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Tuesday, August 21, 2007
Fuel of the future - Biofuel
As fossil fuels become increasingly scarce and expensive, the search for alternative energy sources is getting intensified. Till quite recently the low cost of petroleum products made most agro-based fuels uneconomic, but not any longer. Since taxes in most countries account for more than half the price the consumer pays, many countries lower the taxes on bio fuels to make them viable.
The world automotive industry is seriously worried because they know that the ever-increasing prices of fossil fuels will adversely impact their future sales. Their business is to sell vehicles, so unlike oil companies, they are quite serious about bio fuels.
Brazil was one of the first to introduce a mix of 25% ethanol, derived from sugarcane, with petrol to make Gasahol that was popularized with slightly lower retail prices over 30 years ago. 100% ethanol is used in Formula 1 cars as it does not catch fire but a 10% mix can be used in any petrol powered car without any modification to the engines or fuel systems.
Ethanol has a higher octane value than petrol but will result in slightly lower power and fuel efficiency. But since the Ministry of Petroleum was not interested in bio fuels and it was not a priority with the Ministry of Agriculture, no one pushed bio fuels in India till very recently. Now a 5% mix is being belatedly used in India but oil companies are reported to be dragging their feet in implementing the new mandate.
For trucks, buses and diesel cars, pure Jatropha oil with a small quantity of additives can be used instead of diesel without any modifications to the engines or fuel systems.
Earlier this biodiesel had been successfully tested on test beds and for many thousand kms on the plains but road tests at high altitudes have demonstrated that emissions and performance as well as power output is excellent when put to an extreme test on steep inclines in the rarified air and low temperatures of high altitudes.
Jetropha oil compares well with diesel. The Cetane number is about 15% better than diesel at around 58 to 60 resulting in smoother and quieter performance. But the calorie output is a little lower and should result in about 3% less power output.
However, as biodiesel contains a little oxygen it faces less oxygen starvation at high altitudes. The flashpoint though is about 160 degrees C as compared to 50 for diesel,making it much safer. On the emission front, bio diesel contains no Sulphur so there is no SOX while NOX continunes to be very low.
Jetropha by itself is a useless plant that came to India (originally it came from Mexico along with PL 480 wheat) from America in the 60’s. Animals and birds shun the berries and the stalks that are mildly poisonous. It cannot be used for food, fibre or fuel and its only use is as a hedge crop.
Reliance Money, Motilal Oswal best
Reliance Money has emerged as the top brokerage house in terms of online security and cost effectiveness, while Motilal Oswal leads as the most research driven stock trading platform, a survey says.
According to an online survey conducted by US-based Starcom Mediavest to study trends on investor’s choice of broking firm, Anil Dhirubhai Ambani Group firm Reliance Money was voted as the top platform in terms of security and cost effectiveness.
Motilal Oswal led the general perception about being the most research driven stock trading player, while ICICI Direct was considered as the most accessible by the respondents, the survey said.
In terms of respondent’s perception of best online security, Reliance Money received 47% votes followed by ICICI Direct with 20% endorsements.
Although Reliance Money leads the tally on online security, it is more favoured by business owners (54%) than retired individuals (29%), the survey showed.
For cost-effectiveness in stock trading, more than half (54%) believe that Reliance Money is the best followed by 5paise.com, which got 15% votes.
Meanwhile, just 7% respondents rated ICICI Direct as cost effective.
Motilal Oswal found favour with 34% respondents for being the most research driven stock trading player.
Bears strike back, drag Sensex below 14,000
The Sensex had witnessed a pullback yesterday and surged around 286 points on a strong buying support. However, the bears hit back strongly and triggered a major sell-off in the market during intra-day trades. Tracking the subdued Asian markets, the Sensex began the session marginally above its previous close but slipped on sustained selling in frontline stocks and continued moving southwards. After plunging below the 14,000 mark to touch the day's low of 13,942, the market moved in a range with a negative bias. The market witnessed panic selling towards the close and the Sensex ended the session with a loss of 438 points at 13,989 whereas the Nifty shed 134 points and closed at 4,075.
All the sectoral indices had a weak outing. The BSE Bankex index and the BSE Realty index dropped over 4% each, while the BSE PSU index, the BSE IT index, the BSE metal index and the BSE Teck index were down over 3% each.
The breadth of the mark was extremely negative, with the losers outpacing the buyers in the ratio of 4.54:1. Of the 2,767 stocks traded on the BSE, 2,236 stocks declined, 492 stocks advanced and 39 stocks ended unchanged. All the Sensex stocks ended in the red. SBI was a major loser and tumbled by 5.59% at Rs1,464. Wipro at Rs447, M&M at Rs612, ICICI Bank at Rs834, Reliance Communication at Rs484, Reliance Energy at Rs692 slumped over 4% each. Among the other major losers Tata Steel dropped 3.99% at Rs546, Hindalco lost 3.88% at Rs136, Cipla fell 3.75% at Rs177 and Infosys declined by 3.72% at Rs1,761.
Banking stocks lost ground on profit taking. Union Bank dropped 7.31% at Rs123, Kotak Bank slumped 6.87% at Rs639, Fedral Bank shed 6.01% at Rs304 and Bank of India slipped by 5.65% at Rs222. Andhra Bank, Allahabad Bank, Canara Bank and Yes Bank also ended weak.
Strong buying was evident in several small-cap stocks. Nagarjuna Fertilisers at Rs39.60 and Chambal Fertilisers at Rs49.65 hit the new high.
Over 3.13 crore Nagarjuna Fertiliser shares changed hands on the BSE followed by SEL Manufacturing Company (2.69 crore shares), Central Bank (2.43 crore shares), Ventura Textile (20.30 crore shares) and Bella Steel (1.98 crore shares).
