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Thursday, June 28, 2007
Mumbai has 40% of terminals: D&B
The first-ever comprehensive research on Indian equity broking houses has shown that Mumbai has the maximum number (40 percent) of trading terminals in the country.
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) top 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,” he added.
It was found that 52 per cent of the 200 brokerages that participated in the survey – it constituted more than 90 per cent of the total broking outfits in India – are based in western India, followed by the north (25 per cent), the south (13 per cent) and the east (10 per cent).
In terms of cities, Mumbai (40 per cent) has the maximum number of trading terminals, followed by Delhi (12 per cent), Ahmedabad (8 per cent), Kolkota (7 per cent), Chennai (4 per cent) and remaining cities (29 per cent).
Another interesting result of the survey is that 25 per cent of the brokerages wanted to go public by coming out with an initial public offering (IPO) while another 40 per cent 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 per cent stake in Geojit Financial Services, Citigroup Venture took controlling stake in Sharekhan and Standard Chartered Bank bought 49 per cent stake in UTI Securities.
Bandi Ram Prasad, consultant, D&B Information Services India, said 68 per cent 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 that brokerages expand through the branch network in the north while they use the sub-broking route to extend their network in south India. Not surprisingly, 40 per cent of the branches of brokerages are based in north India while 55 per cent of sub-brokers are based in south India.
In terms of different segments of business, the D&B survey found that 27 per cent of the brokerage outfits concentrate only in the cash market, whereas 35 per cent are into cash and derivatives. Almost 20 per cent of the firms trade in the cash, derivatives and commodities market.
Analysts corner
Punj Lloyd
Current price: Rs 263
Target: Rs 296
Date: June 19
Alchemy has a put a buy on Punj Lloyd with a target of Rs 296. The key investment rationale is the global capex in the energy and infrastructure sectors especially from the Gulf Cooperation Council states which are flush with cash.
Punj Lloyd’s revenues are expected to register 46 per cent FY07-09E growing from Rs 51 bn in FY07 to Rs 108 bn in FY09E, primarily driven by strong order inflows after the acquisition of SEC and Simon Carves.
The acquisitions have also helped the company become main contractor for new complex jobs in large projects like the pipeline project in Libya. Its EBIDTA margin (excluding other income) is expected to improve from 7.3% in FY07 to 9.1% in FY09E.
Network 18 Fincap
Current price: Rs 499
Target: Rs 651
Date: June 20
Sharekhan recommends a buy on Network 18 which runs business channels CNBC-TV18 and Awaaz and general news channels CNN-IBN and IBN 7.
With the digitalisation of cable and advent of DTH platform, the subscription revenues would substantially boost the profitability of the group.
Web properties such as moneycontrol.com, poweryourtrade.com and yatra.com among others, covering the news, e-transaction, travel, recruitment, shopping and e-ticketing genres will also add tremendous value, feels the research firm.
To tap into the opportunities the company has built up a cash pile which include Rs 200 crorethrough a QIP and proposes to raise a similar amount through a rights issue of partly convertible preferential shares.
Jet Airways
Current price: Rs 812
Target: Rs 998
Date: June 19
ICICI Securities has put a buy on Jet Airways with a target of Rs 998. The research firm has revised Jet Airways’ earnings upwards, on the back of a lower cost structure for US routes and alignment of ATF prices corresponding to crude price of $68-70/Bbl. The improving load factor trend is also likely to boost international earnings on the back of increasing product acceptance.
Further, with the culmination of two mega consolidations in the domestic circuit, the sector will witness the return of pricing power, says the equity research company.
On EV/sales multiple and greater chances of an early turnaround, we find Jet’s acquisition of Air Sahara (now JetLite) relatively cheaper as compared to Kingfisher’s (KF) valuation of Air Deccan (AD). Together with JetLite, it values Jet Airways at Rs 998 representing about 22% upside to the CMP.
IPCA Laboratories Ltd
Current price : RS 695
Target: RS 800
Date: June 20
Kotak Securities has given a buy call on IPCA Laboratories with a target of Rs 800. The research firm’s optimism on the stock is a result of the USFDA approval for hydroxychloroquine sulfate tablets (200 mg strength) with annual sales of $50 mn in the US.
The company's marketing partner Ranbaxy Pharmaceuticals Inc, US will commercialise this product in the US market utilising its marketing expertise and distribution network.
After this approval, the company now has three products for marketing under the company's alliance with Ranbaxy after Furosemide and Atenolol tablets. Ipca is one of the largest producers of API hydroxychloroquine sulfate in the world and holds its DMFs in various countries.
Sharon Biomedicine
Current price: Rs 257
Target: Rs 375
Date: June 18
Antique Stockbroking has put a buy on Sharon Biomedicine, a manufacturer of API and intermediates.
By backward integrating and providing a complete package of product development from raw materials to the final formulations, Sharon is filing DMF’s, building up its R&D facility and designing expansions as per USFDA norms.
All this would help it be an integrated pharmaceutical company in a scenario favouring CRAMS businesses. The change from a bulk drug manufacturer to a high end formulation provider is helping push up its margins.
ONGC
Current price: 912
Target: Rs 1025
Date: June 19
CLSA has put a buy on ONGC with a price target of Rs 1025. The impending 16% legacy gas price increase for ONGC from Q2FY08 is a mixed bag, feels the research firm.
While it positively impacts earnings, it also delays gas price deregulation till FY10 diluting the value of this embedded option. The price target has factored in higher gas price (positive), stronger rupee (negative), stronger crude (positive) and higher and longer subsidy sharing (negative).
The resultant effects cancel each other in FY08-09CL but will be positive if the rupee depreciates or the subsidy sharing for FY08 reverts back to the norm.
Indian Hotels
Current price: Rs 143
Target: Rs 187
Date: June 20
Citigroup Research has recommended the Indian Hotels stock on the back of strong results and growth prospects with a target of Rs 187. Standalone Q4FY07 revenues and net profit grew 42% and 71% respectively YoY, while FY07 consolidated revenues grew 37% YoY and net profit grew 49% YoY.
Though the numbers were strong they were below expectations due to a higher interest and depreciation cost on account of amalgamation of five subsidiaries/associate companies and acquisition of Taj Boston in Q4FY07 and lower-than-expected consolidated margins because of higher than anticipated proportion of revenues from overseas properties.
While the EBITDA margins increased 640 bps YoY, on a consolidated basis FY07 EBITDA margins expanded 80 bps YoY. Growth in revenue and profit was supported by strong occupancies of 73% and a healthy 28% increase in ARRs for FY07.
The company plans to add five hotels to its portfolio in FY08 – two new hotels at Bangalore (ITPL) and Chennai (Mount Road) and three management contracts for hotels in Vijayawada, Trivandrum and Langkawi (Malaysia).
In addition, the company plans to increase the number of 'Ginger' hotels to 30 by March 2009, up from eight at present.
In India, metal gold wins out over paper
India, the world's top gold consumer, has barely scratched the surface for exchange traded funds (ETFs) and it will be a long haul to tempt buyers clinging to jewellery to switch to rules-ridden paper gold.
Though the country consumes 800 tonnes a year -- nearly a fifth of the world's annual gold supply -- in jewellery and physical metal, the funds have attracted investments of less than five tonnes since their listings three months ago.
In contrast, an ETF launched in the United States in 2004 attracted investment equal to eight tonnes of gold on the first day and more than 100 tonnes in about a week. Global gold funds now collectively hold more gold than the Chinese central bank, the world's tenth-largest holder with 600 tonnes.
Analysts said bad timing and rigid government rules were equally to blame for not winning over more Indian investors.
"It has been launched at the wrong time when gold prices have started dipping. People are sitting with surplus cash, but the volatility has kept investors away," said Mumbai-based Gnanasekhar Thiagarajan, director of Commtrendz Risk Management.
"Vibrant equity markets have also kept investors away from gold exchange traded funds (ETFs)," he said.
The Bombay Stock Exchange's main index surged 47 percent in 2006 and another five percent this year. Gold rose 24 percent in 2006 but is only up 1.6 percent so far this year.
Spot gold prices fell to a three-month low of $638.90 an ounce on Wednesday and were at $645.75/646.35 by 1003 GMT. That compares with gold's 11-month high of $696.30 in April and a 26-year peak of $730 in May last year.
Analysts said investment in Indian gold ETFs was a sure bet, provided investors were willing to hang on for a longer period and shed their desire to buy it physically. The interest was being stymied by lack of aggressive marketing.
