3i Infotech Ltd
Friday, October 05, 2007
Shares of Power Grid Corporation Ltd. (PGCIL) more than doubled as the mini navratna PSU in the power sector made a spectacular debut on the stock market. The stock closed at Rs100.65 on the BSE as against the issue price of Rs52. It touched a high of Rs109.40 and a low of Rs85. The scrip opened at Rs85. Traded volume on the counter surged to 99.7mn shares. The volume of trading was much higher on the NSE. The Initial Public Offering (IPO) of PGCIL was heavily subscribed by all class of investors. PGCIL's public issue attracted US$30bn (over Rs1.2 trillion) in overseas subscriptions. As margin money alone, the issue brought in about US$3bn in forex into the country. The issue got subscribed nearly 65 times overall. The company raised Rs29bn at the upper end of the price band of Rs44-52 per share. The PGCIL issue comprised a fresh issue of up to 382,621,930 shares by the company and an Offer For Sale of up to 191,310,965 shares by the Government. The issue constituted about 13.64% of the fully diluted post- issue capital of PGCIL. After the issue, the Government will continue to hold 86.36% of the diluted post-Issue paid-up capital of the company. The net proceeds of the fresh issue will be utilized for 15 identified transmission projects. The estimated cost of these projects as on July 31, 2007 is approximately Rs127bn.
Foreign institutional investors (FIIs) were net buyers of Rs 948.06 crore (provisional) today, according to data released by BSE.
While FIIs made gross purchases of Rs 4,557.73 crore, gross sales totalled Rs 3,609.67 crore.
Domestic institutional investors (DIIs) were net sellers of Rs 201.61 crore today. While DIIs made gross purchases of Rs 1,739.66 crore, gross sales totalled Rs 1,941.27 crore.
FIIs were net buyers of Rs 575 crore on Thursday, October 4, according to data released by Sebi today. While FIIs made gross purchases of Rs 4,403.80 crore, gross sales totalled Rs 3,828.80 crore.
Mutual funds (MFs) were net sellers of Rs 532.50 crore on Thursday. MFs made purchases of Rs 590.10 crore and sales of Rs 1,122.60 crore.
Market had one more week of great rally. Huge liquidity inflow continued the rally in index heavyweights. It was just last week that Sensex touched 17k and today it was just at kissing distance from 18k but missed it. Globally too markets have overcome the subprime and recession worries. Clearly, two events consisting of UKs guarantee for Northern Rock and the large Fed cut had offset worries of a pending recesson. We believe that there is at least 4 - 5 months to live on this hope.. post which there will more clarity. The market also prices in the possibility that demand in Asia will be the engine of growth. Thus money flows have been strongly flowing into India which along with China and thats the reason to do well.
This was also the great week for Ambani brothers. Mukesh?s Reliance Ind and Anil?s Reliance energy were the stocks of the week. Reliance Energy is set to launch an IPO for the Power projects and that valuation had the Reliance Energy stock rerated. Reliance made a new high kissing 2500. Thats a huge move for the Sensex heavyweight.
The Oil index also coupled up. Capital goods index was another index mover with Larsen up 10% and ABB up 6%. Sensex gained 2.5% this week. Nifty up was 3%. Banking index however witnessed profit booking with SBI shedding 5%.
There were hopes that CRR/SLR may be cut. In one on our note earlier note we had argued that this cut is certainly not on cards.. given the flush of liquidity. RBI has been intervening. We believed that an excuse is building up for a rate cut and that is in a way to soften the rupee. This we believe will not happen before October 30th. The banks scaled highs on hopes of rate cuts last week. We would be surprised if the cut did happen earlier than October 30th. However on Thursday Govt. announced its intention to increase the ceiling on the MSS bonds (Market stabilisation bonds) which was in line with our thinking. The Auto monthly numbers?were not good enough to worth a discussion. All eyes are on October whether Bajaj can break out of that rut. whether Maruti can sustain its growth and whether the festival demand will pick. Of course its also the results season.
The Cement was one sector which saw strength amidst all negatives. In the strong demand sceanrio many companies increased 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. 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 flooding. All the cement companies will report good numbers Valuations is where the worries are. We are positive on Kesoram Ind, Shree Cement and Madras Cement. Look for dips for investment opportunities.
We had a research note this week on Esab India and another one on SpiceJet. Esab is where there has been a wow call where the call captured the gains. This company manufactres welding equipment and consumables. The parent Charter Plc has increased stake through an open offer to over 55% from 37% and that a price higher than market price. We believe that its a good reason to be bullish.. and ofcourse there is much more than simply that which you will get when you read the report.
Spice Jet is a call which we booked this week with over 20% gains in a matter of 3 weeks. Its certainly good returns. However these are hopeful times for the airlines. The Industry has faced consolidation and thats a good reason to see Spicejet do better. The high crude prices is the negative..There are lots of hopes on this quarter. The stock is likely to see strength.
We had a research note on Allcargo global. Here we have a skeptical view.. and the reason is that the acquisiton of the global business of Eculine is unlikely to deliver much efficiency in the near term. Also the impendig merger of a promoter owned company will weigh on the stock till the merger ratio is indicated.
And there were more broker raps too on many upgrades and downgrades.. by large broking houses. !
Technically Speaking: Sesnex has taken support at the trending upline and thats at 17720. Should see some bounce there. The near supports are far and the markets are bit in the overbought zone. Worries to be seen only if Sensex breaks 17230 . The trend is up.
Fundamentally speaking: Vauations may appear expensive.. but it seems that the risk profile of India has been lowered and that because there is a domestic consumton economy. This is coupled with a scenario where rupee is getting stronger and flows continue to be strong. Thats driving up stocks and largely heavyweights. Next week will mark the beginning of the results season for September quarter. Normally the large cap stocks temper post the numbers.. but we believe that the mid caps will perform this time. 18000 for the Sensex is now only a formality and a matter of academics.. but fundamentally, these gains we believe would trickle down to the mid caps.
After slipping around 70 points in yesterday's session, the market witnessed a strong relief rally in early trades led by across-the-board buying. However, the Sensex witnessed widespread selling as traders tried to book profits by mid morning trades, and the index touched the early low of 17,731. While the market fluctuated sharply thereafter, a firm bullish sentiment came in noon trades as strong buying in heavyweights, capital goods, oil and tech stocks spurred the index to an all-time high of 17,979. But, another round of selling towards the close in capital goods, banking and metal stocks saw the Sensex touch the day's low of 17,709. The Sensex gyrated 270 points during intra-day trades and finally ended the session with a marginal loss of four points at 17,773, whereas the Nifty slipped by 23 points at 5,186.
The market breadth was extremely negative. Of the 2,821 stocks traded on the Bombay Stock Exchange (BSE) 1,825 stocks declined, 9403 stocks advanced and 56 stocks ended unchanged. With the exception of the BSE CG Index, the BSE Oil & Gas Index and the BSE Teck Index, all the other sectoral indices were down around 0.5-2% each. The BSE Bankex Index, the BSE CD Index and the BSE PSU Index lost over 2% each while the BSE FMCG Index, the BSE Metal Index and the BSE Realty Index declined by more than 1% each.
Selling was rampant in several index heavyweight stocks. NTPC triggered a major sell-off in the market and tumbled by 5.28% at Rs214. Among the other major losers, Hindalco dropped 3.70% at Rs169, Tata Steel declined by3.68% at Rs833, ITC lost 3.27% at Rs179, ACC shed 3.11% at Rs1,177, Tata Motors slumped by 2.85% at Rs776, ICICI Bank slipped by 2.31% at Rs1,037 and Reliance Energy dipped by 2.08% at Rs1,447. However, L&T managed to report gains and jumped by 6.66% at Rs3,089, Bharti Airtel advanced 3.32% at Rs993, BHEL added 2.96% at Rs2,154 and Reliance Industries gained 2.53% at Rs2,484.
Over 9.97 crore Power Grid Corporation shares changed hands on the BSE followed by Ispat Industries (5.29 crore shares), Himachal Futuristic communication (1.61 crore shares), IFCI (1.49 crore shares) and Nagarjuna Fertilisers (1.49 crore shares).
Power Grid Corporation was the most actively traded counter on the BSE with a turnover of Rs1,030 crore followed by Reliance Industries (Rs308 crore), Reliance Communication (Rs247 crore), Reliance Energy (Rs213 crore) and L&T (Rs208 crore).
Indian markets may be see an upside in the coming sessions, with stock-specific action based on corporate results. Although certain amount of profit booking cannot be ruled out.
US stock futures shot up in opening trades on Friday, 5 October 2007 after government data showed the economy added more jobs than expected in September 2007, easing worries about the outlook for growth and profits. The US Labor Department said the economy added 110,000 jobs.
Factors that would predict market trend in the coming weeks include quarterly results from Infosys and the board meeting of DLF to consider overseas acqusitions and raising funds offshore on Thursday, 11 October 2007. Quarterly results from HDFC Bank and Reliance Industries annual shareholder meeting on Friday, 12 October 2007.
The market will be keenly watching developments on the political front as India's political crisis over a controversial nuclear deal with the United States could enter a decisive phase as the government and its communist allies hold talks to resolve their bitter row. A joint panel formed to try and end the face-off will make a fresh attempt to convince communist leaders who have threatened to end their support to Prime Minister Manmohan Singh's coalition if it pursues the historic pact.
