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Recommendations
Wednesday, June 06, 2007
Sharekhan Investor's Eye dated June 05, 2007
ICI India
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs581
Current market price: Rs520
Price target revised to Rs581
Result highlights
- The net revenues grew by 5.7% year on year (yoy) to Rs201 crore despite the discontinuation of the surfactant businesses (Uniqema).
- The sales from the continuing businesses (ie paints and chemicals) have shown a growth of 23%. The paint business grew by 26% yoy to Rs170 crore. The continued chemical business grew by 13% yoy to Rs31 crore.
- The profit before interest and tax (PBIT) from the continued businesses grew by 51% in the quarter under review on the back of improved PBIT margin of both the businesses. The PBIT in the paint business grew by 67% yoy with a 170-basis-point expansion in the margin. The PBIT in the residual chemical business grew by 11.5% yoy with an 20-basis-point expansion in the margin.
- The overall operating profit (including all businesses) dropped by 10% yoy with a 150-basis-point contraction in the operating profit margin (OPM).
- With a higher other income (due to a dividend income of Rs31 crore) and stable depreciation, the net profit grew by 20% yoy to Rs12.7 crore.
- ICI India's Q4FY2007 net profit (adjusted for extraordinary items and taxes) at Rs12.7 crore was slightly below our expectations. The net profit grew by 20% yoy.
- The company has announced that it would be utilising Rs210 crore to buy back its own shares from the minority shareholders at a price not exceeding Rs575 per share through market operations.
- Taking into account the sell-off of Quest International and the auto refinish business, we are also introducing our FY2009 numbers. At the current market price of Rs520, the stock trades at 18x its FY2008E EPS of Rs29 and 15.7x its FY2009E EPS of Rs33. In view of the cash per share of Rs202 and 21x FY2008 core earnings per share (EPS) of Rs18, we have revised upward our price target to Rs581. We maintain our Buy recommendation on the stock.
Aurobindo Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs914
Current market price: Rs725
USFDA approvals enrich earnings visibility
Result highlights
- Aurobindo Pharma has received the approval from the US Food and Drug Administration (USFDA) for oral suspensions of its antibiotic Cefpodoxime proxetil in 50mg/5ml and 100mg/5ml strengths.
- Cefpodoxime proxetil is the generic version of Pharmacia Upjohn's brand Vantin. It is an oral third generation Cephalosporin antibiotic.
- The size of the branded market for Cefpodoxime proxetil suspension is about $20 million and the patent of the product expired a few years ago. This is a critical product and just two competitors, including the innovator and Ranbaxy Laboratories, are there in the market.
- Aurobindo Pharma is the proven leader in this segment in several markets in the world. So anticipating a 20% market share and a 20% price erosion, the product can add annual revenue of $3.2 million and profit of $0.64million. That would translate into incremental earnings per share (EPS) of Rs0.43.
- Aurobindo Pharma with 82 abbreviated new drug applications (ANDAs), 110 drug master files (DMFs) and 11 USFDA-approved facilities is well positioned to exploit the generic opportunity going forward. Further, its expansion into Europe and emerging markets, and the likely incremental revenue flow from its largest approved anti-retroviral product basket would fuel its revenue growth and margin expansion in future.
- At the current market price of Rs725, the stock is trading at 15.8x its FY2008E and 12.6x its FY2009E earnings. In anticipation of the ramp-up in the formulation exports (particularly to the USA) we maintain our Buy recommendation, with a one-year price target of Rs914.
Market Commentary
The BSE Sensex ended the session on a negative zone as it declined drastically by 279.08 points to close at 14,255.93 while Nifty closed at 4,198.25 dropped by 86.4 points. Of the 2,615 stocks actively traded on BSE, 1,707 stocks declined while 841 stocks advanced. The BSE Mid cap and Small cap closed lower by 79.11 points and 96.91 points at 6,181.91 and 7,389.76 respectively.
BSE Capital goods index drifted lower by 173.26 points to close at 10,981.01 as BHEL (3.09%), ABB (1.52%), L&T (1.31%) and Siemens (0.45%) closed in negative.
BSE bank index closed lower by 229.12 points at 7,594.85 as PNB (5.14%), SBI (3.35%), IDBI bank (3.27%), ICICI bank (3.02%) and HDFC bank (2.83%) closed in red closed in red.
BSE Metal index closed at 10,414.47 slipped by 234.36 points as SAIL (4.67%) and Tata Steel (3.66%) closed in red while Hindalco (1.88%) closed in green.
BSE IT index closed in negative at 4,872.64 down by 12.29 points as HCL Tech (0.78%), TCS (0.71%), Wipro (0.59%) and Infosys (0.15%) closed in red while Satyam (0.43%) closed in green.
BSE Auto Index closed lower by 91.81 points at 4,868.44 as Tata motors (3.37%), Maruti Udyog (2.84%), Bajaj Auto (1.37%), M&M (0.90%) and Hero Honda (0.31%) closed in red.
BSE Health Care Index closed at 3,785.41 fell by 62.58 points as Ranbaxy labs (3.07%), Glaxosmithkline (1.71%), Sun pharma (1.62%), Cipla (1.27%) and Dr. Reddy lab by (0.76%) closed lower.
BSE FMCG index slipped by 27.67 points to close at 1,842.20 as ITC (2.13%), Dabur (0.74%) and HLL (0.15%) closed in red.
BSE oil & gas index soared down by 243.55 points to close at 7,468.53 as GAIL (3.53%), ONGC (3.30%), Reliance petroleum (3.10%) and BPCL (2.60%) closed in red.
Market Close: Profit taking hits markets yet again !
