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Friday, October 12, 2007

Reliance AGM - Mukesh Ambani Speech

Reliance AGM - Mukesh Ambani Speech

Mukesh Ambani at Reliance AGM

The shareholders of Reliance Industries today gave a standing ovation to Chairman Mukesh Ambani at the company’s 33rd annual general meeting. In return, a visibly embarrassed Ambani presented them a five-pronged strategy to become a global leader.

Addressing shareholders, who congratulated him for receiving a doctoral degree from the Maharaja Sayajirao University of Baroda – some even recited poems dedicated to the chairman – Ambani said the strategy pivots on organic growth, joint ventures, entry into the rural and agricultural sector, innovation and foray into other countries.

The shareholders were in a jubilant mood, anticipating a “favourable announcement” including a bonus issue to commemorate the 30th year of listing of the company. But Ambani remained noncommittal. He said the Reliance board would meet on Thursday and the decision to be taken at the meeting would be beneficial for all stakeholders. The agenda of the next week’s board meeting includes quarterly results.

Reliance has investments that will fetch $28 billion (Rs 112,000 crore) at current prices, giving the company the finances to pursue growth options of “significant size and scale,” he said. The company plans to build chemical businesses in Egypt and Russia, and expects to make new hydrocarbon discoveries.

Ambani said Reliance Petroleum, which is building a 580,000 barrel per day refinery at Jamnagar, Gujarat, would be completed ahead of schedule. The facility, which is coming up near Reliance Industries' 660,000 barrel per day refinery, was scheduled for completion by the end of next year.

He said the company would spend $8-$9 billion (Rs 32,000-36,000 crore) over three to four years at its petrochemical and refining complex in Gujarat.

Industry sources said overseas growth will help Reliance offset the impact of local price controls on oil and gas. The company is facing protests from street vendors and shopkeepers for expanding its retail business. In fact, Reliance is going slow on retail expansion and was forced to down shutters at some of its stores selling products ranging from fruits and vegetables to electronic goods.

Although Ambani was comfortable divulging the billion-dollar expansion plans of his company, he appeared shy on discussing his personal wealth.

Recently, he emerged as the richest Indian, riding on Reliance’s performance on the bourses. “I measure my success by the value that I create for my shareholders and the assets that we, as a company, create for the nation as a whole. My wealth and your wealth are inevitably linked to our growth," he said on a philosophical note.

Model Portfolio - Oct 12 2007

Model Portfolio - Oct 12 2007

Infosys Technologies - HOLD, Bihar Tubes - BUY, South Indian Bank - BUY

Infosys Technologies - HOLD, Bihar Tubes - BUY, South Indian Bank - BUY

Gitanjali Gems may acquire another US company

Gitanjali Gems is betting big on the US retail market. After taking over Samuels Jewellers in December 2006, the firm is now close to acquiring another leading jewellery retailer for around $100 million. Sources close to the deal said the due diligence process is almost complete, and the company is going ahead with the transaction.

“It’s one of the leading jewellery retailers having over 100 outlets across the country. The deal will be completed in two months,” said sources. The company is being advised by Keynote, a Mumbai-based boutique investment bank. Gitanjali shares rose marginally to close at Rs 361 on Thursday.

The Mumbai-based company has also lined up plans to raise capital for its proposed acquisition and domestic expansion. The firm wants to raise $100 million through a global depository receipt (GDR) issue. It has also proposed to issue 10 million convertible equity warrants on preferential basis to the promoters and raise around Rs 320 crore. An extraordinary general meeting (EGM) has been called on November 3 to consider the fund-raising plans.

Last December, the company acquired 97% stake in Samuels Jewellers Inc, operating 97 stores spread across 18 states, for Rs 100 crore. It further infused another Rs 100 crore as working capital. The acquisition was financed through internal accruals and proceeds from the $110-million foreign currency convertible bonds (FCCBs) issue. Sources said Gitanjali is currently in the process of turning around the loss-making US retailer, and is expected to achieve break even by 2007 end.

The company’s other plans include a proposed foray into the luxury retail market through its new venture Luxury Connexions (Lx) and luxury malls. The group plans to invest Rs 100 crore over the next three years for establishing luxury malls across India and acquiring international brands which would be sold through Lx outlets. Sources said these would be positioned to facilitate and promote the growing luxury retail market in India vis-a-vis international brands.

The plans include setting up luxury malls in eight cities, beginning with Hyderabad and subsequently moving to Mumbai, Bangalore, Delhi, Kolkata, Ludhiana, Chandigarh and Chennai. The luxury malls would house global brands, restaurants, spas, international jewellery brands, connected wedding stores encompassing designer products finely bundled with personalised services to suit the growing needs of India’s upper middle class.