Annual inflation, based on the wholesale price index (WPI), moved up 3.42% in the week ended 22 September 2007 from 3.23% in the week ended 15 September 2007. The rise in inflation is due to increase in prices of manufactured products, with a 63.75% weight in WPI. Food products like salt and oil became dearer in the week.
Foreign institutional investors (FIIs) bought shares worth a net Rs 575 crore on Thursday, 4 October 2007, compared to their buying of Rs 3,161.50 crore on 3 October 2007. FII inflow of Rs 575 crore on 4 October 2007 was a result of gross purchases of Rs 4,403.80 crore and gross sales Rs 3,828.80 crore.
Indian markets seem to have wearied after 11 sessions of bull run starting from 18 September 2007. The market was first breached on Thursday, 4 October 2007 when a combination of profit-booking and slackness in global markets acted against the market uptrend. But bears were denied a convincing win in the weak ended on Friday, 5 October 2007 where the broad indices closed flat after a volatile trading session.
In the week ended Friday, 5 October 2007 Indian shares slid from their record high to close down just 0.02%, led lower by ICICI Bank. Oil & gas and capital goods shares were the major gainers. The benchmark BSE 30-share index edged down 3.78 points to end at 17,773.36, after rising to a record high of 17,979.18 in afternoon trade, with 23 stocks declining. The 50-share NSE index was down 0.44% at 5,185.85.
The BSE Sensex has risen 2.8% in a week. The Sensex hit an all-time high of 17,953.07 on Wednesday, 3 October 2007. Its 11-day rally was its longest run of consecutive gains in four years. The index is up 27.05% from a three-month closing low on 21 August 2007.
The S&P CNX Nifty has gained 3.27% in the week to. It hit an all time high of 5261.35 on Wednesday, 3 October 2007.
The BSE Mid-cap index has moved up 0.84% to 7,485.51, while the BSE Small-cap index rose 0.02% to 9,101.87 in a week. Both these indices under-performed the Sensex.
The week began on Friday 28 September 2007 with the market continuing its winning streak on the strong rollover of the September 2007 futures to October 2007 futures on the previous day boosting trading. The Sensex ended up 140.54 points, or 0.82%, to 17,291.10. The S&P CNX Nifty had settled higher 20.80 points, or 0.42%, to 5,021.35.
On Monday, 1 October 2007, 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 during the closing hours. On that day, the Sensex ended up 37.52 points, or 0.22%, to a fresh closing high of 17,328.62. The broader S&P CNX Nifty scored over the Sensex, ending up 47.6 points, or 0.95%, to a fresh closing high of 5,068.95.
On Wednesday, 3 October 2007, the market had surged amid volatile trade, with both the broad market indices, Sensex and Nifty, striking all-time highs. The Sensex closed up 518.42 points, or 2.99%, to 17,847.04, an all-time closing high. The Nifty was up 141.85 points, or 2.8%, to 5,210.80, an all-time closing high.
On Thursday,4 October 2007, the Sensex settled 0.39% , or 69.90 points, lower to 17,777.14, snapping eleven straight days of gains, led by losses in ICICI Bank and Housing Development Finance Corporation. The 50-share Nifty closed 0.04% down to 5,208.65 points. Banks shares fell on expectation the central bank will raise the CRR by 25 bps. The RBI meets on 30 October 2007 for a mid-term review of the monetary policy. But the market expects there could be action on the CRR before that.
ICICI Bank lost 2.48% to Rs 1036.80 in a week. The stock declined on fears that the central bank may raise cash reserve ratio for banks to remove excess liquidity from the money markets. ICICI bank reportedly plans to raise $11 billion overseas in the next 12 months to fund its expansion abroad and credit growth in India. ICICI Bank's target to raise funds totals $13 billion in the next 12 months, including $2 billion of bonds it sold on 26 September 2007. It will raise the money through loans, bonds, shares and overseas deposits.
State Bank of India (SBI) slumped 4.48% to Rs 1863.25 in the week. The bank is considering shelving its planned Rs 8000-crore to Rs 12000-crore rights issue, following a slowdown in credit growth. SBI was planning to boost its capital requirement to fund credit growth and its capital adequacy ratio, but slowing credit growth would free up a significant amount of capital and, therefore, not require raising further capital. The bank paid Rs 1054-crore advance tax in the second quarter of the year ending March 2008, from a year earlier.
Reliance Energy (REL) gained 20.05% to Rs 1477.15 in the week. Reliance Power, the subsidiary of REL, proposes to sell 130 crore shares with a face value of Rs 2 each in its IPO. The company filed its Draft Red Herring Prospectus with SEBI on Wednesday, 3 October 2007. The issue will constitute 11.5% of the company's equity capital. It includes promoters' contribution of 16-crore equity shares to be allotted at the IPO price. The remaining 114-crore shares will constitute the net issue to the public.
Tata Steel fell 2.05% to Rs 832.90 in the week. The company raised prices of rebar, a benchmark long product, for immediate delivery by as much as 2%, or Rs 600 ($15) a tonne to about Rs 26,600, from 4 October 2007. Other Indian steel makers, too, raised prices as demand increases in China and India. On Monday, 1 October 2007, state-run steel firm Steel Authority of India (Sail) had raised prices of its products by Rs 500-Rs 800 per tonne in line with rising input costs. Tata Steel paid Rs 445-crore advance tax in the second quarter from a year earlier. Sail paid Rs 900-crore advance tax in the second quarter from a year earlier.
Reliance Industries soared 8.17% to Rs 2483.90 in a week. The company has reportedly ended the services of about 400 franchisees for its planned retail business in the eastern state of West Bengal. The company also cancelled its retail plans in Orissa because of protests from small traders. RIL paid Rs 649 crore advance tax in the second quarter from a year earlier.
Maruti Suzuki grew 3.52% to Rs 1034.70 in a week. The Indian government has approved Maruti Suzuki's joint venture plan with Japan's Futaba Industrial Corporation for manufacturing auto parts. Futaba will hold a 51% stake for an initial investment of Rs 45.9 crore.
Oil and Natural Gas Corporation (ONGC) went up 0.85% to Rs 966.05 in the week. ONGC will spend Rs 5713 crore on the second phase of the redevelopment of a key field off India's west coast. The redevelopment will help ONGC's Mumbai High South field to produce 22 million tonnes of incremental oil. The company paid Rs 2401-crore advance tax in the second quarter from a year earlier.
The BSE IT index rose 2.59% to 4,740.27 this week despite the fact that rupee rose to its strongest level against the dollar since April 1998. The software companies earn nearly 60% of the revenue from the United States.
The market recovered from its lower levels to end flat in the end trade amid volatility. The market breadth was negative. The mid- cap and small-cap indices declined further. Banking ,metal and realty stocks ended with losses. IT stocks slipped further on rupee concerns. Asian markets ended mixed, while European markets were trading up. Reliance Industries extended gains.
After galloping in mid-afternoon trade, propelling the Sensex to its all-time high, the market had slipped in the red during end trade to hit an intra-day low. Reliance Industries extended gains.
After opening on a positive tone, the market had remained range bound. In mid-afternoon trade, the market surfed in the positive and negative zones. Extending gains, it had hit a new intra-day high in mid-morning trade.
The BSE 30-share Sensex ended down 3.78 points, or 0.02%, to 17,773.36. It had opened with a gap of 54.54 points at 17,779.22 . The Sensex touched an all-time high of 17979.18 in midafernoon trade and a low of 17,708.80 in end trade.
The S&P CNX Nifty closed down 22.8 points, or 0.44%, to 5,185.85. It had hit a high of 5,248.55 in mid afternoon trade, and a low of 5,164.50 in end trade.
Of the 30 shares of the Sensex, seven had moved up, while the remaining were trading down. The market breadth was weak on BSE: 900 scrips had advanced, 1,834 declined, while 348 remained unchanged.
The BSE Mid-Cap index was down 90.76 points, or 1.2%, to 7,485.51 underperforming the Sensex,. The BSE Small-Cap index was down 40.05 points, or 0.44%, to 9,101.87, underperforming the Sensex.
Sectoral indices on BSE displayed mixed trend. The BSE Realty index (down 1.73% to 9,631.36) and the BSE IT Index (down 0.62% at 4,740.27) underperformed the Sensex.
The BSE TecK index (up 0.34% to 3,900.88), the BSE Oil and Gas Index (up 1.09% at 10,190.88), and the BSE Capital Goods Index (up 3.21% at 15,742.79) outperformed the Sensex.
Nifty F&O 25 October contract traded at 5,172, a discount of 13.85 points, or 0.26%, to the spot price of 5,185.85.
The NSE F&O segment clocked a turnover of Rs 64,188.48 crore today, 5 October 2007.
India's wholesale price index (WPI) rose 3.42 % in the 12 months to 22 September 2007, higher than the previous week's 3.23 %, due to a rise in manufactured product prices, data released today, 5 October 2007, showed. Banking stocks declined as WPI was more than expected. SBI (down 2.31% to Rs 1,863.25), ICICI Bank (down 2.31% to Rs 1,036.80) and HDFC Bank (down 1.59% to Rs 1,400.45) edged lower. HDFC shed 1.59% to Rs 2,455.05.
