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Mid-caps rally in an otherwise subdued market

Weak global cues, modest earnings from Infosys and rising crude oil prices kept Indian floats lower today. IT bellwether Infosys Technologies today reported    
a net profit of Rs1,028 crore for the quarter ended June 30, 2007, down 8.5% from Rs1,124 crore in the quarter ended March 31, 2007. Tracking the same, the Sensex resumed with a negative gap of 62 points at 14948 but recovered immediately and touched the day's high of 15015. But, the party did not last. The fresh bout of selling in technology, auto and banking stocks dragged the Sensex to its day's low of 14830 by the afternoon. The market remained subdued thereafter as investors preferred to remain on the sidelines. The Sensex finally closed the session by shedding 99 points at 14911. The broad based Nifty ended the session at 4387, down 19 points.

Surprisingly, the breadth of the market was positive. Of the 2,694 stocks traded on the BSE, 1,444 stocks advanced, 1,183 stocks declined and 67 stocks ended unchanged. The sectoral indices had a mixed outing. The BSE IT index slipped sharply and dropped 3.34% followed by the Teck index (down 1.99%) and the BSE Auto index (down 0.52%). However, the BSE Realty index rallied sharply and gained 3.38% followed by the BSE Metal index (up 1.48%) and the BSE CD index (up 1.30%).

Among the major losers Infosys Technologies slumped by 4.47% at Rs1,930, TCS plummeted by 3.34% at Rs1,147, Satyam Computer tumbled by 3.28% at Rs481, Wipro shed 2.02% at Rs510, Ambuja Cement crashed by 1.84% at Rs128, Tata Motors dropped 1.69% at Rs732 and Ranbaxy declined by around 1.44% at Rs357. However, Grasim surged 3.40% at Rs2,819, Tata Steel jumped 3.40% at Rs656, ACC zoomed 3.16% at Rs1,069, Reliance Energy added 2.14% at Rs626 and HUL gained 1.96% at Rs202. BHEL, ONGC, Bharti Airtel, HDFC Bank and Dr Reddy's Lab closed with modest gains.

Reality stocks, however, registered solid gains. India Bulls Real Estate was in the forefront and vaulted 7.03% at Rs501. Among the other major gainers DLF soared 3.27% at Rs590, Unitech surged 3.06% at Rs542, Sobha Developers advanced 1.98% at Rs955 and Parsvanath Developers scaled up 1.94% at Rs383.

Over 2.12 crore shares of Reliance Natural Resources shares changed hands on the BSE followed by IFCI ( 1.18 crore shares), Nagarjuna Fertilizers (1.17 crore shares), Silverline Technologies (1.13 crore shares) and G V Films (96.42 lakh shares).

Value-wise Infosys Technologies registered a turnover of Rs298 crore on the BSE followed by DLF (Rs190 crore), Roman Tarmat (Rs154 crore), GMR Infrastructure (Rs148 crore) and Indiabulls Real Estate (Rs139 crore).

Infosys Q1: Net down 6% QoQ at Rs 1,079cr

Infosys Technologies, India's second largest software exporter, has under-delivered on its own usually conservative guidance by almost 4%.

The strong appreciation of the rupee during the past quarter against global currencies, specificially the US dollar, has taken its toll on the software bellwether.

Though the company has recorded a 35% and 25% increase in net profit and topline on a year-on-year basis, the bottomline has dipped, sequentially, by close to 6%. The topline, however, has remained stagnant. While YoY operating profit has moved up by close to 22%, it has dropped by almost 10% sequentially.

Net profit for the first quarter of FY08 at Rs 1,079 crore includes a reversal of tax provisions amounting to Rs 51 crore. The company, which might find it hard to add another billion during the year, has posted a 25% YoY increase in topline to Rs 3,773 crore.

CEO & MD S Gopalakrishnan, however, put up a brave face and said: "As clients recognise the strategic imperative of global sourcing in an increasingly flat business world, the demand for large end-to-end players like Infosys continues to be strong. We continue to focus on being a partner of choice to our customers."

The company, which usually sets the trend for the software services industry in India, has added that rupee appreciation will indeed take a toll on its bottomline and has revised its guidance downwards. The dollar guidance has, however, been revised upwards.

