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Thursday, June 07, 2007
Mukesh Ambani Vs KP SIngh
Finally DLF has managed to come up with the biggest IPO in the country. But, investors are in a dilemma whether it will be worth investing in the stock. We at DP would like to inform our visitors about a rumor that has been doing rounds for sometime regarding the DLF IPO and Reliance Industries.
There have been speculations in the market that Reliance is trying to create hurdles to stop DLF going to the market. Something similar that happened with Cairn Energy.
During the Cairn energy IPO, most of the brokers told investors not to invest in Cairn. They said that the issue will not give returns. Brokerage houses came up with reports that the valuations are higher. And, market experts said this all happened thanks to Reliance's attempt to spoil the issue.
If you are wondering why would Reliance do it? Here is a simple answer. Cairn is a competitor to Reliance in the energy space. Similarly, DLF is a direct competitor for Reliance in their real estate play.
DLF has their SEZ in Gurgaon and Haryana. This is in direct conflict with Reliance's ambitious plans for their 25,000 acres SEZ in the same state.
Also, if the DLF's issue happens, Mukesh Ambani will no longer remain the wealthiest man in India. DLF's KP Singh will replace him.
We would like our readers to watch out for some events that might occur.
Markets may perform negatively till the issue is over (around June 14).
Brokerage houses saying that DLF is expensive issue.
Brokers advising clients not to invest in the issue.
DLF may open much below the issue price.
Since few days everyone in market and business journalists are talking about markets to perform badly and that has started to happen.
This also means newspaper flashing news regarding how stock markets are not performing well. Don't be surprised to see articles that say that market is heading for a correction of 15% - 20%.
A Moral Dimension By Jay Dubashi
Why is it that some businesses last a long time, sometimes centuries, while some don't? Take Tatas. They are a 150-year old group and still going strong. Scores of others have come and gone, some even bigger than Tatas but they have fallen by the wayside and vanished into thin air.
Businesses are essentially money-making enterprises. Money is what keeps them going. But money is not enough, nor is it everything. Money is to business what food is to living organisms. You cannot do without food, but you have to have something more to keep you going.
That something is a moral dimension, something bigger than you, or at a level much higher than money. Without such a dimension, you are just like a pig at the trough, using the trough as a sole reason for your existence.
Ghanashyam Das Birla always said that he was not a businessman. He was actually much more than a businessman. He was a political activist all his life, intensely interested in India's struggle for freedom and supported Gandhi through all his ups and down.
This at a time when the British were closely watching him. In fact, GD Birla's close association with Gandhi so alarmed his brothers that there was a move at one time to split the family business and get rid of GD. But it does not seem to have bothered him.
It was the same with Jamsetji Nusserwanji Tata. Jamsetji set up his first industry, a textile mill, immediately after the so-called Mutiny, but what he wanted to do was something much bigger - a steel plant. But the British government in India was deadly opposed to Indians musling in on their monopoly.
Jamsetji received no help at all from the Britishers, and he had to take the help of Americans for his new enterprises. The steel plant at Jamshedpur was set up in the teeth of opposition from foreign vested interests, and it was this, not money, that drove Jamsetji. Incidentally, Tata Steel will be completing its centenary this year.
There were times during the depression of the thirties when it was touch and go whether Tata Steel would survive. There was no money in the kitty and things were so bad that at one time the Tatas have almost decided to close down the factory and go into liquidation. But Jamsetji's two sons and their wives saved the day.
GD Birla was so much involved in Gandhi's politics that at one time the Britishers were seriously thinking of shutting down his jute and cotton mills and throwing him into jail. Somehow he managed to survive, though his brothers were very much cut up with him and almost disowned him.
This is what I call moral dimension, when your drive comes not from money but something bigger than money. I once spent a whole evening with GD in his Delhi residence. He was then past eighty but as perky as ever. Throughout the evening, we did not even once mention business, though it was very much on the agenda. At one point, GD said that he was not a businessman. To call GD a mere businessman is tantamount to calling Gandhi a politician. In fact, Gandhi, a baniya, was more of a businessman than Birla, which is why they got on so well.
Take it from me. Half the businesses you see today will not make it beyond the half-way mark of the 21st century, if at all. But the Tatas and Birlas will still be there, because they are not really business as you and I know them.
Market ends choppy, drops 70 points
The market resumed in the red, tracking weak global cues, but quickly recovered on bargain hunting after Asian markets paired losses. The sustained buying in front-line, technology and telecom stocks helped the Sensex to touch the day's high of 14363. However, the Sensex lost its momentum and slipped into the red again as investor confidence waned. The index majors ITC and HLL led the slump and the Sensex touched the intra-day low of 14139. Although the Sensex managed to curtail some losses, but, heavy blow came towards the close, as selling intensified in front-line stocks, which saw the Sensex end the session in negative territory at 14186, down 70 points. The Nifty closed the session at 4180 by shedding 19 points.
The market breadth was weak as the losers outpaced the gainers in a ratio of 1.38:1. Of the 2,574 stocks traded on the BSE, 1,456 stocks declined, 1,043 stocks advanced and 75 stocks ended unchanged. Except the BSE IT index, the BSE Metal index and the BSE Tech index all the sectoral indices closed in the negative territory. The BSE FMCG index dropped 1.66% followed by the BSE Auto index (down 1.16%), the BSE Bankex (down 1.09%) and the BSE Oil & Gas index (down 1.01%).
