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Monday, October 01, 2007
RDAG eyes Cement Sector
Power-to-telecom business house Reliance Anil Dhirubhai Ambani Group (R-ADAG) plans to enter cement manufacturing by setting up a plant near its 4,000MW coal-fired power project proposed at Sasan in east Madhya Pradesh.
The cement plant proposed by R-ADAG will use millions of tonnes of fly ash generated at the power station, billed ultra mega power project for its large capacity, to produce cement. Fly ash is generated while burning coal.
Not only is the cost of cement production using fly ash 5-10% lower than the cost using the traditional clinker-based method, it also saves on transportation and disposal of a material seen as environment-unfriendly.
“They (R-ADAG) plan to set up a cement plant near the newly bagged power project at Sasan to utilize the fly ash generated from the project,” said a senior government official, who did not wish to be identified.
An R-ADAG executive declined details of the cement project. J.P. Chalasani, director, business development, Reliance Energy Ltd, said, “Our company keeps on evaluating various proposals from time to time.” Reliance Energy is the parent of Reliance Power Ltd, the company in charge of the Sasan project.
Ultra mega power projects are expected to see a major expansion of cement manufacturing capacity in India with cement companies such as Grasim Industries Ltd, Ultratech Ltd, Sanghi Cement Ltd, The India Cements Ltd, Zuari Cements Ltd and My Home Industries Ltd already evincing interest in setting up greenfield cement plants in the vicinity of such power stations, as reported by Mint on 26 September.
The size of the R-ADAG cement plant was not immediately known. Going by the amount of fly ash—some 9 million tonnes a year—the 4,000MW power project will generate, the cement plant capacity could be huge. One tonne of cement needs an input of 0.2 tonne of fly ash.
“Depending on the amount of fly ash the projected is expected to produce, R-ADAG can put up a capacity of 45 million tonnes per annum (mtpa). But nobody would want to put up such a huge capacity. The impact of R-ADAG’s move will depend on the size of the unit,” Rupesh Sankhe, an analyst tracking the commodity for ICICI Direct, said.
The cost of setting up a 1mtpa cement capacity is up to Rs400 crore.
The Rs20,000 crore Sasan project was awarded to Reliance Power after it matched the winning bid for the project after the original winning consortium of Lanco Infratech and Globeleq Singapore was disqualified by a government panel on 25 July for violating terms of the deal.
Analysts said by the time the Sasan project goes online, cement capacity in the country may be less beneficial to cement producers, who have enjoyed a 30-34% price rise in different regions in the past year alone. India, the world’s second largest cement market with Rs55,000 crore estimated demand, has a cement manufacturing capacity of 148mtpa.
“The power project is expected to come up only after 2012, when the cement supply is expected to outstrip demand,” Sankhe said.
E.N. Murthy, secretary general of trade body Cement Manufacturers Association, welcomed the capacity addition. “Around 60% of the cement produced in India uses fly ash. In a situation of supply-side constraint, any additional capacity is good news for the industry,” he said.
The government had planned nine ultra mega power projects. While those at Sasan, Mundra in Gujarat, Tilaiya in Jharkhand, Krishnapattnam in Andhra Pradesh, Tamil Nadu’s Cheyyur and Orissa’s Jharsuguda are on track, others at Girye in Maharashtra, Tadri in Karnataka and Chhattisgarh’s Akaltara are yet to take off. Sasan, Tilaiya and Jharsuguda are coal pithead projects and those at Mundra, Krishnapattnam and Cheyyur are based on imported coal.
DLF, Mahindras, Tulip apply for UASL
US firm AT&T in a tie-up with diversified group Mahindras, property developer DLF and IT firm Tulip on 1 October applied for telecom licences on the last date for filing applications, while Hinduja TMT and realty firm Omaxe may submit the necessary documents later in the day.
AT&T said in a statement it has filed applications with the Department of Telecom for a Unified Access Service License (UASL) to start services in all 22 circles of India.
“This is an important step toward participating in India’s upcoming spectrum allocation proceedings,” it said.
AT&T is extending its partnership with Mahindra Telecommunications Pvt Ltd, through its local unit AT&T India, to apply for the UASL, the company said.
AT&T already has licences to provide NLD and ILD services. Tulip also has NLD and ILD licence.
A Hinduja TMT official said the company will be applying for the license after its board took a decision on it. Omaxe officials also said the company would submit its application.
At least 13 companies have submitted more than 230 applications for telecom licences and most of these are for a pan-India UASL. DLF and Omaxe join other real estate firms Indiabulls Real Estate, Unitech and Parsvnath Developers to apply for telecom licence.
Other companies who have applied for licences include Swan and Cheetah Telecom, JSW Steel, HFCL and Ruias-backed BPL Mobile. The companies rushed to apply for a telecom licence when DoT said on September 24 it will not accept applications after October 1.
Bharti Airtel - in Top 10!
Sunil Mittal-owned Bharti Airtel on Monday became the first Indian telecom company to join the world's top ten operators, with its customer base crossing the 50-million mark in mobile, broadband and wireline services.
"Our next target is to reach 100 million mark by 2010," Bharti Airtel President and CEO Manoj Kohli said here.
The 50 million customers span mobile, broadband and fixed telephone services, with wireless segment estimated to be contributing as much as 96 per cent (47.99 million) of the total base. However, exact figures for the mobile additions in the month of September would be provided by Cellular Operators Association of India in a couple of days.
Bharti Airtel has been adding over two million subscribers every month and had 46.8 million subscribers by the end of August, 2007.
Company's Joint Managing Director Akhil Gupta said: "Most of the susbcribers from the next 50 million would come from rural areas."
He said with this, Average Revenues Per User (ARPU) may fall but it would not decline drastically.
"By acquiring subscribers in rural areas, ARPUs may fall but the usage and revenues increase, so it is not a cause of concern," Gupta added.
For increasing our penetration in the rural areas, we would follow a different strategy which may include providing local content in various languages, simpler tariffs among other things, he added.
The company also plans to make considerable investments in network expansion to establish presence in all towns and over five lakh villages across India by 2010, thereby covering 95 per cent of the the country's total population.
It also plans to start DTH operations by the end of the current fiscal.
However, Bharti did not reveal further details of the DTH venture.
The company would also start its operations in Sri Lanka by the end of March 2008, Kohli said.
Telecom License lock in periods ?
With the queue for telecom licences getting longer by the day, the department of telecommunications (DoT) is planning to introduce a lock-in period to weed out non-serious applicants. Such a lock-in is likely to apply on two counts — exit lock-in and ownership lock-in.
If implemented, a new applicant who is allocated spectrum to launch cellular services will be able to sell out only after operating for a certain number of years. At the same time, its promoters will not be able to sell their stake beyond a certain percentage during this period, despite the foreign direct investment (FDI) limit being at 74%. A final call on this will be taken by the DoT committee set up to formulate pre-qualification norms for applicants and screening guidelines for those that qualify.
When contacted, a government official close to the developments told ET: "There’s no final view since the matter is yet to be taken up by the Telecom Commission. Talks are at a conceptual stage, wherein an exit lock-in will prevent a new universal access service licence (UASL) applicant from exiting the business for a specified period. An ownership lock-in will be more complex as it will entail a defined set of norms that prevents the promoter group in a new licensee company from offloading its stake."
The official said the ownership lock-in will ensure a minimum equity investment in a company that has applied for a mobile licence for a specific period. "There is no decision yet on such a minimum ownership threshold. The matter will be discussed by the Telecom Commission shortly," he said.
Besides the possible introduction of exit/ownership lock-in periods, the DoT committee set up to put in place new norms to screen applicants is also looking at tightening roll-out obligations, increasing the net worth of companies eligible to apply, and reducing the 90-day deadline for companies to convert their letters of intent (LoI) into licences.
Sources said the options being explored involve raising the net worth to around Rs 2,000 crore from the current Rs 1,300 crore and companies being asked to convert their LoIs into licences within 10 days. Telecom minister A Raja had said recently: "All licences will be scrutinised and limited applications selected."
A global investment banker said "determining a workable ownership lock-in period will be a tough call, since all associated legal and commercial complexities will have to be weighed against the present financing requirements".
