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Tuesday, August 14, 2007
Nokia issues product advisory
Mobile handset manufacturer Nokia today issued a product advisory to recall close to 46 million Nokia-branded BL-5C batteries manufactured by Japan-based Matsushita Battery Industrial between December 2005 and November 2006.
The company stated that in rare cases, the batteries could potentially experience overheating initiated by a short circuit while charging causing the battery to dislodge. The company has received more than 100 complaints of overheating globally.
Nokia is working closely with Matsushita, and will be co-operating with relevant authorities to investigate the situation. Nokia has several suppliers for BL-5C batteries who have collectively produced more than 300 million BL-5C batteries.
In order to determine if a battery is subject to this advisory, it is necessary to remove the battery from the device. A Nokia battery will have "Nokia" and "BL-5C" printed on the front of the battery. On the reverse, the Nokia mark appears at the top and the battery identification number (consisting 26 characters) is found at the bottom. Consumers should refer to this identification number to determine if their battery is among the batteries manufactured by Matsushita between December 2005 and November 2006.
It is important to note that the BL-5C battery is not used in all Nokia products and that only a portion of the Nokia BL-5C batteries in use are subject to this advisory.
Nokia handset owners should visit http://www.nokia.com/batteryreplacement/en/ to verify if their batteries can be replaced free of charge.
Labour Productivity helped higher GDP
Growth in labour productivity has helped India and other fast growing economies including China, Cambodia and Vietnam, register higher GDP growth than the rest of the world, according to the International Labour Organization.
Favourable demographic and labour force trends and shift in employment from lower-productivity agriculture to higher value-added industry and service sector has helped the Asia-Pacific region drive growth, says the ILO. The growth has also been fuelled by the rise in aggregate education and skill levels of the Asian workforce.
These are some of the highlights of ILO’s Visions for Asia’s Decent Work Decade: Sustainable Growth and Jobs to 2015, report.
According to the report, output per worker in the Asia-Pacific region grew by 30% since 2000 compared to only 7.8% outside the region. Between 2000 and 2006, real GDP growth in the Asia-Pacific region rose at an average annual rate of 6.3%, compared with growth of 3.1% in the rest of the world, the report reveals.
India’s share of the Asia-Pacific region’s GDP is expected to rise from 7.2% to 8.7-10% by 2020, while China’s contribution to regional output is expected to rise from 20.4% to between 31% and 33% by 2020.
With the growth of India and China, Japan’s share of regional output is expected to decline. In 2005, Japan accounted for over 41% of the region’s GDP but its share is projected to fall to between 27% and 28% by 2020, the report says.
The report says, economic growth in the recent years has been less “employment-intensive” in many Asian countries compared to 1990s. Despite rapid GDP growth, employment grew at an average annual rate of less than 1.6% between 2001 and 2006, compared with slightly more than 1.7% between 1991 and 1996 in the entire Asia-Pacific region. “Much of this change is due to shift from labour-intensive to technology and capital-intensive industries,” says J. John, editor, Labour File, a bimonthly journal of labour and economic affairs. “The fact is highlighted by the decline in the number of casual labourers, who work less than 185 days a year, in India,” he adds.
China and India have opportunity to progress faster since both countries are already developing social and labour institutions that can support a dynamic market economy and address anxieties arising from changing taking place in labour markets throughout Asia, the report says.
Analysts' Corner
| Welspun India Target price: NA Reco price: Rs 60 Current price: Rs 61.85 Broking firm: IL&FS |
| Welspun India reported robust results for Q1FY08 despite various odds arising from rupee appreciation and rising cotton prices. |
| The company’s topline grew by 33 per cent, while PAT grew by 22 per YoY during the quarter. Operating margins (excluding a reversal of provision of Rs 18 crore) was higher than expected. Better realisation in the sheeting fabric, and DEPB benefits enabled Welspun to maintain margins. Utilisation in sheeting fabrics is expected to rise further with higher volume growth during the latter half of the year and further integration of operation with Christy, the company is expected to continue the growth momentum. The stock at recommended price is attractively valued at 6.5 times FY08EPS. |
| Great Offshore Target price: Rs 984 Current price: Rs 794 Broking firm: India Infoline |
| Great Offshore (GOL) is India’s most integrated offshore oilfield services provider offering a variety of services to upstream oil and gas producers to carry out offshore E&P activities. With huge opportunities in the domestic upstream sector, GOL is increasing its fleet size from 39 currently to 42 by FY10. Also, the company has plans to enter the offshore construction space in a big manner. The company is expected to witness 29.8 per cent CAGR in revenues and 41.2 per cent CAGR in PAT between FY07 and FY09. Being one of the largest and most diversified players in the Indian offshore industry, the stock price of the company should command higher valuations compared to its domestic peers. India Infoline puts a target price of Rs 984 per share, which is based on estimated 14 times FY09 earnings of Rs 70.3 per share |
| Lanco Infratech Target price: Rs 369 Current price: Rs 276 Broking firm: Emkay Share |
| Lanco Infratech (LITL) has 518MW of power projects in operation and 9,035MW in various stages of development. It is also executing two toll-based BOT projects and developing three real estate projects. The company enjoys higher operating profit margins by being an integrated player executing its own projects. This ensures that savings in construction and procurement is captured within its own operations. LITL’s consolidated revenue is expected to grow at 126 per cent CAGR over FY07-09E to Rs 81.7 billion. The company is also expected to show 23-25 per cent of EBITDA margins. The net profit (after deducting the minorities interest) would grow to Rs 5.3 billion, a CAGR of 68 per cent, over the same period. Based on SOTP, the target price works out to Rs 369 per share. At the recommended price, the stock trades at 10.7 times its estimated consolidated FY09E EPS of Rs 24.2. |
| MIC Electronics Target price: NA Broking firm: Edelweiss Reco price: Rs 367 Current price: Rs 362 |
| The emerging scope for LED (light emitting diodes) applications globally will benefit MIC and it will emerge as a leader in the LED display and lighting space over the next three to five years. Edelweiss expects to see re-rating of the stock on the back of large order additions and their successful execution. Its media division is expected to grow at a CAGR of 70 per cent over FY07-09E to Rs 230.5 crore which will drive total revenue CAGR of 17 per cent to Rs 330.2 crore in FY09E. Overall, net profit is likely to see an increase at a 44 per cent CAGR. The stock trades at 15.3 times and 11.1 times its FY08 and FY09 estimated earnings. |
| Gujarat Industries Power Company Target price: Rs 95 Current price: Rs 60 Broking firm: Angel broking |
| Gujarat Industries Power Company (GIPCL) is well placed to derive benefits from the favourable power sector dynamics. It trades at an attractive 0.7 times estimated FY2009 price to book value while most of its peers trade at 1.5-2 times estimated FY2009 price to book value. Further, the company has its own captive mines, which would ensure high Plant Load Factor (PLF) for its ongoing expansion programmes as well. At recommended price, the stock trades at 6.3 times estimated FY2008 and 6.1 times estimated FY2009 earnings of Rs 9.8 and Rs10.2 respectively. With 18-month target price of Rs 95 per share, Angel Broking puts a buy recommendation on the stock. |
| IDFC Current price: Rs 124.5 Target price: Rs 155 Broking firm: Prabhudas Lilladher |
