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Tuesday, June 26, 2007

RPL - Refinery Completion Speedup!

Reliance Industries Ltd. India's top private firm, is set to finish building the world's sixth-largest refinery in the second quarter of 2008, more than six months ahead of schedule, a top official said on Tuesday.

Hopes for completing the 580,000 barrels per day (bpd) refinery ahead of a December 2008 target sent shares of subsidiary Reliance Petroleum, which is building the plant, up as much as 6.8 percent to a record 107.70 rupees.

P.M.S. Prasad, president and CEO of the petroleum division, also told Reuters in an interview that Reliance was shopping for retail outlets in Europe and the United States in anticipation of booming exports from its massive refining operations on the west coast of India.

"The new refinery is likely to be commissioned in the second quarter of 2008. We are looking at Europe and the U.S.A. for exports," Prasad said in an interview in his top-floor office on the outskirts of Mumbai, to which he often travels by helicopter.

The early commissioning gives Reliance a bigger head start to capitalise on robust refining profits before other export-focused refineries -- the biggest of which are being built in the Middle East -- weaken margins when they launch early next decade.

Reliance Petroleum Ltd., in which Chevron Corp. holds 5 percent, is building the refinery near Reliance Industries' 660,000 bpd plant, at Jamnagar in western Gujarat state. Together they will form the world's biggest refining complex.

Company officials said last year that they were working hard to bring forward the launch data to June 2008, but Prasad's comments were the first in months to confirm the target despite industry-wide contractor delays and cost escalation.

Prasad said Reliance, which is already exporting gasoline to Iran, Kuwait, Saudi Arabia and UAE, sees a good market for diesel with very low sulphur content in Europe and expects some buyers to blend it with lower quality fuel to meet specifications.

He also said Reliance had an eye on overseas retail assets.

The company's network of petrol stations in India had captured 15 percent of the market last year but subsidised sales by state-run Indian Oil Corp., Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. hurt its operations.

"Our experience in India has given us expertise and understanding of the situation in a developing country," he said.


Reliance is also optimistic about a steady start for gas production in its deep-sea field in the Krishna-Godavari basin off India's east coast.

The field, which will double India's natural gas output when it starts pumping 80 million cubic metres a day next year, is being developed at a cost of $5.2 billion.

Prasad said Reliance had obtained government approval to spend another $3.6 billion to maintain the field after it starts production.

Only a handful of towns and cities in India have gas distribution networks and millions of households use cylinder gas for cooking. Gas finds off the east coast, including Reliance's, are expected to boost natural gas use around the country.

Reliance was in talks with state-run Indian Oil Corp. and GAIL (India) Ltd. for city gas distribution projects, Prasad said.

Britain's BG Group is also keen to distribute gas in Indian cities.

Reliance was also in talks with Chinese firms to introduce gas-based home appliances in India, he said, adding that another group company, Reliance Retail Ltd., would also be involved in this. He did not give more details.

The Indian rupee has appreciated about 8 percent against the dollar since the start of the year and Prasad said its strength would help the firm as a large component of its capital expenditure, about $20 billion, was in dollars. This includes the new refinery, a new cracker project and exploration and production expenditure.

However, the company also has strong dollar earnings from exports, which accounted for 61 percent of its revenue in the January-March quarter.

Shares in Reliance Industries closed 0.15 percent lower at 1,703.50 rupees, while Reliance Petroleum closed 5.85 percent up at 106.75 rupees in a flat Mumbai market.

HDIL IPO Analysis

HDIL IPO Analysis

Indian businesses still look skywards for growth, sales

Fortunes of several Indian businesses are still linked to the monsoon.
More than 60% of India’s population is still directly or indirectly dependent on agriculture for a living; in turn, agriculture in most parts of the country is dependent on the monsoon.

Although the share of agriculture in India’s economy has fallen from one-fourth few years ago to under one-fifth now, the monsoon continues to be a relevant variable. It continues to have an effect on the performance of companies.

A good monsoon means more sales and a bad monsoon usually means the reverse.
Until a decade ago, the Reserve Bank of India (RBI) used to call one of the two credit policies it announced in the course of a year, the “busy season” credit policy.

The other was called the “slack season” one.
Former RBI governor C. Rangarajan rechristened the two policies as the “annual” policy, which was announced in April, and a “mid-year review”, announced in October. Before he did that, the April policy was the slack season policy and the October policy, the busy season one. The historic reason behind this was the phenomenon of rising credit after the harvest season in October and the slack in credit growth in the beginning of the year.

Despite the change in the name of two policies—these days, RBI announces its credit policy every quarter—agriculture still plays a major role in deciding the flow of credit in India. Credit growth picks up in the second half of the year buoyed by good monsoon and harvest. In the first half, it can even dip.

For instance, this year, between April and the first week of June, the overall credit in the banking system has gone down by more than Rs35,000 crore.
This, despite the decline in contribution of agriculture to the country’s gross domestic product (GDP). In 1999-2000, agriculture accounted for close to 23% of India’s GDP. In 2006-07, the corresponding figure was 18.46%(at constant prices).

The cement exception
The cement business is one where there used to be a negative relationship between the monsoon and sales. It has managed to break the cycle.

Cement prices, which normally used to drop during the monsoon, have remained stable in the last three years. This year is no exception, thanks to demand from the infrastructure and construction industry. Earlier, prices used to fall by 5-7% during monsoon due to slowdown in construction activities.

“Infrastructure and heavy construction projects continue through monsoon, as the builders need to meet their deadline. Only individual house builders don’t carry on with their construction, but the demand from them is limited,” said H.M. Bangur, managing director of Shree Cement Ltd and vice-president of the Cement Manufacturers’ Association of India.

Insanity on the loose

On Thursday, there was an air of nervous expectancy in the US markets. Bear Stearns, a leading Wall Street broker, was trying to rescue two hedge funds that it has floated. One was called the High Grade Credit Strategies Fund and the other was called the High Grade Credit Strategies Enhanced Leverage Fund. Although both funds called themselves “High Grade”, they invested in securities backed by subprime mortgages, i.e., mortgages extended to high-risk borrowers and then securitized. The second fund was launched with $600 million (Rs2,460 crore) and it borrowed to invest $11.5 billion in securities, with an additional $4.5 billion of short positions in various securities.

One of the lenders, Merrill Lynch, threatened to auction the securities owned by the fund to collect its dues. That would have enabled “price discovery” for a pool of securities that were valued according to opaque methods. Depending on how much buyers were willing to pay for these securities, other funds that hold similar securities would have had to value them at the prices that buyers were willing to pay for the Bear Stearns fund holdings. That might have set off a chain reaction with unpredictable consequences for the funds, their investors and lenders to the funds. It appears that the immediate danger has been averted for at least one of the two funds, as Bear Stearns has agreed to lend money to it to pay off external creditors. Wall Street rallied on Thursday. However, on Friday, worries returned. The other fund could still be in trouble and Standard and Poor’s and Fitch have downgraded credit ratings (as usual, after the horse has bolted). Wall Street stocks plunged.

Analysts at the Bank of America called the woes at Bear Stearns’ funds the “tip of the iceberg”. They wrote in a report on Friday that homeowners with about $515 billion on adjustable-rate home loans would pay more this year and an additional $680 billion worth of mortgages would reset next year. As homeowners are required to pay more for their mortgages, the risk of foreclosures and defaults rises. Securities whose values depend on soured loans would have to be marked down or extinguished at distress prices, as happened to the two Bear Stearns funds. Is this the end?

A few other indicators, too, suggest that the answer is yes. The price of Brent crude oil is already more than $70 per barrel. It took the Israel-Hamas war and hurricane Katrina to propel oil to more than $70 per barrel in the last two years. Now, tight supply and rising demand are taking the price of oil above that limit.

Other indications that the risk-appetite trade is running into resistance come in the form of intervention by the Reserve Bank of New Zealand (RBNZ) to weaken its currency. It has not succeeded. Speculators and Japanese residents have called the bank’s bluff and have pushed the Kiwi dollar higher against the yen and even against the US dollar. What would RBNZ do next?

Much as these indicators push one to suggest that the end of the last few years of rising asset prices is nigh, the answer is that the game is not over yet. That would require a dramatic shift in policy in Japan towards higher interest rates and a turnaround in the macroeconomic growth strategy of China. Neither is imminent.

China is the key variable in this game. As I had written on numerous occasions, their growth strategy relying on exchange rate competitiveness keeps the dollar from depreciating, keeps interest rates low and encourages Wall Street to build complex products based on debt since the cost of debt is low. That looks unlikely to change.