With companies making a beeline for cellular licences, DoT has constituted an agency consisting of members from different government departments to establish the actual identities of the promoters and shareholders behind the new applications. "DoT will do its bit to ensure offshore deals in the nature of ‘benami’ transactions do not transpire and there is genuine transparency," said the top government official.
DoT gets 500 applications
The frenzy over telecom licences came to an end on Monday with the tally touching the 500-mark as a number of biggies including AT&T, Hindujas, DLF, Sterlite and Videocon jumped into the fray to tap the world's fastest growing cellular market.
The figure may go beyond 500 as the Department of Telecom (DoT) is still counting the applications received from various companies as the deadline expired today. Nearly 200 applications are estimated to have been submitted today.
A senior DoT official termed the rush of applications as "sheer madness" and the Department would start scrutinising these documents soon. The DoT would screen the applicants once a committee appointed by Communications Minister A Raja comes up with fresh guidelines detailing the minimum net worth, ownership and other crucial aspects of the applicants.
Raja has already said that a select number of applicants would be selected. DoT would be following a two-stage screening process. There are allegations by GSM players' lobby COAI that many applicants are front companies of existing players who are trying to circumvent existing restrictions.
The companies which have sought licence include property developers Parsvnath, Unitech, Indiabulls Real Estate, Omaxe and DLF. Besides, Allianz Infratech, Shyam Telecom, HFCL, BPL, Cheetah, DataCom, Stel, Swan Telecom, Tulip, JSW Steel and Bycell also applied. Ispat Industries, Sify, Moser Baer and Dalmia Group are also believed to have put in applications.
US firm AT&T tied up with diversified group Mahindras and Hinduja Group applied through its subsidiary HTMT Telecom.
Most of the players have sought licences for all the 22 circles in the country. India is the world's fastest growing telecom market and existing players are adding more than eight million subscribers every month.
Nokia to buy Navteq
Nokia Corp is buying US navigation-software maker Navteq Corp for around $8.1 billion, the world's largest mobile phone maker said on Monday.
The deal has been approved by the boards of both companies, according to Nokia.
Under the agreement, Nokia will pay $78 in cash for each Navteq share, including outstanding options.
Chicago-based Navteq maintains digital maps which it licenses to global positioning systems and Web sites. Founded in 1985, it has around 3,000 employees in 168 offices in 30 countries.
Nokia's President and Chief Executive Olli-Pekka Kallasvuo said "location-based services are one of the cornerstones of Nokia's Internet services strategy. The acquisition of Navteq is another step toward Nokia becoming a leading player in this space."
Kallasvuo added that by acquiring Navteq, Nokia "will be able to bring context and geographical information to a number of our Internet services with accelerated time to market."
Jari Honko, an analyst at eQ Bank in Helsinki, said Nokia is "extremely driven" in its strategy to move into mobile services and called Navteq "the most significant player in its field."
"It makes a lot of sense," he said. "This is one of the areas that should become extremely important in the future. ... Nokia could very well build one of its core services around it."
Nifty outshines Sensex
The market extended recent solid gains and both the key indices Sensex and Nifty struck all-time closing highs. But the market came sharply off higher level in late trade after it had struck lifetime high in late afternoon trade. A sharp fall in Reliance Industries (RIL) pulled the market off higher level in late trade.
Mid-cap and small-cap indices touched all-time highs today. Market breadth was strong. European markets were trading in red. Asian markets were firm today.
The 30-shares BSE Sensex ended up 37.52 points or 0.22% at a fresh closing high of17,328.62. It had hit a fresh all-time high of 17,425.34 in late afternoon trade. It hit a low of 17,144.58 in the day.
The broder based S&P CNX Nifty today scoared over Sensex. Nifty ended up 47.6 points or 0.95% at a fresh closing high of 5,068.95. It hit an all-time high of 5089.30 today. Nifty's near 1% rise was much higher than Sensex's 0.22% gain.
The BSE Mid-cap index rose 106.21 points or 1.43% to 7,528.64. It hit a all-time high of 7554.54 today. The BSE Small-cap index rose 84.59 points or 0.93% to 9,184.52. It hit an all time high of 9,218.52 today. Both these indices outperformed Sensex.
Sectoral indices on BSE displayed mixed trend., BSE Health Care Index (up 1.42% at 3,837.15),BSE TecK index (up 0.39% to 3,780.54), BSE Oil and Gas Index (up 1.26% at 9,682.95) ,BSE PSU index (up 1.97% to 8,363.25), outperformed the Sensex.
BSE Capital Goods Index (up 0.06% at 14,688.96), BSE IT Index (down 0.64% at 4,598.11), BSE Metal Index (down 0.33% at 13,899.77), BSE Consumer Durables index (down 0.83% to 4,764.56), Bankex (down 0.78% to 9,395.78) BSE Realty index (up 0.04% to 9,181.83), and BSE FMCG Index (down 0.47% at 2,151.10), BSE Auto Index (down 0.3% at 5,316.33) were underperformers.
In opening trade, the market had come off higher level soon after a firm start as political concerns took centrestage wth CPI (M) veteran Jyoti Basu on Saturday, 29 September 2007, ruling out the possibility of any compromise on the issue of Left’s opposition to the Indo-US nuclear deal. It had firmed up again later. The market had opened a firm note after tame US inflation data reinforced expectations of another cut in US interest rates.
While the operationalisation of the nuclear deal has been put on hold by the government pending the findings of a committee, it cannot be stalled forever.
The Communists want the government to defer the Indo-US nuclear accord by six months and have warned of a political crisis if it is implemented. The committee set up of the government to look into Left Front’s concerns over the deal is scheduled to hold its next meeting on 5 October 2007.
On the flip side, political turmoil arising from nuke deal will not impact India’s basic economic fundamentals though some infrastructure projects may get delayed. India’s economy is expected to post strong growth for a long period of time mainly due to favourable demographics.
BSE clocked a turnover of Rs 7197 crore compared to Friday (28 September 2007)'s Rs 7,951.21 crore.
Nifty October 2007 futures were trading at 5062.95, at a discount of 6 points or 0.01% to the spot price of 5,068.95.
NSE F&O clocked a turnover of Rs 61,451.29 crore today, 1 October 2007 compared to a turnover of Rs 56,998.5 crore on 28 September 2007.
Out of the 30 share Sensex stocks, 15 advanced and the rest declined.
Market breadth was strong on BSE: 1605 scrips advanced, 1126 declined while 343 scrips remained unchanged.
India’s largest private sector company by market capitalisation and oil refiner, Reliance Industries (RIL) was down 0.3% to Rs 2,289.35. The stock was volatile today. It moved between a low of Rs 2264.25 and high of 2327.80.
Reliance Retail, a subsidiary of the Mukesh Ambani-promoted Reliance Industries, has reportedly, sacked 400 staff in West Bengal due to its inability to start operations following stiff opposition from political parties and local traders. RIL had earlier laid off 1000 staff in Uttar Pradesh.
Reliance Energy (REL) galloped 11.94% to Rs 1,349.40. It struck an all time high of Rs 1,385 today. It was the top gainer from the Sensex pack. Reliance Power, the Anil Ambani group firm, in which REL holds 50% stake, will raise $2-$2.5 billion in the country’s largest power sector IPO. Reliance Power, which is implementing a clutch of large power generation projects across the country, will sell 10-15% to the public and institutions in the coming months to fund various projects.
State-run power producer NTPC rose 6.49% to Rs 206 on hopes of higher valuation after Reliance Energy's proposed initial public offering of its subsidiary Reliance Power. It touched an all-time high of Rs 207.90 today.
ONGC rose 4.09% to Rs 997.10. It hit an all time high of Rs 1,015 today.
Reliance Communication (up 4.48% to Rs 611.90) was another major gainers from the Sensex pack.
State Bank of India (down 2.93% to Rs 1,893.50) was the top loser amongst the Sensex pack. ITC (down 1.98% to Rs 185.95,Bajaj Auto (down 2.19% to Rs 2,484.10), Bharat Heavy Electricals (down 2.1% to Rs 1,990.05) and, HDFC Bank (down 2.44% to Rs 1,404) were the major losers amongst the Sensex pack.
Reliance Capital rose 14.15% to Rs 1,808.65 on BSE, on continued buying interest. It hit an all time high of Rs 1,850.95.