It was poor day for the market. Global cues were weak and Indian market followed the same trend. It started the day on a subdued note but witnessed high selling pressure ahead. Pressure intensified further as index heavy weights started losing support. Market talks about basket selling in heavy weights by a couple of foreign funds intensified the selling pressure further. This was just ahead of the European Central Bank interest rate hike. The auto sector was major loser for the day. As per the newspaper reports the high interest rates is affecting auto sales. The report indicated that Tata motors may cut production on account of slowdown. All sectors closed in red; Banking and Oil & Gas were the other major losers. Steel majors Tata Steel and SAIL closed in deep red on back of lower prices of steel. Even the Mid and Small caps were hit badly.
Sensex closed down by 279 points at 14255.93. Weighing on the Sensex were losses in TISCO (617.7,-4 percent), HDFC (1830.7,-4 percent), Tata Motors (687,-3 percent), SBI (1388.2,-3 percent) and RIL (1687.35,-3 percent). Losses were restricted by gains in Hindalco (148.75,+2 percent), RCVL (515.55,+1 percent), Satyam (465.35,+0 percent), Grasim (2451.8,+0 percent).
Telco saw 17% fall in sales in May. The truck sales was 20,665 units in May 2006, while in May 2007 the figure was down to 17,195 units. Reasons given are lesser cargo offerings from agriculture and manufacturing sectors, excessive overloading, shortage of trained drivers and an increase in the auto finance interest rates during the last six months as per Indian Foundation of Transport Research and Training report. After remaining robust for 18 months, the truck rentals had dropped by 3-5% in April 2007 says the report. There has been a decline of about 6-10% in truck rentals on trunk routes in the last four weeks due to lower cargo offerings from manufacturing sector. There is another report which says that Tata Motors and Leyland have cut the tyre orders from the Try manufacturers. They also plans to cut production as well. Bad news and the possible implication is the high interest rates. Tyre manufacturers supplying to OEMs is where the pressure will be immediate. Some reason for caution though our discussion with tyre manufacturers indicates that its the capacity for the industry which is a constraint and thats the reason for expansion plans. Also profitability was the best in last many years. We would agree. In our visit to the North we saw hectic Road construction activity. We remain positive on tyre sector. Weakness may actually give an opportunity. Automobile and Tyre stocks closed in deep red. Tata Motors closed down by 3.48%, Eicher Motors closed down by 1.94%, Ceat closed down by 5.12% and MRF ended down by 2.98%.
Sugar futures hit a 2 year low. World sugar production may exceed demand by 10 million metric tons this year, Futures have plunged 44% in the past year. Brazil will have a domestic surplus of 20.4 million metric tons this year. According to London-based ED&F Man Holdings Ltd. India's will be 5.5 million tons and Thailand's is forecast at 4.2 million tons, says the report. Sugar is a write off for now. However the cycle continues. Over the last one year, the industry has seen sugar prices swing from peak levels of about Rs 20 a kg to a low of about Rs 13 currently, where sugar mills are not recovering even the cost of sugarcane. Next year sugarcane production will be down and that?s for sure because the farmers having burnt their fingers will shift crops. Some interest in sugar is seen in advance by the contra players. Sugar is a commodity and that's the way it has to be traded. The doing away of the sops to the EU farmers will also help. Sugar stocks closed in deep red, the major losers were Bajaj Hind (-2.96%) and Rajashree Sugar (-2.69%).
Technically Speaking: It was a bearish session today. Sensex touched an intraday high of 14591 and low of 14234. Resistance lies at 14625 levels and Support lies at 14030 levels. Market turnover was pretty good at Rs 5256 cr. Overall breadth was in favor of Declines, where the Advances stood at 852, Declines stood at 1733.
Markets suffer severe blow on heavy unwinding
The markets which were steady till early afternoon trade, started declining in early after-noon trade, as fresh selling emerged. The fall kept on accentuating as the day progressed, with shares across the board seeing intense selling pressure. All the sectoral indices on BSE settled with losses, with shares from PSU, banking and oil & gas space bearing most of the brunt. As per market talks, there was basket selling in Nifty stocks by a couple of foreign brokerages. Cues from the global markets were not encouraging either. A broad based decline in European shares weighed on domestic bourses.
The 30-share BSE Sensex lost a heavy 279.08 points or 1.92% at 14,255.93. It opened higher at 14,551.53 and advanced to a high of 14,590.82, as buying interest continued for index pivotals. Sensex plunged to a low of 14,234.07, at the fag end of the day.
The NSE Nifty lost 86.40 points or 2.02% at 4,198.25
Index heavyweights suffered collateral damage. Shares that were leading the markets, in the earlier part of the day, could not withstand the fall and succumbed to selling pressure to finish with losses. Reliance Industries (RIL) and Oil & Natural Gas Corporation (ONGC), which have substantial weightage in key indices, Sensex & Nifty, dragged the market lower.
RIL lost 3.50% to Rs 1683.90, on 9.66 lakh shares. It slipped sharply from a high of Rs 1752. The government on Tuesday, 5 June 2007, approved RIL’s Haryana special economic zone, proposed to be spread over 10,000 hectares.
ONGC shed 3.17% to Rs 865.50 on 3.23 lakh shares. As per reports, Norwegian company Norsk Hydro is in talks with ONGC to pick up a share in the latter’s exploration block in the Krishna-Godavari basin. ONGC recently signed a major exploration deal with Brazilian company Petrobras, which also has a small stake in the block in which Norsk Hydro is interested.
The turnover spiked along with sharp fall. The total turnover on BSE amounted to Rs 5256 crore.
The market breadth, which indicates the overall health of the market, was quite weak as small-cap and mid-cap stocks succumbed to selling pressure. There were a little over 2 losers for every gainer on BSE. 1,733 shares declined as compared to 852 that advanced. 70 remained unchanged. This was in sharp contracts to that in morning session, when 895 shares had advanced and 631 declined.
