PSEC - Infosys Technologies

P-Sec report on Infosys Technologies:

This shall be one of the tough AMJ quarter for Infosys. We are revising are Rs/USD assumption to Rs 42.5 for FY08 and FY09 estimates. We are expecting operating revenues of Rs 39313 million, a q-o-q growth of 4.22% and y-o-y growth of 30.4%. However in USD terms we are estimating revenues of USD 925 million ( 7.2% q-o-q, 40.2% y-o-y) We are expecting a q-o-q margin erosion of 244 bps this quarter reflecting the impact of rupee appreciation, Salary hikes, visa expenses. Infosys has only 3.2% of the balance sheet size in the form of debtors & balance in foreign bank a/c. Hence, shall have lesser impact of mark to market of monetary assets. We continue to recommend a BUY at these levels.

HDFC Sec - Asian Hotels

HDFC Securities report on Asian Hotels:

Asian Hotels, AHL reported a turnover of Rs 4134 Mn in FY07 and a PAT of Rs 915 Mn, which were 26% and 61% higher yoy. For the quarter ended March 07, the turnover of Rs 1324 Mn and PAT of Rs 344 Mn were higher by 27% and 51% yoy, respectively. The topline growth was aided by 35% rise in ARRs and marginal increase in occupancy.

The strength in ARRs with an inconsequent increase in costs lead to OPMs surge 811 bps (much better than expected) and 600 bps for the quarter and year ended FY07 to 51.5% and 44.3% respectively. Though it slid below our topline estimate, it positively surprised on the margins front.

The board of AHL has decided to demerge the company and form three separate listed entities. Though the modalities of the restructuring still remain unclear, we have outlined the procedure, in brief ahead. On a rough cut basis, the fair value of the assets are assessed at Rs 20 bn against the market cap of Rs 17bn, an 18% upside. However, with limited information, taking into account strong earnings growth (ARRs to compound 7.5%) and constructive restructuring possibility, we reiterate its fair price at Rs 890 (in line with the AHL’s independent valuation estimate), offering an upside of 18% to the CMP. The fair price has been valued by assigning weights to three key parameters viz., PEG, EV/Room and DCF.

The stock quotes on FY07 basis at 4.6x its P/BV, EV/Ebitda of 9.2x, and offers 1.3% dividend yield. We reiterate “OUTPERFORMER”.

SSKI - IPCA Labs

SSKI Research report on Ipca Labs:

Ipca Labs (Ipca) is a formulation-focused and vertically integrated mid-sized generics company with a multi-pronged and geographically diversified business model. Ipca uses superior API development capabilities to attain global leadership in select APIs and is leveraging it to create strong formulation businesses in high profit branded formulation markets like CIS, Asia and Africa as also generic markets like USA and UK. With very strong product pipelines across geographies, we expect 22% CAGR in earnings over FY07-10. At 12.2x FY08E and 10.1x FY09E earnings, valuations are compelling given the upside possibilities. Initiating coverage with Outperformer and a price target of Rs 1013 (14x FY09E earnings).

Firing on all cylinders:

We expect 22% CAGR in Ipca’s consolidated revenues over FY07-10 driven by 27% CAGR in exports and 16% CAGR in domestic business. More profitable branded formulation exports are expected to register 32% CAGR while generic exports could clock 33% CAGR driven by scale-up in US sales. Ipca’s focus on chronic segments and brand building would drive branded formulations sales in international markets as well in India. Ipca’s ability to generate such strong organic growth momentum clearly reflects the effectiveness of its model.

Expect steady margins:

We estimate Ipca’s operating margin to remain steady at 20- 21% over FY07-10. While we expect margin improvements given faster growth in higher margin international branded formulations and scale-up in regulated market, we have conservatively built in steady gross margins to factor in rupee appreciation.

Attractive business model; Outperformer:

Leveraging its strong presence in chronic segment and brand building focus along with a 500 sales people network across multiple non-regulated markets (excluding India), Ipca is aiming at the USD 77 billion (by 2010) generics opportunity in non-US markets. Further Ipca’s US strategy of leveraging its lowest cost API production capabilities to launch select products and partnering with Ranbaxy would be a winner. At 10.1x FY09E earnings and 26.3% RoCE, Ipca is at sharp discount to peers and deserves to be re-rated.

Investment Argument:

Ipca’s initiatives for building a strong international business have started to pay off, as reflected in the 100% yoy profit growth in FY07 following two soft years. We believe Ipca’s focus on vertical integration and competencies in building successful branded businesses, combined with tight operational control, would continue to drive growth. Ipca has invested significantly in building sales networks in multiple non-regulated markets, which will start paying off handsomely with expanding product portfolios. We are positive on Ipca’s product selection strategy for the US market, which leverages its lowest cost producer status for multiple APIs. Likely deals with innovators for large scale manufacture of off patent APIs has opened yet another growth avenue for Ipca.

Financial Analysis:

We expect 22% CAGR in Ipca’s revenues and profits over FY07-10, driven by continued strong growth across business segments. Topline is expected to be driven by 27% CAGR in exports on the back of continued momentum in international formulations, initiation of US generic sales and strong scale-up in API exports. Domestic business would remain steady (16% CAGR expected). A consistently improving revenue mix, along with scale effect, would drive a 50bp EBITDA improvement over FY07-10. We expect Ipca to maintain strong return ratios (25-26%) over the period. Incremental API supply contracts with innovators and scale-up in malaria tender business will be upside triggers.