IT bigwigs like Infosys (down 0.19% to Rs 1,893.10), TCS (down 1.72% to Rs 1,038.55), Satyam (down 0.17% to Rs 442.75) , Wipro(down 1.28% to Rs 453.95) edged lower.
Among side counters, Binani Industries (up 20% to Rs 270), Spentex Industries (up 20% to Rs 34.50), Hatsun Agro Products (up 20% to Rs 259.55), Brady & Morris (up 20% to Rs 229.40) and SPL Polymers (up 20% to Rs 7.56) spurted.
India's third-biggest motorbike maker TVS Motor rose 1% to Rs 70.75 even after its sales declined 29% to 1,15,091 two-wheelers in September 2007, over September 2006.
Mahindra & Mahindra was up 1% to Rs 759.20 on reports that the group is planning to hive off its logistics division into a seperate company. Mahindra & Mahindra reported 25% rise in sales to 19,871 units in September 2007 over September 2006.
Maruti Suzuki India India's biggest car maker declined 0.7% to Rs 991.75 on recording 13.5% rise in sales to 67,448 vehicles in September, 2007 over September 2006.
Gulf Oil Corporation soared 3.4% to Rs 1538.25 on reports the firm is in talks with infrastructure and real estate funds for investments in the company’s mining and construction verticals.
Sterlite Optical Technologies rose 1.73% to Rs 241.20 after acquired 58.70% holding in equity share capital of Sterlite Infrastructure (SIPL). With this investment, SIPL has become subsidiary of the company. SIPL is into business pertaining to infrastructure projects and telecommunications.
Kavveri Telecom Products rose 4.29% to Rs 159.15. It said on Monday, 1 October 2007, it had acquired the technology, intellectual property rights and patents of cellular infrastructure base station Antenna Line of erstwhile Sigma Wireless, Ireland from US-based PCTEL Inc.
AVT Natural Products was up 7.45% to Rs 98.85 after it announced Friday, 28 September 2007, commencement of marigold flower processing unit AVT Bio-Products in Heilongjiang Province of North East China.
Compact Disc India down 2.5% to Rs 87.70. It announced today before the market hours that meeting of the board will be held on 15 October 2007 to consider the rights issue.
Dr. Reddys Laboratories was up 1.46% to Rs 658.45 after it announced on Friday, September 28, 2007, it has expanded its operations in the ASEAN region with the opening of its 41st overseas office in Manila, Philippines.
Bajaj Auto, India's second-biggest motorcycle maker declined 2.19% to Rs 2484.10 after its sales declined 23% to 2,32,496 units in September 2007 over September 2006.
Time Technoplast was up 1.82% to Rs 705.20 after it said on Monday, 1 October 2007 it bought a 74% stake in battery maker NED Energy for Rs 50.30 crore.
ICSA India declined 1.19% to Rs 1,676.55 after it secured work orders for a total contract value of Rs 93.47 crore from Chhattisgarh State Electricity Board, Raipur.
Lancor Holdings surged 7.12% to Rs 452 after its board approved share split from the face value of Rs 10 each to Rs 2 each.
MIRC Electronics up 12.98% at Rs 24.80 on reports that two of the three founders of the firm have broken off with the third and started talks with rival Videocon and Future Capital to sell a substantial stake in the main holding company that holds stake in the MIRC Electronics
HTMT Global rose 1.06% to Rs 434.45 after it said it will participate in applying telecom license.
India's top motorcycle maker, Hero Honda Motors declined 1.56% to Rs 733.15 even after it reported 4.3% rise in sales to 3,14,567 in September 2007 over September 2006.
Asian markets extended their recent rally on Monday, 1 October 2007. South Korea's Seoul Composite (up 0.83% at 1,962.67, Singapore's Straits Times (up 1.32% at 3,755.22) and Taiwan's Taiwan Weighted (up 0.13% to 9,488.50) and Japan's Nikkei (up 0.36% at 16,845.96 after it opened on a weak note) edged higher.
European markets, which opened after the Indian markets, slipped into the red again after Indian markets closed today. Earlier, European markets had recovered from a subdued start. Germany’s DAX (down 0.14% to 7,850.33), UK’s FTSE 100 (down 0.15% to 6,457.50) and France’s CAC (down 0.44% to 5,670.79) edged lower.
US stocks and bonds slipped as the dollar fell to a record low on Friday, 28 September 2007, amid concerns that US economic growth would continue to slow. The Dow Jones industrial average lost 17.31 points, or 0.12%, at 13,895.63. The Standard & Poor's 500 Index fell 4.63 points, or 0.30%, at 1,526.75. The Nasdaq Composite Index fell 8.09 points, or 0.3%, to 2,701.50.
US crude for November 2007 delivery lost $1.23 to settled at $81.65 a barrel on Friday, 28 September 2007, below its all-time high of $83.90.
Sensex ends marginally above 17,300
Despite opening on a positive note, weak global cues and steadfast rupee climb saw the Sensex enter into negative territory. As selling gained momentum, the index shed over 146 points and nearly slipped below 17,150 before a bout of recovery saw it trim its losses. A positive close in most of the Asian markets and a sustained buying in energy, cement, and capital goods stocks helped the market enter into positive territory by afternoon. The market witnessed volatile trades for the later part of the trading session, but held firm above the 17,300 level. Substantial buying support in heavyweight, pharma, and oil and gas stocks led the Sensex surge to touch the day's high of 17,425. The Sensex finally wrapped up the session at 17,329, up 38 points. The Nifty ended the session at 5,069, up 48 points.
The market breadth was positive. Of the 2,840 stocks traded on the Bombay Stock Exchange (BSE), 1,637 stocks advanced, 1,131 stocks declined and 72 stocks ended unchanged. Most of the sectoral indices closed with gains. The PSU metal index rose by 1.97% followed by the BSE HC index (up 1.40%) and the BSE Oil & Gas index (up 1.26%).
Heavyweights led the upsurge in the market. Energy stocks were in the limelight on firm buying support. Reliance Energy vaulted 11.94% at Rs1,349 and NTPC jumped 6.49% at Rs206. Among the other major gainers Reliance Communication shot up by 4.48% at Rs612, ONGC increased by 4.09% at Rs997 and Cipla soared by 3.43% at Rs189. Ambuja Cement added 2.47% at Rs147, Grasim Industries gained 2.45% at Rs3,600 and Dr Reddy's Lab moved up by 1.68% at Rs660. Select counters, however, finished on a weak note. SBI shed 2.93% at Rs1,894, HDFC Bank dropped 2.44% at Rs1,404, Bajaj Auto declined by 2.19% at Rs2,484 and BHEL lost 2.10% at Rs1,990.
Over 3.39 crore Ispat Industries shares changed hands on the BSE followed by Reliance Natural Resources (3 crore shares), Tata Teleservices (1.99 crore shares), IKF Technologies (1.85 crore shares) and Himachal Futuristic Communications (1.80 crore shares).
Valuewise, Reliance Energy registered a turnover of Rs556 crore on the BSE followed by Reliance Capital (Rs492 crore), Reliance Natural Resources (Rs282 crore), Reliance Industries (Rs204 crore) and Reliance Communications (Rs190 crore).
Mad rush for telecom licenses
US telecom giant AT&T Inc. is all set to begin a new innings in India. This time, AT&T will partner diversified auto major Mahindra & Mahindra Ltd. (M&M). The two have reportedly applied for telecom licenses in all 22 circles.
It may be recalled that in December 2004, AT&T sold its stake in Idea Cellular to Indian partners the Tata Group and Aditya Birla Group.
AT&T filed the application with Department of Telecommunications (DoT), in partnership with Mahindra Telecommunications Pvt. Ltd., a part of the M&M.
"This is an important step toward participating in India's upcoming spectrum allocation proceedings," AT&T said in a statement.
Indian regulations allow Foreign Direct Investment (FDI) of up to 74% in the telecom sector.
Separately, real estate companies DLF and Omaxe, IT solutions firm Tulip IT and cable television provider Hinduja TMT applied for telecom licences on the last date for filing applications.
AT&T and Tulip already have licences to provide National Long Distance (NLD) and International Long Distance (ILD) services in India.