The BSE Mid-Cap index declined 1.26% to 6,6181.91, while the BSE Small-Cap index slipped 1.29% to 7,389.76
A host of side counter were buzzing with activity. Peninsula Land (up 5.71% to Rs 535.90), Parekh Aluminex (up 7.11% to Rs 134), Rayban Sun Optics India (up 6.37% to Rs 115.30), ANG Auto (up 7.69% to Rs 307.50), and Shasun Chemical (up 6.42% to Rs 125.90) advanced.
On the other hand, side counters Zenith Infotech (down 9.07% to Rs 334.50), NIIT (down 7.89% to Rs 914.95), Gemini Communications (down 7.42% to Rs 400.05), Logix Microsystems (down 5% to Rs 265.30), Ceat (down 5.12% to Rs 168.50), Greenply (down 6.54% to Rs 128), and Birla Corporation (down 6.52% to Rs 223.05) declined.
Among the Sensex pack, 26 dipped and the remaining four advanced
Aluminium and copper major Hindalco Industries was up 2.23% to Rs 149.25 on 16.65 lakh shares. It was the top gainer from the Sensex pack. The market has been rife with speculation, this week that Alcan may team up with Sterlite Industries to bid for Hindalco.
Wipro declined 0.73% to Rs 531.25 on total volumes of 50.79 lakh sharesh. Multiple block deals were struck on the Wipro counter, prominent being a block deal of 45.21 lakh shares executed at Rs 537.50 on BSE by 12:43 IST. It was the second most top traded counter on BSE with turnover of Rs 273.31 crore.
IT pivotals were pretty strong throughout the day, but finally pared gains on selling pressure. Indian rupee eased on Wednesday, 6 June 2007, amid concerns of central bank intervention. But the fall was limited due to exporter buying.
The BSE IT index slipped 0.3% to 4,872.64. Satyam Computers (up 0.36% to Rs 465), Infosys Technologies (down 0.35% to Rs 1935) and TCS (down 0.89% to Rs 1197) declined.
Patni Computer Systems was down 0.55% to Rs 537.80, after rising to high of Rs 567. The stocks gained on reports that UK-based private equity firm Apax Partners is interested in buying a controlling stake in the company for over $800 million. Meanwhile, private equity firm General Atlantic is looking to sell its 16% in the company. Apax is willing to pay an 8-10% premium over Patni's existing share price for the stake.
MphasiS BFL rose 1.59% to Rs 312.25 after a block deal of 2.50 lakh shares was struck on the counter on BSE at Rs 310.50 by 10:16 IST.
IT stock have not performed in the market's recent surge due to the strong 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.
Reliance Communications rose 0.87% to Rs 515. and Hindustan Lever (up 0.23% to Rs 196) were the other gainers.
Pharma major Ranbaxy Laboratories was the top loser among the Sensex constituents. It slumped 3.77% to Rs 377.50, on 1.72 lakh shares.
Banking stocks, which had performed well for previous two sessions, settled with losses, on profit booking. State Bank of India (down 3.22% to Rs 1390), ICICI Bank (down 2.81% to Rs 913), and HDFC Bank (down 2.12% to Rs 1135), declined.
Tata Motors shed 3.10% to Rs 689. As per reports, Tata Motors is planning to cut production of some trucks at its plant in Pune as higher interest rates, caused by rising inflation, force transport companies and tour operators to postpone or drop purchase plans. It recently had said that expensive vehicle loans led to fall in sales of its commercial vehicles by about 6% in May 2007 over that recorded in the same period last year. Sales of medium and heavy commercial vehicles, however, fell more sharply by about 17% in May. 2007.
Maruti Udyog (down 3.22% to Rs 774), Hero Honda (down 0.15% to Rs 715), and Bajaj AUTO (down 1.65% to Rs 2212), also slipped. The BSE Auto Index lost 1.9% to 4,868.44.
Reliance Energy (down 3.04% to Rs 533.80), HDFC (down 3.04% to Rs 1840) and Bhel (down 3.15% to Rs 1338.90) declined on profit booking.
State-owned Steel Authority of India (Sail) plunged 5.07% to Rs 132 on reports it has cut prices of various products by up to Rs 300 per tonne. Prices have been lowered of galvanised products (GPGC), cold rolled (CR) steel and CR coils among other items. Sail also cut prices of pig iron, a major input for steel making, by up to Rs 500 per tonne. The new prices have come into effect from 5 June 2007.
Tata Steel (down 3.60% to Rs 618), JSW Steel (down 3.66% to Rs 577), Sterlite Industries (down 3.45% to Rs 537) and Maharashtra Seamless (down 1.47% to Rs 595.30) were the other losers from the steel pack. The BSE Metal Index declined 2.2% to 10,414.47.
State-run power generation major NTPC declined 2.23% to Rs 156, after a block deal of 20 lakh shares was struck in the counter on BSE at Rs 162 per share. On BSE, 33.28 lakh shares were traded in the scrip. As per reports, the company is planning a follow-on equity issue to fund its upcoming power plants. Reports also added that the company is planning a bonus issue.
Engineering & Construction major L&T edged lower by 1.30% to Rs 1,919.90. Citigroup has upgraded its rating on the stock to buy from hold and raised its 12-month price target to Rs 2,360 from Rs 1,733 earlier.
Automobile Corporation of Goa rose 1.35% to Rs 490, after 10.6 lakh shares changed hands in the stock in a block deal on BSE at Rs 475 each. The scrip touched an all-time high of Rs 555 following the block deal. The block deal constituted 16.5% of the company's equity capital. The large block deal represents transfer of shares between two Tata group companies, Tata Motors and Tata International whereby the former has acquired the stake of the later in the company.
Auto components maker Mahindra Forgings (MFL) surged 20% to Rs 281.20 after its board approved for merging three unlisted group firms with itself. The announcement was made after trading hours on Tuesday, 5 June 2007. The three firms to be merged with MFL are Mahindra Stokes Holding, Mahindra Forgings Overseas and Mahindra Forgings Mauritius.