Valuations

With its geographically diversified business and strong emphasis on vertical integration as also branded formulations, Ipca is a strong business model to play the global generics opportunity. In our view, Ipca’s judicious investments in API development capabilities and for building sales front end have built a strong platform for sustained steady growth in its exports business. We remain confident of Ipca’s ability to deliver 20-25% CAGR in profit in the medium term. At 12.2x FY08E and 10.1x FY09E earnings, high growth visibility and 25%+ RoCE, Ipca is one of the cheapest stocks in the Indian pharma industry and deserves a higher rating. Initiating coverage with an Outperformer rating and a 12-month price target of Rs 1013 (16.9x FY08E and 14x FY09E earnings).

ISEC - Bharti Airtel

ICICI Securities report on Bharti Airtel:

Bharti Airtel (BAL) continued to outperform the Indian wireless industry, adding 1.9 million wireless subscribers in May ’07 and taking the total subscriber base to 40.7 million and market share to 23% (up from 20.4% in May ’06). Further, BAL’s revenue market share is notably higher across most circles due to the company registering the best ARPU in the industry on account of early-mover advantage. The surge in net-adds in the month was led by expanding geographical footprint and launch of new attractive schemes. While the pressure on the ARPU and ARPM would continue, we believe that BAL would be able to maintain its leadership position despite increasing competition due to expansive network, high usage customers and better quality services. With valuations remaining attractive at FY09E P/E of 21x and EV/EBITDA of 11x, we reiterate BUY on the stock.

Strengthening subscribers’ market share:

BAL has been one of the leading wireless players since its inception. The company has managed to differentiate itself from the competition and leap ahead by pro-actively investing in the business since the onset of the wireless rally at end-CY04. BAL has pulled up its market share from 19% in Q3FY05 to 23% as on date, adding 24% of total net-adds in the period. We believe that the company’s track record of unbeaten performance is here to stay, with BAL maintaining forefront position, riding on its existing lead and further investments in the business.

But revenue share even higher:

BAL was the first operator to attain pan-India presence and is amongst the first three entrants for 16 of total 23 circles, providing access to higher usage customers. This is reflected in the company recording the highest ARPU in the industry and taking the revenue share to 28% as against its subscriber market share of 21% in Q3FY07. In the prevalent cut-throat competition, service quality would be the differentiating factor as against pricing. We expect that BAL’s ‘Airtel’ brand pull, better quality of service and customised offerings would ascertain its leadership going forward.

Robust financial performance and attractive valuations:

Although BAL’s Infotel business (broadband & telephone, long distance and enterprise services) has performed better than the industry, it has underperformed the wireless business, resulting in a decrease in contribution from this segment from 42% in FY04 to 35% in Q4FY07. Despite the slower growth in the Infotel segment, BAL is expected to report 34% revenue CAGR and 33% earnings CAGR through FY07-09E. The stock is currently trading at FY09E P/E of 21x and EV/EBITDA of 11x, close to most large-cap companies with similar growth profile. We reiterate BUY on the stock, with target price of Rs 956.

Citigroup - India IT Services

Citigroup in their report on IT Services,

Disappointing quarter; INR impact — 1QFY08 results will witness the impact of sharp rupee appreciation, wage increases (for some companies) and visa costs. We expect this to result in sharp margin decline (~350-400 bps qoq for companies with wage hikes). Our 1Q numbers are based on Rs.41/$ assumption.

Look beyond 1Q; risk reward favorable — With a ~15% underperformance against the BSE Sensex, we believe that currency-related negatives are largely priced in. Business momentum continues to be strong with pricing on an uptrend; reasonable valuations provide a good entry point for long-term investors.

2Q/3Q best in terms of price performance — Historical data (last 5 years) suggests that 2Q and 3Q are best in terms of stock price performance. We believe this is due to increased confidence in annual guidance post 1Q results and seasonally strong 2Q results and subsequent upgrades.

Will companies revise guidance downwards? — The rupee has appreciated by 4- 6% after the FY08 guidance issued by Infosys and Satyam, respectively. We expected $-term revenue guidance to be revised upwards but do not rule out a downward revision in EPS guidance.

Infosys/TCS are our top picks — We believe Infosys/TCS are best placed in terms of margin levers. With low expectations and good business momentum, HCL Tech could spring a positive surprise.

Citigroup - Weekly Technicals

Citigroup in their weekly technical report,

Nifty — The index closed on a positive note in the opening session of the week; it consolidated in the 4,296-4,250 band mid-week. It closed on a strong note in the last session of the week. The index ended the week up 66 points.

Breakout from double inside day bar — In the last trading session of the week, the index moved past the 4,296 high of the double inside day bar formation. This suggests the index can push upwards.

Momentum Oscillators — The RSI (14) on the daily chart is 63.43 (reading of 70 signifies overbought). The MACD on the daily chart is in buy mode.

Moving Averages — The 10dma = 4,253; 20dma = 4,218. The 10&20dma crossover is positive (i.e. the 10dma has cut the 20dma from below). 10 wma = 4,192. Intra-week decline should find support around the moving averages.

Support — The support level for the weeks’ trade is around 4,250-4,253. 4,250 is the lower end of the mid-week consolidation band.

Resistance — The resistance level is around the all-time high at 4,363.

Conclusion — Stay focused on the upside till we maintain above 4,250 on a closing basis.