DLF and Omaxe join other real estate firms like Indiabulls Real Estate, Unitech and Parsvnath Developers in applying for telecom licenses. Over the last few weeks, the DoT has received about 250 new applications for new universal access service licences.
Earlier, a newspaper reported that the DoT was planning to introduce a lock-in period to eliminate non-serious players, amid a mad rush among companies to obtain new telecom licenses before the window closes today.
As per the proposed lock-in conditions, a company will be able to sell telecom licenses only after operating for a certain number of years. At the same time, promoters will not be able to reduce their shareholding beyond a certain limit.
Some industry analysts say the scramble for getting new telecom licences is due to telecom regulator TRAI's latest recommendation that the number of players in a circle should not be capped.
TRAI has also recommended that the current norm of allocating 2G spectrum based on the number of subscribers should be increased several times before existing players are allocated fresh spectrum.
If these TRAI recommendations are accepted by the DoT, then several new applicants will be eligible to get spectrum to launch telecom services.
However, some experts are of the view that the rush for telecom licences is aimed at making a quick buck by first getting the licences and then selling the same to overseas players at a hefty premium.
To get to the bottom of the matter, the DoT is believed to have set up an agency to establish the actual identities of the promoters and shareholders behind the new applications for telecom services.
Telecom Minister, A Raja, said on Sept. 24, that the ministry will prepare a fresh set of guidelines for grant of licences to new applicants. "I have asked DoT secretary, DS Mathur to form a committee to frame guidelines for grant of licence to new applicants,” Raja said.
Trading Calls
Buy Reliance Energy with a stop loss of Rs 1120 for a short-term target of Rs 1350.
Buy Ranbaxy Laboratories with a stop loss of Rs 418 for a short-term target of Rs 504.
Buy RNRL with a stop loss of Rs 75 for target of Rs 135.
Buy Reliance Capital with a stop loss of Rs 1474 for target of Rs 1874.
Disclaimer: Wild targets, may go wild ! Its your money, think, research and invest!
Grey Market - Dhanus, Kouton, Saamya, Supreme
Power Grid Corporation 52 30 to 31
Dhanus Tech. 280 to 295 70 to 75
Koutons Retail 370 to 415 75 to 80
Consolidated Construction 510 170 to 175
Supreme Infra 95 to 108 58 to 60
Saamya Biotech 10 5 to 6
MAYTAS Infra 320 to 370 160 to 165
Circuit Systems (India) Ltd. 35 3 to 3.50
Kaveri Seeds 170 22 to 24
Stock Market Analysis
Stock markets have rebounded to make new highs and are likely to continue rising over the long-term. A report.
Arun Kumar, a regular stock market investor, is making substantial gains on his existing equity investments. With the Sensex crossing a record high of 17,000 points, he is both glad as well as worried.
He questions as to how high the markets can go from the current levels. He also wonders with caution whether the market can keep jumping from such higher levels. If the answer is 'yes', then what factors will help the bulls have their grip over the market.
India is now increasingly interlinked with the global economy, which has been grappling with challenges like credit or liquidity crunch following the subprime crisis, weakening dollar, galloping rise in crude oil prices and fears of global economic slowdown especially in the US.
Among the domestic factors, there are uncertainties over interest rates and elections likely next year. Thus, Kumar is perplexed as to whether this is the time to hold on to his portfolio and add more scrips (most of them have gained 30 per cent on an average) or sell off now only to enter at lower levels at every dip?
Like Kumar, many other investors are wondering what to do. Their questions are: Where are the markets headed? How much steam is left? Is a correction overdue? If yes, then how much will the markets slide? Will factors like rising money inflows, inflation, appreciating rupee and economic slowdown in the developed markets derail India's scorching growth?
The Smart Investor helps you answer these questions with the help of market experts and economists.
Rapid fire round
Investors, the world over, gave a euphoric welcome to the 50 basis point cut in interest rates by the US Federal Reserve in response to the credit crunch and interpreted it as a proactive step towards avoiding a recession.
However, the party was merrier for the emerging markets like Hong Kong, India and Brazil, as these markets gained more than the developed markets on account of strong comeback of foreign institutional investors' money.
India, one of the key emerging markets in Asia, has seen FIIs pumping in $2140.8 million in seven days ending September 26.
Starting the week at 16,845 (after crossing 16,000 and gaining 1,000 points only in the week before last), the Sensex zipped past another threshold of 17,000 and gained another 1,000 points within just six trading sessions.
Says Manish Sonthalia, vice president, equity strategy, Motilal Oswal, "The US Federal Reserve has ensured through the rate cut that enough liquidity is available. As liquidity chases growth, which is there in Asia, equity markets in India, one of the fastest growing economies in the world, have also rallied."
Adds Ketan Karani, vice president, research, Kotak Securities, "Asian markets especially China and India have been re-rated after the Fed rate cut, which has resulted in a shift in investments among various global asset classes."
Sandip Sabharwal, chief investment officer, JM Financial Mutual Fund, has yet another reason. Says he, "Indian economy and corporate profits have exhibited robust growth even during challenging times of rising interest rate cycle which started from 2003 onwards."
What's next?
The Sensex currently trades at a trailing twelve month price to earnings multiple of over 20 times. This is still cheaper than its closest comparable peer China, which is trading at double the valuations at 48 times.
The Sensex trades at about 19.5 times and 16.5 times for FY08 and FY09 estimated earnings. Though market experts are cautious over the medium term, they believe that the long-term trend of the Indian markets is that of a secular bull run.
Says Balakrishnan Kunnambath, managing director - Indian Subcontinent, SG Private Banking (Asia Pacific), "Strong liquidity will continue to chase risky assets and drive valuations beyond fundamental fair valuations. We are cautious on the overall market as valuations are in the expensive zone and growth is tapering off."
So is a correction underway? "We expect a correction in the short-term as sectors hit by rupee and interest rates have significant weightage in the index. However Sensex has support at 13500-14500 levels for the current year," says Harendra Kumar, head of research, ICICI Direct.
Even Sonthalia feels that the markets should consolidate and be range bound in the short term.
Sandeep Sabharwal, while agreeing to it goes on to add that it could oscillate 3-4 per cent on the either side. However, long term investors should not pay much heed to the short term gyrations.
Speed-breakers ahead
Market experts believe that the party will last for a few more years. However, this doesn’t mean that the road will be smooth and free of difficult times having reached such high levels. India will have to battle some storms in the medium term.
The appreciating rupee, high oil prices, fears of US economic slowdown, and tapering growth in industrial production and corporate earnings still remain major risks.
However, market experts are unperturbed. Says a much enthused Karani, "Since India is a net importer, the appreciating rupee will be positive." Further, the risk of weakening dollar and US slowdown is limited to sectors like IT and textiles, adds Sabharwal.
High oil prices also pose a limited risk because even if crude oil price have risen more than 30 per cent since the beginning of the year, rupee (the best performing Asian currency in 2007) has also appreciated by 10-11 per cent.
Moreover, corporate earnings growth is also likely to be healthy at 15-20 per cent on a higher base except some sectors like IT, sugar and pharma.
However, some players feel that it is better to watch for August and September data for a better picture as the growth in index of industrial production has slowed down in the recent past.
Softer interest rates-a succour
Among all the factors, market players are watching interest rates keenly. Will Y V Reddy follow Bernanke's lead of reduction of interest rates?
Market participants feel that interest rates could soften going forward. However, economists differ. They don’t expect RBI to follow the footsteps of US Federal Reserve at least in the medium term.
Says D K Joshi, director and principal economist, Crisil, "I do not see RBI signalling interest rate reduction soon as high global crude prices remain a critical risk to domestic inflation. However if inflation remains at the current low levels and GDP growth slows down as expected by us, then we might see a reduction in rates later this year."
Rupa Rege, chief economist, Bank of Baroda, agrees that interest rates are likely to be stable for the time being; however with an upward bias in the second half on account of accelerated money inflows, rising inflation and good demand for loans from agriculture and infrastructure sector.
However, an analyst alleviates fears by saying that Indian corporates are insulated as they are relatively quite underleveraged with a comfortable debt-equity ratio. But continued money inflows remain a risk as it could stoke inflation again.
