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Wednesday, October 03, 2007

Buy ya Sell at 18K

Foreign funds are set on India, with their inflows into the country since Sep 19--the day US Fed cut interest rates--touching Rs 14,485.62 crore till Monday, Oct 1. On the other hand, domestic mutual funds have booked profits to the tune of Rs 4,071.58 crore till Monday with the market at such high levels.

What should retail investors do in this run-up which has seen the Sensex gain nearly 3,000 points and is set to cross another milestone--18,000.

“Retail investors should ride the wave till first signs of trouble are seen. It might come in the form of political uncertainty, RBI move or sub-prime crisis. Then... rush for exit,” said Manish Sonthalia, vice president-equity strategy, Motilal Oswal Securities.

“The market is ignoring everything; which is a cause for concern. At current prices, market is running ahead of fundamentals. Chances of steep correction are likely,” he said.

Hitesh Sheth, head of research at Prabhudas Lilladher, said, “retail investors are cautious. They are not so confident on the bullishness of the market. We are advising booking profits in sharply moving stocks and buy those which have kept low.”

Ambareesh Baliga, vice president, Karvy Stock Broking, said, “It’s not the time to go short but book profits. Get out of the market and don’t look at opportunity lost.” Summing it up, an analyst from a local brokerage said, “retail investors should adopt a strategy of booking profits on every rise in the stocks which have appreciated sharply in the past few days. Long-term players can remain invested as medium-term to long-term out look remains positive.”

Market Close : Booming away to glory !

Indices zoomed like a rocket in the early sessions with Sensex and Nifty hitting an all time highs. Markets weren?t affected by bad news on the US housing market. Sensex was just 50 points away from touching its 18K mark but witnessed huge volatility in mid sessions driven by profit taking in Asia. Markets plunged in the red zone on a free fall from the top. Volatility was an understatement. Markets in that period swung from green to red and back to green again. Indices slipped into red to a low of 17,288, down by 665 points from the peak but soon rebounded into the positive zone as it recovered most of its lost ground to end up by 518 points.

Asia markets ended mixed with Hang Seng down over by almost 1600 points from the day's high. Hang Seng was down over 2% as on profit taking and rumours about changing rules of foreign ownership. This selloff also impacted Indian markets and Europe too which started flat. The Power sector powered the markets. Broad market however was in the read. There was selling pressure in select Pharma and Cement stocks. Small and Mid caps had mixed reviews with the latter ending in green while the other in Red.

Sensex ended the day up by 518 points at 17847 was helped up by gains in Rel Energy (1450.4,+7 percent), Infosys (2001.4,+6 percent), NTPC (217,+5 percent), RCVL (642.65,+5 percent) and RIL (2393.55,+5 percent). Restricting the gains were Cipla (185,-2 percent), Guj Ambuja (144.95,-2 percent), HLL (220.35,-1 percent), Ranbaxy (438.6,-1 percent) and Dr Reddys (655.25,0 percent).

Cement is the one sector which has seen strength amidst all negatives. In the strong demand sceanrio many companies are increasing the price to take the advantage. ACC Ltd, India's second biggest cement producer reported that its September shipments rose 10.7% to 1.55 mn tonnes from 1.40 mn tonnes a year earlier up by 11%. Shree Cement reported its sales for the month of September at 0.47 mn tones vs 0.39 mn tones, up by 20% yoy. But unfortunately Ambuja cement sales for the month of Sept fell to 1.28 mn tones vs 1.34 mn tones, down by 5%. The reason for low shipments was that the plant had been shut down for few days in the month of September due to flood in the region. However this may not have much impact on company's bottom line. All the cement companies are reporting good sales dispatches even for the monsoon season. The demand remains robust. Valuations is where the fly in the ointment. We are positive on Kesoram Ind, Shree Cement and Madras Cement. Look for dips for investment prospects.

As per some reports, Private Low cost carriers will increase their Air fares by around Rs 100 as a result of a 4-5 % increase in ATF prices for domestic flights from this month onwards. The fuel surcharge per ticket will increase to Rs 1200 for domestic passengers from the existing Rs 1100. ATF is the main cost as it accounts for 30% - 35% of the operating cost of most major airlines. This would bring in some relief to margin for domestic airlines with low cost carriers such as Deccan Aviation and SpiceJet. There was another report stating that the Deccan Aviation would be exiting from the metro routes which would be beneficial to Spice jet and Jet airways.

Reliance Communication (RCom) announced the launch of its newest color handset priced at Rs 999. The 'Classic 732' which RCom claims to be the first color handset to be made available in the country at such a low price. The phone also features a color display and FM. Company is confident that the feature-rich Classic 732 color handset would soon become the entry-level handset for every new mobile user in the country. RCom had previously launched Classic monochrome handsets priced at Rs 777 per piece. Rcom saw gains. However competition is only increasing here.

Technically Speaking: Market zoomed in early session but had a bout of volatile session in mid sessions and finally ending the day up by more than 500 points. Sensex touched intraday high of 17953 and low of 17288. Overall breadth was in favor of Declines, where the Declines stood at 1696, while Advances at 1079. High volumes have been noticed over past week but today it broke all the records. The market churned an astonishing Rs 10024 crores. Sensex, as we have projected in our mid market, is going for 18500--18600. Traders who took entry at 17300 can now move their stop loss to 17250.

Technology, DLF, Sun TV, Banks, Automobiles

Technology, DLF, Sun TV, Banks, Automobiles

Eveninger - Oct 3 2007

Eveninger - Oct 3 2007

DLF zooms

Industry leader DLF acted as a catalyst to boost the realty sector Wednesday, after the company bagged a $12 billion housing and commercial real estate project from the Karnataka government Tuesday.

The BSE Realty Index shot up nearly 7 per cent with DLF shares advancing 14 per cent.

