Eveninger - July 26 2007
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Thursday, July 26, 2007
Short Term Trading Calls
Buy Reliance Capital with stop loss of Rs 1180 for target of Rs 1375.
Buy Educomp with stop loss of Rs 2200 for target of Rs 2760.
Buy Global Vectra with stop loss of Rs 198 for short-term target of Rs 236.
Buy Lumax Auto Technology with a stop loss of Rs 80 for short-term target of Rs 112.
Sensex recovers on late buying
The market resumed in the green despite weak Asian cues and rallied sharply led by capital goods and auto stocks. Energy majors Reliance Industries and ONGC also supported indices. The Sensex came of its high as profit selling began in mid-morning trades and slipped into the red as investor confidence waned. The index majors ACC and Bharti Airtel led the slump and the Sensex touched the intra-day low of 15,654. The market remained subdued thereafter but recovered on a hectic buying in heavyweights, IT and pharma stocks towards the close. The Sensex finally wrapped up the session with the gains of 77 points at 15,776. The Nifty closed 31 points up at 4,620.
The breadth of the market was positive, with gainers outnumbering losers in the ratio of 1.42:1. Of the 2,657 stocks traded on the BSE 1,529 stocks advanced, 1,062 stocks declined and 66 stocks ended unchanged. Among the sectoral indices the BSE IT Index flared up by 1.92%, the BSE Realty Index rose 1.54%, the BSE Oil & Gas Index and the BSE HC Index moved up by 1.49%. However, the BSE Bankex Index, the BSE CG Index and the BSE Metal Index closed in the red.
Among the index heavyweights, Ranbaxy was the star performer and surged 9.49% at Rs373. Cipla spurted 4.19% at Rs194, Maruti Udyog scaled up 3.88% at Rs841, Wipro soared 3.24% at Rs515, TCS advanced 3.21% at Rs1,186, Reliance Energy moved up by 2.80% at Rs780 and M&M added 2.36% at Rs801. However, ACC tumbled 4.56% at Rs1,022, Ambuja Cement slipped 2.84% at Rs125, Bharti Airtel fell 2.28% at Rs925, BHEL was down 1.93% at Rs1,755 and HDFC Bank shed 1.82% at Rs1,219.
IT stocks registered significant gains. Rolta India surged 4.35% at Rs493, Mphasis soared 3.29% at Rs278, Infosys firmed up by 2.26% at Rs2,035 and HCL Technologies added 1.81% at Rs327.
Over 2.84 crore IFCI shares changed hands on the BSE followed by Manglore Chemical & Fertilizer (1.47 crore shares), Suryachakra Power Corporation (1.36 crore shares), IDFC (1.31 crore shares) and IKF Technologies (80.04 lakh shares).
HDFC was the most actively traded counter on the BSE and registered a turnover of Rs369 crore followed by IFCI (Rs160 crore), Reliance Industries (Rs153 crore), IDFC (Rs151 crore) and DLF (Rs145 crore)
IT stocks stage a comeback
The market posted modest gains amid high volatility today, 26 July 2007, the day the July 2007 derivatives contracts expired. It was firm in the first half of the day following healthy rollover of derivative positions from the July 2007 series to the August 2007 series. But it weakened in mid-afternoon trade on profit booking, before bouncing back again in late trade. The turnover in NSE's derivatives segment hit record high for the third consecutive day.
Shares from auto, pharma and IT sectors were in demand, while cement, banking and capital goods stocks edged lower. Sugar stocks spiked at the fag end of the trading session. Global markets were subdued.
Meanwhile, the International Monetary Fund (IMF) on Wednesday, 25 July 2007, revised upwards its growth projections for the global economy, citing accelerating growth in China, India and Russia, while the United States appears to be regaining momentum. The IMF's updated World Economic Outlook forecast global growth of 5.2% for both calendar year 2007 and 2008, up from its earlier forecast of 4.9% growth for both years.
The BSE 30-share Sensex rose 76.98 points to 15,776.31. It opened higher at 15,768.28 and jumped to a high of 15,812.27. The index also slipped to a low of 15,654.40 at 13:01 IST
The S&P CNX Nifty was up 31.10 points to 4,619.80. The Nifty July 2007 derivatives contracts expired today. Nifty August 2007 futures settled at 4581.50, a sharp discount of 38.30 points as compared to spot closing.
The NSE F&O turnover was a record Rs 79,995.85 crore as compared to Rs 72,365.46 crore on Wednesday, 25 July 2007.