| IDFC is emerging as one of the key beneficiaries of the infrastructure financing opportunity in the country. The company has exposure to some of the high growth sectors such as energy, transportation, telecom and information & technology. Along with robust growth in lending business, the asset management business currently manages a corpus of $650 million and is expected to grow 4 times over FY07-09E to $3 billion post the deal with Citigroup, Blackstone and IIFC. |
| IDFC has recently raised Rs 2,100 crore through a QIP, reducing the leverage to a comfortable level of 2.95 times. This leads to an increase in lending capability to a single borrower and leaves more room for expansion going ahead. Its lending business is valued at Rs 112 per share, which is 3 times its FY09EP/BV. While it’s non-lending businesses contribute Rs 42.2 to the valuation. The broker re-iterates ‘Outperformer’ rating based on the sum of part valuation target price of Rs 155. |
| Punjab National Bank Broking firm: ICICI Direct Target Price: Rs 647 Current price: Rs 497 |
| PNB has got an extensive branch net work of 4,563 branches, with 50 per cent in rural areas giving it an unparalleled advantage of higher CASA (at 46 per cent) and consequent lower cost of funds. ICICI Direct expects that PNB will be able to sustain its net interest margins (NIMs) at 3.75 per cent levels, higher than its peers. Further net NPAs are expected to stay at 0.7–0.9 per cent levels and return on assets and return on equities are expected to rise from 1 per cent in FY07 to 1.1 per cent levels in FY09 with return on equity (RoE) improving from 15.6 per cent to 17.4 per cent. PNB is trading at 1.2x its estimated FY09E ABV which is quite attractive. |
| MindTree Consulting Target price: Rs 510 Current price: Rs 579 Broking firm: SSKI |
| MindTree Consulting (MindTree), a mid-sized Information & Technolofy (IT) and Research & Development services company, has strong management bandwidth. It services marquee clients like Volvo, AIG, LSILogic, United Technologies, Symantec, Avis and Unilever. However, a high share of development services in revenues creates a project-based business profile, which lowers sales productivity, hurts utilisation and leads to poor client mining. Thus, contrary to street expectations of an expansion, the company is expected to show declining margins by 170 basis point over FY07-09 due to rupee appreciation and salary inflation. The management has cut its FY08 earnings guidance after the first quarter FY08 results, but SSKI expects further risk to consensus estimates for FY09. While the stock price has fallen 23 per cent in just one month, further downside is likely at valuations of 19.8 times estimated FY09 earnings (19.2 times for Infosys). Considering these factors, the stock is rated as underperformer with a downward price target of Rs 510 per share |
Market Close: Volatile session with no clear direction
Market ended almost flat after witnessing some volatile session but was largly range bound throughout the day. Indices opened on a positive note but quickly slipped into the red zone as investors preferred to book profits at high levels. Absence of any positive cues saw the markets trade largely in the negative zone. Cautious approach by the investors also impacted the indices, which kept the bourses volatile. The market is all about greed and fear. There was greed couple of weeks back and now there is fear stalking on the street. There are some who believe that this time its different but really.. even we dont know and expect only time to tell us that. Sugar, Consumer durables and reality sectors outperformed with some value buying while those from the FMCG, Cement and Auto sectors were out of favour. Selective small and mid caps were able to attract buyers. European indices continued to trade in red.
Sensex closed lower by 16 points at 15000.91. Weighing on the Sensex were losses in ACC (990.3,-2 percent), HDFC (1941.3,-2 percent), Grasim (2878.7,-2 percent), HLL (200.05,-2 percent) and BHEL (1687,-1 percent). Losses were restricted by gains in NTPC (172.75,+3 percent), ONGC (853.95,+1 percent), HDFC Bk (1146.95,+1 percent), Hindalco (153.95,+1 percent) and Bharti Tele (857.75,+1 percent).
JK Tyres closed higher by 4% . For the June ended quarter, the company reported a sluggish top line growth as it witnessed a growth of just 4% YoY. The EBIDTA margins and the Bottom line levels for the quarter improved significantly on account of lower input costs. The proximity to OEM?s (Original Equipment Manufacturers) resulted in lower top line growth. The threat from Chinese imports have increased considerably for the company on account of higher dependence on OEM?s. JK has aggressive capex plans worth Rs.1,200 cr to boost up its presence in the industry. However, We believe that other players are better placed compared to JK. Do read our not to be published shortly on JK Tyres to know more.
Videocon is one of the largest electronic goods manufacturers in the country with the market share of 20%. Videocon has many brands under its kitty to cater to different segments of the industry. Brands owned by the company include Akai, Kelvinator, Sansui, Electrolux etc. The other business of the company include Glass manufacturing, Color picture tube manufacturing. and Oil and Gas exploration. Indian consumer goods is dominated by the Korean giants like LG and Samsung. The other big threat to the Videocon?s consumer durables business is from organized retail. The deep pockets of the organized retails entails them the pricing power. That will impact margins in the consumer durables business in the coming quarters. Do read our note on the company to know other investment arguments against Videocon. The stock was up by almost 3%.
The Company saw its Net Profit up by 46.7% At Rs 486.7 Cr Vs Rs 331.8 Cr (QoQ). Total Revenue was up marginally 2.2% At Rs 1,612 Cr Vs Rs 1,577.1 Cr (QoQ). The company had a Forex Gains of Rs 250 Cr which saved the company as its net profit increased. Rupee appreciation and marginal rise in expenses saw its Operating profit dropped by 5.3% to Rs 347.4 crore, while operating margin contracted by 170 basis points (bps) sequentially to 21.6%. Q4 saw 100 bps Impact due to rupee appreciation. Overall Dependence on US business has gone down by 2%. Forward cover stood at $1.1 bn at the end of June 07. The company?s BPO business continued to be more profitable than its consolidated IT services segment. For the year ended June 2007, consolidated net profit stood at Rs 1354.9 crore, up 75.1% against the previous fiscal. Consolidated revenue grew by 37.5%. to Rs 6,033.6 crore Operating profit for the year increased by 37.4% to Rs 1,337 crore while operating margins remained unchanged at 22.2%. Equity stands at 132.74 cr while the stock at its cmp of 316 trades at 16 times. The stock was up by almost 4% in the early trades but ended flat but in green.
Technically Speaking: Markets followed a volatile trend till the end of the today but within a narrow range. Sensex witnessed an intra day high of 15,070 and low of 14,965. Advances marginally outnumbered Declines. Volume for the day stood at Rs.4,030 cr. Sensex has failed to cross above the key resistance of 15060--15090 for the second consecutive day. On the lower side, a close below 14700 could bring in another downtrend upto 13600--13700 levels. The trend is sideways to down for now. Keep reading us for more views on the market.
Quiet Day:Sensex down 16pts, NTPC up 3%
The Sensex opened with a positive gap of 50 points at 15,067. After touching a high of 15,070, the index slipped marginally and displayed lacklustre movement for the major part of the trading session today.
The index dropped to a low of 14,965 - down 105 points from the day's high. The index, however, pulled back and ended with a marginal loss of 16 points at 15,001.
The BSE Realty index was up over 1% at 7391.
The market breadth was fairly positive - out of 2,764 stocks traded, 1,573 advanced, 1,104 declined and 87 were unchanged today.
INDEX MOVERS...
NTPC surged 3% to Rs 173.
ONGC and HDFC Bank gained over 1% each at Rs 854 and Rs 1,150, respectively. Hindalco also advanced 1% to Rs 154.
...AND THE SHAKERS
ACC, HDFC and Grasim dropped around 2% each to Rs 990, Rs 1,941 and Rs 2,879, respectively.
Hindustan Unilever and Mahindra & Mahindra declined around 1.7% each to Rs 200 and Rs 679, respectively.
BHEL slipped over 1% to Rs 1,687. Maruti, Reliance Communications and Larsen & Toubro were the other prominent losers today.
VALUE & VOLUME TOPPERS
Everonn Systems topped the value chart with a turnover of Rs 381 crore followed by debutant Omnitech (150.50 crore), Orbit Corporation (Rs 138.80 crore), SBI (Rs 97.90 crore) and IDBI (Rs 96.90 crore).