Infosys has guided the markets that during the second quarter of the current fiscal, its topline, in rupee terms, will grow by around 15%, while it will move up in the range of around 18% during the entire fiscal.

This is a telling story on how the Indian exporters are caught in a whirlwind of the appreciating rupee - given the fact that Infosys has been growing its topline by at least 30% over the past few quarters.

In dollar terms, the topline for the entire year is expected to grow around 30% just kissing the $4 billion mark, while for the second quarter, it will grow by a little over 30%.

Said V Balakrishnan, CFO, Infosys: "The sharp appreciation of the rupee against all major currencies impacted our operating margins during the quarter. However, our robust and flexible operating and financial model enabled us to maintain our net margins while absorbing the impact of appreciating currency, higher wages and visa costs."

Infosys added 35 new clients during the first quarter, and increased its employee base to almost 76,000. While there was a gross addition of 7,004 employees, net addition was only at 3,730 as Infosys BPO saw heavy attrition.

Sensex drops 97 points

The market stayed weak almost throughout the day's trading session. All the global markets were in the red, with the exception of Shanghai Composite. IT stocks lost ground after IT bellwether Infosys Technologies today, 11 July 2007, cut its FY 2008 EPS and revenue guidance in rupee terms. Shares from the auto and banking pack also saw some profit booking. However, cement, metal and offshore oil services firms edged higher.

The BSE 30-share Sensex was down 96.96 points to 14,912.92, as per provisional closing. It opened lower at 14,948.15 and slumped to 14,829.55, tracking weak global markets. At the day's low of 14,829.55, the Sensex had shed 180.33 points for the day. The Sensex staged a smart recovery from the day's low and moved into the positive zone at one point of time in mid-morning trade, when fresh selling emerged, once again pulling it lower.

The Sensex swung 186 points in the day in volatile trade.

The total turnover on BSE amounted to Rs 5,473 crore compared to Rs 4,147 crore by 14:30 IST.

Among the Sensex pack, 18 declined while the rest advanced

IT pivotals saw intense selling pressure right from the opening bell. Four of the top five losers from the Sensex were IT stocks.

IT bellwether Infosys Technologies slumped 4.65% to Rs 1,926, on high volumes of 15.32 lakh shares. It was the top traded counter on BSE with turnover of Rs 2,98.55 crore. It was the top loser from the Sensex pack.

The company today revised upwards its EPS guidance for FY 2008 (year ending 31 March 2008) in dollar terms to a growth of 28.4% to 29.7% compared to the earlier guidance of 25.7% to 27.7% growth. It has also slightly raised the revenue guidance in dollar terms to 29% to 31%, from the earlier guidance of a growth of between 28% to 30%.

EPS guidance in rupee terms has been cut to reflect a growth of 15.6% to 16.8% compared to the earlier guidance of 20% to 22% growth. It has also reduced the revenue guidance in rupee terms to 16.9% to 18.3%, from the earlier guidance of a growth of 22.6% to 24.6%.

Infosys' consolidated net profit as per Indian GAAP was down 5.6% to Rs 1079 crore in Q1 June 2007, from Rs 1,144 crore in Q4 March 2007. Revenue was almost unchanged at Rs 3,773 crore in Q1 June 2007 compared to Rs 3,772 crore in Q4 March 2007.

Satyam Computers shed 3.25% to Rs 481, TCS lost 3.10% to Rs 1,151 and Wipro lost 1.97% to Rs 510.50.

Auto stocks edged lower on profit booking. Tata Motors (down 1.97% to Rs 729.90), Mahindra & Mahindra (down 0.81% to Rs 782) and Maruti Udyog (down 0.37% to Rs 810) edged lower

Leading private sector lender ICICI Bank declined 1.10% to Rs 953 and State Bank of India slipped 0.88% to Rs 1537.