Infosys Technologies, Bharat Bijlee

Infosys Technologies, Bharat Bijlee

Weekly Strategist, Tech, Wrap

Weekly Strategist, Tech, Wrap

Technical and Derivative Perspective

Technical and Derivative Perspective

BHEL, UTI Bank, HDIL, Satyam Computers, Bajaj Auto, Suzlon Energy, BEL, MTNL, IOC, Kirloskar Brothers, Hindustan Zinc

BHEL

UTI Bank

HDIL

Satyam Computers

Bajaj Auto

Suzlon Energy

BEL

MTNL

IOC

Kirloskar Brothers

Hindustan Zinc

Market Close: 14746..All time high ! But..

Strong momentum in the market as buying in the Capital goods and Metal stocks fuelled the rally. Market touched its all time high of 14730 levels after a long gap. But, Indices paired of its gains as profit booking at higher levels pulled it down. Banking, FMCG, IT and Oil & Gas went for profit booking. Sensex slipped into red zone at final trade but managed to end in green. Cement stocks witnessed selling pressure after good rally last week. Auto stocks cames out with their Monthly sales number. Maruti was the top gainers. Midcaps and Small caps were buzzing today but also witnessed the selling pressure. Global cues had nothing to support as Asia traded mixed, while Europe trading in red.

Sensex ended up by 14 points at 14664.26. It was helped up by gains in Maruti (771.35,+4 percent), Ranbaxy (364.7,+3 percent), RCVL (529.7,+2 percent), Tata Motors (684.05,+2 percent) and L & T (2234.8999,+2 percent). Restricting the gains were Guj Ambuja (122.45,-2 percent), TCS (1134.6,-1 percent), Wipro (512.75,-1 percent), Hindalco (158.45,-1 percent) and RIL (1684.5,-1 percent).

Auto stocks traded mixed. Car major Maruti reported good sales figures for the month June which were in line with the market expectations. The company's sales were up 24% YoY. The company sold 56,000 units in the domestic market, up 25.5% YoY from 44,626 units in June 2006. It has exported around 3,917 units in June, which were up 3% YoY. The company had ramped its presence in the non-European countries leading to the rise in exports. Utility Major Mahindra & Mahindra also reported Fantastic growth with 52 % jump in June month to 17,816 units from 11,709 units sold a year earlier. Its domestic auto sales including utility vehicles, light commercial vehicles and three-wheelers surged by 50 % to 16,814 units from 11,178 units. 2389 units of its new car Renault's no-frills Logan sedan in June and the exports rose by 89 % to 1,002 units. And also sold 10,089 tractors in June which was down 3 %. Maruti (+4%) and MNM (+1.5%) rallied. TVS, Bajaj Auto and Hero Honda numbers were not up to markas all traded weak.

Prathiba Industries reported that the company had secured two contracts from Indore Municipal Corporation for two water supply schemes. The total value of the contracts is almost Rs 98 crore. The project is to be executed in 12 to 18 months. Some days back the company had also secured a contract worth Rs 27 crore from Jabalpur Municipal Corporation for a water supply scheme. The project is to be executed in 24 months. The company is engaged in infrastructure business with focus on the water segment and the company also expertise in building and developing infrastructure projects for water-supply and distribution system. The company has also passed a special resolution was for issue of securities by way of ADR/GDR not exceeding $25 million. We have a quickies call here and its rocking as it got locked up in upper circuit.

Technical Speaking: Momentom has Pushed up sensex to new high at 14746 levels. Sensex touched an intraday high of 14746 levels and low of 14639 levels. Volumes were good as the market churned Rs. 4303 Cr. Overall breadth was in favor of Advances, where the Advancers were 1490 against 1163 Decliners. As we have been telling for sometime now that the trend is up and we are mostly likely to make a new high on Sensex, a new high was made today. Some signals of worry today as we could not close above previous high. The sentiment is still bullish but caution should be taken and fresh entry should be avoided if Sensex goes below 14550. Market is extremely bullish & money flows are strong which keeps good support.

Sensex ends at new high, 15K in sight

The Sensex opened with a positive gap of 34 points at 14,685, and hit a new intra-day high of 14,746 in morning deals surpassing its previous intra-day high of 14,724.

After moving in a narrow, positive range for most part of the session, the index slipped into negative zone (low of 14,639) in late noon deals. Last-minute buying in heavyweights saw the index close with a marginal gain of 14 points at 14,664 - a new closing high.

The BSE Auto, Health Care and Capital Goods indices closed with gains of over 1% each today.

The breadth was bullish - out of 2,687 scrips traded, 1,468 logged gains and 1,153 declined today.

INDEX GAINERS & LOSERS

Maruti gained 5% in intra-day deals after reporting a 25% rise in domestic sales in June. The stock finally closed with a gain of nearly 4% (Rs 28) at Rs 771.

Ranbaxy moved up 2.8% to Rs 365. Reliance Communications added 2.5% to Rs 530. Tata Motors was up over 2% at Rs 684.

L&T, Reliance Energy, Cipla, Dr. Reddy's and Infosys also closed with gains today.

Reliance slipped nearly 1% to Rs 1,684.

Gujarat Ambuja dropped 1.7% to Rs 122. TCS, Wipro, Hindalco and ONGC also declined.

MOST ACTIVE COUNTERS

GMR Infrastructure was the most active counter with a turnover of Rs 158 crore followed by IFCI (Rs 120 crore), Divi's Labs (Rs 103 crore) , Reliance (Rs 103 crore) and ENIL (Rs 93 crore).

Anagram - Eveninger - July 2 2007

Anagram - Eveninger - July 2 2007

Short-term Trading Calls

Buy Shree Renuka Sugar with stop loss of Rs 590 for a target of Rs 770.
Buy State Bank of India with stop loss of Rs 1470 for a target of Rs 1850.
Buy CESC with stop loss of Rs 363 for a short-term target of Rs 408.