Most of the index heavyweights witnessed a correction. Among auto majors Bajaj Auto tumbled by 2.84% at Rs2155, Hero Honda dropped 2.30% at Rs697, Maruti Udyog slipped 2.10% at Rs761 and Tata Motors lost 1.41% at Rs677. Among the other major losers ACC slumped by 2.24% at Rs804, ITC slipped by 2.08% at Rs155, SBI shed 2% at Rs1,360, HLL lost 1.95% at Rs191, HDFC Bank fell by 1.53% at Rs1,109 and L&T crumbled by 1.19% at Rs1,897. The other front-line stocks lost around 1% each. Select counters, however, bucked the downtrend and ended with gains. Satyam advanced by 3.40% at Rs481, Hindalco added 2.96% at Rs153 and Wipro moved up by 2.52% at Rs545 while Infosys, Reliance Communication and TCS ended with modest gains.
FMCG stocks dropped sharply. Nirma crumbled by 3.33% at Rs191, Radico Khaitan lost 2.83% at Rs140, Ruchi Soya shed 2.58% at Rs396 and Eveready Industries declined by 2.42% at Rs51. Among the auto stocks, Denso India, Balkrishna Industries, Amtek India, Cummins India, Subros were down 2-5% each.
Over 2.52 crore IFCI shares changed hands on the BSE followed by Reliance Natural Resources (85.60 lakh shares), GV Films (64.18 lakh shares), SREI Infrastructures (61.52 lakh shares) and Nitin Fire Protections (46.91 lakh shares).
Reliance Communication was the most actively traded counter on the BSE and registered a turnover of Rs211 crore followed by Nitin Fire Protections (Rs207 crore), Reliance Industries (Rs158 crore), IFCI (Rs125 crore) and SBI (Rs121 crore).
Market Close: Uninspiring day with no clear direction.
An extremely volatile day in the market. Global cues were weak as ECB hiked interet rate. This hampered Indian markets too. Inflationary worries are high globally and thats not good news for equities. C Rangarajan Chairman of PMs Economic Advisory Council said that it was important to control certain kinds of capital inflows. The markets took the hint towards P Notes. This probably was the reason for the selloff as P Notes have been in debate for some time. The final beneficiaries are not disclosed. Inflation numbers will be declared tomorrow..we will keep the track for you. For today indices started the day on weaker note but witnessed high degree of volatility through out the day and there was no clear direction. The markets ended in red with moderate losses. Heavy selling pressure was seen in Auto, Banking and FMCG stocks. The major two wheeler Hero Honda and Bajaj Auto hit badly due to cut down in production after slowdown in sales due to high interest rates. As per reports Bajaj will reduce production by 10%. The only sector to close in green was IT as Rupee slipped to trade at 40.65 against the US Dollar. Mid and small caps outperformed the frontline indices and closed flat. Asian markets ended in mixed.
Sensex closed down by 70 points at 14186.18. Weighing on the Sensex were losses in Bajaj Auto (2155.25,-3 percent), Hero Honda (697.4,-2 percent), ACC (803.95,-2 percent), Maruti (760.65,-2 percent) and ITC (155.05,-2 percent). Losses were restricted by gains in Satyam (481.15,+3 percent), Hindalco (153.15,+3 percent), Wipro (545.4,+3 percent), RCVL (519.7,+1 percent) and Infosys (1954.5,+1 percent).
Moser Baer India has commenced commercial shipment of its solar photovoltaic cells. The company said that it has firm customer orders exceeding Rs 410 cr. Additionally, the state of the art fully integrated in-line cell manufacturing facility has started producing photovoltaic cells at expected level of output with cell efficiency levels up to 15.5%. According to MBPV, In-line high yield systems are critical for rapid deployment of solar power in large scale and volumes. The response for MBPV product has been encouraging and has queries/orders from customers based out of America, Europe, South Asia. MBPV further announced that it is on track to implement a 20MW module making capacity in the forthcoming quarter. MBPV plans to straddle multiple future technologies and emerge as an engineering & technology driven Company. It is decisively responding to the rapidly expanding solar PV market. MBPV is moving towards technological leadership in this industry and intends to develop a sustainable competitive edge by investing into disruptive technologies. The global photovoltaic market is on a high growth curve. Sales are expected to grow over 6x to Rs 160000 cr by 2010. The stock closed up by 1.80%. We are surprised at the swiftness of this development. It was only recently that the company was looking to enter this business.
L&T won an order from ENOC Processing Company LLC (EPCL), Dubai, U.A.E., for the mechanical erection work of the new process plants of their naphtha hydro treated reformer project. The estimated value of the contract is AED 187.67 million(Rs 200 cr). The project consists of fabrication and erection of piping, equipment and structural erection and other associated works for the new units constituting inter-connecting piping, LPG naphtha HTV / splitter unit, CCR reformer unit, diesel drying unit, LPG fractionation unit and HC flare. The Engineering stocks closed in red. L&T closed marginally down by 1% and its peer ABB and BHEL closed marginally down.
Technically Speaking: It was a volatile session for the whole day. Sensex touched intraday high of 14360 and low of 14139. Resistance lies at 14323, 14452 levels and Support lies at 14101, 14009 levels. Market turnover was pretty good at Rs 4269 cr. Overall breadth was in favor of Declines, where the Advances stood at 1123, Declines stood at 1436.
Sensex sheds 70 points in choppy trade
The benchmark index, BSE Sensex saw high degree of volatility today, swinging sharply between positive and negative territory. Weakness stemmed on the bourses in late trading ahead of the Bank of England (BOE)'s meeting today on interest rate. Selling pressure was seen in auto, banking and FMCG stocks while shares from IT sector saw buying as the rupee stabilised against the dollar.
The 30-share BSE Sensex was down 69.75 points or 0.49% at 14,186.18. It opened lower at 14,195.84, tracking weak global markets. It recovered later to strike a high of 14,360.82 in morning trade. However it again declined and slipped to touch a low of 14,139.09 in afternoon trade. It recovered from lower level later, before sliding again in late trade.