"The awareness of this type of investment vehicle is still low. Also, if the ETFs have to reach the rural public, the account opening procedures and documents should be kept simple," said S.I. Kannan, analyst with Kotak Commodities.
Mandatory requirements for an income tax identification number made the system difficult for illiterate farmers who buy gold. Rules that prevent commodity firms from giving price guidance were also hampering growth, analysts said.
COMPLICATED STRUCTURE
Analysts said that other issues such as restricting trading in ETFs to Indian stock trading hours prevented investors from taking guidance from global price trends, especially from gold futures in the United States.
Stuart Thomas, managing director of U.S.-based World Gold Trust Service, said the poor response was also a result of the structure of the Indian products.
"With the market size of India, with growth in India, with the affinity for gold, I would call those products sub-optimal," said Thomas, who heads the firm that has launched StreetTRACKS gold ETF , which accounts for 75 percent of gold accumulated by global ETFs.
"It's really a structural issue more than anything else. I think with the right product in that market with the right structure, you have got the massive offtake there," he said.
Analysts said the design of the products -- only in local currency, controls on imports and exports of gold bars, limitations on the foreign exchange trade and several rules imposed by the equities market regulator -- scared investors.
"What has prevented us from really doing something in India is that the current regulations are not favourable for us to roll out our products the way we think they should be," said Pierre Lassonde, chairman of industry-funded World Gold Council, which has sponsored and promoted several gold ETFs in the world.
"It doesn't give the buyer the protection, it doesn't give the buyer the fungibility that we have in other products."
Only about a dozen authorised banks and government trading houses are allowed to import and sell gold in India. Shipments of gold bars are banned, but gold jewellery can be exported.
SPONSORS HOPEFUL
But promoters of Indian ETFs, UTI Asset Management and Benchmark Asset Management, remain optimistic following a pick up in trading, though volumes were still small.
"We have about 10 kg of gold, or 10,000 units being traded every day on the exchange," said Swati Kulkarni, vice-president of UTI Asset Management. "In May, 5,000 units were being traded. In two years, I would think it will be a popular product."
Rajan, Mehta, managing director of Benchmark, which launched the first gold ETF in March, said its growth had been steady.
"It is a cultural shift and it takes time."
Via Reuters
Indian millionaires can wipe out fiscal deficit
India can easily get rid of its entire fiscal deficit estimated at about $33 billion, if over one lakh millionaires in the country decide to give away at least one-third from the huge wealth accumulated by them.
According to the World Wealth Report released by global investment banking giant Merrill Lynch and consultancy major Capgemini, the number of individuals with at least one million dollars in net assets has increased to 1,00,015 in India.
This puts their collective wealth at a minimum of $100 billion. Interestingly, this is nearly three times India's fiscal deficit, which was put at about Rs 1,51,000 crore ($33 billion) in this fiscal's union budget announced by Finance Minister P Chidambaram in February.
The fiscal deficit stands at 3.3 per cent of the GDP, which touched one trillion dollars in the revised estimates released in May this year.
The wealth report cited the country's strong economic growth and gains in stock markets as the key reasons for the 20.5 per cent rise in millionaire population in 2006. This was second only after 21.2 per cent growth in Singapore.
The possibility of Indian millionaires helping wipe out the fiscal deficit may be far-fetched, but rich people in Asia-Pacific region lead the chart of region when it comes to contribution to philanthropic causes.
As many as 26 per cent millionaires in Asia-Pacific pledged some amount for charitable purposes, as against 13-14 per cent in North America and 6-7 per cent in Europe and Middle-East. Globally, 11 per cent of the rich people devoted more than 7 per cent of their wealth for philanthropic causes.
Fuel Price Hike Coming Soon
A rebound in global oil prices to 10-month highs may force India into another small yet unpopular fuel price increase next month, dousing any lingering talk of the full-scale liberalisation that refiners yearn for.
The Congress party-led government, more wary than ever of its fragile voter base, has trimmed gasoline and diesel prices twice in the past 12 months, rolling back much of the increase of 2-4 rupees in June 2006, when Indian crude was around $67 a barrel.
But with the Indian crude basket nearing $69 this week, and inflation easing to its lowest in over a year, pressure has built within the industry for a rise that could revive shares of hard-hit state-run refiners such as Indian Oil Corp (IOC) and put a mild dampener on resurgent oil demand growth. "Inflation is under control and oil companies are losing money, it's the right time to increase prices," said Jaspreet Singh at brokerage Prabhudas Lilladhar Pvt Ltd.
Annual wholesale price inflation eased last week to 4.28 per cent, its lowest in 14 months, helping soften political resistance. "Perhaps a decision can be taken in July when first-quarter results for the companies will be out," said Singh.
India, like top Asian oil consumer China, sells fuels such as diesel and gasoline at artificially low prices. It partly compensates state-run refiners with special bonds to cover the mounting cost of crude, totalling nearly $6 billion last year.
The projected revenue loss this fiscal year would come to over $12 billion if global markets remained at current prices and retail prices are not raised, the petroleum ministry estimates.
Since the start of 2003, global crude prices have risen by 150 percent while Indian fuel prices have climbed by only 50-68 percent, with the government reluctant to eliminate subsidies for fear of worsening inflation and sparking public unrest.
The government's need for populist measures was underscored by elections in India's most populous state of Uttar Pradesh in May, when a party championing the lowest castes scored a surprise victory and the ruling party lost ground.
"Politically people do not accept the idea that commercial entities set the price. In India it is not possible," one key minister in the government told media.
While the incremental approach to fuel prices may keep its billion-plus citizens happy, it does little to curb the country's rising domestic oil thirst, which grew 5.9 per cent in the last financial year, increasing its uncomfortable reliance on imports.
Other countries that have taken bolder measures have met with more success in helping rein in consumption. Motor fuel demand from Thailand and Indonesia slumped after the former liberalised diesel prices and the latter roughly doubled prices in 2005.
But India's smaller measures, like those in China and Vietnam, have failed to pack much of a punch. "When prices go up marginally there is no change in consumption, but when prices go up significantly, people will start figuring out ways and means of conserving," said Amrit Pandurangi, executive director at PricewaterHouseCoopers.
Political will was tested earlier this year, when petroleum ministry officials prepared an internal note to allow state-run oil companies to set their own prices of petrol and diesel before the end of the fiscal year next March, sources told media.
But this was shot down before reaching the cabinet as the world's biggest democracy treads more cautiously than fast-growing Communist Vietnam, which effectively turned over control of domestic pump prices to retailers in May.
The government appears equally unwilling to cut back on taxes that are unusually high for Asia, making up about 52 per cent of petrol prices and 31 percent of diesel prices. "The pressure is there for it, even if total liberalisation still remains some way off," said Bishal Thapa, analyst at ICF Consulting in New Delhi.
"There's a population that needs to be taken care of - change is not going to be supersonic." Liberalisation would attract renewed interest from global majors in investing in refineries or retail networks, as India seeks to become a fuel export hub to tap its shipping position between Middle Eastern producers and North Asian consumers.
Royal Dutch Shell has a license for 2,000 fuel stations, yet it has set up just 32 fuel stations. BP walked away from a $3 billion joint venture refinery with Hindustan Petroleum Corp Ltd (HPCL) last year, while Total has yet to finalise a deal to help build an up to $3 billion new plant with the same company.
Liberalisation would also help private retailers such as Reliance Industries Ltd and Essar Oil, who have lost market share. "Providing a level playing field will increase the number of players in the Indian retailing sector, bringing in competition, better efficiency and subsequently more cost reduction," said V Raghuraman, of the Confederation of Indian Industries.
Jyothy Labs files papers for IPO
Jyothy Labaratories, the makers of Ujala fabric whitener and Maxo mosquito repellent coils, has filed its draft red herring prospectus (DRHP) with the Securities & Exchange Board of India (Sebi) for an initial public offering (IPO).
The company is planning to sell 44,30,260 equity shares of Rs 5 each that is being divested by investors including Canzone, South Asia Regional Fund, CDC Investment Holdings ICICI Bank Canada and ICICI Bank UK PLC.
The offer will constitute 30.52% of the post-issue capital of the company.
Kotak Mahindra Capital Company and Enam Financial Consultants are the lead managers to the offer.
Buoyancy in overseas markets keeps Sensex firm
The market held firm above the 14450 level for almost the entire trading session as strong US and Asian markets created a perfect platform for investors. After registering a loss of 70 points yesterday, the market resumed with a positive gap of 67 points at 14498. The Sensex remained firm thereafter but within a range. The sustained buying in cement, capital goods and consumer durable stocks saw the Sensex touch the day's high of 14537 by the afternoon. But, some profit booking towards the close dragged the Sensex to its day's low of 14435, up four points over its previous close. However, late buying in index pivotal stocks lifted the Sensex to end the session with a gain of 74 points at 14505, while the Nifty closed its session by adding 18 points at 4282.