The 9,187-acre Bidadi Knowledge City, which will be positioned as New Bangalore, is three times the size of DLF City, the realty firm's flagship integrated township in Gurgaon. The project will entail an investment of over Rs 60,000 crore and will be developed in 50:50 joint venture with the Dubai-based Limitless Holdings.

“DLF's market capitalisation, which stood at Rs 12,000 crore Monday, climbed to Rs 17,000 crore today on account of this mega deal. Karnataka government's decision of awarding this project to DLF spurred the stock, and in turn, had a sentimental rub-off on other stocks in the sector,” an analyst with Religare Securities said.

At 2:54 pm, DLF soared 13.85 per cent to Rs 873.15, Unitech was up 2.97 per cent at Rs 326, Akruti Nirman gained 9.29 per cent to Rs 776.10 and HDIL rose 1.39 per cent to Rs 647.

Unitech's inclusion in Nifty-50 on Friday will see further upmove for the sector.

On Sep 12, just news of the stock's entry into Nifty 50 was greeted with the BSE Realty Index gaining over 2.5 per cent.

Going forward, sky is the limit for the realty space. To hasten implementation of special economic zone projects, the commerce ministry has asked states to come up with a single-window clearance mechanism for SEZ project developers.

As a first step, the commerce ministry has convened a meeting of state governments of Maharashtra, Andhra Pradesh, Tamil Nadu, Gujarat, Haryana and Karnataka to review the progress of relevant SEZs that have received formal clearances. This augurs well for realty shares in the months to come.

Likewise, the Mumbai Metropolitan Region Development Authority has proposed to raise the floor space index for commercial properties in Bandra-Kurla Complex from 2 to 4.

"Currently, HDIL has a land bank of 1.1 million square feet in Bandra, while Satra Properties holds 3 lakh square feet. If MMRDA's proposal comes through, valuations of these companies are expected to rise," the brokerage said.

"HDIL with a target of Rs 694, Parsvnath Developers with a target of Rs 512 and Peninsula Land with a target of Rs 697 are our top picks in the sector," Religare added.

According to reports, the Indian Railways is planning to unlock value of its commercial real estate in three prime locations--Bandra (250 acres); Mumbai CST (250 acres); and Mumbai Central (250 acres)--in a phased manner. The Railways has a total land bank of 48,000 hectares across the country. Realty companies are expected to cash in on this news too.

While prices in Mumbai – both sale and rent rates – are likely to remain stagnant in the residential segment, prices on the commercial side are expected to rise for a year or so.

With the Dharavi redevelopment and the Mumbai airport expansion, demand and supply would be matched in the next 3-4 years. Prices in the commercial segment are expected to stabilise then.

Sugar Sector Update

Sugar Sector Update

Model Portfolio - Oct 2007

Model Portfolio - Oct 2007

Post Market Commentary

The market rallied and extended its recent solid gains during the trading session, which led both the benchmark indices i.e. BSE Sensex and Nifty touched its lifetime high. The market tumbled in the mid session but manages to recover well. The BSE Sensex grew by 518.42 points to close at 17,847.04 while Nifty jumped by 141.82 points to close at 5,210.80. The benchmark indices i.e. BSE Sensex touched its lifetime high of 17,953.07, just lacks few points from the psychological mark of 18,000 during the trading session. This boost was on the back of heavy buying across almost all the sectoral indices scrips mainly from the reality index which outperformed the Sensex to close higher by 593.36 points at 9,775.19. Today''s rally in the market led the BSE to fetch a turnover of more than Rs10,000 Crore. Overall, the market breadth remains weak as 1695 stocks are closed in red while 1111 stocks are closed in green. The BSE Mid cap closed little higher by 13.36 points at 7,542 while BSE Small cap lost grounds as it closed lower by 82.21 points at 9,102.31.
BSE Reality index advanced by 593.36 points to close at 9,775.19 as DLF (16.41%), Akruti Nirma (10.96%), Unitech (3.92%) and Parsvnath (2.51%) closed higher.
The oil and gas index closed the session on a firm note as it grew by 312.68 points to close at 9,995.27. Leading this pack are Reliance Industries (4.55%), ONGC (2.76%), BPCL (2.04%), IOCL (1.88%) .
BSE Metal index surged by 261.75 points to close at 14,161.52. The main gainers are Hindalco Industries (3.83%), Sterlite Industries (3.69%), JSW Steel (3.12%) and SAIL (1.82%).
The IT index closed up by 184.89 points at 4,783 on the back of expectations of goods earnings by the companies in the second quarter. Adding to the gainers pack are Infosys (5.72%), TCS (3.99%), Wipro (3.68%), HCL tech (3.44%)
BSE bankex index jumped by 156.90 points to close at 9,552.68. Leading the rally are Kotak bank (4.54%), ICICI bank (2.83%), Federal bank (2.10%), HDFC bank (1.31%), SBI (0.84%) closed higher.

India Strategy

India Strategy

Steel Sector

Steel Sector

Market hits record high for the tenth consecutive trading session

The market surged today in a volatile trade, with both the niche indices, BSE Sensex and S&P CNX Nifty, striking all-time highs. Index heavyweight Reliance Industries surged. Pharma pivotals edged lower whereas IT pivotals rallied. Market breadth which was strong earlier during the day, turned weak in mid-afternoon trade.

Asian markets were mixed after firm opening. European markets were in the green.

Sensex ended up 518.42 points or 2.99% at 17,847.04 an all time closing high. It had hit a fresh all-time high of 17,953.07 in early afternoon trade. It hit a low of 17,288.41 during mid-afternoon trade. Sensex opened with a upward gap of 138.79 points.

The S&P CNX Nifty was up 141.85 points or 2.8% at 5,210.80, an all-time closing high. It hit an all-time high of 5,261.35 in early afternoon trade today.

Market had come sharply off the higher level to slip into the red for a short while in mid-afternoon trade. At day's low of 17288.41, it had declined 40 points for the day. At day's high of 17,953.07, Sensex had risen 624.45 points for the day.