Real interest rates are negative and the stock market bubble is growing bigger as negative real deposit rates lead to a flight of deposits from the banking system into stocks. The government makes periodic noises against speculation, but does little to stem it effectively. Many state actors are benefiting from the bubble. Perhaps that explains the reluctance to walk the talk.

Surely, this is an unsustainable model. But predicting the timing of its collapse is hard. It will stop when it cannot run any more. Until that day arrives, one should expect more of the same from China. That means continued reliance on competitive currency, reserves accumulation and purchase of all kinds of international assets. So, besides manufactured goods, China would also continue to export its asset price bubbles abroad.

That is why the answer to the question of whether this is the beginning of the end is a NO. Any wobbles in financial markets induced by the fear of a meltdown in the US mortgage finance would find investors who have hitherto stayed in the sidelines rushing to buy. Bubbles would get bigger much as I wish they would not. It is not easy trying to explain an insane world.

India's Top Broking Houses

The first-ever comprehensive research of Indian equity broking houses saw Angel Broking (5,081 trading terminals), Motilal Oswal Securities (4,179 terminals), SMC Global Securities (3,231 terminals), Indiabulls Securities (2,700) and Geojit Portfolio Management Services (2,410) topping the list of broking outfits in India, in terms of the number of terminals.

“The findings help in knowing the reach and the spread of brokerage houses in India,” said Kaushal Sampat, chief operating officer of Dun & Bradstreet Information Services India, which did the survey. “We have not looked at their revenues.”

It was found that 52% of the 200 brokerages that participated in the survey – it constituted more than 90% of the total broking outfits in India – are based in Western India, followed by North (25%), South (13%) and East (10%).

In terms of cities, Mumbai (40%) has the most number of trading terminals, followed by Delhi (12%), Ahmedabad (8%), Kolkota (7%), Chennai (4%) and remaining cities (29%).

Another interesting feature of the survey is the finding is that 25% of the brokerages wanted to go public by coming out with an initial public offering (IPO) while another 40% were looking for a tie-up or a joint venture with overseas brokerages.

The survey comes at a time when the Indian stock broking industry is witnessing a slew of mergers and acquisitions (M&As). France’s BNP Paribas bought 33% stake in Geojit Financial Services, Citigroup Venture took controlling stake in Sharekhan and Standard Chartered Bank bought 49% stake in UTI Securities.

Bandi Ram Prasad, consultant, D&B Information Services India said 68% of the firms surveyed preferred expansion of business by targeting institutional and foreign institutional investors. “During the past couple of years, India, along with Korea and Taiwan, has been one of the preferred destinations for the FIIs. With corporate restructuring, rising market capitalization and sector-friendly policies, helping the FIIs, more than two thirds of the firms are interested in increasing their FII client base,” says the survey.

Another significant finding is the brokerages expand through branch network in North while they use the sub-broking route to extend their network in South India. Not surprisingly, 40 per cent of branches of brokerages are based in North India while 55% of sub-brokers are based in South India.

In terms of different segments of business, the D&B survey found that 27% of the brokerage outfits concentrate only in the cash market, whereas 35% are into cash and derivatives. Almost 20% of the firms trade in cash, derivatives and commodities market

India Economics - June 22 2007

India Economics - June 22 2007

WS Industries

WS Industries

Opto Circuits India

Opto Circuits India

Mindtree Consulting

Mindtree Consulting

ITC - Technical Analysis

ITC - Technical Analysis

Vishal Retail Allotment

See here

Hexaware Technologies

Hexaware Technologies

Daily Technical Analysis Report - June 26 2007

Daily Technical Analysis Report - June 26 2007

Trading Buy - Murudeshwar Ceramics Limited

Trading Buy - Murudeshwar Ceramics Limited

Market Close : Volatility on upper hand ahead of F&O settlement

Global markets where weak and no surprise that Indian market opened subdued on back of this. Investors continued to be cautious ahead of F&O settlement which kept the indices volatile. Indices continued to trade in the positive territory in the preceding sessions. However, profit booking in the final trading hours resulted flat close. The buying activity was witnessed across Auto, Cement and Engineering counters. Power and Banking counters were on the sellers hit list. With crude almost at $ 69 a barrel refineries were under pressure. European markets were weak too.

Sensex closed higher by 13 points at 14501.08. It was helped up by gains in ONGC (935.9,+2 percent), Bharti Tele (850,+2 percent), Grasim (2496.1499,+1 percent), BHEL (1470.75,+1 percent) and Tata Motors (684.4,+1 percent). Restricting the gains were Ranbaxy (347.65,-2 percent), Wipro (508.65,-1 percent), ACC (846.1,-1 percent), HDFC (1884.85,-1 percent) and Guj Ambuja (116.1,-1 percent).

Jet ended 2% higher post results. Company posted a net profit of Rs 88.01 cr for the quarter compared to Rs.227.12 cr, down by 61%. The top line for the quarter stood at Rs.1,989 cr against Rs.1,950 cr, marginally higher by 2%. On yearly basis the top line improved by 21% at Rs.7,401.31 against Rs.6,087.57 cr. Company informed that its recent acquisition of Sahara Airline which would be renamed as Jet Lite is expected to break even by the October this year. Company intends to make Jet Lite a low cost carrier. With consolidation among the existing Airline companies expect the losses suffered by the industry to slow down. Post consolidation the three big companies (Air India & Indian Airlines) (Deccan airways & Kingfisher) (Jet & Sahara) account for 80% of the total market. This will have a significant impact on the airfare prices in the country. Things are changing here but we would prefer the wait and watch.

Suzlon energy ended 5% higher after the company got technical clearance from the Kerala state Govt for setting up wind mils in Attapadi. Company had applied for setting up 33 wind mills aimed at generating 20 MW of power, Anert (Agency for non conventional energy sources) which is the nodal agency for wind power development has currently accorded technical clearance for setting up eight machines in Sholayur village which will generate 4.8 MW of power. The setting up of 33 machines will involve an outlay of Rs 1.1 cr and the first 16 machines will be commissioned by September 2007. Company has already purchased 500 acres of land in Attapadi for setting up wind farms totalling 100 mw of power. With exhausting resources and global warming shift to renewable and natural enery will increase. We are positive on the company.

Esab India which has an open offer from its parent Charter Plc as the company wants to increase stake by 20% to 57.5% and this at Rs 436. The stock remained bouyant throughout the day but ended lower by 2%. Do read our research to find out why we remain positive on the company.

Technically Speaking : Sensex is trading in a very narrow range for the last 4days, and we are very near the expiry. Bears likely to have a upper hand in the expiry days if the support of 14,420 is broken. On the higher side the Sensex has made a double top in the last 4 days at 14560, which creates some skepticism. Yet the trend seems positive unless 14,420 is broken and we are likely to have a bullish expiry. The volume for the day stood at Rs.4,677 cr.

Sensex posts modest gains

The market returned to stability in the afternoon and gradually picked up momentum on healthy buying in consumer durables, capital goods and oil stocks but slipped into the red on profit booking towards the close. The Sensex opened on a cautious note at 14479, down nine points, tracing weak Asian markets. The market remained choppy thereafter but with a positive bias. It moved gradually up on sustained buying in front-line stocks to touch the day's high of 14560. However, a strong bout of selling thereafter saw the market enter into the red towards the close but buying at lower levels helped the Sensex to pare some of the losses and enter into positive territory again. The Sensex finally closed at 14501, up 13 points, while the Nifty ended the session at 4286, up 26 points.

The broader market, however, continued to remain in the green. Of the 2,692 stocks traded on the BSE, 1,493 stocks advanced, 1,118 stocks declined and 81 stocks ended unchanged. Most of the sectoral indices ended in the green. The BSE CD was the biggest gainer and moved up by 2.71% at 4164 followed by the BSE CG index (up 1.01% at 11950) and the BSE PSU index (up 0.75% at 6789). However, the BSE Bankex index dropped 0.36% at 7802 and the BSE IT index was down 0.25% at 4800.

Among the laggards Ranbaxy was down 2.36% at Rs348, HDFC declined by 1.27% at Rs1,880, Wipro shed 1.25% at Rs509 and ACC dropped 1.17% at Rs846. However, select heavyweights attracted buying support. ONGC surged 2.11% at Rs936, Bharti Airtel rose 2.01% at Rs850, Grasim jumped 1.44% at Rs2,496, BHEL added 1.40% at Rs1,471 and Tata Motors moved up by 1.07% at Rs684.

Consumer durable stocks, however, were in the limelight. Titan Industries surged 8.78% at Rs1,279, Timex Watches jumped 5% at Rs26, Samtel Color soared 4.68% at Rs16 and Goldiam International gained 3.13% at Rs97. Llyod Electric, Shrenuj & Company, Nilkamal were up over 1% each.