Shareholders of Mahindra Stokes would receive 20 shares of MFL for 103 shares held. Mahindra Forging Overseas shareholders would get 20 shares of MFL for 49 shares held and Mahindra Forgings Mauritius shareholders would get 20 shares of MFL for 73 shares held.
Siyaram Silk was up 2% to Rs 143 after reporting a 75.6% surge in net profit in Q4 March 2007 to Rs 5.78 crore as against Rs 3.29 crore in Q4 March 2006. Sales rose 8.88% to Rs 131.79 crore (Rs 121.04 crore).
Net profit scaled up 23.97% to Rs 20.07 crore in the year ending March 2007 as against Rs 16.19 crore in FY 2006. Sales moved up 13.31% to Rs 446.71 crore (Rs 394.25 crore).
PSL advanced 4.16% to Rs 249.20 after the steel pipe maker received government’s nod for energy special economic zone in Gujarat. The proposed zone, with common infrastructure and tax-breaks, would come up in Gujarat.
Praj Industries edged up 0.92% to Rs 497.10 after fixing book closure for bonus issue entitlement. After trading hours on Tuesday, 5 June 2007, Praj Industries announced that the register of members and share transfer books of the company will remain closed from 20 to 25 July, 2007 (both days inclusive) for the purpose of bonus issue. The company has announced a liberal 1:1 bonus.
BASF India dropped 7.77% to Rs 252.25 after the chemicals maker reported a 26% fall in net profit in Q4 March 2007 to Rs 3.67 crore from Rs 4.98 crore in Q4 March 2006. Sales moved up 10.68% to Rs 160.70 crore (Rs 145.19 crore). Net profit rose 10.31% to Rs 50.09 crore in the year ending March 2007 from Rs 45.41 crore in FY 2006. Sales scaled up 12.59% to Rs 768.53 crore (Rs 682.57 crore).
Tamil Nadu Newsprint and Papers gained 1.88% to Rs 95.05. On 4 June 2007, the company announced that its Rs 565 crore mill development plan (MDP) will complete by August 2007. The plan would enable the company to increase the pulp production capacity to 800 tons per day (TPD). Exide Industries advanced 1.74% to Rs 46.75. Earlier in end-April 2007, Exide Industries announced its Rs 450 crore expansion plan, spread over next three years to double its production of automotive batteries, two-wheeler batteries and batteries for industrial applications in phases by 2010.
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 8,750 crore and Rs 9,625 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 17,500 crore through an equity issue in the domestic and overseas market.
All the European indices were trading with losses. They fell for a third day in a row on Wednesday as investors braced for possible warnings on eurozone inflation from the European Central Bank chief after a policy meeting later in the session. There are two seperate meetings of European Central Bank (ECB) and Bank of England (BOE) scheduled today. As per market expectations, ECB will raise interest rate to 4% from the present 3.75%, while BOE is expected to keep rates unchanged.
Most major Asian share markets inched lower and the dollar slipped on Wednesday, after comments from US Federal Reserve Chairman Ben Bernanke dashed hopes for an interest rate cut this year in Asia's top export market. Hang Seng was down 0.11% to 20,818.61 while Nikkei 225 index slipped 0.07% to 18,040.93.
The Shanghai Composite Index in China rose 0.24% at 3,776.37 after a strong intra-day rebound on Tuesday, 5 June 2007. Chinese stocks had recovered on Tuesday on market talks that the government would soon issue a policy statement designed to restore investor confidence. The Shanghai Composite Index has fallen more than 10% from a record high since Chinese authorities hiked a stock-trading tax a week ago to cool a market that had almost tripled in value over the past year.
US stocks edged lower on Tuesday, 5 June 2007, after comments from Federal Reserve Chairman Ben Bernanke and a strong reading on the service sector suggested the central bank has little reason to lower interest rates. The Dow fell 80.86, or 0.59%, to 13,595.46, after earlier falling more than 100 points. Broader indexes also retreated. The Standard & Poor's 500 index fell 8.23, or 0.53%, to 1,530.95, while the Nasdaq composite index shed 7.06, or 0.27%, to 2,611.23. Bernanke said inflation was still a major concern.
As per provisional data, FIIs were net sellers to the tune of Rs 148 crore on Tuesday, 5 June 2007. Domestic institutions were net buyers to the tune of Rs 48 crore on Tuesday.
Oil prices rose Wednesday, 6 June 2007, amid forecasts that the strongest storm to hit the Arabian Peninsula in 60 years was barreling toward Iran, a major oil producer, and the oil-rich Persian Gulf. Light, sweet crude for July delivery added 23 cents to $65.84 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-morning in Singapore. The contract had slipped 60 cents to settle at $65.61 a barrel Tuesday.
Short term Trading Calls
Buy Kotak Mahindra Bank above Rs 629. Stop Loss at Rs 560. Remain invested for a target of Rs 696-715-807 (Delivery-based Call)
Buy Educomp Solution on declines with stop loss of Rs 1775(On Closing Basis), for a short term target of Rs 2000.
Buy Cinemax India with stop loss of Rs 163, (On Closing Basis), for a short-term target of Rs 204
Market tumbles on weak global equities
The markets which were steady till early afternoon trade, started declining in early after-noon trade, as fresh selling emerged. The fall kept on accentuating as the day progressed, with shares across the board seeing intense selling pressure. As per market talks, there was basket selling in Nifty stocks by a couple of foreign brokerages. Cues from the global markets were not encouraging either. A broad based decline in European shares weighed on domestic bourses.
The 30-share BSE Sensex was down 277.74 points or 1.91% to 14,257.27, as per provisional closing. It opened higher at 14,551.53 and advanced to a high of 14,590.82, as buying interest continued for index pivotals. Sensex plunged to a low of 14,234.07, at the fag end of the day.