The market had spurted in opening trade with Sensex and S&P CNX Nifty hitting all-time highs after more bad news on the US housing market kept alive hopes of further US interest rate cuts after last month’s steep 50 basis points cut in fed funds rate to 4.75% from 5.25%.

The market has been a roll with the Sensex hitting record high in each of the past ten trading sessions from 19 September 2007 to 3 October 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. From a low of 13,989.11 on 21 August 2007, Sensex galloped a whopping 3,857.93 points or 27.57% to 17,847.04 on Wednesday, 3 October 2007.

BSE Mid-Cap index rose 13.36 points or 0.18% to 7,542 today. It hit an all time high of 7,678.70 today. BSE Small-Cap index declined 82.21 points or 0.9% to 9,102.31. Both these indices underperformed the Sensex.

Sectoral indices on BSE displayed mixed trend. BSE Realty index (up 6.46% to 9,775.19), BSE IT Index (up 4.02% at 4,783), BSE TecK index (up 3.31% to 3,905.77) and BSE Oil and Gas Index (up 3.23% at 9,995.27) , outperformed the Sensex.

BSE Capital Goods Index (up 2.59% at 15,609.20), BSE Health Care Index (down 0.56% at 3,815.80), BSE PSU index (up 1.89% to 8,520.96), BSE Metal Index (up 1.88% at 13,899.77), BSE Consumer Durables index (down 0.52% to 4,739.97), Bankex (up 1.67% to 9,552.68) and BSE FMCG Index (up 0.31% at 2,157.78), BSE Auto Index (up 1.42% at 5,391.60) were underperformers.

Turnover soared. BSE clocked a turnover of Rs 10024 crore compared to Monday (1 October 2007)’s Rs 7228.53 crore.

NSE's F&O segment clocked a turnover of Rs 1,00,056 crore today 3 October 2007 compared to turnover of Rs 61,451.29 crore today, 1 October 2007.

Nifty October 2007 futures were trading at 5,229.70, at a premium of 18.9 points or 0.36% to the spot price of 5,210.80.

The market breadth was weak on BSE: 1076 scrips advanced 1,689 scrips declined and 312 scrips remained unchanged.

Out of the Sensex pack, 24 scrips advanced while rest declined.

India's largest private sector company and oil refiner Reliance Industries (RIL) was up 4.55% to Rs 2,393.55. It hit an all-time high of Rs 2,443.90 in the early afternoon trade today. As per reports, RIL paid 46% higher advance tax to Rs 649 crore in the second advance tax installment ended 15 September 2007, over 15 September 2006.

IT bigwigs firmed today on hopes quarterly earnings from the beaten down sector may not be as bad as widely feared. India’s second largest IT services exporter in terms of revenue Infosys was up 5.72% to Rs 2,001.40, and was the top gainer amongst the Sensex pack. TCS (up 3.99% to Rs 1,079.95), Satyam (up 1.86% to Rs 451) edged higher. Wipro rose 3.68% to Rs 470.65. Infosys kickstarts earnings reporting season on Thursday, 11 October 2007.

Pharma majors declined today. Cipla was down 1.93% to Rs 185. It was the top loser among the Sensex pack. Dr. Reddys Laboratories (down 0.49% to Rs 655.25), Ranbaxy Laboratories (down 0.54% to 438.60) were the major losers among the Sensex pack.

Hindustan Unilever lost 0.92% to Rs 220.35.

Ambuja Cements (down 1.63% to Rs 144.95) declined after its September 2007 cement shipments fell 4.2% to 12.9 lakh tonnes from 13.4 lakh tonnes in September 2006

Shares of power generation and distribution companies hogged the limelight. Tata Power Company surged 13.22% to Rs 1,031.25. It hit an all-time high of Rs 1,150. Reliance Energy rose 7.48% to Rs 1,450.40 on a volatile trade, It hit an all-time high of Rs 1,488.40. It was the top gainer from the Sensex pack. NTPC rose 5.34% to Rs 217, It hit an all time high of Rs 222.40.

The rally in power stocks was attributed to the proposed public issue of Reliance Power. The unlisted power arm of Anil Ambani is planning additional capacity worth 25,000 mega watts through new projects.

Reliance Communications rose 5.03% to Rs 642.65. It hit an all-time high of Rs 660 today.

ONGC was up 2.76% to Rs 1,024.60. It hit an all-time high of Rs 1,052 today.

India's largest real estate developer in terms of revenue, DLF rose 16.41% to Rs 892.75. It hit an all-time high of Rs 904 today. The Karnataka government has awarded the 9,187-acre Bidadi Knowledge City, which will be positioned as New Bangalore, to DLF. Dubai-government owned Limitless will own half the venture.

Among side counters, Amrit Banaspati (up 69.02% to Rs 7.65), ITL Industries (up 20% to Rs 54.40), Kerala Ayurveda (up 20% to Rs 88.95), Nagpur Power (up 19.93% to Rs 54.45) were the major gainers.

Resonance Specialities (down 13.86% to Rs 10.75), RoseLabs (down 10.58% to Rs 5.75), Acknit Knitting (down 12.62% to Rs 42.60) and Amit Spinning (down 10.07% to Rs 6.79) were the major losers.

BSE Capital Goods index was the second largest gainer among the sectoral indices on BSE. Larsen and Toubro (L&T), India's largest engineering and construction company in India in terms of revenue rose 2.9% to Rs 2,074.20. It has reportedly floated a new arm, L&T Power Projects (L&T PPL), to foray into the booming power generation business.

Bharat Heavy Electricals was up 4.23% to Rs 2,074.20. Suzlon Energy had jumped 5.55% to Rs 1,556 after it secured an order from property developer DLF to build a wind farm with a total turbine capacity of 150 mega watt in Gujarat.