The market breadth, indicating the overall health of the market, held firm as small- and mid-cap stocks saw continued buying interest. On BSE, 1,558 shares advanced as compared to 1,100 that declined, while 73 remained unchanged
The BSE Mid-Cap index rose 35 points or 0.5% to 6,790.50 while the BSE Small-Cap index advanced 90 points or 1.1% to at 8,145.86.
The total turnover on BSE amounted to Rs 5,719 crore as compared to Rs 5,929 crore on Wednesday, 25 July 2007.
Among the 30-Sensex pack, 18 gained and the rest declined
IT pivotals rose on stock-specific buying despite the Indian rupee heading towards a nine-year high on Thursday, 26 July 2007, in anticipation of strong capital inflow.
India’s second largest software services exporter Infosys Technologies gained 1.81% to Rs 2,026 after it bagged a $250-million (around Rs 1,010 crore) contract from Royal Philips Electronics. It is one of the largest acquisition-cum-outsourcing deal by an Indian information technology firm.
TCS (up 3.13% to Rs 1185), Wipro (up 4.22% to Rs 520) and Satyam Computers (up 1.64% to Rs 494.90) gained in anticipation of further mergers and acquisitions activity in the IT sector. The BSE IT Index gained 1.92% at 5,001.24, and was the top gainer among the sectoral indices on BSE.
In early trade, the rupee was at 40.31/32 per dollar, strengthening from the previous close of 40.3500/3575 and inching towards from a nine-year high of 40.20 hit earlier this week.
India’s largest drug manufacturer by sales Ranbaxy Laboratories jumped 9.95% to Rs 375 on 19.34 lakh shares. It was the top gainer from the Sensex pack. The stock rose after Ranbaxy today, 26 July 2007, reached an agreement with GlaxoSmithKline (GSK) to end their litigation in the US on Valtrex (valacyclovir hydrochloride tablets) used in the treatment of herpes.
Other pharma stocks Cipla (up 4.16% to Rs 193.90) and Dr Reddy’s Laboratories (up 0.29% to Rs 667.40) also edged higher. The BSE Health Care Index was up 1.5% at 3,788.36.
Auto stocks advanced on fresh buying interest in anticipation that sales will pick up after monsoon, generally a slack season. Bajaj Auto (up 1% to Rs 2378) and Mahindra & Mahindra (up 2.55% to Rs 802) advanced. The BSE Auto Index closed at 5,096.44, up 1.5%.
Maruti Udyog vaulted 3.38% to Rs 837 after India’s biggest small car maker today, 26 July 2007, reported a 35.1% growth to Rs 499.60 crore in net profit in Q1 June 2007 over Q1 June 2006. Net sales were up 26% at Rs 3,930.82 crore. Maruti Udyog will be renamed as Maruti Suzuki India.
Cement shares declined for the second straight day on fresh selling following reports that the goverment is easing cement import norms in an attempt to rein in prices. India’s second largest cement manufacturer ACC plunged 4.55% to Rs 1,021.80 on 3.82 lakh shares. It was the top loser from the Sensex pack.
Ambuja Cements (down 3% to Rs 124.50) and Shree Cement (down 2.86% to Rs 1,280) also slipped.
Cement scrips had fallen yesterday, Wednesday, 25 July 2007, following reports that the Monopolies and Restrictive Trade Practices Commission (MRTCP) had on Tuesday, 24 July 2007, ordered a probe into the business practices of 14 leading cement manufacturers.
The country’s biggest private sector company Reliance Industries (RIL) advanced 1.92% to Rs 1,940, after striking an all-time high of Rs 1,948. RIL's results are due on Saturday, 28 July 2007. The market expects surprise on the positive side.
Capital goods heavyweights Bhel (down 2.05% to Rs 1,753) and L&T (down 1.13% to Rs 2,544.50) declined on profit booking after a recent rally. The BSE Capital Goods index lost 1.35% to 13,247.03, and was the worst performing sectoral index on BSE
Top cellular services provider Bharti Airtel dropped 2.30% to Rs 925 on profit taking even as it reported robust Q1 June 2007 results. The stock had hit an all-time high of Rs 960 in early trade. Bharti Airtel’s consolidated net profit as per US GAAP jumped 100% to Rs 1,511.60 crore in Q1 June 2007 over Q1 June 2006, exceeding market expectations. Revenue rose 53% to Rs 5,904.60 crore in Q1 June 2007 over Q1 June 2006. Revenue growth was within market expectation.