Over 1.43 crore Reliance Petroleum shares changed hands on the BSE followed by IFCI (1.03 crore shares), GV Films (92.60 lakh shares), IKF Technologies (83.25 lakh shares) and Hindalco (51.65 lakh shares).

Time Technologies topped the value list with a turnover of Rs200 crore on the BSE followed by Indiabulls (Rs189 crore), Indiabulls Real Estate(Rs123 crore), Reliance Petroleum (Rs119 crore) and GMR Infrastructure (Rs103 crore).

Side counters hog limelight in range bound market

The market settled with marginal gains in volatile session. Volatility was witnessed in late trade. There has been a lack of direction on the bourses since the past few trading sessions due to absence of any trigger. Shares from consumer durables sector surged, while IT stocks saw some unwinding in late trade, after opening firm.

The 30-shares BSE Sensex posted marginal gain of 13.36 points or 0.09% to 14,501.08. It opened slightly lower at 14,478.75 tracking weak global markets. It was also Sensex's low of the day. From here, the index advanced to strike a high of 14,560.48 at 13:11 IST. Sensex swung just 82 points today, between a low of 14,478.75 and high of 14,560.48.

BSE Sensex is 222 points away from its all-time of 14,723.88, which it had hit on 9 February 2007.

The S&P CNX Nifty rose 26.30 points or 0.62% at 4,285.70. The Nifty June 2007 futures settled at 4272.20, a discount of 13.50 points as compared to spot closing

Gains in some of the heavyweights in Nifty helped Nifty score over Sensex today. ONGC rose 2.1% to Rs 935.90, Bharti Airtel gained 2% to Rs 850 and Bhel rose 1.4% to Rs 1470.75. These three stocks have a combined weightage of 19.44% in Nifty. The combined weightage of these three stocks in Sensex is lower at 12.93%.

There was a plenty of action outside index stocks, indicated by healthy market breadth. On BSE, 1503 shares advanced as compared to 1126 that declined, while 80 remained unchanged.

The BSE Mid-Cap index struck all time high of 6,435.32. It rose 33.71 points or 0.53% to 6,417.90. The BSE Mid-Cap index has witnessed a solid surge over the past few months.

The BSE Small-Cap index settled with a gain of 41 points or 0.54% to 7,604.72. It is 268 points away from its all-time of 7,872.80 that it had hit on 11 May 2006.

The total turnover on BSE amounted to Rs 4,677 crore as compared to Rs 4,316 crore on 25 June 2007. Turnover surged to Rs 52,571.16 crore in NSE's F&O segment as compared to Rs 40264.20 crore on 25 June 2007.

Among the Sensex pack, 16 advanced while the rest declined.

State run oil exploration major Oil & Natural Gas Corporation (ONGC) gained 2.45% to Rs 939.10, on 2.96 lakh shares. It was the top gainer from the Sensex pack. ONGC posted 13% fall in net profit to Rs 2681.64 crore in Q4 March 2007 compared to a net profit of 3085.89 crore in Q4 March 2006. Total income rose 16.35% to Rs 14575.92 crore in Q4 March 2007 (Rs 12528.23 crore). The results were announced during trading hours on Monday, 25 June 2007.

Led by heavyweight ONGC, the BSE Oil and Gas Index rose 0.6% to 7,658.34.

Telecom services provider Bharti Airtel rose 1.89% to Rs 849, on 2.46 lakh shares as buying continued after HSBC Holdings Plc., recently raised price target of India’s top wireless services company by 9%, and said that the company will continue to expand market share. The one-year target was raised to Rs 1110.

State run engineering major Bharat Heavy Electricals (BHEL) gained 1.35% to Rs 1470. The company won an order worth Rs 106 crore from Rashtriya Ispat Nigam (RINL). The announcement of the order win was made during market hours on Monday, 25 June 2007. The contract will be executed in 28 months.

The BSE Capital Goods Index rose 1.01% at 11,949.91. Suzlon Energy (up 5.16% to Rs 1431.10), Crompton Greaves (up 4.37% to Rs 253), Bharat Bijlee (up 3.98% to Rs 2260), Praj Industries (up 4.21% to Rs 488.70), and Areva T&D (up 3.86% to Rs 1495), edged higher from Capital Goods index.

IT stocks which were trading firm till mid-afternoon session, pared gains later. The BSE IT Index lost 0.25% at 4,799.99. Satyam Computers rose 0.86% to Rs 457, while TCS (down 0.22% to Rs 1123), Infosys Technologies (down 0.50% to Rs 1926.10), and Wipro (down 1.18% to Rs 509) edged lower.

The Indian rupee started at its lowest level in more than two weeks on Tuesday, 26 June 2007, as investors anticipated an abatement in capital inflows on shrinking global risk appetite and a step-up in dollar purchases by oil refiners. In early trade, the rupee was at 41.01/02 per dollar, slipping from Monday's (25 June 2007) 40.875/885.

Index heavyweight Reliance Industries (RIL) slipped 0.35% to Rs 1,700, on 5.56 lakh shares. It had struck a high of Rs 1719.40. As per reports, the Prime Minister's Office (PMO) has referred the issue of pricing natural gas found off the east coast to a committee of secretaries. The move comes in the wake of differences the petroleum ministry has with the power and fertiliser ministries over the methodology adopted for arriving at the gas price.

Pharma major Ranbaxy Laboratories lost 2.40% to Rs 347.50, on 3.13 lakh shares. It was the top loser from the Sensex pack. Goldshield become the latest in a string of companies to pay millions of pounds in out-of-court settlements to the NHS for alleged drug price-fixing. Goldshield's settlement follows April's announcement from the UK's Serious Fraud Office that it intended to charge nine people and five companies with conspiracy to defraud the NHS over certain drug prices and supply. Ranbaxy is one of the 5 companies allegedly involved in a cartel that took place between 1996 and 2000.

Cement stocks Ambuja Cements (down 0.68% to Rs 116.45) and ACC (down 1.27% to Rs 845.25), edged lower on profit booking

Housing finance major HDFC lost 1.27% to Rs 1880, on reports that it has cut floating rates for new home loans by 25 basis points as part of monsoon offer

ICICI Bank continued to shed value since the Foreign Investment Promotion Board (FIPB) on Monday, 25 June 2007, rejected ICICI Bank’s proposal to divest 24% stake in ICICI Financial Services in favour of foreign investors as a subsidiary could not take part in insurance business. It lost 0.70% to Rs 945.10.

The BSE Bankex was down 0.35% at 7,802.33, and was the top loser among the sectoral indices on BSE. Canara Bank (down 2.99% to Rs 255.95), UTI Bank (down 2.98% to Rs 598.20), Federal Bank (down 2.50% to Rs 290.10) and Union Bank of India (down 1.50% to Rs 131.20), were some of losers from the banking pack.

Entertainment Network India (ENIL) jumped 20% to Rs 506.60, on 5.72 lakh shares. Novartis India (up 14.90% to Rs 400), Nicco Corporation (up 19.86% to Rs 33.50), Valecha Engineering (up 10% to Rs 269.40), Kalindee Rail Nirman Engineers (up 10% to Rs 254), and Honeywell Automation (up 9.80% to Rs 2060), surged from small-cap and mid-cap space.

Kothari Products rose 2.85% to Rs 555 after 16.9 lakh shares changed hands in block deals on the BSE at an average price of Rs 541.41 each. The scrip touched a high of Rs 585 and low of Rs 540 during the day. The stock had average daily volume of 7,313 shares on BSE in past one quarter. The block deals, amounting to 25.5% of its equity capital, constituted transfer of stake between promoters. As per recent media reports, Deepak Kothari intends to increase his stake to 46.02% in the company by purchasing the stake from M.M. Kothari and Sharda Kothari.

Shares from the consumer durables sector were in demand. The BSE Consumer Durables index surged 2.71% to 4,163.86, and was the top gainer among the sectoral indices on BSE. Titan Industries (up 8.78% to Rs 1279.30), Lloyd Electric (up 1.91% to Rs 155), and Rajesh Exports (up 0.52% to Rs 525.15), were the major gainers from BSE Consumer Durables index.

Steel stocks gained in anticipation of further consolidation of steel industry globally. Tata Steel (up 0.42% to Rs 602), Sail (up 0.83% to Rs 133.40) and Bhushan Steel (up 0.11% to Rs 703), gained. As per reports, Arcelor Mittal and Nippon Steel Corporation will ink a new partnership agreement next month on technology transfer and capacity expansion at their joint ventures. The two firms have been talking about the pact since last July after Mittal bought Arcelor, Nippon's strategic partner in Europe, in an unfriendly bid to create the world's biggest steel maker.

