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Wednesday, August 22, 2007
No Entry Load
Market regulator Sebi is considering a move to do away with the entry load on mutual fund investments
The Asset Management Companies (AMCs) charge an entry load of upto 2.25 per cent from the retail investors for their investments in equity funds.
With this move the investment in mutual funds will become more cost effective for investors.
However, this waiver will be applicable to investors who will directly interact with the fund houses i.e deposit their applications directly with the AMCs. Applications received through internet or collection centre/ investor service center directly will also qualify for the waiver.
The move is not expected to go down well with the mutual fund distributors as it is this entry load which the fund houses use in paying commissions and brokerage to distributors. Today most of the funds in India are sold through distributors.
ITC plans big Chaupal Fresh
Aiming to become a player to reckon with in fresh produce retailing, ITC is planning to initially scale up Chaupal Fresh—stores selling
vegetables and fruits—from the current three outlets to 40 this financial year. At present, the stores are located at Hyderabad, Pune and
Chandigarh. The new 40 stores will all be in these three cities.
In the next three years, another 140 Chaupal Fresh outlets will be opened across the country, including in cities like Mumbai, Delhi and Kolkata.
"These stores share a lot of synergy with our existing business of agri-retail and therefore it is difficult to provide an investment figure. It is not easy to distinguish between the two businesses," said S Sivakumar, chief executive - agri business, ITC.
All the new stores will be opened on leased properties.
In addition, ITC is planning to take its rural malls - Choupal Sagar - to small towns. Forty such outlets have been planned as of now. While
Choupal Sagars in rural areas are spread across seven to ten acres retailing approximately 25,000 SKUs, the format for smaller towns will be
shrunk to one acre selling 12,000-13,000 products in small towns. The catchment area for these outlets would include villages near small towns.
Interestingly, kirana stores and other small retailers from the small towns will also be able to purchase goods from these outlets. Choupal Sagar will
provide different prices to retailers and ordinary consumers.
These stores would cost Rs 2 crore each, and would be set up in UP, Madhya Pradesh, Rajasthan and Maharashtra.
In rural areas, Choupal Sagar will begin focusing on health services. "Having looked at poor health facilities in rural areas, we are scaling up
health services. We have already experimented in Madhya Pradesh, and will be soon expanding to Uttar Pradesh and Maharashtra," said Sivakumar.
Market Close: Eased political issue helped !
Mixed global cues and political uncertainty kept Indian Indices in a volatile mood. Despite a strong start indices witnessed a roller coaster ride as selling intensified in the mid sessions. Investors were cautious to enter the volatile market but buying at low levels in the front liners gave a boost to their sentiments. Late in mid sessions market saw some recovery after the news that Congress has settled issue with the Left. Buying was seen across the board with capital goods, power and metal stocks leading the pack of gainers. The BSE Capital Goods and the BSE FMCG advanced by 4% and 3% respectively. But some Realty, Banking and selective Auto stocks were out of favour. Midcaps also saw some action.
Sensex ended up by 260 points at 14248.66. It was helped up by gains in BHEL (1666.95,+5 percent), Rel Energy (724.8,+5 percent), TISCO (569.3,+4 percent), Bharti Tele (847.65,+4 percent) and ITC (158.4,+4 percent). Restricting the gains were Tata Motors (618.95,-2 percent), Cipla (175.55,-1 percent), Hero Honda (625.85,-1 percent), SBI (1457.95,0 percent) and Maruti (766.7,0 percent).
We met with IT People which is expected with its follow on Public offer. The company provides human capital solutions on the IT and ITES industry globally. The company addresses vital requirements of the IT industry by providing recruitment Solutions through an e-Recruitment portal. The Company has a large active database of CVs, in addition to online services. IT People have a complementary 'brick and mortar' model for providing a range of contract consulting services that meet client's off-line requirements. The Company's client list includes Emirates Airlines, National Bank of Dubai, EDS, KPMG, WIPRO, Hexaware among others. For FY 07 the revenues were seen at Rs.18 crores and Net Profit of Rs.3. crores. With a Market cap of 185 crores it seems pointless to talk about it. The company is a play on the high attrition in the IT sector. The company hopes to raise Rs 45 cr to use for promotion and for setting up new offices.
A new policy is on cards to bring about state-of-the-art technology in wagon manufacturing, maintenance and allow private players to procure wagons on lease without investing in it. The existing wagons were designed 25 years ago. They have become outdated and there is a need to change it to meet the global standard. Currently, customers have to buy their own wagons for carrying goods under the wagon investment scheme. The policy would allow private players to invest in special kinds of wagons and lease them to customers of railways. Till now, it was only railways which could lease out wagons. Certainly there is immense demand and supply is constrained. Titagarh Industries has indirect exposure as part of the group of Titagard wagons. It supplies castings here. A direct exposure is Texmaco which is a story by itself. Increasing capacity in its foundry will make this a strong play. However, on valuation parameters, things don't seem too encouraging. Expect a research note on this one. Texmaco ended down marginally.
Telecom was mixed for the day but this sector may see pressure. The TRAI has suggested 'number portability' as the solution to ensure that the Telecom companies don't increase prices as they recently did. The suggestion is also to have no limit to the number of players in each circle. This is the risk we have been referring to earlier. The companies would need to invest big way to give better services and the returns may not be commensurate. Look for negatives in the Telecom stocks if this comes in.
Technically Speaking: Sensex had volatile session with no clear direction bur recovered in late trading hours. The Declines outnumbered Advances as the declines were 1568 against advances of 1122. Volume for the day was at Rs.4387 cr. Sensex closes near the 200dma with major resistance seen at 14400 levels. Many pivotal are at their resistance so the market can see some more choppy sessions. If the market breaks the 14400 levels then the market can see some directions.
End Session Commentary
The BSE Sensex ended the session on a positive note as it closed higher by 259.55 points at 14,248.66 while Nifty grew by 78.25 points to close at 4,153.15. The BSE Mid cap advanced by 25.39 points to close at 6,159.62 while Small cap decreased by 19.75 points to close at 7,518.70. Of the 2,674 stocks actively traded on BSE, 1,575 stocks declined while 1,042 stocks advanced.
BSE Metal index surged by 234.18 points to close at 10,081.33 as Sterlite Industries (4.35%), Tata steel (4.25%), Hindalco industries (2.02%), JSW Steel (1.17%) and SAIL (1.14%) closed in positive.
BSE Auto Index dropped by 1.35 points to close at 4,473.79 as Tata Motors (2.42%), Maruti Udyog (0.13%) and Hero Honda (0.06%) closed in red while M&M (2.93%) and Bajaj auto (1.02%) are closed in green.
BSE oil & gas index grew by 103.31 points to close at 7,511.33 as GAIL (3.32%), ONGC (2.43%), IPCL (2.14%) and HPCL (1.88%) and Reliance petroleum (0.60%) closed higher.
BSE bankex index closed higher by 63.62 points at 7,387.92 as ICICI bank (1.98%), IDBI Bank (1.57%) and HDFC Bank (1.40%) closed in green while PNB (3.03%), BOI (2.05%) and SBI (0.40%) closed in red.
BSE Capital goods index grew by 407.53 points to close at 12,397.50 as Siemens (9.17%), Praj industries (8.41%), BHEL (4.81%), L&T (3.26%) and ABB (2.95%) closed higher.
BSE Health Care Index ended lower by 4.42 points at 3,426 as Sun pharma (2.40%), GlaxoSmithKline (1.94%) and Cipla (0.93%) closed in negative while Dr Reddy lab (1.50%), Glennmark (1.41%) and Ranbaxy (0.71%) closed in positive.
BSE FMCG index increased by 42.85 points to close at 1,841.90 as ITC (4.07%), HUL (1.45%), Tata Tea (0.46%) and Dabur (0.45%) closed in green.
BSE IT index closed higher by 53.67 points at 4,348.53 as HCL technologies (1.74%), Wipro (1.51%), Infosys (1.63%), TCS (0.81%) and Satyam (0.25%) closed higher.
Mckinsey - Pharma worth 20 billion$ in 10 years!
Increasing personal incomes, addition of healthcare facilities and deeper penetration of health insurance will see the domestic pharmaceutical market triple to $ 20 billion in a decade, according to global consulting firm McKinsey.