Nagarjuna Fertilisers led the volume chart with trades of around 1.93 crore shares followed by IKF Technologies (1.57 crore), IFCI (1.25 crore), Reliance Natural (1.03 crore) and Omnitech (90 lakh).
Rupee closes at 6-week low
The rupee on Tuesday fell by 12 paise to close at a six-week low of 40.7450/7550 against the US dollar on fresh dollar demand amid a firm dollar overseas.
Capital outflows and some downward pressure on the Asian markets, including India, also weighed on the rupee.
In active trade at the Interbank Foreign Exchange (forex) market, the local currency opened slightly lower at 40.64/66 from yesterday's close of 40.6250/6350 per dollar.
It later tumbled further to settle at a six-week low of 40.7450/7550 per dollar. It gyrated in a range of 40.62 and 40.77 a dollar. Previously, the rupee had ended at 40.83/84 a dollar on June 28, 2007.
Sustained dollar demand from state-run banks and oil refiners in the face of absence of supplies from exporters mainly put pressure on the rupee, forex dealers said.
The dollar on Monday reached its strongest level in more than a month against the Euro and was also firm against other major currencies, boosting the dollar sentiment. Higher than expected US retail sales report for July also lent support to the dollar in overseas market.
Lacklustre equity markets with downward bias also dampened the rupee sentiment further as dealers expect more more capital outflows in near term. After being net sellers in the last two weeks, Foreign Institutional Investors (FIIs) pulled out USD 101 million on August 13
Reliance Retail unveils India's largest hypermarket
Reliance Retail on Tuesday opened its first hypermarket here, with plans to open 30 more such superstores across the country at an investment of over Rs 375 crore by this year end.
The hypermarket here, which at over 1,65,000 sq ft is by far the largest retail facility under a single roof, has over 95,000 products ranging from full line of groceries to garments, consumer durables to garden equipment.
"The company will open 30 hypermarkets by this year end of 40,000-60,000 sq ft each," Reliance Hypermarket CEO K Radhakrishnan said.
Although he declined to give details of investments, an informed source said that the company would be spending Rs 2,500-3,000 in developing each sq ft.
Radhakrishnan said six malls under the Reliance Mart brand would come up in the national capital, five each in Punjab and Andhra Pradesh, three in Gujarat and two in Bangalore.
Over 500 such superstores are planned by 2010.
The hypermarket format is the latest to be unveiled by Reliance Retail, which last year unveiled its fresh food format store Reliance Fresh, followed by consumer electronics store Reliance Digital.
Sensex settles just above 15,000
The market ended almost unchanged after seeing range-bound movement throughout the day. Shares from sugar, consumer durables and real estate sector outperformed while those of FMCG, cement, auto and healthcare underpeformed. The turnover was also subdued. US stocks had also closed without much movement yesterday, 13 August 2007.
Asian indices settled on a mixed note while European indices were trading on a weak note today, 14 August 2007. Crude oil rose on Tuesday, with US crude gaining 23 cents at $71.85 a barrel, supported by central banks' moves to pump extra cash into financial systems to head off dangers of a credit squeeze.
The BSE 30-share Sensex declined marginally by 16.30 points or 0.11% at 15,000.91. It had opened higher at 15,066.71 and climbed up to a high of 15,069.64. But from here, the index had started declining and touched a low of 14,946.66 at 13:12 IST. It recovered later from that low. The benchmark index oscillated in a narrow range of 105 points for the day.
The Sensex is 868 points away from its all time high of 15,868.85 hit on 24 July 2007. However, in the past one year duration it has surged 3,687.92 points or 32.60% from 11,312.99 on 14 August 2006 till 15,017.21 on 13 August 2007.
The S&P CNX Nifty slipped 3.45 points or 0.08% at 4,370.20. The Nifty August 2007 futures settled at 4347, a discount of 23.20 points as compared to spot closing.
Global markets, meanwhile, are watching with concern for cues from hedge funds, which have been hit due to their exposure to subprime mortgage-backed loans. 15 August 2007 is the last day of the 45-day notice period required for investors to withdraw money from many hedge funds across the world for the current July-September 2007 quarter.
The market breadth was strong on BSE with 1,580 shares advancing as compared to 1,113 that declined, while 88 remained unchanged.
The total turnover on BSE amounted to Rs 4030 crore as against Rs 4,157.97 crore on Monday, 13 August 2007. The average daily turnover on BSE is Rs 4873.15 crore
The NSE F&O turnover was Rs 28493.98 crore as compared to Rs 31627.64 crore on Monday, 13 August 2007.
The BSE Mid-Cap Index declined 0.20% to 6,563.16 while the BSE Small-Cap Index rose 0.08% to 8,034.56
The BSE Consumer Durables index was the top gainer among the sectoral indices on BSE, up 2.07% to 4,231.87 while the BSE FMCG Index was the top loser, down 0.54% to 1,921.78
Among the sectoral indices on BSE, Bankex (up 0.24% to 7,846.29), the BSE Metal index (up 0.07% to 11,016.63), the BSE Oil & Gas index (up 0.47% to 7,847.70), the BSE PSU index (up 0.54% to 7,004.98) and the BSE Realty index (up 1.19% to 7,391.06) gained
While BSE Auto index (down 0.30% to 4,811.59), BSE Capital Goods index (down 0.27% to 12,780.51), the BSE Healthcare index (down 0.32% to 3,629.60), BSE IT index (down 0.08% to 4,761.44), and the BSE TECk index (down 0.07% to 3,675.22), declined.
Among the 30-member Sensex pack, 16 declined while the rest of them gained.
NTPC, the country’s largest power generation firm, rose 3.10% to Rs 173 on high volumes of 18.76 lakh shares. It was the top gainer from the Sensex pack. It struck an all-time high of Rs 176.80 in intra-day trade. Late last week, NSE decided to add NPTC in S&P CNX Nifty index in place of Dabur India from 24 September 2007.
State Bank of India (SBI), the country’s largest bank, moved up 0.10% to Rs 1614.70 on its plans to mop up nearly Rs 180000 crore over the next five years, including a Rs 14500-crore public offer this fiscal.
HDFC Bank (up 1.26% to Rs 1149.90), ONGC (up 1.99% to Rs 860) and Hindalco Industries (up 0.92% to Rs 153.90) were the other gainers from the Sensex pack.
India’s largest private sector company and oil refiner Reliance Industries (RIL) rose 0.45% to Rs 1837.10 on 4.47 lakh shares. It moved in a range of Rs 1815 and Rs 1842. As per reports RIL has received clearance from West Bengal's Food Processing and Horticulture department for its agri-retail business in the state.
ACC, the country’s second largest cement producer, slipped 2.40% to Rs 988 on 2.01 lakh shares. It was the top loser from the Sensex pack.
MNC associate FMCG giant Hindustan Unilever declined 1.55% to Rs 200.40 on profit booking after rallying 4% to Rs 203.50 yesterday, 13 August 2007. According to AC Nielsen's retail panel, HUL’s market share in the instant coffee market rose from 40.7% in the March 2007 to 47.4% in the June 2007 quarter. In fabric wash too, HUL's share in the June 2007 quarter went up to 37.8% from 36.4% in the preceding quarter. Also, HUL's share in shampoos increased from 46.9% to 47.5%.
HDFC (down 1.85% to Rs 1947) and Grasim (down 1.92% to Rs 2880.25) were the other losers from the Sensex pack.
Shares from the consumer durables sector were in demand on fresh buying. Blue Star (up 3.92% to Rs 314), Gitanjali Gems (up 1.85% to Rs 260), Titan Industries (up 2% to Rs 1174) and Videocon Industries (up 3% to Rs 380) advanced.
Sugar shares also advanced on renewed buying. Bajaj Hindustan (up 0.85% to Rs 137.10), Shree Renuka Sugars (up 2.91% to Rs 515), Balrampur Chini (up 1.90% to Rs 62), and Sakthi Sugars (up 4% to Rs 77.20) advanced.
