels. The breadth was in favor of advances as there were 1,318 advances against 1,270 declines. Resistance lies at 14,600 levels while the support lies at 14,430 levels. The volume stood at Rs.3,776 cr. Sensex is consolidating before breaking into a new high. Mid and small caps likely to remain in flavor.
Edelweiss - DLF IPO
The Indian real estate sector is on a strong growth path with likelihood of a 33% increase in total constructed area over the next five years. The country has investable real estate assets of USD 50-80 bn (6-10% of its GDP) compared with 40-50% in most developed countries. We expect the investable assets to increase to 20-25% of GDP over the next ten years. DLF is the best way to get exposure to India real estate, given its size, quality, and credentials. We consider the company a default play on the Indian real estate as well as growth story going forward.
DLF's land bank of 10,255 acres is among the largest in India. The company owns titles and development rights of ~90% of this land bank and has paid for 67% of the land cost. Around 80% of this land bank is in the metros and a significant portion of the balance is within master plans, making DLF unique among all other large-size real estate companies. It has locked in the land at a cost of INR 235 per sq. ft. DLF added another 554 acres to its land bank recently and intends to continue adding to its land bank over time.
DLF has developed 224 mn sq. ft. of land (including plots, residential, commercial, and retail properties) till date across the country, which is reflective of its pan-India presence. Currently, it has ~44 mn sq. ft. of land under project execution and is expected to deliver over 30 mn sq. ft. of projects annually. It has also managed to lease 11.2 mn sq. ft. of commercial properties. To strengthen its execution capabilities, DFL has tied up with WSP Group plc for engineering designs, Laing O'Rourke plc. for
construction, and Feedback Ventures for project management. These tie-ups along with the company's high quality and broad-based management team will enable it to grow rapidly.
Currently, we have valued DLF's existing land bank only and assumed execution period of 15 years for its residential business (versus management expectation of 10 years). We estimate the value of land for sale at INR 436 bn and the value of its rental business (commercial and retail) at INR 460 bn. Thus, we arrive at an NAV of INR 512-517 per share. The IPO at the price band of INR 500 to 550 is at 2 to -6% discount to its NAV.
Upsides to DLF valuation could arise from: a) the 554 acres of land not included in the land bank plus purchase of new land in the next few years, b) tie-up with Hilton to develop hotels on a pan-India basis (evaluating 22 sites), c) construction JV with Laing O'Rourke and d) venture into large SEZs and MoUs with Nakheel for two large projects.
Thus, the IPO provides option value to the new growth initiatives that DLF
has undertaken, which are not included in its current land bank. Further,
the company has an existing stock of more than 10 mn sq. ft. in commercial
space (including plots) on its own books, which gives it visibility on the
profit front. We believe that over a period of time, DLF could trade at P/E
multiples rather than on NAV basis, as its project visibility starts
yielding regular profits.
*We recommend subscribe to the IPO.*
Download Edelweiss - DLF IPO
Debutant Nitin Fire Protection Industries tops volume chart on BSE
The stock settled at Rs 484.10 on BSE, a premium of 154.7% over IPO price of Rs 190. The stock debuted at Rs 332.50, which was also its low of the day. It hit a high of Rs 502.70.
The company had priced its IPO at the top end of Rs 171 - Rs 190 per share price band.
Nitin Fire Protection Industries had entered capital market with initial public offer on 15 May 2007. The IPO ended on 18 May 2007. The IPO ended with 48.04 times subscription. The issue received total subscription for 16.28 crore shares compared to the issue size of 33.90 lakh shares.
Nitin Fire Protection Industries provides fire protection, and safety and security by offering end-to-end turnkey solutions. This business is carried through two wholly owned subsidiaries and one partnership concern. Nitin Fire Protection Industries reported consolidated net profit of Rs 9.99 crore on revenue of Rs 100.54 crore in the year ended 31 March 2007 (FY 2007).
Reliance Natural Resources clocked the second highest volume of 1.22 crore on BSE. The share price rose 3.91% to Rs 35.90.
The scrip had maintained its numero uno slot in terms of volumes on BSE (top traded scrips in terms of trading volumes) for last three days in a row after it had slipped to the second position, last Wednesday, 30 May 2007. RNRL had topped volumes on BSE on 28 May 2007 and 29 May 2007.
On 4 May 2007 an interim order was passed by Justice A M Khanwilkar, preventing Reliance Industries (RIL) from selling off the quantity of gas from its Andhra offshore field committed to younger brother Anil Ambani's entities including Reliance Natural Resources (RNRL) as part of 2005 demerger pact between the two brothers Mukesh and Anil.
RNRL’s net profit jumped to Rs 7.35 crore in the quarter ended March 2007 from Rs 1.04 crore in the quarter ended March 2006. Sales vaulted to Rs 56.33 crore, from Rs 0.41 crore.
GV Films clocked the third highest volume of 91.31 lakh shares. The share price rose 10% to Rs 7.53.
G V Films net profit rose 160.10% to Rs 5.15 crore in Q4 March 2007 as against Rs 1.98 crore in Q4 March 2006. Sales rose 389.74% to Rs 18.61 crore in Q4 March 2007 as against Rs 3.80 crore in Q4 March 2006.
The net profit rose 241.09% to Rs 17.60 crore in the year ended March 2007(FY 2007) as against Rs.5.16 crore in FY 2006. Sales rose 129.78% to Rs 42.74 crore in FY 2007 as against Rs 18.60 crore in FY 2006. The results were announced on 30 April 2007.
Industrial Finance Corporation of India (IFCI) was the fourth highest scrip in terms of volumes on BSE today as 87.96 lakh shares were traded on the counter. The share price rose 2.70% to Rs 47.50.
. From Tuesday, 29 May 2007, NSE allowed taking fresh positions in the derivatives contracts of IFCI. Earlier, NSE had barred taking fresh positions in the derivative contracts of IFCI as the open interest limit had crossed 95%.
On 4 May 2007, IFCI had raised overseas investment ceiling in the company to 74% from 24%. IFCI reported robust results on 3 May 2007. It posted a net profit of Rs 668.43 crore in Q4 March 2007 as against net loss of Rs 1.11 crore during the previous quarter ended March 2006. Operating income rose 40.1% to Rs 1236.11 crore in Q4 March 2007 as against Rs 882.29 crore during Q4 March 2006.
It posted net profit of Rs 898.02 crore in the year ended March 2007 (FY 2007) as against net loss of Rs 74.10 crore in FY 2006. Operating income rose 20.91% to Rs 2070.99 crore in FY 2007 as against Rs 1875.26 crore in FY 2006. The results were announced on 3 May 2007.
SREI Infrastructure Finance clocked a volume of 75.24 lakh shares on BSE. It rose 1.21% to Rs 95.90.
SREI Infrastructure Finance announced on 31 May 2007 during market hours it had reached an agreement with BNP Paribas Lease group (BPLG), the leasing arm of BNP Paribas, for a strategic partnership in equipment finance in India.