Bank shares drifted lower on selling pressure. HDFC Bank (down 2.12% to Rs 1,215), State Bank of India (down 1.2% to Rs 1,549) and ICICI Bank (down 1.51% to Rs 945) slipped. With inflation under control, the Reserva Bank of India (RBI) is likely to keep rates steady when the monetary policy comes up for review on 31 July 2007. However, it remains to be seen whether the central bank will raise the cash reserve ratio (CRR) to suck out excess liquidity in the banking system. BSE Bankex lost 1.2% at 8,185.52.
India’s biggest cigarette maker ITC lost 0.21% to Rs 165.50. The stock had surged almost 9% on Wednesday, 25 July 2007, on market talks it may announce demerger of its agri business. ITC announces Q1 June 2007 results tomorrow, 27 July 2007.
Sugar stocks spurted at the fag end of the trading session. Shree Renuka Sugars (up 5.51% to Rs 635), Bajaj Hindustan (up 4.30% to Rs 160.20) and Balrampur Chini Mills (up 5.45% to Rs 70.65), galloped.
NDTV (up 4.44% to Rs 400.90) and IFCI (up 9.43% to Rs 58) rose on build-up of fresh positions after NSE lifted the ban building fresh derivatives positions in these two stocks.
IDFC rose 2.30% to Rs 134.90 after 74.32 lakh shares changed hands at Rs 134 per share on BSE in early trade. IDFC’s net profit rose 38.42% to Rs 167.81 crore in Q1 June 2007 over Q1 June 2006. Total income surged 73.19% to Rs 556.8 crore . The company announced the Q1 results after trding hours yesterday, 25 July 2007.
Cummins India lost 0.17% to Rs 382.80 after it reported 26.07% rise in net profit to Rs 64.02 crore in Q1 June 2007 over Q1 June 2006. Total income was up 38.7% to Rs 565.49 crore in Q1 June 2007 over Q1 June 2006.
3i Infotech rose jumped 5.20% to Rs 306.35 after its net profit rose 39.09% to Rs 21.42 crore in Q1 June 2007 over Q4 march 2007. Sales were up 25.43% to Rs 118.81 crore in Q1 June 2007 over Q4 March 2007.
Drug maker Wochkardt gained 4.47% to Rs 400 after it reported a 39.6% growth in net profit in 39.6% growth in net profit to Rs 69.10 crore in Q1 June 2007 over Q1 June 2006.
Multiplex cinema operator Shringar Cinemas gained 3.16% to Rs 62 after it reported a 314% growth in net profit to Rs 5.22 crore in Q1 June 2007 over Q1 June 2006.
Bombay Dyeing & Manufacturing Company advanced 6.0% to Rs 618 on promoters' intention to raise their stake. The Wadia family, directly and indirectly, owns 43% in the textile company.
Sterlite Industries declined 2.90% to Rs 651 after posting 9.85% fall in net profit in Q1 June 2007 to Rs 201.46 crore over Q1 June 2006. Total income rose 31.70% to Rs 3,165.85 in Q1 June 2007 over Q1 June 2006.
India's largest wind turbine generator Suzlon Energy plunged 7.98% to Rs 1,290 after its net profit declined 53.8% to Rs 89.4 crore in Q1 June 2007 over Q1 June 2006. Total income dipped 8.85% to Rs 862.9 crore in Q1 June 2007 over Q1 June 2006. The company made this announcement before market hours today, 26 July 2007.
Hitachi Home & Life Solutions (India) galloped 11.26% to Rs 123.50 after its net profit jumped 95.83% to Rs 17.37 crore in Q1 June 2007 over Q1 June 2006. Sales rose 27.95% to Rs 148.49 crore.
Japanese shares fell today, 26 July 2007, on decline in stocks of exporters such as Canon Inc. and Advantest Corp., although strong earnings reports lifted shares of Honda Motor Co. and Nintendo Co. Japan's Nikkei slipped 0.88% at 17,702.09, while Hang Seng declined 0.64% to 23,211.69.
China's main stock index reached a new high on opening today, 26 July 2007, on strong corporate earnings. The Shanghai Composite Index opened higher and hit 4,357.796, breaching the previous high of 4,335.96 set on 29 May 2007. It was up 0.52% to 4,346.51
European markets were trading slightly weaker today, 26 July 2007.