GMR Infrastructure, Dish TV, Infosys Technologies, Suzlon Energy, Sun TV

GMR Infrastructure, Dish TV, Infosys Technologies, Suzlon Energy, Sun TV

Post Market Commentary

The BSE Sensex ended the session on a positive note as it grew by 13.75 points to close at 14,664.26 while Nifty slipped by 4.55 points to close at 4,313.75. Of the 2,687 stocks actively traded on BSE, 1,468 stocks advanced while 1,153 stocks declined. The BSE Mid cap and Small cap closed up by 64.32 points and 52.86 points at 6,591.35 and 7,783.26 respectively.

BSE Auto Index grew by 51.49 points to close at 4,791.06 as Maruti Udyog (3.80%), Tata Motors (2.14%), M&M (1.51%), Hero Honda (0.28%) are closed in green.

BSE Capital goods index surged by 129.79 points to close at 12,429.15 as ABB (1.78%) and L&T (1.77%) are closed in green whereas Siemens (0.72%) and BHEL (0.34%) are closed in red.

BSE bankex index decreased by 19.46 points to close at 7,990.48 as BOI (2.21%), PNB (2.12%) and ICICI bank (0.48%) are closed lower while SBI (0.36%) and HDFC bank (0.17%) are closed higher.

BSE Metal index closed at 10,560.32 down by 44.68 points as SAIL (2.06%), Hindalco (1.06%) and Tata Steel (0.61%) closed in red.

BSE IT index decreased by 3.46 points to close at 4,867.27 as HCL tech (2.25%), TCS (1.27%) Wipro (1.11%) and Infosys (0.70%) closed lower.

BSE Health Care Index closed up by 43.89 points at 3,849.59 as Ranbaxy labs (2.75%), Sun pharma (1.41%), Cipla (0.77%), and Dr Reddy (0.74%) closed higher.

BSE FMCG index closed marginally lower by 5.33 points at 1,824 as Dabur (0.73%) and ITC (0.45%) closed in negative while Tata tea (0.66%) and HLL (0.11%) closed in positive.

BSE oil & gas index decreased by 29.36 points to close at 7,597.30 as IPCL (1.84%) and ONGC (0.67%) closed lower while Reliance petroleum (3.11%), IOCL (2.43%), BPCL (0.90%) and GAIL (0.28%) closed higher.

Karnataka Bank, Nagarjuna Constructions

Karnataka Bank, Nagarjuna Constructions

Sensex strikes record closing high

The market which was firm till mid-afternoon trade, pared gains towards the later part of the trading session as some selling emerged at higher level. Sensex, in fact, slipped into the red at one point of time in late trade, before settling with small gains. The market rose for the third straight day today. Auto, capital goods, and healthcare shares saw buying interest, while cement and IT shares witnessed selling.

Asian markets which were subdued earlier during the day, recovered later.

The BSE 30-share Sensex rose 13.75 points to 14,664.25, an all time closing high. The barometer index opened higher at 14,685.16 and surged to strike a record high of 14,745.75 at 11:23 IST. It slipped to a low of 14,638.88 at 15:12 IST. It oscillated in a range of 108 points for the day.

Prior to this, the Sensex had struck a record high of 14,723.88 on 9 February 2007.

The Sensex had surged 146 points on Friday, 29 June 2007, boosted by latest data showing fall in inflation to a 14-month low.

The S&P CNX Nifty ended the day marginally in the red, declining 4.55 points to 4,313.75. The Nifty July futures settled at 4302.30, a discount of 11.45 points as compared to spot closing.

The total turnover on BSE amounted to Rs 4,303 crore compared to Friday (29 June 2007)'s Rs 4,855.07 crore. Turnover on NSE's futures & options (F&O) segment stood at Rs 34061.14 crore compared with Friday (29 June 2007)'s Rs 35,463.65 crore.

The market breadth was strong on BSE with 1,490 shares advancing as compared to 1,163 shares that declined. 64 remained unchanged.

The BSE Small-Cap Index rose 0.68% to 7,783.26. It struck an all time high of 7,819.30. The BSE Midcap Index gained 0.99% to 6,591.35. It scaled an all time high of 6,615.65. 6,615.65

Among the Sensex pack, 17 advanced while the rest declined.

Car major Maruti Udyog surged 4.29% to Rs 774.40, on 2.26 lakh shares, after it said on Monday, 2 July 2007, it had sold 59,917 vehicles in June 2007, up 24% from 48,425 vehicles sold in June 2006. Maruti Udyog sold 56,000 units in the domestic market, up 25.5% from 44,626 units in June 2006. It exported 3,917 units in June, up 3% from 3,799 units last year.

Tata Motors (up 2.20% to Rs 684.50), Hero Honda Motors (up 0.05% to Rs 689.20), Mahindra and Mahindra (up 1.82% to Rs 736) rose from the auto pack. The BSE Auto Index settled 0.99% higher at 4,791.06.

Bajaj Auto rose 0.10% to Rs 2,131. The company said on Sunday, 1 July 2007, said its sales in June 2007 fell 12% to 1,87,624 units, from 2,13,918 units in June 2006. The company said it will launch a new motorbike in September 2007, with an initial sales target of 50,000 units a month by January 2008.