ACC went up 1.54% to Rs 1228.45 after it said its September 2007 shipments rose 10.7% to 15.5 lakh tonnes from 14 lakh tonnes in September 2006.

ICICI Bank soared 2.83% to Rs 1088 on reports it plans to raise $11 billion overseas in the next 12 months to fund its expansion abroad and credit growth in India.

Tata Motors moved up 2.15% to Rs 789.60, after it announced on Monday, 1 October 2007, its sales of commercial vehicles in the domestic market rose 1.5% to 27,036 units in September 2007 over September 2006.

ABG Heavy Industries was locked at upper limit of 5% at Rs 300.65 on BSE on reports two container ship operators are looking to purchase a stake in the company

Anjani Synthetics hit 5% upper circuit to Rs 85.10 after it said its board would meet on Oct 23 October 2007 to consider issue of bonus shares.

Zenotech Laboratories hit 10% upper circuit at Rs 167.30 ahead of the firm's board meeting to consider a preferential issue of shares to financial investors.

Asian markets, which opened before Indian markets, were mixed. Hong Kong’s Hang Seng (down 2.55% to 27,479.94), Singapore's Straits Times (down 1.03% to 3,754.62) edged lower. Taiwan's Taiwan Weighted (up 0.8% to 9,700.71) and Japan's Nikkei (up 0.9% at 17,199.89) edged higher.

European markets, which opened after the Indian markets were mixed. UK’s FTSE 100 (up 0.33% to 6,521.80) and Germany’s DAX (up 0.12% to 7,955.74) edged higher. Whereas, France’s CAC (down 0.15% to 5,790.76) edged lower.

US blue-chip stocks edged lower on Tuesday, 2 October 2007, as investors booked profits a day after the Dow Jones Industrial Average hit a record high. Dow lost 40.24 points or 0.29% at 14,047.31. But the tech-heavy Nasdaq Composite Index rose 6.12 points or 0.2% at 2,747.11.

Roller coaster ride

Today, the market witnessed a pre-result rally fueled by global money. After registering the all-time high of 17,953 in early trades, the Sensex slipped over 665 points to touch the intra-day low of 17,288 on the back of a frenzied selling pressure. But, by the afternoon the market went into a major recovery mode and surged by 559 points during intra-day trades. While the mood remained upbeat on strong buying in technology, oil, realty and capital goods stocks, the rally gathered more steam towards the closing hours and the Sensex ended the session with a gain of 2.99% or 518 points at 17,847, and the Nifty rose by 2.80% or 142 points to close at 5,211.

However, the market breadth was negative. Of the 2,849 stocks traded on the BSE 1,695 stocks declined, 1,111 stocks advanced and 43 stocks ended unchanged. Among the sectoral indices the BSE Realty index flared up by 6.46% and the BSE IT index gained 4.02%. While the other sectoral indices were up around 1-3% each, the BSE CD index and the BSE HC index ended in negative territory.

Recovery in the market was led by Reliance Energy, which shot up by 7.48% at Rs1,450. Among the major gainers, Infosys advanced by 5.72% at Rs2,001, NTPC moved up by 5.34% at Rs217, Reliance Communication added 5.03% at Rs643. Reliance Industries scaled up by 4.55% at Rs2,394 and BHEL jumped 4.23% at Rs2,074. Select index stocks witnessed selling pressure. Cipla was the major loser and dropped by 1.93% at Rs185, Ambuja Cement fell by 1.63% at Rs145. HLL, Ranbaxy, Dr Reddy's Laboratories and Tata Steel also ended in the red.

Over 3.65 crore Reliance Natural Resources shares changed hands on the BSE followed by Ispat Industries (3.07 crore shares), Tata Teleservices (2.51 crore shares), IKF Technologies (2.43 crore shares) and Centurion Bank of Punjab (2.27 crore shares).

Reliance Energy was the most actively traded counter on the BSE. Reliance Energy registered a turnover of Rs736 crore followed by DLF (Rs617 crore), Reliance Industries (Rs567 crore), Reliance Capital (Rs443 crore) and Reliance Natural Resources (Rs348 crore).

Poll - Sensex for 18K?

Yea baby! Go for it! - 205 (51%)

Nah, more like 16K for now! - 126 (31%)

Should be stable around these levels! - 70 (17%)

TOTAL number of Votes - 401

Question was asked when the market was at 17200 levels

Hang Seng Today!

Day Range - 27245.48 - 28871.04

Ends the day at 719.81 (2.55%)

Looking Glass

Looking Glass

Trading Calls

Buy NTPC with stoploss of Rs 195 for target of Rs 230.

Buy Reliance Communication with stoploss of Rs 582 for target of Rs 674.

Buy Shriram City Union Finance with stoploss of Rs 270 for short term target of Rs 340.

Market may extend winning streak

The market is likely to extend its record breaking winning streak, tracking firm Asian markets. Domestic bourses have been shrugging of negative news. The market edged higher on Monday, 1 October 2007, brushing aside political concerns. Political concerns resurfaced after CPI (M) veteran Jyoti Basu on Saturday, 29 September 2007, ruled out the possibility of any compromise on the issue of Left’s opposition to the Indo-US nuclear deal.

Sensex rose 37.52 points or 0.22% to a record closing high of 17,328.62 on Monday, 1 October 2007. The market was closed on Tuesday, 1 October 2007, on account of Gandhi Jayanti.

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 central committee of CPI (M) on Monday, 1 October 2007, authorized the politburo to take legislative measures to prevent the Manmohan Singh government from taking the next step on the Indo-US nuclear deal. 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.

The market has been a roll with the Sensex hitting record high in each of the past nine trading sessions from 19 September 2007 to 1 October 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. From a low of 13,989.11 on 21 August 2007, Sensex galloped a whopping 3,339.51 points or 23.8% to 17,328.62 on Monday, 1 October 2007.

As per provisional data, FIIs bought shares worth a net Rs 1721.74 crore on Monday, 1 October 2007. Domestic institutions sold shares worth a net Rs 930 crore on that day.