Value wise, SEL Manufacturing Company clocked a turnover of Rs335 crore on the BSE followed by Central Bank (Rs305 crore), Reliance Industries (Rs189 crore), SBI (Rs121 crore) and Nagarjuna Fertilisers (Rs116 crore).
Sensex settles below 14,000
Domestic markets suffered sever setback today, 21 August 2007, on concerns arising from the fluid political situation in New Delhi, with the prospect of a general election looming large. Volatility intensified in second half of the day. The political concerns started dampening the sentiment, visible from yesterday itself, when Indian markets underperformed their Asian peers.
US markets closed firm overnight while most Asian markets settled firm today, 21 August 2007. Most of the European indices were also trading higher after an initial fall.
The BSE 30-share Sensex lost 438.44 points or 3.04% at 13,989.11. It had opened higher at 14,512.19 and advanced further to hit a high of 14,534.51. However it started declining from here on intense selling to touch a low of 13,941.93 as selling continued.
At the day’s low, the Sensex had lost 485.62 points for the day. It oscillated 592.58 points for the day.
The benchmark index BSE Sensex has lost 1879.74 points or 13.43% from its all time high of 15,868.85, struck on 24 July 2007.
The S&P CNX Nifty lost 134.15 points or 3.19% at 4074.90. The Nifty August 2007 futures settled at 4060.05, a discount of 14.85 points as compared to spot closing.
On Monday, 20 August 2007, Left parties asserted that a freeze on the forthcoming negotiations on India-specific safeguards at the International Atomic Energy Agency (IAEA) was a prerequisite for accepting the government’s suggestion of setting up a panel to look into Left’s concerns over the Indo-US nuclear deal.
Left parties had warned the government on Saturday, 18 August 2007, of serious consequences if it pursues with a nuclear deal with the United States. The four Communist parties have 60 members of parliament (MPs) in the 545-member lower house of parliament. Prime Minister Manmohan Singh's government could fall or be reduced to a minority if the Left withdraws support
All the sectoral indices on BSE suffered losses. The BSE Metal index (down 3.45% to 9,847.15), BSE IT index (down 3.68% to 4,294.86), BSE Realty index (down 4.59% to 6,844.63), BSE Healthcare index (down 3.06% to 3,430.42), BSE PSU index (down 3.29% to 6,491.97), and the BSE TECk index (down 3.5% to 3,358.81) were underperformers when compared with the broad market index.
Though trading in the negative territory, the BSE Capital Goods index (down 2.57% to 11,989.97), BSE Oil & Gas index (down 2.79% to 7,408.02), BSE Consumer Durables (down 1.56% to 3,972.30), BSE FMCG Index (down 2.45% to 1,799.05), and BSE Auto index (down 2.69% to 4,475.14) had outperformed the broad market index.
The market breadth was weak on BSE with 2234 shares declining as compared to 509 that advanced, while 44 remained unchanged.
The BSE Mid-Cap index slipped 3.30% to 6,134.23. From a recent high of 6,665.67 on 8 August 2007, the BSE Mid-Cap index has declined 4.84% to 6,342.78 on 20 August 2007.
The BSE Small-Cap index lost 3.80% to 7,538.45. From a recent high of 8,051.22 on 8 August 2007, the BSE Small-cap index had declined 2.71% to 7,832.36 on 20 August 2007.
The total turnover on BSE amounted to Rs 4201 crore as compared to Rs 3,877.61 crore on Monday, 20 August 2007. The NSE F&O turnover was Rs 45485.53 crore as compared to Rs 40,075.04 crore on Monday, 20 August 2007.
All the 30-member Sensex pack were trading with losses
Banking stocks tumbled on concerns of sub-prime lending in US. State Bank of India plunged 5.50% to Rs 1465.30 on 8.05 lakh shares. it was the top loser from the Sensex pack.
HDFC Bank (down 1.80% to Rs 1105) and ICICI Bank (down 4.20% to Rs 835.45) also slipped
Reliance Energy (down 5.16% to Rs 688) and Mahindra & Mahindra (down 4.66% to Rs 612), and were the other key losers from Sensex pack.
Reliance Communication lost 4.22% to Rs 486.50 after denying recent reports it was in talks with Malaysia's Maxis Communications to buy a controlling stake in its Indian unit Aircel Cellular. India's second largest cellular services provider Reliance Communications slipped 2.44% to Rs 495.55. It added 14.6 lakh mobile customers in July 2007 taking its total subscriber base to about 3.7 crore. It had gained 14.5 lakh users in June 2007.
India's top cellular services provider Bharti Airtel slipped 0.65% to Rs 821.70. The company plans to double the number of wireless towers to 80,000 by the end of March 2008.
Bhel, the country’s largest power equipment maker, declined 0.66% to Rs 1599.80. It had hit a high of Rs 1648 on securing order worth Rs 6500 crore to set up two power projects of 1,000 megawatts each
Reliance Industries, the country’s biggest private sector entity by net profit and oil refiner, slipped 2.77% to Rs 1742.10 on 10.65 lakh shares. As per reports, the company has made an oil discovery in the Krishna basin while drilling the third well. The discovery is estimated at around 20 meters of thickness, making it possibly one of the largest oil discoveries on India’s east coast.
IT stocks came under pressure on concerns that they may face tougher market conditions if the US credit woes squeeze IT spending.
Wipro (down 4.94% to Rs 446.30), Satyam Computer Services (down 4.03% to Rs 415.05), and Infosys Technologies (down 3.76% to Rs 1760.15) slipped.
Tata Consultancy Services slipped 4.03% to Rs 1012 after it denied the reports of bagging an outsourcing contract worth $1.5 billion multi-year outsourcing deal from Prudential plc, the UK-based financial services major. WNS Global Services, the country’s second largest BPO firm, said late last week it has been hit by the turmoil in the US sub-prime lending market.
IT companies derive more than half of their revenue from the United States. The rupee was hovering at 41.10 against the US dollar, stronger than Friday's (17 August 2007) close of 41.33/34.