Omnitech InfoSolutions was trading at Rs 164.55 on BSE, a premium of 56.71% over the IPO price of Rs 105. It debuted at Rs 183.75 on BSE, and hit a low and high of Rs 155 and 183.75, respectively. About 89.97 lakh shares were traded on the counter on BSE. The company had fixed the issue price at the top end of the Rs 90-Rs 105 price band. Omnitech InfoSolutions IPO ended on 25 July 2007 with 61.84 times subscription.
Pearl Fashion jumped 4.45% to Rs 284.10 after a block deal of 9.86 lakh shares was struck at Rs 255 per share on BSE by 13:17 IST.
Pratibha Industries climbed up 3% to Rs 268.40 after it secured a contract from the Indore Development Authority for a road construction project. The total value of the contract is Rs 137.70 crore. The project is in joint venture with Niraj Cement Structurals, and is to be executed in 24 months.
Advanta India jumped 11.50% to Rs 881 after the central bank approved raising the foreign fund limit to 49%. The present foreign holding on the counter is 22.93% (as of June 2007).
Petron Engineering galloped 15.15% to Rs 218.95 after it bagged a contract for fired heaters for Bina Refinery Project being developed by Bharat Oman Refineries for a contract value of Rs 127 crore.
Retailer Trent moved up 3% to Rs 681 on reports Europe based Benetton may enter into distribution tie-up with the Tata Group company for its premium fashion brand Sisley. Sisley, with over 850 outlets globally, is targeted at the premium end of the apparel market. The brand was created in 1968 in Paris and entered the Benetton fold in 1974.
JSW Steel scaled up 3% to Rs 648 on reports that it has set up JSoft Solutions, a Bangalore-based IT company, that is likely to be spun off as an independent vertical.
Diamond Cables was locked at the upper limit of 5% at Rs 289.15 after private-equity investor Clearwater Capital Partners agreed to help it revive Apex Electrical and three other group firms. The funding for the revival, through debt and equity would be about Rs 63 crore.
HCL Technologies rose 0.30% to Rs 318.30, off its day’s high of Rs 334. Its net profit surged 63.59% to Rs 391.23 on a 1.86% decline in sales to Rs 941.13 crore in Q4 June 2007 over Q3 March 2007. Net profit jumped 72.6% to Rs 1101.82 crore on a 24.3% rise in sales to Rs 3768.62 crore in the year ended June 2007 over the year ended June 2006.
Torrent Power galloped 10.77% to Rs 85.85 on reports its upcoming gas-based combined cycle power project, located near Surat, has been approved as being eligible for Clean Development Mechanism (CDM) benefits.
Hindustan Copper (HCL) advanced 5% to Rs 138.95. As per recent reports, it plans to enter gold mining in India and is scouting copper mines abroad. The stock had jumped 30% in the past six trading sessions, from Rs 99 on 3 August 2007 to Rs 132.35 on 13 August 2007.
Kernex Microsystems India jumped 5% to Rs 297.35. On 10 August 2007, the company said it had executed a service contract with Konkan Railway Corporation, Mumbai, for providing operational maintenance and annual maintenance contract services for the anti-collision systems. The estimated amount of contract for operation and maintenance of ACD systems will be about Rs 28.50 crore.
EIH was down 0.75% to Rs 106 after a block deal of 5 lakh shares was struck in the counter in opening trade on BSE at Rs 105 per share.
Sterlite Optical Technologies jumped 4.54% to Rs 227.95 after it received a Rs 38-crore fibre optic cable order from state-owned Bharat Sanchar Nigam.
Telecom services firm Spice Communications dropped 3.57% to Rs 52.70. The company said on Monday, 14 August 2007, it had received licences to operate national and international long distance voice and data services in India.
Jay Shree Tea & Industries rose 5% to Rs 106.20 after it said it plans to seek shareholders' approval to transfer, lease, sell, or demerge a tea manufacturing unit in Assam and an infotech unit.
Scooter maker LML rose by its maximum daily limit of 10% to Rs 12.99 on a newspaper report that the beleaguered company would re-enter the domestic market with the launch of a 150-cc scooter.
Sanco Transmissions (up 20% to Rs 143.10), Shah Alloys (up 14.83% to Rs 71), MIC Electronics (up 12% to Rs 409), Ahluwalia Contracts (up 9.62% to Rs 653), and Autoline Industries (up 10.44% to Rs 204.20) were the top gainers from the small-cap and mid-cap basket.
DIL (down 8.22% to Rs 273.95), Flex Industries (down 6.90% to Rs 166), UB Engineering (down 6.47% to Rs 85.25), Webel Sl Energy (down 6.17% to Rs 444) and Wpil (down 6.11% to Rs 43) were the top losers from the small-cap and mid-cap basket.
A majority of European indices were trading lower today, 14 August 2007.
Asian indices ended on a mixed note today, 14 August 2007, after wavering around the previous session's closing levels during early trading. Nikkei 225 (up 0.27%), Shanghai Composite (up 1.09%), Singapore's Straits Times (up 0.18%), and Hang Seng (up 0.53%) gained
South Korea's Seoul Composite (down 1.70%) and Taiwan Weighted (down 0.31%), slipped.
US shares closed marginally lower yesterday, 13 August 2007. The Dow Jones industrial average fell 3.01 points, or 0.02%, to 13,236.53. Broader stock indicators were also down. The Standard & Poor's 500 index dropped 0.72 points, or 0.05%, to 1,452.92, and the Nasdaq Composite index retreated 2.65 points, or 0.10%, to 2,542.24.
Oil rose on Tuesday, 14 August 2007 supported by central banks' moves in recent days to pump extra cash into financial systems to head off dangers of a credit squeeze. US crude oil was up 23 cents at $71.85 a barrel while London Brent crude rose 16 cents to $70.39.
Omnitech InfoSolutions ends with 57% premium
At Rs 164.55 over IPO price of Rs 105 on BSE
Omnitech InfoSolutions ended at Rs 164.55 on BSE, a premium of 56.71% over the IPO price of Rs 105.
On BSE, 89.97 lakh shares of the scrip were traded. The scrip debuted at Rs 183.75. It touched a high of Rs 183.75 and a low of Rs 155.
At the current price of Rs 164.55, the PE multiple works out 18.28, based on the year ended March 2007 EPS of Rs 9.
The company had fixed the issue price at the top end of the Rs 90-Rs 105 price band.
Omnitech InfoSolutions IPO ended on 25 July 2007 with 61.84 times subscription.
Omnitech offers IT solutions and products such as business availability services, business continuity services, systems integration solutions, framework solutions and products.
The company plans to deploy the IPO proceeds to fund acquisitions and strategic investments, set up overseas offices for business expansion and enhance existing facilities.
Omnitech's net profit rose 57.37% to Rs 11.85 crore on a 43.53% increase in sales to Rs 77.64 crore in the year ended March 2007 over the year ended March 2006.
Market lacked the lustre
After opening marginally above its previous close, the Sensex slipped into the red tracking weak global cues. The market continued to trade in a narrow range thereafter. The lack of interest in buying and the selling in index pivotal stocks dragged the index to the day's low of 14,965 by the afternoon. The Sensex entered into the green in the late trades due to resumption of buying in energy, banking and consumer durable stocks. But the index could not withstand the selling pressure and entered into the red again, finally closing the session at 15,001, down 16 points. The Nifty ended the session three points down at 4,370.
However, the market breadth was positive. Of the 2,763 stocks that traded on the BSE, 1,571 stocks advanced, 1,103 stocks declined and 89 stocks ended unchanged. Among the sectoral indices, the BSE CD index moved up by 2.07% followed by the BSE Realty index (up 1.19%). However, the BSE Auto index, the BSE HC index, the BSE IT index, the BSE FMCG index and the BSE Teck index closed in negative territory.