The alliance will involve 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.
SREI Infrastructure Finance's net profit rose 38.3% to Rs 17.92 crore in Q3 December 2006 compared to Rs 12.96 crore Q3 December 2005. Operating income jumped 40.8% to Rs 93.93 crore (Rs 66.71 crore).
Market moves higher on rebound in Chinese equities
The BSE Sensex, which had moved between positive and negative territory earlier during the day, firmed up in the second half of the trading session. It settled with modest gains, as buying emerged for index pivotals from afternoon trade. Volatility was the hallmark of today’s trade, with Sensex swinging sharply.
A strong recovery in markets across the globe, led by rebound in China, aided recovery in domestic markets. Buying was seen in IT, banking stocks and in select pivotals. FMCG stocks declined.
Sensex gained 39.24 points or 0.27% at 14,535.01. It had opened slightly higher at 14,514.20, but immediately declined to a low of 14,432.67 as selling emerged. It surged to strike an intra-day high of 14,571.31, in mid-afternoon trade.
The S&P CNX Nifty rose 17.60 points or 0.41% at 4,284.65
However, there are concerns that investors may pull out funds from the secondary market to invest in IPOs which are scheduled to hit the market later this month. Reality major DLF is mopping up between Rs 8750 crore and Rs 9625 crore at the proposed price band of Rs 500 - Rs 550 per share. DLF IPO opens for subscription on 11 June 2007 and ends on 14 June 2007. ICICI Bank had, on 15 May 2007, filed a draft prospectus with Sebi to seek approval for raising Rs 17500 crore through an equity issue in the domestic and overseas market.
The total turnover on BSE amounted to Rs 3776 crore while the NSE's futures & options (F&O) segment clocked a turnover of Rs 31210.07 crore.
The market breadth, which indicates the overall health of the market, was positive with 1,318 shares advancing on BSE as compared to 1,270 that declined. 90 remained unchanged. The market breadth had turned negative in mid-morning trade compared to positive breadth in early trade.
The BSE Mid-Cap index was up 0.44% at 6261.02, while the BSE Small-Cap index rose 0.27% to 7,486.67
Among the Sensex pack, 18 pivotals advanced, while the rest declined.
State Bank of India (SBI) gained 2.93% to Rs 1447.90 on 6.56 lakh shares. It also surged to an all time high of Rs 1448, in intra-day trade. The government appears set to promulgate an ordinance to close the largest ever acquisition involving the transfer of Reserve Bank of India's 59.7% stake in State Bank of India to the Centre in a deal worth nearly Rs 40,000 crore.
As per reports, the finance ministry will seek the Cabinet's approval over the next couple of weeks to ensure that the Centre hands over the cheque to RBI on 29 June 2007, a day before RBI closes its annual books of accounts.
Other shares from the banking and financial sector also advanced on renewed buying after last week's inflation data eased market concerns of a further tightening in monetary policy. UTI Bank (up 0.57% to Rs 579.50), Vijaya Bank (up 4.24% to Rs 50.54), Federal Bank (up 3.77% to Rs 286.50), Canara Bank (up 2.78% to Rs 257), Kotak Mahindra Bank (up 6.08% to Rs 610), HDFC (up 0.71% to Rs 1890), and ICICI Bank (up 0.27% to Rs 936), edged higher.
Led by SBI, BSE's banking sector index Bankex rose 1.06% at 7,823.97, and was the top gainer among sectoral indices on BSE.
IT pivotals extended early gains on fresh buying after the rupee backed away from last week's nine-year high as traders bought dollars on concerns the Reserve Bank of India (RBI) may intervene aggressively to check the Indian currency's rise.
The BSE IT index rose 31.58 points or 0.79% to 4,884.93. TCS (up 0.10% to Rs 1210), Infosys Technologies (up 1.33% to Rs 1942) and Wipro (up 0.27% to Rs 535.40) advanced. I-Flex Solutions jumped 10.5% to Rs 2431 on market talk that majority owner Oracle Corp. may make an open offer to increase its stake in the Indian banking software maker.
IT stock have not performed in the market's recent surge due to the 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. The rupee has gained about 9% this calendar year.
Reliance Energy (REL) advanced 1.64% to Rs 550.10 on 1.45 lakh shares, while Bajaj Auto rose 1.57% to Rs 2253.90 on 56,138 shares.
Index heavyweight Reliance Industries (RIL) was up 0.25% to Rs 1744.10 on 6.13 lakh shares. It recovered from low of Rs 1724.
Cigarette major ITC was the top loser among Sensex constituents, down 1.81% to Rs 161.80, on 9.40 lakh shares. The stock has been declining since the past few trading sessions. Hindustan Lever (down 0.8% to Rs 194.90), Tata Tea (down 2.3% to Rs 893), and Bata (down 1.54% to Rs 182.50), were the other losers from FMCG pack. The BSE FMCG Index lost 1.3% at 1,869.87, and was the top loser among sectoral indices on BSE.
L&T (down 1.32% to Rs 1943.90), Gujarat Ambuja Cements (down 1.71% to Rs 111.95) and Cipla (down 0.94% to Rs 215.45) slipped on profit booking.
Nitin Fire Protection Industries settled at Rs 484.10 on BSE, a premium of 155% over the IPO price of Rs 190. It debuted at Rs 332.50, (also its low), and surged to a high of Rs 502.70. On BSE, 1.29 crore shares were traded on the counter on BSE.
Nitin Fire Protection Industries provides fire protection, and safety and security by offering end-to-end turnkey solutions. This business is carried through two wholly owned subsidiaries and one partnership concern. Its IPO ended was subscribed 48.04 times. The issue received total subscription for 16.28 crore shares compared to the issue size of 33.90 lakh shares.
After staying range-bound to slightly weak in the earlier part of the day, sugar stocks surged on momentum buying. Shree Renuka Sugars (up 2.74% to Rs 645.15), Bajaj Hindusthan (up 1.10% to Rs 167.50), Dhampur Sugar (up 1.71% to Rs 68.45) and Mawana Sugar (up 1.09% to Rs 41.65), edged higher.
On Monday, 4 June 2007, Uttar Pradesh-based sugar companies' shares had slumped after the newly elected government in the region withdrew an incentive scheme for sugar mills. Bajaj Hindusthan said on Monday, 4 June 2007, the cancellation of the Uttar Pradesh sugar policy 2004 would have a significant adverse impact on its financials. It said it could not yet quantify the impact, adding it had not heard from the government on the issue.
Amtek Auto rose 0.51% to Rs 415.60 after announcing the acquisition of assets of UK-based J.L. French (Witham). J L French's (Witham) (JLF), is a manufacturer of HPDC aluminium for automotive application. JLF's business has been developed to offer die-casting solutions including product design, simulation, testing, rapid prototyping, high pressure die-casting, precision machining and assembly. This is predominantly aimed at the European automotive industry. The company supplies its products to Land Rover, Jaguar, Trellborg, Ford and PSA (Peugeot). JLF's current sales revenues are pegged at about $ 60 million with 60% capacity utilisation.