Index heavyweights suffered collateral damage. Shares that were leading the markets, in the earlier part of the day, could not withstand the fall and succumbed to selling pressure to finish with losses. Reliance Industries (RIL) and Oil & Natural Gas Corporation (ONGC), which have substantial weightage in key indices, Sensex & Nifty, dragged the market lower.
RIL lost 3.50% to Rs 1683.90, on 9.66 lakh shares. It slipped sharply from a high of Rs 1752. The government on Tuesday, 5 June 2007, approved RIL’s Haryana special economic zone, proposed to be spread over 10,000 hectares.
ONGC shed 3.17% to Rs 865.50 on 3.23 lakh shares. As per reports, Norwegian company Norsk Hydro is in talks with ONGC to pick up a share in the latter’s exploration block in the Krishna-Godavari basin. ONGC recently signed a major exploration deal with Brazilian company Petrobras, which also has a small stake in the block in which Norsk Hydro is interested.
The turnover spiked along with sharp fall. The total turnover on BSE amounted to Rs 5256 crore compared to Rs 4121 crore by 14:30 IST.
The market breadth, which indicates the overall health of the market, was quite weak as small-cap and mid-cap stocks succumbed to selling pressure. There were a little over 2 losers for every gainer on BSE. 1,733 shares declined as compared to 852 that advanced. 70 remained unchanged. This was in sharp contracts to that in morning session, when 895 shares had advanced and 631 declined.
Among the Sensex pack, 26 dipped and the remaining four advanced
Aluminium and copper major Hindalco Industries was up 2.23% to Rs 149.25 on 16.65 lakh shares. It was the top gainer from the Sensex pack. The market has been rife with speculation, this week, that Alcan may team up with Sterlite Industries to bid for Hindalco.
Wipro declined 0.73% to Rs 531.25 on total volumes of 50.79 lakh sharesh. Multiple block deals were struck on the Wipro counter, prominent being a block deal of 45.21 lakh shares executed at Rs 537.50 on BSE by 12:43 IST. It was the second most top traded counter on BSE with turnover of Rs 273.31 crore.
Reliance Communications rose 0.87% to Rs 515. Satyam Computers (up 0.36% to Rs 465) and Hindustan Lever (up 0.23% to Rs 196) were the other gainers.
Pharma major Ranbaxy Laboratories was the top loser among the Sensex constituents. It slumped 3.77% to Rs 377.50, on 1.72 lakh shares.
Banking stocks, which had performed well for previous two sessions, settled with losses, on profit booking. State Bank of India (down 3.22% to Rs 1390), ICICI Bank (down 2.81% to Rs 913), and HDFC Bank (down 2.12% to Rs 1135), declined.
Tata Motors shed 3.10% to Rs 689. As per reports, Tata Motors is planning to cut production of some trucks at its plant in Pune as higher interest rates, caused by rising inflation, force transport companies and tour operators to postpone or drop purchase plans.
Tata Motors recently had said that expensive vehicle loans led to fall in sales of its commercial vehicles by about 6% in May 2007 over that recorded in the same period last year. Sales of medium and heavy commercial vehicles, however, fell more sharply by about 17% in May. 2007.
Reliance Energy (down 3.04% to Rs 533.80), HDFC (down 3.04% to Rs 1840) and Bhel (down 3.15% to Rs 1338.90) declined on profit booking.
State-owned Steel Authority of India (Sail) plunged 5.07% to Rs 132 on reports it has cut prices of various products by up to Rs 300 per tonne. Prices have been lowered of galvanised products (GPGC), cold rolled (CR) steel and CR coils among other items. Sail also cut prices of pig iron, a major input for steel making, by up to Rs 500 per tonne. The new prices have come into effect from 5 June 2007.
Tata Steel slipped 3.60% to Rs 618.
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 8,750 crore and Rs 9,625 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 17,500 crore through an equity issue in the domestic and overseas market.
All the European indices were trading with losses. They fell for a third day in a row on Wednesday as investors braced for possible warnings on eurozone inflation from the European Central Bank chief after a policy meeting later in the session. There are two seperate meetings of European Central Bank (ECB) and Bank of England (BOE) scheduled today. As per market expectations, ECB will raise interest rate to 4% from the present 3.75%, while BOE is expected to keep rates unchanged.
Most major Asian share markets inched lower and the dollar slipped on Wednesday, after comments from US Federal Reserve Chairman Ben Bernanke dashed hopes for an interest rate cut this year in Asia's top export market. Hang Seng was down 0.11% to 20,818.61 while Nikkei 225 index slipped 0.07% to 18,040.93.
The Shanghai Composite Index in China rose 0.24% at 3,776.37 after a strong intra-day rebound on Tuesday, 5 June 2007. Chinese stocks had recovered on Tuesday on market talks that the government would soon issue a policy statement designed to restore investor confidence. The Shanghai Composite Index has fallen more than 10% from a record high since Chinese authorities hiked a stock-trading tax a week ago to cool a market that had almost tripled in value over the past year.
US stocks edged lower on Tuesday, 5 June 2007, after comments from Federal Reserve Chairman Ben Bernanke and a strong reading on the service sector suggested the central bank has little reason to lower interest rates. The Dow fell 80.86, or 0.59%, to 13,595.46, after earlier falling more than 100 points. Broader indexes also retreated. The Standard & Poor's 500 index fell 8.23, or 0.53%, to 1,530.95, while the Nasdaq composite index shed 7.06, or 0.27%, to 2,611.23. Bernanke said inflation was still a major concern.
As per provisional data, FIIs were net sellers to the tune of Rs 148 crore on Tuesday, 5 June 2007. Domestic institutions were net buyers to the tune of Rs 48 crore on Tuesday.