Among the index heavyweights, NTPC flared up by 2.98% at Rs173, ONGC spurted 1.27% at Rs854, HDFC Bank scaled up 1.26% at Rs1,150, while Hindalco, Bharti Airtel, Dr Reddy's Lab, ICICI Bank, Bajaj Auto, Wipro and Reliance Industries gained marginally. However, ACC tumbled 2.17% at Rs990, HDFC slipped 2.13% at Rs1,941, Grasim was down 1.97% at Rs2,879, HLL lost 1.72% at Rs200 and M&M fell 1.59% at Rs679.
Over 1.92 crore Nagarjuna Fertilizers’ shares changed hands on the BSE followed by IKF Technologies (1.57 crore shares), IFCI (1.23 crore shares), Reliance Natural Resources (1.03 crore shares) and Omnitech (89.95 lakh shares).
Everonn Systems was the most actively traded counter on the BSE and registered a turnover of Rs380 crore followed by Omnitech (Rs150 crore), Orbit Corporation (Rs138 crore), IDBI (Rs97 crore) and SBI (Rs96 crore).
Subprime Concerns
Subprime. I don't remember any other word that a whole lot of stock market types had to learn so quickly about. And it's not even a real word. By now most people who read newspapers and watch TV know about subprime. They have some idea about what subprime is and have heard that something called The Subprime Crisis is causing stock markets around the world including India to jump up and down violently. But the connection sounds a bit tenuous. So there were all these people in America who were given housing loans even though it looked unlikely that they could pay their installments. And when many such people found that they really couldn't pay up, then stock markets around the world fell. As we say in Sanskrit, Vasudhaiv Kutumbkam. The world is but one family. EMI cheques in America bounce and Dalal Street catches a cold. I can bet that a lot of Dalal Street types would like to personally lay their hands on an actual subprime borrower, grab him by the collar, give him a tight slap and ask him why exactly he bought a house that he can't afford to pay for
Anyhow, one can't blame the borrowers too much either when the business methods of the lenders were so bizarre. Apparently, you didn't actually have to give in any documents for these so-called 'self-certified' loans. Self-certified means that the borrower can certify himself as having the capacity to repay. There were even self-certified loans with zero down payment and a honeymoon period of up to two years during which no repayments had to be made. The exact implications of a loan facility like this are left as an exercise for the reader. But the part that matters to us is how, if at all, this is connected to us in India. The tightest explanation one can find that the subprime failures will impact many of the same investors whose money is also flowing into Indian (and other emerging) stock markets. As things get shaky in one part of their investments, they'll pull money out of their other investments and that will shake up the foreign fund flows that are known to be a major driver of the stock market boom. There's another, more touchy-feely and broader version of these explanations, which is that the subprime crisis has led to the rise of a general aversion to risk of all kinds and a desire in lenders as well as investors to get there money back safely regardless of opportunity lost.
Does this really have anything to do with India? As I'd said in my Global Cues article a couple of weeks ago, there's a huge and growing disconnect between what drives stocks in the short-term and what drives them in the long-term. American hedge-fund manager-turned-TV personality Jim Cramer says that the stock markets are like a fashion show. In the audience, the amateurs watch the models but the professionals watch other professionals. What Cramer means is that what happens to the companies doesn't matter, what matters is what other investors think of what is happening to the companies. There's a lot of this attitude around, and this is what leads to this obsession with global cues and subprimes. In the medium and long-term, this is utterly irrelevant. Even in America, the actual proportion of outstanding housing loans that are in trouble is 0.6 per cent. The fundamental numbers and trends of the Indian economy and stocks are as robust as ever. It's what's actually happening in the economy and the corporate that matters. If others think something else, well then they'll just have to change their thinking sooner or later. The moral of the story is that when you go to a fashion show, take the long-term view and keep your eyes fixed on the models.
Sensex ends almost unchanged
The market ended almost unchanged after seeing range-bound movement throughtout the day today, 14 August 2007. US stocks had also closed without much movement yesterday, 13 August 2007.
Asian indices were trading on a mixed note today, 14 August 2007. European indices were also trading mixed after opening lower today
Global markets, meanwhile, are watching with concern for cues from hedge funds. 15 August 2007 is the last day of the 45-day notice period required for investors to withdraw money from many hedge funds across the world for the current July-September 2007 quarter.
The BSE 30-share Sensex was down marginally by 0.77 points to 15,016.44, as per provisonal close. It had opened higher at 15,066.71 and climbed up to a high of 15,069.64. But from here, the index had started declining and touched a low of 14,946.66 at 13:12 IST. It recovered later from that low.
It oscillated in a narrow range of 105 points for the day
The S&P CNX Nifty rose 1.45 points to 4,375, as per provisonal close
The market breadth was strong on BSE with 1,580 shares advancing as compared to 1,113 that declined, while 88 remained unchanged.
Among the 30-member Sensex pack, 16 declined while the rest of them gained.
NTPC, the country’s largest power generation firm, rose 3.10% to Rs 173 on high volumes of 18.76 lakh shares. It was the top gainer from the Sensex pack. It struck an all-time high of Rs 176.80 in intra-day trade. Late last week, NSE decided to add NPTC in S&P CNX Nifty index in place of Dabur India from 24 September 2007.
State Bank of India (SBI), the country’s largest bank, moved up 0.10% to Rs 1614.70 on its plans to mop up nearly Rs 180000 crore over the next five years, including a Rs 14500-crore public offer this fiscal.
HDFC Bank (up 1.26% to Rs 1149.90), ONGC (up 1.99% to Rs 860) and Hindalco Industries (up 0.92% to Rs 153.90) were the other gainers from the Sensex pack.
India’s largest private sector company and oil refiner Reliance Industries (RIL) rose 0.45% to Rs 1837.10 on 4.47 lakh shares. It moved in a range of Rs 1815 and Rs 1842. As per reports RIL has received clearance from West Bengal's Food Processing and Horticulture department for its agri-retail business in the state.
ACC, the country’s second largest cement producer, slipped 2.40% to Rs 988 on 2.01 lakh shares. It was the top loser from the Sensex pack.
MNC associate FMCG giant Hindustan Unilever declined 1.55% to Rs 200.40 on profit booking after rallying 4% to Rs 203.50 yesterday, 13 August 2007. According to AC Nielsen's retail panel, HUL’s market share in the instant coffee market rose from 40.7% in the March 2007 to 47.4% in the June 2007 quarter. In fabric wash too, HUL's share in the June 2007 quarter went up to 37.8% from 36.4% in the preceding quarter. Also, HUL's share in shampoos increased from 46.9% to 47.5%.
HDFC (down 1.85% to Rs 1947) and Grasim (down 1.92% to Rs 2880.25) were the other losers from the Sensex pack.
Omnitech InfoSolutions was trading at Rs 164.55 on BSE, a premium of 56.71% over the IPO price of Rs 105. It listed at Rs 183.75 on BSE, and hit a low and high of Rs 155 and 183.75, respectively. About 89.92 lakh shares were traded on the counter on BSE. The company had fixed the issue price at the top end of the Rs 90-Rs 105 price band. Omnitech InfoSolutions IPO ended on 25 July 2007 with 61.84 times subscription.
Asian indices were mixed note today, 14 August 2007, after wavering around the previous session's closing levels during early trading. Nikkei 225 (up 0.27%), Shanghai Composite (up 1.09%), Singapore's Straits Times (up 0.18%), and Hang Seng (up 0.53%) gained
South Korea's Seoul Composite (down 1.70%) and Taiwan Weighted (down 0.31%), slipped.