Samtel Color jumped 5% to Rs 18 after 25.4 lakh shares, or 5.4% shareholding, changed hands through block deals at Rs 16.50 per share on BSE. The Samtel Color stock was also boosted by stock exchanges' decision to transfer the scrip back to normal rolling settlement from trade to trade segment.
Construction firm Sadbhav Engineering vaulted 7.20% to Rs 570 on bagging Rs 90.5-crore contracts.
Ispat Industries rose 2.61% to Rs 15.70 on entering into a revised MoU with Chhattisgarh for setting up a 1,200-MW coal-based power project. The proposed power project entails an investment of approximately Rs 5,300 crore.
Shares of refining companies slipped for the second straight day, after they slashed jet fuel (aviation turbine fuel — ATF) prices by 1.9%, the first reduction since February 2007.
Hindustan Petroleum Corporation (HPCL) (down 2.96% to Rs 277.25), and Bharat Petroleum Corporation (BPCL) (down 1.65% to Rs 349) declined.
Other refinery stocks like Bongaigaon Refinery and Petrochemicals (down 0.80% to Rs 49.55) and Chennai Petroleum (down 0.83% to Rs 245.25), also declined.
Oil firms had raised jet fuel prices for three consecutive months since February 2007. Public sector companies—Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) —-revise ATF prices on the first of every month in line with movement in international prices.
Sterlite Industries rose 1.45% to Rs 554 after it filed with US regulators to raise up to $2.1 billion in an initial public offering of 125 million American depositary shares. Each (American depository share) ADS will represent the right to receive one equity share.
Shipping firm Mercator Lines jumped 3.80% to Rs 47.80 after receiving a Rs 200-crore contract from Indian Oil Corporation. The contract is for transporting around 12 million tonnes of crude oil over a period of 15 months to Indian Oil Corporation (IOC) commences from July 2007.
AvayaGlobal Connect vaulted 9.05% to Rs 383.30 after parent Avaya Inc. agreed to be acquired by a private equity firms TPG Capital and Silver Lake for $8.2 billion. Silver Lake LP and TPG's TPG Capital LLC, on Monday 4 June 2007, agreed to purchase telecommunications-equipment company Avaya Inc. for about $8.2 billion, marking the second big buyout in the telecom industry in two weeks. Avaya Inc. holds 59.13% stake in Avaya GlobalConnect.
Power transmission equipment maker KEC International added 1.58% to Rs 523 after it won Rs 380-crore worth of orders in Kazakhstan. The order is to construct a 475-kilometer transmission line of 500 kilovolts (Kv) in the Ekibastuz-Agadyr section of the North-South Electricity Transit in Kazakhstan. The project will be executed over a period of 27 months. KEC has a strong order book of over Rs 3000 crore.
GMR Infrastructure rose 2.53% to Rs 500.45 on signing a MoU with the Chhattisgarh government for a 1,000-MW coal-based thermal power plant.
GMR Infrastructure announced during the market hours today, 5 June 2007, that GMR Energy, the holding company for the GMR Group's energy business and a subsidiary of the company, has signed a memorandum of understanding (MoU) with the government of Chhattisgarh for implementation, operation and maintenance of a 1,000-mega watt (MW) coal-based, thermal power plant in Chhattisgarh.
China’s Shanghai Composite index recovered on rumours that Chinese authorities would make a policy statement to restore investor confidence, after a 7% slide in the index earlier in the day. The index rose 96.70 points, or 2.63%, to 3,767.10. Chinese markets have tumbled ever since the government, late last month, tripled a share-trading tax to cool its red-hot market. However, the Chinese market fall has failed to trigger a broad rout in global equity markets, which some had feared.
Boosted by strong recovery by Shanghai Composite, other Asian and European markets also gained. Hong Kong's Hang Seng index was up 112.56 points, or 0.54%, to 20,842.15.
Japan's Nikkei 225 Stock Average ended above the 18,000 level for the first time in about three months on Tuesday, 5 June 2007, tracking the steady increases in the US market and investors' confidence in Japanese companies. The Nikkei index rose 80. 39 points or 0.45%, to close at 18,053. 81.
Wall Street recovered from a mostly down session yesterday, 4 June 2007, eking out a gain as investors brushed off another slide in Chinese stocks. The Dow Jones Industrial Average (DJIA) rose 8.21 points, or 0.06%, to 13,676.32. Broader stock indicators were also narrowly higher. The S&P 500 index was up 2.84 points, or 0.18%, to 1,539.18, and the Nasdaq Composite index moved up 4.37 points, or 0.17%, to 2,618.29.
Oil prices eased on Tuesday, 5 June 2007, as the Middle East cyclone fears waned. But concerns over gasoline supply in the United States kept crude above the $70 mark. London Brent crude shed a cent to $70.39 a barrel, after climbing $1.33 on Monday, 4 June 2007, on concerns the storm could disrupt shipping and output in the Middle East. US light crude fell 18 cents to $66.03 a barrel.
Sensex recovers on positive global cues
After an initial hiccup the recovery in Asian markets helped the Sensex to trim its early losses and end the session with gains of 39 points. The market witnessed correction in the morning trades on the back of mixed global cues and fears of overvaluation. The market resumed with a negative gap of 18 points at 14514. The selling pressure in front-line stocks and fast moving consumer goods dragged the index to its day's low of 14433 by mid-morning trades. The firm global cues and sustained buying in select heavyweights, banking and technology stocks helped the Sensex to enter into positive territory. Some profit booking at higher levels and lack of buying interest, however, kept the index range-bound but with a positive bias. The Sensex finally closed the session with gains of 39 points at 14535. The Nifty ended the session by adding 18 points at 4285.
Among the sectoral indices, the Bankex led the upsurge with gains of 1.06% at 7824 followed by the BSE Teck index (up 0.89% at 3722) and the BSE IT index (up 0.79% at 4884). However, the BSE FMCG index tumbled by 1.27% at 1870. The market breadth was positive. Of the 2,677 scrips traded on the BSE 1,325 stocks advanced, 1,279 stocks declined and 73 stocks ended unchanged.
Among the Sensex stocks, banking major SBI was the lead gainer and soared 2.10% at Rs1,436. Reliance Energy advanced 1.72% at Rs551, Bajaj Auto moved up by 1.35% at Rs2,249, Infosys jumped 1.32% at Rs1,942, Bharti Airtel shot up by 1.28% at Rs837, Ranbaxy added 1.12% at Rs392 and HDFC rose 1.08% at Rs1,897. ICICI Bank, Tata Steel and BHEL gained marginally. Among the laggards, ITC dropped 1.79% at Rs162, L&T shed 1.26% at Rs1,945, Gujarat Ambuja declined by 1.01% at Rs113 and Satyam Computer lost 0.86% at Rs463.