Pharma shares advanced on renewed buying. Ranbaxy Laboratories (up 3.10% to Rs 365.95), Cipla (up 0.74% to Rs 210) and Dr Reddy’s (up 0.74% to Rs 660.80), edged higher. The BSE Healthcare Index was up 1.15% at 3,849.59. It was the top gainer among the sectoral indices on BSE

Shares from the capital goods space advanced on fresh buying. L&T (up 2.23% to Rs 2,245), Punj Lloyd (up 8.47% to Rs 278.65), Areva T&D (up 5.25% to Rs 1589) and Crompton Greaves (up 4.56% to Rs 264.75) advanced. However, Bhel slipped 0.41% to Rs 1,532 after striking an intra-day high of Rs 1582.70. L&T firmed up on reports that the government may select the engineering and construction firm as an additional supplier of equipment for power projects. The BSE Capital Goods index struck an all-time high of 12,586.12. It finished 1.06% higher to 12,429.15.

Cement stocks saw profit booking after two straight days of rally. Ambuja Cements shed 1.97% to Rs 122.10, on 5.54 lakh shares. It was the top loser from the Sensex pack. Grasim slipped 0.57% to Rs 2,622.90.

However, ACC gained 0.14% to Rs 935.10 after it reported 9.67% growth in cement despatches to 1.70 million tonnes in June 2007 from 1.55 million tonnes in June 2006.

IT stocks saw some unwinding as the Indian rupee opened at its highest level in over three weeks on Monday, 2 July 2007. Wipro (down 1.25% to Rs 512), Satyam Computers (down 0.21% to Rs 466), and TCS (down 1.07% to Rs 1136.90), edged lower.

However, Infosys Technologies was up 0.57% to Rs 1940.10, buoyed by rumors that the Indian IT major is mulling a bid to buy Europe’s largest IT services giant, Capgemini. Both Infosys Technologies and Capgemini have denied the takeover rumours which had first hit the market after trading hours on Thursday, 28 June 2007. Infosys Technologies will announce its first quarter June 2007 results on 11 July 2007. The BSE IT Index lost 0.07% to 4,867.27.

The Indian was at 40.645/655 per dollar in early trade, slightly off its opening of 40.60, its strongest start since 6 June 2007. The rupee rose as traders built positions in the local unit on positive cues from high-yielding Asian currencies, and expectations of foreign investment flows.

Index heavyweight Reliance Industries slipped 0.83% to Rs 1,686.20, on 6.07 lakh shares. It had hit a high of Rs 1709.80.

Reliance Energy (REL) gained 1.94% to Rs 626. REL’s wholly owned subsidiary Rosa Power Supply, on 26 June 2007, tied up long-term loans of around Rs 2,000 crore for the first stage of its 600 meg watt (MW) power project.

Hindalco Industries slipped 0.81% to Rs 158.85 on entering into a joint venture agreement with Mahanadi Coal (MCL), a subsidiary of Coal India, and with Neyveli Lignite Corporation (NLC) for coal mining. The joint venture company (JV) is expected to be formed in the next 3-6 months and the company will have 15% shareholding, with MCL holding 70% and NLC holding 15%.

Other metal stocks, Tata Steel (down 0.61% to Rs 593.55) and Sail (down 2.24% to Rs 128.30), also slipped. The BSE Metal index was down 0.42% to 10,560.32, and was the top loser among the sectoral indices on BSE.

IFCI galloped 7.87% to Rs 60.30 on high volume of 2.03 crore shares, after scheduling a board meet on 6 July 2007 to consider inviting bids for inducting a strategic investor in the firm. The company made the announcement after market hours on Friday, 29 June 2007. IFCI said it would also take on record its audited financial results for the quarter ended June 2007 on the same day.

Welspun Gujarat Stahl Rohren surged 7.19% to Rs 237.85 on announcing plan to build a manufacturing facility in the US.

Corporation Bank rose 1.79% to Rs 330.20 after it sold 0.26% stake in NSE for $6.625 million to Citigroup Strategic Holdings Mauritius. The company made the announcement during trading hours today, 2 July 2007.

Pratibha Industries rose 5% to Rs 242.60 on securing two contracts from Indore Municipal Corporation for two water supply schemes. The total value of the contracts is Rs 97.78 crore. The project is to be executed in 12 to 18 months.

Kernex Microsystems India was locked at the 5% lower limit at Rs 244.90 on BSE even as its board of directors approved issue of one bonus share for every 10 shares held in the company after trading hours on Friday 29 June 2007. The company's net profit rose 58.2% to Rs 0.87 crore in Q4 March 2007 as against Rs 0.55 crore in Q4 March 2006. Sales declined 50.4% to Rs 5.42 crore in Q4 March 2007 compared to Rs 10.93 crore in Q4 March 2006.

Spentex Industries rose 4.83% to Rs 40.15 on acquiring Schoeller Litvinov k.s. in Czech Republic. The company made this announcement before market hours on Monday, 2 July 2007. The acquisition of Schoeller was made for $25 million. The transaction will enhance the topline of the company by about euro 55 million and add another euro 6 million per year in cash flows.

GMR Infrastructure rose 2.29% to Rs 765 after the company said its board approved splitting each share of face value Rs 10 each into five shares of Rs 2 each. The company made the announcement on Saturday, 30 June 2007. GMR reported net profit of Rs 12.37 crore upon sales of Rs 22.75 crore in Q4 March 2007. Net profit plunged 91.89% to Rs 2.88 crore in the year ended March 2007 as against Rs 35.55 crore in FY 2006. Net sales declined 41.9% to Rs 33.39 crore in FY 2007 (Rs 57.44 crore).