Strategies to adopt
Investors need to brace up for bouts of volatility due to factors like profit booking at higher levels, uncertainty over interest rates and elections next calendar year among others. Moreover, experts advise investors to whittle down returns expectations.
The trick could be to pick and choose stocks and still make decent gains as the rally hasn’t been broad-based. A better strategy would be to remain invested in sectors or stocks led by domestic growth and accumulate at every dip.
FIIs are attracted to India as the growth is largely driven by domestic consumption and thus are relatively immune to global shocks.
Thus, market experts as well fund managers are most positive on domestic growth stories like banks, infrastructure, power, capital goods, cement, metals and to some extent select media and telecom companies.
India provides huge business potential whether it is for building infrastructure like power, roads, ports and airports (which will require cement and metals) or changing demographics with substantial share of younger population boosting demand for autos, consumer durables, property and retail.
All this requires capital which is partly met by banks and financial services.
JM’s Sabharwal and Motilal Oswal’s Sonthalia are also positive on interest rate sensitive sectors like auto (except two-wheelers), real estate besides banks and financial services. This is because India has to maintain a benign interest rate scenario to keep the growth running.
But investors should be cautious on sectors like textiles, information technology, sugar, pharma and two-wheelers as they are going through a rough phase and various challenges and uncertainties.
But some analysts don’t mind taking a contrarian call on IT stocks as they are available at cheap valuations. Large-caps are going to be the market's favourite due to better liquidity.
Via BS
Maytas Infra IPO
Maytas Infra is moving up the value chain in the construction business and diversifying its service offerings.
While many companies have tapped the capital markets in the infrastructure space, not all of them have cheered investors.
The key ingredients to the success of the outperformers are appropriate size of balance sheet, diversification in terms of geography and services, a strong order book and adequate margins.
Promoted by B Teja Raju (son of Satyam Computer Services chairman B Ramalinga Raju), Maytas Infra is one such company having these attributes. Focused on irrigation, roads and bridge, and building infrastructure business, Maytas is one of the fastest growing construction companies.
Maytas’ contract revenues on a standalone basis have grown at 57 per cent annually to Rs 787.7 crore in FY07 and net profit has increased at 107 per cent annually to Rs 55 crore. Also, the operating margins have improved from 5.1 per cent in FY03 to 16.1 per cent in FY07.
Maytas generates a majority of its income from the roads and irrigation accounting for 77 per cent of FY07 revenue. Road segment includes the construction of roads, highways and bridges, while irrigation includes development and construction of dams, canals and tunnels.
However, the company is now focusing on other segments as well. Its current order book accounts for only 68 per cent coming from the transportation and irrigation segments, while the share of other segments such as buildings, power, railways and oil & gas sectors account for the rest.
Bigger horizon
There are considerable opportunities within the road and irrigation segments driven by higher government spending on highways, rural roads, bridges, irrigation canals, dams and tunnels.
According to industry estimates, investment in the road segment is expected to grow at 15 per cent annually till 2011. The company has a sizeable order book of Rs 1,113 crore from the road segment.
As of June 2007, Maytas had 12 road and bridge contracts in different stages of construction in the states of Assam, Chhattisgarh, Karnataka, Uttar Pradesh, Maharashtra and Tamil Nadu. These projects are undertaken either independently, or as part of a joint venture.
For example, it has invested Rs 57 crore as its equity participation for 33 per cent participation interest in the Bangalore-elevated tollway project, a build-operate-transfer (BOT). This project is estimated to cost Rs 775.7 crore and to be completed by the 3Q FY08.
Also in irrigation, under the different central and state development schemes such as Accelerated Irrigation Benefit Programme (AIBP), there are huge investments lined up.
According to a CRIS-INFAC report, investments worth Rs 74,400 crore will be made over the next five years compared to Rs 51,400 crore over the last five years.
Though there are considerable opportunities in the transportation and irrigation segment, there is intense competition as well. However, the company also believes there is enough room for everybody to grow.
To further reduce its dependence on these sectors and tap the emerging opportunities in the other infrastructure segments, the company is making its presence in the other segments as well.
“We are identifying suitable partners and positioning ourselves for expected opportunities in the water and waste water management, special economic zones, urban infrastructure, ports and airport,” says B Teja Raju, vice-chairman, Maytas Infra.
Port and airports
Maytas plans to enter into development and operation of ports and airport through alliances with strategic partners.
The company has already been awarded a project for the development of a deep water port at Machilipatnam, Andhra Pradesh on a build-own-operate-and-transfer basis at an estimated cost of Rs 1,590 crore.
The company proposed an equity investment of 40 per cent in a consortium with Nagarjuna Construction and SREI Infrastructure Finance.
Along with opportunities in port infrastructure, the company is also eyeing to participate in airport projects.
According to the civil aviation ministry, India requires an investment of Rs 4.8 lakh crore to be invested in this sector by year 2020 towards development, building and modernisation of airports.
Power
Along with other partners, the company is also investing in the growing power sector. Out of the total issue proceeds of Rs 327 crore at the upper price band, Maytas will invest 162 crore as its equity share in power projects.
The company has formed two special purpose vehicles with 50 per cent interest in both companies -- KVK Nilachal Power and SV Power.
Both these companies will have a combined power generation capacity of about 400 MW of power in Orissa and Chhattisgarh. KVK Nilachal is on a BOT basis and will be completed in FY10. SV Power is on a build-operate-own basis to be completed by third quarter of FY09.
Outlook
Maytas is growing in terms of revenues and order book. The order book has gone up from Rs 800 crore in FY05 to Rs 3590 crore currently, which is almost 5.6 times of its FY07 revenues, executable over 18-30 months.
More importantly, the diversified portfolio of its current order book with increasing share of power and other growing segments indicate better volumes and higher margins.
Maytas is in the investment phase, where most of its projects are under implementation. It is infusing fresh capital in the long gestation BOT projects and SPVs through the IPO and internal accruals.
The company is expected to maintain strong revenue growth driven by current order book and its entry into other areas.
At the upper price band of Rs 370, the issue is priced at 39 times its FY07 fully diluted earnings. This seems expensive compared with peers such as IVRCL and Patel Engineering, which are trading at 34 and 23 times respective trailing earnings.
However, considering the future earnings growth, higher operating margins and its stakes in 11 SPVs make Maytas a promising investment.
Issue opens : September 27
Issue closes : October 4
Higher level may attract profit taking
Political concerns may trigger profit taking on the bourses after a solid surge witnessed over the past few days. Political concerns have resurfaced with CPI (M) veteran Jyoti Basu on Saturday, 29 September 2007, ruling out the possibility of any compromise on the issue of Left’s opposition to the Indo-US nuclear deal. While the operationalisation of the deal has been put on hold by the government pending the findings of a committee, it cannot be stalled forever.
The Communists want the government to defer the Indo-US nuclear accord by six months and have warned of a political crisis if it is implemented. The committee set up of the government to look into Left Front’s concerns over the deal is scheduled to hold its next meeting on 5 October 2007.
On the flip side, political turmoil arising from nuke deal will not impact India’s basic economic fundamentals though some infrastructure projects may get delayed. India’s economy is expected to post strong growth for a long period of time mainly due to favourable demographics.
Q2 September 2007 results is the next major trigger for the market. Figures of advance tax suggest that earnings will be decent to strong. Stock specific activity may take place in the near term on the bourses ahead of the earnings-reporting season, based on result expectations. IT bellwether Infosys Technologies kickstarts reporting season on 11 October 2007.
The market has been a roll with the Sensex hitting record high in each of the past eight trading sessions from 19 September 2007 to 28 September 2007. Heavy FII buying and hopes of a further cut interest rates by the US Federal Reserve at its next policy meeting on 30 October 2007-31 October 2007 has boosted bourses. Sensex rose 140.54 points 0.82% at record closing high of 17,291.10 on Friday, 28 September 2007.
From a low of 13,989.11 on 21 August 2007, Sensex galloped a whopping 3,301.99 points or 23.6% to 17,291.10 on Friday, 28 September 2007
As per provisional data, FIIs were net buyers of shares worth a net Rs 2275.71 crore on Friday, 28 September 2007. Domestic institutions were sold shares worth a net Rs 100 crore on that day. FIIs inflow in the month of September 2007 totaled Rs 16132.60 crore.