Banking stocks were the star performers, Kotak Bank jumped 5.54% at Rs607, Oriental Bank surged 3.61% at Rs243, Federal Bank jumped 3.55% at Rs286, Canara Bank scaled up 2.38% at Rs256, Bank of Baroda spurted 2.37% at Rs281, Indian Overseas Bank soared 2% at Rs117 and Andhra Bank was up 1.22% at Rs87.
Over 1.29 crore of Nitin Fire Protection shares changed hands on the BSE followed by Reliance Natural Resources (1.22 crore shares), GV Films (91.13 lakh shares), IFCI (87.96 lakh shares) and SREI Infrastructure (75.24 lakh shares).
Nitin Fire Protection registered a turnover of Rs590 crore on the BSE followed by Reliance Capital (Rs111 crore), Reliance Industries (Rs106 crore), SBI (Rs93 crore) and Cinemax (Rs75 crore).
Trading Calls
Buy Jain Irrigation on declines with stop loss of Rs 465 for a target of Rs 500. This is an Intraday Recommendation.
Buy Rain Calcining with stop loss of Rs 39, for a target of Rs 46.75. This is an Intraday Recommendation.
Sell India Cement above Rs 176.50 with stop loss at Rs 179. This is a day-trading recommendation.
Buy Ceat below Rs 180 with stop loss at Rs 176.5. This is a day-trading recommendation.
Buy Hindustan Zinc with stop loss below Rs 660 for a target of Rs 692, 705 & 726.. This is a
day-trading recommendation.
Sell Tata Tele (M) with stop loss above Rs 27.30 for a target of Rs 25.90. This is a day-trading recommendation.
Daily Technical Analysis
Market reacts on lower volumes
The Sensex opened positive however, immediately turned down ward and traded lower the trend remained negative throughout, in the end it has given a negative close of 75 points at 14495.77.
Sensex trend indecisive; remain cautious till clear trend emerges
The Sensex as expected moved down ward, it has given a close near the crucial support levels of 14441 (Nifty 4250), its behaviour around this level would be crucial it need to maintain 14441 for the trend to remain positive, in case, the Sensex breaks below 14441 then it could move down to 14366 to 14291 (Nifty 4232 to 4202) range. The nature and extend to which it moves down ward would decide the Sensex future trend. At the lower levels 14046 would be the crucial trend change level for short term
trend below it the trend would have a negative bias.
Wave count: Trend to remain bullish
An alternative count suggested last week looks feasible, were by the Sensex rise between 12711 to 14383 could be considered as a standard corrective pattern there after the Sensex downward move from 14383 to 13554 as wave-x and the present upward beginning from 13554 could be an another standard corrective pattern. As it has been the case in the past, if the pattern formation of the second standard corrective pattern is same as the first standard corrective pattern; the second corrective pattern could then move up to 14914 to 15551 levels by the end of June. All long positions should have a stop loss placed at 13554(Nifty 3981) levels.
Anand Rathi - Daily Strategist
The NIFTY futures saw a gain of 6.23 % in OI with prices coming down sharply and closing low indicating short positions built up in the market thus suggesting if the follow up continues then we may see fresh built up in positions with shorts more aggressive and forcing weak bulls to liquidate their positions. The nifty June series futures closed at 31 points discount to spot nifty suggesting lack of confidence among players resulting in liquidation of positions by weak hands. Market if it sustains below 4240 levels then we may see further short positions built up in the market and longs liquidation. The FII were sellers in index futures to the tune of 164 crs and buyers in index options to the tune of 274 crs. The PCR has come up from 1.62 to 1.60 indicates some strength may be seen in the market.
IV in the market was 26.35 and HV was 22.78.
Among the Big guns, ONGC saw 7.19 % rise in OI with prices coming down indicating built up of short positions in the counter suggesting the counter may show weakness. Whereas RELIANCE saw gain in OI with prices closing down indicating selling pressure emerging in the counter at higher levels thus suggesting the counter may show further weakness in the coming days if market doesn't take support at current levels.
In the TECH counters all the major counters INFOSYSTCH, WIPRO, TCS & SATYAMCOMP saw gain in OI with prices down significantly indicating fresh short positions built up in overall IT pack suggesting further weakness may be seen in these counters.
In the BANKING counters, SBIN saw rise in OI with prices up indicating fresh money coming in the counter with buying spree suggesting further strength in the counter. ICICIBANK & HDFCABKN saw rise in OI with prices remaining in a range suggesting some profit booking may be seen in the counter.
In the Metal pack, TATASTEEL & SAIL saw rise in OI with prices facing resistance at higher levels indicating fresh short positions built up in the counter thus suggesting some weakness may be seen in the counter HINDALCO saw significant gain in OI with prices going up indicating built up of fresh long positions in the counter suggesting further strength in the counter. STER saw gain in OI with prices closing at day's low suggesting fresh short positions built up in the counter suggesting weakness in the counter. NALCO saw gain in OI with prices closing near day's low indicating short positions built up in the counter suggesting weakness in the counter.
We feel that the volume and built up in OI suggests that market may show some weakness if it remains below 4240 levels suggesting one should avoid taking aggressive positions in the market and should hedge the positions appropriately to avoid any unexpected movement in the market. One should trade with strict stop losses to be adhered too.
Stocks to watch: NEYVELILIG, SBIN, HCC, GESCOCORP (Looking positive)
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4235 and 4204 levels with reistance at 4287 and 4325 levels .
Buy : Sail intraday above 142 target 149 s/l of 138
Sell : IFCI below 45.9 target 42 s/l 47.5
Buy : Gesco in F&O above 649
Sell : Escorts in F&O below 121
Negative Biasness to prevail .
Out House :
Markets at a support of 14401 & 14325 levels with resistance at 14532 & 14585 levels .
Buy : RIL at dips
Buy : Siemens & Titan at dips
Buy : IDFC & Unitech
Buy : GujNrecoke & Garwarewallrope
Buy : Lupin & GlenMark
Buy : Sail & Tisco at dips
Buy : RNRL & IFCI
Dark Horse : GlenMark , MIC , LUPIN , MtEverest , IDFC , PFC , & Visaka
Bullet for the Day : McDowell Holding & MIC with strict stop loss
Sensex to stay sideways
The BSE Sensex has not been able to breach an all time high of 14,723.88, struck on 9 February 2007, since the past few days. Fresh selling is emerging at higher levels. Since the past two sessions (1 June and 4 June), the Sensex is opening strong, but is declining on selling pressure in later half of the day.
Asian stocks were trading mixed today, with Japanese markets trading slightly higher as investors bought Nippon Oil and other natural resource shares after crude-oil prices rose in New York on concerns over potential supply disruptions on reports a cyclone may hit the Persian Gulf on Wednesday.