Steel maker Tata Steel galloped 4.20% to Rs 660.55 on 13.27 lakh shares. It was the top gainer among Sensex constituents. A recent report by a brokerage states that India's steel consumption will grow 16% annually until 2012, or twice as fast as in the past five years, fueled by demand for construction projects worth $1 trillion. The construction industry, growing 60% a year, will keep steel mills running at near full capacity. The brokerage house expects global steel prices to rise in 2008 and 2009

Bhushan Steel (up 0.38% to Rs 713), JSW Steel (up 2.38% to Rs 670), Hindustan Zinc (up 3.27% to Rs 731) and Sail (up 1.66% to Rs 137.75) were the other gainers from metal sector.

Cement stocks advanced on renewed buying on expectation of strong Q1 June 2007 results. Cement major ACC (up 3.32% to Rs 1071.10), UltraTech Cement Company (up 1.60% to Rs 896.55), Birla Corporation (up 4.28% to Rs 286.20) and Grasim (up 2.77% to Rs 2802) edged higher.

Reliance Energy (REL) vaulted 2.10% to Rs 625.50 on its plans to invest Rs 60,000 crore to add 15,000 mega watts (MW) of power over the next five years. This will boost the company's generation capacity almost 17 times from 941 MW now. The stock was also boosted by market rumors that promoters may hike their stake in REL by 5%, taking it around to 40%

Offshore oil services firms were in demand on reports that rig rates have gone up by 10-15% globally. Dolphin Offshore (up 2.46% to Rs 285), Aban Offshore (up 1.88% to Rs 3075), Selan Exploration (up 7.11% to Rs 105.50) and SEAMEC (up 6.92% to Rs 250.20), all gained

All Asian markets fell today, 10 July 2007, reacting to the sharp overnight fall on the Wall Street. The Japanese market fell, led by exporters such as Toyota Motor Corp. and Sony Corp., as the US dollar weakened against the yen. Japan's Nikkei plunged 1.11% to 18,049.51.

Hong Kong's Hang Seng (down 0.64% at 22,739.03), Taiwan's Taiwan Weighted (down 1% at 9,290.95), and Singapore's Straits Times (down 0.61% at 3,598.26) edged lower.

However China's Shanghai Composite recovered after the initial fall. It was up 0.33% to 3,865.72l

All the European indices were trading with losses.

US stocks fell sharply on Tuesday, 10 July 2007, after investor enthusiasm was hit right at the outset of earnings season after both Home Depot Inc. and Sears Holdings lowered their forecasts.

The Dow Jones declined 148.27, or 1.09%, to 13,501.70. Broader stock indicators also dipped. The Standard & Poor's 500 index fell 21.73, or 1.42%, to 1,510.12, while the Nasdaq Composite index lost 30.86, or 1.16%, to 2,639.16.

As per provisional data, foreign institutional investors (FIIs) bought shares worth a net Rs 583.02 crore, while domestic institutional investors (DIIs) were net sellers of shares worth Rs 206.70 crore on Tuesday, 10 July 2007.

Daily Strategist Note

The NIFTY futures saw a rise of 1.43% in OI with prices in a very narrow range suggesting both bulls and bears were aggressive in the market indicating that the uncertainty may prevail in the market. The Nifty July series futures discount came to 14 points indicating profit booking happened in the market.  The FII were sellers in index futures to the tune of 280 crs and buyers in index options to the tune of 202 crs indicating hedged positions built up by them.  The PCR has changed from 1.54 to 1.55 levels indicates strength may be seen in the market at current levels. IV in the market was 24.10 and HV was 16.82.

 
Among the Big guns, ONGC saw 0.45 % rise in OI with prices coming up indicating buying emerging at lower levels in the counter suggesting some strength may be seen in 09% with prices flat to negative indicating some consolidation may be seen in the stock before any sharp direction o either side.
 
In the TECH counters INFOSYSTCH saw rise of 0.31% OI with prices positive indicating that the counter saw built up of positions in expectation of result thus we may see sharp movement in the stock in next trading sessions.TCS & SATYAMCOMP saw drop in positions with prices up thus suggesting short covering seen in the market. WIPRO saw rise in OI with prices marginally down indicating selling pressure emerging in the counter suggesting some weakness may be seen.
 