From a recent high of 4,808.43 on 8 August 2007, the BSE IT index had eroded 7.26% to 4,459.07 on 20 August 2007. The BSE IT index had touched a 52-week high Rs 5611.33 on 19 February 2007 and a 52-week low of Rs 4129.09 on 11 September 2006.
Ambuja Cements (down 0.51% to Rs 127.25), HDFC (down 0.45% to Rs 1906.90) and Dr Reddy’s Laboratories (down 0.12% to Rs 624.50) outperformed the market.
Central Bank of India settled at Rs 115.40 on BSE, a premium of 13.14% over its IPO price of Rs 102. It made its debut at Rs 130.10 on BSE. The stock touched a high of Rs 133.25 and a low of Rs 114 during the day. About 2.43 crore shares were traded on the counter on BSE. The Central Bank of India (CBI) IPO had ended on 27 July 2007 with 62.07 times subscription
Real estate stocks were hammered. Ansal API (down 3.06% to Rs 257), Sobha Developers (down 4.66% to Rs 750.55), DLF (down 3.63% to Rs 558.25), Unitech (down 3.23% to Rs 477), and Omaxe (down 12.90% to Rs 273), slumped.
Machino Plastics (up 18.12% to Rs 73.65), Stovec Industries (up 10.48% to Rs 174), Sundaram Fasteners (up 5.52% to Rs 55.45), Perfect Circle (up 5% to Rs 24.15), and JP Hydropower (up 4.52% to Rs 47.40) were the top gainers from the small-cap and mid-cap basket.
English India Clays (down 13.22% to Rs 537), Basant Agro (down 13.20% to Rs 47.35), Zylog Systems (down 13% to Rs 429), Shah Alloys (down 12% to Rs 66.85), and JBF Industries (down 11.52% to Rs 134) were the top losers from the small- and mid-cap basket.
TCI Industries was frozen at 5% upper circuit filter at Rs 4318.50. The scrip has been hitting 5% upper circuit filter for the previous 28 sessions from 9th July 2007 till 20 August 2007. As per reports, the company owns Mukesh Mills property at Colaba, which is worth over Rs 1000 crore.
Rane Engine Valves lost 1% to Rs 281.30 after the Rane Group announced a restructuring to eliminate residual crossholdings and consolidation of group company investments. Rane Brake Linings surged 7.60% to Rs 156.
Bongaigaon Refinery & Petrochemicals tanked 8.64% to Rs 51.30 on turning ex-dividend for a dividend of Rs 3.50 per share on face value Rs 10 each.
Ispat Industries grew 1.07% to Rs 16.01. Recent reports suggest that the company is planning to invest about Rs 10,000 crore within five years to ramp up domestic production. It is also planning to expand overseas through capacity expansion and backward integration.
TRF declined 4.46% to Rs 891.10. After market hours on Monday, 20 August 2007, it scheduled a meeting of board of directors to be held on 8 September 2007, to consider the shareholders' agreement entered with Baker Technology, Singapore, and TRF for acquisition of 51% paid-up share capital of York Transport Equipment (Asia) PTE, Singapore.
JSW Steel slipped 6% to Rs 542 after hitting the day’s high of Rs 599.95.
Gokaldas Exports jumped 10.20% to Rs 252 after the company said private equity firm Blackstone Group is acquiring 70% stake in the company for nearly Rs 660 crore through a two-step deal: 50% from the Bangalore-based Hinduja family and 20% stake through an open offer to other shareholders at an offer price of Rs 275 per share. Post-acquisition, the total stake of the Hinduja family would come down to 19.22%, from current 69.22%.
Exide Industries was unchanged at Rs 55, off its high of Rs 59. It company informed BSE that a meeting of the board of directors of the company will be held on 28 August 2007, to consider an issue of equity shares on a rights basis.
California Software rose 1.71% to Rs 86.40. A unit of Chemoil Energy today, 21 August 2007, offered to buy 20% additional stake in California Software at Rs 100 a share. Kemoil, a Hong Kong-based investment holding company of Chemoil, said it would acquire 2.47 million shares of California Software. After this transaction Kemoil would hold 47.71% in the company.
Construction firm Gayatri Projects fell 7.74% to Rs 255. The company said on today, 21 August 2007, its board would meet on 28 August 2007 to consider raising the foreign fund limit to 49%.
Indusind Bank slumped 6.70% to Rs 49.40 after denying market talks of a foreign bank picking up a stake in the bank. On Monday, 20 August 2007, the Indusind Bank stock had ended up 3.11% to Rs 52.95 boosted by these rumours.
Allcargo Global Logistics shed 1.52% to Rs 840.50 after it said on Monday, 20 August 2007, its board would meet on 27 August 2007 to consider acquisition of Transindia Freight Services.
Patni Computer Systems galloped 7.82% to Rs 422, on reports that private equity firms are close to buying a stake in the software services firm. Private equity (PE) funds Texas Pacific Group and Apax Partners are close to purchasing the stake of two Patni brothers Ashok and Gajendra in Patni Computer Systems.
Dolphin Offshore declined 6.10% to Rs 217.90 despite securing a $8.5-million order from Punj Lloyd. The contract is for providing underwater diving services for the ONGC Heera Redevelopment project. The contract value could be extended by another $3.5 million by providing additional diving services.
HOV Services (down 5.40% to Rs 175.15), Bharat Fertilizer Industries (down 9.39% to Rs 67), Kilburn Engineering (down 13.58% to Rs 63.95), Zyden Gentec (down 9.93% to Rs 34), Bajaj Hindustan Sugar & Industries (down 4.27% to Rs 125.40) and Ion Exchange (India) (down 4.58% to Rs 187.50), declined after BSE said these stocks will be included in trade to trade segment from 24 August 2007.