US shares closed marginally lower yesterday, 13 August 2007. The Dow Jones industrial average fell 3.01 points, or 0.02%, to 13,236.53. Broader stock indicators were also down. The Standard & Poor's 500 index dropped 0.72 points, or 0.05%, to 1,452.92, and the Nasdaq Composite index retreated 2.65 points, or 0.10%, to 2,542.24.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 559.58 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 137.76 crore on Monday, 13 August 2007.
US crude oil was little changed on Tuesday, 14 August 2007, after managing a slight gain a day ago, supported by central bank cash injections into the global financial system and storms brewing in the Atlantic basin. US crude oil futures slipped 7 cents to $71.55 a barrel. London's Brent crude fell 8 cents to $70.15 a barrel.
NTPC to gain!
Change in the Constituents of Nifty Inde x; Dabur India Ltd getting replaced by NTPC w.e.f. September 24, 2007
Sr Index Excluded Included
(1) S&P CNX Nifty Index Dabur India Ltd NTPC Ltd.
(2) CNX 100 Index Dabur India Ltd NTPC Ltd
(3) CNX IT Index Mastek Ltd. MindTree Consulting Ltd
As a regular activity of reshuffling of index constituents Dabur India Ltd will be replaced by NTPC w.e.f. September 24, 2007. Going back to history whenever Nifty index constituents have been reshuffled significant action has been witnessed in the excluded and included counter.
This time the included stock is NTPC having market Cap of INR 1,358bn which is nearly15x against the excluded stock Dabur having market Cap of INR 88bn. As a result of this reshuffle the long only funds on the Nifty Index will start adjusting their portfolio by buying NTPC on one hand and selling Dabur on the other. The other stock weight s will also get adjusted as NTPC will gain the 4th highest weight (nearly 5.75%). Slight changes are expected in the other index constituents (the attached excel shows the adjusted weights of nifty constituents)
The buying pressure in NTPC will be significantly higher as compared to the selling pressure in Dabur.
Recommended Strategy:
Buy NTPC and hedge against market risk by selling Nifty Futures on a money natural basis.
NTPC to gain
Geojit Weekly Recommendations
CMC
1040.90
Buy
Denso India
85.10
Buy
Honda Siel Power
254.95
Buy
Indian Hotel
133.70
Buy
Madras Cement
3300.45
Buy
Warren Buffet's Secrets of Sucess
• 'Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.'
• 'The investor of today does not profit from yesterday's growth.'
• 'Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.'
• 'I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.'
• 'I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.'
• 'I always knew I was going to be rich. I don't think I ever doubted it for a minute.'
• 'We enjoy the process far more than the proceeds.'
• 'You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.'
• 'I buy expensive suits. They just look cheap on me.'
• 'Let blockheads read what blockheads wrote.'
• 'I do not like debt and do not like to invest in companies that have too much debt, particularly long-term debt. With long-term debt, increases in interest rates can drastically affect company profits and make future cash flows less predictable.'
• 'My grandfather would sell me Wrigley's chewing gum and I would go door to door around my neighbourhood selling it. He also sold me a Coca-Cola for a quarter and I would sell it for a nickel each in the neighbourhood, so I made a small profit. I was always trying to do something like this.'
• 'A public-opinion poll is no substitute for thought.'
Bharti, Vodafone hike mobile tariffs
Faced with declining average revenue per user (ARPU), mobile operators are now increasing their tariffs.
Bharti Airtel and Vodafone Essar have increased local charges for calls within their own network by 20 per cent. All pre-paid and post-paid subscribers using the low-end tariff pack with rentals less than Rs 150 per month will have to pay Rs 1.20 per minute instead of Re one a minute for Airtel-to-Airtel calls and Hutch-to-Hutch calls.
New SMS rates
The two operators have also increased local SMS rates to Rs 1.20 per message for all users — both pre-paid and post-paid — from Re one earlier. This comes within a few weeks of an increase in STD rates in Delhi. Both Bharti Airtel and Hutch had increased their STD rates to Rs 2.60 per minute from Rs 2.40 per minute and Rs 2 per minute, respectively.
The increase in tariff comes even as the operator’s revenue per user continues to dip over the past year. The national average is hovering around Rs 300 per user per month, which is among the lowest in the world.
Though operators such as Bharti Airtel have stopped using ARPU as a measure for checking the financial health of the company, the increase in tariff targeted especially at low-end users clearly indicates the operator’s concern about declining ARPUs. Other operators are also likely to follow suit given that the two largest cellular operators have taken the lead.
Consumer groups, however, pointed out that the operators have not given any publicity to the increase in tariffs to create awareness among users. They said that the telecom regulator should take a look at the revised rates. The operators, on the other hand, said that advertisements were issued to inform the subscribers. The increase comes even as the Communications Ministry has made lower tariffs as one of its primary goal this year.
Andhra Bank, TCI
Andhra Bank
Cluster: Cannonball
Recommendation: Buy
Price target: Rs117
Current market price: Rs85
Price target revised to Rs117
Result highlights
- For Q1FY2008 Andhra Bank (ANDB) reported a 21.2% year-on-year (y-o-y) growth in its net profit to Rs141.1 crore, driven by a modest operating performance coming on the back of a higher non-interest income and lower provisions.
- The net interest income (NII) was up 8% year on year (yoy) to Rs362.1 crore. The bank’s net interest margin (NIM) declined by 25 basis points on a y-o-y basis and by six basis points on a sequential basis (after adjusting for Rs25 crore of one-time income in Q4FY2007).
- The non-interest income increased by 33.4% yoy to Rs112.5 crore due to a higher treasury income component as the fee income growth remained flat.
- A 13.1% growth in the net income coupled with a moderate 9% y-o-y growth in the operating expenses helped the bank to report an 18.2% y-o-y growth in the operating profit to Rs223.4 crore; the core-operating profit (operating profit excluding treasury and amortisation) grew by 13.3% yoy to Rs227.5 crore.
- Provisions and contingencies showed a decline of 68.1% yoy to Rs9.3 crore from Rs29.1 crore, mainly due the absence of a one-time hit of Rs20 crore that the bank had taken during Q1FY2007 on transfer of securities.
- Business growth of the bank stood at 24.8% yoy with advances up 27.1% yoy and deposits up 23.3% yoy. Despite the strong growth in the advances the asset quality continues to remain among the best in the industry with the net non-performing assets (NPAs) at 0.19%.
- The NIM is expected to stabilise going forward and lead to an improvement in the operating performance. The capital adequacy levels are comfortable at 12.5% with the Tier-I capital adequacy ratio (CAR) at around 9%, which is not a constraint for growth, and asset quality continues to remain among the best in the industry. At the current market price of Rs85, the stock is quoting at 5.8x its FY2009E earnings per share (EPS), 3.2x pre-provision profits (PPP) and 1x book value. We have introduced our FY2009E numbers in this report. The bank is available at attractive valuations, given its low price to book multiple compared with its peers and an average return on equity of 18.5%. We maintain our Buy call on the stock with a revised price target of Rs117.
Transport Corporation of India
Cluster: Cannonball
Recommendation: Hold
Price target: Rs100
Current market price: Rs115
Put on hold
Key points
- Transport Corporation of India (TCI) has placed 7% of its equity with Fidelity Investments International for Rs53 crore. The placement was part of the company's fund raising plans to finance its scheduled capital expenditure (capex) of Rs440 crore. The shares have been placed at Rs105.25 per share at a premium of Rs103.25 to the face value of Rs2 per share. The placement will expand TCI's equity by Rs1 crore to Rs14.5 crore, resulting in an equity dilution of 7%.
- TCI has lined up a capex of Rs440 crore to be spent over FY2007-10; of the proposed capex it has already spent Rs100 crore in FY2007.The capex will entail the augmentation of its warehouse space, expansion of its truck fleet, acquisition of ships and setting up of wind power plants.