The S&P CNX Nifty was down 18.75 points or 0.45% at 4,179.5. The Nifty June 2007 futures were at 4,164, a discount of 15.50 points over spot price
There are concerns that investors may pull out funds from the secondary market to invest in IPOs, which are scheduled to hit the market in the near term. 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.
The total turnover on BSE amounted to Rs 4272.41 crore while the NSE futures & options (F&O) turnover was at Rs 42,284.84 crore today, 7 June 2007.
The market breadth was negative with 1436 shares declining on BSE as compared to 1123 that advanced. 76 remained unchanged.
The BSE Small-Cap Index was up 0.02% to 7,391.02 while the BSE Mid-Cap Index rose 0.10% to 6,187.97
Among the Sensex pack, 21 declined while the rest advanced.
IT pivotals posted gains, as buying continued. The Indian rupee hovered near one-week low on Thursday, 7 June 2007, as investors unwound short positions in the dollar on concerns that local stocks would extend losses and spark a wave of capital outflows.
Four of the top six gainers in Sensex were from the IT sector. TCS (up 0.82% to Rs 1209), Satyam Computers (up 3.96% to Rs 483.80), Infosys Technologies (up 0.83% to Rs 1955) and Wipro (up 2.86% to Rs 547.20) advanced. The BSE IT Index advanced 1.7% to 4,957.57, and was the top gainer among the BSE sectoral indices.
More action was seen in mid-cap software stocks. i-flex solutions (up 1.16% to Rs 2399.95), Mastek (up 1.28% to Rs 285), Rolta India (up 0.47% to Rs 449), Polaris Software (up 4.2% to Rs 167.10), MphasiS (up 5.72% to Rs 329.35), Infotech Enterprises (up 1.18% to Rs 387), Zensar Technologies (up 0.46% to Rs 348.25), and Subex Azure (up 0.75% to Rs 614.10) advanced.
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.
Aluminium and copper major Hindalco Industries advanced 3.46% to Rs 153.90 on 20.97 lakh shares. The market has been rife with speculation, this week that Alcan may team up with Sterlite Industries to bid for Hindalco.
Reliance Communications (RCOM) was up 1.25% to Rs 523. It added 1.4 million subscribers in May 2007, taking its total mobile user base to 30.5 million. The firm had added 1 million mobile subscribers in April 2007.
RCOM is said to be awaiting allocation of spectrum from the government for national roll-out of its GSM service. The company had earlier applied for additional spectrum allocation to the government. It also launched a special lifetime validity offer of Rs 222 for its GSM subscribers.
Two-wheeler maker Bajaj Auto declined 2.85% to Rs 2155, and was the top loser from the Sensex pack. Hero Honda shed 2.36% to Rs 697. As per reports, bike sales have hit the slow lane, forcing bike makers to rationalise production and reduce dealer inventories.
Other auto stocks Tata Motors (down 1.16% to Rs 679) and Maruti Udyog (down 2.25% to Rs 759.50) were not spared either. The BSE Auto index shed 1.2% to 4,812.08
Index heavyweight Reliance Industries (RIL) slipped 1.34% to Rs 1664.80, on 9.33 lakh shares. It moved in a range of Rs 1661 - Rs 1705.95.
State Bank of India (SBI) declined 2.10% to Rs 1359.05 and Oil & Natural Gas Corporation (ONGC) lost 0.72% to Rs 858.
Investors dumped FMCG shares, with the FMCG index sliding 1.7% to 1,811.60. It was the biggest loser among the sectoral indices on BSE. ITC (down 1.96% to Rs 155.25) and Hindustan Unilever (down 1.92% to Rs 191.50) declined.
Larsen & Toubro declined 0.87% to Rs 1902.80 despite bagging a contract in United Arab Emirates from ENOC Processing Company (EPCL), Dubai, UAE, for the mechanical erection work of the new process plants of ENOC's naphtha hydro-treated reformer project. The estimated value of the contract is $ 51million.
Reliance Communications was the top traded counter on BSE with turnover of Rs 211.75 crore followed by Nitin Fire Protection Industries (Rs 207.25 crore), Reliance Industries (Rs 159 crore), IFCI (Rs 125 crore) and State Bank of India (Rs 121 crore).
Industrial Finance Corporation of India (IFCI) led the volumes chart with 2.52 crore shares followed by Reliance Natural Resources (85.60 lakh shares), G V Films (64.20 lakh shares) and Srei Infrastructure Finance (61.51 lakh shares).
Shares of refining companies declined on fresh selling even as petrol and diesel prices were raised marginally in the national capital following the state government's decision to levy sales tax on the two auto fuels. Hindustan Petroleum Corporation (HPCL) (down 1.73% to Rs 272.20), Indian Oil Corporation (IOC) (down 1.13% to Rs 440), Bongaigaon Refinery and Petrochemicals (down 0.33% to Rs 48.60), Chennai Petroleum (down 0.37% to Rs 240.05), and MRPL (down 1.11% to Rs 40), declined.
Petrol has become dearer by Rs 0.67 a litre to Rs 43.52 per litre while diesel price has increased from Rs 30.25 a litre to Rs 30.48 per litre, in Delhi.
Suzlon Energy spurted 4.56% to Rs 1370 after the firm announced after market hours on Wednesday, 6 June 2007, that its subsidiary has bagged a contract from a US company to supply 300 turbines. US-based Suzlon Wind Energy Corporation, the step-down subsidiary of Suzlon Energy, has signed a contract for a total of 300 units of 630 mega watt (MW) of wind turbine capacity with Edison Mission Group of Irvine, California, the USA. The two phase contract calls for delivery of 315 MW of turbine capacity in 2008 and another 315 MW of capacity in 2009.