Reliance Communications (up 1.62% to Rs 644.75) and Bharti Airtel (up 3.32% to Rs 993.05) were among the major gainers in the Sensex pack.
NTPC (down 5.28% to Rs 214.45 and the top loser from the Sensex pack), Hindalco Industries (down 3.7% to Rs 169.20), Tata Steel (down 3.68% to Rs 832.90) and ITC (down 3.27% to Rs 178.75) and ACC (down 3.11% to Rs 1,176.60) were the major losers from the Sensex pack.
IT bigwigs declined as the rupee gained further. Infosys (down 0.27% to Rs 1,989.65), TCS (down 0.78% to Rs 1,070.20), Wipro (down 0.03% to Rs 461.15) and Satyam Computer Services (down 1.33% to Rs 444.45) were weak.
The BSE Capital Goods index was the major gainer from the sectoral indices. L&T (up 6.66% to Rs 3,089.25, hit an all-time high of Rs 3,197.50 today and was the top gainer from the Sensex pack) and Bhel (up 2.96% to Rs 2,153.55 , hit an all-time high of Rs 2,229 today) and Suzlon Energy (up 0.75% to Rs 1,651.55) edged higher.
The largest private sector company and oil refiner Reliance Industries rose 2.53% to Rs 2,483.90. It touched an all-time high of Rs 2,539 today on reports it may join state-run firms to set up a Rs 6000-crore petrochemicals complex in Visakapatnam.
Power transmission firm Power Grid Corporation of India ended at Rs 100.65 on BSE on its debut, a premium of 93.56% over the IPO price of Rs 52.
Hexaware Technologies was down 0.16% to Rs 121.10 on BSE after securing a large order from a leading German financial institution to upgrade its technology.
DLF was declined 1.24% to Rs 851.70 on reports that it is in talks with private equity firms and investment banks to raise Rs 2000 crore.
Exide Industries moved up 0.45% to Rs 66.80 after it said it would enter the lead smelting and recycling business to reduce dependence on import of lead.
Lanco Infratech declined 3.42% to Rs 417.85 on BSE even after bagging a Rs 7.30-crore order from Tirupati Tirumala Devasthanams, Tirupati, for constructing a university.
Bayer CropScience surged 2.79% to Rs 300.55 on reports that parent Bayer is keen to acquire full control of the company.
i-flex Solutions closed down 0.96% to Rs 1,895.40 on BSE after increasing its stake to 100% in Castek Software.
Parsvnath Developers traded up 0.90% to Rs 375 at 14:03 IST on reports that global financial investors Lehman Brothers and Morgan Stanley may invest in the company’s special economic zones projects.
Hind Rectifiers had spurted 5.16% to Rs 184 at 15:36 IST on BSE after it signed a technical collaboration agreement with Infineon Technologies AG, Germany, for manufacturing a prime stack.
Refex Refrigerants had jumped 3.65% to Rs 177.20 on receiving a special import licence for importing 2,000 tonnes of hydrochlorofluorocarbon-based refrigerants from the Indian government.
Petron Engineering Construction had climbed up 3.78% to Rs 284, after it received a Rs 1.33-crore order from Vedanta Alumina for installation of anode, grouping and cleaning system for its aluminium smelter project.
Among the side counters, Phoenix International (up 19.83% to Rs 20.85) Tata Sponge Iron (up 19.23% to Rs 233.45), Shree Ram Mills (up 19.44% to Rs 427.10), and OCL India (up 19.71% to Rs 191.95) had advanced and were the major gainers.
Solectrun Centum (down 21.04% to Rs 220.10) and Ras Resorts (down 14.45% to Rs 37) and Almondz Capital (down 12.02% to Rs 35.15) were the major losers.
Asian markets, which opened before the Indian markets, were mixed today. Taiwan's Taiwan Weighted (down 0.11% to 9,617.26) and Japan's Nikkei (down 0.16% at 17,065.04) were in red. Hong Kong’s Hang Seng (up 3.18% to 27,831.52) and Singapore's Straits Times (up 1.03% to 3,822.62) were in positive territory.
Most of the European markets were trading in green. These included France’s CAC (up 0.04% to 5,806.66), Germany’s DAX (up 0.38% to 7,975.76) and UK’s FTSE 100 (up 0.23% to 6,562.80).
The market snapped its 10-day winning streak on 4 October 2007 as the Sensex ended down 69.90 points, or 0.39%, to 17,777.14 points. The S&P CNX Nifty closed lower 2.15 points, or 0.04%, to 5,208.65. It had touched a low of 5,126.05 in mid-afternoon trade.
Till then, the market had been on a roll, with the Sensex hitting a record high in the trading sessions from 19 September 2007 to 3 October 2007. Heavy FII buying and hopes of a further cut in interest rates by the US Federal Reserve at its next policy meeting on 30-31 October 2007 had boosted the bourses.
From a low of 13,989.11 on 21 August 2007, the Sensex has galloped a whopping 3,857.93 points, or 27.57%, to 17,847.04 on Wednesday, 3 October 2007.
Excess liquidity in the economy prompted the Reserve Bank of India to intervene vigorously in the money market through ‘reverse repo’ (in which the RBI sells liquid money market instruments with the promise of buying it back the next working day) auctions on Thursday.
The resultant mop up — in excess of Rs 50,000 crore — made it an intervention of that order for the second day running.
Incidentally, successive intervention in the first three days of October saw the central bank pull out a net sum of Rs 23,480 crore from the system.
On October 1, the RBI’s intervention resulted in Rs 30,400 crore being sucked out of the system on a two-day ‘repo’ (returnable on Wednesday as the previous day was a public holiday). This was followed by an intervention to the tune of Rs 53,520 crore on October 3 making the net intervention being worth Rs 19,520 crore.
On Thursday, the RBI auctioned securities worth Rs 57,480 crore thus pulling out a further sum of Rs 3,960 crore from the market making the cumulative effect of its intervention worth Rs 23,480 crore in reduced liquidity and the meter is still running.
This is the highest since August this year, said bank officials. Market players attribute this glut to the central bank’s intervention in the foreign exchange market to arrest further appreciation of the rupee.
According to Mr Abheek Barua, Chief Economist, HDFC Bank, “Even if the seasonal outflow (advance tax outflow) in the second week of September was coming back into the system, the amount under reverse repo should not have been so high. The huge amount is entirely because of the RBI’s intervention in the forex market.”
Inflation may rise
The surplus (overhang) liquidity could push up inflation, which may touch 6 per cent in the next two weeks, said Dr G.C. Nath, Vice-President and Chief Economist, CCIL.
“There could be a sharp rise in inflation figures in two weeks because consumer prices are still high. Also, the advantage of base effect will not be there,” he said.
No other option
Most bankers and dealers agree that there is no other option but to increase the MSS (Market Stabilisation Scheme) limit, as the RBI has reached 97 per cent of the sanctioned limit. The current ceiling stands at Rs 1,50,000 crore and the outstanding amount is Rs 1,44,000 crore.
“The question is how much the RBI is going to increase the limit. If the amount is increased, it will mean that the Government will have to pay more in terms of interest rates. It is revenue expenditure for the Government. Though Treasury-bills, under MSS, offer higher yield than Liquidity Adjustment Facility (LAF), the RBI has no option but to raise the MSS limit,” Dr Nath said.
Last year the cost to Government was about Rs 3,700 crore. This year it will be over Rs 10,000 crore with the current MSS limit. If the limit is increased, it could go up to Rs 15,000 crore, he added.
In a development late in the evening, the RBI said that the Government is hiking the ceiling under MSS to Rs 2,00,000 crore. It also said the limit would be reviewed on reaching a threshold of Rs 1,85,000 crore.
The central bank said it would, “under the existing arrangements, subject to variations in liquidity, announce every Friday the auctions under the MSS, covering the Treasury-bills and dated securities, if any, for the succeeding week.”
Another option with RBI is to hike the Cash Reserve Ratio (CRR) from the current level of 7 per cent. Despite the liquidity surge, banks have not seen credit offtake to the extent they would have liked to see. Also, deposit rates continue to be high, at an average of 9 per cent. This could see banks’ margins coming under pressure.
At a recent press briefing, Dr A.K. Khandelwal, Chairman and Managing Director of Bank of Baroda, said that deposit rates needed to soften. “Unless, deposit rates soften, lending rates won’t come down,” he said.
He added: “Despite the high liquidity, the deposit rates continue to be high. Banks want to sustain their growth momentum and expand their balances sheets, hence, they are not cutting deposit rates.”
Meanwhile, speaking to reporters after a bankers’ meeting with the RBI Governor on Thursday, Mr O.P. Bhatt, Chairman, State Bank of India, said if cash reserve ratio was hiked, “The bank would take a combination of measures – it would absorb whatever it can and pass on the rest to its customers.” He said they did not press the RBI for an interest rate cut at their meeting.
He said that the bank would take a decision on lending rate cuts at its next Asset Liability Committee meeting.
A proposal before SEBI to consider Dutch auction as the method to sell shares of companies in an initial public offering (IPO) has the potential to revolutionise the way public issues are priced. Famously used in the Google IPO, investors have to indicate the price and the number of shares bid for. The results are then tabulated in descending order of prices until the number of shares on offer is covered.