Most of the Asian markets were trading higher today, 21 August 2007. Hang Seng (up 0.62% at 21,729.35), Shanghai Composite (up 1.03% to 4,955.27), Japan's Nikkei (up 1.06% at 15,899.24) and South Korea's Seoul Composite (up 0.28% at 1,736.18) advanced
However, Taiwan's Taiwan Weighted (down 0.43% to 8,479.05) and Singapore's Straits Times (down 2.82% at 3,228.66) slipped.
US blue-chip stocks rose on Monday, 20 August 2007 after reversing direction in the last hour of trade as the flight to safety in the short-term Treasury bills flagged, suggesting concerns over the stability of credit markets were receding. The Dow Jones Industrial Average rose 42.27 points, or 0.32%, to end at 13,121.35. The Standard & Poor's 500 Index edged down 0.03% to 1,445.55. The Nasdaq Composite Index gained 3.56 points, or 0.14%, to end at 2,508.59.
Oil prices dropped today, 21 August 2007, as traders shifted focus from the threat of Hurricane Dean on US energy facilities in the Gulf of Mexico to worries about global stock markets. Light, sweet crude for September delivery lost 36 cents to $70.76 a barrel on the New York Mercantile Exchange.
Grey Market - Indowind, Magnum Venture, KPR Mills and more
Motilal Oswal 725 to 825 230 to 240
Indowind Energy 55 to 65 4 to 5
Magnum Venture 27 to 30 3 to 4
Puravankara Projects 400 AT PAR / Discount
Take Solutions 730 220 to 230
KPR Mills 225 Discount
SEL Manufacture Ltd. 90 Discount
Asian Granito 97 3 to 4
Morning Call - Aug 21 2007
Market Grape Wine :
In House :
Nifty at a supp of 4170 and 4118 with resis at 4260 and 4235
Positive opening expected with profit booking at higher levels not ruled out.
Intra day calls: Sell SBIN below 1539 with a TGT of 1520 and a SL of 1550
Buy GNFC with a TGT of 143 and a SL of 132
Out House :
Markets at a support of 14231 & 14045 levels with resistance at 14545 & 14621 levels .
Buy : SBIN & KotakBank
Buy : RIL & RelCap
Buy : IDBI & IFCI
Buy : Hanun bullet
Buy : Gacl & CenturyTex
Buy : IbullReal , Unitech & JaiCorp
Dark Horse : Kotak , SBIN , IDBI , Hanun , IciciBank , RNRL & REL
US Market survives a wild ride
Late reversals in Energy and Financial sectors help market register gains
After a full day of wild trading, US Market managed to close with modest gains today, Monday, 20 August, 2007. During lunch hours, Dow was trading lower by almost 100 points after being up by 50 points earlier in the day. Just after the market opened, the U.S. Federal Reserve said it added $3.5 bln in reserves via overnight repurchase agreements, another dose of soothing investor sentiments.
Market finally closed mixed with S&P 500 being the only index losing for the day, but by nominal amount. The Dow Jones Industrial Average closed higher by 42.27 points at 13121.35. Tech-heavy Nasdaq gained 3.56 points to close at 2508.59. S&P 500 lost just 0.39 points to close at 1445.55.
Eighteen out of the thirty Dow stocks closed in the green today. Alcoa, Caterpillar, Boeing, Honeywell and Citigroup were the main Dow winners today. JP Morgan, IBM, Altria and H-P were the main Dow laggards.
After the close, Capital One said it will close its struggling GreenPoint Mortgage business, resulting in 1,900 job losses due to weakness in the nation's secondary mortgage markets.
Lowe’s beat Wall Street expectations
When market opened in the morning, all the three indices opened in green. Home improvement retailer, Lowe's topping Wall Street expectations offered some early confidence. Also, the July index of leading economic indicators rose 0.4% following a 0.3% decline in June.
Lowe's today reported better than expected earnings for the second quarter but same store sales fell 2.6% from a year ago. Weak housing market conditions and a more difficult consumer environment weighed on results and this led the retailer to cut its outlook for the year.
Fed stepped in again this morning adding $3.5 bln in overnight repurchase agreements. But a sharp reversal in Financials quickly reversed market’s course of direction which had made a strong start. Reversals in Technology, Health Care and Industrials also offset a wave of bargain hunting interest.
Concerns of a widening credit crunch, left the Financial sector down for most part of the day.
Patni Computers and Sify only end in green
But later in the day, The Financial sector once again turned around to some extent. But notable turnaround was noticed in the Energy sector whose stocks went up despite crude prices slipping down. These two sectors helped market make an U-turn.
Among the Indian ADRs, all Indian ADRs ended in the red today barring Patni Computers and Sify. Patni ended up being up by 3.3% while Sify ended up by 4.8%. In the banking sector, both ICICI Bank and HDFC Bank closed down by almost 2.5%.
Meeting to promote more-stable markets tomorrow
Crude oil futures slipped today as prospects of hurricane Dean attacking Gulf of Mexico faded away. Luckily, Gulf of Mexico is supposed to be in the safe haven compared to where the hurricane has currently targeted. Natural gas and gasoline prices also fell as Dean moved away from the Gulf.
Crude-oil futures for light sweet crude for September delivery closed at $71.12/barrel (lower by $0.86/barrel or 1.19%) on the New York Mercantile Exchange. On a yearly basis, prices are 1.5% higher. Natural gas for September delivery finished the session today with a loss of 97 cents (13.8%) at $6.04 per million British thermal units on the New York Mercantile Exchange. That was the biggest one-day drop in more than four years. The contract had gained 2.7% last week.
Volume at the New York Stock Exchange hit 1.5 billion shares, with advancing stocks outpacing decliners 10 to 7. At the Nasdaq, 1.7 billion shares exchanged hands, with advancing stocks edging ahead of decliners 15 to 14.