GMR Infrastructure rose 6.49% to Rs 691.95 and came fourth among top gainers in A group. As per recent reports, the GMR group is planning to invest in infrastructure private equity (PE) funds. The company has got proposals from several PE funds to invest in them, reports stated.

Ciba Specialty Chemicals (India) slumped 3.95% to Rs 382.50 even as it notched up 68.75% rise in net profit in Q4 March 2007 to Rs 5.40 crore as against Rs 3.20 crore in Q4 March 2006. Sales declined 36.81% to Rs 100.10 crore in Q4 March 2007 (Rs 158.40 crore). The net profit jumped 142.81% to Rs 81.10 crore in the year ended March 2007 (FY 2007) as against Rs 33.40 crore in the year ended March 2006 (FY 2006). Sales declined 18.24% to Rs 510.20 crore in FY 2007 (Rs 624.00 crore). The results were announced after the market hours on Monday, 25 June 2007.

Jet Airways India rose 0.16% to Rs 804.25 after it reported 61.25% a fall in net profit in Q4 March 2007 to Rs 88.01 crore as compared to Rs 227.12 crore in Q4 March 2006. Total income rose 1.99% to Rs 1989.03 crore in Q4 March 2007 from Rs 1950.19 crore in Q4 March 2006. Net profit declined 93.82% to Rs 27.94 crore in the year ended March 2007 compared to Rs 452.04 crore for the year ended March 2006. Total income rose 21.58% to Rs 7401.31 crore in FY 2007 from Rs 6087.57 crore in FY 2006

Great Eastern Shipping declined 3.13% to Rs 337 after its board approved issue of 50 lakh warrants convertible into shares at Rs 312.75 each to promoters and directors. The conversion price of warrants of Rs 312.75, is 7.1% discount to current market price of Rs 337. If the entire warrants are converted into equity shares, it will result into 3.2% equity dilution. The promoters hold 29.30% stake as on March 2007.

Dollex Industries was locked at the 5% upper circuit of Rs 142.05, after the company said it bagged an order worth $5 million to supply liquor to Africa. The time-frame for the order is 6 months. Once the order is successfully executed, the company plans to enter into a joint venture with this buyer and expects to cross its export target of IMFL up to 1200 containers in this year alone.

Cairn India advanced 4.17% to Rs 143.50 on reports that the government has agreed to company’s proposal to lay a pre-heated 580 kilo metre pipeline at a cost of Rs 2400 crore to transport the crude oil from its Barmer oil fields in Rajasthan to Virangam in Gujarat.

The cost of laying the pipeline is to be shared between Cairn and Oil and Natural Gas Corporation (ONGC) in a 70:30 ratio, the same as the shareholding in the oil field, laying to rest a contentious issue between the government and Cairn. Petroleum Minister Murli Deora is expected to announce the decision shortly, reports suggest.

Esab India declined 2.27% to Rs 449.90 on reports of London based Charter making an open offer for acquiring 20% stake to the shareholders of Esab India at Rs 426 per share. According to Esab India's shareholding pattern as of 31 March 2007, Charter holds 57,43,200 shares amounting to 37.31% in the company through a subsidiary, Esab Holdings. With this offer, Charter's shareholding in Esab India would increase to 57.3%, subject to the regulatory approvals.

Wearology was locked at the 5% upper circuit of Rs 263.15 after foreign fund Merrill Lynch Capital Markets Espana bought 5.7% stake or 2.9 lakh shares in the company in a block deal at Rs 250 per share on BSE on Monday, 25 June 2007.

Britannia Industries slipped 0.86% to Rs 1520, after striking a high of Rs 1594.95, on reports that Groupe Danone, an equal partner in Indian biscuit major Britannia Industries, may sell its 25.5% stake in the company to an outsider.

NIIT spurted 4.70% to Rs 988.10 after it tied up with Intel Corporation to develop a multi-core training curriculum. NIIT, in association with its training partners, will offer the Intel multi-core training curriculum to the software developer community, globally.

Suraj Stainless plunged 5% to Rs 342.70, even after its board recommended a liberal 2:1 bonus. The company made the announcement during trading hours today, 26 June 2007.

Natco Pharma rose 5.45% to Rs 146 after the drug maker said it got US Food and Drug Administration approval to market its ondansetron hydrochloride tablets in the United States. Ondansetron tablets are used to treat nausea and vomiting caused by cancer treatments. The company also stated that it is in process of establishing a retail chain in the US and hopes that the chain would serve a useful purpose in distributing and marketing its approved products there.

Gabriel India galloped 4.76% to Rs 27.55 after the auto parts maker said it plans to close its loss-making plant in Noida, near Delhi. The company made the announcement after market hours on Monday, 25 June 2007.

Asian markets were in the red. Japan’s Nikkei 225 index declined on losses in exporters such as Sony Corp. and Canon Inc., while food stocks such as Ajinomoto Co. edged higher. Nikkei was down 21.37 points at 18,066.11. Taiwan's Taiwan Weighted (down 0.82% at 8,865.75), Singapore's Straits Times (down 1.54% at 3,525.10), Hang Seng (down 0.09% at 21,803.57), South Korea's Seoul Composite (down 0.47% at 1,749.55) all edged lower.

China’s Shanghai Composite gained 0.82% to 3,973.31

All the European markets were trading lower.

US markets gave up a big advance and turned lower yesterday, 25 June 2007, as investors suffered a renewed case of the jitters ahead of the Federal Reserve’s meeting on interest rates later this week. The Dow Jones industrial average fell 8.21 points, or 0.06%, to 13,352.05, after rising more than 100 points earlier in the day. Broader indices also declined. The Standard & Poor's 500 index fell 4.82 points, or 0.32%, to 1,497.74, and the Nasdaq Composite lost 11.88 points, or 0.46%, to 2,577.08.

Volatility is likely to be high on the bourses in the short term ahead of expiry of June 2007 derivatives contracts on Thursday, 28 June 2007. As is the case at the time of expiry of near-month contracts, the extent of rollover to July 2007 contracts from June 2007 contracts will dictate the trend in the near term. A higher rollover indicates that the market players expect bourses to remain firm in the month ahead and vice versa.

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

Crude oil prices reversed early weakness to gain 4 cents to $69.18 today, 26 June 2007, following news that a number of oil companies have reportedly refused Venezuela's terms on major oil projects.

Trading Calls

Buy Godrej Industries with stop loss of Rs 184 for a target of Rs 260
Buy Reliance Petroleum with stop loss of Rs 93 for a target of Rs 140
Buy Valecha Engineering on declines with stop loss of Rs 235 for a short-term target of Rs 270.

Protect your lever

Via Business Standard

Stock market volatility is increasing along with prices. How should you use leverage in such situations?

Every bull run culminates in a peak and is followed by a correction. Bear this in mind, with the stock market close to its all time highs. That final peak may come tomorrow or a year later.

When it arrives, you should be braced for the end of the party. In a market trading close to its historic peak, volatility is high. As and when the trend reverses, momentary panic will lead to additional volatility.

Especially for traders, using borrowed capital and leverage, a trend change may be disastrous. Margin is inevitably raised and most traders are over-exposed and unable to meet margin calls. The broker gets spooked and cuts losing positions off.

Volatility in itself is not dangerous. If you've read the trend right, you make more money in a high-volatility market. Leverage is also neutral – it amplifies both gains and losses. But a combination of high volatility and high leverage is disastrous to the trader on the wrong side of the trend.

Traders avail of leverage in both spot and F&O segments. In spot, leverage comes through funding and day-traders are sometimes offered leverage of up to 10:1. F&Os are naturally leveraged and the leverage on a long option is theoretically infinite.

A note of caution is struck by Manish Bandi, Vice President, Wealth Advisory Services, India Infoline, who says “Global concern over inflation and the expected hike in interest rates globally may result in extremely high volatility in the market. In the present scenario, we do not advise retail investors to leverage in cash markets.”

Other market analysts concur that a degree of overheating is visible. “There has been an excessive build up of positions. Investors are, therefore, advised to cut down positions according to their capacity to handle repercussions in the event of a fall-out.” Dinesh Thakkar, CMD, Angel Broking.

The trader must be disciplined. Don't get greedy, set stop losses, and don't commit more than say, 5 per cent of capital to a given trade. According to Nihar Oza, vice-president, Brics Securities, you should not leverage more than 50 per cent of your own capital.

For example, if your trading capital is Rs 100, then Rs 40 should be assigned for completely-owned positions and Rs 40 for leveraged positions. The remaining Rs 20 should be held in cash as a cushion against mark-to-market differentials.

Here is a description of how margin works in spot and F&O segments. Margin trading and leverage are perhaps easiest explained through an example.