The method will give investors a greater ability to influence the price at which the stock is offered, while taking away the discretion of merchant bankers and the company to do so. At the same time, the method could encourage very aggressive bidding in some public offers, particularly where demand is very strong. Nevertheless, the Dutch auction method can lead to a more efficient price discovery than under the existing price-band based book-building method. Conversely, for retail investors the opportunity to acquire stocks at a discount to the market price would disappear.
Also, the scope to flip the shares immediately on listing, and thus make a killing, would be limited. This would especially be so in the case of companies that have very attractive growth potential, as the demand for the shares of such firms would see the securities priced closer to the market price. That would lower the first-day bounce, the rise in share price immediately upon listing. Consequently, the Dutch auction method may see participation of long-term investors in public offerings.
While the auction method has its merits, frequent changes to the IPO guidelines is not desirable. Also this method is clearly more appropriate for an IPO rather than a follow-on public offer. Nor would we recommend a complete switchover to the new method in the near term. Instead, the regulator should allow companies the option to choose between the auction and the current price-band based book-building. After adequate experience is gained with auction-based IPO and glitches, if any, in the guidelines are identified and addressed, a complete transition may be considered. Meanwhile, the regulator should move to treat qualified institutional bidders on par with other investors on matters such as revision of bids.
The market pared gains in late afternoon trade after the BSE 30-share Sensex hit an all-time high. The market breadth remained negative. The mid-cap and small-cap indices declined. Banking stocks were weak. IT stocks slipped further.Asian markets ended mixed, while European markets were trading up.
The market galloped in mid-afternoon trade, propelling the Sensex to its all-time high. Reliance Industries extended gains.
Remaining range bound in mid-afternoon trade, the market surfed in the positive and negative zones. Extending gains, the market had hit a new intra-day high in mid-morning trade.
At 15:57 IST, the Sensex was up 7 points, or 0.01%, to 17,954.15 in mid-afternoon trade. It opened with a gap of 54.54 points at 17,779.22 . The Sensex touched an all-time high of 17979.18 in mid-morning trade and a low of 17,731.14 in early afternoon trade.
The S&P CNX Nifty was down 21.8 points, or 0.42%, to 5,186.85. It had hit a high of 5,248.55 in mid-afternoon trade, and a low of 5,173.75 in early afternoon trade.
Of the 30 shares of the Sensex, seven had moved up, while the remaining were trading down. The market breadth was weak on BSE: 955 scrips had advanced, 1,760 declined, while 367 remained unchanged.
The BSE Mid-Cap index was down 85.13 points, or 1.12%, to 7,494.14 underperforming the Sensex,. The BSE Small-Cap index down 30.03 points, or 0.33%, to 9,111.89, underperforming the Sensex.
India's wholesale price index (WPI) rose 3.42 % in the 12 months to 22 September 2007, higher than previous week's 3.23 %, due to a rise in manufactured product prices, data released today, 5 October 2007, showed. Banking stocks declined as WPI was more than expected. SBI (down 1.86% to Rs 1,865), ICICI Bank (down 1.35% to Rs 1,047) and HDFC Bank (down 0.44% to Rs 1,398) edged lower. HDFC declined 1.71% to Rs 2,452.10.
Reliance Communications (up 2.13% to Rs 648) and Bharti Airtel (up 3.42% to Rs 994) were among the major gainers in the Sensex pack.
NTPC (down 4.37% to Rs 216.50 and the top loser from the Sensex pack), Hindalco Industries (down 2.55% to Rs 171.40), Tata Steel (down 2.77% to Rs 840.80) and ITC (down 3% to Rs 179.25) and ACC (down 2.58% to Rs 1,183) were the major losers from the Sensex pack.
IT bigwigs declined as the rupee gained further. Infosys (down 0.41% to Rs 1,988) ,TCS (down 0.8% to Rs 1,070), Wipro (down 0.55% to Rs 458.75) and Satyam Computer Services (down 0.94% to Rs 446.50) were weak.
The BSE Capital Goods index was the major gainer from the sectoral indices. L&T (up 6.62% to Rs 3,087.95, hitting an all-time high of Rs 3,197.50 today and the top gainer from Sensex pack), Bhel (up 3.03% to Rs 2,155 , hitting an all-time high of Rs 2,229 today) and Suzlon Energy (up 0.66% to Rs 1,650) advanced.
The largest private sector company and oil refiner Reliance Industries rose 2.79% to Rs 2,490.05. It touched an all-time high of Rs 2,539 today on reports it may join state-run firms to set up a Rs 6000-crore petrochemicals complex in Visakapatnam i n Andhra Pradesh.
Power transmission firm Power Grid Corporation of India was trading at Rs 101.40 on BSE on its debut, a premium of 94.71% over the IPO price of Rs 52.
Among the side counters, Phoenix International (up 19.83% to Rs 20.85) Tata Sponge Iron (up 20% to Rs 234.95), Artson Engineering (up 20% to Rs 57.35), and OCL India (up 20% to Rs 192.40) had advanced and were the major gainers.
Solectrun Centum (down 20.68% to Rs 221.10) and Ras Resorts (down 14.45% to Rs 37) were the major losers.
Asian markets, which opened before the Indian markets, were trading mixed today. Taiwan's Taiwan Weighted (down 0.11% to 9,617.26) and Japan's Nikkei (down 0.16% at 17,065.04) were in red. Hong Kong’s Hang Seng (up 3.18% to 27,831.52) and Singapore's Straits Times (up 1.03% to 3,822.62) were in positive territory.
Most of the European markets were trading in green. These included France’s CAC (down 0.03% to 5,802.88) edged lower. Germany’s DAX (up 0.14% to 7,956.30) and UK’s FTSE 100 (up 0.21% to 6,561.70).
American markets rose marginally on Thursday, 4 October 2007. The Dow Jones Industrial Average index ended up 6.26 points to 13,974.31 points and Nasdaq up 4.14 points to 2,733.57. US stocks barely rose on Thursday as investors shied away from making big bets before the release of the jobs data on Friday, 5 October 2007, to shed light on the economy and the outlook for interest rates. The American earnings season goes in full force in another one week.
Provisionally, as per NSE data, foreign institutional investors (FIIs) were net buyers of Rs 457.28-crore equities, while domestic institutional investors (DII) were net sellers of Rs 663.9-crore equities on Thursday, 4 October 2007.
The market snapped its 10-day winning streak on 4 October 2007 as the Sensex ended down 69.90 points, or 0.39%, to 17,777.14 points. The S&P CNX Nifty closed lower 2.15 points, or 0.04%, to 5,208.65. It had touched a low of 5,126.05 in mid-afternoon trade.
Till then, the market had been on a roll, with the Sensex hitting a record high in the trading sessions from 19 September 2007 to 3 October 2007. Heavy FII buying and hopes of a further cut in interest rates by the US Federal Reserve at its next policy meeting on 30-31 October 2007 had boosted the bourses.
From a low of 13,989.11 on 21 August 2007, the Sensex has galloped a whopping 3,857.93 points, or 27.57%, to 17,847.04 on Wednesday, 3 October 2007.
DoT allotted BSNL spectrum between March and July.
Tensions between private telecom players and the government ratcheted up a notch after it was discovered that state-owned Bharat Sanchar Nigam Ltd (BSNL) was given additional spectrum of up to 10 MHz for GSM technology services in over 16 circles even as private competitors have been waiting to be allotted spectrum by the Department of Telecommunications (DoT) since December 2006.
GSM operators say this is a clear violation of government assurances of a “level playing field” between private and state-owned operators on the question of allocation of spectrum, the radio frequencies that enable wireless communication.
The issue came to light a few days ago when BSNL issued a circular to its chief general managers in various circles saying the management had decided to use the additional spectrum commercially with immediate effect.
DoT granted the company additional spectrum between March and July this year.
The allocation covers circles which include Andhra Pradesh, Bihar, Assam, Chennai, Haryana, Kolkata, Karnataka, Kerala, Maharashtra, Tamil Nadu, eastern and western Uttar Pradesh amongst others.
In most of these circles, spectrum has been granted in the range of 2 to 3.8 MHz.
The issue was brought to the notice of Communications Minister A Raja by the GSM operators’ lobby, Cellular Operators Association of India (COAI), at a ministerial meet here yesterday.
Confirming the additional allocation, a top BSNL executive said: “There is nothing wrong in this; we have been given spectrum according to the guidelines.”
GSM operators, however, complain that many of them are yet to hear from DoT on their nine-month-old applications.
Companies like Aircel, Vodafone-Essar and Idea Cellular were collectively granted 22 universal access service licences (UASLs), which allows them to offer both GSM and CDMA technology services, in December 2006.
The spectrum issue has become even more serious with DoT having received over 300 applications for UASLs.
With players ranging from real estate (Omaxe, Unitech, Parsvnath), steel major like Ispat Industries and little-known IT companies in the race, much hinges on the defence ministry vacating 25 MHz of spectrum.