For tomorrow, no economic report expected. Few companies, including some notable retailers (Target) are expected to report their earnings tomorrow. But the event that will garner attention will be D-Conn, chairman of the Senate Banking Committee, planning to meet Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson to discuss how to promote more-stable markets.
Positive, Negative Bias
Stocks:
Stocks with +ve bias: RIL, IDFC, PFC
Stocks for Investments: Ranbaxy, Maruti, Infosys.
Discount sale ends, danger ahead
A certain amount of danger is essential to the quality of life.
Entering the markets on Monday was like entering a discount sale. What you wanted is already sold out and the left overs may not seem attractive for the price. On the face of it, the bulls seem to be back in world markets, thanks to Bernanke & Co.'s timely help last week in the form of a cut in the discount rate. There are talks that the Bank of Japan (BOJ), in its two-day meeting that concludes on Thursday, will keep its key interest rate steady. Wall Street observers are now hoping that the Fed would also lower the benchmark lending rate at its next meeting. But, that is still a month away and the trouble in the subprime mortgages and credit market is far from over. Don't get carried away by the rebound across global markets as there could be some more bad news in the offing in the days to come.
Back home, the political situation remains quite fragile with the Government and the Left not ready to take a step back from their current positions on the Indo-US nuclear deal. There are only two options now. Either the Congress-led regime will give into the pressure from the communist allies or it will go ahead with the deal to protect the country's image and the credibility of the Prime Minister. In either case, the impact on the market will be only temporary. The larger concerns are somewhere else, particularly in the US housing market. Any further unfolding of the mess there will lead to a fresh round of global selloff.
While bulls may want to extend their shopping spree, there is a likelihood of profit booking at higher levels as the global situation is yet to stabilise completely. We have three listings today. the most important one is that of Central Bank of India. The other two are SEL Manufacturing and Sujana Towers. In stock specific news, garment major Gokaldas Exports will be in action as the promoters have decided to sell a 50.1% stake to private equity major Blackstone. Reliance Industries is another stock to keep an eye on due to reports of a big oil find in the KG basin. Patni Computer could attract some attention as the long-awaited stake sale could see the light of day soon. Be prepared to see the indices in the red today.
Pyramid Saimira is also likely to be in the limelight as a financial daily reports that Citigroup Venture Capital is in talks for investing $100mn in the theatre chain company. Sun TV could gain amid reports that it has reached an out-of-court settlement with Tata Sky. JSW Steel will hog some limelight as the Sajjan Jindal-run company announces an acquisition in the US. Oil stocks might be affected due to the indefinite strike called by Oil Sector Officers' Association. Tourism Finance Corporation is expected to be in action as well amid market talk of a private placement.
The Dow Jones Industrial Average recovered to end slightly higher, though the S&P 500 index and the Nasdaq closed nearly unchanged. Investors bet that the Federal Reserve will swing into action to ease the turmoil in credit markets and keep the economy in good shape.
The Dow rose 42.27 points, or 0.3%, to 13,121.35. The Nasdaq Composite Index added 3.56 points, or 0.1%, to 2,508.59. The S&P 500 finished flat at 1,445.55. More than seven stocks climbed for every six that fell on the New York Stock Exchange.
All three major stock indices see-sawed throughout the session, slumping in the early afternoon, rallying in the late afternoon, and then giving up some of that advance right near the close.
Many economists on Wall Street feel that the Fed will cut the federal funds rate at the Sept. 18 policy meeting. On Monday, the central bank injected another $3.5bn to the banking system. But credit worries remain and are not likely to disappear anytime soon.
Thornburg Mortgage said that it sold over 35% of its assets and reduced its borrowing to lower its risk. Shares fell 10%.
After the close, Capital One Financial said it was closing its troubled GreenPoint mortgage unit, that it will cut 1900 jobs and shutter 31 offices by the end of the year. Shares fell 2% in extended-hours trading.
Countrywide Financial has started laying off employees, in an effort to cut costs amid its ongoing credit crunch, the Wall Street Journal reported. Shares of the troubled mortgage lender fell 7.5%, erasing early gains.
In economic news, the July index of Leading Economic Indicators (LEI) rose 0.4%, in line with estimates, after falling 0.3% in June.
US light crude oil fell 86 cents to settle at $71.12 a barrel on the New York Mercantile Exchange, sliding on signs that Hurricane Dean is unlikely to disrupt refining centers in the Gulf of Mexico.
COMEX gold for December delivery fell 30 cents to $666.50 an ounce. Treasury prices gained, lowering the benchmark 10-year note yield to 4.63% from 4.67% late on Friday. In currency trading, the dollar slipped versus the euro and gained versus the yen.
European shares ended higher. The pan-European Dow Jones Stoxx 600 index advanced 0.7% to 362.33, with the gains in resources outstripping other sectors. France's CAC-40 rose 0.7% to 5,399.38, the UK's FTSE 100 gained 0.2% at 6,078.70 and the German DAX 30 added 0.4% at 7,407.53.
In emerging markets, the Bovespa in Brazil advanced 1.3% to 49,206 while the RTS index in Russia lost 0.5% at 1852. The IPC index in Mexico fell 0.2% at 28,453 while the ISE National-30 index in Turkey dropped 1.1% to 57,671.
Most Asian markets have taken off from where they left yesterday, with the Hang Seng in Hong Kong jumping by over 600 points or 3% to 22,215. The Nikkei in Tokyo was up 235 points at 15,967 while the Kospi in Seoul gained 23 points at 1754 and the Straits Times in Singapore advanced 21 points to 3344.
The Morgan Stanley Capital International Asia-Pacific Index added 0.8% to 143.89 at 10:40 a.m. in Tokyo, adding to a 4.1% gain yesterday that was the regional benchmark's best one-day performance since March 2002. Last week's 8% fall marked the worst week since September 1990.