Asian markets extended their recent solid run today, 3 October 2007. Key benchmark indices in Hong Kong, Japan, Singapore and Taiwan were up by between 0.07% to 1.5%.

US blue-chip stocks edged lower on Tuesday, 2 October 2007, as investors booked profits a day after the Dow Jones Industrial Average hit a record high. Dow lost 40.24 points or 0.29% at 14,047.31. But the tech-heavy Nasdaq Composite Index rose 6.12 points or 0.2% at 2,747.11.

Global cues see Indian markets open with caution

After posting significant gains in the previous sessions, buying interest may continue on the back of a firm trend. However, caution should be exercised as the market may move in tandem with Asian indices which are marginally up in current trades. Investors should also take into account the prevalence of strong intra-day volatility. Among the key local indices, the Nifty could test higher levels at 5088 and 5100 while it has a strong support at 5025. The Sensex has a likely support at 17050 and may face resistance at 17500.

US indices notably the Dow Jones witnessed a subdued trend and ended lower on Tuesday at 14047, while the tech-laden Nasdaq gained marginally to close six points up at 2747.

Indian floats had a mixed outing on the US bourses. Infosys, Satyam, Wipro, ICICI Bank, HDFC Bank, MTNL and Rediff gained around 1-4% each while Dr Reddy's, Tata Motors, VSNL dropped over 1-5% each.

Crude oil prices in the international market closed marginally down on Tuesday, with the Nymex light crude oil for November delivery slipped by 19 cents to close at $80.05 per barrel.

Morning Call

Market Grape Wine :

In House :

Nifty at a supp of 5031 and 5000 with resis at 5107 and 5157. Mkt to open on a positive note.

Intra day: Buy Bajajauto above 2498 with a TGT of 2600 and a SL of 2470

Buy Gujalkali above 165.50 with a TGT of 172 and a SL of 162

Out House :

Markets at a support of 17171 & 17271 levels with resistance at 17571 & 17747 levels .

Buy : RIL

Buy : Relcap & REL

Buy : Sail

Buy : SBIN

Buy : MRPL ,RNRL , TTML , IFCI , Nagarfert & JpHydro

Buy : IBullReal

Buy : GMRInfra

Buy : JpAsso

Buy : NoidaToll & NTPC bullet

Dark Horse : GMrInfra , IBullReal , REL , Aban , RelCap , SBIN & Noida

Bullet for the Day : NTPC , Adlabs & GmrInfra with stop loss

A mixed finish for US Market

Good sales figure from General Motors help Dow erase most of its morning losses

US market closed mixed today as investors weighed more disappointing news on the housing front against strength in the Technology sector. Five out of ten economic sectors posted losses today, Tuesday, 2 October, 2007. The dollar index made some gains and the strengthening dollar weighed on commodities today.

The Dow Jones industrial Average closed lower by higher by 40.2 points at 14,047. But the Nasdaq Composite Index, finished higher by 6.12 points at 2,747.2. S&P 500 finished a slight lower by 0.41 points at 1,546.43.

Sixteen of thirty Dow stocks ended in red. Exxon Mobil led the group of Dow decliners with crude prices slipping even today. General Motors was one of the top Dow advancers. The company reported that its September North American auto sales increased by 4% against a street expectation of just 1%. Rivals – Ford and Toyota reported declining sales.

Earlier in the day, The National Association of Realtors reported that pending home sales fell a larger than expected 6.5% in August from July and 21.5% from a year earlier. The report suggested that existing home sales will most likely remain weak in the coming months.

On the technology front, Google shares once again hit a new all time high. Google's strong performance was partly due to Credit Suisse's announcement that it expects Google to report better than expected earnings.

Homebuilders remain unaffected by weak housing report

When market opened in the morning, indices lingered in the red. The financial sector was the early-morning’s only standout as it continued yesterday's leadership role.

The other surprise for the day was that the Homebuilding group was not fazed by the report that came today. Infact, it led this morning with a good gain. Homebuilding outperformed yesterday after Citigroup upgraded several large cap homebuilders.

The big story this morning was that TD Bank Financial Group is going to acquire Commerce Bancorp for $8.5 billion.

Among Indian ADRs, was the trop gainer today while VSNL was the top loser. Rediff shares gained a little over 4% while VSNL shares dropped by 5.4%. On the finance sector, HDFC Bank and ICICI Bank closed up by 0.4% and 1.3% respectively.

Volume on the New York Stock Exchange topped 1.2 billion shares, and advancing issues edged decliners 9 to 7. Nearly 1.8 billion shares exchanged hands on the Nasdaq, and advancers outdid decliners 4 to 3.

For tomorrow, investors will have the Institute for Supply Management releasing its September services report. Other than that, the Department of Energy will release its weekly inventory report at 10:30 ET.

Daily Market Outlook - Oct 3 2007

Daily Market Outlook - Oct 3 2007

Derivatives for October 03, 2007

Derivatives for October 03, 2007

Grey Market - Maytas, Saamya, Supreme, Consolidated

Power Grid Corporation 52 30 to 31

Dhanus Tech. 280 to 295 50 to 55

Koutons Retail 370 to 415 75 to 80

Consolidated Construction 510 160 to 170

Supreme Infra 95 to 108 50 to 55

Saamya Biotech 10 4 to 5

MAYTAS Infra 320 to 370 150 to 160

Circuit Systems (India) Ltd. 35 3 to 4

Kaveri Seeds 170 22 to 25

Trading Calls

Nifty (5069) Sup 5015 Res 5141

Buy Unitech (317) SL 312
Target 326, 329

Buy Dr Reddy’s (658) SL 652 Target 670, 672

Buy ACC (1210) SL 1197
Target 1237, 1242

Sell BILT (137) SL 141
Target 130, 128

Sell Patni (460) SL 465
Target 451, 449

Forget reasons, book some profits

The supreme function of reason is to show that some things are beyond reason.