The projected growth would see India become the 10th biggest pharmaceutical market - from number 14 two years ago - by replacing Brazil, Mexico, South Korea and Turkey, the report released here today said.
"Doubling of disposable incomes and the increase in numbers of middle-class households will account for nearly 40% of the projected growth as affordability and access will increase dramatically," Palash Mitra, Partner, McKinsey & Company and co-leader of the Pharmaceuticals & Medical Products Practice said.
According to Mitra, significant expansion of medical infrastructure will account for 20% of the expected growth followed by greater penetration of health insurance (15%) and a gradual shift in disease profile and adoption of patented products (10%).
India Mobile Banking Savvy!
One out of every three people in India is ready to switch to another bank if its offers them free mobile banking, states an Asia Pacific survey on mobile banking opportunities. The survey notes that Indian users are much more aware of mobile banking than the others countries.
The report titled, ‘Mobile Opportunities for Financial Sector’ was conducted in five countries including India, and commissioned by Sybase 365, a subsidiary of Sybase, along with BDM Intelligence -- a custom market research firm in Asia. It surveyed 1,818 mobile users.
The survey states that 81% of Indian respondents are aware they can check bank balance on a mobile phone, while 49% have used the services in the last three months-- the highest amongst the five countries surveyed in the region. Almost 42% of Indian consumers are able to state their bank balance at any given time. The survey also points out that consumers in India (71%) are much more aware when compared to their counter parts in the other regions on the offering from their banks on mobile phones.
Meanwhile, 50% of Indian respondents checked their bank balance on their mobile phone and 54% via the Internet-- although the majority still obtain account balance information through brick and mortar facilities.
However, the biggest concern among the Indian user while accessing details through mobile phones is security. In line with this, they accounted for the largest percentage of survey respondents expressing an interest in the ability to report potentially fraudulent transactions and to freeze cards via their mobile phones (67% for both). Indian respondents also expressed the most willingness to pay for these services.
Kaustuv Ghosh, country manager Sybase 365 India said, "Indian bank’s need 360 degree view of mobile service deployment and its benefit to customer and operational expenditure alike. The survey reveals a growing culture of financial awareness as customers are becoming increasingly vigilant when it comes to their money."
Mobile banking is gaining traction in Asia Pacific on a number of levels, though the speed at which each region adopts mobile banking clearly differs. India has a greater enthusiasm for mobile banking services.
Post Market Commentary
The benchmark Sensex on Wednesday rebounded by 260 points on emergence of buying by funds in a roller-coaster ride caused by concerns of a mid-term poll following a political stalemate. Swinging in a range of 14,281.48 and 13,870.70, the BSE bar ometer settled at 14,248.66, a net rise of 259.55 points or 1.86 per cent over yesterday's close of 13,989.11.
The broader S&P CNX Nifty of the NSE also bounced by 78.25 points or 1.92 per cent to close at 4,153.15 from previous close of 4,074.90.
Analysts, however, visualised uncertain outlook for near future in the light of political standoff between the government and its Left allies on the Indo-US civil nuclear deal even as some stability was seen in global markets.
Domestic institutional investors (DIIs) were believed to have cornered a sizeable chunk of shares at the lower levels. Financial institutions and private mutual funds also made heavy sector-specific purchases, particularly shares in capital goods, metal and fast moving consumer goods (FMCG) sector, market players said.
Foreign institutional investors (FIIs) including hedge funds, however, remained net sellers. As per provisional numbers, FIIs pulled out Rs 138 crore on August 21 while DIIs pumped in Rs 826.84 crore on the same day.
Meanwhile, the CPI(M) top brass began a two-day meeting amid signals that the government is in no mood to heed its ultimatum on the issue of nuclear deal.
Power Grid Corporation IPO coming soon
Power Grid Corporation of India Ltd (PGCIL), the country’s biggest transmission utility, on 22 August filed its red herring propectus with market regulator Sebi for its initial public offer to raise an estimated Rs580 crore.
PGCIL is the third central power utility to tap the capital market for raising funds after NTPC Ltd in 2004 and Power Finance Corporation early this year. Like NTPC and PFC, the government will piggyback on PGCIL IPO to divest five per cent of its stake. While NTPC had raised around Rs 5,400 crore, PFC had mopped up nearly Rs 1,000 crore. Power Grid is expected to mobilise up to Rs 580 crore, sources said.
Power Grid Corp is raising funds from the market to part-finance its expenditure requirements. The country’s transmission sector requires an estimated investment of Rs 70,000 crore during the 11th plan and central utilities led by PGCIL are expected to contribute as much as Rs 50,000 crore.
The public issue comprises 57.39 crore equity shares of Rs 10 each. This includes a fresh issue of 38.26 crore shares by PGCIL and an offer for sale of 19.13 crore shares by the government. About 1.39 crore shares have been reserved for employees and the net issue to public is 55.99 crore shares.
The IPO would constitute 10% of the equity capital and government is divesting 5%of its holding.
The company will issue shares at a price to be decided through the book building process and the shares will be listed on Bombay Stock Exchange and National Stock Exchange.
Kotak Mahindra Capital Company Ltd, Citigroup global Markets India and Enam Financial Consultants are the book running lead managers to the issue.
Investors flock to buy cheap stocks
The Bombay Stock Exchange benchmark Sensex partly made up for the previous session’s losses, rising 260 points on 22 August on emergence of buying by funds amid firm Asian markets and gains in US stocks.
The market remained volatile on aggressive bouts of buying and selling, which took the index to a high of 14,281 and low of 13,870 points during the day.
The Sensex, which had tumbled 438 points on 21 August on political concerns, gained 259.55 points to close at 14,248.66 as buying interest revived in fundamentally strong stocks led by shares in capital goods, metal and oil and gas sectors.
Similarly, the wide-based National Stock Exchange’s Nifty gained 78.25 points at 4,153.15 after touching a high of 4,165.70. The Nifty had fallen to 4,040.15 in morning deals.
The market gained as Asian stocks rose on the back of fourth day of gains in US stocks yesterday, while discounting the political crisis brought about by the Indo-US nuclear deal at home.
As the market turned bullish, capital goods segment index spurted the most by 407.53 points at 12,397.50 followed by metal index by 234.18 points at 10,081.33. Oil and gas index shot up by 103.31 points at 7,511.33 and PSU index by 81.97 points at 6,573.94.
Bank index rose by 63.62 points at 7,387.92, Teck index by 63.16 points at 3,421.97, IT index by 53.67 points at 4348.53 and FMCG index by 42.85 points at 1,841.90.
However, realty, healthcare, consumer durables and auto sector stocks remained weak.
Mid-day
In volatile trading, the benchmark Sensex surged over 291 points at midsession on the Bombay Stock Exchange on 22 August on emergence of buying by funds amid brokers covering their short positions.
The key index moved in a wide range of 14,280 and 13,870 points on heavy alternate bouts of trading in fundamentally strong stocks led by heavy-machinery and information technology company stocks.
The Sensex gained 291.22 points at 14,280.33 at 1300 hours, while the wide-based National Stock Exchange’s Nifty gained 87.50 points at 4,162.40. The Nifty had fallen to 4,040.15 in morning deals.
The Sensex had plunged 438 points on 21 August on political developments over the nuclear issue after the last week’s bearish trend over widening sub-prime mortgage problems in US markets.
“The fresh firmness in the market came on speculations that the US Federal Reserve cutting the discount rate might help the market to defuse a crisis in the credit markets and revive demand for riskier assets like equities, Mumbai-based broker Ratnesh Gupta said.
Asian stocks rose on the back of rebound in US stocks for the fourth day yesterday, giving positive signals to the Indian markets, even discounting the political crisis at home, Gupta said.
Reliance Industries, which has the world’s third biggest refinery and is the heaviest on the Sensex, jumped Rs8.15, or 0.5%, to Rs 1,755.5.
Infosys Technologies rose Rs10, or 0.6%, to Rs1,771. India’s second-largest software exporter expanded into Latin America by setting up a software development and sales unit in Monterrey, Mexico. These two companies carry almost one-fifth of the total weightage on the Sensex.