The breadth of the market was positive. Of the 2,651 stocks that traded on the BSE, 1,445 stocks advanced, 1,139 stocks declined and 67 stocks ended unchanged. Among the sectoral indices, the BSE CD index moved up by 0.73% followed by the BSE CG index (up 0.70%) and the BSE Bankex (up 0.44%). However, the BSE Auto index, the BSE HC index, the BSE IT index, the BSE Metal index, the BSE Oil & Gas index and the BSE Teck index closed in negative territory.
Among the index heavyweights, cement majors registered solid gains ACC flared up by 8.33% at Rs899, Gujarat Ambuja Cement spurted 7.43% at Rs125, Grasim scaled up 4.82% at Rs2,624, while HDFC soared 5.02% at Rs1,958, SBI advanced 1.60% at Rs1,470, Ranbaxy moved up by 1.52% at Rs348 and Wipro added 1.04% at Rs515. However, Bajaj Auto tumbled 1.75% at Rs2,094, ONGC slipped 1.62% at Rs906 and Cipla fell 1.14% at Rs203.
Over 4.71 crore Meghmani Organics shares changed hands on the BSE followed by IFCI (2.53 crore shares), Reliance Natural Resources (1.33 crore shares), IKF Technologies (1.03 crore shares) and Reliance Petroleum (77.47 lakh shares).
IFCI was the most actively traded counter on the BSE and registered a turnover of Rs137 crore followed by Meghmani Organics (Rs132 crore), Reliance Industries (Rs110 crore), SBI (Rs108 crore) and Orbit Organic (Rs131 crore).
Sensex settles above 14,500 as cement shares rally
The market settled with modest gains as buying continued throughout the day. The market swung sharply for a while in late trading ahead of the expiry of derivatives contracts for June 2007 series. Rollover from Nifty June 2007 series to Nifty July 2007 stood at 48.29% till Wednesday, 27 June 2007. BSE Consumer Durables and BSE Mid-Cap indices struck all time highs today. Shares from cement, sugar and banking sector were in demand, while auto and metal stocks attracted selling.
Sensex rose 73.51 points or 0.51% at 14,504.57. It opened higher at 14,498.05, and surged to strike a high of 14,537.04 at 09:57 IST on higher global markets. The index slipped to a low of 14,435.24 at 14:39 IST.
The S&P CNX Nifty rose 18.05 points or 0.42% at 4,282. Nifty July 2007 futures settled at 4250, a discount of 30 points compared to spot closing of 4,282. The NSE F&O turnover spurted due to expiry of June 2007 contracts. Turnover surged to Rs 60499.6 crore as against Rs 56258.84 crore on Wednesday, 27 June 2007.
The total turnover on BSE amounted to Rs 4,682 crore compared to Rs 4,844 crore on Wednesday, 27 June 2007.
The market breadth was strong on BSE with 1,482 shares advancing as compared to 1,164 that declined, while 65 remained unchanged.
Mid-cap shares, buzzing with activity since the past few days, extended gains today, 28 June 2007, as buying continued. The BSE Mid-Cap index struck an all time high of 6,487.01 in intra-day trade, and settled with gain of 33 points or 0.53% to at 6,458. The BSE Small-Cap index rose 48.26 points or 0.6% to 7,662.10
Among the Sensex constituents, 16 advanced while the rest declined.
Shares from the cement pack rallied, on renewed buying after Finance Minister P Chidambaram told a television news channel, after market hours, on Wednesday, 27 June 2007, that there was no freeze on cement price and the government has not tried to control cement prices. He also said that the prices had gone up by a few rupees in south India.
Cement major ACC surged 9.06% to Rs 905, on 8.88 lakh shares. It was the top gainer from the Sensex pack. 3 out of top 4 gainers from the Sensex were cement pivotals. Ambuja Cements (up 7.43% to Rs 125.10), and Grasim (up 4.51% to Rs 2615.75) surged.
Housing Development Finance Corporation (HDFC) jumped 5.44% to Rs 1966 after it received Rs 445 crore for its stake sale in BPO firm Intelenet to Blackstone, which has resulted in a total capital gain of Rs 381 crore on its BPO venture. At its 30th annual general meeting (AGM) held on Wednesday, 27 June 2007, HDFC chairman Deepak Parekh said interest rates had peaked and he expected them to remain stable for some time.
Pharma major Ranbaxy Laboratories advanced 1.82% to Rs 349. Ranbaxy Pharmaceuticals Inc (RPI), its wholly-owned subsidiary, has launched Pravastatin Sodium 80 mili gram tablets in the US. Pravastatin is indicated for the primary prevention of coronary events as in hypercholesterolemic patients without clinically-evident coronary disease.
State-run banking major State Bank of India (SBI) rose 1.64% to Rs 1471 on reports that it is planning to launch a private equity fund with a corpus of $1 billion (Rs 4,100 crore). ICICI Bank rose 0.55% to Rs 943.50. The BSE Bankex was up 0.44% at 7,786.72.
State run oil exploration major Oil & Natural Gas Corporation (ONGC) lost 1.98% to Rs 903, on 3.48 lakh shares. It was the top loser from the Sensex pack. As per reports, Brazilian oil company Petro Brasileiro (Petrobras) has agreed to pick up a 30% stake in one of ONGC’s discovered gas blocks in the Krishna Godavari basin. The company, which is among the largest deepwater oil producers in the world, will now jointly operate the block, KG-DWN-98/2, with ONGC.
Aluminum and copper major Hindaco Industries saw high volatility today, swinging in a range of Rs 164 –Rs 171.25. It settled 1.18% lower at Rs 168, on 48.93 lakh shares.
The BSE Metal Index lost 0.48% to 10,634.50. Jindal Steel (down 0.99% to Rs 3375.15), Sterlite Industries (down 0.86% to Rs 580), and Tata Steel (down 0.47% to Rs 593.45), edged lower.
Auto stocks were weak with the BSE Auto Index declining 0.68% to 4,714.18. It was the top loser among the sectoral indices on BSE. Bajaj Auto (down 1.70% to Rs 2095), Tata Motors (down 1.18% to Rs 664) and Maruti Udyog (down 0.37% to Rs 749) declined. Bajaj Auto went ex-dividend today, for a dividend of Rs 40 per share on face value of Rs 10.
IT major Infosys slipped 0.78% to Rs 1921.10 after it today, 28 June 2007, announced that it will declare its Q1 June 2007 results on 11 July 2007.
NTPC gained 0.57% to Rs 151.05 on reports it has made its debut into power equipment manufacturing. Recently, NTPC signed business collaboration and shareholders’ agreement with TELK of Kerala for synergy in the field of manufacturing and repair of high voltage power transformers and associated equipment.
Index heavyweight Reliance Industries (RIL) lost 0.44% to Rs 1,690.25 on 6.42 lakh shares.
Shares from the sugar sector were in demand on renewed buying interest after the Finance Minister told a TV channel that more sops will be given to the sugar sector if required. Bajaj Hindusthan (up 2.10% to Rs 156.10), Sakthi Sugars (up 3.06% to Rs 80.75), Balrampur Chini Mills (up 2.12% to Rs 67.40) and Shree Renuka Sugars (up 1.20% to Rs 597) advanced.
The BSE Consumer Durables (CD) index struck an all-time high of 4,274.12 today, 28 June 2007. It settled 0.73% higher to 4,247.26, and was the top gainer among the sectoral indices on BSE. Titan Industries (up 0.83% to Rs 1,340.25), Lloyd Electric (up 10% to Rs 176.80), and Rajesh Exports (up 0.71% to Rs 529.60) were among the gainers from the BSE CD index.
Debutant Meghmani Organics settled with 40.26% premium at Rs 26.26 over its IPO price of Rs 19 per share. The scrip touched a high of Rs 34 and a low of Rs 26.15 during the day. On BSE, 4.71 crore shares were traded in the scrip. The company had priced its IPO at the top end of the Rs 17 - Rs 19 price band. Meghmani Organics has its presence in pigments and agrochemicals, and offers a range of products catering to a diversified customer base.