Oil prices rose Wednesday, 6 June 2007, amid forecasts that the strongest storm to hit the Arabian Peninsula in 60 years was barreling toward Iran, a major oil producer, and the oil-rich Persian Gulf. Light, sweet crude for July delivery added 23 cents to $65.84 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-morning in Singapore. The contract had slipped 60 cents to settle at $65.61 a barrel Tuesday.
Sensex cools, drops 279 points
The Sensex witnessed the awaited correction today as a meltdown in the major global indices turned the market upside down. After rallying for the past few sessions the index lost 279 points on sustained selling in heavyweights, oil, banking and metal stocks. The market began on a positive note at 14552 and touched the day's high of 14591 but remained range-bound as the trading progressed. After slipping below the 14500 level in noon trades, the Sensex plunged deep into the red towards the close on unabated selling in oil, banking and metal stocks, touching the day's low of 14234. The Sensex signed off the session with losses of 1.92% or 279 points at 14256. The Nifty tumbled by 2.02% or 87 points to close at 4198.
The breadth of the market was extremely weak. Of the 2,615 stocks traded on the BSE, 1,706 stocks declined, 842 stocks advanced and 67 stocks ended unchanged. All the sectoral indices were hammered today. The BSE Oil & Gas Index led the slump and crashed by 3.16% at 7469. The BSE PSU Index was down 3.01% at 6552, the BSE Bankex Index lost 2.93% at 7595 and the BSE Metal Index dropped 2.20% at 10414. Other sectoral indices slipped by around 1-2% each.
Out of the 30 Sensex stocks 26 ended in the red, with oil and banking stocks taking a strong beating. Among the oil stocks, Reliance Industries plummeted by 3.31% at Rs1,687 and ONGC crashed by 3.30% at Rs864. Banking majors SBI slumped 3.35% at Rs1,388 and ICICI Bank lost nearly 3.02% at Rs911. Index heavyweight Tata Steel plunged 3.66% at Rs618, HDFC shed 3.51% at Rs1,831, Tata Motors declined by 3.37% at Rs687, Reliance Energy slipped by 3.17% at Rs533 and BHEL fell by 3.09% at Rs1340.
Oil stocks took a major hit today. Reliance Natural Resources tanked 4.04% at Rs34, Gail shed 3.53% at Rs293, Petronet LNG slumped 3.47% at Rs56 and Mangalore Refineries dipped 3.46% at Rs40.
Over 2.02 crore IFCI stocks changed hands on the BSE followed by Reliance Natural Resources (1.31 crore shares), Nitin Fire Protections (85.55 lakh shares), Tata Teleservices (72.13 lakh shares) and GV Films (66.84 lakh shares).
Value-wise Nitin Fire Protections registered a turnover of Rs417 crore followed by Wipro (Rs274 crore), Reliance Industries (Rs165 crore), MIC Electric (Rs129 crore) and Reliance Communication (Rs120 crore).
Daily Strategist Note
The NIFTY futures saw a gain of 4.06 % in OI with prices coming up and closing high indicating long positions built up in the market thus suggesting if the follow up continues then we may see fresh built up in positions with bulls more aggressive and forcing weak shorts to cover their positions .The nifty June series futures closed at 1 points discount to spot nifty suggesting aggressive short covering seen in the market. Market if it sustains above 4320 levels then we may see further long positions built up in the market and shorts covering their positions. The FII were sellers in index futures to the tune of 77 crs and buyers in index options to the tune of 174 crs. The PCR has come up from 1.60 to 1.52 indicates some consolidation may be seen in the market.
IV in the market was 22.20 and HV was 22.50.
Among the Big guns, ONGC saw 1.06 % drop in OI with prices coming up indicating short covering seen in the counter suggesting the counter may show strength. Whereas RELIANCE saw gain in OI with prices closing up indicating buying spree emerging in the counter suggesting further strength in the counter.
In the TECH counters INFOSYSTCH & WIPRO saw drop in OI with prices going up indicating that the counter saw short covering their positions aggressively suggesting that we may see further short positions being covered. TCS saw rise in OI with prices up indicating long positions built up in these counters suggesting further strength. SATYAMCOMP saw gain in OI with prices down indicating fresh short positions built up in this counter suggesting weakness in the counter.
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 gain in OI with prices going down indicating built up of short positions in the counter suggesting further weakness in the counter. STER saw gain in OI with prices closing near day's high suggesting fresh long positions built up in the counter suggesting strength in the counter. NALCO saw drop in OI with prices closing up indicating buying emerging in the counter suggesting further strength in the counter.
We feel that the volume and built up in OI suggests that market may show some strength if it remains above 4280 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: BOMBAYDYEING, AIAENG, BEML, IFCI (Looking positive).
Daily Technical Note
Nifty and Sensex have exhibited a bullish candlestick.
Technically, one may use the level of 4250 (Nifty) and 14425 (Sensex) as the stop loss level.
Nifty faces resistance at 4340 and Sensex at 14600.
BSE Smallcap and BSE Midcap exhibited a bullish candlestick.
CNX IT has gained ground.
In the Punter's zone we have a BUY in Infosys Tech , Mind Tree & Tulip.
In the Technical call section, we have a BUY in Satyam Computer , KTK Bank & NDTV.
Caution may prevail ahead of large IPOs
The market may remain range bound amid 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.
Asian markets were mixed on Wednesday, 6 June 2007. The Shanghai Composite Index in China was up 1.3% at 3,817 extending Tuesday (5 June 2007)'s strong intra-day rebound. Tuesday's recovery in Chinese stocks had materialized on rumours that the government would soon issue a policy statement designed to restore investor confidence. The Shanghai Composite Index has fallen more than 10% from a record high since Chinese authorities hiked a stock-trading tax a week ago to cool a market that had almost tripled in value over the past year.