Gujarat Alkalies & Chemicals jumped 6% to Rs 153 after signing an initial agreement with DowEurope GmbH for a long-term strategic business relationship for chlorinated organics.

Asian markets which were subdued earlier during the day, recovered later. Singapore's Straits Times (up 0.06% to 3,550.34), Taiwan's Taiwan Weighted (up 0.63% at 8,939.49) and Seoul Composite (up 1.59% at 1,771.35) edged higher. China’s Shanghai Composite rose 0.41% to 3,836.29.

Japan's Nikkei was flat at 18,146.30. The Tankan report released by the Bank of Japan showed that the major manufacturers' business confidence index was unchanged at 23 in June 2007 from the previous survey in March 2007, while the index for large non-manufacturers was also unchanged at 22.

All the European indices were trading lower.

US stocks slipped on on Friday, 29 June 2007 as investors sold shares due to rising oil prices and lingering worries about subprime mortgage lending.

The Dow Jones lost 13.66 points, or 0.10%, to 13,408.62, after swinging dramatically higher and lower over the course of the day. Broader stock indicators also dipped. The S&P 500 index fell 2.36 points, or 0.16%, to 1,503.35, and the Nasdaq Composite fell 5.14 points, or 0.20%, to 2,603.23.

Oil prices retreated on Monday, 2 July 2007, as traders took profits after crude futures closed above the $70-a-barrel mark, last week, for the first time in almost a year. Light, sweet crude for August delivery lost 31 cents to $70.37 a barrel in Asian electronic trading on the New York Mercantile Exchange in Singapore.

Market lacked lustre

The market began the day on a firm note. After opening 34 points above its previous close at 14685, the Sensex advanced to touch a new intra-day high of 14745.

However due to a lack of movement in most of the counters, the trading thereafter was range-bound with an upward bias. The market eventually gave up its early gains in the afternoon trades and the emergence of sharp selling towards the end saw the index slip below the 14700 mark to touch the day's low of 14639. Although selective buying trimmed the losses of the index at the close, yet it ended the session with a marginal gain of 14 points at 14664. The Nifty ended a tad lower than its previous close at 4317.

The BSE Mid-cap Index rose 1% at 6591 while the BSE Small-cap Index moved up 0.68% at 7783 in a range-bound market. Among the sectoral indices, the BSE Auto index, the BSE CG index, the BSE HC index and the BSE Teck index were up nearly half percent each.

The BSE Metal index, the BSE Bankex, the BSE IT index and the BSE Oil & Gas index, however, were the laggards. Gujarat Ambuja led the weakness and dropped 1.69% at Rs122. While TCS slumped 1.27% at Rs1,135, Wipro lost 1.11% at Rs513 and Hindalco shed 1.06% at Rs158. Reliance was down 1% at Rs1,685. ICICI Bank, ONGC, Tata Steel, Grasim and ITC were down.

Maruti Udyog, however, remained firm through the session and moved up 3.80% at Rs771. While Ranbaxy jumped by 2.75% at Rs375, Reliance Communication added 2.45% at Rs530 and Tata Motors gained 2.14% at Rs684. L&T scaled up 1.77% at Rs2,235 and Reliance Energy was up nearly 1.66% at Rs624.

Auto stocks stole the limelight and ended with sharp gains. Swaraj Engines Company rose 7.67% at Rs186. While Sono Koyo shot up by 4.95% at Rs47.70, Automo Car advanced 4.76% at Rs558. JMT Auto surged 4.28% at Rs95 and Balkrishna Industries moved up 4.02% at Rs635.

Amara Raja at Rs553.20, IFCI at Rs60.50, SBI at Rs1,549.90, Titan India at Rs1,378, Kotak Bank at Rs678, Great Estate at Rs366.50 and Automobile Corporation at Rs584 scaled to new intra-day highs.

Reliance Petro clocked volumes of over 50.26 lakh shares on the BSE followed by IDBI (49.87 lakh shares), Welspun Gujarat (36.43 lakh shares), Dena Bank (21.65 lakh shares) and GMR Infrastructure (20.88 lakh shares).

GMR Infra was the most actively traded counter on the BSE with a turnover of Rs159.20 crore followed by Reliance Industries (Rs103.23 crore), Welspun Guj (Rs85.01 crore), RCom (Rs80.23 crore) and State Bank of India (Rs75.24 crore).

Mahindra and Mahindra, Maruti Udyog, Reliance Industries

Mahindra and Mahindra, Maruti Udyog, Reliance Industries

India Equity Strategy

India Equity Strategy

Week Ahead in Mkts: New highs possible

The intermediate projection would suggest a move till 4400 points on the Nifty is possible.

The market surged in the post-settlement session driven by a combo of positive monsoon projections, sops to the sugar industry and speculative activity in bank stocks.

The Nifty closed at 4318.3 points for a week-on-week gain of 1.56 per cent. The Defty was up 1,46 per cent as the rupee lost a little ground versus the dollar. The Sensex underperformed the Nifty somewhat, rising 1.26 per cent to close at 14,650 points.

Breadth was excellent with advances outnumbering declines. The Nifty Junior rose 3.2 per cent while the BSE 500 was up 1.82 per cent.

The Bank Nifty also rose by 3.03 per cent while the CNX IT registered a positive but marginal move of 0.53 per cent. Volumes were good, although they are always high in a settlement week.

Surprisingly, in what seems to be a key week, the mutual funds and FIIs were not uniformly bullish. The FIIs were net sellers through the first four sessions while domestic funds were net buyers.

Outlook: The market appears on the cusp of a bullish breakout. A saucer pattern has almost been completed with the accompaniment of high volume on the breakout.