“We allow intra-day margin trading in a large basket of liquid shares and normally allow an exposure of five times (20 per cent margin),” claims Sudip Bandyopadhyay, CEO Reliance Money.

This 5:1 leverage ratio allows disproportionate profits and losses. Take Reliance Industries at its current price of Rs 1728. You buy 500 shares of Reliance (value Rs 864,000) by paying only Rs 172,800 or 20 per cent of contract value.

If the stock price rises 2 per cent, the return is Rs 17,280 or 10 per cent appreciation on Rs 1,72,800. But leverage is double-edged. If the above position sees a 2 per cent price depreciation, that translates into a 10 per cent loss of capital.

Borrowing for delivery, brokers may fund anywhere between 50-80 per cent of a delivery position through affiliate financiers. The cost ranges between 18-22 per cent per annum. At 50 per cent funding, a 1 per cent rise translates into 2 per cent profit, less interest.

When there's a big trend reversal like in the crashes of May 2006 and March 2007, traders with highly leveraged long positions get wiped out. The graph shows, that an investment of Rs 100 in the Sensex in January 2007 would have dropped to Rs 85 during the crash of March 2007. But if you had 4:1 leverage, your losses would have been magnified to Rs 60.

Another important thing to remember is that small stocks mean big risk. Risks are usually higher in mid-caps and small-caps. When two stocks have the same average volatility, the variance of the smaller stock's returns is usually higher.

Smaller stocks fall more than the market index during crashes – they have high betas.

During the crash of May 2006, the BSE Midcap and BSE Smallcap were down 38 and 42 per cent respectively, much more than the Sensex fall of 29 per cent. Importantly, small counters also become illiquid and investors are often left without an exit option.

Apart from trading in the secondary markets, investors borrow money to apply for IPO, intending to sell allotments on listing. Finance companies charge about 18-20 per cent for IPO finance.

IPOs such as Mindtree Consulting, Nitin Fire and MIC Electronics have given massive gains on listing. And a holding period of 3-4 weeks means that an absolute gain of 10 per cent annualises to 120 per cent.

This is tempting but you need a clear understanding of IPO mechanics, over-subscription ratios, etc. Ambreesh Baliga, VP private client group, Karvy Stock Broking opines “I do not think leveraging in primary markets is a good idea when cost of funds is high”.

If there isn't a gain on listing, you're left with a capital loss and an interest payment to service. Higher the subscription to an issue, lower are the allotments. This can mean a high per share cost (after accounting for interest charges) and hence higher is your break-even point. Take two contrasting examples. Nitin Fire offered 75 per cent gain on listing. Mudra Lifestyle lost 30 per cent.

F&O margins: The NSE's F&O margin system relies on the SPAN model. It is like a black box: you plug in contract details and it spits out the required margin.

SPAN margin changes continuously and in addition, there's an exposure margin. SPAN adjusts for spreads and other combined F&O positions. The required margin is usually between 8-25 per cent on a futures position. It's a minimum 7.1 per cent for index futures and 10.5 per cent for stock futures.

On long options, there is no margin since the premium covers maximum loss. Option premiums are generally 1-2 per cent of contract value for close-to-money positions. Out-of-money short options require margins of between 7-15 per cent of contract value. Thus, margin on a short option is often 5 times as high as the premium.

Option leverage is much more variable than futures leverage. Suppose you have paid 1 percent of contract value to buy an option that is struck. The premium may double –even while the position is at break-even.

Futures offer symmetrical gain and loss. Suppose you commit Rs 200,000 to buy a stock and pay Rs 40,000 margin (@ 20 per cent) to take the corresponding short futures hedge. Whether the stock rises or drops, your total portfolio value stays the same. If you take an incomplete hedge (buy Rs 400,000 stock and pay Rs 40,000 @ 20% margin to take a single lot) your loss is halved but so is your profit.

Options offer more versatile hedges because loss-gain is asymmetric. For example, assume a Rs 200,000 stock position and buy a long put 1 per cent from money at 1.5 per cent premium.

Your maximum loss is 2.5 per cent if the stock drops 1 per cent and the premium doesn't rise. If the stock drops over 1 per cent, the option kicks in. On the upside, gains are unlimited once price has moved more than 2.5 per cent up.

Stock options, especially puts are illiquid. To hedge a stock position, in practice you will have to use index options.

This requires 1) computing beta and correlation for the given stock with the Nifty 2) using regression analysis to judge the “fit” of beta 3) taking an appropriate index option position that protects against an adverse move. This is cumbersome and never produces a complete hedge.

Conclusion: While margin and leverage are tempting, they are two-edged swords. Don't go overboard trying to maximise gains because you could end up with larger losses.

Reading F&O warnings

There are several volatility-related signals across F&O and spot markets that can offer advance warning when a market peak is round the corner.

IV signals Implied volatility always spikes when the market is close to a peak and it usually stays high until the crash is over. IV is usually low in a rising market.

In May 2004, as the market crashed, IV jumped from 25 per cent to 70 per cent. From September 2004 to March 2006 as the Nifty smoothly gained 105 per cent, IV stayed between 15-30 per cent. In May 2006, it spiked above 60 per cent as another crash occurred. On historical evidence, any Nifty IV reading of over 30 per cent is a danger signal.

Divergence in HV-IV: During an uptrend, the IV tends to be lower than the HV. Discount to HV is a good sign and a premium to HV appears to be a danger signal.

Stock futures OI: Another useful signal is the open interest in stock futures. A very high stock futures OI is a danger signal. Especially so if it comes in a market with falling volumes. This combination of high OI and low spot volumes is a classic sign of a market top. A stock OI of around Rs 30,000 crore seems to be a danger signal.

Spot Volumes A rising price should always be backed by high volumes that signify there is no easing in demand as price rises. Near a market peak, spot volumes usually decline and start thinning out – this signals that demand is dropping.

Breadth: A market where breadth is strong is a healthy bull market. Near a market peak, trading interest tends to narrow and declining shares start to outnumber advances.

Depth: As prices fluctuate, so do trading volumes. In a market with good depth, a price fluctuation will not lead to an instant loss of volumes. That is, say a given share see a volume of 200,000 at a price of Rs 100. If the volumes remain constant when the shares rise to 110, or if it drops to 90, we have a deep market. Near a market peak, small price changes lead to large volume changes.

F&O Margin Situations

Assume Nifty is at 4250. The market lot is 50. All margin calculations are indicative.

Both Span and EM subject to continuous change.

1) Buy a future or sell a call/put at the money (Nifty 4250).
Contract Value = 212,500 (4250X50)
Margin (Span 8.5%+ EM 3%) =11.5% =Rs 24,438

2) Sell out of money call @ 4300 strike for premium of Rs 22
Premium received = 1100
Contract value (4300+22)X50 = 216,100
Margin Span =(8.5-1)+ EM 3%= 10.5% =22,700
(Span is lower by the percent difference between strike and spot)

3) A bull spread
Buy 4300call for 22 premium =Rs 1100 paid
And sell 4350call for 8.5 premium =425 received
Total premium paid = 675
Short call contract value = 50X (4350+8.5) =217,925
Margin = approx 4% on short call = 8,700

Hot and spicy

Spice Communications appears attractively priced given the prospects of consolidation in the industry.

The Indian telecommunications story is not yet over. Right after Vodafone made its costly debut into India, consolidation bells started ringing in the industry, as there was a buzz over the potential merger of Idea Cellular and Spice Communications.

The merger talks apparently did not succeed, but the target – Spice Communications is now knocking at the bourses to raise about Rs 520 crore from the public.

The initial public offering (IPO) consists of 11.31 crore equity shares of face value Rs 10 each, in a price band of Rs 41-46. The shares on offer will comprise of 16.39 per cent of the company's fully diluted post-issue capital.

Spice Communications is promoted by Modi group chairman B K Modi and has Telekom Malaysia (TM), Malaysia's incumbent service provider as a strategic investor, which holds a 47 per cent stake in the company. Post-issue, TM's holding in the company will come down to 39.2 per cent.

Mobile play
Spice operates in two states, --Punjab and Karnataka. The operator ranks second in Punjab with about 23 per cent market share, next to Bharti, and sixth in Karnataka with nearly seven per cent market share.

The eighth largest GSM operator in the country, it has a subscriber base of nearly three million users.

The company now plans to spread its wings across the country, and has applied for licenses for an additional 21 circles throughout India to provide GSM cellular services.

Further, it is also applying for licenses to provide national long distance (NLD) and international long distance (ILD) services.

The company also plans to leverage synergies from its alliance with TM, such as using TM's vast array of submarine cables spread across South East Asia for its ILD services.