Industrial Finance Corporation of India (IFCI) jumped 5.36% to Rs 50.15 on reports the company has received income tax refund of Rs 380 crore on account of some extra provisioning from previous years, and would add to the profits of this quarter Q1 June 2007. The reports of IFCI getting the refund hit the market after trading hours on Wednesday, 6 June 2007.
Ispat Industries rose 2.95% to Rs 15.70 after the steel maker reported turnaround results in Q4 March 2007. Ispat Industries posted net profit of Rs 82.12 crore in Q4 March 2007 as against net loss of Rs 153.14 crore in Q4 March 2006. Sales rose 64.37% to Rs 2105.26 crore in Q4 March 2007 as against Rs 1280.83 crore in Q4 March 2006.
The company reported net loss of Rs 9.53 crore in the year ended 31 March 2007, much lower than a net loss of Rs 812.67 crore in the year ended March 2006. Sales rose 51.35% to Rs 7486.57 crore (Rs 4946.55 crore).
Gujarat State Petronet was down 2.10% to Rs 54. It reported 78.52% spurt in net profit to Rs 19.28 crore in Q4 March 2007 from Rs 10.80 crore in Q4 March 2006. Sales rose 23.20% to Rs 83.12 crore (Rs 67.47 crore). The net profit rose 91.45% to Rs 89.37 crore in the year ended March 2007 (FY 2007) as against Rs 46.68 crore in FY 2006. Sales rose 20.53% to Rs 317.56 crore (Rs 263.47 crore).
Alstom Projects India gained 1.68% to Rs 579.50 after the power equipment maker said during market hours on Wednesday its consortium won Rs 255 crore contract from the Delhi Metro Rail Corporation. The contract involves design, manufacture, supply, installation and commissioning of train control & signaling System for DMRC's Metro Line 1 and 2 extensions.
Sical Logistics vaulted 7% to Rs 266.30 on winning operations and maintenance bid for 17 vessels from Oil and Natural Gas Corporation. Sical Logistics announced today 7 June 2007, that it has won the operations and maintenance bid for 17 vessels from Oil and Natural Gas Corporation (ONGC). Sical also said offshore logistics would contribute at least 30% to 2007-08 revenues.
Most of the European indices which had opened firm pared gains later. In contrast, Asian markets recovered from early losses. Japan's Nikkei was up 0.07% at 18,053.38. Earlier during the day, it had shed about 0.8%. South Korea's Seoul Composite had moved into the green from red, during the day. It was up 0.62% at 1,753.04. Taiwan's Taiwan Weighted was up 0.49% or 8,355.26. China's Shanghai Composite index was up 3.03% at 3890.80
British interest rates are likely to remain unchanged at a six-year peak of 5.5% today (by evening), when Bank of England (BOE) policymakers convene, but another hike is due in the near future as the bank seeks to tame inflation.
US stocks slid for a second straight session yesterday, 6 June 2007, after an increase in labour costs stirred concerns about inflation and interest rates and as the yield on the benchmark 10-year treasury flirted with 5%. The Dow Jones fell 129.79 points, or 0.95%, to 13,465.67, losing more than 210 points in two days.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 0.89%, to 1,517.38, and the Nasdaq composite index fell 0.92% to 2,587.18.
On Wednesday, 6 June 2007, the European Central Bank (ECB) raised its key interest rate a quarter percentage point to 4% in the eighth increase in 18 months, and the highest reading for five and a half years. It also signalled a further hike could come - perhaps in September 2007- to combat inflation in a dynamic eurozone economy.
Oil prices were higher in Asian trading after news that refinery production in the US fell last week at the same time as the peak season there for demand for gasoline began. The New York Mercantile Exchange's main oil futures contract, light sweet crude for delivery in July, was up $0.07 at $66.03 per barrel from $65.96 in late trading in the US overnight. Brent North Sea crude for July had added $0.05 at $71.07
As per provisional data, FIIs were net sellers to the tune of Rs 287.17 crore today, 7 June 2007. Domestic institutions were net buyers to the tune of Rs 283.81 crore today.
Trading Calls
Buy Dishman Pharma below Rs 275 with stop loss at Rs 270. This is a day-trading recommendation.
Buy SRF with stop loss of Rs 162, (On closing basis), for a short-term target of Rs 196. (This target may be achieved within a month)
Sell Bharat Forge above Rs 318 with stop loss at Rs 324. This is a day-trading recommendation.
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4130 & 4050 levels with resis at 4235 and 4265 levels
Gap down opening expected.
Intra day calls: Sell SBIN below 1388 with a TGT of 1364 and a SL of 1396
Sell Maruti below 777 with a TGT of 761 and a SL of 785
F&O: Sell Icicibank below 905 with a TGT of 890 and a SL of 911
Sell Sail below 131 with a TGT of 125 and a SL of 134
Out House :
Markets at a support of 14144 & 14054 levels with resistance at 14345 & 14432 levels .
Buy : RIL at dips
Buy : SBIN at dips
Buy : Bhel at dips
Buy : GujNre ( Bullet )
Buy : Lupin & GlenMark at dips
Buy : TataElxi at dips
Buy : EKC , Educomp , MIC & McdowellHolding
Dark Horse : PRAJ , EKC ,GlenMark , LUPIN , SBIN , RIL & Unitech
Daily Strategist Note
The NIFTY futures saw a gain of 5.11 % in OI with prices coming down and closing low indicating aggressive short positions built up in the market thus suggesting if the follow up continues then we may see fresh built up in positions with bears more aggressive and forcing weak bulls to liquidate their positions. The nifty June series futures closed at 27 points discount to spot nifty suggesting aggressive short positions built up in the market. Market if it sustains below 4220 levels then we may see further short positions built up in the market and longs liquidating their positions. The FII were sellers in index futures to the tune of 1522 crs and sellers in index options to the tune of 104 crs. The PCR has come up down 1.52 to 1.41 indicates some weakness may be seen in the market.