US stocks edged lower on Tuesday, 5 June 2007, after comments from Federal Reserve Chairman Ben Bernanke and a strong reading on the service sector suggested the central bank has little reason to lower interest rates. The Dow fell 80.86, or 0.59%, to 13,595.46, after earlier falling more than 100 points. Broader indexes also retreated. The Standard & Poor's 500 index fell 8.23, or 0.53%, to 1,530.95, while the Nasdaq composite index shed 7.06, or 0.27%, to 2,611.23. Bernanke said inflation was still a major concern.
As per provisional data, FIIs were net sellers to the tune of Rs 148 crore on Tuesday, 5 June 2007. Domestic institutions were net buyers to the tune of Rs 48 crore on Tuesday.
Intraday Stock Ideas
NIFTY (4284) SUP 4270 RES 4306
BUY BRFL (241.90)
SL 235 T 251, 254
BUY BANKBARODA (281.50)
SL 276 T 291, 294
BUY CROMPGREAV (257.35)
SL 252 T 266, 269
SELL HCL-INSYS (166.40)
@ 168 SL 172 T 158, 156
SELL ANSALINFRA (330.80)
@ 334 SL 338 T 323, 320
STRATEGY INPUTS FOR THE DAY
So near, yet so far
There are many a slip between the cup and the lip.
The above more or less sums up the current market situation as the BSE Sensex is struggling to hit a new high. It has been going back and forth for the past several sessions even as its counterpart, the NSE Nifty has already scaled a new peak. Today, the key indices may open in the red due to the overnight fall in US stocks and some weakness in Asian markets. However, a bounce later in the day is not ruled out. With three more trading days to go for the week it remains to be seen whether the Sensex can get to a new milestone this week.
The market appears to have lost momentum in the past few sessions after a two-month rally. It is looking a bit top heavy though FII inflows continue unabated. The trend in the local market mirrors what is happening globally. Markets across the world have witnessed increased volatility after having rebounded from the crash in February-March period. In the absence of any big catalysts, we may see more sideways movement in the near term. Having said that the bias remains positive.
FIIs were net sellers to tune of Rs1.48bn (provisional) in the cash segment yesterday while the local institutions pumped in Rs477.9mn. In the F&O segment, they were net sellers of Rs2.48bn.
Patni could see some action amid reports that private equity firm Apax Partners is interested in picking up majority control in the Mumbai-based IT services company. Tata Motors could also attract attention as a financial daily reports that the auto major has gone in for production cuts amid a slowdown in demand owing to higher interest rates.
Infotech Enterprises is another stock one can keep an eye on, as General Atlantic is buying a 13% stake while Carrier International is increasing its stake by 2%. Fortis could gain as a newspaper reports that it is planning a medicity in Lucknow and is also eyeing similar projects in other states. Phoenix Mills might advance amid media reports that it is building a hotel at Lower Parel and is also looking at setting up more hotels across India.
NTPC is reportedly considering a follow-on public issue to raise money for its expansion. VSNL on the other hand is likely to invest $500mn this fiscal on expansion and acquisitions.
US stocks slipped on Tuesday, on the back of rising Treasury yields, cautious remarks from Federal Reserve chairman Ben Bernanke and a strong report on the services sector. The decline pulled both the S&P 500 and Dow Jones Industrial Average down from records.
The S&P 500 fell 8.23, or 0.5 percent, to 1530.95. All 10 of the index's main industry groups declined. The Dow average retreated 80.86, or 0.6 percent, to 13,595.46. The Nasdaq Composite Index lost 7.06, or 0.3 percent, to 2611.23.
The Institute for Supply Management's index of non- manufacturing businesses rose to 59.7 from 56 in April, the Tempe, Arizona-based group said. Economists surveyed by Bloomberg News had expected a reading of 55.8. Readings above 50 signal growth.
Fed chief Bernanke said that core inflation remains somewhat elevated, though officials have seen a gradual ebbing. He also said that tighter lending standards for mortgages will restrain housing demand, although the magnitude of these effects is difficult to quantify.
Treasury prices slipped, raising the yield on the 10-year note to 4.99% from 4.92% late on Monday. In currency trading, the dollar fell versus the euro and the yen. COMEX gold for August delivery fell $1.20 to settle at $675.10 an ounce. US light crude oil for July delivery fell 62 cents to $65.59 a barrel in New York.
European shares lost ground. The pan-European Dow Jones Stoxx 600 index slipped 0.5% to 397.12. The German DAX Xetra 30 closed down 0.7% at 7,919.83 and the French CAC-40 shed 0.8% to 6,078.54, while the UK's FTSE 100 slipped 0.5% to 6,632.80.
Asian stocks were mixed this morning. The Nikkei in Tokyo was up 15 points to 18,069 while the Hang Seng in Hong Kong advanced 69 points to 20,911. The Straits Times in Singapore was down 8 points at 3564.
In the emerging markets, the Ibovespa in Brazil was down 0.15% to 53,162 while the IPC index in Mexico gained 0.55% to 32,271 and the RTS index in Russia rose 0.4% to 1833.
Markets closed in positive terrain but with modest gains, as bulls managed to hold on to its gains. The BSE Bank index led from front as the index gained by 1.06%, others like Technology and Auto stocks followed suit. Individual stocks like i-Flex, Cinemax, SBI, Bombay Dyeing, IDBI, RPL and NIIT Ltd hogged the limelight. Finally, the 30-share Sensex gained 39 points to close at 14535. NSE-50 Nifty was up 17 points to close at 4284.
NIIT LTD rallied by over 8% to Rs990 after the board of directors of the company approved bonus issue of 1 share for every two held and also to split each share into five. The scrip touched intra-day high of Rs1028 and a low of Rs910 and recorded volumes of over 8,00,000 shares on NSE.
KEC International advanced 1.5% to Rs521 after the company announced that they have secured Rs3.8bn order in Kazakhstan. The scrip touched intra-day high of Rs536 and a low of Rs508 and recorded volumes of over 85,000 shares on NSE.