The stock market remains closed tomorrow, 2 October 2007, on account of Gandhi Jayanti.
Asian markets extended their recent rally on Monday, 1 October 2007. Key benchmark indices in Japan, South Korea, Singapore and Taiwan were up by between 0.39% to 1.6%.
US stocks and bonds slipped as the dollar fell to a record low on Friday, 28 September 2007, amid concerns that US economic growth would continue to slow. The Dow Jones industrial average lost 17.31 points, or 0.12%, at 13,895.63. The Standard & Poor's 500 Index fell 4.63 points, or 0.30%, at 1,526.75. The Nasdaq Composite Index fell 8.09 points, or 0.3%, to 2,701.50.
US crude for November 2007 delivery lost $1.23 to settled at $81.65 a barrel on Friday, 28 September 2007, below its all-time high of $83.90.
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 4950 and 4900 with resis at 5047 and 5081
Mkt to stay range bound with a positive bias
Intra day: Buy Bajajauto with a TGT of 2619 and a SL of 2550
Buy HDIL above 628 with a TGT of 647 and a SL of 622
Out House :
Markets at a support of 17017 & 17117 levels with resistance at 17371 & 17474 levels .
Buy : RIL
Buy : Relcap & REL
Buy : Sail and Tisco
Buy : SBIN & Kotak
Buy : MRPL ,RNRL , TTML , IFCI , Nagarfert & JpHydro
Buy : IBullReal s/l of 662 target 717 then 737
Buy : GMRInfra
Buy : JpAsso
Buy : Grasim and IndiaCem
Dark Horse : GMrInfra , IBullReal , REL , Aban , RelCap , SBIN & IOB
Bullet for the Day : IBullReal & GmrInfra with stop loss .
Weekly Technicals - Overbought!
Nifty — The index closed on a strong note on the opening session of the week, after which the rally continued throughout the week’s trading. It ended the week with gains of 183 points.
Momentum Oscillators — On the daily chart, MACD is in buy mode. RSI (14) – Relative Strength Index is exhibiting a reading of 82.55 (reading above 70 signifies overbought). Stochastic (5,3) is in overbought zone and in sell mode; it is showing signs of negative divergence. Momentum oscillators are showing overbought reading on daily charts; the index could decline from current levels during the week's trading.
Moving Averages — The 50 dma = 4485, 20 dma = 4660, 10 dma = 4819. The index is trading above the averages. Rising moving averages act as support during declines; support can be expected around the 10 dma at 4819 during the week’s trading.
Support — The index has support around 4930 (low of 26 September 2007), break of support around 4930 could see index decline toward 4800 levels during the current week’s trading.
Higher Levels — The index can test higher levels around 5076.
Conclusion — Index can test higher levels around 5076; support is around 4930, break of which could see index decline during the current week’s trading.
Northbound journey to continue
After witnessing the surge on Friday the market is expected to make further headways on firm Asian markets. The market may see some short-term profit bookings in frontline stocks creating a volatility in the afternoon trades.
Major US indices slipped on Friday, clueless investors questioning themselves whether another rate cut is likely from Federal Reserve after a handful of economic readings. The Dow Jones industrial average fell by 17 points, or about 0.12% lower, the Nasdaq moved down by eight points to close at 2702.
The Indian ADRs also witnessed a fall on the US bourses. MTNL tumbled 6.18% followed by VSNL shedding 3.44%, while Infosys, Satyam, Wipro, Dr Reddy's Lab and Patni Computer were down around 0.5 -2% each. However, Tata Motors, ICICI Bank, HDFC Bank and Rediff gained over 1-2%.
Crude oil prices slipped on Friday, with the Nymex light crude oil for November delivery was down by $1.22 to close at $81.66 a barrel. In the commodity space, the Comex gold for December delivery gained $10.10 to settle at $735.50 an ounce.
Crude stays above $81
Prices increase by more than 15% in the third quarter
Crude-oil future prices for sweet light crude for November delivery which had ended at $81.62/bbl last week (21 Sept) finished 4 cents (0.04%) higher this week (28 Sept) at $81.66/bbl. Prices continued to stay above the $80/bbl mark throughout the whole week. It touched a high of $83/barel on Thursday, 27 September.
During the week, prices started on a weaker note around $80/barrel after the storm at Gulf of Mexico weakened and the place resumed back production. But then during the middle of the week, crude oil prices soared and were back at touching almost $83/bbl. Weak dollar, supply conditions and once again concerns regarding Iran’s nuclear policy took crude prices high.
But ultimately prices eased on Friday, 28 September, after refining margins shrank to their smallest in almost 11 months and heating oil and gasoline also tumbled.
As per this week’s inventory report by the Energy Dept, crude supplies rose 1.8 million barrels to 320.6 million for the week ended 21September (against an expected decline of 2.15 million barrels). Crude inventories are 3.5% lower than year-ago levels. U.S. stockpiles had fallen by a total of 18.3 million barrels in the previous four weeks. This was first gain in last five weeks.
Motor gasoline supplies climbed 600,000 barrels to stand at 191.4 million barrels. Distillate stocks were up 1.6 million barrels at 137.1 million barrels. Refinery utilization fell to 86.9% of capacity from 89.6% a week earlier.
The dollar has touched a record low against the euro for seven straight trading days. A lower dollar makes oil cheaper in the countries using other currencies.
Oil prices have risen 15% this quarter, the biggest quarterly percentage gain since the first quarter of 2005.
OPEC has planned to boost daily oil production by 500,000 barrels. OPEC's production target is 27.2 million barrels a day, beginning 1 Nov. OPEC, has decided to raise their daily output by 500,000 barrels per day, starting 1 November.
Rally keeps on going in US Market
Despite lingering concerns about the economic outlook, market ends the week higher
US Market made a weak end for a strong quarter with indices slipping on the last day of the week ending on Friday, 28 September, 2007. Strong economic reports on Friday failed to take indices higher on that day. But the Dow Jones Industrial Average and Nasdaq managed to register modest gains for the week. S&P 500 was almost unchanged.
The Dow Jones Industrial Average gained 75 points for the week. Tech - heavy Nasdaq gained 30 points and S&P 500 gained just 1 point.
For the quarter the Dow, Nasdaq, and S&P 500 gained 3.6%, 3.8%, 1.6% respectively. The dollar index dropped more than 5%. Gold prices reached a 27 year high. Crude prices once again touched $83/barel mark but fell back to $81/barrel at the month’s end.
Market started off on a weak note on Monday, 24 September, 2007 after 73,000 workers in the United Auto Workers union went on strike against General Motors, as the two sides failed to reach an agreement over cuts in health care costs and union demanded to keep U.S. production jobs.
The financial stocks were also hard hit following reports that Deutsche Bank might have to take a big write-down of its leveraged loan commitments. There was also news that Barclays might be selling its subprime unit at a loss. Dow closed lower by 61 points on that day.
Reduced sales forecast from top two retailers put market in a tug-of war situation for most part of the day on Tuesday, 25 September, 2007. Retailer, Lowe's said that it expects FY07 earnings to be at the low end of prior guidance, or slightly below. Another retailer, Target, citing weak guest traffic, lowered its September same-store sales growth forecast to a range of 1.5% to 2.5% from 4.0% to 6.0%. Nevertheless, Dow closed higher by 19 points.
Indices rallied in the final hours of trading on Wednesday, 26 September, 2007 after GM and Bear Sterns gave market some good pieces of news. General Motors and the United Auto Workers union reached a tentative labor agreement. On the Bear Sterns front, The New York Times reported that the company is interested in selling its minority stake and there were rumors flying that Warren Buffet, Bank of America and Wachovia are potentially interested candidates.
On Thursday, 27 September, 2007, investors were rattled by a bleak new home sales report. Sale of new homes fell 8.3% in August and 21% from a year ago to a seasonally adjusted annual rate of 795,000, which was the worst level since June 2000. Stll Dow closed higher by 35 points due to good support from Energy sector.
But on Friday, 28 September, 2007, investors digested a large batch of economic news and lingering concerns about the outlook for corporate earnings and the economy.
August personal consumption expenditures, which make up over 70% of GDP, rose a stronger than expected 0.6%. The core PCE deflator – a closely watched gauge of inflation – was up just 0.1% for the month. The y-o-y increase in the core PCE deflator was a low 1.8%.