Opening
The benchmark Sensex on 22 August recovered by over 178 points in early trade on the Bombay Stock Exchange on revival of buying by funds even as some investors were covering short positions.
The Sensex, which tumbled nearly 438 points in yesterday trade, bounced back to gain 178.5 points to 14,167.61 in first five minutes of trading.
Similarly, the wide-based National Stock Exchange’s Nifty recovered by 49.25 to 4,124.15 as most of the index stocks jumped up on fresh buying.
Subprime concerns, implications for India
The global equities sell-off of the last four weeks reflects a sharp rise in risk aversion. Higher risk aversion has come on the back of the disarray in the credit markets and the growing concern that an emerging global "credit crunch" as well as the continuing US housing slump, will force the US economy into recession over the next 12 months.
In addition, the re-pricing of risk took on yet another ugly dimension on Thursday and Friday of the last week with the dramatic unwinding of "carry trades" across Asia leading to a sharp rise in the Yen, and further major declines in Asian equities, including the Sensex.
How should investors react? Clearly the last four weeks have been very painful for many and the immediate market outlook is very uncertain.
But long term investors should take comfort from the overall health of the world economy, including India. Outside the US housing sector, the world economy is very strong with good GDP growth, generally well-contained inflation, high corporate earnings, and healthy business and consumer sector balance sheets.
We believe that the most likely outlook is that global markets will calm down by or during September and that the sense of panic of recent weeks will recede.
In addition, if the markets sell-off does escalate further and seriously threatens the economic outlook, the US Federal Reserve has shown that it is sensitive to the threat that the re-pricing of risk becomes even more disorderly. The Fed (along with other central banks) has lifted its liquidity injections into markets and on Friday lowered the so-called discount rate at which it lends emergency funding to financial institutions - by 50 basis points to 5.75%.
In addition, if its largely technical measures do not do the trick in stabilising markets, the Fed has also indicated that if necessary it would also reduce its key policy rate - the Fed Funds rate (currently at 5.25%). The Fed remains reluctant to be perceived as bailing out investors for unwise decisions.
But US inflation is no longer a serious problem and markets may well have suffered enough pain for lessons to have been learnt. The risk of a US recession and a prolonged stocks meltdown is higher now than a few weeks ago but still looks only something like a 30% risk, in our view, over the next 12 months.
The fear in markets may take some time to dissipate and volatility is likely to stay high for a while. But a global equities rebound should come through over the next few months, and this should lift Indian markets as well. It will not be a straight line but our end 2007 target for the Sensex before the current turmoil was 16000, and we are sticking with that target. From the close on Friday August 17th, this implies a 12-15% climb and a 15% gain for 2007 as a whole.
The stocks turmoil stems from losses on US sub-prime mortgage lending, where lax lending standards in the US in 2005-06 combined with falling house prices in some areas since then are now bringing a wave of mortgage defaults.
Even on very pessimistic assumptions about the US housing prices, the total losses look set to be around $200 bn, losses which when spread around the world's investors should not be dangerously large.
But the problem is that many of the sub-prime mortgages have been packaged up into other securities, such as collateralised debt obligations (CDO's), which are now impossible to value.
The uncertainty over valuations caused the CD0 market to dry up in mid-August. This uncertainty, combined with the news of major losses from the general markets sell-off, have spread doubt about the liquidity of the financial system.
As a result, banks have been hoarding cash, pushing up short term lending rates and forcing central banks to respond by adding more liquidity into the system to keep market rates close to policy rates - 4% in Europe and 5.25% in the US. Have central banks now done enough to calm markets?
Central banks have probably done enough but it is far too early to be sure. In addition, the US housing sector looks almost certain to worsen further. The reduced availability of mortgages to weaker borrowers as well as higher interest rates will discourage new buyers. With many local markets already suffering from acute oversupply, this means that US house prices are likely to fall further and that the drag on the overall economy from the housing slump will probably continue into 2008.
The continued drag from housing makes the current crisis very different to the 1998 LTCM crisis when liquidity injections and Fed rate cuts quickly restored confidence. Nevertheless, the key economic uncertainty remains the extent to which house price weakness will translate into sharply weaker US consumer spending
The good news here is that there are several reasons not to be overly pessimistic although much will depend on whether stocks weaken further. On the positive side, US household wealth remains strong and should be able to absorb the hit from weaker housing and the stocks sell-off. In addition, income gains remain solid and employment continues to expand.
The US economy should also continue to gain from strong exports whilst good corporate balance sheets should offset the negative impact on business investment of tighter lending standards.
As a result, a US recession still seems unlikely and we still expect that the Federal Reserves will be able to keep rates on hold at 5.25% into 2008.
But the uncertainties around this "no change" Fed Funds forecast are very large. If the current markets turmoil does escalate further and threatens the economic outlook, and/or the credit crunch widens even further from mortgage, then the Fed would respond quickly by cutting the Fed Funds policy rate.
The problems in the US will overhang Indian markets for a while but, provided the US avoids recession, the pressures should be manageable and Indian equities upswing should continue. Back in 2000-01, India and Asia more generally were far more dependent on the US and the US equities downturn hit very hard. In 2007 and 2008, economic growth in Europe and Japan should continue to be resilient to a weak US economy.
In addition, there are more alternative sources of domestic economic growth - from private consumption in India and business investment in India. In addition, the Reserve Bank has raised interest rates since 2004 and so now has plenty of scope to make monetary policy less stringent if the Indian economy looks like slowing significantly.
The key risk scenario for Indian equity investors is the threat that the US economy does move into recession over the next 12 months. A US recession would happen in 2008 if the contagion from the housing market is much more severe than we expect, and crucially, the Fed is too slow in responding to any systemic economic weakness and does not cut interest rates quickly enough.
In this event, Indian equities would likely move sharply weaker over the next few months. Investor should not rule out the Sensex falling back well below 10000 by end 2007 or early in 2008 before eventually finding a bottom. We do not think that this we happen but Indian investors would be wise to stay much more aware of the potential downside market risks.
Via ET
Sensex rallies, steers past 14,200
Today the market went into a major recovery mode despite slipping over 184 points in early trades. The market saw a smart pull-back in the afternoon and gained over 292 points for the day. The sharp appreciation came after the investors bought frontline stocks at lower levels. The recovery in major Asian and European markets also made the undertone bullish in the afternoon and the market maintained an upward bias thereafter. Strong buying in capital goods, FMCG and metal stocks helped the Sensex cross 14,200 levels and touch the day's high of 14,281. The Sensex finally ended the session with a gain of 1.86% or 260 points at 14,249. The Nifty rose 1.92% or 78 points to close at 4,153.
However, the breadth of the market was negative. Of the 2,674 stocks traded on the BSE 1,576 stocks declined, 1,041 stocks advanced and 57 stocks ended unchanged. Among the sectoral indices the BSE Capital Goods Index flared up by 3.40%, the BSE FMCG Index rose 2.38%, the BSE Metal Index moved up by 2.38% and the BSE Teck Index was up 1.88%. However, the BSE Realty index, the BSE Auto index, the BSE CD index and the BSE HC index closed in the red.
Barring Tata Motors, Cipla, SBI and Maruti Udyog, all other Sensex stocks ended at higher levels. BHEL flared up 4.81% at Rs1,667, Reliance Energy shot up by 4.74% at Rs725, Tata Steel zoomed 4.28% at Rs570, ITC moved up by 4.07% at Rs158, Bharti Airtel scaled up 4.04% at Rs846, L&T surged by 3.52% at Rs2,390, Ambuja Cement jumped by 2.96% at Rs131 and Reliance Communication gained 2.40% at Rs495.
Capital Goods stocks were in demand and attracted strong buying support. Siemens spurted by 9.17% at Rs1,231, Praj Industries shot up by 8.41% at Rs181, Suzlon Energy flared up 4.77% at Rs1,290 and Areva jumped by 3.56% at Rs1,440. Metal, too, logged significant gains. Sterlite Industries soared 4.35% at Rs567, Maharashtra Seemless Steel added 2.61% at Rs562, Hindustan Zinc jumped by 2.47% at Rs692 and Hindalco climbed 2.02% at Rs139.