The intermediate projection would suggest a move till 4400 points on the Nifty is possible. The short-term projection suggests intra-day levels of 4365 will be reached next week.

Rationale: High volumes and good breadth on a rising price line are a classic bullish combination.

The saucer formation is also a reliable pattern that usually achieves its targets. The last two weeks have seen a narrow trading range, a pattern that has been clearly broken. The last month has seen a correction followed by a recovery.

Counter-view: The breakout is not absolutely confirmed yet – that would have required a slightly higher close of 4336 and intra-day levels of 4365.

A combination of fund buying and speculation by operators has counter-balanced and absorbed heavy FII sales. If FIIs continue to press sales, the trend could reverse.

However, it does seem far more likely that the bull run will continue. A burst of profit booking should still see the Nifty find support around 4275.

Bulls & bears: As mentioned above, the sugar sector saw the most violent spikes. Stocks ranging from the liquid Triveni, Shree Renuka and Balrampur to Upper Ganges and KCP gained over 15 per cent on Friday.

But banks were the major influence on index moves with everything from ICICI and SBI to Corporation Bank, Kotak Mahindra Bank, Syndicate Bank, PNB and HDFC Bank did well.

Cement stocks such as ACC and Gujarat Ambuja also saw recovery. Other heavy gainers included GMR Infrastructure and Tata Tele along with Reliance Natural Resources.

MICRO TECHNICALS

ABB Current Price: 1094 Target Price: 1200

The 5:1 split has generated extra liquidity in an already-bullish counter with volumes multiplying more than 10 times since the split. It's dangerous to make price projections immediately post-split.

However if we adjust for the split, the target price ought to be about 1200. Keep a stop at 1075 and go long.

Balrampur Chini Current Price: 76.35 Target Price: 81

Despite a huge spike on Friday, the long term pattern still looks bearish in this industry bellwether.

The stock has massive resistance just above the current levels and it has not managed to violate a falling trend line drawn from its highs of May 2006 on a weekly chart. If you go long keep a tight stop at 73 and book profits above 81.

GMR Infra Current Price: 749 Target Price: NA

The stock has gained approximately 50 per cent in the past month and risen almost vertically in the past five sessions on excellent volumes. It's impossible to set a target with this sort of a pattern.

Go long, keep a trailing stop loss at 705 and raise the stop by 20 for every gain of 20. Expect high daily volatility but net gains.

RNRL Current Price: 39 Target Price: 42

This is the new darling of the punters. Massive buying in the past few sessions has pushed it close to new all-time highs. Keep a stop at 37 and go long. There is a minimum target of 42 but that is liable to be exceeded next week.

SBI Current Price: 1525.8 Target Price: 1650

“Bank” rose sharply on Friday with rising volumes to back the price move. The chart formation projects to a possible target of 1640. Keep a stop at 1495 and go long. Book some profits above the 1550 threshold.

TCS, Wipro, Infosys export software worth $9 billion

Tata Consultancy Services, Infosys and Wipro, the country’s top three Information Technology firms, account for approximately $9 billion (Rs 39,260 crore) software exports during 2006-07, according to a Dataquest survey.

The exports from top 10 IT companies crossed $15 billion (Rs 68,236 crore) during last fiscal, according to the industry survey and analysis.

The top software exporter Tata Consultancy Services earned revenues of Rs 15,881 crore during the year at a growth rate of 38% from exporting software and services.

Infosys’ revenues stood at Rs 13,025crore growing by over 45% rate while Wipro’s revenues touched Rs 10,354 at a growth rate of 39%.

Tech Mahindra, which stormed into the top 10 this time, emerged as the largest growing IT company with a growth rate of 135% and revenues that stood at Rs 2,890 crore.

Seven of the top 10 software firms are Indian multinational companies. The software and services exports of India development centres of foreign multinational companies that made it to the Top 10 list include IBM, Cognizant and Oracle which together accounted for business generated to the tune of Rs 13,127 crore.

Stocks you can pick up this week

Cadila
Research: Kotak Securities
Rating: outperform
CMP: Rs 376 (Face value Rs 5)

Zydus Cadila has acquired a 100% stake in Nikkho, a mid-sized,privately held company in Brazil. Nikkho is generating profits andposted sales of $26 million in calendar year ’06. The acquisitionprice is around 1x sales, and seems to be attractive. This is Zydus’second oveRseas acquisition this year, after the one in Japan, and ispart of its global expansion strategy.

More such acquisitions arepossible in the medium term. For FY08, the estimated revenuegrowth is expected to be 18% and net profit growth, 25%. This acquisitionwill add about 5% to the company’s revenues. Kotak hasassigned an outperform rating to Cadila, with a DCF-based targetprice of Rs 420, or 17x FY09 earnings.

Reliance Communications
Research:HSBC
Rating: Outperform
CMP: Rs 517 (Face Value Rs 5)

HSBC believes that it is time to update/upgrade its estimate of thevalue unlocked by Reliance Communications’ (RCOM) balancesheet, following the planned spin-off of its telecom tower and undeRseafibre optic assets. RCOM will be the fiRst operator to monetisetower assets via a strategic investment by private equity playeRs/tower operatoRs. The company acquired its FLAG undeRsea fibreoptic unit in ’04 and is well-positioned to benefit from the globalre-rating of fibre, following the listing of FLAG on London’s AIMlater this year.