- The company achieved a turnover of Rs266 crore for Q1FY2008, growing at the rate of 9% year on year (yoy). The express cargo business grew by 30% yoy whereas the supply chain management (SCM) business grew by 27% yoy. The decline in the trading revenues affected the company's top line growth.
- The earnings before interest and tax (EBIT) grew by 16% yoy to Rs13.69 crore whereas the EBIT margin remained flat at 5% during the quarter. The SCM margin remained flat whereas the express cargo margin was lower by 100 basis points yoy. But sequentially, the express cargo margin expanded by 300 basis points whereas the SCM margin stabilised after an exceptional Q4FY2007.
- The company's interest cost almost doubled to Rs4.08 crore on account of higher borrowings whereas the depreciation provision was higher by 51.5% on account of addition to gross block.
- As the company's tax provision stood higher at 36.4% against 27% in the last year, the net profit witnessed a decline of 13.5% yoy to Rs5.69 crore.
- The complete phase-out of the central sales tax (CST) will augur well for the company as more companies start following the hub-and-spoke model of distribution, leading to complete outsourcing of their logistic needs to third party players. We believe that at the end of the capex plan by FY2010, TCI will be fully equipped to benefit from the opportunities in the third-party logistic (3PL) space. We expect the company's net profit to grow at a compounded annual growth rate (CAGR) of 27% over FY2007-09.
- As mentioned in the previous update, TCI is developing four properties, covering a total area of 12.5 acre, over the next five years. The net realisable value of these properties would be Rs200 crore which translates into a value of Rs26 per share on a diluted equity base of the company. We believe this would provide ample cushion to the company's stock price.
- The stock has witnessed a sharp run-up in the last four months and appreciated by 86% against an 18% rise in the Sensex in the same period. The stock is currently quoting at Rs115 per share. At the current market price TCI is discounting its FY2008E earnings by 23x and its FY2009E earnings by 18x. Considering its historical valuations we believe that the stock is fully valued at the current market price and thus offers little scope for appreciation in the near term. We thus put a Hold on the stock.
VIEWPOINT
Novelis (subsidiary of Hindalco)
Overhang of fixed-price contracts
We attended the analyst meet of Novelis (the wholly owned subsidiary of Hindalco) to discuss the Q1FY2008 results. Presenting the key takeaways from the meet.
Grey Market Premiums
Magnum Ventures 27 to 30 7 to 9
Indowind Energy 55 to 65 5 to 7
Puravankara Projects 400 to 450 Discount
Take Solutions 675 to 730 510
KPR Mills 225 to 265 Discount
Refex 65 6 to 8
I V R Prime 550 Discount
OMNI Tech Info 105 75 to 80
Central Bank 102 40 to 45
Zylog Systems Ltd. 350 300 to 350
SEL Manufacture Ltd. 80 to 90 Discount
Asian Granito 85 to 102 5 to 7
Motilal Oswal 725 to 825 80 to 82
FIIs' net sell Rs 1cr in F&O on Monday
The Foreign Institutional Investors (FIIs) were net sellers to the tune of Rs 1.12 crore in the futures & option segment on Monday.
According to data released by the NSE, FIIs were net buyers of index futures to the tune of Rs 217.19 crore and bought index options worth Rs 21.90 crore. They were net sellers of stock futures to the tune of Rs 248.46 crore while bought stock options worth Rs 8.24 crore.
As per data available on the Sebi website - FIIs were net buyers of stocks worth Rs 382.60 crore in the cash market on Thursday. Mutual funds were net buyers of shares worth Rs 45.30 crore on the same day.
Market may remain under pressure
Except Heng Seng most of the major Asian indices are currently trading in the red and overnight fall in the US indices is likely to weigh on the investors sentiment. The FIIs are also remained net sellers in equities in previous trades and the prevalence of sub-prime woes may also add pressure on local indices. Among the key indices, the Nifty may decline to 4350 while on the upside the index faces resistance in the 4400-4440 range. The Sensex has a likely support at 14700 and could test higher levels of 15140.
US indices finished weak on Monday amid concerns of economic growth. While the Dow Jones declined three points at 13237, the Nasdaq dropped three points to close at 2542 on weakness in tech stocks.
Indian ADRs had a mixed outing on US bourses. MTNL, VSNL, Patni computers and Rediff slipped 1-2% each. However, Wipro surged 2.92% while, Infosys, Satyam, Dr Reddy's, ICICI Bank, HDFC Bank and Tata Motors gained around 1- 2% each.
Crude oil prices moved up, with the Nymex light crude oil for September delivery gaining by 15 cents at $71.62 a barrel. In the commodity segment, the Comex gold for December series fell by 70 cents to settle at $680.90 a troy ounce.
India Inc Overseas buying to slow down
Big-ticket foreign acquisitions by Indian companies may slow this year on the heels of the turmoil in European debt markets that is increasing borrowing costs and inducing more volatility in the foreign exchange markets.
Two of the biggest foreign acquisitions in 2007 by Indian companies have relied on overseas borrowings: Tata Steel Ltd’s acquisition of Corus for $12.2 billion and Hindalco Industries Ltd’s acquisition of Novelis Inc. for $6 billion.
“The increasing credit spreads (in overseas market) will impact incremental borrowing (by Indian companies). The cost of borrowing will go up,” said Ajay Mahajan, group president, financial markets, YES Bank Ltd.
Together with the recent policy measures taken by the Indian government, this is expected to trigger a sharp drop in external commercial borrowings (ECBs), slowing foreign capital inflows and easing the pressure on the appreciating rupee.
“The potential slowdown in capital inflows through ECBs could be $15 billion this year (2007-08),” added Mahajan. The net inflows through ECBs in 2006-07 were a record $16 billion, which prompted the government to initiate measures to choke ECB inflows and help the central bank’s currency management operations.
The rupee, which has gained 9% against the US dollar since January, closed at Rs40.63 against the dollar on Monday, marginally higher than the 10 August close of Rs40.635.
Several large foreign acquisitions by Indian companies have been helped by a favourable overseas debt market. The interest rate on ECBs, for instance, is fixed at a premium to the six-month London interbank offered rate (Libor), a daily reference derived from the money market in London.
The spread over Libor has started widening as investors turn risk averse in a time of uncertainty. The interest rate on the last medium-sized five-year ECB issued in end-May was about 6%. Since then, no major offering has been made by Indian companies.
But signals of a tight money regime are already apparent. The European Central Bank, the US Federal Reserve and other central banks injected $135.7 billion on 9 August and $154 billion on 10 August into the money market amid fears that the fallout of the trouble in the US subprime market would adversely impact lending in Europe. Financial institutions have begun to invest in government securities in Europe, driving up yields on corporate paper.
Not all executives familiar with Indian companies’ borrowing abroad are of the opinion that the increased cost of borrowing will be temporary.
“I expect this to subside in the near future because there’s is a lot of inherent strength operating in the Indian economy,” said Anil Ladha, senior vice-president, debt capital markets, ICICI Securities Ltd.
Credit default swap (an instrument that allows the buyer cushion in the event a company defaults on its debt obligations) rates on Indian debt have widened by about 75% in the recent past on account of global factors, but this is not likely to have a long-term impact, said Ladha.
But some other disagree. The developed world’s debt market has already begun to see an increase in risk premium on all kinds of securities issued by emerging markets fir-ms, said Bidisha Ganguly, ch-ief economist at BRICS Securities. “ECB funding is going to be more difficult,” she added.
If the rupee begins to weaken against the dollar, it might have a negative impact on companies that want to borrow overseas. “Volatility does impact decision making even if they have hedging mechanisms,” said Raman Uberoi, senior director, ratings, at credit rating agency Crisil Ltd.