Austin Engineering (up 20% to Rs 120.70), Batliboi (up 17.36% to Rs 134.90), India Cements (up 10.78% to Rs 206.50), Ceat (up 10% to Rs 162.30), Forbes Gokak (up 8.35% to Rs 490) and UltraTech Cement Company (up 8.33% to Rs 905) were some of the top performers from the small- and mid-cap pack.
Reliance Petroleum gained 2.29% to Rs 111.45, extending its recent rally. The scrip touched a high of Rs 112.70 today, 28 June 2007, which is a record high for the scrip.
Kesoram Industries jumped 8.10% to Rs 438 on media reports that chairman Basant Kumar Birla has decided to give the diversified firm to his grandson Kumar Mangalam Birla, who heads the Aditya Birla group.
A block deal of 3.15 lakh shares was executed in Container Corporation of India counter at Rs 2,325 per share in opening trade. The stocks was down 1.23% to Rs 2320.
Subhash Projects & Marketing vaulted 5% to Rs 232.55 after it announced its board meet on 30 June 2007 to consider raising up to Rs 300 crore through a preferential issue of equity shares.
Nirma lost 2.30% to Rs 188.85 on reporting a massive net loss of Rs 93.45 crore in Q4 March 2007 as against a net profit of Rs 95.17 crore in Q4 March 2006. Sales jumped 31.74% to Rs 636.49 crore (Rs 483.15 crore in Q4 March 2006). Net profit declined 55.09% to Rs 108.41 crore in the year ended March 2007 (FY 2007) as against Rs 241.38 crore in FY 2006. Sales rose 16.96% to Rs 2244.28 crore (Rs 1918.80 crore). The results were announced during market hours today 28 June 2007.
Numeric Power Systems surged 4.52% at Rs 460. It reported 43.50% fall in net profit in Q4 March 2007 to Rs 2.91 crore as against Rs 5.15 crore in Q4 March 2006. Sales rose 38.46% to Rs 90.08 crore in Q4 March 2007 as against Rs 65.06 crore in Q4 March 2006. Net profit rose 9.17% to Rs 18.81 crore in the year ended March 2007 (FY 2007) as against Rs 17.23 crore in FY 2006. Sales jumped 31.65% to Rs 295.70 crore (Rs 224.61 crore). The results were announced after market hours on Wednesday, 27 June 2007
Asian Paints was down 0.05% to Rs 830.05 after a block deal of 6.51 lakh shares was struck on the counter on BSE at Rs 815 per share in opening trade.
Ashapura Minechem slumped 4.56% to Rs 364 despite recommendation of 1:1 bonus issue. The company made the bonus announcement after the market on Wednesday 27 June 2007. The current equity of the company is 7.82 crore with 3.91 crore outstanding shares of a face value of Rs 2.
Asian markets were trading strong today, 28 June 2007. Hong Kong’s Hang Seng index surged 1.07% at 21,938.22 while Japan's Nikkei gained 0.46% at 17,932.27. Taiwan's Taiwan Weighted (up 0.55% at 8,829.23), Singaopre’s Straits Times (up 0.93% at 3,538.23) and South Korea's Seoul Composite (up 1.08% at 1,751.75), also logged gains.
However, China’s Shanghai Composite slumped 4.03% to 3,914.20
All the European markets were trading with gains, except Spain’s Madrid General which was down 0.40%.
US stocks rose on Wednesday, 27 June 2007 as investors snapped up beaten-down shares after a three-day slide and a nearly 2% jump in oil prices boosted demand for energy companies' shares.
The Dow Jones industrial average was up 90.07 points, or 0.68%, at 13,427.73. The Standard & Poor's 500 Index was up 13.45 points, or 0.90%, at 1,506.34. The Nasdaq Composite Index was up 31.19 points, or 1.21%, at 2,605.35.
Oil prices edged higher in Asian trading Thursday, 28 June 2007, following a US government report that showed an unexpected fall in gasoline stocks amid peak summer driving season demand. Light, sweet crude for August 2007 delivery gained 11 cents to $69.08 a barrel in electronic trading on the New York Mercantile Exchange in Singapore. Brent crude contract for August delivery rose a cent to $70.56 a barrel on the ICE Futures exchange in London.
Yen Carry Trade again...
These are early signals how a choppy overseas market could cast a shadow on the Sensex in the coming days. And it may not be good news for the bulls, at least in the short-term. Yen — the currency in which international investors borrow to buy stocks across the world — is behaving strangely and this could trigger something what all markets fear: the unwinding of “yen carry trades”.
It can act on the markets like a double-edged sword: If yen rises against the dollar (which it has), investors find their borrowing cost go up (since they have to pay more yen to pay the interest on yen loans); this makes the investments less attractive and many are forced to unwind. In other words, they sell stocks to repay the yen loan. Such selling pressures unnerve the markets and the ripples touch emerging markets like India.
Interestingly, it can happen even when yen falls against the US dollar. “If yen keeps depreciating against dollar, people who have entered into carry trades at higher levels get a chance to book greater profits. Thus, the falling yen pushes such players towards booking profits,” said ICICI Bank chief economist Samiran Chakraborty.
The Japanese currency has fallen to 123.34 a dollar from 121.83 in the last month. However, it rose to a 3-month high on Wednesday. In the past couple of weeks, there has already been slight unwinding of “yen carry trade”, amid weakening of yen against dollar; this has fuelled a growing belief that yen’s downside could be limited hereon. (More so, given the widely shared perception that Bank of Japan will hike rate at least once this year). While the current liquidation has had no major impact on global equity markets, including India so far, some analysts are not ruling out such a possibility.
For years investors have taken advantage of the near-zero interest rate in Japan by borrowing yen, converting them into dollars or pounds and investing in higher-yielding assets including overseas equities.
Investors are already jittery about comments by Japan’s finance minister, indirectly warning against excess carry trades, and dropping hints at concern about the yen’s fall. In a note to investors, US-based Forex Capital Markets’ chief currency strategist, Kathy Lien said, “Comments from Japanese officials suggest that they may be facing increased pressure from overseas authorities to stem the slide in the yen. Now that yen weakness has taken off against the US dollar as well, the Japanese may be feeling the pressure from Washington.”
Industry officials expect yen carry trade to continue even if BoJ hikes rate because of the relatively higher returns in other markets. Kotak Mahindra Bank treasurer Mohan Shenoi said, “In my view, huge global liquidity will continue to support asset prices and hence yen carry trades will continue with marginal unwinding once in a way on issues such as the recent problems with sub-prime credits.”
Trading Calls
Buy AIA Engineering with stop loss of Rs 1580 for a target of Rs 2050
Buy Suzlon Energy with stop loss of Rs 1380 for a target of Rs 1630/2100
Buy Idea Cellular with stop loss below Rs 117 for targets of Rs 123.50 and 127. This is a day trading recommendation.
Buy J K Lakshmi Cement with stop loss of Rs 113 for a short-term target of Rs 140.
Avoid big-ticket trades for now
| The markets opened on a shaky note and ended with widespread losses on the back of weak overseas cues. Traded volumes were subdued compared with the previous session. |
| The market breadth was marginally negative as the BSE & NSE combined advance decline ratio was at 1700 : 1968. |
| The capitalisation of the breadth too was weak as the combined exchange figures were Rs 7000 crore : Rs 6817 crore. The derivatives data for the previous session indicated a 1.79 per cent increase in net long positions as the bulls continued to ramp up longs ahead of the June expiry. |
| The indices have closed at the lower end of the intraday band and lower traded volumes are indicating a truncated retail participation. The 4255 critical support advocated yesterday held as the Nifty bounced exactly from that juncture. |
| That validates our price retracement / extension counts and enables a extrapolation of an intraday band of 4288 / 4240 on advances and declines respectively for Thursday. |
| A breakout / breakdown beyond these parameters is likely to be an indicator of near-term trends. Expiry days are largely anti-climatic in nature as a majority of rollovers / squaring up is completed in the previous session itself. Watch the traded volumes and open interest for signs of commitment of traders. |
| The outlook for Thursday is that of guarded optimism as global cues will play a bigger part than the domestic triggers as the expiry session will be largely governed by demand supply forces. |
| I maintain my view that big-ticket trades should be avoided for now. Medium / long term players may initiate long positions in Reliance Petroleum as the charts have witnessed a breakout. |
US Market reverses course and closes higher
Financial, Technology and Energy sectors help stocks rally at close
US Market overcame early weakness today, Wednesday, 27 June 2007 and stocks rallied after good earnings report from Oracle and higher crude prices lifted Technology and Energy stocks respectively. Investors kept aside subprime concerns and hedge fund worries. A weak durable goods report also helped bond yields close lower.