China's CSI 300 Index rose 0.9%, headed for a record. Benchmarks also advanced in New Zealand and the Philippines, which was shut yesterday for a holiday.
Markets finally broke three days losing streak as bulls rode on global cues. Strong comeback from the Asian and the European markets aided the key indices to jump at open. The rally was ignited after the Federal Reserve' announced 50 basis-point cut in discount rate at which it lends to banks. However, the volumes dropped as turnover on NSE cash segment slipped 41.3% and in F&O segment declined 38.2%. Further selling pressure in the index heavyweights like Infosys and Satyam dragged the key indices to close off their days high. Finally, the BSE 30-share Sensex closed at 14,427 gaining 286 points. NSE Nifty added 101 points to close at 4209.
Ranbaxy surged by 4% to Rs364 after the company announced that it has secured US FDA approval to sell copy of Abbott Labs Vicodin. The scrip touched an intra-day high of Rs367 and a low of Rs355 and recorded volumes of over 6,00,000 shares on NSE.
Pantaloon Retail advanced by 3% to Rs490 after the company declared that they would sell shares atRs500 each to Private Investors. The scrip touched an intra-day high of Rs499 and a low of Rs480 and recorded volumes of over 1,00,000 shares on NSE.
Great Offshore edged lower by 0.7% to Rs771 after reports stated that the Indian oil-drilling company that was separated from Great Eastern Shipping Co. last year is close to acquiring Petrojack ASA, a Norwegian oilrig owner, for as much as $500mn. The scrip touched an intra-day high of Rs802 and a low of Rs756 and recorded volumes of over shares 37,000 on NSE.
ICICI Bank surged by over 5.8% to Rs872 as the FIPB has cleared its plan to induct foreign investors in its proposed new wholly-owned subsidiary that will house its insurance and asset management businesses. The scrip touched an intra-day high of Rs888 and a low of Rs856 and recorded volumes of over 28,00,000 shares on NSE.
Siemens marginally gained by 0.2% to Rs1199 after the company announced that it secured an order for installing a new hot-strip Mill. The scrip touched an intra-day high of Rs1229 and a low of Rs1187 and recorded volumes of over 95,000 shares on NSE.
Fertilizer stocks continued to be in the limelight after Prime Minister Dr. Manmohan Singh said that he existing subsidy system may have to be reviewed in the future. Chambal Fertilizer rallied by over 19% to Rs44, GNFC surged by over 14%to Rs135 and GNFC added 10% to Rs104.
Telecom stocks were in action amid reports that the TRAI is considering scrapping the cap on the number of players in a circle, besides the proposal to allow a company to offer both GSM and CDMA services under the same license. Bharti Airtel surged by over 4% to Rs827, R Com advanced by 3% to Rs507 and Idea added 2.3% to Rs113.
IT stocks were on the receiving end as index heavyweights like Infosys lost by 1.3% to Ras1829, Satyam Computer was down 1.7% to Rs432, TCS edged lower by 0.3% to Rs1055 and Wipro declined 1.1% to Rs469.
Metal sector which was worst hit made a strong come back led by Sterlite Industries as the scrip was up by over 9% to Rs566, Tata Steel spurred by over 5% to Rs570, SAIL added 4.4% to Rs143 and Nalco gained 3.7% to Rs259.
Banking stocks were the top gainers as the index gained 4.23% led by gains ICICI Bank as the scrip surged by over 5.5% to Rs872, HDFC Bank was up by 4% to Rs1110 and SBI added 2% to Rs1549. Bank of India, Union Bank and OBC were the major gainers among the mid-cap stocks.
Realty stocks recorded smart gains. Akruti advanced by 2% to Rs495, Sobha was up by 0.8% to Rs786 and Parsvnath added 2% to Rs295.
Fund Activity:
FIIs were net sellers of Rs6.49bn (provisional) in the cash segment on Monday and the local institutions pumped in Rs1.42bn. In the F&O segment, FIIs were net buyers at Rs42.53bn. On Friday, foreign funds pulled out Rs5.2bn from the cash segment. Mutual Funds were net buyers at Rs228mn on the same day.
Major Bulk Deals:
Principal MF has bought McDowell Holdings while HSBC Global has sold the stock; Merrill Lynch has purchased Nagarjuna Fertilizers; Kotak Mahindra has sold Pranava.
Lower Circuit:
Balasore Alloys, Rama Pulp and IOL Broadband.
Upper Circuit:
Assam Company, Goldstone Tech, Mangalore Chemical, Tourism Finance, Godavari Fertilizers, Silverline Technologies, Diana Tea and Karuturi Networks.
Delivery Delight (Rising Price & Rising Delivery):
Amtek Auto, Amtek India, Exide Industries, Gail India, GHCL and IOC.
Abnormal Delivery:
Sintex, Cholamandalam Investments, Amtek Auto, EKC, Neyveli Lignite and Centurion Bank of Punjab.
Major News & Announcements:
Reliance Industries may start Financial Services – Reports
Blackstone to buy 50.1% stake in Gokaldas Exports
Power Finance to team with NTPC, on power exchange
Rane Engine to separate Manufacturing unit
Pantaloon Retail to sell shares at Rs500 each to Private Investors
HDIL to buy property from Kilburn Eng for Rs1.25bn
Hanung Toys gets orders worth Rs6bn - Reports
Ansal Infrastructure signs two agreement with IL & FS Investment
TCS gets $16mn contract
Agriculture Minister Sharad Pawar says sugar production next year may rise 15%
JSW Steel's Board to meet on Tuesday to consider an acquisition in US.
Market may extend its rebound
Asian markets have rallied for the second consecutive day as U.S. subprime concern are receding. The market is likely to display positive outlook on the back of firm overseas markets. However, FIIs remaining net sellers in equities and persisting intra-day volatility may see the market witness sideways movement. Among the key indices, the Nifty can see a pull-back to 4200 or 4250 levels and has a key support at 4070 levels in the near-term. The Sensex has a likely support at 14,100 and may face resistance at 14,500.