Japan's Nikkei 225 index rose 90.57 points or 0.50% at 18,063.99 while Hong Kong's Hang Seng index gained 66.44 points or 0.32% at 20,796.03. Taiwan's Taiwan Weighted was up 1.68 points or 0.02% at 8,296.470. Singapore's Straits Times and South Korea's Seoul Composite were trading flat.
China’s Shanghai Composite plunged 207.82 points or 5.66% to 3,462.52
Wall Street recovered from a mostly down session yesterday, eking out a gain as investors brushed off another slide in Chinese stocks. The Dow Jones Industrial Average (DJIA) rose 8.21 points, or 0.06%, to 13,676.32. Broader stock indicators were also narrowly higher. The S&P 500 index rose 2.84 points, or 0.18%, to 1,539.18, and the Nasdaq Composite index rose 4.37 points, or 0.17%, to 2,618.29.
Oil prices eased on Tuesday, 5 June 2007, as Middle East cyclone fears waned, but concerns over gasoline supply in the United States kept crude above the $70 mark. London Brent crude shed a cent to $70.39 a barrel, after climbing $1.33 on Monday, 4 June 2007, on concerns the storm could disrupt shipping and output in the Middle East. U.S. light crude fell 18 cents to $66.03 a barrel.
As per provisional figures, FIIs were net buyers to the tune of Rs 88.79 crore, while Domestic Institutional Investors were net sellers worth Rs 28.94 crore on Friday, 4 June 2007
Market on a zigzag road, but upmove continues
Drop in the Chinese market dampened the sentiment on Dalal Street yesterday but it was more related to the fears of overvaluation. The market is taking cues from international markets and the mixed global cues likely to weigh on the local indices in the morning trades. However, the prevailing bullish trend may add to the market advantage and help the sentiment turn positive. Among the domestic indices, the Nifty could test 4300 and below this level next support is in 4220-4202 range, while on the upside it could edge higher to 4320. The Sensex has a likely support at 14100 and may face resistance at 14700.
Among the Us indices the Dow industrials closed at record highs Monday, despite a steep decline in Chinese stocks and higher crude prices. While the Dow Jones gained over eight points, the Nasdaq moved up by four points.
Indian floats trading on the US bourses had a mixed outing on Monday, the gainers were, VSNL gaining over 2% while Dr Reddy's, HDFC Bank and Rediff gained marginally. However, Tata Motors slipped over 4% and MTNL, Infosys, Satyam, Wipro, Patni Computer and ICICI Bank dropped around 1-2% each.
Crude oil prices are moving up gradually, while the Nymex light crude oil for July delivery rose by $1.13 to close at $66.21 a barrel. In the commodity segment, the Comex gold for August series dropped by 60 cents to settle at $676.30 an ounce.
Daily Market Snippets
US markets were marginally up. Asian markets are trading negative.
The bias for markets is cautious.Strong trading support for nifty at 4240 spot and resistance at 4280.
Levels Nifty : Support 4252 / 4236/ 4222. Resistance 4282/ 4297/ 4314.
News: 1) Glenmark Pharmaceuticals board scheduled on June 11, 2007, to consider a proposal for stock split of the company's equity shares. 2) Tata Tea made an open offer to purchase an additional 20% stake in Mount Everest Mineral Water for Rs 95.19 crore. Tata Tea agreed to buy 25.74% stake in Mount Everest for around Rs 115 crore through subscription of preferential shares from promoters of MEMW 3) Nitin Fire Protection will list on bourses today. 4) Aurobindo Pharma has received the approval from the USFDA for its Cefpodoxime Proxetil suspens
US markets were marginally up. Asian markets are trading negative.
The bias for markets is cautious.Strong trading support for nifty at 4240 spot and resistance at 4280.
Levels Nifty : Support 4252 / 4236/ 4222. Resistance 4282/ 4297/ 4314.
News: 1) Glenmark Pharmaceuticals board scheduled on June 11, 2007, to consider a proposal for stock split of the company's equity shares. 2) Tata Tea made an open offer to purchase an additional 20% stake in Mount Everest Mineral Water for Rs 95.19 crore. Tata Tea agreed to buy 25.74% stake in Mount Everest for around Rs 115 crore through subscription of preferential shares from promoters of MEMW 3) Nitin Fire Protection will list on bourses today. 4) Aurobindo Pharma has received the approval from the USFDA for its Cefpodoxime Proxetil suspens
5) ACC - May sales at mt vs 1.57 mt yoy. 6) Madras Cements, we maintain our Buy recommendation on the stock with a reduced price target of Rs3,500 per share.
Stocks with positive bias are: Sterlite, ITC, Punj Loydd, SBI.
Stocks for short term delivery: S Kumars ( cmp 80) , HCC (cmp 103)
Stocks for Investment are : Genus Overseas, Aurobindo Pharma.
(11) RCOM launches colour FM phone at rs 1888 ; sells 1.5 m handsets under rs 777 plan in May alone (12) Avaya Inc agrees to be acquired by PE firms TPG Capital and Silver Lake for $ 8.2 bn (13) Bombay HC dismisses Rel Energy petition against MSRDC decision to disqualify it from bidding for rs 2600 cr Nhava-Sewri sea link project (14) Tata's, Ruias set sights on Canadian Steel maker Stelco (15) Cabinet okays additional 300 acres land to TELCO at Dharwad for their project (16) NRIs may face 3 year pre-IPO realty lock-in (17) Ex-dividend : Accel frontline 1.50/- (18) board meeting : Mahindra forg on amalgamation of Mahindra Stokes holding co, Mahindra forging overseas & Mahindra forging Mauritius with itself (19) Aristocrat luggage board approves amalgamation with VI
(20) Nagajurna Fert denies the rumour of Rallis,Nagajurna rise on stake buy
Indiainfoline - Intraday Stock Ideas
NIFTY (4267) S4230 R4299
BUY Archies at Rs140 with SL of Rs136 target 147, 150
BUY Aurobindo Pharma at Rs721 with SL of Rs715 and target of Rs731, 735
BUY Adlabs at Rs545 with SL of Rs540 and target of Rs555, 560
SELL Century Textiles at Rs600 with SL of Rs605 and target of Rs590, 587
SELL HPCL at Rs285 with SL of Rs290 and target of Rs277, 273
STRATEGY INPUTS FOR THE DAY
Bulls and bears walk side by side
No matter what side of the argument you are on, you always find people on your side that you wish were on the other.
The bulls and bears appear to be strolling neck to neck. While the bulls have a psychological milestone to cross in terms of an all time high, the bears get their few minutes of fame with the indices in the red. We expect a cautious opening given a flat close on Wall Street and a mixed trend in Asian markets. The Chinese market is remains deep in the red.