Wall Street rose yesterday, 25 July 2007, on some strong earnings and new deals, but not without a struggle, as mounting signs of a tougher lending climate again dogged investors. The Dow Jones Industrial Average gained 68.12 points, or 0.50%, to 13,785.07. Broader stock indicators also rose in shaky trading. The Standard & Poor's 500 index climbed 7.05 points, or 0.47%, to 1,518.09, and the Nasdaq Composite index advanced 8.31 points, or 0.31%, to 2,648.17.
Crude oil rose today, 26 July 2007, for the second day in New York after a report showed US oil inventories fell for a third week and gasoline demand was near a one-year high. Crude oil for September 2007 delivery gained as much as 50 cents, or 0.7%, to $76.38 in after-hours electronic trading on the New York Mercantile Exchange. It was at $76.17 in Singapore
Market may remain volatile
The market may witness cautious trend as US indices closed on a firm note yesterday and Asian indices are exhibiting mixed trends in the morning trades. Although the bias remains positive, investors should maintain caution as profit taking at higher levels may pull down the market. The market is likely to remain under pressure on account of unwinding of position ahead of July series derivative contracts. Among the local indices the Nifty could test 4550 and 4500 on the downside while on the upper side it may move up to 4300. The Sensex has a likely support at 15480 and may face resistance at 15850.
US indices advanced on Wednesday, influenced by positive earnings news surging off credit and housing market jitters. While the Dow Jones gained 68 points to close at 13785, the Nasdaq advanced by 12 points at 2651.
Indian ADRs had a mixed outing on US bourses. VSNL lost 2.97% while Satyam and ICICI Bank shed over 1% each. Among other laggards Infosys, Tata motors, HDFC Bank, Patni Computer and Rediff closed with the marginal losses. However, MTNL gained 2.80%, Wipro and Dr Reddy's Lab moved up marginally.
In the crude oil front, the Nymex light crude oil for September series surged by $2.32 to close at $75.88 per barrel. The bullion Comex gold for August delivery tumbled $11 to settle at $673.80 a troy ounce.
Intraday Calls
NIFTY (4589) Supp 4567 Res 4621
Buy ONGC (934) SL 927
Target 946, 950
Buy Zee (338) SL 334
Target 345, 348
Buy HPCL (257) SL 252
Target 265, 267
Sell Bharat Forge (294) SL 298 Target 287, 284
Sell Amtek Auto (391) SL 395 Target 383, 380
Bulls set to swing
Win as if you were used to it, lose as if you enjoyed it for a change.
The bulls will hope to get back to their winning ways after taking a break on Wednesday. Global weakness has not caused a major dent to the sentiment as yet. We may see the main stock indices touching new highs. Though provisional data shows marginal net sale figure by the FIIs on Wednesday, it may just be an aberration rather than a potential change in trend.
Coming to today's session, we expect a smooth rollover in the F&O segment. Despite, Wednesday's weakness, bulls continue to have an edge over the bears. Some consolidation or correction going ahead could always take place. The derivative settlement is also likely to increase the intra-day gyrations. A few key results may also have some bearing on the direction of the market today.
The outlook on the Indian economy is strong with inflation softening considerably from a two-year high hit in January. Interest rates seems to have stabilised, albeit at a higher level. The RBI is unlikely to jack up key short-term lending rates at the upcoming review of its annual policy, on July 31. However, the abundant liquidity in the banking system and the non-stop rise in the rupee may prompt some kind of a response from the central bank. One has to watch out for that.
Globally, the housing market crisis and trouble in the credit markets in America, higher crude oil prices and overheating in China are some of the key issues to keep an eye on. Also, interest rates may go up in key economies like the UK, Europe and Japan over the next few months. The uncertainty over what could be the next move by the Federal Reserve is also keeping investors across the globe on tenterhooks.
Wipro may be in action amid reports that the company, along with Coke and Danone are in the race for acquiring Bisleri, the popular bottled water business from Ramesh Chauhan. Sun Pharma will attract some attention as Sanofi Aventis has sued the domestic pharma major to prevent it from launching a generic version of the French drug maker's blockbuster cancer treatment Eloxatin.
Public sector Oil Marketing Companies (OMCs) will be in focus amid media reports that pressure is mounting on the Government to raise local retail prices of petrol and diesel following the spike in crude oil prices. Firstsource is the stock to watch out for as the BPO firm is reportedly eyeing a big-ticket acquisition in the US. Karuturi Networks is also expected to be in the limelight as a financial daily reports that it is looking at acquisitions in the US.