Spice operates in the 900 MHz spectrum in Punjab and Karnataka and has installed 1,358 cell sites throughout Punjab, and 1,019 sites throughout Karnataka, as on March 2007.

Cell sites are physical locations equipped with a base station consisting of transmitters, receivers and other equipment used to communicate through radio channels with subscribers' cellular phone handsets.

"We plan to share this network infrastructure with other operators going forward, which would bring down our operating costs significantly," claims Dilip Modi, chairman and managing director, Spice Communications.

These expansion plans will materialise using a half of the issue proceeds. The remaining 50 per cent of the issue proceeds are earmarked to retire part of its Rs 1,000 crore debt.

The company has been operating with a negative networth since June 2002, rendering it ineligible for listing on the National Stock Exchange.

Town and country
The Indian telecommunications industry has metamorphosed itself into a monster growth sector within just a decade.

The Indian telecommunications network is the fifth largest in the world and the second largest among the emerging economies of Asia, with a subscriber base of 167.4 million in April 2007.

The mobile subscriber base grew by a robust 69 per cent in FY07 over the 96 million subscribers in FY06, a net addition of 66 million subscribers, resulting in an average addition of 5.5 million subscribers per month.

Again, the growth in GSM subscriber base (75 per cent in FY07) is faster than that in CDMA subscribers (52 per cent in FY07), which makes GSM service providers hold nearly 75 per cent of the country's mobile industry pie.

The pie is now getting bigger, as the Department of Telecommunications (DoT) is in the process of receiving bids for the provisioning of passive telecom infrastructure in rural areas, for 81 clusters aggregating about 7,871 cell sites.

The country currently has around ten players in the GSM arena, Bharti Airtel being the largest with around 23 per cent share of the market. Spice holds a distant rank, with hardly 2 per cent market share at the national level.

Even though Spice has been present in the markets since 1997, it is yet to break even. The company has been profitable at the operating level, but not at a net level, which makes it difficult to value the issue offering using the price-earnings multiple approach.

However, comparing the company with its peers applying other ratios, such as the enterprise value to earnings before interest, tax, depreciation and amortisation (EV/EBITDA) and enterprise value to sales (EV/Sales), the Spice issue appears reasonably priced.

On the flipside, the company has been registering slower revenue growth (about 9 per cent y-o-y) compared to its peers (ranging from 35-60 per cent y-o-y). Its operating margins too are on the lower side (around 22 per cent), while the industry average is of about 35-40 per cent.

Spice is optimistic about growth in its operating and net profit margins following network sharing and launch of NLD and ILD services, and reducing finance costs by retiring debt after the issue. It had recently been in the news over its potential merger with Idea Cellular.

Given the prospects of consolidation in the industry, Spice could well become a target of any such move going forward, once it reduces its debt and moves toward profitability. Put it all together, and the issue appears attractive, both in the short and the long term.


Q4 Review: Six key steel pipe manufacturers saw an aggregate 17.5 per cent growth in sales and 37.7 per cent rise in profit in the March 2007 quarter. Profit grew at a faster pace than sales following a decline in input costs. The cost of raw materials rose by 9.6 per cent against 17.5 per cent growth in sales.
Operating profit margins increased by 125 basis points on a y-o-y basis, but were still lower by 45-90 basis points compared with those in the previous three quarters. JSW Steel, the leading pipes manufacturer, reported a robust growth in sales at 33.1 per cent, while net profit rose by around 50 per cent.
Welspun Gujarat’s net profit grew 112 per cent on a modest rise in sales, while Maharashtra Seamless’ top line and bottom line rose over 25 per cent each.
Trigger: The Chinese government has cancelled the export rebates on welded steel pipes and reduced the rebates on seamless steel pipes from the current 13 per cent to 5 per cent, effective from July 1.
With a host of global accreditation, industry leaders such as Jindal Saw, Welspun Gujarat Stahl Rohren, PSL, Maharashtra Seamless and Man Industries are well-equipped to cash in on the opportunity unfolding in the space.
Outlook: According to Alchemy Research, demand for steel pipes is emerging from West Asian markets such as Iran, Iraq, UAE and Qatar and markets in Africa such as Algeria, Libya and Nigeria.
The reason: a boom in the oil and gas transportation infrastructure in these regions. Indian pipe companies are likely to ride the demand growth on account of their cost competitiveness. Domestic demand from oil sector players such as ONGC, Reliance, and GAIL India is estimated at 21,000 kms in five years.



Emkay - IPCA Labs

Emkay - IPCA Labs

Market may exhibit caution

The market is likely to witness cautious trend as major Asian gauges like the Nikkei, the Kospi index and the Jakarta index have declined in current trades and may drag down the indices in early trades. Although the domestic indices moved up in the last couple of sessions, intra-day volatility remains the major concern. Among the local indices, the Nifty may slip to 4222 and 4165 while on the upside it could test 4280 to 4363 level. The Sensex has a likely support at 14400 and could test higher levels at 14600.

US indices closed weak on Monday on worries of hedge funds hitting big losses. While the Dow Jones dropped eight points at 13352, the Nasdaq was down 11 points at 2577.

Indian floats, also, bucked the weak US market trend and ended lower. ICICI Bank and Satyam lost over 2% each, while Patni, Wipro, HDFC Bank, VSNL and Rediff lost around 1% each. Dr Reddy's, MTNL and Tata Motors, however, was the gainers amongst the ADRs and gained by 0.7%, 0.13% & 0.43% respectively.

Global crude oil prices inched up, with the Nymex light crude oil for August series rising by four cents to close at $69.18 per barrel.

Domestic bourses may track weak Asian stocks

The market may remain range bound in absence of any positive trigger in near term. Asain markets were trading lower today, 26 June 2007 and US markets also settled slightly lower on Monday, 25 June 2007.

The 30-share BSE Sensex gained 20.36 points or 0.14% at 14,487.72 on Monday, 25 June 2007 without much movement on either side. It started firm, but later pared gains tracking weak global markets.

Asian markets saw high volatility in opening session today, 26 June 2007, with Japan’s Nikkei 225 index declining on losses in shares of exporters such as Sony Corp. and Canon Inc., while food stocks such as Ajinomoto Co. edged higher. Nikkei was down 56.45 points or 0.31% at 18,031.03. Taiwan's Taiwan Weighted (down 0.44% at 8,900.07), Singapore's Straits Times (down 0.44% at 3,564.57), South Korea's Seoul Composite (down 0.73% at 1,744.95) all edged lower. However, Hong Kong's Hang Seng rose 0.36% at 21,901.61.

US markets gave up a big advance and turned lower yesterday, 25 June 2007, as investors suffered a renewed case of the jitters ahead of the Federal Reserve’s meeting on interest rates later this week. The Dow Jones industrial average fell 8.21 points, or 0.06%, to 13,352.05, after rising more than 100 points earlier in the day. Broader indices also declined. The Standard & Poor's 500 index fell 4.82 points, or 0.32%, to 1,497.74, and the Nasdaq Composite lost 11.88 points, or 0.46%, to 2,577.08.

As per provisional data, FIIs were net buyers to the tune of Rs 19.84 crore in equities, while domestic institutional investors (DIIs) bought shares worth a net Rs 179.23 crore on Monday, 25 June 2007.

Volatility is likely to be high on the bourses in the short term ahead of expiry of June 2007 derivatives contracts on Thursday, 28 June 2007. As is the case at the time of expiry of near-month contracts, the extent of rollover to July 2007 contracts from June 2007 contracts will dictate the trend in the near term. A higher rollover indicates that the market players expect bourses to remain firm in the month ahead and vice versa.

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

Futures & Options Strategy

Nifty futures lose OI to the tune of 8.50% with index closing positive. Market was range bound during today's session and given a strong close on the day's high. Market was moving in a very narrow range of 30 points during whole day. Today's closing has given a sign of strength in the market. At the end, Nifty closes positive and given a close above 4250 levels, which was very important levels for the market. Nifty futures close with a discount of 30 points, which indicates profit booking in the market. The FIIs sold index futures to the tune of Rs. 765 Crs and sold stock futures to the tune of Rs. 235 Crs. The PCR has come up from 1.40 to 1.42 levels, which indicate strength continuing in the market. The volatility has come down from 25.65 to 26.45 levels indicating volatility expected by market participants.

Among the Big guns ONGC loses OI to the tune of 7.00% with prices going up during the day, indicating some strength in the counter and buying at lower levels, however counter has also seen profit booking on higher levels. RELIANCE loses OI to the tune of 7.50% with prices closing positive indicating strength in the counter, However counter witnessed short covering by bears in the counter on higher levels during today's session.