All eyes will be on Nitin Fire Protection Industries Ltd., which is listing the shares on BSE and NSE. The issue price been fixed at Rs190 per share. Expect some fireworks on this counter as it is likely to make spectacular debut.
The Sensex seems to be struggling to get to a new peak. Weakness in Chinese markets and routine profit booking dragged the key indices down yesterday. The sideways movement may continue for a while before the bulls get back on track. The slugfest between the bulls and the bears may slowly lead to an escalation in intra-day volatility.
Things appear to be stable on the domestic front. Economic growth is strong; inflation has cooled off and interest rates may possibly be topping out. What is heartening for the bulls is the resurgence in liquidity in the past couple of months, especially from overseas investors.
However, there are a few cracks developing in the global markets. The Chinese economy and its stock market are over heating, prompting the government to unleash a slew of tightening steps. There are also worries about the state of the other key economies like the US and Japan. Brent crude prices have inched past the $70 per barrel mark. Oil may remain on the boil due to the onset of summer in the US and the start of the ‘hurricane’ season. These issues may cast their spell on the generally buoyant Indian markets. Hence, one should adopt a stock centric approach.
The Dow Jones Industrial Average, S&P 500 index and Russell 2000 all closed at record highs on Monday. Higher oil prices and a steep decline in Chinese stocks weighed on the sentiment.
The S&P 500 added 2.84 points, or 0.2%, to 1539.18. The Dow increased 8.21 points, or 0.1%, to 13,676.32. The Nasdaq Composite Index climbed 4.37 points, or 0.2%, to 2618.29.
Oil prices jumped amid concerns about a cyclone approaching the Arabian peninsula. US light crude oil for July delivery rose $1.13 to settle at $66.21 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell 60 cents to settle at $676.30 an ounce. Treasury prices rose, lowering the yield on the 10-year note to 4.92% from 4.95% late on Friday. In currency trading, the dollar fell versus the euro and the yen.
European shares weakened modestly. The pan-European Dow Jones Stoxx 600 index shed 0.3% to 399.02, reversing course after having traded at its highest in six and a half years during the session.
The French CAC-40 lost 0.7% to close at 6,125.81, while the UK's FTSE 100 slipped 0.2% to 6,664.10 and the German DAX Xetra ended down 0.1% at 7,976.79.
In the emerging markets, Brazilian stocks finished lower. In Sao Paulo, the Ibovespa, which closed at a record on June 1, lost 180 points, or 0.3%, to end at 53,242.68. In Mexico City, the IPC rose 150 points, or 0.5%, to 32,096.21, a record high.
Asian markets are mixed this morning. The Nikkei in Tokyo is up 33 points at 18,007 while the Hang Seng is down 38 points at 20,691. The Kospi in Seoul is down 5 points at 1731 and the Straits Times in Singapore has shed 4 points to 3574.
The Morgan Stanley Capital International Asia-Pacific Index added 0.2% to a record 152.79 at 10:45 a.m. in Tokyo. But, the Shanghai Composite index in China is down 207 points or 5.7% at 3462.
Markets lost ground on the first day of the week as bulls were unable to hold on to early gains. Index heavy weights like Infosys, L&T, Reliance Industries, Tata Motors and ACC led the downfall. Further, Shanghai SE Composite slipped by over 8% dampening the sentiments of the investors on Dalal Street. However, banking and Metal stocks bucked the negative trend as SBI, HDFC Bank and Hindalco were among the major gainers. Finally, the 30-share Sensex slipped 74 points to close at 14495. NSE-50 Nifty was down 30 points to close at 4267.
ACC slipped by 2.6% to Rs837. The company announced its May Cement Dispatch figures at 1.82mn tonnes (up 18.9%). The scrip touched intra-day high of Rs861 and a low of Rs834and recorded volumes of over 200,000 shares on NSE.
Development Credit Bank slipped 1.6% to Rs100. According to reports there are expectations of a minor stake sale and improvement in the fundamentals. The scrip touched intra-day high of Rs105 and a low of Rs100 and recorded volumes of over 7,00,000 shares on NSE.
Rain Calcining was locked at 20% upper circuit to Rs42.50 after the company decided to acquire all of the outstanding equity of CII Carbon LLC for $595mn. The scrip touched intra-day high of Rs42.50 and a low of Rs39.50 and has recorded volumes of 1,00,000 over shares on NSE.
Oil refinery stocks lost ground after the company companies declined jet fuel prices by 1.9%. IOC declined 3.2% to Rs450, HPCL was down by 4% to Rs284 and BPCL dropped by 1.3% to Rs355.
Oil exploration stocks also were under selling pressure. ONGC dropped by 1% to Rs902 and Reliance Industries was down by 0.5% to Rs1744.
Metal stocks shined brightly led by gains in Hindalco as the scrip surged by over 4% to Rs146 amid speculation the company may become a takeover target. Alcan Inc. may partner Sterlite Industries Ltd. to make a bid for Hindalco in an attempt to fend off a hostile takeover attempt by New York-based Alcoa Inc, Hindustan Zinc spurred by over 4.5% to Rs677 and Jindal Steel spurred by over 12% to Rs3705.
Technology stocks continued to be on the receiving end as the Indian rupee further strengthens against the US Dollar closed at Rs40.52 per US Dollar. Index heavy weight Satyam Computer slipped by 2.6% to Rs465, Wipro dropped 2% to Rs533 and Infosys was down by 0.8% to Rs1916. Mastek, i-Flex and Mphasis BFL were the major losers among the Mid-Cap stocks.
Real Estate stocks were in limelight. Mahindra Gesco surged by 5.6% to Rs634, Bombay Dyeing spurred by 1.5% to Rs568 and Akruti gained by 0.5% to Rs372.
FMCG stocks ended with smart gains. Dabur surged by 2% to Rs100, ITC was up by 2.4% to Rs165, Marico gained by 0.6% to Rs57. However, Tata Tea dropped by over 4% to Rs912 and Nirma was down by over 3% to Rs189
Insider Trades:
Man Industries (India) Ltd: ICICI Prudential Life Insurance Company Ltd has purchased from open market 400000 equity shares of Man Industries (India) Ltd on 30th May, 2007.
AMD Metplast Limited: UBS Securities Asia Limited - A/C Swiss Finance Corporation (Mauritius) Ltd has sold in open market 1223668 equity shares of AMD Metplast Limited on 30th May, 2007
Abhishek Mills Ltd: HSBC Financial Services (ME) Limited has sold in open market 501362 equity shares of Abhishek Mills Ltd on 31st may, 2007.
Lower Circuit:
United Breweries, Assam Company, Tanla, Rasoi, Donear Industries, Mount Everest and IID Forgings.
Upper Circuit:
Rain Calcining, SREI Infrastructure, Suven Life, Rain Commodities, Swan mills, Kernex, Shree Precoated and Ashapura Minechem.