US stocks managed modest gains on Wednesday on the back of positive earnings from Amazon.com and Boeing, while investors shrugged off credit and housing market jitters. Energy shares rallied on a surge in oil prices.
The S&P 500 added 7 points, or 0.5%, to 1518.09. The Dow Jones Industrial Average advanced 68 points, or 0.5%, to 13,785.07. The Nasdaq Composite Index gained 8 points, or 0.3%, to 2648.17.
In its so-called Beige Book report, the Federal Reserve revealed modest economic growth in the United States, and further declines in homebuilding and real estate in most regions.
Early gains quickly vanished after the National Association of Realtors said that the pace existing home sales fell more than expected in June.
Adding pressure to stocks was news that private equity firm Cerberus Capital was experiencing difficulties tapping debt markets for the $20bn needed for the purchase of Chrysler fanned credit market fears.
Oil prices surged above $75 a barrel in New York. US light crude soared $2.34 to $75.90 a barrel on the New York Mercantile Exchange. Treasury prices edged higher, leaving the yield on the 10-year note at 4.9%, down from 4.91% on Tuesday. The dollar gained against the euro and the yen.
European stocks closed lower as investors reacted with dismay to earnings and outlooks from Volvo, Randstad and Siemens and the postponing of a sale of Chrysler's bonds.
The pan-European Dow Jones Stoxx 600 lost 0.9% to 385.80. The German DAX 30 declined 1.5% to 7,692.55 and the French CAC-40 fell 1.2% to 5,837.11. The UK's FTSE 100 dropped 0.7% to 6,454.30.
Major Latin American equity markets closed mixed. Mexican stocks succumbed to pressure from a weak report on US housing sales while Brazilian equities pushed through the sluggish data to finish higher.
In Sao Paulo, the Bovespa stock index closed up 207 points, or 0.4%, at 56,001.30. In Mexico City, the IPC index fell 359 points, or 1.1%, to 31,103.53. The Merval index in Argentina finished nearly flat at 2,242.78. But the IPSA index in Chile fell 30 points, or 0.9%, to 31,103.53.
Among the other emerging markets, the RTS index in Russia shed 0.1% to 2047.
It is a mixed picture in Asian markets this morning. The Nikkei in Tokyo was down 46 points at 17,811 while the Hang Seng in Hong Kong was up 141 points at 23,502. The Kospi in Seoul was flat at 2004 and the Straits Times in Singapore dropped 6 points at 3627.
The Morgan Stanley Capital International Asia Pacific Index lost 0.4% to 160.03 as of 10:44 a.m. in Tokyo, after falling 0.5% yesterday. Australia's S&P/ASX 200 Index dropped 1%, the only other loser among markets open for trading.
Bears were back on the street ahead of F&O expiry as a volatile session in red. Global weakness and profit booking in the Realty, Auto, Capital Good and Metal stocks dragged the benchmark Sensex below the 15700mark and NSE Nifty below the 4600mark. Cement stocks led the downfall after reports stated that trade practices regulator ordered an investigation into an alleged price manipulation by top 14 cement manufacturers. Even broader market i.e. Mid-Cap and the Small Cap indexes also were on the receiving end. However, FMCG index was the only index that ended in green led by heavyweight ITC and Hindustan Lever. Finally, BSE 30-share Sensex slipped 95 points to close at 15699. NSE-50 Nifty lost 32 point to close at 4588.
ONGC gained by 2% to Rs934 after the company announced its Q1 result with net profit at Rs46.1bn (up 12%). However, its net sales were at Rs136.88bn (down 6.2%). The scrip touched an intra-day high of Rs940 and a low of Rs905 and recorded volumes of over 13,00,000 shares on NSE.
Reliance Capital surged by over 3.5% to Rs1243 after the company announced its Q1 group result with net profit at Rs3.25bn (up 187%) and net sales at Rs11.11bn (up 212%). The scrip touched an intra-day high of Rs1255 and a low of Rs1190 and recorded volumes of over 30,00,000 shares on NSE.
SAIL lost by over 5% to Rs153. The company announced its Q1 result with net profit at Rs15.25 (up 10%) and net sales at Rs80.4 (up 6.3%). The scrip touched an intra-day high of Rs161 and a low of Rs152 and recorded volumes of over 1,00,00,000 shares on NSE.