On the TECH front, TCS, INFOSYSTCH, WIPRO & SATYAMCOMP loses OI with decline in price indicating profit booking and liquidation in the counters. Counters have given a weak close that is almost on day's low indicating further weakness in the counters. Counters are not showing any strength during today's session, remain dull, and at last closed negative. From last few trading days, counters are not giving any significant move in either direction, which is due to the appreciation of rupee. Now the market participants are losing there interest in the counters.

On the Metal front, TATASTEEL & SAIL loses OI with decline in price indicating liquidation in the counter. At the end of the counters closed negative. HINDALCO & NATIONALUM loses OI with gain in prices indicating strength in the counter. Counters have witnessed short covering by bears on higher levels and given a strong close during today's session.

In the BANKING arena, SBIN, HDFCBANK & ICICIBANK loses OI with decrease in prices, indicating weakness in the counters. Counters have seen liquidation of long position on higher levels during today's session. BANKBARODA gains OI with rise in price indicating strength in the counter. Counter has given a close almost on the day's high and seen fresh buying on lower levels.

During today's session Nifty futures has seen strong buying on lower levels near 4220 levels and given a close just below the important level of 4250. Overall nifty has strong support around 4250 levels. If nifty given a close below 4200 than we can see fresh short position in the market. One should take hedged positions in the market to minimize the risk.

Technical Note - June 26 2007

Nifty and Sensex have exhibited a bullish candlestick.

Technically, one may use the level of 4220 (Nifty) and 14350 (Sensex) as the stop loss level.

Nifty faces resistance at 4335 and Sensex at 14700.

Nifty Range 4220 to 4280.

BSE Smallcap and BSE Midcap also exhibited bullish candlesticks.

CNX IT has closed negative.

In the Punter's zone we have a Buy in Reliance industries, A.C.C and Kesoram ind.

In the Technical call section, we have a Buy in Rcom, Lupin and ONGC.

Technical Note - June 26 2007

Investsmart - Morning Call

Market Grape Wine :

In House :

Nifty at a support of 4234 & 4220 & 4200 and 4125 levls with resistance at 4263 & 4280 & 4325 levels .

Buy : Intraday : AbanLLoyd above 3010 target 3080 s/l of 2980

Buy : Intraday : MahSeamless above 639.5 targte of 655 s/l of 633.5

Buy : in F&O BOB above 274 target of 283 s/l 270

Buy : in F&O RComm above 528 target 542 s/l of 522

Buy : Bilt & APIL in F&O looks good .

Out House :

Markets at a support of 14242 & 14363 levels with resistance at 14515 & 14567 levels .

Buy : RIL & RelCap

Buy : Adlabs & Educomp

Buy : UTV & EssdEe Alum

Buy : APIL & IbullsReal


Buy : Centextile & AuroPharma

Buy : Greaves & BHEL

Buy : Contrarian call : 3 to 6 months delivery call : TNPL , SesaSahee papaer , BILT & StarPaper

Buy : PunjLLoyd & Moser Baer

Buy : Contrarian call : 3 to 6 months delivery call : Nicco Corp , RPGcable , Univeraslcable & KEI

Dark Horse : SBIN, RIL , IBullsReal , IDBI , Centextile , KotakBank , Icici & Asian

Bullet : KotakBank & Skumar with strict stop loss .

Daily Call - June 26 2007

Daily Call - June 26 2007

Indiainfoline - Intraday Stock Ideas

NIFTY (4259) SUP 4240 RES 4278

BUY Voltas (109) SL 105
target 116, 119

BUY Chennai Petro (274) SL 269 target 282, 825

BUY Gammon India (432) SL 427 target 440, 443

SELL Patni (494) SL 499
target 486, 483

SELL Hexaware (159) SL 164
target 152, 149

Tempting opportunities lie ahead

Be cautious. Opportunity does the knocking for temptation too

The market remains in no man's land with the bulls and bears appearing equally confused. The situation has remained so ever since the Nifty hit a new high earlier this month. The Sensex, which is just a few hundred points away from a new lifetime high has been unable to narrow the gap. The key indices have been trading in a range over the past few weeks and the trend may continue for a while.

Today, we expect another cautious opening, given the weakness across global markets. Having said that there is a likelihood of a short-covering led bounce back ahead of the F&O expiry on Thursday. The markets will also be eyeing the outcome of the Fed meeting on Thursday and the US central bank's take on inflation and rates in the world's largest economy. After that the market may remain choppy and will await the first-quarter results, especially that of the IT companies.

Global markets have also been quite choppy of late as have been the FII inflows. Crude oil prices have gradually inched higher to the $70 per barrel mark. Concerns about inflation and interest rates continue to haunt global markets, though here in India inflation has softened substantially from a two-year high struck in end-January. Still, nobody's sure if the RBI is done with its monetary tightening steps. The quarterly review in July will give us a better idea of where interest rates are heading locally.

FIIs were net buyers to the tune of Rs198.4mn (provisional) in the cash segment yesterday. On the other hand, local institutions pumped in Rs1.79bn. In the F&O segment, FIIs pulled out Rs7.64bn. On Friday, foreign funds were net buyers of Rs782mn in the cash segment. Mutual Funds were net sellers at Rs267mn on the same day.

Jet Airways will be in action as the company announces its results and considers a Rights Issue. SpiceJet will be in the limelight once again amid reports that Jet Airways is interested in picking up a stake in the budget carrier. All aviation related shares will attract attention as a financial daily reports that the government may allow up to 100% FDI in the sector.

SBI is expected to gain after its chairman said that the nationalised bank wants to unlock value by hiving off its asset management and insurance subsidiaries. ICICI Bank will also continue to hog the limelight as it is likely to re-file its application for foreign investment in the proposed new holding company. Bajaj Auto would also be in focus amid reports that sales will pick up from October after the launch of its new entry level bike. The company is also experimenting with a passenger four-wheeler platform along the lines of Tata Motors' one-lakh car.

Tata Motors might face some pressure amid rising competition to its one-tonne cargo vehicle Ace and reports that DaimlerChrysler will start manufacturing commercial vehicles in India. Sesa Goa may also witness some weakness as a business newspaper reports that the government will clamp down on higher iron ore exports.

Reliance Industries, Reliance Energy and RNRL will remain in the spotlight amid the raging controversy over the offtake of gas from the KG Basin and its pricing. Construction companies may gain further ground amid reports that the government may relax norms on portfolio investment in the sector in its upcoming review of the FDI policy.

US shares declined on Monday amid renewed concerns about sub-prime mortgages. Wall Street continued to worry about hedge funds hit by big losses in troubled securities backed by sub-prime mortgages.

Bear Stearns slid to its lowest in nine months after Merrill Lynch analyst Guy Moszkowski said the second-biggest US underwriter of mortgage bonds may have to salvage a second troubled hedge fund that it manages. That fund could have a loan exposure of as much as $7bn, Moszkowski wrote.

The S&P 500 Index fell 4.82, or 0.3%, to 1497.74. Earlier, the gauge rose 0.8%. The Dow average dropped 8.21, or 0.1%, to 13,352.05. The Nasdaq Composite Index declined 11.88, or 0.5%, to 2577.08.

A private report today reinforced concern that the slump in the housing market will worsen. Sales of previously owned homes in the US fell in May to the lowest in almost four years.

US stocks had rallied early in the session after bond yields retreated for a second day. Yields on the benchmark 10-year Treasury note fell 5 basis points, to 5.08%.

The weak housing number helped dispel fears that the Fed would have to start raising interest rates soon, sending stocks higher. The US central bank will begin its two-day rate setting meeting on Wednesday, when policymakers are widely expected to hold an overnight lending rate for banks, at 5.25%.

After falling by more than a dollar earlier in the session, US light crude for August ended 4 cents higher at $69.18 a barrel in New York. In currency trading, the dollar declined against the euro and the yen. COMEX gold for August delivery fell $2.30 to $654.70 an ounce.

European shares ended mostly lower. The pan-European Dow Jones Stoxx 600 index slipped 0.1% to 391.95. The German DAX lost 0.2% to 7,930.61 and the French CAC-40 dropped 0.3% to 6,002.85. The UK's FTSE 100 ended up 0.3% at 6,588.40.

Asian markets are trading mixed. The Nikkei in Tokyo is down 56 points at 18,031 while the Hang Seng in Hong Kong rose 34 points to 21,856. The Kospi in Seoul slipped 8 points to 1748 and the Straits Times in Singapore lost 24 points at 3555.

Volatile session ended on a flat note. Markets opened on a flat note and struggled to find any specific direction throughout the session. The frontline stocks like L&T, R Com, BHEL and ONGC stood firm saving the key indices from slipping in negative terrain. Cement stocks were in focus as heavy weight ACC and Gujarat Ambuja gained by 1% each and Capital Good index was the only strong gainer.