Chidambaram - things will cool down soon

Finance Minister P Chidambaram on Friday attributed the recent surge in stock markets to speculators and hoped "things will cool down soon" - a prediction reflected in the plummeting Sensex.

"To some extent speculators are taking advantage of the rise in the Sensex... Things will cool down," he said on the sidelines of a summit here.

The 30-share BSE index today fell by 395.03 points to 18,419.04, against the record high level of 18,814.07 reached in yesterday's trading.

Chidambaram, who had cautioned retail investors from entering the market when it crossed 18,000 points, said: "Sensex is an index of 30 stocks (and) as such it is a number. We don't invest our future in Sensex."

"Steep rise in Sensex sometimes surprises me, sometimes worries me. I do not think fundamentals change so rapidly day-to-day. Our assessment tells us Sensex is driven by copious inflow of funds," he said.

The market had lost heavily in August on concerns about the credit crisis in the US. The Sensex, which was trading at 14,000 level in July and gained up to 15,794 on July 24, fell back to 13,989 points on August 21.

It has since appreciated smartly and in fact galloped from 16,000 points to 17,000 in just six sessions last month and covered the next 1,000 point journey in eight trading days.

Sensex ends down 395pts, SBI drops 4%

Mirroring weakness in the global markets, the Sensex opened marginally lower at 18,795 - down 19 points. The index moved into positive zone in morning deals, and touched a new all-time intra-day high of 18,845 - up 31 points from the previous close.

The index, however, was unable to hold gains, and profit-taking in noon deals saw the index tumble to a low of 18,336 - down 509 points from the day's high. The Sensex finally ended with a loss of 395 points at 18,419 after having gained 1,323 points in the last three trading days.

The BSE Bankex and the Capital Goods indices dropped 2.7% each to 9311 and 16,615, respectively. The FMCG index plunged 2% to 2142. The Auto and IT indices were down over 1.5% each to 5515 and 4688, respectively.

The market breadth was negative - out of 2,801 stocks traded, 1,693 declined, 1,052 advanced and the rest were unchanged today.


SBI tumbled over 4% to Rs 1,862.

Larsen & Toubro, Tata Motors, ICICI Bank, BHEL and Cipla dropped around 3.5% each to Rs 3,361, Rs 802, Rs 1,053, Rs 2,341 and Rs 185, respectively.

Reliance Communications and Bajaj Auto slipped 3% each to Rs 718 and Rs 2,542, respectively.

Bharti Airtel and Reliance slipped 2.5% each to Rs 1,069 and Rs 2,567, respectively.

Infosys and Dr. Reddy's declined 2.3% each to Rs 1,930 and Rs 615, respectively.

ITC, NTPC, Satyam, HDFC, Maruti and Hindustan Unilever were down 2% each to Rs 185, Rs 217, Rs 439, Rs 2,471, Rs 1,097 and Rs 221, respectively.

Reliance Energy and ONGC surged over 2% each to Rs 1,636 and Rs 1,092, respectively.

Mahindra & Mahindra and Hindalco gained 1.7% each at Rs 828 and Rs 179, respectively.


Reliance topped the value chart with a turnover of Rs 907 crore followed by Reliance Energy (Rs 575.30 crore), Reliance Petro (Rs 396.20 crore), Reliance Capital (Rs 394.30 crore) and Reliance Natural Resources (Rs 386.70 crore).

Reliance Natural Resources led the volume chart with trades of around four crore shares followed by Power Grid (2.65 crore), Reliance Petro (2.22 crore), Ispat Industries (1.43 crore) and Arvind Mills (1.21 crore).

Weekly Close: 19K missed but some relief on Politics !

It was the Formula one race for the indices this week and indices crossed historical level. Market zoomed ahead in spite of political uncertainties and crossed the 18k levels in beginning of the week. Since then the rally was very much strong but it marginally fell short to touch 19k. Volumes were extremely high led by huge liquidity inflow by foreign funds. The jitters on politics some what eased as Congress gave indication that it would miss the nuclear bus and try to avoid early election. This further gave boost to the market. Reliance group continued to be all time beloved of investors. Capital good too continued to flare on huge order book. Sugar stocks became sweet with some favourable changes in the Govt policy. However, Small and mid caps were left out in the recent run up. Infy was disappointment with it quarterly numbers.

Market Performance for the week: Sensex up by 700 points or 3.8% up for the week. Nifty up 4.5%. Mid cap 0.5% up; Adlabs 23% up; Mercator Lines 20% up. Small cap index flat; Metal Index 5.5% up; SAIL 11% up; Nalco 6% up Capital Goods index 5.5% up; L&T 9.5% up; BHEL 8% up; Index gainers VSNL 17% up; Rel Comm 11.5%; ONGC 12% up..