Educomp Solutions rallied by over 7.5% to Rs2408 after the company announced that it has signed agreement with Government of Chattisgarh to set up centers in 323 locations. The scrip touched an intra-day high of Rs2433 and a low of Rs2200 and recorded volumes of over 9,00,000 shares on NSE.
Nagarjuna Construction was down by 3% to Rs202. The company announced that it has secured a Civil Construction Contract valued at Rs2.85bn comprising of Design, Engineering, Construction, Development of a Road Project from Pondicherry to Tindivanam. The scrip touched an intra-day high of Rs208 and a low of Rs200 and recorded volumes of over 22,00,000 shares on NSE.
Cement stocks lost ground amid news that trade practices regulator MRTPC has ordered an investigation into an alleged price cartelisation by top 14 cement manufacturers. ACC dropped by over 4.5% to Rs1065, Grasim was down by 2% to Rs2966 and Gujarat Ambuja declined over 4% to Rs128.
IT stocks also were under the pressure as forward contracts in the foreign exchange market has turned into discounts from premium and the rupee also constantly strengthening against the dollar as it hit a nine-year high of 40.27 per dollar. Satyam Computer dropped by over 5.5% to Rs487, Wipro was down by 1.5% to Rs498, Polaris declined by 4% to Rs125 and i-Flex declined 3% to Rs2267.
Capital Good stocks were on the receiving end as of profit booking dragged them lower. ABB lost by 1.2% to Rs1134, BHEL was down by over 2.5% to Rs1786 and L&T dropped by over 3.5% to Rs2568.
FMCG stocks stood firm in a choppy market led by gains in the heavyweight ITC as the scrip surged by over 9% to Rs165 on speculation that cigarette sales will beat estimates, Hindustan Unilever gained by 1% to Rs201 and Colgate edged higher by 0.5% to Rs371 and Dabur marginally added 0.3% to Rs100.
Auto stock were in reverse gear as heavyweight Bajaj Auto fell over 3.5% to Rs2353, Tata Motors was down by 2.8% to Rs726, M&M dropped 1.7% to Rs781 and Maruti declined 1.2% to Rs809.
Pharma stocks were in poor health. Glenmark lost 2.6% to Rs687, Dr Reddy’s Lab was down by 1.7% to Rs660, Cipla declined 1.2% to Rs186 and Ranbaxy lost 1% to Rs346.
Results Today:
ABB, Alfa Laval, Apollo Tyres, Apar Industries, AstraZeneca Pharma, Bajaj Electricals, Balaji Telefilms, Bharti Airtel, Crompton Greaves, Cummins India, Dabur Pharma, Dena Bank, EIH, Everest Kanto, Federal Bank, Gayatri Projects, GSK Consumer, GSK Pharma, Gujarat State Petronet, Gujarat Gas, Hikal, ICRA, Indraprastha Gas, ING Vysya Bank, Jyoti Structures, Lanco Infratech, MRF, Maruti, Patni, Punjab Tractors, Rajesh Exports, Shree Renuka Sugars, RPG Transmission, Shree Ashtavinayak, Subex, Sterlite Optical, Taj GVK Hotels, Tata Power, VIP Industries and West Coast Paper.
Fund Activity:
FIIs were net sellers of Rs354.7mn (provisional) in the cash segment on Wednesday. On the other hand, local institutions were net buyers at Rs1.5bn. In the F&O segment, FIIs were net sellers at Rs11.75bn.
On Tuesday, FIIs poured in Rs12.86bn in the cash segment. Mutual Funds were net sellers of Rs3.68bn.
Major bulk Deals:
Birla Sunlife has bought Esab India; Merrill Lynch has picked up Fact Enterprise; Citigroup and Goldman Sachs have purchased Fedders Lloyd; Reliance Capital has bought ICRA; Goldman Sachs and fidelity have purchased Lloyd Electric; Merrill Lynch has picked up Modison Metals and Abn Amro Bank has sold Suryachakra Power.
Insider Trades:
Gitanjali Gems Ltd: Goldman Sachs Investments (M) I Limited has purchased from open market 1000000 equity shares of the company on 19th July, 2007.
Lower Circuit:
Hindustan Oil exploration, Kothari Products, Prism Cement, IID Forgings and Vakran Software.
Upper Circuit:
Ganesh Forgings, TCI Industries, Anant Raj Industries, Oil Country and Jaybharat Textiles
Delivery Delight (Rising Price & Rising Delivery):
Indian Hotels, NDTV, IDFC, Ashok Leyland and HCC.