The rise so far may be beyond reason. And if the markets have to consolidate, (we’ve been expecting it for some time now) there is no need to pinpoint reasons. But thoughts that come in when weakness is likely to set in include quarterly results, political uncertainty and stretched valuations. How the bulls will react in the event of mid-term polls only time will tell. Given the strong fundamentals of the Indian economy and solid growth momentum for corporate earnings, the market should be fine after a temporary blip.

The sharp spurt off late has taken the main indices to all-time highs practically everyday for the last couple of days. Lock in some gains at every rise in counters which have run too fast. Stay invested in quality stocks, irrespective of the market cap, as the medium to long-term outlook is still positive. Get out of weak stocks or the ones that haven't lived up to your expectations.

Today, we expect a positive start and a choppy day of trade. Global markets had a pretty good outing on Tuesday, especially in Asia. The Dow Jones, meanwhile has crossed the 14k mark. Expect some buying to come into pharma counters in the coming days. Cipla, Ranbaxy, Divi’s Lab are showing positive signals.

US stocks ended mixed on Tuesday after a volatile session. Disappointing news on auto sales and the housing sector prompted investors to take a breather after the previous day's rally, when the Dow Jones Industrial Average closed at an all-time high of 14,087.55.

Financial shares climbed to the highest since July after Commerce Bancorp agreed to be bought by Canada's Toronto-Dominion Bank and Citigroup said it will purchase the rest of Japanese brokerage Nikko Cordial.

Homebuilders had their biggest two-day gain since August amid growing optimism that the contagion from the subprime-mortgage losses is waning.

Seven stocks advanced for every five that declined on the New York Stock Exchange.

The Dow lost 40 points, or 0.3%, to 14,047.31. The S&P 500 finished little changed at 1,546.63, and the Nasdaq Composite Index rose by 6 points, or 0.2%, to 2,747.11.

US stocks moved lower after the National Association of Realtors reported a bigger-than-expected decline in the August pending home sales, which slipped to its lowest level on record.

The report failed to boost the broader stock market, which has been betting that weak economic data would force the Federal Reserve to continue cutting interest rates. However, more rate cuts this year may not be in the cards.

Treasury prices gained, lowering the yield on the 10-year note to 4.53% from 4.55% late on Monday. In currency trading, the dollar rebounded against the euro and gained versus the yen, which helped send commodity prices lower.

Oil prices recovered slightly from an early selloff but remained lower. Crude prices fell 19 cents to settle at $80.05 a barrel on the New York Mercantile Exchange. COMEX gold for December delivery fell sharply after last week's run-up, falling $17.80 to settle at $736.30 an ounce.

European shares advanced. The pan-European Dow Jones Stoxx 600 index increased 0.5% to 382.70, with banks leading the advancers, followed by gains in the construction sector. The French CAC-40 advanced 0.5% to 5,799.27 and the German DAX 30 rose by 0.3% to 7,946.79. The UK's FTSE 100 closed down 0.1% at 6,500.40.

In the emerging markets, the Bovespa in Brazil was down 0.5% at 62,017 while the IPC index in Mexico gained nearly 2% to 31,451. The RTS index in Russia surged by 3% to 2108 and the ISE National-30 index in Turkey added 1.1% to 69,522.

Asian stocks were trading mostly higher this morning. The Nikkei in Tokyo was up 8 points at 17,055 and the Hang Seng in Hong Kong shot up by 273 points to 28,472. The Straits Times in Singapore advanced 45 points to 3838.

The Morgan Stanley Capital International Asia-Pacific Index added 0.6% to 167.16 as of 10:54 a.m. in Tokyo, after a four-day, 4.8% rally that lifted the benchmark to a record. Financial stocks contributed the most to today's gains.

Benchmarks climbed elsewhere in Asia, except for New Zealand. Markets in South Korea and China are shut for holidays today.

In a volatile trading session markets managed to make a comeback ending in positive territory. Key indices extended their longest winning streak in more than a year led by the Oil & Gas and Pharma stocks. Vital support was yet again provided by the Reliance pack of stocks led by REL, R Com, RNRL and RPL. However, IT, Auto and Banking stocks were offloaded. Finally, BSE 30-share benchmark Sensex ended 37 points higher to close at 17,328. NSE Nifty added 47 points to close at 5,068.

M&M advanced 1% to Rs759 after the company announced their September sales figure which was at 19,871 units (up 8.7%). The scrip touched an intra-day high of Rs777 and a low of Rs755 and recorded volumes of over 9,00,000 shares on NSE.

Hero Honda dropped 2% to Rs732. The Company’s September sales rose 4.6% to 314,000 units. The scrip touched an intra-day high of Rs762 and a low of Rs727 and recorded volumes of over 2,00,000 shares on NSE.

TVS Motors advanced 1% to Rs70 on October sales outlook. The company announced that sales would rise 20% from September. The scrip touched an intra-day high of Rs73 and a low of Rs70 and recorded volumes of over 13,00,000 shares on NSE.

Biocon surged by over 3.5% to Rs489 after the company announced that they have completed sale of Enzymes unit to Novozymes. The scrip touched an intra-day high of Rs502 and a low of Rs471 and recorded volumes of over 5,00,000 shares on NSE.

Alphageo India was frozen at 5% upper circuit to Rs512.7. The Board of Directors of the company has approved selling warrants to founders. The scrip touched an intra-day high of Rs512.7 and a low of Rs470 and recorded volumes of over 10,000 shares on BSE.

Omaxe advanced by 0.4% to Rs334 after the company announced that its unit would apply for Unified access service for 22 circles. The scrip touched an intra-day high of Rs341 and a low of Rs331 and recorded volumes of over 1,00,000 shares on NSE.

PSU stocks recorded smart gains. NTPC rose by over 6.5% to Rs206, Union Bank was up by over 6% to Rs173 and Chennai Petroleum added 3% to Rs287.