In a May ’07 initiation report, HSBC valued RCOM’stower business at $4.8 billion or Rs 97 per share, based on 12,000toweRs. It has since updated its tower valuation, based on the15,000 toweRs the company currently has in place, thus raising valuationto $5 billion or Rs 102 per share. The target price for thestock has now been upgraded from Rs 624 to Rs 644.

Tata Steel
Research: Macquarie Research
Rating: Outperform
CMP: Rs 597 (Face Value Rs 10)

Tata Steel’s recently acquired subsidiary, Corus, has announced a7% hike in UK wire rod prices for deliveries beginning in July.Corus has been increasing prices across product segments sinceFebruary this year. Macquarie has assumed a year-on-year increaseof 3% in average realisations for FY3/08 for Tata Steel and Coruscombined. Prices remaining at current levels could add Rs 9 to theFY3/08 EPS estimate.

Tata Steel trades at a rights-adjusted PER of5.4x its FY3/08 EPS estimate, which represents a 43% discount toAsian steel stocks Macquarie believes that this steep discount is unwarranted,given the margin expansion and strong growth that isprojected for the company. It strongly reaffirms its outperform recommendationwith a target price of Rs 800.

Ranbaxy
Research: CLSA
Rating: Outperform
CMP: Rs 355 (Face Value Rs 5)

While CLSA maintains an outperform rating on the stock, it has downgraded its target price for the stock from Rs 445 Rs 405. CLSA believes that even though there have been visible improvements in cost control in both selling, general & administrative (SG&A) and research& development (R&D), organic growth remains a challenge and aweak balance sheet limits its ability to grow inorganically. A 10% appreciationin the rupee vis-à-vis the dollar will result in a strong secondquarter (expected profit of more than Rs 300 crore), as well as an8% upgrade to CLSA’s CY07 estimates due to the translation gains on$600 million+ ECB/FCCBs.

However, CLSA is concerned about a potentialstructural downward shift in margins if the rupee remainsstrong and is downgrading its CY08/09CL estimates by 12%, assuming that the rupee trades at 42 to a dollar.

LIC Housing Finance
Research: SBICAP Securities
Rating: Buy
CMP: Rs 206 (Face Value Rs 10)

SBICAP believes that LIC Housing Finance (LICHF), the second largest non-banking housing finance company (HFC), is a serious long-term player in the business and deserves better valuations.The industry offeRs great potential for growth, given Indian demographics.LICHF will be able to reap benefits with its marketingnetwork and enhanced operational set-up. SBICAP expects thedisbuRsements for LICHF to witness a compounded annual growthrate (CAGR) of 22.5% over the next three yeaRs, against 11.7%CAGR witnessed in the past three yeaRs. It believes that the restructuringof business processes and improvement in credit qualityundertaken by LICHF will also pay dividends.

At the currentmarket price of Rs 193, the stock is trading at 5.7x (FY08E) and4.8x (FY08E) its earnings and 1x (FY08E) and 0.8x (FY09E). Thecurrent valuations do not fully reflect the growth potential of theindustry and the company. With expected return on equity (RoE)at around ~17.5% and return on assets (RoA) at ~1.4% over thenext couple of yeaRs, SBICAP believes that the stock deservesbetter valuations.

Union Bank
Research: CLSA
Rating: Buy
CMP: Rs 212 (Face Value Rs 10)

Union Bank of India is the fifth-largest state-owned bank. Itranks in the top tier on all operational measures with 30% earningsgrowth in FY08CL and has one of the highest FY09CL returnon equity (RoE) at 21%. With the non-retail sector accounting formore than 75% of its lending, Union Bank is a key beneficiary of rising corporate credit demand. With the management strategicallyreducing its lending to large corporates and focusing on thesmall & medium enterprises (SME) segment, CLSA expects marginsto expand by 4-7 basis points over the next two yeaRs.

UnionBank trades at a 20-25%discount to its peeRs like Bank of Indiaand Canara Bank. CLSA believes that while it has underperformedin the past year, given earnings growth in excess of 30% in FY08and high RoE of 20% in FY08, Union Bank could trade up to 1.2-1.3x one-year forward (FY09CL) adjusted book, with a pricetarget of Rs 180.

Cairn India
Research: Citigroup
Rating: Buy
CMP: Rs 146 (Face Value Rs 10)

Citigroup has set a target price of Rs 185 for Cairn India, based ona 15% premium to net asset value (NAV) of cash flows and recoveryand exploration upsides. Cairn India’s owneRship of valuable oil reservesin Rajasthan should generate steady cash flows from ’09, besideshaving the potential to generate further upside from enhancedoil recovery (EOR) and exploration.

Cairn India’s valuations areamong the most highly leveraged to crude among global exploration& production (E&P) peeRs, offsetting inherent operationalrisks. Key risks include delays and cost overruns, unfavourable rulingon cess liability being higher and potential conflict of interestarising out of Cairn’s majority owneRship in Cairn India, especiallyin the context of the new exploration assets in the country.

IPO Grey Market Premiums Update

Price within the brackets indicate current premiums

Roman Tarmat 175 (125 to 130)
Celestial Labs 60 (8 to 10)
Ankit Metal 36 (3.50 to 4)
DLF Ltd. 525 (22 to 24)
Vishal 270 (350 to 360)
Suryachakra 17 to 20 (2.5 to 3)
BEML 1020 to 1090 (--)
Spice Commu. 41 to 46 (9 to 10)
HD Infia 430 to 500 (18 to 20)
Allied Digital 170 to 190 (105 to 110)
Everonn Systems 125 to 140 (300 to 305)
Omaxe Ltd. 260 to 310 (20 to 25)