Abnormal Delivery:
Punjab Tractors, Adlabs, CESC, GAIL and L&T.
Major News & Announcements:
Infosys wins a seven-year, US$250mn contract from Philips
ONGC Q1 profit at Rs46.1bn (up 12%) and net sales at Rs136.88bn (down 6.2%)
Bombay Dyeing Q2 net profit at Rs691mn(up 100%), net sales at Rs3.04bn (up 6%)
Yes Bank Q1 profit at Rs360mn (up 113%) and revenue at Rs3.48bn (up 169%)
APIL Q1 profit at Rs175mn (up 50%), revenue at Rs2.5bn (up 8.2%)
Educomp Solutions signs agreement with Govt of Chattisgarh
BHEL wins Rs4.31bn order from IOC
Nagarjuna Construction secures order worth Rs2.85bn
Chambal Fertilizers Q1 profit at Rs617mn (up 92%) and revenue at Rs6.4bn (up 20%)
Nicolas Piramal Q1 net profit at Rs343.9mn (down 32%) and sales at Rs3.95bn (down 0.17%)
PNB Q1 net profit at Rs4.25 (up 15.4%) and revenue at Rs37.95bn (up 29.8%)
SAIL Q1 profit at Rs15.25bn (up 10%), net sales at Rs80.4bn (up 6.3%)
Reliance Capital Q1 group profit at Rs3.25bn (up 187%), net sales at Rs11.11bn (up 212%).
Asian Granito India
Promoted by Kamleshbhai Patel, Mukeshbhai Pate and Vinodbhai Patel, Asian Granito India manufactures vitrified tiles. The company currently has an installed capacity of 14,000 square meters(sq mt) per day and is second largest domestic producer of vitrified tiles controlling 10.57% of the installed capacity to produce domestic vitrified tiles. Asian Granito’s subsidiary, Asian Tiles, manufactures ceramic floor tiles. It has a capacity of 7,000 sq mt per day.
To modernise and expand its existing vitrified plant and set up a wall tile unit, Asian Granito is coming out with an initial public offering (IPO). For the proposed wall-tile plant and for future expansion requirement, the company has purchased 167,565 sq mt of agricultural land (at total cost of Rs 1.07 crore), of which 99,780 sq mt have been acquired from promoters. The average cost of acquisition of land from outsiders works out to Rs 35 per sq mt, while from promoters Rs 83 per sq mt, higher by 141%.
Strengths
- 2,000 sq mt per day of vitrified-tile capacity is likely to come on stream from October 2007.This will increase the vitrified-tile capacity to 16,000 sq mt per day. Production of vitrified tiles will be 4.51 million sq mt in the year ending March 2007 (FY 2007) and projected to be 5.2 million sq mt in FY 2008.
- The wall-tile unit is likely to come on stream in January 2008. Production is projected to be 0.68 million sq mt in FY 2008, 2.89 million sq mt in FY 2009 and 3.06 million sq mt in FY 2010. Realisation of wall tiles is currently about Rs 183 per sq mt.
- From 1 July 2007, China has reduced the export subsidy for producer of vitrified tiles to 3%, from 8% earlier. This is likely to improve competitiveness of domestic vitrified manufacturers compared with importers of vitrified tiles who have received antidumping exemption: Nitco and Kajaria. Imports of vitrified tiles have increased from Rs 11.66 crore in FY 2004 to Rs 66.95 crore in FY 2006.
Weaknesses
- Entering into the less attractive wall-tile segment. The realisation in wall tile is less than vitrified tiles on account of presence of many large unorganised players. Also the market size of wall tiles is much smaller than vitrified tiles.
- Over the past few years, realisation in tiles has not shown any significant improvement.
- About 50% of the revenue is from institutional clients compared with 70% earlier. Increase in proportion of retail sale is likely to increase marketing cost and reduce average realisation as institutional clients generally buy high-end products.
Valuation
Consolidated FY 2007 EPS on post-issue equity workout to Rs 10.9. At the offer price band of Rs 85 – Rs 102, the P/E range works out to 7.8-9.3, respectively. Even after the 58% rise in price in the last nine trading session, Murudesh Ceramic (larger player compared with Asian Granito) is trading at 8.9 times its FY 2007 earning. TTM P/E of the ceramics tiles industry is 9.23.
Globalization ... thoughts..