The combined impact of all these factors could last up to two years, added Uberoi.
Data collected by consultancy Grant Thornton showed outbound deals initiated by Indian companies in the first six months of 2007 increased significantly. Outbound deals in 2007 was $27.9 billion, almost three times the $9.9 billion worth of deals registered in all of 2006.
Uberoi did not rule out the possibility of overseas deals by Indian companies, but said everybody would have to contend with higher costs
US Market ends flat paring early gains
Market seems to get back some confidence as global banks continue to inject liquidity
Federal Reserve perhaps today got what it wants – lower volume and a bit lower volatility. US Market seemed to appreciate the global central banks' efforts followed by Federal Reserve’s to ensure a smooth flow of credit and the indices sported modest gains throughout the day. But without much of a reason, indices reversed course in the final few minutes of trading and all the three indices closed in red, though marginally.
The European Central Bank pumped in another $65 bln into money markets today and declared that markets are returning to normal which initially helped renew confidence. Federal Reserve too added a much smaller than expected $2.0 bln to the system and the same also contributed to the improved underlying tone. The Fed Funds rate opened at the Fed's target of 5.25% for the first time in three days.
The Dow Jones Industrial Average, after being up by almost 100 points earlier in the day, dropped by 3 points while going into close at 13236.53. Tech-heavy Nasdaq shed 2.65 points to close at 2542.24. S&P 500 lost 0.72 points to close at 1452.92.
Eighteen out of thirty Dow stocks closed in the green today. Boeing, Alcoa, H-P and United Technologies led the team of Dow winners for the day. American Express, Exxon Mobil, Procter & Gamble and Home-Depot led the team of Dow laggards.
Reports that one of Goldman Sachs' struggling hedge funds has received a $ 3 bln investment and confirmation that Goldman is not unwinding its global Alpha or North America Opportunities Funds also offered some relief among investors today.
The Fed Funds rate open at the Fed's target of 5.25% for the first time in three days
When market opened in the morning, all the three indices opened in green. Dow was trading up by almost eighty-five points. Easing credit concerns gave the economically-sensitive Industrial sector a nice lift.
Consumer Discretionary also turned in a similarly strong performance as a stronger than expected rebound in July retail sales brought back bargain-hunting interest among beaten-down retailers.
Despite a mixed bag of reports from individual retailers last week, the Commerce Department today said retail sales rose 0.3% in July after a 0.7% decline in June. Economists had been expecting a 0.2% rise last month.
But major financial stocks suffered a setback. JP Morgan shares lost 1% even after an upgrade from Deutsche Banc to buy from hold. Citigroup shares also fell 1% after reports that the bank lost more than $700 million in its credit business in recent weeks.
Among the Indian stocks, Tata Motors was a major gainer after the scrip closed 2.5% higher at $17.16. Wipro Technologies was up by almost 3% at $14.11. In the banking sector, while ICICI Bank registered 1.5% increase to close at $43, HDFC Bank eked out a marginal gain of 0.1% to close at $84.72.
All eyes set on Home-Depot and Wal-Mart’s earnings tomorrow
Crude oil futures finished a little higher today after traders were a bit ascertained that US economic slowdown might not take place that soon as central banks across the world are injecting liquidity into the system. Crude pared earlier higher gains as a storm near Gulf of Mexico headed away from sensitive regions.
Crude-oil futures for light sweet crude for September delivery closed at $71.62/barrel (higher by $0.15/barrel or 0.21%) on the New York Mercantile Exchange. It hit an intra day high of $73.19/bbl.
At the New York Stock Exchange, 1.7 billion shares were traded, and advancing and declining stocks ran nearly even. On the Nasdaq, 2.1 billion shares were exchanged, and declining issues outpaced advancing stocks by an 8 to 7 ratio.
Dow components Home Depot and Wal-Mart will be tomorrow morning's headliners as they come out with their earnings reports. Other than this, the market will focus on Producer Price Index data and the International Trade report. PPI gives market watchers the latest measure of inflationary pressure amongst suppliers and manufacturers. The trade report will provide the latest balance between imports and exports, which influence the dollar in currency markets.
Morning Call - August 14 2007
Market Grape Wine :
In House :
Nifty at a supp of 4325 and 4296 on an intra day basis with resis at 4390 and 4432 levels
Mkt to stay volatile in the range of 4550 on the higher side and 4250 on the lower side.
Needs to break either side to confirm the trend.
Intra day calls: Buy IDBI above 127.50 with a TGT of 135 and a SL of 123
Sell Praj below 186 with a TGT of 181 and a SL of 189
F&O: Buy Indiainfoline above 662 with SL
Buy CESC above 472
Out House :
Markets at a support of 14786 & 14848 levels with resistance at 15115 & 15234 levels .
Buy : SBIN & Kotakbank
Buy : RIL & RPL
Buy : IDBI & IFCI
Buy : Titan & Jpasso
Buy : HanunToys & Apar bullet
Buy : Murudeshwar & NITCO
Buy : BHEL & Centextile
Dark Horse : SBIN , Muru , Jpasso , Hanun, IFCI , IDBI , Gacl & APAR
Market to consolidate
The market is expected to consolidate on muted cues from global markets. The BSE 30-share Sensex surged 148.96 points, or 1%, to 15,017.21, on Monday, 13 August 2007. The S&P CNX Nifty rose 40.30 points, or 0.93%, to 4,373.65.
The Nifty August 2007 futures discount declined consistently for the third straight session yesterday, 13 August 2007, indicating short covering at lower levels. The Nifty August 2007 futures settled at 4360, a discount of 13.65 points as compared to spot closing.
Asian indices were trading lower today, 14 August 2007 after wavering around the previous session's closing levels during early trading. Financial shares paced losses after US stocks declined overnight, with Sompo Japan Insurance and Sumitomo Mitsui Financial Group leading the decline in Japan. Nikkei was down 0.02% at 16,797.48.
Hang Seng (down 0.13% at 21,863.29), Singapore's Straits Times (down 0.08% at 3,378.05), South Korea's Seoul Composite (down 0.62% at 1,837.78), declined.
However, Taiwan Weighted gained 0.62% at 8,994.13
Wall Street shares gave up a moderate gain in late trading and closed marginally lower yesterday, 13 August 2007 after the Federal Reserve and other central banks added more cash to their banking systems, helping investors set aside some concerns about credit tightness.
The Dow Jones industrial average fell 3.01 points, or 0.02%, to 13,236.53. Broader stock indicators also fell. The Standard & Poor's 500 index fell 0.72 points, or 0.05%, to 1,452.92, and the Nasdaq Composite index retreated 2.65 points, or 0.10%, to 2,542.24.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 559.58 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 137.76 crore on Monday, 13 August 2007.
U.S. crude oil was little changed on Tuesday, 14 August 2007 after managing a slight gain a day ago, supported by central bank cash injections into the global financial system and storms brewing in the Atlantic basin. U.S. crude oil futures slipped 7 cents to $71.55 a barrel. London's Brent crude fell 8 cents to $70.15 a barrel.
Trading Calls
Stocks with +ve bias : Orchid chem , Tata Power ,Ranbaxy , Divis lab
Stocks with short term Delivery:Cesc
Stocks for Investment: Tata Elxi , Aditya Birla Nuvo
Motilal Oswal Financial Services IPO opens on 20 Aug 2007
Price band Rs 725-825 per share
Motilal Oswal Financial Services is planning to raise Rs 216-246 crore through an initial public offer (IPO). The company has fixed the price band between Rs 725-825 per share.
The 29.8 lakh share issue will open on 20 Aug 2007 and close on 23 Aug 2007.
The money would be used to expand its business in organic and inorganic terms.
The company plans to grow its investment banking, private equity and distribution of third-party financial products. Broking and related services contribute 85-86% of its revenues.
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