Anil Kashid, a farmer in Yedgoan, is just an hour’s drive away from Pune now that an excellent road network has been developed. He has a small tract of land where he grows fruit and vegetables. Over the past six months, he has been supplying his horticulture products to ITC for two Choupal Fresh stores in Pune. While working with ITC’s managers in the area, he has discovered that he is not dependent on just one crop and just one growing season for his livelihood. On a single patch of land, he can grow more than five types of vegetables. He has also invested in a wire-mesh so that he can grow veggies like cucumber and brinjal, essentially creepers.
Farmers like Kashid are part of the second phase of ITC’s e-choupal project. The first phase of the project consisted of sourcing grains like wheat, soya etc directly from farmers, but ITC has now turned to horticulture produce The company has entered this space directly because the grain sourcing business is facing an imminent problem of decreasing return to scale – it won’t be able to increase grain sourcing exponentially like it did in the first few years. S Sivakumar, chief executive, agribusiness, ITC Ltd, says, “We found that the bulk dry-grain sourcing could only be increased marginally once most of the area we wanted to reach was covered.
Hence, we decided incorporate horticulture and expand the scope of the project.” The project will begin with three pilots in Maharashtra, Andhra Pradesh and Chandigarh. The first phase marked a seven-year run of grain sourcing, a total of 1.5 million tonnes of wheat, soya and other grains in Madhya Pradesh and UP by benchmarking against the market and providing farmers a higher price than the local mandi.
More importantly, this phase of expansion would have a greater fit with ITC’s foods, exports and retail businesses. While most of the grain in the first phase was used by ITC in its then fledgling foods operations, three businesses will get the benefit of fruit and vegetables sourcing – foods, retail and exports. In foods, the Bingo brand of snackfood will require a huge quantum of potatoes, running into thousands of tonnes annually.
Choupal Fresh, the retail initiative which is present in all three states where ITC is piloting this project from, will receive a bulk of the fresh produce on a daily basis as will Big Bazaar and TruMart, which have entered into a sourcing contract with ITC. Besides this, ITC’s exports division will require both fresh and processed fruit procured from farmers.
So how will ITC go about this phase of e-choupal? The first three pilot clusters for the fresh project have been set up near Chandigarh, Pune and Chandigarh. The pilots have a distinct advantage over places like Mhow, where ITC set up one its early e-choupal projects, since they are much better equipped with basic infrastructure. Linkages with the three cities are very good; all of them have an excellent road network, leading to the villages nearby.
In and around Pune, for instance, ITC has set up a supply chain network that ensures that the two Choupal Fresh stores receive supplies twice a day, and warehousing is kept to a minimum. ITC’s trucks pick up nearly 15 tonnes of vegetables twice a day from hundreds of farmers in the region. As a result, Choupal Fresh, the retail store, gets vegetables that are harvested barely four hours ago at the farm. These are sold at a premium after ITC’s insight that customers might be willing to pay more for premium and fresh products.
Of the Rs 5,000 crore earmarked for the entire e-choupal project by ITC, Rs 1,000 crore will go into this phase. Most of the investments, according to Mr Sivakumar, will have to be in technological inputs to farmers, and a greater investment in cold-chain and storage compared to when ITC was just sourcing grains. The company is investing in bringing in more sanchalaks and samyojaks — the former a representative of the farmer and the latter a representative of the company.
For horticulture, it’s the samyojak who will play a dominant role since he would be the aggregator and also play a huge part in transportation. Currently the IT investments aren’t significant, partly because the project is yet to scale up but also because of lower connectivity costs compared to 2001 when e-choupal had first begun.
A big advantage that ITC would have from this phase is the higher output per hectare in horticulture. Soya harvests don’t exceed more than 1 tonne per hectare while wheat yields are 3-4 tonnes per hectare, but fruit and vegetables yield anywhere between 10-15 tonnes per hectare. So ITC’s realisations per hectare would also be much higher. Of the targeted 100,000 villages in which ITC wants to extend the e-choupal project, it’ll add another 40,000 villages in addition to the existing 40,000 villages that it has covered for grain sourcing. The company is attempting to keep the horticulture and grain sourcing as separate as possible.
But as the project scales up, there will be some overlap. ITC anticipates that nearly 10,000 villages will provide both grains and horticulture, thus covering a total of 70,000 villages, and a farmer population of nearly 4 million.
ITC’s managers work extensively with the farmers to improve agricultural practices beyond the traditional methods. For instance, ITC has educated farmers to reduce the gap between individual potato plants in a single row so that more seeds can be sown without hampering the crop. They’ve also provided farmers with new iron ploughs that decrease the space between two rows by 5-6 inches while the individual plants grow without hindrance.
Says Hemant Gaur, head of ITC’s horticulture sourcing, “These practices increase total yield from a single patch of land for the farmers, potentially running into a few tonnes per farm.” There will be some teething troubles initially considering the seasonality of fruit. Mr Sivakumar admitted that they would have to get some items from Bangalore to tide over the shortages in Hyderabad for the retail part of the business.
Market Grape Wine :
In House :
Nifty at a supp of 5176 and 5125 with resis at 5235 and 5265
Intra day: Buy Escorts above 120.50 with a TGT of 129 and a SL of 117
Buy SBIN above 1906 with a TGT of 1970 and a SL of 1870
Positional calls: Buy Reliance with a TGT of 2600~2800 and a SL of 2390
Buy IGL with a TGT of 200 and a SL of 130
Out House :
Markets at a support of 17171 & 17371 levels with resistance at 17997 & 18077 levels .
Buy : RIL
Buy : Relcap & REL
Buy : HDIL & APIL bullet
Buy : Siemens bullet
Buy : JpHydro & RNRL
Buy : DLF , HCC & NagarConst
Buy : NTPC bullet
Buy : JpAsso
Buy : Redington & ORBIT
Dark Horse : Siemens ,GMrInfra , DLF , REL , APIL , HDIL , NTPC , RNRL & NTPC
Bullet for the Day : HDIL , APIL & REL with stop loss .
TGIF : Thank God Its Friday : Markets nearing 18k Mark Book half profit in all stocks
Indian market is likely to have a positive opening as the US market closed higher. On Thursday, the Indian markets ended lower as BSE Sensex slipped by 69.90 points to close at 17,777.14 while Nifty fell 2.15 points to close at 5,208.65. We expect the market to remain range bound during the trading session but the investors will be looking for a positive clue to book their positions.
On Thursday, the US market closed in positive territory. The Dow Jones Industrial Average (DJIA) improved 6.26 points to close at 13,974.31. The S&P 500 (SPX) index increased by 3.25 points to close at 1,542.84 and the NASDAQ Composite (RIXF) grew 4.14 points to close at 2,733.57.
Indian ADRs ended in green. In technology sector, Wipro grew by (1.57%) along with Patni computers by (1.05%), Satyam (0.98%) and Infosys by (0.83%). In banking sector, HDFC bank advanced by (0.90%) while ICICI bank slipped by (1.17%). MTNL and VSNL grew by (1.90%) and (0.43%) respectively.
The major stock markets in Asia are trading mixed. Hang Seng index gained 357.90 points to trade at 27,331.88. Japan''''s Nikkei is trading lower by 28.70 points at 17,063.79. Taiwan weighted slipped by 28.68 points to trade at 9,598.71. Seoul Composite is trading down by 12.57 points at 1,991.03.
Yesterday, the gross equity purchased was Rs8,194.50 (in crores) and the gross debt purchased was Rs91.30 (in crores). The gross equity sold was Rs5,033 (in crores), and the gross debt sold was Rs38.90 (in crores). The net investment of equity was Rs3161.50 (in crores) and the net debt investment was Rs52.40 (in crores).
Today, Nifty has support at 5,155 and resistance at 5,295 and BSE Sensex has support at 17,605 and resistance at 18,080.
The market bias may remain positive on strong fund buying into the local market and surging international indices. However, caution should be maintained on account of the prevalence of a intra-day volatility. Among the local indices. Among the local indices, the Nifty could test 5260 on the upside and may slip to 5130 on the downside. The Sensex has a likely support at 17650 and may face resistance at 18200.
US indices moved marginally up despite drop in factory order, rise in weekly jobless claims and jump in oil prices. The Dow Jones gained by six points at 13974, the Nasdaq advanced by four points at 2734.
The Nymex light crude oil for November series advanced by $1.50 at $81.44 a barrel. In the commodity space, the Comex gold for December delivery rose by $8.10 to settle at $736.30 an ounce.
Nifty (5209) Sup 5142 Res 5293
Buy Alstom Projects (873) SL 866 Target 889, 893
Buy Tata Steel (865) SL858 Target 877, 881
Buy VSNL (451) SL 446 Target 460, 463
Sell ITC (185) SL 188 Target 179, 176
Sell Hotel Leela (50) SL 53 Target 45, 44
When you doubt your power, you give power to your doubt.
No doubt power stocks will be in action yet again, as Power Grid Corporation of India makes its debut on the bourses today. The mini-ratna PSU major attracted huge response during its IPO, which was heavily subscribed by all class of investors. The company has set an issue price of Rs52. A premium of Rs30-40 is being talked about in the market.
But coming to the broader market, trading will continue to be volatile, as the signals emanating from the global markets are quite mixed. Plus, we have a whole host of events ahead of us, that could have a bearing on the market's direction going forward. A crucial meeting of the committee set up by the Government to sort out the differences with the Left parties over the Indo-US nuclear deal is taking place today. We also have meetings of both, the Federal Reserve and the RBI at the end of the month. Before that, we will have the quarterly earnings to deal with.