For years, globalization was touted as the undisputed good news in terms of the low prices it delivered to consumers. It was unqualified bad news only if you happened to be the fellow who made the goods now being produced in China.
Now the tide has turned. After more than a decade of “exporting” deflation, China has gone over to the dark side, according to the US government statistics. The price of Chinese imports to the US has risen in the last few months, triggering predictable reactions based on faulty assumptions.
Specifically, the question is, can one country import inflation from another? In the case of China and the US, it depends on whether one is flying from east to west or west to east. China pegs its currency to the US dollar. In other words, it has adopted US monetary policy as its own. If the US inflates, China inflates, not the other way around.
JPMorgan Chase & Co. senior US economist Jim Glassman says, “If China had an independent monetary policy and its currency wasn’t linked, rising prices would be offset by a falling currency and the US wouldn’t see any effect.
The broader issue is whether a sovereign nation with an independent central bank can import inflation—or deflation—from overseas. The answer is, it depends on what the monetary authority in the importing country does. A sovereign central bank isn’t a “price taker,” or an inflation accepter. Instead, it always has the ability to offset any relative price change, be it in domestic or foreign goods, with tighter monetary policy.
Forget about borders and exchange rates for a moment and think about individual prices in the domestic economy. Let’s say the price of oil goes up because demand increases. Is that inflationary? Former Federal Reserve chairman Alan Greenspan used to explain to Congress that relative price changes are not inflationary per se. That is as true for the price of oil as it is for the price of labour (wages), although you’d never know it from listening to policymakers.
For a given stock of money, a rise in the price of oil may translate into a one-time rise in the price level. With time, the price of something else will fall as consumers cut back on non-oil purchases. The same is true for the price of imports. If consumers have to pay more for items made in China, they will have less money to spend on domestic goods and services and other foreign imports—unless the central bank accommodates those higher prices by allowing the money supply to increase. So it is always and everywhere the province of the central bank to determine its domestic inflation rate.
Fed governor Don Kohn and San Francisco Fed president Janet Yellen have challenged the notion that central banks have to passively accept whatever price increases are thrust on them from abroad.
“In the end, however, policymakers here and abroad cannot lose sight of a fundamental truth: In a world of separate currencies that can fluctuate against each other over time, each country’s central bank determines its inflation rate,” Kohn said in a speech to the Boston Fed’s 51st economic conference in Chatham, Massachusetts, on 16 June 2006. While it’s too early to assess the inflation implications of the increased integration of goods and markets, “it is also clear that such developments do not relieve central banks of their responsibility for maintaining price and economic stability,” Kohn said.
Here, here. Another decade of globalization won’t change the basic reality either. “With respect to monetary policy, I find nothing either in theory or the existing empirical evidence to overturn the conclusion that a country like the US, operating under a flexible exchange rate regime, can ultimately achieve the inflation target of its choice,” Yellen had said in a May 2006 speech at a conference on the euro and the dollar in a globalized economy at the University of California at Santa Cruz.
The departure point for some recent studies on the role of globalization is the low and stable inflation globally accompanying increased economic integration. A recent working paper by economists Claudio Borio and Andrew Filardo at the Bank of International Settlements in Basel, Switzerland, concedes that better monetary policy, with central banks around the world adopting implicit or explicit inflation targets, explains the improved performance.
Still, they found some “prima facie evidence” of the role of “global slack” in national inflation, leading them to question the “near-term effectiveness of domestic policy levers.” (If you think the output gap is a slippery concept, try measuring global capacity.) To the extent that domestic inflation is increasingly influenced by “global capacity constraints, this could weaken the near-term efficacy of monetary policy levers because of their limited (i.e. domestic) reach,” they said.
If “globalization” and “common external shocks” are the main contributors to inflation, not common monetary policies, “this would imply that national central banks’ ability to steer domestic inflation has been severely reduced,” said Joachim Fels, chief fixed-income economist at Morgan Stanley in London, in an email response to my question. As long as globalization doesn’t mean one world central bank, “flexible exchange rates give countries the independence to set their own inflation goals,” Glassman says. “That insulates everyone else from what you choose to do.”
And as for price shocks, the central bank has the ability to offset them, whether they occur at home or abroad. Inflation isn’t transmitted via spores in the air. It’s a monetary phenomenon, and as such, starts and ends on native shores.
Globalization hasn’t made central banks impotent. To the contrary, their unity of purpose in the goal of price stability has made them more powerful.
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