Over 2.83 crore Nagarjuna Fertilisers shares changed hands on the BSE followed by IKF Technologies (1.68 crore shares), Chambal Fertilisers (1.18 crore shares), IFCI (1.15 crore shares) and Ispat Industries (78.61 lakh shares).
Value wise, Reliance Industries clocked a turnover of Rs187 crore followed by SBI (Rs150 crore), Zylog Systems (Rs145 crore), GMR Infrastructure (Rs127 crore) and Orbit Corporation (Rs101 crore).
Sensex settles above 14,200; firm global markets aid recovery
The market which saw series of wild swings in first half of the day amid negative bias, surged in the second half on value buying coupled with short covering. Strong Asian and European markets today, 22 August 2007, boosted local bourses. The market breadth recovered from early weakness, but still ended negative.
Today's recovery is commendable, coming in the backdrop of Tuesday (21 August 2007)’s 438-point fall in Sensex that was triggered by concerns arising from the fluid political situation in New Delhi, with the prospect of a general election looming large
Sensex gained 259.55 points or 1.86% to settle at 14,248.66. It had opened with an upward gap of 66.29 points at 14,055.40. Sensex hit high of 14,281.48 and low of 13,870.70. Sensex swung in a band of 410.78 points for the day.
At the day's high, the Sensex had gained 292.37 points. It had lost 118.41 points at the day's low.
The benchmark index, BSE Sensex, is down 1620.19 points from its all time high of 15,868.85, struck on 24 July 2007.
The S&P CNX Nifty advanced 78.25 points or 1.92% at 4153.15. The Nifty August 2007 futures settled at 4153.70, a marginal premium of 0.55 points as compared to the spot closing.
The market breadth was weak on BSE with 1568 shares declining as compared to 1122 that advanced, while 67 remained unchanged.
The BSE Mid-Cap Index rose 0.41% to 6,159.62 while the BSE Small-Cap Index lost 0.26% to 7,518.70. Both these indices underperformed the broad market.
The total turnover on BSE amounted to Rs 4387 crore as against Rs 4867 crore on Tuesday, 21 August 2007. The NSE F&O turnover was Rs 51749.70 crore, as compared to Rs 45485.53 crore on Tuesday, 22 August 2007.
Most of the sectoral indices on BSE settled with gains. The BSE Metal index (up 2.38% to 10,081.33), BSE TECk index (up 1.88% to 3,421.97), BSE Capital Goods index (up 3.40% to 12,397.50) and BSE FMCG Index (up 2.38% to 1,841.90), outperformed the Sensex
BSE IT index (up 1.25% to 4,348.53), BSE PSU index (up 1.26% to 6,573.94), BSE Oil & Gas index (up 1.39% to 7,511.33), BSE Consumer Durables (down 0.09% to 3,968.76), BSE Bankex (down 0.87% to 7,387.92), BSE Realty index (down 0.55% to 6,806.90) and BSE Health Care index (down 0.13% to 3,426.00) and BSE Auto index (down 0.03% to 4,473.79), underperformed the Sensex.
Among the 30-member Sensex pack, 27 advanced while the rest slipped.
Reliance Energy, the country’s second largest power generation and distribution company in terms of sales jumped 5.92% to Rs 733 on 12.55 lakh shares. It was the top gainer from Sensex pack. The stocks lost 8.20% to Rs 692 on 21 August 2007 from Rs 748.30 on 10 August 2007.
India’s leading power equipment maker Bharat Heavy Electricals soared 4.69% to Rs 1665 after winning contracts worth Rs 6500 crore for setting up power project units. The orders have been placed by Damodar Valley Corporation (DVC).
India’s largest listed cellular operator, Bharti Airtel surged 4.22% to Rs 847.55 on reports it will double its tower capacity to 80,000 by March 2008 as it grows its network to reach more towns and cities across the country, while expanding in the metros. Currently it has 40,000 towers.
Shares from metal sector recovered from sharp recent fall that was triggered by falling metal prices on London Metal Exchange (LME). India’s largest private sector steel maker Tata Steel surged 3.96% to Rs 567.70.
Other metal stocks, Sterlite Industries (up 4.31% to Rs 567.10), Sesa Goa (up 1.28% to Rs 1736.10) and Hindustan Zinc (up 2.47% to Rs 692), also edged higher
Dr Reddy's Laboratories rose 1.50% to Rs 631, recovering from a low of Rs 612.20 after it got an approval from the US Food and Drug Administration for cholesterol-lowering simvastatin tablets.
India’s largest cigarette manufacturer ITC jumped 3.94% to Rs 158.20 on high volumes of 26.07 lakh shares. As per reports, ITC has taken over Australian agri-biotech company Technico Pty for an undisclosed sum as part of a strategy to strengthen its foods business. The deal was executed through its subsidiary Russell Credit, ITC, which recently launched its Bingo brand potato chips. Technico provides bulk potato supply chain management.
Reliance Industries (RIL), the country’s top private sector entity by market capitalisation and oil refiner rose 1.47% to Rs 1773 on 10.64 lakh shares. It had slipped to day’s low of Rs 1717. As per reports, RIL will foray into solar power generation through pilot projects that will supply electricity to a few villages in Maharashtra. In the next 8-12 months, pilots will be launched in 38 villages in Maharashtra.
India’s third largest pharma company in terms of sales Cipla saw intense volatility. It rose 0.23% to Rs 177.60 on 11.20 lakh shares. The stock recovered sharply from day’s low of Rs 160.
India’s top truck maker Tata Motors lost 2.10% to Rs 621 and was the top loser from Sensex pack.
State Bank of India (down 0.58% to Rs 1455.25) and HDFC (down 0.16% to Rs 1898.55), were the other losers from Sensex pack.
Reliance Industries topped the turnover chart on BSE with turnover of Rs 188.77 crore followed by State Bank of India (Rs 150.26 crore), Zylog Systems (Rs 145.45 crore), GMR Infrastructures (Rs 127.64 crore) and Orbit Corporation (Rs 101.31 crore).
Real estate stocks slumped on selling pressure. Ansal API (down 3.23% to Rs 247.50), Parsvnath Developers (down 1.94% to Rs 274.80), Unitech (down 3.14% to Rs 459), and Sobha Developers (down 0.96% to Rs 735.20), slumped. The BSE Realty index lost 17.97% to 6,738.53 on 21 August 2007 from 8,183.02, on 20 July 2007.
India's largest real estate developer in terms of market capitalisation DLF rose 0.80% to Rs 560.60. It clinched a deal to develop an integrated town ship in Kolkata. DLF also launched its first IT SEZ at Nagpur, Maharashtra on 140 acres of land. This SEZ project will involve an investment of about Rs 1000 crore. The IT Park is expected to be operational in a period of 3 years and being an IT SEZ, it would cater to all the international and national IT/ITES companies.
Jaiprakash Hydro Power slipped 0.86% to Rs 46.30 after the National Stock Exchange banned fresh positions in the derivatives contracts of the stock as it had crossed the 95% position limit.
Deccan Aviation jumped 5.22% to Rs 140.10 on reports that the airline plans to increase fares in a range of Rs 500-1000 per seat to become profitable, and the company expects to break-even by April-June 2008 quarter.
MNC associate engineering company Siemens surged 9.35% to Rs 1235 after Peter Loscher, president and CEO of Siemens AG affirmed that Siemens group is looking at doubling its sales in India in the next three years by focussing on healthcare, infrastructure and energy.
India's largest listed airline firm in terms of revenue Jet Airways was up 3.18% to Rs 762 on reports the airline has received the government’s permission to fly to three new foreign destinations—Birmingham, Madrid and Geneva.
Patni Computer Systems jumped 5.98% to Rs 444 on recent reports that two US private equity funds Texas Pacific Group and Apax Partners, are close to buying stakes of two Patni promoters Ashok and Gajendra in Patni Computer Systems. The Patni ADR jumped 9.5% on New York Stock Exchange (NYSE) on Tuesday, 21 August 2007.
Macmillan India rose 2.20% to Rs 263 after its board of directors at its meeting held on 21 August 2007 approved the acquisition of majority shareholders of Frank Bros and Company Publishers, a renowned publishing company with 70 years of presence with a loyal customer base.