As a result, the market will remain choppy at least this month, though the bias remains positive. Avoid big-ticket purchases as of now unless one is prepared to hold on to the stock(s) for the long term. Short-term traders will face some difficulty amid high intra-day gyrations. Stay light cause Manic Mondays could give you the jitters.
What could add more sparkle to Power Grid debut is the fact that power generation shares like Reliance Energy, NTPC and Tata Power have been on a roll recently, on the back of announcement of a mega IPO by Reliance Power, a subsidiary of Reliance Energy. The Government appears aggressive on adding new generation capacity and these companies will power ahead. Other companies linked to the power sector like the power equipment manufacturers and turnkey contractors will also benefit from the Centre's continued thrust. So much so that UTI MF has relaunched its Petro Sector fund as UTI Energy Fund. So, watch out for some fireworks today, not only on the Power Grid counter but also in all stocks having some exposure to the red-hot sector.
Lanco Infratech has bagged an order worth Rs730mn from Tirupati Tirumala Devasthanams, Thirupati for Construction of Sri Venkateswara Vedic University at Alipiri, Tirupati.
Karnataka Bank's Board will meet today, to consider raising of capital through a preferential allotment and issue of Upper Tier 2 instruments through private placement. Separately, reports say that IFC, the private equity arm of World Bank, is likely to buy a 4-5% stake in the Mangalore-based bank.
Sinclairs Hotels' Board will meet on Oct. 11, to consider a preferential issue of shares and / or other instruments to promoters and strategic investors.
US stocks managed modest gains on Thursday, recovering from early declines, as investors remained cautious ahead of Friday's big monthly jobs report. Stocks had fallen in the morning as investors considered weak reports on the labor market and manufacturing sector. But the sentiment improved later in the day.
The Standard & Poor's 500 Index added 3 points or 0.2%, to 1,542.84. The Dow Jones Industrial Average increased 6 points to 13,974.31. The Nasdaq Composite Index gained 4 points, or 0.2%, to 2,733.57.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 5 to 3 on volume of 810mn shares. On the Nasdaq, advancers topped decliners 8 to 7 on volume of 1.33bn shares.
In currency trading, the dollar gained versus the euro after the interest rate decision. COMEX gold for December delivery rose $8.10 to settle at $743.80 an ounce. Treasury prices inched higher, lowering the yield on the 10-year note to 4.51% from 4.56% late on Wednesday.
Oil prices reversed course, turning higher. US light crude for November delivery rose $1.50 to settle at $81.44 a barrel on the New York Mercantile Exchange.
After the close, Research in Motion reported higher quarterly earnings and revenue that beat expectations and boosted its current-quarter profit forecast. However, its shares fell more than 7% in extended-hours trading owing to profit booking.
Alcoa said it will sell two of its divisions and that it will restructure another one. Shares of the Dow component slipped 1% in extended-hours trading.
European shares ended mostly higher, as gains in the banking sector offset weakness in the mining sector. The Bank of England and European Central Bank kept interest rates on hold, as expected.
The pan-European Dow Jones Stoxx 600 index advanced 0.2% to 384.49. The U.K.'s FTSE 100 closed up 0.2% at 6,547.90. The French CAC-40 finished virtually flat at 5,804.39, and the German DAX 30 dipped 0.1% to 7,944.99.
In the emerging markets, the Bovespa in Brazil rose 0.5% to 60,407 while the IPC index in Mexico was down 0.3% at 31,078. The RTS index in Russia fell 0.1% to 2090 and the ISE National-30 index in Turkey was up 1.4% at 69,599.
Asian markets were trading mixed this morning. The Nikkei in Tokyo was down 28 points at 17,063 while the Hang Seng in Hong Kong surged by 566 points to 27,504. The Straits Times in Singapore gained 13 points at 3797 and the Kospi in Seoul dropped 10 points to 1993.
Indian stocks market indices fell from all time highs as bears finally managed to stage a small come back. Markets snapped its longest winning streak in almost four years after index heavyweights like ICICI Bank, HDFC and ONGC witnessed selling pressure. Further, IT stocks were yet again under pressure after rupee appreciated to the strongest in more than nine years.
Despite, weak cues from the International markets, benchmark index managed to recoup almost 280 points towards the end on back of gains in the Metal and Capital Good stocks.
Finally, BSE 30-share benchmark Sensex ended 111 points lower to close at 17,735. NSE Nifty ended flat to close at 5,208.
Exide Industries edged higher by 0.7% to Rs67 after the company announced that they would invest Rs250mn in local Smelter. The scrip touched an intra-day high of Rs67 and a low of Rs65 and recorded volumes of over 2,00,000 shares on NSE.
EKC slipped by 1.8% to Rs242. The company announced that they have planned to sell shares worth Rs 1bn. The scrip touched an intra-day high of Rs251 and a low of Rs239 and recorded volumes of over 3,00,000 shares on NSE.
Ranbaxy marginally gained by 0.7% to Rs442 after the company declared they acquired approval to sell Clarithromycin for Oral Suspension. The scrip touched an intra-day high of Rs449 and a low of Rs436 and recorded volumes of over 16,00,000 shares on NSE.
I-Flex advanced by 1% to Rs1909 after the company announced that they would invest Rs100mn in I-Flex Processing Services. The scrip touched an intra-day high of Rs1947 and a low of Rs1880 and recorded volumes of over 68,000 shares on NSE.
Educomp Solutions slipped 2.1% to Rs2902. The company announced that they are in accord with Singapore’s Raffels Institution. The scrip touched an intra-day high of Rs2979 and a low of Rs2855 and recorded volumes of over 81,000 shares on NSE.
Banking stocks were on the receiving end on back of selling pressure in the index heavy weight, ICICI Bank, the scrip declined 1.7% to Rs1068, HDFC bank was down by 1% to Rs1409 and SBI edged lower by 0.3% to Rs1905. OBC Corp bank and Canara Bank were the major losers among the Mid-Cap stocks.
Capital Good stocks ended on a firm note. BHEL gained 1% to Rs2091, Siemens surged over 3.5% to Rs1423 and Punj Lloyd added 0.3% to Rs321.
IT stocks were under pressure after rupee rose to the strongest in more than nine years. Wipro was down by 1.8% to Rs462, Infosys edged lower by 0.3% to Rs1998 and NIIT Technology dropped over 8% to Rs135.
Metal stocks were shinning brightly. Frontline stock Tata Steel advanced 3% to Rs865, Bhushan Steel was up by 2% to Rs940, Jindal Steel surged by over 17% to Rs6291 and JSW Steel spurred by over 5% to Rs911.
Reliance Power plans to offer 5% to an overseas power utility or a private equity fund in addition to selling 10% through an IPO.
The DoT has allocates additional spectrum to BSNL for GSM mobile services in 17 circles.
DLF is in talks with private equity firms for raising Rs20bn.
Reliance Industries may join GAIL and HPCL to set up a mega 1mtpa petrochemical complex in Visakhapatnam.
Parsvnath Developers is in talks with global financial investors for divesting equity in its SEZ projects.
International Financial Corporation (IFC) is likely to pick up 4-5% in Karnataka Bank.
Tata Motors’ next generation versions of Indica, Indigo and Sumo will hit market in 2008.
JSW Energy close to acquiring coal mines in Australia and Indonesia.
Hindustan Motors has earmarked Rs2.95bn for upgrading its Uttarapara plant which makes the Ambassador.
The West Bengal Government has signed a MoA with Videocon Industries and Jai Balaji Industries for setting up steel and power capacities with investments worth Rs310bn.
Kingfisher Airlines expects to break-even by the first half of FY09.
GoAir has scaled down expansion plans and plan an IPO or stake sale upto 26% by 2009.
The RBI has increased the limit for bond issuances under MSS from Rs1,500bn to Rs2,000bn for the current fiscal.
The TRAI introduces a cap of Rs5 per pay channel in monthly cable bills for cable TV homes in non-CAS areas.
The RBI has asked banks not to dispose off NPAs at prices below the value of the securities available.
The Government may relax ECB norms for infrastructure sector.
Rainfall in June-September 2007 has been 5% above normal.
FIIs were net buyers of Rs4.57bn (provisional) in the cash segment on Thursday while the local institutions pulled out Rs6.64bn. In the F&O segment, foreign funds were net sellers at Rs19.55bn.
On Wednesday, FIIs were net buyers to the tune of Rs31.62bn in the cash segment. With this, the net investment by overseas investors in the past 10 days has touched US$4.87bn.
Major Bulk Deals:
HSBC Financial has bought Bihar Tubes and Nitco Tiles; Fidelity has purchased CESC while Reliance Capital has sold it; Merrill Lynch has picked up Parekh Aluminum; UBS has purchased Pioneer Investcorp; Sundaram MF has sold Spanco Telesystems; DSP Merrill Lynch has sold Sparsh BPO.
RIIL, Bag Films, AMD Metplast, Victoria Mills, Jai Corp, Dhanlakshmi Bank and IID Forgings.
Malu Paper, KEI Industries and Swan Mills.
What do these numbers mean ?