Delivery Delight (rising Price & rising delivery):
Alfa-Laval, Aurobindo Pharma, Aventis Pharma, Cadila Healthcare, Dabur India, Federal Bank GlaxoSmithKline Pharma,
iGate Global, IPCL, Punjab Tractors, Siemens, SAIL, Tata Elxsi and VSNL.
Abnormal Delivery:
Escorts, Hindustan Motors, Balaji Telefilms, Titan Industries, Balrampur Chini Mills, Tata Chemicals, Kesoram Industries, Nirma, EID Parry and India Cements.
Results Today:
NIIT and Rain Commodities
Bulk Deals:
Merrill Lynch has picked up Allsec Technologies while selling Asahi Songwon Colors; Reliance MF has bought Aurobindo Pharma while Standard Chartered MF has sold it; Tata MF has bought Electrosteel castings; Fidelity has sold Everest Kanto; Citigroup has sold Gayatri Projects; HSBC holdings has sold McDowell Holdings; Fidelity has sold NIIT; Citigroup has purchased Pyramid Symira while selling Rain Calcining; Birla MF has picked up Taj GVK Hotels.
Major News:
Govt may increase size of sugar stockpile, says Sharad Pawar
ONGC signs an agreement with Brazil's Petrobras on swapping of interests in offshore blocks in India and Brazil
Hindalco shares jump amid reports that Canada-based Alcan and Sterlite were planning to bid for the company
Moser Baer to sell $150mn convertible bonds in two Tranches
Gujarat Ambuja Cement May sales at 1.53mn tones (up 3.3%)
Corus raises flat rolled prices in UK between 5-12%
Glenmark to mull stock split on June 11
ACC May Cement Despatches at 1.82mn tonnes (up 18.9%)
Nagarjuna Construction Company Ltd (NCC)
Recommendation: HOLD
CMP: Rs168
Target Price: Rs182
Nagarjuna Construction Company Ltd. (NCC) posted a healthy topline growth of 56% yoy during FY07. Though the numbers were close to our estimates for the year, it was lower than management guidance of Rs30bn. With its present order book of Rs73bn, NCC is well placed to reach Rs40bn revenue target for FY08E. However, high order intake accretion is needed during FY08 to meet our revenue estimate for FY09E (46.4% of FY09E revenues on account of assumed new orders). While turnover CAGR is expected to be 37.3% during FY07-09E, margin upside during FY08-09E seems ruled out as new orders result in higher initial costs. Further, there is a capital raising plan, which is likely to result in an 18-20% equity dilution, not factored into our projections. We recommend a HOLD.
Anand Rathi - Daily Technical Note
Nifty and Sensex have exhibited a bearish candlestick.
Technically, one may use the level of 4250 (Nifty) and 14450 (Sensex) as the stop loss level.
Nifty faces resistance at 4340 and Sensex at 14600.
BSE Smallcap and BSE Midcap also exhibited bearish candlesticks.
CNX IT has lost ground.
In the Punter's zone we have a Buy in Federal Bank & Sell in Shri Renuka Sugars and M&M.
In the Technical call section, we have a Buy in Reliance Capital & Sell in ONGC and Reliance Industries.
Macquarie - Unitech, Citigroup - Cairn, India Market Watch
Macquarie on Unitech say,
Unitech announced a strong set of FY3/07 results, with top-line revenue rising 255% to Rs33.9bn from the FY3/06 level, and net profit up 15x at Rs13.05bn; implying an EPS of Rs16.09 for the full FY3/07.
Impact
We estimate that approximately half of EPS, ie Rs8, is from the sale of commercial assets to UCP, a vehicle listed on AIM, London in December 2006. Excluding this sale to UCP, remaining net profit is in line with or core business full year FY3/07 EPS estimate of Rs7.92.
Our estimate suggests that the company must have delivered ~8m sqf in FY3/07 in line with our expectation of 7.8m sqf. We believe the company is on track to achieve our strong development schedule forecasts (FY3/08 and FY3/09), and thereby reduce execution risk.
Operating margins are very strong at 62.0% against our expectation of 44% but the two numbers are strictly not comparable. The reported numbers include the sale of commercial assets to UCP where company has partly monetised its land at relatively higher margins.
UT is planning to hive-off 25¿30% of its hotel assets comprising 28 hotel sites, and press reports suggest this is likely to be valued at $2bn. Presently we have valued these hotel sites around $450m.
UT stated that it plans to spend $6bn over next four years to develop residential, commercial, retail properties and build hotels.
UT's board of directors has also announced 1:1 bonus shares. This is the second time the company has declared bonus shares in the last 12 months. The board also announced a 25% dividend for FY3/07.
Earnings revision
No change.
Price catalyst
12-month price target: Rs501.00 based on a Sum of Parts methodology.
Catalyst: Surging Residential Demand and Higher Realisations
Action and recommendation
We strongly reiterate our Outperform rating. We believe Unitech is a very good proxy for the Indian property sector as it is the most diversified property company both geographically and in terms of business segments. We also see Unitech getting re-rated with DLF soon looking to hit the capital markets. Our best-case scenario (which includes option value of future projects like the 38,000-acre Kolkata project) suggests a potential price of Rs750-800.
Citigroup in their report on Cairn India
Oil forecasts raised
After our global oil numbers were raised to US$63.5/b, US$60/b and US$55/b for 2007E, 2008E and long-term respectively, we adjusted our estimates for Cairn India. Our core NAV moved up to Rs160 from Rs146, with a target price of Rs185 reflecting a 15% premium to NAV. Cairn is highly leveraged to long-term oil price expectations.
Uncertainty over offtake should pass; Buy
The recent newsflow on new refinery and consequent changes to the ¿approved¿ production plan are overdone in our opinion. While the associated political overtones of recent developments could delay first oil, there is unlikely to be a complete overhaul. The sensitivity of NAV to a 6-month delay is a manageable 4%. The recent correction in the stock therefore, in our view, offers favorable risk-reward in the context of consensus oil moving up.
Core valuation support
At long-term Brent of US$55/bbl, the shares trade at 0.85x NAV. But potential bid interest raises the possibility that a higher oil price is used in the bid valuation. In this context, premium to NAV of 15% therefore imputes a long-term oil assumption of US$60/bbl.
Oil upgrade drivers
We remain of the view that a weak US$, rising costs and limited
visibility on new sources of long-term non-OPEC supply strengthen OPEC's ability to set a floor under prices facilitated by a creeping increase in market share
Citigroup in their report India Market Watch...
Spotlight on External Commercial Borrowings: Latest data on external borrowings (ECBs) indicates that corporates raised a record US$25.3bn during FY07, over 50% higher than the amount raised during FY06, and breaching the annual cap of US$22bn fixed by the Finance Ministry. ECBs during March 2007 totaled as much as US$5bn- the highest-ever borrowing in a single month. Over the past year, ECBs. which include loans, buyers/suppliers credit, securitized instruments and Foreign Currency Convertible Bonds (FCCBs) have been a growing source of funding for corporates and have a minimum average maturity of 3 years (for ECBs below US$20mn) and 5 years (for ECBs over US$20mn).