Lanco Infratech gained 1.43% to Rs 241 after it received letter of acceptance from Airports Authority of India for construction of a new Terminal Building at Varanasi Air Port at negotiated amount of Rs 82.39 crore. The company made this order win announcement after market hours on Tuesday, 21 August 2007
Among the side counters, Rasoi (up 20% to Rs 246), SEL Manufacturing (up 20% to Rs 171.35), Sujana Tower (up 20% to Rs 146.60), Chambal Fertilisers (up 16.55% to Rs 50), Dollex Sahara Housing (up 10% to Rs 68.20), and Baba Arts (up 12.18% to Rs 59.40), advanced.
Zee News (down 15.38% to Rs 55), Monnet Sugar (down 13.80% to Rs 30.95), Jindal Hotels (down 9.69% to Rs 39.60), Siel (down 9.06% to Rs 25.60) and Sterling Tools (down 8.84% to Rs 65) declined sharply.
Indian Hotels rose 0.64% to Rs 118.65 after a block deal of 21.90 lakh shares was struck on counter at Rs 117.90 per share on BSE at 10:02 IST.
Carborundum Universal slipped 1.43% to Rs 172.50. The company said on Tuesday, 21 August 2007, it had entered into an agreement to acquire the industrial ceramics division of IVP.
Shares of the fourth largest public sector bank in terms of operating income Bank of India was down 2.25% to Rs 217.25, off from a low of Rs 206.15 after the bank decided to revalue some of its properties taking into account the appreciation in their value.
India's fifth-largest software company by sales HCL Technologies was up 2% to Rs 295.50 after it said it would acquire the balance 49% stake in HCL EAI Services Inc. HCL Technologies, through its unit HCL America Inc, already holds 51% of HCL EAI. HCL EAI develops and deploys enterprise application integration services for customers globally.
In Europe, key benchmark indices in London, Germany and France rose between 0.80% to 1.20%.
All the Asian indices settled higher today, 22 August 2007. Hong Kong's Hang Seng (up 2.84% to 22,346.86), Singapore's Straits Times (up 2.88% to 3,321.50), South Korea's Seoul Composite (up 1.34% to 1,759.5) and Shanghai Composite (up 0.50% to 4,980.75) gained.
However, Japan's Nikkei was unchanged at 15,900.64
The Dow Jones industrial average fell 30.49 points, or 0.23%, to end at 13,090.86 on Tuesday, 21 August 2007. But the Standard & Poor's 500 Index inched up 1.57 points, or 0.11%, to 1,447.12. The Nasdaq Composite Index gained 12.71 points, or 0.51%, to 2,521.30.
Oil nudged up from intra-day steep losses on Wednesday, 22 August 2007 as traders looked toward an expected decline in weekly US crude and gasoline stocks after discounting the threat of a significantly weakened Hurricane Dean to oil flows. US crude gained 30 cents to $69.87 a barrel.
With the Indo-US nuclear deal hotting up the political scene, the Communist Party of India (Marxist), or CPI(M), top brass is meeting today to decide on the next steps amid signals that the government is in no mood to heed its ultimatum on the contentious issue. The two-day Central Committee meeting of the Marxist party has to take tough decisions on how far it could go in its opposition to the government in the critical matter, amid growing apprehensions of a mid-term election.
The meeting comes at a time when the ruling Congress has indicated that the government will go ahead with negotiations with the IAEA in September 2007 in connection with the deal, notwithstanding Left objections. The Left party is maintaining that negotiations with IAEA on the safeguards agreement would bind India in perpetuity.
Meanwhile, the CPI has also called an emergency meeting of its National Executive on 28 and 29 August 2007 to decide on the ''next steps'' in view of the standoff between government and Left parties.
Recently, the Indian markets had underperformed its Asian peers due to political concerns. The benchmark index BSE Sensex lost 1879.74 points or 13.43% to 13,989.11 on 21 August 2007 from its all time high of 15,868.85, struck on 24 July 2007. The sharp fall was due to selling pressure from FIIs, who sold shares worth Rs 8,548.30 crore in the month of August, till 20 August 2007. In the month of July 2007, they pumped Rs 23,872.40 crore in the Indian equity market.
Central Bank Bulk Deals
21-AUG-2007,CENTRALBK,Central Bank of India,CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE LIMITED,BUY,8859294,127.67,-
21-AUG-2007,CENTRALBK,Central Bank of India,FID FUNDS (MAURITIUS) LIMITED,BUY,2931988,130.54,-
Trading Calls
Sell VSNL with stop loss of Rs 400 for target of Rs 340.
Buy Easun Reyrolle with a stop loss of Rs 215 for a short-term target of Rs 272.
Morning Call - Aug 22 2007
Market Grape Wine :
In House :
Nifty at a supp of 4035 and 3981 levels with resistance at 4115 and 4152 levels .
Sell : Intraday : Infy below 1751 target 1704 s/l of 1785
Sell : Intraday : Parsvnath below 275 target 263 s/ of 281
Sell : Intraday : in F&O GMRInfra below 720 targte 695 s/l of 730
Sell : Intraday : TataMotors in F&O below 628 target 605 s/l of 638
Out House :
Markets at a support of 13786 & 13553 levels with resistance at 14141 & 14221 levels .
Markets to remain choppy and volatile buy low sell high call of the day .
Buy : IciciBnak & KotakBank at dips
Buy : RIL at dips
Buy : RNRL at dips
Buy : HanunToys at dips
Buy : JPAsso & CenturyTex at dips
Buy : Supremepetro & Geojit at dips
Dark Horse : Kotak , Hanun , IciciBank , RNRL , JP & Centextile
Market to consolidate
The market is expected to consolidate on mixed cues from global markets. The BSE 30-share Sensex lost 438.44 points or 3.04% at 13,989.11, on Tuesday, 21 August 2007, on political uncertainties. 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.
Asian indices were mixed today, 22 August 2007. Hong Kong's Hang Seng (up 1.16% at 21,981.19), Singapore's Straits Times (up 0.86% at 3,256.56), South Korea's Seoul Composite (up 1.04% at 1,754.29). gained.
However, Japan's Nikkei (down 0.18% at 15,872.09) and Taiwan's Taiwan Weighted (down 0.50% at 8,437.07) declined.
The Dow Jones industrial average fell 30.49 points, or 0.23%, to end at 13,090.86. But the Standard & Poor's 500 Index inched up 1.57 points, or 0.11%, to 1,447.12. The Nasdaq Composite Index gained 12.71 points, or 0.51%, to 2,521.30.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 138.24 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 826.84 crore on Tuesday, 21 August 2007.
Oil nudged up from steep losses on Wednesday, 22 August 2007 as traders looked toward an expected decline in weekly US crude and gasoline stocks after discounting the threat of a significantly weakened Hurricane Dean to oil flows. US crude gained 30 cents to $69.87 a barrel.
Grey Market Premium - Indowind Energy, Asian Granito, Take Solutions
Motilal Oswal 725 to 825 190 to 200
Indowind Energy 55 to 65 3 to 5
Magnum Venture 27 to 30 4 to 6
Puravankara Projects 400 Discount
Take Solutions 730 190 to 195
KPR Mills 225 Discount
Asian Granito 97 3 to 5
Negative bias may continue
The market tumbled over 400 points in the last trading session and is expected to fall further on mixed global cues. The mix close in the US markets and flat opening in most of the Asian markets coupled with the presence of sharp intra-day volatility could drag down the local indices. The Nifty could test higher levels at 4100 and may find supports at 4060 or 4000, while the Sensex has a likely support at 14,100 and may face resistance at 14,500.
US indices witnessed choppy trading during intra-day trades and ended on a subdued note on Tuesday as investors welcomed a meeting among Federal Reserve Chairman Bernanke, Senator Dodd and Treasury Secretary Paulson on the problems in the financial markets. While the Dow Jones was down 30 points at 13091, the Nasdaq rose 13 points at 2521.
Indian floats closed largely with loses on the US bourses. Rediff was the only gainer and rose over 2% while Infosys, Satyam, Dr Reddy's, Tata Motors ICICI Bank, HDFC Bank, VSNL and MTNL lost over 1-4% each.
Crude oil prices slipped marginally. While the Nymex light crude oil for September delivery moved down by $1.65 at $69.47 a barrel. In the commodity space, the Comex gold for December series slipped by 30 cents to settle at $666.20 a troy ounce.