All three indices snapped a three-day losing streak and closed near their best levels of the day. Of the other nine sectors closing higher, Energy was the only other than Financial to sport a gain of more than 1%.
Twenty six out of 30 Dow stocks closed in the green today. The Dow Jones Industrials reversed its way from a 78 point loss to close higher by 90 points at 13427. Tech heavy Nasdaq gained 31.2 points to close at 2605 while S&P 500 closed higher by 13.4 points at 1506.
Exxon Mobil, Intel, 3M and Microsoft were the main Dow winners today. Caterpillar was a notable laggard.
The financials sector today got a new lease of life after Bear Stearns made a number of moves to convince investors that its problems in some of its hedge funds are under control. Bear Stearns jumped 2.8% today to $143.31. The firm's Private Equity Fund today defended its financial strength saying it has confronted many storms in its 80-year history.
The Commerce Department reported that orders for durable goods fell 2.8% in May, the first decline in four months. Market had been expecting a 1% drop. Orders for durable goods rose a revised 1.1% in April.
Brokerage stocks get a good push as CEOs speak
When market opened in the morning, stocks opened lower across the board. Of the eight economic sectors losing ground, Materials paced the way with a 1.3% decline, due largely to a nearly 3% plunge in Monsanto ahead of its Q3 earnings report tomorrow morning. Dow was down by as much as 90 points at one point.
An afternoon rally in Financials helped the indices reverse their course. Higher oil prices helped it further. Brokerage stocks were a bright spot today following several upbeat remarks from company executives. Merrill Lynch CEO sees "well contained" risk from subprime fallout and Goldman Sachs CEO said private equity hasn't peaked.
Oracle shares today gained 2.8%. The company quarterly earnings before special items beat expectations, as did its revenue. The profit was 23% higher on y-o-y basis. Nike shares gained 8.3%. The company's fourth-quarter earnings were in line with analysts' expectations, while revenue was a bit above forecast.
Merck shares today gained 2.5% after the pharmaceutical giant said that its HIV drug, Isentress, was granted a priority review status by the Food and Drug Administration.
Another round of M&A activity also offered some assurance to investors. CommScope is reported to pay about $2.6 bln for Andrew Corp while Guitar Center agreed to go private for $2.1 bln.
Traders will focus on interest rates for tomorrow
Crude oil futures witnessed a rally today, Wednesday, 27 June 2007, as the weekly inventory report by Energy Department showed that gasoline inventory and distillate supplies registered an unexpected fall for the week ended 22. Crude stockpiles rose for the week, as expected. But gasoline stock fell despite an increase in refinery activity.
For the day ending Wednesday, 27 June, 2007 crude-oil futures for light sweet crude for August delivery closed at $68.97/barrel (higher by $1.2/barrel or 1.8%) on the New York Mercantile Exchange. Futures touched $67.07. Prices are up 4% from a year ago.
As per today’s weekly inventory report, Motor gasoline supplies unexpectedly declined by 700,000 barrels in the latest week, 22 June, to stand at 202.6 million. They are 5.5% below the year-ago level. Crude-oil supplies rose 1.56 million barrels to 350.9 million barrels last week.
Trading volumes showed 1.7 billion shares exchanging hands on the New York Stock Exchange and 2.0 billion trading on the Nasdaq stock market.
A final read on Q1 GDP and Initial Claims will hit the wires tomorrow at 8:30 ET. As policy makers wrap up a two-day FOMC meeting, interest rates will be on the minds of investors tomorrow. On the earnings front, reports from Monsanto, Research in Motion and Solectron are expected.
Derivatives expiry may cause high volatility
The market is expected to swing sharply today, 28 June 2007, as derivatives contracts for June 2007 series expire today. Rollover from Nifty June 2007 series to Nifty July 2007 stood at 48.29%, till Wednesday, 27 June 2007.
The BSE 30-share Sensex lost 70.02 points or 0.48% at 14,431.06, on Wednesday, 27 June 2007.
Asian markets were trading strong today, 28 June 2007. Hong Kong’s Hang Seng index surged 1.18% at 21,962.51 while Japan's Nikkei gained 0.52% at 17,942.43. Taiwan's Taiwan Weighted (up 0.26% at 8,867.23), Singaopre’s Straits Times (up 0.64% at 3,527.99) and South Korea's Seoul Composite (up 0.62% at 1,743.92), also logged gains.
US stocks rose on Wednesday, 27 June 2007 as investors snapped up beaten-down shares after a three-day slide and a nearly 2% jump in oil prices boosted demand for energy companies' shares.
The Dow Jones industrial average was up 90.07 points, or 0.68%, at 13,427.73. The Standard & Poor's 500 Index was up 13.45 points, or 0.90%, at 1,506.34. The Nasdaq Composite Index was up 31.19 points, or 1.21%, at 2,605.35.
As per provisional data, FIIs were net sellers of equities to the tune of Rs 567.33-crore while domestic institutional investors (DIIs) bought shares worth a net Rs 244.10 crore on Wednesday, 27 June 2007
Market may witness pull-back
After losing 70 points in the last session the market is likely to head northwards on firm Asian indices, which are up around 1% in morning trades. Also today being the last day of derivatives expiry for the June series, investors winding up their position may help the sentiment remain bullish. Among the domestic indices, the Nifty could test higher levels of 4300 and may dip to 4220 on the downside. The Sensex has a likely support at 14300 and may face resistance at 14600.
A late session push by the tech sector helped the US indices end their three-day losing streak, even amid concerns about the manufacturing sector and higher oil prices. While the Dow Jones flared up by 90 points at 13427, the Nasdaq moved up by 31 points at 2,605.
Crude oil prices edged higher, the US light crude oil for August delivery moved up by $1.20 at $68.97 a barrel.
Daily Technical Analysis Note - June 28 2007
Nifty and Sensex have exhibited a bearish candlestick.
Technically, one may use the level of 4235 (Nifty) and 14350 (Sensex) as the stop loss level.
Nifty faces resistance at 4380 and Sensex at 14800.
BSE Smallcap and BSE Midcap also exhibited bullish candlesticks.
CNX IT has gained ground.
In the Punter's zone we have a Buy in Infosys Tech , IVRCL Infra & Punj Lloyd.
In the Technical call section, we have a Buy in Grasim Industries , Hcl - Tech & Satyam Computers.
Daily Technical Analysis Note - June 28 2007
Investsmart - Morning Call
Market Grape Wine :
In House :
Nifty at a support of 4205 and 4300 levels on the resistance side .
Buy : Jp above 703 target 723 s/l 695
Buy : Sterlite above 588 target 605 s/l of 583
Buy : Arrowwebtex s/l of 225 target 325 medium term delvery call .
Out House :
Markets at a support of 14325 & 14352 levels with resistance at 14563 & 14616 levels .
Today F&O Expiry Nifty might try 4320 levels .
Buy : RIL & RelCap
Buy : Titan & IBulls
Buy : GMRinfra & ENIL
Buy : Centurytex & Kesoram
Buy : IDBI & IFCI
Buy : LUPIN & AuroPharma
Buy : SBIN & KotakBank bullet
Dark Horse : IFCI , IBullsReal , IDBI , Centextile , IBulls , GMRInfra , ENIL , Titan & Siemens
Bullet : Bharti & Wipro & Skumar with strict stop loss .
Indiainfoline - Intraday Stock Ideas
NIFTY (4264) S 4238 R 4289
Buy Kesoram Inds (406) SL 401 Target 415, 418
Buy Aurobindo Pharma (783) SL 777 Target 793, 796
Buy Wipro (510) SL 505 Target 518, 522
Sell SCI (188) SL 192 Target 180, 178
Sell UTI Bank (590) SL 595 Target 581, 577
Morning Call - Words speak louder than action
"The 10 Commandments contain 297 words. The Bill of Rights is stated in 463 words. Lincoln's Gettysburg Address contains 266 words. A federal directive to regulate the price of cabbage contains 26,911 words.”
Investors will have to keep a close watch on two key events - the F&O expiry today and the outcome of the Fed policy meeting. It's only words that matter for the time being as far as the Fed is concerned as status quo is likely to be maintained on the interest rate front. Beyond these events, the next big impetus will come from the earnings announcements. IT stocks movement will particularly hinge on the results and the guidance for the rest of the year. In the meantime, software shares will be at the mercy of the daily trend in the forex market.
Local market has managed to hold its own amid a slew of worries, like the sub-prime mortgages in the US, higher oil prices, a slowdown in FII inflows and big-ticket issues of DLF and ICICI Bank. But, there may be some cooling going ahead. The timing of an imminent correction and its intensity is something no one can accurately predict.