Comments from St. Louis Fed President William Poole caused a bit of a stir near the end of Friday’s trading after he reportedly said it would be a mistake for markets to bet on more rate cuts. That comment erased earlier gains in the Treasury market and sent the major indices to their lows for the session. Dow slipped 17 points on that day.
Among other economic data that were released during the week, the Commerce Department reported that orders for durable goods fell 4.9% in August, indicating growing concerns that business spending might not be strong enough. Orders fell in August after a 6.1% gain in July; the drop was the biggest monthly decline since January.
Executive Summary
For the week, the indices closed modestly up. DJIx was up by 0.54% and S&P 500 was up by 0.07%. Nasdaq was up by 1.13%. Despite lingering concerns about the economic outlook, the three major averages ended the week higher.
The dollar index dropped more than 5% in the past three months. Gold prices reached a 27 year high. Crude prices once again touched $83/barel mark but fell back to $81/barrel at the month’s end.
History says that September is generally the worst month of the year. But in nine years, this was the best September for market. For the year, Dow is up by 11.5%, Nasdaq is up by 11.8% and S&P 500 is up by 7.6%.
Trading Calls
Nifty (5021) Sup 4979 Res 5047
Buy GNFC (158) SL 154
Target 164, 166
Buy Praj Inds (237) SL 233 Target 245, 247
Buy M&M (752) SL 746
Target 763, 766
Sell Balrampur Chini (76) SL 79 Target 69, 66
Sell Hexaware (125) SL 129 Target 117, 115
Keep it going...
As long as you derive inner help and comfort from anything, keep it - Mahatma Gandhi.
The bulls are getting inner help as well as external help. When you get nearly $2.8bn (cash segment only) in seven days, can the bulls remain subdued? That's what has happened in the past few sessions on the local bourses. In the wake of the Federal Reserve's better than expected rate cuts, equity markets across the world have been on fire. Indian indices in particular have set the market ablaze with a spectacular show. The Sensex and the Nifty have achieved new milestones. The bears are nowhere to be seen these days but expect them sooner rather than later. Though the undertone has changed for the better, a much needed healthy correction is more than warranted at this stage.
The upcoming results, especially that of the IT firms will be keenly watched. The guidance from the software companies will be crucial. The results from the old economy companies will also be important, for they will provide some clues on the state of the economy. We see the key indices being rangebound over the next few days, but with a positive bias. Most players will wait for the results to get out of the way before taking a fresh call on the market. Having said that, if the liquidity flow remains as strong as it is now, the bulls will rule the roost. Today, we expect a flat to slightly positive start and a choppy day. Trading volume may be lower given tomorrow's holiday and anxiety ahead of results.
US stocks slipped on Friday after some upbeat economic news and cautious comments from a Fed official tempered bets that the central bank will cut interest rates next month.
The Dow Jones Industrial Average lost 0.1% on the session - but gained 4.1% on the month. The broader S&P 500 dropped 0.3% but gained 3.6% in September. The tech-fueled Nasdaq Composite fell 0.3% on the session and gained 4.1% on the month.
The major indices also ended a tumultuous third quarter with gains. For the quarter, the Dow gained 3.7%, the S&P 500 added 1.6% and the Nasdaq added 3.8%.
Weighing on investor confidence was a better-than-expected reading on consumer spending in August, which surprised many investors.
While the report included a tame inflation reading that is favored by the Federal Reserve, it reduced expectations that the central bank would continue to cut interest rates at its next policy meeting in October.
Comments from St. Louis Fed President William Poole, a voting member of the 2007 FOMC, also fueled those expectations.
Supporting that view was a better-than-expected Chicago PMI reading - a key index of regional business activity - and a surprisingly strong August construction spending report.
That contrasted with the University of Michigan's consumer sentiment reading for September, which came in weaker than expected.
US light crude for November lost $1.28 to settle at $81.60 a barrel on the New York Mercantile Exchange. COMEX gold for December delivery jumped $10.10 to settle at $750.
Treasury prices fell, raising the yield on the 10-year note to 4.58% from 4.56% late on Thursday. In currency trading, the dollar fell versus the euro and also dipped versus other major currencies.
European shares ended the third quarter on a mixed note, as some better-than-expected US economic data and gains from Alcatel-Lucent helped offset food-sector weakness tied to a warning from sugar firm Tate & Lyle.
The pan-European Dow Jones Stoxx 600 index inched down less than a fraction of a percentage point to 377.72. The benchmark logged a loss of about 4% from its 393.70 close on June 29.
The German DAX 30 rose 0.1% to close the week at 7,861.51, but the French CAC-40 lost 0.3% at 5,715.69 and the UK's FTSE 100 declined 0.3% to 6,466.80.
In the emerging markets, the Bovespa in Brazil lost 1% to 60,465 while the IPC index in Mexico was down 0.8% at 30,296. The RTS index in Russia rose 0.4% to 2071 and the ISE National-30 index in Turkey shed 0.8% at 68,547.
Asian stocks rose this morning, leaving a regional benchmark set for a third straight record, after Japan's business sentiment unexpectedly held near a two-year high.
Sony led gains among Japanese exporters, while industrial robotics maker Fanuc advanced after the Bank of Japan's quarterly Tankan survey showed companies are raising projections for spending, sales and profits.
Mitsubishi UFJ Financial surged on its first day of trading after a one-week suspension as the bank split its stock and lowered its minimum trading lot, making the shares more affordable.
Posco led South Korea's Kospi index to a two-month high after announcing price increases. Telekom Malaysia Bhd jumped the most in seven years after the company said it plans to spin off its mobile-phone units.
The Morgan Stanley Capital International Asia-Pacific Index added 0.6% to 164.23 as of 10:54 a.m. in Tokyo, with all 10 industry groups posting gains.
Japan's Nikkei 225 Stock Average added 0.4%. Stock benchmarks advanced elsewhere in the region. Markets in Hong Kong and China are shut for holidays.
Markets likely to consolidate
The benchmark Sensex today rose to its eighth consecutive record, with ICICI Bank Ltd. and Tata Steel Ltd. leading from the front. NSE Nifty also rose to its new record high sustaining above the 5kmark. Better than expected inflation figures further boosted the sentiments on D-Street. Inflation rate was 3.23% in week ended September 15, against expectation of 3.45%. Finally, BSE 30-share benchmark Sensex ended 140 points higher to close at 17,291. NSE Nifty added 20 points to close at 5,021.
Reliance Energy was the pick of the day, the scrip was the top gainer among the Sensex stocks adding over 8% to finally close at Rs1205 also hitting its 52-week high. Reports stated that the company planned to sell shares in its generating unit for the first time. The scrip has touched an intra-day high of Rs1222 and a low of Rs1128 and has recorded volumes of over 67,00,000 shares on NSE.
IFCI surged by over 7% to Rs99 on reports that the company short listed eight bidders for sale of 26% stake including a consortia led by Wilbur Ross and Shinsei Bank The scrip touched an intra-day high of Rs102 and a low of Rs95 and recorded volumes of over 7,00,00,000 shares on NSE.
DLF gained by 2.8% to Rs762 after reports stated that the nation's biggest real estate developer may ally with AT&T Inc. and Singapore Telecommunications Ltd. for its proposed mobile-phone services venture in India. The scrip touched an intra-day high of Rs7667 and a low of Rs745 and recorded volumes of over 9,00,000 shares on NSE.
SAIL advanced by 3% to Rs207 on reports that the company would sign a Rs9.7bn MoU with Indian Railways, NMDC and Chattisgarh government to lay 235km of railway lines connecting iron ore mines to its steel plants. The scrip touched an intra-day high of Rs209 and a low of Rs203 and recorded volumes of over 1,00,00,000 shares on NSE.
Gayatri Projects ended flat at Rs319. The company announced that they would raise investment limit of foreign funds. The scrip touched an intra-day high of Rs327 and a low of Rs318 and recorded volumes of over 1,00,000 shares on NSE.
United Breweries marginally gained 0.8% to Rs381. The company announced that they would raise Rs4.25bn via rights issue. The scrip touched an intra-day high of Rs396 and a low of Rs376 and recorded volumes of over 59,000 shares on NSE.