Pharma stocks were in momentum led by gains in heavyweight, Ranbay advanced by 1.5% to Rs440 and Dr Reddy’s Lab added 1.5% to Rs659, Biocon was up by 3.5% to Rs489, Lupin gained 1.5% to Rs596.

Banking stocks were under pressure. ICICI Bank slipped by 0.5% to Rs1057, SBI was down by 2.6% to Rs1894 and HDFC Bank declined 1.7% to Rs1411. Syndicate Bank, Andhra Bank and PNB were the major losers among the Mid-Cap stocks.

Refinery stocks were in the limelight after the Indian Refiners announced that they have raised Jet fuel prices by 4.2% for October. HPCL advanced by 3.4% to Rs275, BPCL surged 5.6% to Rs377 and IOC added 4.6% to Rs492.

Stocks in News:

Reliance Retail plans to enter insurance, travel and NBFC businesses.

TCS to use Germany as its base to become the top ten IT companies in Europe.

GSPC to invite final bids for 20-30% stake dilution in its KG basin offshore gas find.

Tata Steel plans to raise prices of some of its products due to rising demand.

Jain Irrigation will invest nearly Rs500mn to set up pipes and drip irrigation manufacturing facility in Tamil Nadu.

Singapore has agreed to allow SBI and ICICI Bank to launch full banking operations under the CECA with India.

The Tatas may sell their stake in tea plantation business and are in talks with overseas investors.

VSNL plans Rs10bn spend for WiMax out of its total capex budget of Rs25bn.

Tata Tea rejected Cadbury’s offer to acquire its global beverages business.

Indo Asian Fusegear is in talks with SEBs, corporations and utilities in North India to for taking up power distribution network on franchise basis.

IFC plans to invest in Karnataka Bank to support network expansion and asset growth.

ICICI Bank to raise US$11bn in the next 12 months to fund its expansion abroad and credit growth in India.

Bajaj Auto management will meet with the company Union to resolve ongoing dispute between workers and the management.

DLF plans to extend its retail footprint to tier II and tier III cities, indicates an investment of Rs25bn.

DLF plans to develop an integrated township spread over 9,178 acres on the outskirts of Bangalore at an investment of Rs600bn.

L&T has floated a new arm L&T Power Projects to foray into the power generation business.

BSNL has announced plans to offer CDMA mobile services in class-A cities, beginning with Kolkata.

BHEL will have to shell out additional Rs4bn for acquiring the ailing Bharat Heavy Plates and Vessels.

Two foreign shipping companies, Zim, Israel and Mediterranean Shipping Co, Geneva have indicated to pick up stake in ABG Heavy Industries.

The Government is in advanced stage of finalizing standard bid documents for inviting PPP in the transmission sector through tariff based competitive bidding.

Average room rates of star hotels may rise by 15-20% during the coming festive season.

The Government to invest Rs100bn in five new deep sea ports during the 11th Five year plan.

Cement manufacturers hike prices in North India by 2% wef October 1.

IMF projects 8% mid-term growth for India.

Entry level bike sales have been slowing on falling rural demand.

The railways is likely to extend its 30% discount for construction, cement and steel companies on empty flow direction for freight carriage till December.

Fund Activity:

FIIs were net buyers of Rs17.22bn (provisional) in the cash segment on Monday and the local institutions pulled out Rs9.3bn. In the F&O segment, foreign funds were net sellers of Rs12.99bn.

On Friday, FIIs were net buyers to the tune of Rs34.93bn in the cash segment. This figure includes a slew of big bulk deals. With this, the net investment by overseas investors in the past eight days has risen to US$3.6bn.

Major Bulk Deals:


Upper Circuit:

Binani Industries, RIIL, Tourism Finance, Bag Film, Raj Tele, Karutari Network, Swan Mills, Ruby Mills, DS Kulkarni, Jai Corp and Marksans.

Lower Circuit:

IID Forgings and Bombay Burmah.

Stock Picks

Reliance Energy
CMP: Rs 1,349.40
Target Price: NA

SSKI has upgraded Reliance Energy (REL) to outperformer on account of the expected value unlocking through the public offer of its 50% subsidiary, Reliance Power (RPL). Incidentally, the board of REL has already given its approval for the IPO of Reliance Power. RPL holds all the new power generation assets of REL such as Dadri (7,480 MW), Rosa (1,200 MW), Shahpur (4,000 MW) and Sasan UMPP (4,000 MW) among others.

The total power capacity being set up by RPL is around 25,000 MW. According to reports, the IPO is likely to raise around Rs 80-100 billion at a dilution of 15-20%, implying a valuation of Rs 400-667 billion for RPL. “We believe the IPO is positive for REL shareholders as it unlocks the value for its power assets. The capex of power assets is funded through the IPO funds as well”, said the report in a note to its clients.

Overall, we like REL’s strategy of backward integration of its distribution business by setting up generating capacity across various fuels such as gas, coal and hydel, it adds. Fifty per cent of RPL is held by REL and the balance 50% is held by ADAG.

Arvind Mills
CMP: Rs 63
Target Price: NA

Merrill Lynch has maintained a sell rating on Arvind Mills as it feels that the valuations are expensive and the near-term earnings outlook remains extremely weak. “We have cut our earnings estimates by 28-29% over FY’08-09 to factor in a deteriorating second half with costs set to escalate further. We have also factored in slower than expected growth from the garment exports business on the back of a rising rupee”, says the report.

Further, cotton prices are likely to rise at least 10-15% by the time the company runs out of low-cost inventory. Power cost is also set to shoot up November onwards when the gas contract for captive power generation expires. A hardening rupee is making matters worse, with the company having to put on hold its jeans capacity expansion, notes the report.