IV in the market was 27.79 and HV was 24.86.
Among the Big guns, ONGC saw 7.92% rise in OI with prices coming down indicating short positions built up in the counter suggesting the counter may show weakness in the coming days. Whereas RELIANCE saw 4.37% gain in OI with prices closing down indicating selling pressure emerging in the counter suggesting further weakness in the counter.
In the TECH counters INFOSYSTCH saw drop in OI with prices coming down and closing near day/'s low indicating liquidation of long positions as market reacted sharply. If the market recovers we may see buying happening in the counter and shorts covering their positions. TCS, WIPRO & SATYAMCOMP saw gain in OI with prices coming down indicating short positions built up in the counter suggesting further weakness may be seen in these counters.
In the BANKING counters, SBIN & HDFCBANK saw drop in OI with prices fell sharply indicating liquidation of long positions and fresh built up of short positions indicating further weakness may be seen in the counter. ICICIBANK saw RISE in OI with prices coming down indicating liquidation of short positions built up suggesting further weakness in these counters.
In the Metal pack, TATASTEEL & SAIL saw rise in OI with prices falling sharply indicating short positions built up in these counters suggesting further weakness may be seen in these counters..HINDALCO saw gain in OI with prices going up indicating long positions built up in this counter suggesting further strength may be seen in this counter. HINDALOCO & STER saw gain in OI with prices coming down indicating short positions built up in these counters suggesting further weakness in these counters.
We feel that the volume and built up in OI suggests that market may show some weakness if it remains below 4180 levels where we may see fresh short positions built up in the market thus one should hedge the positions to avoid any unexpected direction the market. One should trade with strict stop losses to be adhered too.
Markets to stay under pressure
The markets are expected to stay under pressure, tracking weak global markets.
Asian markets were also trading weak, tracking US markets. Hong Kong's Hang Seng index tumbled 180.57 points or 0.87% at 20,638.04 while Japan's Nikkei slumped 141.86 points or 0.79% at 17,899.07.
Singapore's Straits Times (down slipped 0.49% at 3,546.22), South Korea's Seoul Composite (down 0.13% at 1,739.85) also declined. However, Taiwan's Taiwan Weighted was up 0.04% or at 8,318.38
US stocks slid for a second straight session yesterday after an increase in labour costs stirred concerns about inflation and interest rates and as the yield on the benchmark 10-year Treasury flirted with 5%. The Dow Jones fell 129.79 points, or 0.95%, to 13,465.67, losing more than 210 points in two days.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 0.89%, to 1,517.38, and the Nasdaq composite index fell 0.92% to 2,587.18.
Nervousness may continue
After witnessing a sharp slump of 279 points in yesterday's trades, the market is likely to remain shaky as global markets fell further and the FIIs remaining net sellers of equities in the local market. Although domestic mutual funds have been providing cushion by remaining net buyers, the sentiment is likely to remain bearish on weak global indices. Among the key domestic indices, the Nifty may get support at 4160 and a break below this level could see the index slip further to 4140. The Sensex has a likely support at 14100 and may test higher levels at 14400.
US indices slumped on Wednesday as the worries about inflation, the housing market and rising interest rates gave investors a reason to bail out after the recent rally. The Dow ended lower at 13466 down 130 points, while the tech-laden Nasdaq declined to close 24 points lower at 2587.
Indian floats had a weak outing on the US bourses. Except Rediff all fell sharply. HDFC Bank tumbled 4.75%, Tata Motors slipped 4.7% and Wipro, Patni Computer, Infosys, ICICI Bank, MTNL, Satyam dropped over 1-3% each.
Crude oil prices in the international market edged higher, with the Nymex light crude oil for July delivery rose by 35 cents to close at $65.96 per barrel. In the commodity space, the Comex gold for August series declined 50 cents to settle at $675.10 a troy ounce.
Daily Technical Note - Jun 7 2007
Nifty and Sensex have exhibited a bearish candlestick.
Technically, one may use the level of 4180 (Nifty) and 14150 (Sensex) as the stop loss level.
Nifty faces resistance at 4250 and Sensex at 14450.
BSE Smallcap and BSE Midcap also exhibited bearish candlesticks.
CNX IT has lost ground.
In the Punter's zone we have a Sell in Century Textiles , Tata Power & Reliance Capital.
In the Technical call section, we have a Sell in SBI , IBRealest & Renuka Sugar.
Daily Technical Note - Jun 7 2007
Kotak - Vardhaman Textiles, Ashok Leyland
Kotak on Vardhaman Textiles
Vardhman Textiles (VTEX) announced 4QFY07 stand-alone net income of Rs369 mn versus our estimate of Rs409 mn. Despite significantly lower-than-expected EBITDA margins (14.2% versus expected 19.5%), earnings did not decline much as depreciation and interest costs were considerably lower-than-expected. Consolidated adjusted revenues and income for FY2007 were in-line with our estimates at Rs21.6 bn and Rs1.86 bn. However, EBITDA margins were lower than expectations (17.4% versus expected 18.4%) due to low volumes and very low margins in the processed fabric business (EBIT margin of 5.4% as against 10% last year). We expect increasing business pressures from— (a) strong rupee, (2) lower yarn prices and (3) marginally higher cotton cost—will restrict any margin improvement in FY2008. Higher interest and depreciation costs will further depress earnings as company capitalizes a large part of its capex in FY2008. We revise our FY2008 and FY2009 consolidated eps estimate to Rs22.7 and Rs31.6 versus Rs32.7 and Rs44.3, respectively, previously. We reduce our12-month DCF-based target price to Rs220 from Rs325, previously and change our rating to in-line from OP.
Kotak on Ashok Leyland
Ashok Leyland has reported a 3% yoy growth in total sales for the month of May.