We expect a strong opening on the back of strength across global markets. As a result, we may see some more short-covering from the bears. Having said that, the intra-day gyrations are here to stay and so is the stock specific action. Given that the Sensex is about 300 points away from a new lifetime high, we would advocate some caution. Fresh purchases should be avoided for the day and use spikes to exit shaky positions.
FIIs were net sellers to the tune of Rs5.67bn (provisional) in the cash segment yesterday while local institutions pumped in Rs2.44bn. In the F&O segment, foreign funds were net sellers at Rs6.91bn. On Tuesday, FIIs offloaded stocks worth Rs2.99bn in the cash segment.
Among the stocks, Kesoram will rise after BK Birla said it will hand over the reigns of this diversified company to his grandson Kumar Mangalam Birla. Maruti may gain amid reports of export orders from a few ASEAN markets. Cambridge Solutions is likely to feel some pressure as a financial daily says that HCL Tech and Carlyle have decided against bidding for the BPO firm. Adlabs will attract attention as reports say CEO Manmohan Shetty will retire next year.
Tyre companies should advance as rubber prices have dropped sharply this year. Sugar companies may build on yesterday's gains as Finance Minister has indicated that the government may announce some more sops for the beleaguered industry. Nicco Corp may continue its rally amid reports that ADAG is likely to pick up a stake in the cable manufacturer. BSEL Infrastructure is also expected to be in action as it announces its results and is likely to go for a private placement to fund future projects.
Dabur India, Godrej Consumer and Emami will be in the limelight. A financial daily says that Dabur India has dropped the plan to acquire Unza while its other two peers may have entered the race for the takeover of the Malaysian FMCG firm. Panacea Biotec might rise amid reports that it is likely to launch seven anti-cancer drugs.
Shares of Meghmani Organics will get listed on the bourses today. The issue price was fixed at Rs19 per share. The premium heard on the street is to the tune of Rs15-20. Meghmani's competitor Asahi Songwon might just see some action as it has come out with its results for the fourth quarter and the full year. Indiabulls may gain as a business newspaper says NTC will develop 100 acres of mill land in Mumbai.
US stocks posted its first advance in four days on the back of a rally in energy shares while the technology sector benefited from the better-than-expected earnings of Oracle.
Exxon Mobil, Intel and Microsoft helped lift the S&P 500 Index to its biggest gain in two weeks. Oracle jumped the most in three months after saying sales may grow 21%.
A rebound in financial shares aided the rise after the CEO of Merrill Lynch and Goldman Sachs said they see little risks in credit markets from the sub-prime mortgages. Results from Nike also improved the sentiment on earnings growth.
The S&P 500 added 13.45, or 0.9%, to 1506.34. The Dow Jones Industrial Average surged 90.07, or 0.7%, to 13,427.73. The Nasdaq Composite Index increased 31.19, or 1.2%, to 2605.35.
Crude oil for August delivery rose 1.8% to $68.97 a barrel in New York after an Energy Department report showed an unexpected decline in US gasoline inventories last week.
Treasury prices were lower, raising the yield on the benchmark 10-year note to 5.09% from 5.08% late on Tuesday. In currency trading, the dollar moved higher versus the euro and eased against the yen. COMEX gold for August fell 50 cents to $644.80 an ounce.
European shares lost ground. The pan-European Dow Jones Stoxx 600 index declined 0.4 to 387.98. The UK's FTSE 100 closed down 0.5% at 6,527.60, the German DAX lost 0.8% at 7,801.23 and the French CAC-40 slipped 0.2% to 5,941.76.
In the emerging markets, the Bovespa in Brazil rose 0.5% to 54,143 while the IPC index in Mexico gained 0.2% to 30,804 and the RTS index in Russia dived 1.2% to 1875.
Asian stocks are all up sharply this morning after crude oil prices advanced and the yen weakened. Woodside Petroleum, Australia's second-largest oil explorer, gained for the first time in six days. Honda rose by the most in almost three weeks, leading gains among Japanese exporters.
Energy shares posted the biggest gains on the Morgan Stanley Capital International Asia-Pacific Index. The benchmark index climbed 0.4% to 151.50 at 10:25 a.m. in Tokyo, after sliding 1.2% yesterday to its lowest since June 14.
Japan's Nikkei 225 Stock Average added 0.4% to 17,915.86, halting a four-day, 2.1% drop. Australia's S&P/ASX 200 Index jumped 1%, the region's biggest advance, while the Hang Seng in Hong Kong was up 293 points at 21,999. Other markets open for trading advanced.
Markets ended in red ahead of the F&O expiry as bulls lost ground towards the fag end of the session. The Asian and European markets also were in the negative terrain dampening the sentiments of investors. Further selling pressure in the heavy weights like ONGC, BHEL and Tata Steel dragged the key indices to close lower. The BSE Metal, Bank and Auto index was the major losers, however, the Mid-Cap and the small cap index managed to close in positive terrain.
Reliance Communication was the major laggard as it dragged the benchmark index Sensex by 12.1 points. Finally, the 30-share Sensex slipped 70 points to close at 14431. NSE-50 Nifty was down 21 points to close at 4263.
Tata Power spurred nearly by 2% to Rs644 after the company announced that they may buy ships to transport coal to India. The scrip touched intra-day high of Rs660 and a low of Rs623 and recorded volumes of over 7,00,000 shares on NSE.
Petron Engineering slipped by 0.9% to Rs186 after Kazstroy Services made an offer to buy the company’s Stake at Rs180 per share. The scrip touched intra-day high of Rs195 and a low of Rs185 and recorded volumes of over 23,000 shares on NSE.
IKF Technology advanced by 3% to Rs7.8 after the company announced that it has entered into JV with Salampuria Agrotech for biofuel activity. The scrip touched intra-day high of Rs8 and a low of Rs7.59 and recorded volumes of over 82,00,000 shares on BSE.
MICO dropped by over 4.5% to Rs4485. The company's German parent hiked the open offer price to Rs4600 per share from Rs4000 earlier. The scrip touched intra-day high of Rs4500 and a low of Rs4300 and recorded volumes of over 71,000 shares on NSE.
IFCI surged by over 3.5% to Rs51 as RBI allowed overseas investors to resume purchases in the stock. The scrip touched intra-day high of Rs58 and a low of Rs50 and recorded volumes of over 5,00,00,000 shares on NSE.
Metal stocks lost their shine led by fall in SAIL as the scrip was down by 2.6%t o Rs130, Tata Steel slipped 2% to Rs592, Hindustan Zinc slipped 2.6% to Rs705 and JSW Steel edged lower by 0.5% to Rs605.
Banking stocks were on the receiving end led by fall in the index heavy weight like SBI slipped by 0.7% to Rs1447, ICICI Bank lost by 0.9% to Rs938 and HDFC Bank edged lower by 0.5% to Rs1094. Bank of Baroda, OBC and Corp Bank were the major gainers among the Mid-Cap stocks.
Pharma stocks also were in bad health. Cadila plunged by over 4% to Rs379, Sun Pharma declined 2.2% to Rs1014, Ranbaxy dropped 1.3% to Rs342 and Cipla slipped 0.7% to Rs205.
Technology stocks gained momentum towards the end as the Indian rupee weakened to Rs41 per against Dollar. Satyam Computer surged by 2.6% to Rs468, Infosys was up by 0.7% to Rs1935 and Wipro added 0.3% to Rs509.
Results Today:
Blue Bird, BSEL Infrastructure, Cranes Software, Dish TV, Dredging Corp, EL Forge, Jain Studio, KRBL, Lok Housing, Moschip Semiconductor, Mount Everest Mineral, Navneet, Nilkamal, Pfizer, Phoenix Mills, Pritish Nandy, Radha Madhav Corp, Tourism Finance Corporation, TVS Motor, Unity Infra and Zee News.
Major Bulk Deals:
Principal PNB Asset Mgmt has bought Zenith Infotech; PRB Secs has sold Nelcast; Religare has purchased ADF Foods; Sundaram BNP Paribas MF has picked up La Opal.
Insider Trades:
Rolta India Ltd: 1) Morgan Stanley & Co. International Limited a/c Morgan Stanley Dean Witter Mauritius Co. Ltd. 2) Morgan Stanley & Co. International Limited A/C Morgan Stanley Investment Mauritius Ltd. has purchased from open market 2,000,000 equity shares of Rolta India Ltd on 20th June, 2007.