Oil & Gas stocks were on the receiving end. BPCL slipped by 1.6% to Rs357, HPCL was down by 2% to Rs266. Oil exploration stocks also ended lower. Reliance Industries lost 1% to Rs2298.
IT stocks also witnessed some selling pressure. Infosys was down by 1.2% to Rs1892, TCS edged lower by 0.4% to Rs1060 and HCL Tech slipped 2% to Rs300. However, Satyam gained 1% to Rs446.
Bullish outlook on the sector and rising prices of metal boosted the metal stocks on Dalal Street. Tata Steel surged by over 7% to Rs850, JSW Steel advanced by 4% to Rs852, SAIL was up by 3% to Rs207 and Hindalco added 4.8% to Rs172.
Stocks in News:
Reliance Power is considering an IPO to raise Rs110bn for funding the ultra mega power projects in Sasan and Rosa
BHEL expects orders worth Rs350bn in the current financial year
Arvind Mills to raise Rs2.6bn through warrants issue to promoters; to use funds for
retail and brand expansions
Future Capital Holdings, the financial arm of Pantaloon to raise Rs3-3.5bn through an IPO
Wipro Tech is acquiring OkI Techno Centre, Singapore, a wireless design company with annual revenues of SG$8.8mn
BHEL is in talks with Siemens, Areva and GE to set up JV to manufacture nuclear power plant equipment
Cairn India has made a new oil find in one of its exploration wells in the Ravva field
of India’s east coast. Cairn India owns 22.5% stake in the block
Emaar MGF Land, a JV between Dubai’s largest real estate developer and Delhi-based
MGF Development has filed DRHP to raise Rs60bn
Jet Airways plans rights issue of $400mn by year in the next 3-4 months
NIIT Technologies is scouting to acquire IT and BPO companies in travel, transportation and logistics space
JSW Steel plans to seek licenses for all telecom circles in the
country
Ansal API forms joint venture with Malaysian firm UEM Builders,
to undertake building, construction and engineering activities
New Mobile licenses may come with lock-in clause, norms to weed out non-serious players
India has overtaken the US as the second-largest cotton producer in the world for the
2006-07 season
India’s mobile players not investing in infrastructure in pace with subscriber growth,
says CRISIL
Current account deficit widens marginally to US$4.7bn in April-June 2007 period
Fund Activity:
FIIs were net buyers of Rs22.76bn (provisional) in the cash segment on Friday and the local institutions pulled out Rs1bn. In the F&O segment, foreign funds were net buyers of Rs6.98bn.
On Thursday, FIIs were net buyers to the tune of Rs24.33bn in the cash segment. With this, their net investment in Indian shares in the past seven days has risen to US$2.77bn. Mutual Funds were net sellers of Rs5.17bn on Wednesday.
Major Bulk Deals:
Blackstone Asia has sold Ahmednagar Forgings; Morgan Stanley has bought Arvind Mills; Lotus Global has sold Escorts India; Deutsche Securities has picked up GTL while Deutsche Bank has sold the stock; Merrill Lynch has sold HFCL; DSP Merrill Lynch has purchased ITI; Lotus Global Investments has sold Kashyap Tech; Morgan Stanley has bought LIC Housing Finance; ICICI Pru Life Insurance has picked up NRB Bearings while SBI MF has sold SBI; Goldman Sachs has sold Ruchi Soya; SBI MF, HDFC MF, HSBC Global and ABN AMRO have bought Sintex; Kotak Mahindra UK has picked up Tera Software; Fidelity MF has bought Whirlpool India; JM MF has purchased XL Telecom.
Upper Circuit:
Atlanta, Bag Films, Deep Industries, RIIL, Ruby Mills, Swan Mills, Jai Corp, Marksans and Ion Exchange.
Lower Circuit:
IID Forgings.
Stocks you can buy this week
Titan Industries
Research: Morgan Stanley
Rating: Overweight
CMP: Rs 1,469
Morgan Stanley has assigned an ‘overweight’ rating to Titan. The stock is not fully discounting its long-term growth potential which depends on the following factors: 1) Product mix-led revenue growth and margin expansion in the watch business; 2) Improvement in product mix and same-store growth for Titan’s Tanishq jewellery retailing business; 3) Successful roll-out of its new businesses, i.e. eyewear and mass market jewellery retailing; and 4) Turnaround in its international and precision engineering division businesses. Morgan Stanley assumes Titan can deliver 22.4% CAGR in earnings during FY07-20. However, in FY07-10, it is likely to deliver 34.7% CAGR in earnings. The stock is trading near its all-time high and is attractively valued on a price-earnings growth versus return on equity basis.
Jet Airways
Research: Merrill Lynch
Rating: Neutral
CMP: Rs 907
Merrill Lynch has downgraded Jet Airways’ rating to ‘neutral’ from ‘buy’ as the stock has breached its target after its strong performance this fiscal. The stock currently trades at a slight premium to global growth airlines, up from a 25% discount earlier this year. Jet’s earnings are highly sensitive to variations in Jet Kero prices, but they are even more sensitive to the rupee’s volatility. A $1 variation in fuel price will impact Jet’s FY09E EBITDAR by 1.8%, assuming load factors are not impacted. Conversely, a Re 1 variation in exchange rate will positively impact FY09E EBITDA by 5.1%.
Jet has registered stronger-than-expected load factors on existing as well as new routes. The company’s recent introduction to the US has expectedly done well, and it is on track to add five more routes this year, including the busy Middle Eastern routes. Jet’s key routes to London and Singapore continue to grow rapidly.
The company is likely to sustain this performance on new routes, given its superior product and expanding franchise. Jet’s Q1 yields, up 13.4% YoY and 2.4% QoQ, also illustrate improved pricing power. The stock has risen 53% this fiscal, compared to 30% growth witnessed in the broader stock market. Merrill Lynch believes that this has largely captured the turnaround in Jet’s operations.
Bharti Airtel
Research: HSBC Global
Rating: Overweight
CMP: Rs 941
HSBC Global reiterates ‘overweight’ rating on Bharti Airtel. The domestic wireless segment has a fragmented market structure with scarce radio spectrum allocated to a large number of players on a circle-by-circle basis. With rapid growth of 6-7 million subscribers a month and very high minutes of usage per subscriber, network congestion is a serious problem in metros. TRAI’s plan to raise the subscriber targets required to receive additional spectrum can drive up capex for Bharti Airtel, which is entitled to additional spectrum in all 23 circles under existing rules.
The military announced plans to clear out of 45 MHz of spectrum and our current forecasts for India assume spectrum constraints are resolved over time. However, the potential shift in TRAI’s policy suggests our existing capex-tower assumptions are too optimistic.
HSBC provides three scenarios under which the number of subscribers per cell site decline by 2-4% per year for FY09-FY11E, from the current level of 857, down to a worst case of 760. Bharti Airtel will have to invest $2.6 billion to install 26,500 towers to support the existing subscriber forecast of 122 million by FY11E, trimming off Rs 57 per share from HSBC’s enterprise value. A significant portion of this investment in new towers can be offset by tower-sharing revenues.
Markets likely to consolidate
Equities are likely to consolidate on Monday. US markets closed flat with negative bias on Friday while Asian markets were trading higher this morning.
“We expect markets to consolidate ahead of corporate numbers. During the last ten trading sessions, the Sensex has climbed 1786.67 points or 11.52 per cent. Though the undertone remains bullish, we advise caution. Profit booking cannot be ruled out,” Networth Securities warns.
Vasant Joshi, technical analyst at Religare Securities feels the market is definitely headed upward, advising traders with a 3-4 month perspective to continue to hold and very short-term traders to use strict stop-losses.
“The momentum is still strong. There will be casual profit taking intraday, but I am looking at an upside to 5225 in Nifty and 17840 in Sensex,” he said.
Friday, National Stock Exchange’s Nifty closed at 5021.35, higher by 21 points or 0.42 per cent. Bombay Stock Exchange’s Sensex ended up 141 points or 0.82 per cent at 17,291.1, a new closing high.
Foreign institutional investors were net buyers of equity worth Rs 2,275.71 crore on Friday, while domestic instiutional investors net sold Rs 100.13 crore, according to provisional data on NSE.
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