Meanwhile, the company has issued 50.6 million warrants to promoters, convertible into equity shares at Rs 52 per share over a period of 18 months. This will result in a 24% increase in share capital and the promoter holding will rise from 33.9% to 46.8%. “We assume the funds, aggregating to Rs 2.6 billion, will be utilised for debt repayments over FY’08-10. As a result, we estimate the gearing will fall to 1.2 times in FY’08 and 1 time in FY’09”, says the foreign brokerage.

Yes Bank
CMP: Rs 211.30
Target Price: Rs 230

Citi has initiated coverage on YES BANK with a buy rating due to the bank’s focused asset portfolio, apart from a strong treasury and advisory income businesses. The brokerage has set a price target of Rs 230 for the country’s youngest private sector bank.

According to the foreign brokerage, the key catalysts for the stock’s medium-term performance are likely to ease domestic interest rate and liquidity environment that will provide a respite to margins and bolster quarterly performance over the next two to three quarters, along with fresh capital and strong growth in investment banking fees.
“We expect YES BANK to grow significantly more than peers, in part, due to its smaller absolute size, with advances and total assets estimated to grow at 70% and 64% CAGR, respectively, over FY’08-10 estimates. We also estimate earnings to increase 56% and profits by 61%, driven by strong loan growth, continued momentum in fee incomes (51% CAGR), and relatively lower (though increasing) provisioning charges”, adds the report.

Ennore Foundries
CMP: Rs 181.60
Target Price: Rs 480

ICICI Securities has initiated coverage on Ennore Foundries with an 18-month price target of Rs 480, factoring in the high-growth trajectory and capacity expansion that, according to the brokerage, will make it the largest foundry in Asia.

“Ennore Foundries has embarked on an aggressive capex plan of Rs 3.5 billion over the next three years. This would treble its capacity to 210 TPA from 75 TPA in FY’07. Post completion of its capex, EFL would emerge as the largest foundry in Asia”, notes the report. Meanwhile, the company staged a smart turnaround FY’04 onwards by registering a 29.8% revenue CAGR and 430 basis points EBITDA margin improvement over FY’04-07.

“We believe the company will be on a high-growth trajectory through FY’08-11 (estimates), clocking in 34.8% revenue CAGR and 73.4% recurring net profit CAGR after a subdued FY’08 due to high depreciation and interest charges”, says the report. The company is also aggressively exploring inorganic growth avenue for expanding global footprint.

IPO market hots up

With sub-prime jitters allayed to some extent, the IPO market is once again hotting up. Most of the IPOs in the grey market that are open for subscription or have been scheduled for listing in the coming weeks are trading at a 30-50% premium in the grey market. The announcement of the Reliance Power IPO has only infused further buoyancy to the primary market.

The remaining quarter could see further action as many infrastructure, energy and power companies are slated to hit the market.

Issues like Koutons Retail, Consolidated Construction, Dhanush Technologies, Saamya Biotech, Kaveri Seeds, Supreme Infra, among others, are all trading at a significant premium to their offer price as per grey market sources. IPOs like that of Power Grid are further expected to generate good returns for retail investors. Going by the current grey market premiums, each share will fetch a premium of about Rs 35. Thus, gaining roughly Rs 10,000 excluding the borrowing cost.

Experts say while pricing the issue, usually 20-25% listing gains are set aside for investors. However, when markets fall, this premium shrinks and many a times the issue becomes unattractive for subscription. Bankers are now trying to leave more on the table, keeping in mind the volatile market conditions.

Sub-prime concerns had taken a toll on some issues slated to hit the markets during those months. Typically, when markets nosedive, listing returns diminish significantly, even if there is enough money left on the table for the investor. Public issue mop-up by Indian companies has gone up during September, with realisations of around Rs 4,000 crore, compared with just about Rs 665 crore in August.

This was mainly because markets did not perform well in August. The mobilisation in September is also significantly higher than about Rs 882 crore raised in the year-ago period, as per Prime Database.

“There is a large pipeline of issues in the coming months. If global markets see a downturn, the issues that have already closed for subscription could see some decline in the grey market premium,” says a merchant banker.

Sterlite Industries, Mahindra and Mahindra

Sterlite Industries, Mahindra and Mahindra

Daily Technicals, Futures - Oct 3 2007

Daily Technicals, Futures - Oct 3 2007

Gold and silver prices slip

Gold and silver prices drop as dollar strengthens and crude weakens

Gold and silver prices dropped today at New York. The drop for gold prices was the highest since August, 2007. A drop in crude oil and a partial strengthening of the dollar against other currencies hurt gold's appeal as an inflation hedge.

In recent days, the weakening of dollar had continued to affect the price of the metal. Investor sentiments were boosted by the fact that gold and silver were alternate sources of good investment in the face of declining dollar and rising energy prices. Till last week, gold had rallied six straight weeks to the highest in 27 years as the dollar tumbled to a record against the euro.

Gold for December delivery fell $17.80 (2.4%) to close at $736.3 an ounce on the New York Mercantile Exchange today, 2 October 2007, 2007. The contract had touched a low of $730.8 during the day but rebounded back. Yesterday, gold had climbed to an intraday high of $755.7. This was the highest intra day price seen since the last 28 years.

Silver futures for December delivery dropped 40.5 cents (2.9%) to $13.45 an ounce. The metal has climbed 4% this year.

Gold prices have jumped 15% during the third quarter and it is the most since 1999. The yellow metal has climbed 15% this year.

The U.S. currency today rose after touching all-time lows in the previous eight sessions. The currency ignored a couple of weak economic reports. The Dollar Index, which tracks the performance of the dollar against a basket of other currencies, moved up by 0.5% to 78.28. Previous to today, dollar had dropped more than 7% against the euro this year. Crude prices continued to trade below $80/barrel.

As per Nymex data on last Friday, Gold warehouse inventories rose by 79,316 troy ounces to stand at 7.1 million troy ounces but Silver supplies fell to 132.6 million troy ounces, down 1.4 million troy ounces.