US Market remains confused
No chance of immediate rate cut though Federal Reserve shows worries confuse investors
It was a confused market today with the US Market getting mixed messages and behaving in a mixed way. Basically, market went nowhere today, Tuesday, 21 August, 2007. U.S. Federal Reserve saying it added $3.5 bln in reserves via overnight repurchase agreements to reserves via one-day repos left the market again questioning whether Fed actions will be enough.
Market once again finally closed mixed with Dow losing for the day. The Dow Jones Industrial Average closed lower by 30.5 points at 13,090.86. Tech-heavy Nasdaq gained 12.71 points to close at 2,521.3. S&P 500 gained 1.57 points to close at 1,447.12.
Richmond Fed President, Jeffery Lacker, saying that Fed’s decision last week was consistent with his view that market volatility does not require a change in the funds policy rate was the main catalyst for sending Dow to negative territory. The Dow turned negative soon thereafter and remained there for the rest of the day. Crude prices slipping below $70/barrel was welcome news for investors.
American Express, H-P, Alcoa and Verizon were the main Dow winners today. Exxon Mobil, United Technologies and Honeywell were the main Dow laggards.
Nasdaq got an extra support today from Apple shares which rose more than 4%. Analysts saying that Apple might sell more than 800,000 iPhones this quarter, beating the company’s goal of 730,000, as consumer demand for the device stays strong, were the main reason for this surge.
Bernanke is "absolutely" prepared to use "all the tools at his disposal"
When market opened in the morning, all the three indices opened in red but it reversed soon after. The Materials sector paced the way, but upside leadership from the much more heavily weighted Financial sector provided early support.
Split sector leadership continued to dictate morning's volatile action; Indices slipped in the red within an hour of trading again.
On the top of the hour, Senator Christopher Dodd's commentary regarding credit turmoil and market volatility offered little relief. Dodd, said that Fed Chairman Bernanke is "absolutely" prepared to use "all the tools at his disposal" to address the credit crisis. Dodd also said he approves the Fed's decision to cut the discount rate and doesn't want to put political pressure on the Fed.
Indices slipped immediately after the comments hit the market. But recovered after some time.
Patni Computers gains almost another 10%
The Treasury market stabilized today, with the yield on the 13-week Treasury bill rising to 3.4% from 2.95% on Monday.
Among the Indian ADRs, all Indian ADRs once again ended in the red today barring Patni Computers. Patni ended up being up by 9.5% at $21.12. Wipro and Infy closed down by 3.2% and 4.5% respectively.
Discount retailer Target registered 13% increase in second-quarter earnings. Revenue rose nearly 10% to $14.6 billion. Earnings were in line with analysts' expectations. Target shares rose 1.7%
Crude slips below $70 as Dean re-graded to Category 2
Crude oil futures once again slipped today as hurricane Dean was reduced to Category 2 storm by the U.S. National Hurricane Center. Prices have dipped almost 12% since early August on concerns that losses on subprime mortgages may slow the world's biggest economy.
Crude-oil futures for light sweet crude for September delivery closed at $69.57/barrel (lower by $1.39/barrel or 1.96%) on the New York Mercantile Exchange. On a yearly basis, prices are 4.1% lower. October crude, which became the lead-month contract at the session's end, closed $1.39 lower at $69.57 a barrel.
Volume at the New York Stock Exchange came to 1.3 billion shares, with advancing stocks outpacing decliners by around 5 to 3. At the Nasdaq, nearly 1.7 billion shares were exchanged, and advancers ran slightly ahead of decliners.
For tomorrow, in addition to earnings reports, the Energy Department's weekly inventory report at 10:30 ET will garner some attention. A number of notable companies are expected to report their results and luxury homebuilder Toll Brothers is one of them.
Intraday Stock Ideas
With the market being highly volatile these days, we will not be giving intra-day trading calls today. The same should resume as soon as things start to stabilise.
Bounce after a shaky start?
A hard fall means a high bounce... if you're made of the right material.
Even if your stock is of the right material, the current situation may delay the bounce you expect. Keep the faith if you've done your homework well. Fresh set of bad news on the fallout of the turmoil in the US mortgage and credit markets hit the bulls hard in the yesterday. The current standoff between the UPA and the Left threatens the stability of the Government. In short, the market has global and domestic worries to factor in and these are not good times for the bulls.
The near-term direction of the market remains uncertain. FIIs have been selling heavily for the past few weeks and are unlikely to resume their big buying spree anytime soon. At the same time local funds, which are flush with cash, are snapping up battered stocks. Short-term traders will continue to be the worst hit if the current situation doesn't change much while long-term players should grab the opportunity with both hands.
We see a mixed opening today given the lack of clear signals from the global markets and uncertainty over both the global credit crunch and the fate of the Congress-led coalition. A bounce after Tuesday's crash is on the cards, but don't think its the end of worries. Use the gains to lighten positions and hold on to stocks which will eventually bounce higher at a later date.
We visited Kesoram Industries (KIL) and maintain a buy recommendation with a target price of Rs562. A visit note will be mailed to you later in the day.
Jet Airways could gain amid reports that it is all set to fly to three new international destinations. North India based real estate majors like DLF, Unitech and Omaxe could advance as a financial daily reports that the Government is working on a plan to free up 30,000 acres of disputed land in the NCR region. Siemens might attract some attention as its German parent plans to double the size of Indian operations in the next three years. Birla Kennametal will consider a stock split today. Himatsingka Seide's Board will meet on August 22, to consider preferential issue of warrants to promoters.
The Nasdaq and S&P 500 index rose on Tuesday, even as Federal Reserve Chairman Ben Bernanke, Senator Christopher Dodd and Treasury Secretary Henry Paulson met to discuss the problems in the financial markets. However, the Dow Jones Industrial Average declined marginally.
The S&P 500 closed nearly flat, up 1.57 points, or 0.1%, to 1,447.12. The Dow Jones slipped 30.49 points, or 0.2%, to 13,090.86. The Nasdaq Composite Index climbed 12.71 points, or 0.5%, to 2,521.3. About six stocks rose for every five that fell on the New York Stock Exchange.
US stocks had slipped in the morning amid ongoing worries about problems in the credit and mortgage markets, but managed to stabilise in the afternoon, with the Nasdaq managing an small gain. At the same time, Treasury prices rallied for a second session in a classic flight-to-safety move.
Senate Banking Committee leader Dodd said that Fed chief Bernanke had pledged to use all the tools at his disposal to keep markets working, Reuters reported. The Fed has been infusing billions into the banking system in recent days as a means of trying to keep the liquidity moving. On Monday, it added $3.75bn.
Last week, the Fed cut its largely symbolic discount rate - which affects banks and other lenders - by 50 basis points to 5.75%. The move raised hopes that it may cut the more widely-watched fed funds rate - which affects consumer loans - at the Sept. 18 policy meeting.
But, Fed President Jeffrey Lacker said that recent market problems alone are not sufficient to justify a rate cut. Lacker is not a voting member of the policy-setting committee this year.
Troubled lender Countrywide Financial found some relief on reports that billionaire investor Warren Buffett's Berkshire Hathaway may be seeking to buy parts of the company. Shares jumped 10%.
Treasury prices gained, after turning flat at midday. The advance lowered the benchmark 10-year note yield to 4.59% down from 4.63% late on Monday. In currency trading, the dollar slipped versus the yen and inched higher versus the euro. COMEX gold for December delivery fell 30 cents to $666.20 an ounce.
US light crude oil for September delivery fell $1.65 to settle at $69.47 a barrel on the New York Mercantile Exchange.
European shares closed slightly higher in a choppy session. The pan-European Dow Jones Stoxx 600 index, which wobbled between gains and losses through the session, closed a fraction of a percentage point higher at 362.39. The UK's FTSE 100 rose 0.1% to 6,086.10, the German DAX 30 gained 0.2% at 7,424.75 and the French CAC-40 added 0.4% to 5,418.78.
In emerging markets, the Bovespa in Brazil gained 1.2% at 49,815 while the IPC index in Mexico rose 0.4% to 28,568. But, the RTS index in Russia tumbled 1.7% and the ISE National 30 index in Turkey was down 2.1% at 56,443.