However, this growth has been largely driven by the bus segment. The bus segment grew
by 123% yoy and 28% mom in May. Goods M&HCV sales declined 17% yoy and 10% mom in May. CV volumes have declined due to the high interest rates. The decline in volumes is in line with the other major player in the CV industry - Tata Motors, which also reported a 17% decline in M&HCV volumes. Besides, there have been media reports that both the CV manufacturers have indicated a slowdown and have reduced their orders for CV tyres for the months of June and July. This, in our opinion, is a negative for the industry and the company. If the trend continues, the CV industry could witness a slowdown in growth and pose significant downside risks to our estimates. We currently estimate a 2.5% volume growth in FY2008 for Ashok Leyland.
Indiainfoline - Intraday Stock Ideas
NIFTY (4198) SUP 4131 RES 4257
BUY AMTEKAUTO (170)
SL 166 T 178, 181
BUY CRANESSOFT (120.85)
SL 116 T 128, 130
SELL NTPC (155.75)
@ 157 SL 161 T 148, 145
SELL UNIONBANK (121.50)
@ 124 SL 127 T 116, 114
SELL INDIACEM (171.10)
@ 173 SL 173 T 165, 162
STRATEGY INPUTS FOR THE DAY
Rough weather...avoid catching small fishes
The fishermen know that the sea is dangerous and the storm terrible, but they have never found these dangers sufficient reason for remaining ashore
There seems to be nothing pleasant about the weather these days. After a weak Wednesday, we seem to be heading for possible a terrible Thursday. If you've decided to take on the storm, do bottom fishing only with the large fishes. Avoid picking up similar business companies which are available in the smaller segments for now.
We expect the bulls to remain under pressure as global markets are down sharply and crude oil prices have also inched higher. There may be some short-term pain before the bulls fight back and lift the Sensex past its previous lifetime high. Liquidity will play a critical role. If FIIs continue to pour money, there should not be any major issues. However, one must factor in the global markets, as this year they are increasingly having a bearing on the local markets. We will also have a slew of public issues, especially the big-ticket ones from DLF and ICICI Bank to contend with.
The bulls got trapped badly in a late afternoon crash, possibly sparked by fresh fears of higher interest rates globally. Those concerns did turn out to be true as the European Central Bank hiked its key rate by another 25 basis points to 4%, the highest since Aug. 2001. Today, the Bank of England will announce its decision on interest rates. Though it may maintain a status quo, there is every likelihood of tightening in future to reign in inflation.
Goldman Sachs now doesn't expect the Fed to cut rates this year. Earlier, it had expected a 75 basis points rate cut. Fed chief Ben Bernanke and his colleagues have not given any concrete clues with regard to a reduction in borrowing costs as they are more concerned about inflation. As is the Chinese central bank, which may also have to resort to rate increases in order to cool down the over-heating economy there. Back home too, the markets are worried about some more monetary squeeze by the RBI though inflation has fallen sharply over the past several weeks.
Auto sales, especially the two-wheelers may crack further, amid reports that companies are cutting production and dealer inventories as rising interest rates hurt sales. Great Offshore and GE Shipping will hog the limelight as a financial daily reports that the Vijay Seth will take control of Great Offshore by paying Rs5.8bn to cousins - Bharat and Ravi. Cambridge Solutions will also be in action amid reports that Europe's largest private equity firm Permira has joined the race for buying the BPO firm. MTNL could buck the negative trend as it has reportedly emerged as the highest bidder for Sri Lanka's fixed-line operator Suntel.
Inflation concerns sent US stocks to their biggest two-day decline since March after first-quarter labor costs rose more than forecast. Federal Reserve Bank of Cleveland President Sandra Pianalto also joined Bernanke in warning that prices are rising too quickly.
The S&P 500 lost 13.57, or 0.9%, to 1517.38. The Dow average fell 129.79, or 1%, to 13,465.67. The Nasdaq Composite Index retreated 24.05, or 0.9%, to 2587.18.
Unit labor costs rose 1.8% versus the initially reported rise of 0.6%. Separately, Richmond Federal Reserve Bank President Jeffrey Lacker said that it is not clear whether so-called core inflation is moderating. Pianalto said that the long-term inflation trend remains too high.
Treasury prices inched higher, lowering the yield on the 10-year note to 4.96% from 4.99% late on Tuesday. Investors are keeping an eye on 5%, a key psychological level that the 10-year note yield has not surpassed yet this year.
In currency trading, the dollar rose versus the euro and fell versus the yen. COMEX gold for July delivery fell 50 cents to settle at $674.60 an ounce.
US light crude oil for July delivery settled up 35 cents to $65.96 a barrel in New York after the weekly inventories report showed a jump in gas supplies and a surprise fall in refinery activity, while a cyclone batters the Persian Gulf. The front-month contract was quoting 8 cents up at $66.04 a barrel in extended trading.
European stocks posted their biggest decline in more than two months on concerns that policy makers will keep raising interest rates to curb inflation. The ECB raised interest rates by a quarter percentage point to temper inflationary pressures in the expanding economy. That sent European stocks tumbling.
The pan-European Dow Jones Stoxx 600 index lost 1.6% to 390.41. The German DAX Xetra 30 closed down 2.4% at 7,730.05 , the UK's FTSE 100 fell 1.7% to 6,522.70 and the French CAC-40 dropped 1.7% to 5,977.87.
Most emerging markets too ended in the red. The Ibovespa in Brazil was down 2.1% at 52,049 while the IPC index in Mexico slid 1.8% to 31,681 and the RTS index in Russia gave up 0.5% to 1823.
Asian stocks fell for the first time in six days this morning after a higher-than-expected gain in US labor costs fueled concern that the Fed will follow Europe in jacking up interest rates to tame inflation.