Rico Auto Industries Ltd: Reliance Long Term Equity, Reliance Tax Saver (ELSS) Fund & Reliance Regular Savings Scheme - Schemes of Reliance Mutual Fund has purchased from open market 1,076,000 equity shares of Rico Auto Industries Ltd on 22nd June, 2007.
Lower Circuit:
Tulip IT, Triton Corp and Hindo SPG
Upper Circuit:
Deep Industries, GMR Industries, Teledata Informatics, GVK Power, 3MIndia, Lanco Global, MLL, Ansal Housing, Bank of Rajastan, Orbit Corp and BF Utilities.
Delivery Delight (Rising Price & Rising Delivery):
Aditya Birla Nuvo, Alstom Ltd, Amtek Auto, Bank Of Maharashtra, Bongaigaon Refinery, Hero Honda, Hindustan Lever, HT Media, IOC, Jet Airways, Mahindra Gesco, Mercator Lines, Prism Cement and Rico Auto.
Abnormal Delivery:
Reliance Capital, Arvind Mills, Gammon India, Sterlite Industries, Torrent Pharma, INOX Leisure, Bharati Shipyard, PNB and Sun TV.
Major News & Announcement:
Ashapura Minechem announces 1:1 bonus
Nilkamal to acquire material handling business of two companies for Rs250mn
TCS & IFS in pact for Asset Service, Management
Chidambaram sees Indian Growth around 9% this year
Sun TV starts FM Radio Station inn Bhubaneshwar
MSK Projects secures Rs231.2mn order
Tata Power completes acquisition of 30% stake in Coal Companies owned by PT Bumi Resources
IKF Tech enters into JV with Salampuria Agrotech for biofuel activity
Indiabulls Real Estate to raise $200mn selling securities
Kazstroy Services makes offer to buy Petron Engineering Stake at Rs180
J&K Bank to sell about $150mn shares overseas.
Real Estate Bubble - Interest Strong in Asia Property market
It’s a decade since an asset bubble fed the Asian economic crisis and fears swirl over the US housing market and interest rates, but investors still believe the only way for Asia’s soaring property markets is up—at least for a couple of years.
Asian economies are booming, and property is once again the hot subject of dinner conversations from Tokyo to Mumbai, fuelled by cheap credit, cross-border investment and rising incomes.
Policy makers fear a boom-and-bust cycle, where rising real estate prices fuel inflation and force interest rates higher, leaving households and companies loaded with debt and dragging on economic activity.
But at the Reuters Real Estate Summit this week in Singapore, where some residents are seeing their rents jump 50% overnight, property executives effused about India, despite a doubling in urban land prices since foreign property investment was ushered in two years ago.
Japan also appears to be still hugely popular, although average Tokyo office prices have leapt 25% in the last two years.
And investors believe government cooling measures will bring order to China’s market, while failing to stem a hunger for homes among the expanding and increasingly affluent middle class.
Justin Chiu, executive director of Hong Kong property giant Cheung Kong (Holdings) Ltd, said the prospect of ever higher prices was driving Asia’s notoriously sentiment-driven markets. “If there are no bubbles, you don’t drink beer. It’s just plain water and there’s no incentive to invest,” he said. “Of course, if you see too many bubbles, you stop pouring.”
Cheung Kong expects mainland China to account for a third of its property earnings by 2010 from about 18% now.
The Asian continent saw some $94 billion (Rs4.32 trillion then) of property investment in 2006, up 43% on the previous year, but barely one- seventh of the global total. And investors show no sign they will stop the flow.
Morgan Stanley said last week it had earmarked for 60% of a new $8 billion fund for Asia and The Goldman Sachs Group, Inc. has raised about the same amount in a couple of funds, according to a person familiar with the matter.
ING Real Estate is raising two $1 billion funds for Asia, and private equity (PE) firm Blackstone Group is raising $10 billion to spend globally.
But some market watchers wonder where all the money will be spent, and if rising values will curb investment returns. Asian commercial property is tightly held by families and private companies, so Peter Barge, Asia chief executive of property consultants Jones Lang LaSalle, believes many investors will have to take on risky development projects.
“There’s a lot of money on the books, but people are scratching their heads about what to do with it,” Barge said.
Japan is a perennial favourite in Asia because its $1.27 trillion of investment-grade property offers huge choice. Kurt Roeloffs, Asia head for Deutsche Bank’s property unit RREEF, put it at the top of his list followed by China, India.
RREEF, one of the world’s biggest property fund managers, plans to spend around 30% of its future PE funds in Asia, said Roeloffs. “Office is still interesting in Japan, rental growth should continue to be strong because the supply rate is low,” he said.
“We also like retail. We’ve done some and we’ll do more.”
China is drawing Hong Kong developers such as Cheung Kong as well as funds run by ING Real Estate, AETOS Capital and Invesco.
But the new flavours of the month are India and Vietnam that both rank among the most opaque property markets in the world, but promise internal rates of return of 25-30%.
Forecasts that Indian property prices have surged too fast and could drop anywhere between 10% to 40% are brushed aside on the grounds that an outsourcing boom is enrichening a middle class couped up in crumbling homes built decades ago. “India has huge potential,” said Seek Ngee Huat, head of GIC Real Estate. An investment company of the Singapore government and one of the world’s top property investors, the Government of Singapore Investment Corporation Pte Ltd. (GIC) is eyeing developing markets, including Russia and Turkey, while cautious about London offices because of steep price rises.
Barge at Jones Lang LaSalle believes Asia has at least two or three years more to run on the upward swing of its property cycle, saying: “Mother gravity is always there.”
Derek Cheung, Asia executive director at fund manager Cohen and Steers believes
Asia lagged the global property rebound from around 1996 by about five years, so is nowhere near a peak. “We’re now in a similar situation to 1994-1995, before the Asian crisis, with economic growth strong,” Cheung said. “In three or four years from now I don’t know, but now we’re not at a dangerous level.”
With the Chinese and Indian economies growing at around 9% annually, and Japan tentatively emerging from more than a decade of stagnation, the main risks now appear to stem from the US.
GIC Real Estate’s Seek was wary that defaults on US subprime mortgages could infect the whole financial system. “There are certainly financial risks being built up,” he said.
Meanwhile, Liew Mun Leong, CEO of Southeast Asia’s biggest developer, CapitaLand Ltd, which is launching funds for China and India this year, acknowledged that property investors may not have the best crystal balls. “It’s funny, but we in the property industry can always predict when the market will turn up, but we can never say when it will turn down,” he said.
Via Mint
Rakesh Jhunjhunwala - Huge Sucess of Public Offers worrying
Big Bull Rakesh Jhunjhunwala is raising concerns about the short-term direction of the Indian stock market.
Addressing an audience of about 200 brokers here on Tuesday, Jhunjhunwala said, “I am circumspect and rather careful about the market for the next six months.”
He says he is concerned about the way Indian initial public offerings (IPOs) are getting huge subscriptions not only in India, but globally.
Jhunjhunwala was talking at the launch of India’s Leading Equity Broking Houses 2007, a publication of Dun & Bradstreet, a business information providing firm.
The recently concluded domestic follow-on offer of ICICI Bank Ltd attracted close to Rs1 trillion against an issue size of about Rs9,000 crore.
In mid-June, New Delhi-based realty firm DLF Ltd’s Rs9,500 crore IPO was subscribed three-and-a-half times. Dozens more IPOs, including those in real estate, are on the cards.
In early 2005, when India’s benchmark stock market index Sensex was hovering around 6,000 point levels, Jhunjhunwala surprised investors by predicting that it will go up to 25,000 by 2009. Two years since that prediction, the benchmark index has been hovering around 14,500 levels. It reached its lifetime high of 14,723.88 on 9 February.
Over the past month, the 30-stock Sensex has risen marginally from 14,397 points to close at 14,43.06 on Wednesday. The broad-based 50-stock S&P CNX Nifty has risen from 4,256 levels to 4,263 during this time.
Despite being cautious in the near-term, Jhunjhunwala’s speech had its usual bullish undertone as well.
“It’s not that the market is going to fall from a cliff tomorrow. After an year from now, we will once again enter a long-term bull phase.”
Jhunjhunwala, who runs Rare Enterprises, an investment firm here, says he’s surprised that many investors who come to him tend to focus on the negative aspect of the Indian growth story.
Ramesh Damani, a member of the Bombay Stock Exchange and a well-known markets commentator, is also worried about the money being thrown in the recent IPOs.
“I think it’s time to get scared,” he said. “After four years of strong double-digit returns, we are likely to see consolidation in this year. Sensex could be seen in the range of 12,500-15,000,” he added.