GMR Infrastructure surged by over 2.5% to Rs499 after its group secured 1000mw Thermal power project in Chhattisgarh. The scrip touched intra-day high of Rs504 and a low of Rs483 and recorded volumes of over 10,00,000 shares on NSE.
Amtek Auto edged higher by 0.6% to Rs416 after the company acquired UK Based JL French's Witham Assets. The scrip touched intra-day high of Rs422 and a low of Rs413 and recorded volumes of over 2,00,000 shares on NSE.
Aurobindo Pharma gained by 0.8% to Rs726 after the company secured US FDA nod for its Cefpodoxime Oral. The scrip touched intra-day high of Rs735 and a low of Rs722 and recorded volumes of over 1,00,000 shares on NSE.
Telecom stocks rang with smart gains. MTNL surged by over 2% to Rs165, Bharti Airtel gained by 1.3% to Rs837, VSNL was up by 3.2% to Rs479 and R Com added 0.5% to Rs511 and Tata Teleservices gained 2.8% to Rs27.55 after the company announced that they would borrow USD400mn overseas.
FMCG stocks witnessed some cooling off as profit booking dragged them lower. Heavy weight ITC dropped 2% to Rs161, McDowell was down 3% to Rs1162, Tata Tea slipped 2% to Rs893 and Marico slipped by 1.7% to Rs56.
Technology stocks witnessed some fresh buying interest after rupee backed away from last week's nine-year high. Infosys advanced by 1.4%t o Rs1943, i-Flex has surged by 10% to Rs2226 and Rolta gained 3% to Rs460.
Insider Trades:
UFLEX Limited: Anshika Consultants Pvt. Ltd. (both part of the promoters' group) has purchased from open Market 15375 equity shares of UFLEX Limited on 1st June 2007.
Clutch Auto Limited: JM Financial Asset Management Private Limited has purchased from open market 100000 equity shares of Clutch Auto Limited on 1st June 2007.
McDowell Holdings Limited: Management of FMR Corp. and its direct and indirect subsidiaries and Fidelity International Ltd. and its direct and indirect subsidiaries acquired 1191695 equity shares of McDowell Holdings Limited.
Lower Circuit:
United Breweries, Tripex Overseas and UTV.
Upper Circuit:
GV Film, Dawn Mills, McNally Bharat, GMR Industries, Ashapura Mieichem, Global Broadcasting, Sparsh BPO, RIIL and Ruby Mills.
Delivery Delight (Rising Price & Rising Delivery):
Andhra Bank, BILT, Bank of India, Century Textiles, Corporation Bank, Dr Reddys Labs, Geometric Software, HCL Technologies, HDFC, ICICI Bank, Infosys, Jain Irrigation, LIC Housing Finance, PNB, TVS Motor and UTI Bank.
Abnormal Delivery:
ABB, McDowell, Bombay Dyeing, Gujarat Alkalies, Cipla, SRF, Colgate, Apollo Hospitals, Lupin and Hindustan Lever.
Results Today:
Assam Company, BASF India, Cyber Media, Gujarat State Petronet, Ispat Industries, PVR and Surana Industries.
Major News:
Govt approves RIL's plan to set up SEZ in Haryana
Rolta to set up IT park in Kolkata
Bihar Tubes to give 1:1 bonus
Spanco Tele to meet on June 7 to consider investment in JV
Tata Teleservices plans to borrow US$400mn overseas
Sadbhav Engineering bags order worth Rs905mn
Amtek Auto acquires UK Based JL French's Witham Assets
Ashok Leyland may sales at 5804 units (up 3%)
JP Associates signs an accord on cement plant in Gujarat
KEC International secures Rs3.8bn order in Kazakhstan
NIIT okays 1:2 bonus issue and to split each share into five
Mercator Lines gets Rs2bn order from IOC
Crude oil...prices on a firm footing
We expect crude oil prices to remain firm in the short term, buoyed by a rise in the demand for gasoline in the U.S and with refining a bottleneck in the oil supply chain. Spare capacity is expected to remain thin over the next two years at around 1.8mb/d, adding premium to crude oil prices. EIA expects petroleum consumption to witness a CAGR of 2.1% over the next three years against 1.3% CAGR for refinery capacity. The deficit in the demand-supply situation of petroleum products will lead to an incremental demand for sweet oil, adding premium to current sweet crude oil prices. With lack of significant contribution from substitutes like ethanol and from non-conventional sources, crude oil prices are expected to remain elevated above the US$60/bbl mark over the next two years. In the short run the inability of the U.S refiners to match rising gasoline demand, we expect crude oil prices to move northwards to US$68-70/bbl levels over the next three months.
Sweet crude oil prices are expected to witness a move towards US$68-70 per barrel over the next two months. We recommend investors to add long positions on declines at US$62.50-63.25 per barrel with a target of US$68 per barrel on the NYMEX (New York Mercantile Exchange) and Rs2800-2860 on the MCX (Multi Commodity Exchange).
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4261 & 4235 levels with resistance at 4293 and 4325 and 4360 levels .
Opening to be Negetive with expiry expected above 4300 levels .
Buy : Jstainless above 155 target 163 s/l 152
Buy : Shreecement above 1195 target 1245 s/l 1173
Buy : BombayDye above 610 target 627 s/l 602
Buy : NDTV above 407 target of 418 s/l 402
Out House :
Markets at a support of 14414 & 14353 levels with resistance at 14575 & 14595 levels .
Buy : RIL
Buy : SBIN
Buy : IDFC & IDBI
Buy : GujNre & Garwarewall
Buy : Lupin & GlenMark
Buy : Tisco
Buy : RNRL & IFCI
Dark Horse : GlenMark , LUPIN , IDFC , IDBI , SBIN , RIL , Tisco & Unitech
Bulet for the Day : Gesco , EKC & Patni with strict stop loss
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