The Morgan Stanley Capital International Asia-Pacific Index retreated from a record high, following declines in the US and Europe.
The MSCI Asian index lost 0.5% to 152.38 as of 10:45 a.m. in Tokyo, snapping a five-day, 3.3% rally. BHP Billiton led mining shares lower after metals prices fell. A measure of six metals traded on the London Metal Exchange (LME) lost 1.8% overnight. Copper slid 1.6%, zinc fell 2.7% and nickel dropped 1.5%.
Japan's Nikkei 225 Stock Average dropped 0.8% to 17,891.70. Benchmarks in other markets open for trading declined, except in China, where the CSI 300 Index advanced for a third day.
Markets registered poor close as bulls were shrugged off the bourses. Bears ruled as heavy sell of in the scrip’s across the bourses dragged the NSE Nifty to close below the 4200 mark and benchmark index Sensex to close almost 300 points lower. The upcoming DLF IPO and other public issues coming this month possibly will drive away money from the markets dampening the spirits of the bulls.
All the sectoral indices ended in red, even the Mid-Cap and the small cap index closed lower by 1.2% each dragging the benchmark index Sensex to post its biggest single day fall since April 27. Tata Tea, SAIL and Zee Telefilms were among the major losers, however, Hindalco, VSNL and Satyam Computer were the major gainers losers among the 50-scrip’s of NSE Nifty.
Finally, the 30-share Sensex dropped 279 points to close at 14255. NSE-50 Nifty was down 86 points to close at 4198.
BASF lost by over 7% to Rs253 after the company announced its Q4 result with net profit at Rs36.7mn (down 26%), however revenue at Rs1.62bn (up 10.2%). The scrip touched intra-day high of Rs278 and a low of Rs250 and recorded volumes of over 1,00,000 shares on NSE.
Praj Industries gained 1.4% to Rs499 after the Board of Directors of the company announced that they have approved bonus issue in ratio of 1:1. The scrip touched intra-day high of Rs513 and a low of Rs494 and recorded volumes of over 11,00,000 shares on NSE.
Cadila was down by 0.8% to Rs334. The company announced that they received approval for Topiramate tablets. The scrip touched intra-day high of Rs341 and a low of Rs332 and recorded volumes of over 15,000 shares on NSE.
Sunil Hitech slipped 1% to Rs138. The Company announced that they have secured orders worth Rs1.5bn. The scrip touched intra-day high of Rs147 and a low of Rs138 and recorded volumes of over 3,00,000 shares on NSE.
Auto stocks witnessed selling pressure. Tata Motors dropped by 3.2% to Rs688, Maruti was down 3% to Rs776, Bajaj Auto slipped 1.2% to Rs2218 and M&M lost 0.9% to Rs745, Amtek Auto edged lower by 0.5% to Rs414. The company announced that it acquired UK Based JL French's Witham Assets and Ashok Leyland slipped by 1.7% to Rs37. The company announced its May sales at 5804 units (up 3%)
IT stocks also pared its intra-gains despite rupee weakening to 40.70 per dollar. Infosys was down 0.6% to Rs535, Wipro slipped 0.6% to Rs532, Rolta declined 3% to Rs446 and NIIT Ltd plunged nearly by 8% to Rs911. The company yesterday declared 1:2 bonus issue and also announced that they would split each share into five.
FMCG stocks also ended lower. Tata Tea declined by 4.7% to Rs851, ITC was down by 2.5% to Rs157, Nirma slipped 1.8% to Rs185, McDowell edged lower by 0.6% to Rs1155 and Colgate dropped 0.6% to Rs358.
Pharma stocks were in bad health. Ranbaxy was down by 2.8% to Rs380, Sun Pharma slipped by 1.6% to Rs1075, Glaxo declined by 1.4%t o Rs1281 and Cipla slipped 1.2% to Rs213.
Insider Trades:
Igarashi Motors India Limited: M/s.T. Rowe Price Associates, Inc. & its affiliates has sold in open market 7179 equity shares of Igarashi Motors India Limited on 4th June, 2007.
Mahindra & Mahindra Ltd.: Nadir B. Godrej, Director has purchased 9500 equity shares from the market of Mahindra & Mahindra Ltd on 30th May 2007.
Titan Industries: Nihal Kaviratne, Director of the company from market has purchased 300 equity shares of Titan on 31st May 2007.
Lower Circuit:
Adhunik Metaliks, Tanla, Shaw Wallace and Tripex Overseas
Upper Circuit filters:
Shree Ashtavinayak, Geojit Financial, Dawn Mills, Mahindra Forging, Ruby Mills, and IID Forgings.
Delivery Delight (Rising Price & Rising Delivery):
Apollo Hospitals, Grasim Industries, Hindalco Industries, MPhasis BFL, NALCO, Polaris Software, Siemens, SRF, Tamil Nadu Newsprint & Papers, VSNL and Wockhardt.
Abnormal Delivery:
Aurobindo Pharma, Nagarjuna Fertilizers, Grasim Industries, Federal Bank, Ashok Leyland, Wipro, Lupin, Tata Power, Colgate, MTNL, Escorts, Thermax and Dr Reddys.
Major Bulk Deals:
Fnil A/C. Copthall has bought Bank of Rajasthan; Deutsche Bank has sold Core Projects; T Rowe Price has sold McDowell Holdings; Sundaram BNP Paribas has picked up Shreyas.