Reliance Petroleum was the top mover among the 50-scrip’s of Nifty as the scrip lifted the index by 4points. Finally, the 30-share Sensex gained 21 points to close at 14488. NSE-50 Nifty was up 8 points to close at 4259.

L&T surged 3% to Rs2174 after the company declared that they would consider special dividend on 3rd July. The scrip touched intra-day high of Rs2198 and a low of Rs2055 and recorded volumes of over 10,00,000 shares on NSE.

BHEL gained by 0.9% to Rs1450 after the company announced that they won Rs1.06bn order. The scrip touched intra-day high of Rs1468 and a low of Rs1430 and recorded volumes of over 8,00,000 shares on NSE.

ONGC marginally gained by 0.8% to Rs917 after the company declared dividend of Rs31 per share for FY07. The scrip touched intra-day high of Rs927 and a low of Rs905 and recorded volumes of over 12,00,000 shares on NSE. Hexaware Tech slipped 0.9% to Rs158 after the company announced that they would offer Enterprise Risk Management. The scrip touched intra-day high of Rs165 and a low of Rs157 and recorded volumes of over 4,00,00 shares on NSE.

IT stocks lost ground on back of selling pressure. Satyam Computer slipped by 1.6% to Rs454, Infosys was down 0.8%t o Rs1936 and Wipro edged lower 0.4% to Rs515. Rolta, Moser-Baer and Mphasis BFL were the major losers among the Mid-Cap stocks.

Pharma stocks looked in bad health. Zydus Cadila dropped by 3.6% to Rs373. The company announced that they have acquired Brazil’s Nikkho Pharma, Cipla was down 2.7% to Rs204, Wockhardt Pharma edged lower by 0.7% to Rs393. However, Ranbaxy gained by 0.2% to Rs356 after the company announced that hey have launched Pravastatin Sodium 80mg tablets in USA.

Capital God stocks held firm in a dull market led by gains in the heavy weight L&T as the scrip surged by over 3% to Rs2174, Siemens spurred by over 3.5% to Rs1359, BHEL advanced by 0.9% to Rs1450 and Punj Lloyd added 0.6% to Rs260.

Results Today:

Ansal Housing, Apollo Hospitals, FDC, Gitanjali Gems, Godawari Power, Himatsingka Seide, Jet airways, NALCO and Rama Newsprint & Papers.

Major Bulk Deals:

SREI Infra has sold Diana Tea; Citigroup has sold Gayatri Projects; Lotus Global has sold IKF Tech; UTI Bank has sold Kernex Micro; HDFC MF has sold Netflier Finco; Citigroup and Merrill Lynch have picked up NIIT; Master Trust Bank Of Japan has purchased Sadbhav Engineering; Goldman Sachs has bought Vakranjee Software and Merrill Lynch has purchased Wearology.

Insider Trades:

Mahindra Gesco Developers Limited: ICICI Prudential Mutual Fund along with Prudential Asset Management Singapore Limited & Prudential Asset Management Hong Kong Limited has acquired in open market 74488 equity shares of Mahindra Gesco Developers Limited on 15th June, 2007.

Advanta India Limited: (1) Morgan Stanley & Co. International Limited a/c Morgan Stanley Mauritius Co. Ltd. (2) Morgan Stanley & Co. International Limited A/C Morgan Stanley Investment Mauritius Ltd. has purchased from open market
159000 equity shares of Advanta India Limited on 20th June, 2007

Lower Circuit:

Aarti Industries, GV Films, IKF Technology and Max India.

Upper Circuit:

Tripex Overseas, Ruby Mills, Marg Construction, Country Club, Flawless Diamond, Yashraj Securities, Bag Films, Heritage Foods, GMR Industries, Hindustan Oil Exploration, PBA Infrastructure, Inox Leisure, Godrej Industries, Goldiam International and Crisil.

Delivery Delight (Rising Price & Rising Delivery):

Alstom Projects, BILT, Bank of Baroda, BHEL, Bharti Airtel, GDL, Gujarat Ambuja, HDFC, India Cements, MTNL, NIIT, Prism Cement, Reliance Capital, UTI Bank and Voltas.

Abnormal Delivery:

Mahindra Gesco, Sterlite Optical, Moser Baer, Financial Technologies, Jagran Prakashan, Rajesh Exports, Mcleod Russel and Jyoti Structures.

Major News & Announcement:

ONGC Q4 profit at Rs26.82bn (down 13%) and revenues at Rs145.76bn (up 16%)

L&T to consider special dividend on 3rd July

GE Shipping Board to meet on June 26 to consider share sale to founders

Cadila pays about $26mn for Brazil's Nikkho

BHEL wins order worth Rs1.06bn

BEML Q4 profit at Rs935.1mn (up 8.66%), revenues at Rs9.58bn (up 14.4%)

BEML sets public issue price band of Rs1020-1090

Cholamandalam DBS to raise Rs2bn selling securities

Man Industries bags Export orders for pipes

Market Outlook - June 26 2007

Market Outlook - June 26 2007

Sharekhan Investor's Eye June 25, 2007

Tourism Finance Corporation of India
Cluster: Cannonball
Recommendation: Buy
Price target: Rs30
Current market price: Rs17.1

Riding on improved prospects for tourism sector

Key points

  • To benefit from the positive outlook on tourism sector: Tourism Finance Corporation of India's (TFCI) deteriorating financial performance and increasing NPAs were a direct consequence of the downturn in the tourism sector in the late 1990s. However, the positive outlook for the tourism sector going forward would significantly benefit TFCI in terms of higher loan growth.
  • Substantial improvement in asset quality: TFCI has significantly improved its asset quality. Its net NPAs, which were high at 11% in FY2004, were at 2.6% in FY2006 and are expected to fall further in FY2007. Higher recoveries and lower incremental NPAs have helped reduce the level of its NPAs.
  • Possible foray into private equity space to boost future earnings: TFCI is also reported to be in talks with major private hotel chains, real estate funds and private equity players to raise private equity to finance large hotel projects. This will enable TFCI to generate a fee income, and increase its ability to co-invest and lend.
  • Dividend payment now possible: Due to its high NPAs, TFCI was not permitted by the RBI to pay dividends in FY2005 and FY2006. TFCI had paid a dividend of Rs0.7 per share in FY2004. If it resumes dividend payment at the earlier historical rate, the dividend yield would work out to 4%, which could provide a margin of safety for the stock.
  • Stock could trade at Rs30: TFCI had a reported book value of Rs27 per share in FY2006. The stock is trading at 0.6x trailing book and is cheaper than most other financial stocks. At our target price/book value of 0.8x for FY2009, the price target for the stock works out to Rs30 per share. We believe that the valuation at 0.8x is reasonable given that the company has never made losses, its NPAs have turned around and its loan growth is expected to be strong with the improving prospects of the hotel and tourism industry. We therefore recommend a Buy on TFCI with a price target of Rs30.



Alphageo India
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs395
Current market price: Rs370

Price target revised to Rs395

Result highlights

  • Alphageo India has reported a 56.7% growth in its revenues to Rs29.5 crore for the fourth quarter ended March 2007. This is in line with our estimate of Rs29 crore.
  • The operating profit margin declined by 5.3% to 44.5% during the quarter, largely due to the incremental cost related to the third 3D crew. The crew became operational only in the latter part of Q4FY2007 but the staff cost for the same was reflected in the entire quarter.
  • The net profit grew by 41% to Rs6 crore which is marginally higher than our estimate of Rs5.9 crore.
  • On the full year basis, the revenue and earnings have grown by 127.5% to Rs54.3 crore and 80.2% to Rs7.5 crore respectively.
  • Along with the results, the board has approved a dividend of 15% (or Rs1.5 per share) for the existing shareholders.
  • The company had a pending order book of Rs110 crore as of end March 2007. The order book is executable over the next five quarters and provides a strong visibility for the revenue growth in FY2008. Accordingly, we have revised upwards our estimates for FY2008. At the current market price the stock trades at 11.2x FY2008 estimated earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs395 (12x FY2008 estimated earnings).

Hindustan Unilever
Cluster: Apple Green
Recommendation: Buy
Price target: Rs280
Current market price: Rs188

To prune margins at stockists
According to media reports, Hindustan Unilever Ltd (HUL) is expected to prune the margins of the stockists with an intention to bring in efficiencies. It is still not clear to what extent the company would bring down the margins though. Till now, the company had allowed its stockists to keep a little less than 5% as margins. The other fast moving consumer goods companies in the business like Amul pay their dealers margins in the region of 3%

Sharekhan Investor's Eye June 25, 2007