The US indices staged a comeback on Monday, recovering from its earlier selloff sparked by renewed worries about the credit and mortgage markets. With the Dow Jones adding 0.3% or 42 points at 13121 and the Nasdaq also ended firm with gains of four points at 2509.
However, most of the Indian ADRs closed in the red on US bourses. Patni Computer was the major gainer amongst the ADRs and gained over 3%, while Dr Reddy's lab closed with the marginal gains. Infosys, Satyam, Wipro, Tata Motors, ICICI Bank, VSNL, MTNL and HDFC Bank were down over 1-2% each.
Crude oil prices slipped marginally on Monday. While the Nymex light crude oil for September series fell by 86 cents at $71.12 a barrel. In the commodity segment, the Comex gold for December series slipped by 30 cents to settle at $666.50 an ounce.
Subprime .. the India Connection
While the Manmohan Singh government is facing a huge threat to its existence, or even worse, its ability to govern effectively, the stock markets were obsessing over the problems of American home loan lenders and borrowers. This is a little bit like a cancer patient obsessing over a runny nose. Or is it? Every morning, when you pick up the newspapers or switch on a news channel, there is a wide choice of news items to pick from. Some are obviously more important than others and some, one assumes, are more of the kind that can have only short-term affect, if at all. But that's something that's generally true of all news. However, when it comes to looking at news from an investment analyst's point of view, I have a deep and long-held belief in the non-newsiness of news. As I wrote in another context a few weeks ago, news, by definition, is something unusual, something that hardly ever happens.
It is clear that there is no direct connection between the subprime mess and India. The fact that there's a run of sorts on Countrywide Financial's bank in the US doesn't have much to do with the Indian end of Countrywide's business. As I said last week, the only tenable connection between themes in America and the Indian stock markets is that investors in the US will turn averse to all kinds of risk and the enormous flow of foreign funds into India will stop or even reverse. What kind of impact would this have on the stocks here? Like most questions about the stock markets, the long term and the short-term answers to this question are different. It is a basic fact of the stock market (or any market) that no matter how wonderful the traded good, its price will languish if there are no buyers. Great things are happening to our country's economy and businesses but for these things to reflect in stock prices, there has to be money flowing into the markets that is willing to buy into the future. Are the foreign investors the only people buying Indian stocks? Not by a long shot, but stock prices are very sensitive to what the last buyer or seller in the market is doing. In a manner of speaking, the price is decided by the 'pressure', upwards or downwards, created by the last unsatisfied buyer or seller in the market. The weighty presence of large foreign inflows for the last few years has been the biggest source of upwards pressure in the markets.
It is entirely possible that this will disappear from the Indian stock markets for some time. This could be for any period of time from day to weeks to months. Since short-term price movements are driven by expectation of short-term price movements, this could lead to a considerable period during which the stock markets languish or even fall. I don't think there's anything much wrong with this as long as the real economy is fine. Companies are making more products and selling them. People are earning more money and spending it. The growth is real and deep. If the stock markets hang around for a while without going anywhere much, then that's that much more of a buying opportunity for those who have faith and are interested in the long-term.
This means that even though the impact of the so-called subprime mess could turn out to be important for a certain period of time, its eventual impact is less important than many other things that you'll read in newspapers.
Dhirendra Kumar
Tanla Solutions
Tanla Mobile (a subsidiary of Tanla Solutions), leading provider of next generation mobile applications, m-commerce and interactive services, was selected by the UK-based mobile services provider Pocket Group to deliver multi-media entertainment services across the customer base.
The Pocket Group delivers a variety of compelling media-rich content including music, gaming and video downloads across a broad range of 2.5 and 3G mobile devices.
Net profit of Tanla Solutions rose 88.85% to Rs 19.47 crore on 47.89% rise in sales to Rs 25.88 crore in Q1 June 2007 over Q1 June 2006.
Tanla Solutions is the provider of integrated telecom infrastructure solutions and products. The company has got strong domain expertise in the non-voice mobile telephony industry. Its business is mainly targeted at the exponentially growing non-voice mobile messaging and data services marketCentral Bank in F&O segment
NSE has included Central Bank of India (CBI) in futures & options (F&O) segment from the day of the stock’s debut in the cash segment on Tuesday, 21 August 2007. The lot size of CBI in F&O is fixed at 2000.
CBI has pan-India presence with branches in 27 states and three Union Territories. At dnd March 2007, the bank had 3,194 branches, the third largest network of branches in India.
CBI reported net profit of Rs 498.01 crore on net total income of Rs 2950.07 crore in the year ended 31 March 2007 (FY 2007). Profit for FY 2007 includes recovery/write back of provisions of Rs 163.33 crore.
Real estate sector to ride the subprime woes
The US subprime credit defaults have become a bugbear for most global markets, though none of them, except for the US market, seems to have been directly impacted by it.
Concerns over the crisis in the US subprime lending market, where loans are offered to borrowers who do not qualify for market interest rates because of poor credit history, has sent world markets into a tailspin since the beginning of the month.
Though the markets recovered well on Monday, taking cues from buoyant conditions following US Fed’s intervention on Friday, the realty sector still appears to be a bit jittery. Any adverse news or events relating to the US subprime could further upset the sector, say market watchers.
Most global markets have been witnessing extreme bearishness and volatility over the past couple of weeks. Stocks of real estate companies, listed across world exchanges, have been at the receiving end. Key US sectoral realty indices have fallen by 11-32%. The US Mortgage REIT Index is down 32% over the past one month.
As far as Asian indices are considered, there has been a ripple effect of the shake-up in the US market, as most realty benchmarks have fallen down in the range of 9-11% over the past one month. The Singapore Property Equity Index has plummeted 21% over the period.