Major News:
Alstom wins signaling contract worth Rs2.55bn from Delhi Metro Rail Corp
Strides Arcolab gets two more NDA approvals from USFDA
Zydus Cadila Gets Tentative nod for Topiramate Tablets
BASF Q4 profit at Rs36.7mn (down 26%), revenues at Rs1.62bn (up 10.2%) and recommends 70% dividend
Sunil Hitech gets orders worth Rs1.5bn
GEI Industries secures orders worth Rs350mn
Rajesh Exports sets aside Rs10bn to buy Rivals Abroad
Suzlon gets order for 630MW Wind Turbine
NTPC mulling follow-on public issue: report
ISMT buys Structo Hydraulics AB
Citigroup - NIIT Ltd
Citigroup on NIIT say,
Maintain Buy (1M); Target price raised to Rs.1120 — We raise our estimates and target price to incorporate better pricing power in GNIIT and strong performance of its holding in NIIT Tech. Our new SOTP based target price of Rs1,120 incorporates organic business valuation at 12x FY09E EBIDTA (rolled forward 6 mths), current price of NIIT Tech and ElementK at acquisition price.
Citigroup - Daily Technicals
Citigroup in their daily technical report,
Nifty — The index opened on a flat note and traded sideways in negative territory till the afternoon session, post which it saw a sharp decline towards 4190. It ended the day down 87points.
Breaks below the Trading Range — The index violated the lower end of the 4307-4241 trading band and closed below it on a weak note, suggesting it should decline from current levels.
Support — The index has support around 4141 (low of 25 May 2007) and 4127 (approx.). The level of 4127 is a 62% retracement of the rise from a low of 3981(11 May 07) to the recent high at 4363. Nifty is likely to decline towards the 4141-4127 levels.
Resistance — The index will face resistance around 4241 (Role Reversal- Earlier 4241 was a support, now will act as a resistance) and 10dma at 4261.Intra day bounce will face stiff resistance around 4241-4261 levels.
Conclusion — Expect declines towards 4141-4127 levels.
Sharekhan Investor's Eye dated June 06, 2007
HDFC Bank
Cluster: Evergreen
Recommendation: Buy
Price target: Rs1,355
Current market price: Rs1,127
Price target revised to Rs1,355
HDFC Bank has announced it plan to raise additional equity capital of Rs4,200 crore or $1 billion, whichever is higher. The additional capital is required to strengthen its capital base under the new Basel II guidelines and also fund the future growth plans. We had earlier factored in our valuations a minor equity dilution of 5% during FY2008, based on the historical trend of capital raising programmes of the bank. However the bank's recently announced capital raising plan is expected to lead to a dilution of 13.3% of the existing equity base and the same is much above our estimate. After the capital raising exercise the Tier-I ratio of the bank is expected to be at 11.6%.
Key points
- The present promoter's (ie the HDFC group) stake stands at 21.6%. With a view to maintaining the stake of the promoter group at or about 23% of the enhanced capital base, the bank would make a preferential offer of 13,582,000 equity shares of Rs10 each to the promoter group at a price of Rs1,023.49 per share determined by the SEBI formula. Thus the promoters would infuse Rs1,390 crore to maintain their stake at 22.8% of the enhanced equity base. The balance amount of the proposed equity capital may be raised either as a domestic public offering or as public or private offerings in one or more international markets. The bank already has 18.9% of its existing capital as American depository shares (ADS).
- We have assumed a follow-on offer price (FOP) of Rs1,000 per share for HDFC Bank which would result in a fresh issue of 2.81 crore equity shares to raise the remaining amount of Rs2,810 crore. The FOP is significantly higher than the bank's FY2007 year-end book value of Rs201 per share. Hence the issue would significantly add to the book value of the bank. The book value is expected to go up by 62% to Rs327 per share by March 2008 if we factor in a stable 31% earnings growth in FY2008.
- We have revised our FY2008 earnings estimate upwards by 1.8% to Rs1,503 crore from Rs1,475 crore. But after factoring in the higher dilution, the earnings per share (EPS) estimate has reported a decline of 7.3% to Rs41.6 from Rs44.9. We have also introduced our FY2009 estimates and at the current market price of Rs1,127 the stock is quoting at 20.7x FY2009E EPS, 8.0x FY2009E pre-provision profits and 3.1x FY2009E book value. The historical one-year forward price-to-book value chart indicates that the HDFC Bank stock consistently trades around the 3.7x price-to-book value band. So maintaining the same price-to-book multiple of 3.7x for HDFC Bank we uphold our Buy recommendation on the stock with a revised price target of Rs1,355.
Aban Offshore
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs3,110
Current market price: Rs2,750
Price target revised to Rs3,110
Key points
- Aban Offshore Ltd's (AOL) earnings estimate for FY2009 has been revised upwards by 15.8% to factor in the higher than our assumption of day rates for the six existing assets that are scheduled for renewal over the next three quarters. The revised estimate also factors in the steep appreciation of the rupee and the exchange rate assumption has been revised to Rs41 against the US Dollar (USD) for FY2008 and FY2009.
- In addition to the net positive impact of the re-pricing of its assets at higher day rates and the change in the foreign exchange (forex) rate assumption, the sentiment towards the stock would be boosted by the flow of positive news related to the delivery of two newly built jack-up rigs and the contracts for the same. Moreover, the delivery of its drill ship, Aban Abraham, is also scheduled in August 2007.
- At the current market price the stock trades at 21.8x FY2008 and 7.5x FY2009 estimated earnings. We maintain our Buy call on the stock with a revised price target of Rs3,110 (8.5x FY2009E earnings).
Sharekhan Investor's Eye dated June 06, 2007
HSBC - Tech Mahindra
HSBC in their report on Tech Mahindra,
IT spending programs and cost-saving initiatives of BT and other service providers have led to growing demand for offshore technology vendors
We believe positives of USD1bn deal win by Tech Mahindra are largely priced in. Expect initial investments on the deal to drag margins over the next two years
Trades at a premium to peers despite management guiding to lower growth in FY08. We initiate coverage with a Neutral (V) rating and 12-month target price of INR1600
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