ECB uptrend has created a liquidity dilemma: Given the backdrop of an unfolding capex cycle and rising investment spend across industries such as infrastructure, telecom, cement and financial services; ECBs have emerged as a significantly cheaper corporate financing strategy especially under the current scenario of tighter domestic interest rates and a steady appreciation in the rupee. While overseas borrowings make commercial sense for most companies in the current backdrop, they have posed as a liquidity concern given that higher foreign inflows have resulted in more dollars coming into the system, thus creating inflationary worries.
New Regulations make ECBs less attractive. In order to manage capital flows, the RBI recently imposed several regulations that would make ECBs less attractive. These include (1) lowering interest rate ceilings on ECBs under the automatic route1 thus making it difficult for companies with lower credit quality to access overseas markets. (2) Banning ECBs for integrated townships for100 acres or more thereby further tightening funding towards real estate. While the new norms will help limit borrowings, given the uptrend in FDI, we are maintaining our full year balance of payments estimates of a reserve accretion to the tune of US$21.5 and our rupee appreciation view.
Citigroup - India Technicals
Citigroup in their daily technical report,
Nifty — The index opened on a positive note and posted an intra-day high of 4,363 in opening trades, after which it drifted down for the rest of the day’s trading session. The index closed with a loss of 40 points.
Perfect Downward Bar Reversal — The index has posted a perfect downward bar reversal on the daily bar chart (i.e. the index traded above the previous day’s high and closed below the previous day’s low and close), which suggests the index can decline from current levels.
Resistance — The index is facing stiff resistance around 4,307 levels; it is unable to hold above 4,307 on a closing basis.
Support — The index has support around 4,235 (lower end of the channel) and 4,202 (20dma). Expect test of support during the day’s trading.
Conclusion — Expect an intra-day decline towards 4,235.
Sharekhan Investor's Eye dated June 04, 2007
International Combustion (India)
Cluster: Cannonball
Recommendation: Buy
Price target: Rs519
Current market price: Rs320
Results meet expectations
Result highlights
- The revenues of International Combustion India Ltd (ICIL) grew by 15.6% year on year (yoy) to Rs24.1 crore in Q4FY2007, in line with our estimates.
- The revenues of the heavy engineering division (HED) grew by 24.8% yoy to Rs18.4 crore while that of the geared motor and geared box division (GMGBD) declined by 5.1% yoy to Rs5.9 crore. However, on a sequential basis the GMGBD's top line grew by 61.2%.
- The operating profit margin (OPM) of the company improved by 280 basis points yoy to 20.3% in Q4FY2007, in line with our estimates. The margin expansion was driven by a lower raw material cost as the raw material cost as a percentage of sales ratio declined to 51% from 56.3% yoy. Consequently, the operating profit grew by 34.6% to Rs4.9 crore.
- The margin of the HED improved by a whopping 1,340 basis points yoy to 32.6% while that of the GMGBD declined by 1,800 basis points to 14.7%. The GMGBD's margin declined largely because the company started manufacturing the B2000 series of geared motors and gear boxes in this year. It has made huge investments in the B2000 series project the results of which will get reflected in its FY2008 numbers.
- The interest cost declined by 7.7% yoy to Rs0.1 crore as the company repaid its entire debt and became a debt-free company in this year. Consequently, the net profit grew by a strong 47.4% yoy to Rs2.8 crore.
- The outstanding order book stood at Rs56 crore out of which the HED's order book stood at Rs48 crore with the GMGBD accounting for the balance Rs8 crore.
- ICIL is currently trading at a price/earnings ratio (PER) of 6.8x its FY2008E earnings and 4.2x its FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). Considering the strong order backlog and the expansion plans of its key user industries such as steel, sugar and cement, we maintain our Buy recommendation on the stock with a price target of Rs519.
Madras Cement
Cluster: Cannonball
Recommendation: Buy
Price target: Rs3,500
Current market price: Rs2,746
Price target revised to Rs3,500
Result highlights
- Cement volumes of Madras Cement Ltd (MCL) grew at a slower rate of 10.1% in Q4FY2007 compared the previous quarters to 1.48MMT as the plant at Alathiyur witnessed a maintenance shutdown for 15 days. The realisation growth was strong at 27% year on year (yoy) to Rs2,923 per tonne which resulted in a robust top line growth of 45.1% yoy to Rs435 crore.
- The operating expenditure increased by 29.4% yoy to Rs301.8 crore as the power and fuel cost increased by 25% yoy to Rs85 crore on the back of higher international coal prices and freight cost, which increased by 35% yoy to Rs72.8 crore. The employee cost too jumped substantially to Rs18 crore as against Rs12 crore in the previous quarter on account of the bonuses given to employees.
- The operating profit doubled yoy to Rs133 crore whereas the operating profit margin (OPM) improved by 800 basis points yoy to 30%; though on a sequential basis, the OPM dropped by 270 basis points.
- The interest cost reduced by Rs3 crore yoy to Rs6 crore, thanks to the repayment of debt in the quarter. The depreciation provision remained more or less flat sequentially at Rs18.2 crore.
- With the tax provision growing at a marginal rate, the net profit jumped by 117% yoy to Rs71 crore.
- Thanks to the additional capacity of 4MMT that kicked in during the fourth quarter, we expect the company to clock a healthy volume growth of 12% in FY2008 and 26% in FY2009 yoy. The accompanying captive power plants (CPPs) will help the company to keep its power cost under control.
- We are reducing our FY2008 earnings per share (EPS) estimate by 6.6% to Rs313 from Rs334 earlier as we expect the cement prices to remain firm for the next one year. We are also introducing our FY2009 estimate of Rs359.
- We expect the company to clock a 40% compounded annual growth in its earnings over FY2007-09. At the current market price of Rs2,746, the stock trades at 7.7x its FY2009 estimates and an enterprise value (EV) per tonne of USD77. Considering the positive outlook, we maintain our Buy recommendation on the stock with a reduced price target of Rs3,500 per share.
SECTOR UPDATE
Automobiles
Weakness across
The weakness in automobile sales continued across segments in May, with utility vehicles (uv) being the only exception. The two-wheeler segment witnessed a decline in sales across players, confirming fears of a slow-down in the segment. The passenger car segment managed to show a small growth due to new product launches. The commercial vehicle (CV) segment, particularly the medium and heavy commercial vehicle (M&HCV) segment, continues to decline due to rising interest rates. The light commercial vehicle (LCV) segment has also managed to report a nominal growth that too due to the growth of ACE. Mahindra and Mahindra (M&M) was the exception in the month with strong sales being reported by Scorpio as well as non-Scorpio UVs, good response to Logan with the exception of high base effect restricting the growth in the tractor segment.
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