Read as - Scrip - Offer Price - Grey Market Premium
Power Grid Corporation 52 33 to 35
Dhanus Tech. 280 to 295 45 to 50
Koutons Retail 370 to 415 60 to 65
Consolidated Construction 510 150 to 160
Supreme Infra 95 to 108 50 to 55
Saamya Biotech 10 3 to 4
MAYTAS Infra 320 to 370 135 to 140
Circuit Systems (India) Ltd. 35 3 to 4
Reliance Power 60 to 80, 33 to 34 (NEW!)
The Securities and Exchange Board of India (SEBI) has barred a dealer employed with UTI Securities, a sub-broker empanelled with Emkay Shares and Stock Brokers and 34 clients from dealing in shares of Ballarpur Industries.
(Bilt) till further notice. All these entities have been charged with front running, an activity in which a trader takes a position of unfair advantage in advance of a large buy or a sell order of a client.
The capital market regulator has also directed the 34 clients to deposit profits made by them, amounting to around Rs 66 lakh, with the National Stock Exchange of India (NSE) within 15 days from the date of issue of this order.
SEBI investigations revealed that a set of clients registered with Emkay Shares and Manish Innani, director of another broking firm, Prayas Securities, were dealing in the stock of Bilt, around the time of large sell orders by a foreign institutional investor (FII) Netherlandse FMO. The FII was observed to be selling its holdings in Bilt through UTI Securities on different dates between November 1, 2006 and June 13, 2007.
“Prima facie there appears to be a clear pattern in which Shri Raajeev Kasat, dealer of UTI Securities is seen to be passing information to Manish Innani at Prayas Securities and Rajeev Shroff at Emkay Shares and Stock Brokers. Rajeev Shroff in turn appeared to have passed on the information to a group of apparently set up clients, who indulged in ‘customised front running’,” the SEBI order said.
SEBI has directed UTI Securities and Emkay Shares to conduct an internal enquiry into the matter and initiate appropriate action against their employees or agents named in this order and submit an action report within 30 days of the order to the regulator.
Power Grid Corporation of India (PGCIL) couldn’t have asked for a better time to make its debut on bourses. Power stocks are the toast of investors these days. Stocks of sector heavyweights like Tata Power, NTPC and Reliance Energy (REL) have been galloping in the recent past. While Reliance Energy has shot up nearly 80% in just one month, Tata Power and NTPC have gained 42% and 25%, respectively.
Power Grid Corporation of India (PGCIL) is expected to register decent gains on its debut day (Friday). Even the most conservative market players are betting on a listing gain of 15-20%. The company’s public offer, which closed on September 13, had received an unprecedented response, with the total subscription value touching Rs 1,90,000 crore. The issue was subscribed 64.50 times, with the QIB portion getting subscribed 115.47 times.
While the HNI segment was subscribed 39.75 times, the retail portion was subscribed 6.68 times. The issue price was fixed at Rs 52 per share. In a rare instance, the provident and retirement funds also bid for the PGCIL shares.
The company is India’s largest central transmission utility, handling around 45% of the power generation. It has been accorded a mini-navratna status by the government.
Meanwhile, power stocks have added sizeable chunk to investor wealth during the past one month. Tata Power, REL and NTPC have created over Rs 50,000 crore of fresh wealth. While this may still not sound too much in comparison to heavyweights like RIL, it is significant as the sector was considered a laggard until last year. While Tata Power is now trading at a PE of 30, REL is trading at 40, much above the earlier range of 15-20.
The sector came into the limelight late last year, with two ultra mega power projects being awarded and has been in focus since then. Both TPC and REL have been awarded one project each, requiring a total investment of around Rs 36,000 crore.
The project is likely to generate revenues of around Rs 6,500 crore for TPC and Rs 3,500 crore for REL. With a fresh capacity of 4,000 mw, these projects provide significant economies of scale.
The movement in these stocks seems to be a classic case of ‘irrational exuberance’ going by the numerous complexities attached to the projects and the longer-term horizon. Since it is the first time that such large projects are being undertaken in the power sector, there is a large degree of execution risk attached to it.
This contrasts with the fact that the largest-running power plant at a single location currently has a capacity of only 3,200 mw, which was commissioned in three phases over a period of 20 years. Further, since no plant based on super critical technology is in operation right now, there is a significant degree of technology risk, more so in the case of REL project, which would be using domestic coal with high ash content.
However, any downside for these projects could be limited on account of the government thrust. Since these projects have bagged the government approval, the latter has a significant stake in their success. Also, with power shortage being a critical bottleneck in the current growth cycle, the government has an interest in ensuring the success of these projects.
While that could be an important reason for these companies and investors to ignore the downside risk, the short-term prospects of these stocks from the current levels could be weak.
In fact, Credit Suisse is of the view that this sector is an ideal defensive play on account of the inelastic demand and assured returns. “These stocks are impervious to economic cycles and prone to neither big surges nor big drops in earnings, unlike growth stocks. The predictable nature of their business makes them ideal defensive plays,” adds the Credit Suisse report.
Meanwhile, NTPC is planning to double its capacity in the next five years while Tata Power will triple its capacity. Reliance Energy is also expecting to register a five-fold jump in capacity in the next five years. “While these capacities move towards market pricing, there is scope for earning more than the regulated 14% ROE, thereby enhancing the book value of these companies,” says Credit Suisse.
The power pricing formula in India is based on the total cost of the generation and a fixed rate of return. Under this mechanism, power plants are able to pass on fuel, operational and financing risk, and maintain a fixed return on equity of 14% for the generator.
Power Grid Corporation of India is likely to list on Friday at a premium of 50 per cent to its issue price.
“Strong listing is expected for Power Grid mainly on positive market sentiment. I expect the stock to list a healthy premium,” said Nitin Khandkar of Keynote Capital without giving a range.
Vikas Khemani, co-head, institutional equities, Edelweiss Securities, too is positive on the company. “PGCIL has a good business model and investors will be holding it for long-term gains. The stock is likely to list around Rs 85-90,” he said.
An analyst from another broking firm expects the stock to list at a premium of Rs 40-50. The initial public offering of Power Grid was subscribed 65 times, raising Rs 2,985 crore at the issue price of Rs 52.
The company raised funds to part-finance its capital expenditure
After slipping for two consecutive days, gold prices rose today as dollar weakened against its rival currencies. Since the past couple of days, drop in crude oil and a continuation of the strengthening of the dollar against other currencies continued to hurt gold's appeal as an inflation hedge.
Comex Gold for December delivery climbed $8.1 (1.1%) to close at $743.8 an ounce on the New York Mercantile Exchange today, Wednesday, 4 October, 2007. It recovered from a low price of $726.5 an ounce. On Monday, 1 October, gold had climbed to an intraday high of $755.7. That was the highest intra day price seen since the last 28 years.
Comex Silver futures for December delivery rose 3 cents (0.2%) to $13.50 an ounce. The metal has climbed 4.4% this year.
The dollar climbed today after erasing its earlier gains against the euro after new orders data for U.S made factory goods showed that it dropped a greater-than expected 3.3% in August, the largest decline in factory orders in seven months. The dollar index, which tracks the performance of the dollar against a basket of currencies, fell 0.2% at 78.40.
In recent times, the weakening of dollar have continued to affect the price of the metal. Investor sentiments are boosted by the fact that gold and silver were alternate sources of good investment in the face of declining dollar and rising energy prices.
Gold prices have jumped 15% during the third quarter and it is the most since 1999. The yellow metal has climbed 17% this year.
As per Nymex data on Wednesday, Gold warehouse inventories rose by 83,102 troy ounces to stand at 7.2 million troy ounces and silver supplies rose to 133.1 million troy ounces, up 294,757 troy ounces.
At the MCX, gold prices for December delivery closed at Rs 9475 per 10 grams. The closing price is Rs 12 (0.12%) lower as against previous closing price. Prices fell to a low of Rs 9319 per 10 grams during the day’s trading.
At the MCX, silver prices for December delivery closed Rs 54 (0.3%) lower at Rs 17,971/Kg. Prices opened at Rs 17,988/kg and went to a low of Rs 17,651/Kg during the day’s trading.
Crude oil futures were back above $81/barrel today. Prices rose after dollar once again weakened today against its rival currencies. Expectations of a strong job report tomorrow also firmed up crude prices today.
For the day ending Thursday, 4 October, 2007, crude-oil futures for light sweet crude for November delivery closed at $81.44/barrel (higher by $1.50/barrel or 1.8%) on the New York Mercantile Exchange.
As per the weekly inventory report issued by the Energy Dept yesterday, crude supplies rose by 1.2 million barrels to stand at 321.8 million barrels in the week ended 28 September. Market was expecting a decline in crude supplies. Refineries activity rose to 87.5% from 86.9%.
Motor gasoline inventories fell to 191.3 million barrels, down 100,000 barrels. Distillate supplies were pegged at 135.9 million barrels, down 1.2 million barrels on the week.
Natural gas, gasoline and heating oil - all rise
Natural gas for November delivery rose 13.5 cents to $7.412 per million British thermal units. As per the weekly report by Energy Dept today, natural-gas supplies rose by 57 billion cubic feet to 3,263 billion cubic feet during the week ended 28 September. The increase was below market expectations.
Against this backdrop, November reformulated gasoline gained 5.64 cents to $2.0522 a gallon and November heating oil rose 5.26 cents to $2.2313 a gallon.