Asian markets are trading mixed. While the Hang Seng in Hong Kong up sharply and the Nikkei in Tokyo losing some ground.
Sensex tumbled over 400 points as uncertain political situations dampened the sentiments of the traders. All round selling in scrip’s across the sectors dragged the BSE Sensex to close below the 14k mark for the first time since 15th May. RIL, ICICI Bank and IT bellwether Infosys led the down fall. However, volumes rose as turnover in cash segment rose 20.2% and in F&O segment rose 13.7%.
All the key sectoral indices ended in deep red led by Bank and Realty index as both lost over 4% each. Even the Mid-Cap and the Small Cap indices fell over 3.5% each.
Among the Mid-Cap losers Sun TV, Punj Lloyd and Divi’s Lab were the major losers each losing over 9%. However, Patni, JP Hydro were the star performers of the day as they held out in a falling market. Finally, the BSE 30-share Sensex closed at 13,398 dropping 438. NSE Nifty lost 134 points to close at 4074.
Reliance Industries lost nearly 3% to Rs1746. According to reports,
BHEL slipped 1.2%to Rs1590. The company announced that they have secured order worth Rs65bn and would set up 2 power projects of 1,000MW each. The scrip touched an intra-day high of Rs1651 and a low of Rs1570 and recorded volumes of over 14,00,000 shares on NSE.
Central Bank of
Dolphine Offshore dropped by over 4% to Rs217. The company declared that they have secured $8.5mn contract from Punj Lloyd. The scrip touched an intra-day high of Rs237 and a low of Rs216 and recorded volumes of over 9,000 shares on NSE.
Reliance Communication declined over 4.5% to Rs484. The company denied report of talks with Maxis for stake. The scrip touched an intra-day high of Rs513 and a low of Rs472 and has recorded volumes of over 52,00,000 shares on NSE.
Metal stocks were badly beaten up Tata Steel dropped by over 4% to Rs546, Nalco was down by over 4.2% to Rs248, Hindalco declined by 4% to Rs136 and Sterlite Industries declined 3.5% to Rs543
Auto stocks also were ion reverse gear led by fall in the index heavyweight M&M slipped by over 4.5% to Rs614, Bajaj Auto declined by 3.5% to Rs2185, Tata Motors was down by 2.5% to Rs634, Maruti dropped 2% to Rs767.
Capital Good stocks also were trading lower on back of selling pressure. Punj Lloyd dropped by 8.6% to Rs239; L&T was down by 1.8% to Rs2306 and Gammon
IT stocks continued to be under pressure as Wipro declined by 4.7% to Rs446, Infosys slipped by 3.7% to Rs1761 and Satyam Computer lost 3.8% to Rs416. HCL Tech, Mphasis BFL and Polaris were the major losers among the Mid-Cap stocks.
Banking stocks also ended lower on back of heavy selling pressure. ICICI Bank slipped by 5% to Rs829, SBI was down by 5.5% to Rs1463. Others like Bank of India, Canara Bank and OBC are the major gainers among the Mid-Cap stocks.
Fund Activity:
FIIs were net sellers of Rs1.38bn (provisional) in the cash segment on Tuesday and the local institutions pumped in Rs8.27bn. In the F&O segment, FIIs were net sellers at Rs3.92bn. On Friday, foreign funds pulled out Rs32.43bn from the cash segment and on Monday they were net buyers at Rs928mn.
Major Bulk Deals:
Religare Securities has picked up Alfa Transformers; Citigroup Global and Fidelity have bought Central Bank; HSBC Financial has purchased Centurion Bank of Punjab; Merrill Lynch has bought Chambal Fertilizers; Merrill Lynch has picked up Prakash Industries; Prabhudas Lilladhar and Lotus Global have have purchased SEL Manufacturing while Credit Suisse (Singapore) has sold the stock.
Lower Circuit:
Godrej Industries, Atlanta, LML, Zuari Industries, Radha Madhav, Aarti Industries, Goldstone Tech, Jai Corp, Ganesh Forgings, Prism Cement, GTC Industries, ETC Network, Hind Oil Explorations, XL Tele, IOL Broadband, Era Construction, Taneja Aerospace, Swan Mills, Nirlon and Shaw Wallace.
Upper Circuit:
Sujana Tower and Carol Info.
Delivery Delight (Rising Price & Rising Delivery):
Dabur, EKC, Kirloskar Electric, Patni and Rolta.
Abnormal Delivery:
Grasim, Bank of India, ABB, Sesa Goa and MTNL.
Major News & Announcements:
Infosys to set up unit in Monterrey, Mexico
DLF secures Durgapur township project
Jindal Saw to sell minority stake held in US cos
JSW Steel to set up Benificiation plant for Rs8.5bn
RCom denies report of talks with Maxis for a stake
Dolphin Offshore secures $8.5mn contract from Punj Lloyd
UB may buy stake from existing investors in Deccan Aviation - says Vijay Mallya
Gayatri Projects Board to consider raising FII limit to 49% on Aug 28
Exide Industries Board to consider rights issue on Aug 28
BHEL gets order worth Rs65bn from DVC
Public sector oil company employees call off strike after meeting Deora.
Daily Technical Analysis
Nifty — The index opened on a positive note but was unable to hold on to its opening gains. It declined through the day’s session, ending down 124 points.
200 Day Moving Average — The index has closed around the 200dma (4,071); high intra-day volatility can be expected around this level. A break through 4,071 could take the index toward 3,971 [a 62% retracement level from the low of 3,555 (5 March 07) to the recent high of 4,648 (24 July 07)].
Resistance — Intra-day resistance is 4,140-4,189. Intra-day bounce should face stiff resistance around the 4,140 levels.
Conclusion — Expect intra-day weakness below 4,071.
Ranbaxy Labs, Tourism Finance Corporation, Kanoria Chemicals
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs500
Current market price: Rs352
Price target revised to Rs500
Key points
- Pfizer Inc has lost the initial bid for a new patent on Lipitor, the world's best-selling drug that could extend the company's monopoly on the medicine until June 2011.
- The rejection of Pfizer Inc's plea to reissue the invalidated '893 patent by the US Patent & Trademark Office brightens Ranbaxy Laboratories' (Ranbaxy) chances of entering the $8.5-billion Lipitor market in March 2010, 15 months ahead of the expiry of the invalidated '893 patent.
- Lipitor is the world's largest selling drug with annual sales of $8.5 billion in 2006. Using the discounted cash flow (DCF) method, we have valued the Lipitor exclusivity opportunity for Ranbaxy at Rs48 per share.
- Ranbaxy has created a rich pipeline of one-time opportunities for itself, the current ones being for Pravastatin 80mg, Valtrex and Isoptin SR (an authorised generic). Further, the company has a First-to-File (FTF) status on approximately 20 Para IV abbreviated new drug application (ANDA) filings, representing a market size of about $26 billion. The management is confident of monetising one such opportunity every year during CY2008-10.
- Ranbaxy has underperformed the market by over 30% over the last one year, largely due to the overhang of the regulatory issues with the company's Paonta Sahib plant and the raid by the US Food and Drug Administration (USFDA) on its US offices. However, we believe that all the negatives relating to the company have been priced in, with limited downside potential from the current levels.
- To account for the lower dollar/rupee exchange rate for CY2007, we have adjusted our CY2007 revenues and earnings estimates by 5.7% and 10.9% respectively. Our revised earnings estimate for CY2007 now stands at Rs18.5 per share. We are also introducing our CY2008 estimates for Ranbaxy in this report. We estimate a 14% growth in its revenues to Rs7,456.2 crore and a 4.7% decline in its profits to Rs706.0 crore in CY2008, yielding earnings of Rs17.7 per share in CY2008.
- At the current market price of Rs352, Ranbaxy is trading at 19.0x its estimated CY2007 and 19.9x its estimated CY2008 earnings. We maintain our Buy recommendation on the stock, with a revised price target of Rs500.