In the AUTO counters, M&M saw rise of 1.16%   in OI with prices moving up suggesting long positions built up in the counter suggesting strength may be seen in the stock.  TATAMOTORS & MARUTI saw rise in OI with prices up indicating    long positions built up in theses counter suggesting further strength may be seen.
 
In the Metal pack, TATASTEEL & JSWSTEEL saw drop in OI with prices positive suggesting further strength may be seen in the counter. . SAIL saw rise in OI with prices up indicating fresh long positions built up in this stock suggesting further strength may be seen.  HIINDALCO saw flat OI with prices flat indicating some consolidation may be seen in the counter.NATIONALUM saw 10.18% rise in OI with prices positive suggesting fresh buying emerging thus indicates of further strength. STER saw rise in OI with prices coming down indicating built up of short positions in the counter suggesting some weakness may be seen.
 
We feel that the volume and built up in OI suggests that market may show some volatility with positive bias in the coming days and market is having support around 4350 levels. One should trade with strict stop losses to be adhered too as market is at all time high.

Infosys lowers guidance

All progress has resulted from people who took unpopular positions.

The markets are in a shaky position today with global weakness coupled with a downward revision in Infosys' full-year guidance. The IT heavyweight has reported a consolidated net profit of Rs10.79bn for Q1 FY08 versus Rs11.44bn in the previous quarter. However, revenues were flat at Rs37.73bn compared to Rs37.72bn in the January-March quarter. The company has missed its revenue guidance for the first quarter. It had given Q1 revenue guidance of Rs38.96-39.13bn while reporting its full-year results in April. On the bottomline however, Infosys has surpassed its own guidance of Rs10.05bn. The real disappointment is on the outlook. The company says its FY08 revenues will grow by 17-18% year-on-year and earnings per share (EPS) by 13-14%. FY08 EPS is now seen a t Rs78-79.

We have to wait for the Other Income numbers and more importantly listen to what the IT bellwether has to say on its full-year guidance. The IT sector and the market may take their cues from the comments made by Infosys top management on the outlook going forward. At the same time, one has to remember that the market is at an all-time high. Signals from the global markets are not great this morning and oil prices too remain quite high.

The partially-convertible Indian currency closed yesterday at 40.40 per dollar. Higher visa costs and salary hikes, and the IT biggies surely would have had one of their toughest quarters in recent memory. We will have to wait and hear the guidance and outlook going ahead. The bottomlines of most software firms are likely to be hit owing to the 6.5% sequential growth in the rupee over the January to March quarter. Even as the market has recovered from the February-March jolt, IT shares have underperformed by a wide margin. So, in a way the bad news may be factored in. Any untoward development, such as a downward revision in FY08 EPS guidance, could peg them back further. On the flip side, if the "expected bad news" from Infosys is not so bad, there could be a spike up in IT stocks and the market.

Global markets have tumbled, led by renewed concerns over the US housing market. So, we expect a weak opening on the back of the grim global scenario. But, our market will have different issues to grapple with today. All in all, it promises to be an action-packed day.

Disappointing earnings forecasts from the retail sector, renewed concerns about the subprime mortgages and rising crude oil prices sent US stocks tumbling on Tuesday.

Both the Standard & Poor's 500 Index and Nasdaq Composite Index posted their worst decline in a month on growing concerns that the housing slump will hamper earnings as companies start to report second-quarter results this week. Oil's rise above $73 a barrel also dimmed the outlook for profits.

The S&P 500 lost 21.73 points, or 1.4%, to 1510.12. The Dow Jones Industrial Average plunged 148.27 points, or 1.1%, to 13,501.70. The Nasdaq slid 30.86 points, or 1.2%, to 2639.16.

US stocks extended their decline after Federal Reserve Chairman Ben S. Bernanke said inflation expectations remain imperfectly anchored in part because the public doesn't know the central bank's goal for prices. Still, increases in energy prices over the past few years have not led either to persistent inflation or to a recession in contrast to the 1970s, he said in a speech in Cambridge, Massachusetts.

Across the Atlantic, European stocks suffered their biggest drop in a month after Home Depot cut its forecast, copper prices retreated and the dollar fell to a record low against the euro. Europe's Stoxx 600 index lost 1.1% to 394.02.