“Though indirect ripples could not be ruled out, the subprime crisis should not affect Indian real estate sector as much as it impacts European countries and the US. Forget India, it should not even hit Asian markets (excluding Japan) like Singapore and Hong Kong,” Emkay Shares & Stock Brokers analyst Navin Jain said.
“There may be some blips or dips in real estate sector as it is closely related to mortgage loans; infrastructure sector looks perfectly fine. As far as India is concerned, the construction sector would continue to do well in the long term. Stocks in the sector would bounce back once the market stabilises. The sector would be buoyant as foreign direct investment into India is unlikely to drop,” Mr Jain added.
Fundamentally, there should be no impact of subprime on GDP growth of the country or earnings of Indian corporates. Minus the concerns of US credit defaults, the market is well-poised as interest rates have softened a bit and inflation seems to be under control, analysts said.
“Indian real estate does not have any direct exposure to the US subprime credit market. Moreover, subprime fears in the US can only trigger negative sentiment in markets that have low or no exposure; there will be only concerns of a probable real estate slowdown shrouding the sector in subprime insulated markets. However, to be on the safer side, investors can overlook real estate stocks for some time; infrastructure companies look good even in these market conditions,” said India Infoline vice-president-research Amar Ambani.
According to analysts, the trouble may start when large-sized funds, with exposure to highly-leveraged subprime markets, start liquidating their holdings in emerging markets to make good their losses in a sinking subprime market.
Indian market has been witnessing a series of large outflows over the past one week as a result of probable losses suffered by overseas funds in the US subprime market.
India Technicals
Nifty — The index opened on a strong note and traded range-bound though positive throughout the day session. It ended the day with a gain of 100 points.
5 & 10 dma — The index is trading below the 5 & 10 dma. Pullback towards the averages can be expected .The 5dma = 4248 and 10dma = 4313. Intra-day strength can be expected on sustaining above 4248.
Support — On the downside, intra-day support can be expected around 4189 (lower end of yesterday’s intra-day consolidation). Lower support can be seen around the 4163-4132 band (38% and 50% retracement level of the advance from
low of 4003 to 4261).
Conclusion — Expect rise towards 4248 with support around 4189 levels.
Motilal Oswal Financial Services
Motilal Oswal Financial Services (MOFSL) is the Motilal Oswal group’s holding company with stake in four group companies: Motilal Oswal Securities (MOSL – the stock broking arm), Motilal Oswal Commodities Brokers (MOCB - the commodity business arm), Motilal Oswal Venture Capital Advisors Pvt Ltd (MOVC - the venture capital advisory arm) and the Motilal Oswal Investment Advisors Pvet Ltd (MOIAPL - the investment banking arm).
The object of the issue is to raise funds to enable the group to improve its competitive position and support growth plans through deployment of long-term working capital, enhanced financing facility for broking customers, and additional office space and technology advancement.
MOFSL proposes to infuse IPO funds into MOCB (Rs 10 crore) and MOSL (amount not mentioned) by subscribing to their equity shares, advancing unsecured loan or any combination of this and provide Rs 40 crore as additional margin capital for both the subsidiaries. Such capital infusion is to strengthen their balance sheets and enable them to increase trading volumes in the equities and commodities market. Also, MOFSL provides financing facility to its retail broking customers. It now proposes to enhance this financing facility by infusing Rs 110 crore. Besides, about Rs 450 crore will be used to purchase / lease new office space for business expansion and technology upgradation.
MOFSL incorporated MOVC in April 2006 as an investment manager and advisor with a target to raise US$ 100 million. Commitments stood at Rs 181.67 crore (US$ 42.15 million) on March 2007. The funds raised to date have yet to be invested.
Strengths
- Large and diverse distribution network with well established brand among retail and institutional investors in India. Registered retail customer base exceeds 200,000. This is serviced through 1,200 business locations spread across 377 cities with 2,072 employees (including 741 on contract basis). It is also empanelled with 251 institutional clients including 165 FII clients (end March 2007).
- Recent forays in investment banking and venture capital is to diversify its revenue stream from brokerage income. The share of brokerage income came down to 85.8% of the consolidated operational income in the year ending March 2007 (FY 2007) from 92.5% in FY 2006.
Weakness
- With about 85.8% of the operation income still coming from brokerage income, performance is correlated to the cyclical nature of the stock markets.
- Management fees paid by portfolio management service (PMS) clients is part of the consolidate revenue. This declined 45% to Rs 8.30 crore in FY 2007. Thus, the segment’s contribution to the total operational income fell from 5.8% end March 2006 to 2.3% in FY 2007. The assets under management were down from Rs 520.00 crore end March 2006 to Rs 508.86 crore end March 2007.
- Though an established player in stock broking; the increased level of competition is a cause of concern. Moreover, performance in investment banking and venture capital segment is untested. Lack of experience and competitive nature of these businesses is a cause of concern.
Valuation:
In FY 2007, consolidated revenue increased 39% to Rs 358.75 crore. After accounting for EO expense of Rs 4.26 crore on account of ESOP compensation, net profit after minority interested increased 15% to Rs 69.58 crore. On the adjusted net profit excluding EO items, EPS on post- issue equity of 14.20 works out to Rs 26.
At the offer price band of Rs 725-Rs 825, P/E works to 27.9 (on lower band) to 31.7 (on upper price band) times. The peer composite TTM P/E of securities/commodities trading companies stands at 27.21. P/E of other comparable listed players is: India Bulls Financial Services (24.9 times), Emkay shares (25.5 times), India Infoline Financial Services (41.1 times), IL&FS Investsmart (33.3 times) and Geojit Financial Services (33.6 times).
Fortunes of such scrips are directly linked to the fortunes of the stock markets. When the markets are buoyant, trading opportunities plenty and turnover strong, such scrips often get into the bull orbit. But in adverse markets, they find themselves in rough weather.
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