At the MCX, crude oil for October delivery closed at Rs 3204/barrel, higher by Rs 27 (0.8%) against previous day’s close. Natural gas closed at Rs 291.3/mmtbu as against previous close of Rs 288.6/mmtbu.
OPEC 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.
Attacks on oil facilities in Nigeria have curtailed shipments and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.
The Nifty October 2007 futures were at 5,209, a premium of 0.35 point compared to the spot closing of 5,208.65 points.
The NSE F&O turnover was Rs 69,313.27 crore, which is less than Rs 1,00,056.19 crore on 3 October 2007.
Reliance Capital October 2007 futures settled at a premium: 1,778 compared to the spot closing of Rs 1,773.45.
SAIL October 2007 futures settled at premium: 209.10 compared to the spot closing of Rs 207.10.
DLF October 2007 futures settled at a premium: 867 compared to the spot closing of Rs 863.35.
After an entire day of almost flat trading, US stocks inched in the green territory in the final hour of trading and the indices ended little higher for the day today, Thursday, 4 October 2007. Investors digested weak economic reports and waited for tomorrow’s crucial job and unemployment report. Eight out of ten economic sectors registered gains.
The Dow Jones industrial Average closed higher by 6.26 points at 13,974.31. The Nasdaq Composite Index, finished higher by 4.14 points at 2,733.57. S&P 500 finished higher by 3.25 points at 1,542.84.
Eighteen of thirty Dow stocks ended in green. Merck, United Technologies, P&G and CoCo-Cola led the group of Dow winners. IBM, Exxon Mobil, Caterpillar and Citigroup were the major Dow decliners.
In the morning, the Department of Labor reported that weekly initial jobless claims (number of Americans filing new claims for state unemployment insurance) for the week ended 28 September rose to 317k, up from the previous reading of 301k.
After that, the Department of Commerce reported that factory orders in August slipped 3.3%, as against the consensus estimate that called for a decrease of 2.8%. Orders had rose 3.4% in July.
Blockbuster result from RIMM fails to impress market
After opening higher for the day, stocks fell in the face of a larger-than-anticipated drop in factory orders and a modest rise in jobless claims. Ultimately, at the end, indices managed to close in the green.
But the economic reports were not much of market movers. It seemed that investors wanted to keep money away today and rather wait for tomorrow’s unemployment report.
Investors waited for Research in Motion (RIMM), the maker of Blackberry devices, to report earnings after the close today. The company reported a second-quarter profit that beat expectations. Earnings per share registered 100% increase on a y-o-y basis. The company crossed the 10 million subscriber mark and predicted strength for the rest of the year. But the company's stock struggled in after-hours trading.
Among Indian ADRs, all ended in green barring ICICI Bank and Rediff.com. tata Motors and MTNL were the top gainers gaining 1.7% and 1.95 respectively.
Crude oil futures were back above $81/barrel today. Prices rose after dollar once again weakened today against its rival currencies. Crude-oil futures for light sweet crude for November delivery closed at $81.44/barrel (higher by $1.50/barrel or 1.8%) on the New York Mercantile Exchange.
On the New York Stock Exchange, 1.1 billion shares were exchanged, with advancing stocks outpacing decliners 5 to 3. Volume on the Nasdaq topped 1.1 billion shares, and advancers outran declining stocks 4 to 3.
For tomorrow, investors will have U.S. Labor Department’s September jobs report before the market opens. Also garnering some attention will be the August Consumer Credit report.
Nifty — The index opened on a flat note and saw an intra-day dip towards 5126 in afternoon trade, after which it saw a rise towards the close. It ended the day with loss of 2 points.
Inside Day — On the daily bar chart the Nifty posted an “Inside Day”, i.e., today’s price range is totally within the prior day’s price range. Today’s price range was a high of 5233 and low of 5126, while yesterday’s price range was a high of 5261 and low of 5034. This may result in range-bound trading with high intra-day volatility.
Support & Resistance — The index has intra-day support around 5127, lower support is at 5034. Resistance is around 5232 with higher resistance around the 5261-5300 levels.
Conclusion — Expect intra-day strength above 5232.
Cluster: Ugly Duckling
Price target: Rs300
Current market price: Rs222
Price target revised to Rs300
- Ahmednagar Forgings Ltd (AFL), a subsidiary of Amtek Auto, manufactures small- and medium-sized forged components such as connecting rods, gear blanks, shafts, transmission components, flanges and hubs. AFL is a tier-1 supplier to large domestic original equipment manufacturers (OEMs) like Tata Motors, Ashok Leyland, Eicher Motors, Force Motors, Bajaj Auto and Maruti Suzuki.
- In Q4FY2007 AFL’s sales grew by 52.7% to Rs150.7 crore, which was below our expectations. The profit after tax (PAT) grew by 61.9% to Rs16.6 crore in the same quarter. The profit growth was lower mainly due to the slowdown in the domestic market and the impact of the strengthening rupee on its exports.
- For the fiscal ended June 2007, the company has reported a 59.9% growth in its net sales to Rs600.3 crore and a 75.3% growth in its net profit to Rs68.2 crore against our expectations of Rs67.5 crore of PAT.
- Though the company has a strong order book, we would like to take a cautious view on the domestic sales in FY2008 in light of the slowdown in the OEM segment. The outlook on the exports remains bullish with the commencement of the additional lines and increase in the utilisation levels. However, the margins may be hit due to rupee appreciation as around 40% of its exports are in US dollar terms.
- Considering the slowdown in the domestic market and the delay in commencement of the export lines, we are downgrading our FY2008 earnings per share (EPS) estimate by 30% from Rs36.5 to Rs25.3 and introducing our EPS estimate for FY2009 at Rs32.2. At the current market price of Rs222, the stock trades at attractive valuations of 6.9x its FY2009E earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.4x. We maintain our Buy recommendation on the stock with a slightly reduced price target of Rs300.
Federal-Mogul Goetze (India)
Cluster: Emerging Star
Recommendation: Book Out
Current market price: Rs148
- Federal Mogul Goetze Ltd’s (FMGI) performance was much below our expectations. For H1CY2007, the sales grew by 34% to Rs296 crore, however the profit was below our expectations. Despite the fact that the company made a turn around from a loss making company to a profit making company, the profit margin was much below our expectations.
- There was a substantial delay in the ramp up of the exports to the parent company. The export profitability has also been affected by rupee appreciation.
- FMGI has high exposure to the medium and heavy commercial vehicle (M&HCV) and the two-wheeler segments. The two segments were hit the most due to a slowdown in the domestic market as a consequence of the high base of last year and due to the rise in the interest rates.
- Higher costs of raw materials such as aluminium and nickel affected the earnings before interest, tax, depreciation and amortisation (EBITDA) margin. The company was unable to pass on the rising raw material cost to the full extent due to a slowdown in the domestic vehicle sales.
- The rights issue was to help the company to improve its capital structure and financial gearing has been delayed by more than six months. The price band of the proposed rights issue has been revised downwards leading to a 25-30% higher equity dilution than our estimates. Consequently, the profits have been affected by a higher interest cost. The higher dilution will impact the earnings.
- The company’s management has revised its guidance downwards for 2008E. The profit before tax (PBT) guidance has been revised down to Rs30 crore in June 2007 from Rs100 crore in September 2006, in a span of just nine months for the reasons discussed above.
- In view of all the above-mentioned disappointing factors, we advise investors to book out of the stock.
Network 18 Fincap
Cluster: Emerging Star
Price target: Rs651
Current market price: Rs411
Files amended rights issue document
- After the transfer of Studio18’s business to Viacom18, Network18 has filed the amended draft offer document for its rights issue. The old draft document stated the earlier objects of the issue to raise a part of the funds for film projects under Studio18.
- We maintain our valuation of the right issue at Rs133.6 per share.
- Network18 proposes to use a part of the rights issue proceeds towards capex on television content production. We believe, the investment in content production business will cater to the content requirements of the forthcoming channels of Viacom18.
- HomeShop18 is going great guns with business spreading over 2000, towns and cities across India, and with average sales of approximately 20 lakh per day just a few months after its launch. A full-fledged home shopping channel is in the offing.
- Issue of preferential warrants in TV18 and GBN will lead to increase in Network18’s holding in TV18 to 53.3% and in GBN to 45.1%.
- We maintain our buy recommendation on the stock based on our sum-of-the-parts price target of Rs651.
Cluster: Apple Green
Price target: Rs47
Current market price: Rs39
Price target revised to Rs47
- A strong demand for tyre replacement in the commercial vehicle (CV) segment is triggering a healthy growth for Apollo Tyres, which is the market leader in this segment.
- We expect Apollo Tyres to be one of the top performers in the coming Q2FY2008 results. We expect the revenues of the company to grow by 8.5% and the profit to rise by 99.4% for the forthcoming quarter.
- With improved performance of its subsidiary Dunlop as a result of better utilisation, price hikes and debt restructuring the consolidated picture for the company looks even better.
- We maintain our positive outlook on the company considering strong growth potential and sustainable margins. We are revising upwards our earnings estimates for the company by 5.3% for FY2008 and by 10.5% for FY2009. We maintain our Buy recommendation on the stock with a revised price target of Rs47.