The German DAX 30 dropped 1.4% to 7,964.76, the French CAC 40 declined 1.4% to 6,019.22 and the UK's FTSE 100 closed down 1.2% at 6,630.90. 

In the emerging markets, the Bovespa in Brazil was down nearly 1% at 55,882 while the IPC index in Mexico fell 1.1% to 31,743 and the RTS index in Russia dropped 1.1% to 1977.

Asian stocks fell for the first time in three days after metals prices dropped and earnings reports in the US suggested that demand is cooling in the region's biggest export market.

The Morgan Stanley Capital International Asia-Pacific Index slid 0.7% to 157.58 at 10:28 a.m. in Tokyo, after rising to a record yesterday. All 10 industry groups fell. The Hang Seng in Hong Kong was down 225 points to 22,660.

Japan's Nikkei dropped 1.2% to 18,035.90, set for its biggest decline in two weeks. Exporters were dragged lower after the yen yesterday posted its second- biggest jump this year. Other markets open for trading declined.

Bulls took a breather ahead of the result announcement by the IT bellwether Infosys. After opening on a strong note profit booking in the index heavy weights like Bharti Airtel, SBI, L&T and ACC dragged the markets lower. The broader index i.e. The BSE Mid-Cap and the Small Cap indexes also were under pressure. However, support from the Auto and the IT index saved the markets from a huge fall. Finally, the 30-share Sensex lost 35 points to close at 15009. NSE-50 Nifty slipped 13 points to close at 4406.

GMR Infrastructure spurred by over 6.5% to Rs795 after the company announced that its venture won tender for Sabiha Gokeen Airport at Istanbul, Turkey. The scrip has touched intra-day high of Rs797 and a low of Rs746 and has recorded volumes of over 3,00,000 shares on BSE.

Suzlon declined by 3.3% to Rs1445 amid reports that the government is probing the accounts of its subsidiaries as part of a wider exercise to look into the use of IPO money since 2004. The scrip touched intra-day high of Rs1490 and a low of Rs1435 and recorded volumes of over 3,00,000 shares on NSE.

L&T declined by 1.1% to Rs2389. The company secured order worth Rs5.4bn from IOC. The scrip touched intra-day high of Rs2435 and a low of Rs2380 and recorded volumes of over 8,00,000 shares on NSE.

Tulip IT advanced by 1.5% to Rs805 after the company announced that it has secured ILD License from DOT. The scrip touched intra-day high of Rs842 and a low of Rs797 and recorded volumes of over 2,00,000 shares on NSE.

FMCG stocks were on the receiving end. ITC slipped by 1.3% to Rs153, Colgate was down by 1% to Rs382, Britannia slipped by 2% to Rs1682 and Tata Tea dropped 1% to Rs55. However, HLL gained by 1.6%to Rs198.

Capital Good stocks were on the receiving end as profit booking dragged tem lower. Frontline stock L&T slipped 1.1% to Rs2389, BHEL as down by 1% to Rs1565, ABB declined by 0.8% to Rs1106 and Gammon India dropped 1% to Rs425.

IT stocks ended firm despite the rupee strengthening against the US Dollar currently at Rs40.40 per dollar. Satyam Computer advanced by 1% to Rs497; Infosys gained by 1.3% to Rs2020 and TCS was up by 0.6% to Rs1183.

Auto stocks held on to their gains led by heavy weight Tata Motors as the scrip surged by over 3.8% to Rs743, Maruti was up by 2.3% to 813, M&M gained by 1.01% to Rs787 and Bajaj Auto added 1% to Rs2126.

Cement stocks took the day off after continuously rising for couple of trading sessions. Gujarat Ambuja dropped 2.5% to Rs129, ACC was down by 1.2% to Rs1035 and Grasim declined 1.2% to Rs2727.

Results Today:

Bajaj Auto Finance, Bihar Tubes, Chennai Petro, Country Club, GV Films, iGate Global and Maharashtra Scooters.

Fund Activity:

FIIs were net buyers of Rs5.83bn (provisional) in the cash segment on Monday. On the other hand, local institutions were net sellers at Rs2.07bn. In the F&O segment, FIIs offloaded stocks worth Rs1.43bn on the same day.