Tourism Finance Corporation of India
Cluster: Cannonball
Recommendation: Buy
Price target: Rs30
Current market price: Rs25
Operating performance to improve going forward
Result highlights
- For Q1FY2008 Tourism Finance Corporation of India (TFCI) has reported an 86% year-on-year (y-o-y) growth in its profit after tax (PAT) to Rs1.6 crore. The profit growth was aided by improved operating performance and lower provisions. The quarter-on-quarter (q-o-q) comparison has not been presented as we feel it is not relevant for TFCI since most of its earnings are back-ended with the fourth quarter accounting for over 65% of its FY2007 PAT.
- In the first quarter, the net interest income (NII) grew by 40.7% year on year (yoy) to Rs4.7 crore, mainly driven by a y-o-y decline of 10.3% in the interest expense to Rs8.2 crore. Going forward, we expect the interest expense to remain subdued due to the limited borrowing requirements of TFCI for FY2008. The existing funds coupled with the recoveries and planned capital raising should be sufficient for TFCI's business plans.
- TFCI's operating expenses jumped by 47.8% mainly due to a significant increase in the lease rentals for its office space. The increase had come into effect from October 2006—hence the full impact of the same would keep the operating expenses elevated in FY2008. The operating profit was up by 35.4% to Rs3.8 crore.
- Provisions and contingencies declined by 33.3% to Rs1 crore, reflecting the lower provisioning requirement as the net non-performing asset (NPA) was almost nil and incremental defaults were contained during the first quarter.
- The tax outflow jumped up significantly during the quarter due a higher income and also a higher effective tax rate of 38% for Q1FY2008 compared with 23% in Q1FY2007 and 18% in FY2007. Going forward, the management expects the effective tax rate to decline but the overall tax outflow to remain higher due to a higher income.
- We expect TFCI's earnings to grow at a 32% compounded annual growth rate over the period FY2006-09. The business prospects for the company have improved significantly on the back of the capacity expansion planned in the hotel and tourism sectors for the next three to four years. At the current market price of Rs25 the stock is quoting at 6.1x its FY2009E earnings and 0.7x FY2009E book value. We maintain our Buy recommendation on the stock with the price target of Rs30.
VIEWPOINT
Kanoria Chemicals & Industries
Capex of Rs150 crore for expansion
We attended the analyst meet of Kanoria Chemicals & Industries Ltd (KCIL) to discuss the future prospects and expansion plans of the company. We present the key takeaways from the meet.
ICICI Bank, Aban Offshore, SEAMAC, Cement
South East Asia Marine Engineering & Construction
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs300
Current market price: Rs223
High charter rates improves earnings
Result highlights
- South East Asia Marine Engineering & Construction (SEAMEC) has reported a growth of 26.5% in its revenues to Rs46.7 crore in Q2CY2007. The growth in revenues was largely driven by an increase in day rates for two of its vessels (Seamec-II and Seamec-III) that were renegotiated in the second half of CY2006.
- The operating margin, however, declined by 290 basis points to 49.4% largely due to a jump of 96% in the staff cost to Rs14.4 crore. The staff cost as a percentage of net sales increased by 1,090 basis points to 30.7% in Q2CY2007, as compared with 19.8% in Q2CY2006. Consequently, the operating profit increased by around 20% to Rs23.1 crore as compared with Rs19.3 crore in Q2CY2006.
- The increase in the interest outgo and higher depreciation charges resulted in a relatively lower growth of 15% in its earnings to Rs19.6 crore.
- On a half-yearly basis, the revenues grew at a healthy rate of 60.9% to Rs102.8 crore whereas the earnings rose at a relatively lower rate of 36.5% to Rs44 crore due to the steep increase in the staff cost (up by 175.8% to Rs34.5 crore).
- In terms of operational highlights, one of the company's vessels Seamec-I went for the periodic maintenance from mid June 2007 and is expected to get operational by the third week of July 2007. The dry docking expenses for the same will be accounted in Q3CY2007. Another vessel Seamec-II is scheduled to go for the statutory periodic maintenance by the end of Q3CY2007. Further, the delivery of its fourth vessel Seamec Princess has been delayed to the mid of the current quarter.
- To factor in the change in the exchange rate assumption (Rs41 in CY2007 and CY2008 as compared with Rs44 earlier), delay in the delivery of Seamec Princess and higher than expected dry-docking period for Seamec-I, we have revised downwards CY2007 and CY2008 earnings estimates by 24.7% and 2.4% respectively.
- At the current market price the stock trades at 12.7x CY2007 and 6.5x CY2008 earnings. We maintain our Buy rating on the stock with a price target of Rs300.
ICICI Bank
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,173
Current market price: Rs872
FIPB hurdle cleared, positive for valuations
Key points
- ICICI Bank has obtained the Foreign Investment Promotion Board (FIPB) approval (subject to RBI clearance) to sell upto 24% stake in its financial services company to foreign investors. This proposal had earlier been rejected by FIPB on the grounds that it did not comply with the 26% foreign direct investment (FDI) cap in insurance ventures and also that the promoter of an insurance venture cannot be the subsidiary of the same company, ICICI Financial Services (IFS) in this case.
- The above view of FIPB was in contradiction to the view expressed by the finance ministry's insurance division and the Insurance Regulatory and Development Authority that the FDI in ICICI Bank's proposed holding company would not violate the norms. The change in the stance of FIPB is a welcome move for ICICI Bank and other banks like state Bank of India who are looking to adopt the holding company route to raise the capital for their insurance business.
- Our back of the envelope calculation suggests that with the formation of the holding company and its future listing, the overall valuations of the stock can further improve by Rs78 per share as the core banking business can improve by 4% or Rs30 per share, and if the market valuations for its subsidiaries are taken as a benchmark then there is a further upside to our valuations of Rs48 per share. The details on the valuation upside are explained later.
- At the current market price of Rs872, the stock is quoting at 19.1x its FY2009E earnings per share, 9.3x its pre-provisioning profits and 1.9x book value (BV). We maintain our Buy recommendation on the stock with a price target of Rs1,173.
Aban Offshore
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs3,540
Current market price: Rs2,760
Price target revised to Rs3,540
Key points
- AOL's consolidated financial performance in FY2007 is below our expectations as the line-by-line consolidation of Sinvest was done only with effect from January 9, 2007 (after it become the wholly owned subsidiary of Aban Singapore Pte [ASPL]). In terms of its consolidated balance sheet, the company had total debt of Rs10,852 crore (debt-equity ratio of 20.4). The gross block of Rs8,099 crore included a goodwill of Rs4,800 crore which would not be amortised, and only the impairment cost (if any) would be charged to the profit & loss account.
- To support its decision to acquire Sinvest, the company believes that the step was taken keeping in view the robust industry outlook (i.e. the record day rates and consequently the compelling payback). Moreover, the strong visibility in cash flow more than negate the financial risk in terms of higher debt-equity of over 20 times. The outlook for the day rates continues to be robust with the support from favourable supply-demand scenario and the increasing pricing power of operators due to the consolidation among leading global players. Further, AOL is taking steps to enter into long-term contracts for its older assets that are more venerable to a possible softening of day rates going forward.
- The proposed listing of its Singapore-subsidiary ASPL (which holds 100% stake of Sinvest and controls three other assets) at the indicated equity value of $2.5-3 billion (much higher than market expectations) is an important re-rating trigger for the stock. Another likely positive development is the unexpected gain of $90 million due to the acquisition of Petrojack where AOL holds indirect stake of 18%.
- The earning estimates have been revised downwards by 25% for FY2008 (primarily due to delay in the schedule for some assets and change in the exchange rate assumption) and upgraded by 8.6% for FY2009 estimates. At the current market price the stock trades at 25x FY2008 and 7.4x FY2009 earning estimates. We maintain the Buy call on the stock with a revised price target of Rs3,540 (8.5x FY2010 estimates discounted backward by one year).
SECTOR UPDATE
Cement
Dispatches up 14.5% yoy in July
In July, industry dispatches grew by 9.5% year on year (yoy) whereas the dispatches for the Sharekhan universe rose by a robust 14.5% yoy to 7.63 million metric tonne (MMT) underlining the buoyancy in the appetite for cement consumption. As mentioned in our earlier update, among the majors, Ambuja Cements witnessed the highest growth of 19% due to a lower base last year. Similarly ACC and AV Birla Group recorded a strong growth of 15% yoy and 13% yoy respectively.
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