However, Damani still thinks that there are stocks available at great valuations and investors just need to focus on picking individual stocks instead of chasing the market movements.
Manish Chokhani, director and CEO, Enam Securities Ltd, foresees the market entering into a consolidation phase in the next six months.
“In last two weeks, three Indian companies have raised around $9 billion from domestic and global markets,” he noted. “This shows the huge appetite of investors for Indian papers. But the secondary markets still haven’t taken off in a big way.”
However, not all market pundits who have huge investor followers are bearish in the near term.
For instance, Raamdeo Agrawal, managing director, Motilal Oswal Securities, is comfortable with the current state of markets and he doesn’tsee any dangers in the nearfuture. “There is a clear distinction between performers and non-performers,” he said.
“Sectors which have not performed well have been decimated or severely punished by investors. But the ones which have performed well have been more than adequately rewarded,” Agrawal added.
Bharat Earth Movers FPO Analysis
Bharat Earth Movers (BEML), a public sector undertaking under the ministry of defence, is a leading player in the construction and mining equipment industry in the country. The government of India (GoI) holds a 61% stake. This is slated to come down to 54% after the present issue. The company’s heavy earthmoving equipment is deployed in core sectors such as mining, road, and construction. Further, it has a captive steel-foundry subsidiary at Tarikere. Moreover, BEML also manufactures and supplies heavy-duty trucks and aggregates for defence, and rail and metro rail coaches for the railways.
The mining & construction equipment business is BEML’s largest business with a 63% share of the total revenue of the company in fiscal ended March 2006. Defence supplies and railway products account for 32% and 5% of its revenue, respectively. About 65% of the business stems from the government and government agencies such as the Indian Army through the Department of Defence Production of GoI, Coal India, and Indian Railways.
With a lion’s share of about 70% market share for earthmoving equipment in the domestic market, BEML has start augmenting its product basket with strategic technical tie-ups and getting into business such as contract mining through joint ventures. The company is also eyeing a bigger pie in the emerging markets for supplies to mass urban transportation and rail logistics. To garner a share in the international markets, the company has formed a joint venture (JV) with Companhia Comercio E Construcoes, a Brazilian company, to manufacture and supply rail wagons and bogies and mining and construction equipment in Brazil.
BEML is coming out with a follow-on public issue to raise Rs 499.80 crore to Rs 534.10 crore to part finance expansion, modernise existing plants and fund voluntary retirement scheme (VRS) expenditure. The company is currently expanding the capacity of its metro coach manufacturing facility at Bangalore from 150 coaches per annum to 190 coaches per annum at a cost of Rs 214.51 crore and setting up a 5-MW wind mill for captive consumption at a cost of Rs 27 crore. Moreover, the company also envisages a capital expenditure of Rs 90 crore for upgradation of current facilities. The VRS scheme aims at pruning the staff strength by 1,125 at an estimated cost of about Rs 90 crore. The fund proceeds are also expected to meet BEML’s contribution of Rs 9 crore for setting up a R&D centre of excellence for metro coaches and general corporate purposes.
Strengths
BEML has near 100% market share in the dozers and heavy-duty dumper trucks of above 85 tonnes in the country. On an overall basis, the company caters to about 70% of the construction and mining equipment demand of the country. The domestic market for construction and mining equipment is expected to grow at a faster pace on increased spending on infrastructure and mining. BEML is better positioned to garner a greater share of this growing pie. To achieve this end, the company is expanding its product base through in-house R & D and also through appropriate technological tie-ups with global majors. Incidentally, it is the only metro-rail coach manufacturer in the country.
Having supplied most of the construction and mining equipment under use in the country, BEML continues to get strong spares and service income. As a result, the share of spares and services in the revenue has increased from 24% in the year ending March 2006 to 28% in the nine months ended December 2006 and FY 2006.
BEML has lined up new initiatives such as e-engineering services, captive mining and setting up of a plant in Brazil. These initiatives are expected to expand product and services range as also help geographical expansion.
India’s coal demand is set to accelerate on massive capacity additions planned in the power, steel and cement. To cater to this demand, three coal PSUs --- Coal India, Singanerei Colleries and Neyveli Lignite --- have come together to draw up mining augmentation plans at a capex of Rs 23590 crore in the Eleventh Five-Year Plan beginning current fiscal. Meanwhile, the government is also opening up coal mining for captive purposes for power and steel. These initiatives, as and when they blossom out, would turn out to be a major trigger for acceleration in the pace of growth in demand for mining equipment.
In JV with Midwest Granites, BEML has formed a company, BEML Midwest, to undertake captive mining. The JV has tied up with NTPC, a licencee for carrying out mining on the blocks. As a result, BEML will not only get assured demand for its mining equipment, but will gain expertise and its share of profit from the mining JV as well.
Being under the ministry of defence, BEML continues to get assured support of defence orders. The company is able to maintain a 1.5-2% share of the ever-growing defence-capex pie.
Weaknesses
As a result of the Indian Railways’ inconsistent track record of placing orders and arbitrary fixing of prices, BEML does not even recover costs, hampering growth. This business continues to be in red. The segment posted a loss of Rs 17.68 crore in the nine months ended December 2006 and Rs 15.78 crore in FY 2006. The segment loss in FY 2005 and FY 2004 was Rs 24.71 crore and Rs 61.39 crore, respectively.
The profit earned by supplying metro coaches moderated losses in a small way in FY 2005 and FY 2006. But this cushion is likely to go off in the short-term with BEML completing its current order book of 40 metro coaches by June 2007. Further orders from Delhi Metro and new orders from metros in Mumbai and Bangalore are expected to take some time as the tendering process is still on. However, being the only manufacturer of metro coaches in India and expected tax advantages from Karnataka government, the company is confident of good order flow from these projects, though the financial benefits will flow only after FY 2008.
Though the railway business is bleeding, about 40 to 43% of the issue proceeds are to be invested in this business.
Demand for heavy-earth moving equipment, BEML’s forte, is still skewed towards/ dependent on orders from PSU coal-mining companies such as Coal India and its subsidiaries, Singaneri Colleries and Neyveli Lignite. Notwithstanding the massive expansion plans of these PSUs, the delay in order placement by these PSUs or uneven delivery schedule can affect the performance of the company. Order flow from Indian Railways is also uneven. Order book stood at Rs 1617 crore end March 2007 compared with Rs 2243 crore end March 2006.
Valuation
BEML reported an 18% growth in net sales to Rs 2423.87 crore and a 10% growth in net profit to 204.93 crore in FY 2007.
In the last three months, high/low and average price of BEML was Rs 1225, Rs 938 and Rs 1031, respectively. Against this, the offer price band is Rs 1020 to Rs 1090, discounting the FY 2007 EPS (on the post-issue equity) of Rs 49.2 by 20.7 to 22.2 times. For a company whose profit has grown at CAGR of just 8% in the last two years, the P/E looks high. However, the growth potential in construction and earthmoving division will be realised in future as investment in mining and infrastructure picks up. Nevertheless, the turnaround in the railway products division is crucial for the upside of the construction and earthmoving division to get fully reflected in the bottomline growth. And the turnaround in railway products division will depend on consistency and increased flow of orders by the Indian Railways, better pricing (decided by an independent advisor), and pick-up in implementation of various planned metro rail projects. With Railways becoming financially capable as well as serious about investing directly as well as through public-private partnership, railway products division is likely to complement growth from the construction and earthmoving division in the long-run, though short-term hick-ups can not be ruled out.
Deepak Parekh - Interest rates have peaked
HDFC Chairman Deepak Parekh today said interest rates have peaked, and are likely to remain stable in the next six months, while real estate prices could fall by up to 20% in the next few months.
"Interest rates have peaked. In the next six months, they are likely to remain steady. There will be no major correction, neither will they move much upward," Parekh said on the sidelines of HDFC's annual general meeting.
Maintaining that real estate prices were showing signs of cooling down, he said in the next three to four months prices could see a correction in the range of 10-20%.
Parekh said developers are giving freebies such as first six months EMI free to keep the price momentum.
"In many areas prices are coming down as in Delhi, Gurgaon and Bangalore. The freebies being given by the developers are indicative of prices cooling down. There will be correction in real estate prices. However, a crash is unlikely," he said.
Asked whether hardening of interest rates impacted the lender's portfolio, he said HDFC had not see a slow down yet, since approvals grew 30% last fiscal over 2005-06.
"This year, we will be expecting a growth of 25%," he said.
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