On Friday, FIIs poured in Rs8.89bn in the cash segment. Some part of this may still have been due to the ICICI Bank follow-on public offering. Mutual Funds were net sellers of Rs1.91bn.

Major bulk Deals:

Credit Suisse has sold Ankit Metal; Kotak PMS has bought Bihar Tubes; Bear Stearns has picked up Euro Ceramics; Macquarie Bank has sold Hexaware; Citigroup Global has purchased Macmillan; Goldman Sachs has bought Om Metal; HSBC MF has picked up Pritish Nandy Communications; UBS has purchased Tricom India and HSBC Global has bought Welspun India.

Insider Trades:

Spentex Industries Ltd: Schemes of Sundaram BNP Paribas Mutual Fund a) Sundaram BNP Paribas Select Midcap; b) Sundaram BNP Paribas Tax Saver (OE); c) Sundaram BNP Paribas SMILE Fund; d) Sundaram BNP Paribas Rural India Fund has sold in open market 1538273 equity shares of the company on 5th July, 2007.

Lower Circuit:

Anant Raj, Zenith Info and Best & Cromp.

Upper Circuit:

Ram Informatics, Tripex Overseas, Info edge, Tanla, Kothari Products, Ganesh Firgings, Silverline, Bank of
Rajasthan, Ruby Mills and Diamond Cables.

Delivery Delight :( Rising Price & Rising Delivery)

Ashok Leyland, Bajaj Auto, Bank of India, CESC, Cipla, Dr Reddy's, Essar Shipping, Godrej Industries, Nagarjuna Fertilizers, ONGC, SRF and SAIL.

Abnormal Delivery:

Thermax, Kesoram Industries, IGL, Federal Bank, UTI Bank, Sun Pharma Biocon and NTPC.

Major News & Announcements:

S&P cuts rating on Tata Steel to 'BB'

GAIL, Apollo Tyres sign agreement for steam conversion project

HDFC Bank Q1 profit at Rs3.21bn (up 33.7%), total income at Rs26.42bn (up 47%)

Output at six key industries grows 8.7% in May

GMR Infrastructure consortium wins bid for Sabiha Gokeen Airport at Istanbul, Turkey

Tulip IT bags ILD License from DoT

Time Technoplast to discontinue operations at Sahibabad Unit

Reliance Energy would add 15000 MW capacity, says Anil Ambani

L&T gets order worth Rs5.4bn from IOC

HEG to hive of Steel unit

Shasun Chemicals sign technology-licensing Agreement with Lundbeck, Danish Co.

Dollex Industries to consider stocks split on 19th July

Ranbaxy receives final USFDA approval for Amlodipine Besylate Tablets

Intraday Stock Ideas

Nifty (4406) Supp 4385 Res 4427

Buy Jet Air (803)
SL 797 Tgt 814, 817

Buy Nitin Fire (410)
SL 405 Tgt 420, 422

Buy Can Bank (272)
SL 268 Tgt 280, 282

Sell Orchid Chem (245)
SL 249 Tgt 237, 325 

Sell Amtel Auto (409)
SL 414 Tgt 400, 398

Morning Call

Market Grape Wine :

In House :

Nifty at a support of 4380 & 4351 levels with resistance at 4442 & 4463 levels .

Buy : Intraday : RNRL above 41.1 target of 44.5 s/l of 39.9

Buy : Intraday : RenukaSugar above 655 target of 675 s/l of 649

Buy : in F&O Maruti above 810 target 825 s/l of 804

Sell : in F&O UltraCemco below 877 target of 855 s/l of 885

Out House :

Markets at a support of 14909 & 14848 levels with resistance at 15115
& 15191 levels .

Buy : SBIN at dips

Buy : Century & JPAsso at dips

Buy : Bhel & Divis at dips

Buy : ACC at dips

Buy : IDBI & IFCI at dips

Buy : ICRA & Madhucon

Buy : Sail & JSW

Buy : IBReal & DLF at dips

Dark Horse : WelspunGuj , ACC , BajajHind , Divis , SBIN ,
IbullReal & Century