Infosys declared numbers this week and that was a disappointment as the markets had been building up greater expectations. The company posted just 1.9% growth sequentially in its second quarter numbers at Rs 1100 cr as against Rs 1,079 cr in previous quarter of the same year. It's consolidated net sales surged by 8.8% sequentially to Rs 4,106 cr versus Rs 3,773 cr. The operating profit margin increased to 31.27% from 28.73%. We were not very disappointed though. The company has increased the targets of employee additions for the year which is the positive. Do read Economy : Taking stock to get more thoughts on this.

We had lots of research this week. There was research on VIP industries.. where we believe that the company is cruising for a take off. The company has been fighting with unorgainsed market and key here is Brand. VIP is well placed with brand. But what excites us here is the size of luggage industry globally. Globally Luggage industry is quite big and also highly fragmented.. VIP will have over 70% of the Indian Market .. but the hurdles remain.. Do read our detailed note here.

We had a research note on Asian Paints. We like the busniess.. but the valuation is where we are not very happy. Interesting observation was that 65% of paints go for repainting. A booming economy like India with 112 crs (around 25 mn households assuming 4-5 per house) of population provides a great opportunity. Current size of middle class is estimated to be 30% of the population which is likely to touch around 45%- 50% between 2007 and 2015. This would be the actual earning population which will be ready to spend more for better living. In addition to this around 4.5 million houses are added per year, which includes 2 million housing units under the weaker section housing policy. A Large consuming population and high economic growth gives great potential here. Clearly the demand for paints will be higher. So really this element is really large and will be the driving force in future. Do read our note.

Allcargo Global Logistics (AGL) a multimodal transporters & CFS operator in India. AGL drives major part of revenues from MTO segment while in CFS business it has 12% in the market. The company has approved acquisition of Transindia Freight Services (TFSPL). TFSPL is an unlisted company owned by the promoter-family of AGL and is primarily engaged in the business of contracting transportation of containers and project-related cargo and hiring of cranes, reach stackers and forklift trucks. The share swap ratio will be 518 fully paid-up equity shares of AGL for every 100 fully paid-up shares of TFSPL. TFSPL will issue 2.10 Cr shares and the valuation will be around Rs 206 Cr @ Rs 982 / share. For this purposed the company raised up to Rs 300 crore. Promoters holding is 79.6% stake in AGL. Now after adding TFSPL equity, AGL?s new equity will be 2.23 Cr. With this promoter holding would move up to 81.61% after the proposed swap. This merger will help AGL to get some synergies in terms of overheads and lower taxes. The event has been priced in the stock after the merger news. Do read our note to get more insights.

We had research on Kesoram and also Madras cement. These are South focussed companies. Next 18 months is likely to be very exciting for the mid caps. As such cement counter seems expensive but Kesoram and Madras cement can provide some opportunity. Our detailed note on site would give you more idea about this.

Our research on Solar explosives paid off. We had a research note just a few weeks back on this one. The stock has exploded and the consolidated results were spectacular. The demand for explosives is directly linked to the growth in mining and infrastructure sector. Demand for explosives is more in Coal mining, Infrastructure development and Metal mining. Mining industry is expected to grow in the core segments like coal, iron ore, and limestone. Coal mining remains the largest application for Explosives worldwide accounting for almost 70% of total explosive consumption. With the increasing allocation of coal fields to private sectors, the demand for explosives will continue to grow. Solar Explosive is the best bet in this sector as the industry has a huge entry barrier for the new player as it's a licensed industry where you have to procure license for producing, transportation and can sell to sell only to those company having a license. Do watch for more gains here in future. We will have our results analysis out early next week on this one.

Another stock moving up was Navneet. The education company has finally made a big entry into the e-education space which was dominated by Educomp. In a matter of 3 months the company has developed the animated software which covers the school syllabus for 1st - 10th for the state of Gujarat. This it has already launched and has more than 50 schools to its credit. The low pricing really has the schools willing to buy and use the same in the audio Video room. Navneet believes that in an environment driven by marks, a product which helps the student score higher markets will be a winner. Near term the results for the September quarter should be good helped by the spillover effect from the previous quarter sales. We are really bullish on this one as it provides tuff competition to Educomp which has become too expensive but still is the market leader. Navneet has along way to go but we see that the company has the potential to deliver.

Todays pullback was one of profit taking. The big trigger of the Reliance AGM was over but the more important one was from the HT Summit where Sonia Gandhi indicated that the Government was attempting to persuade the Left, but surviving the full term seemed more important. The Nuclear deal seems to be a casualty. So really all political cues are now discounted. The results is what will drive the markets ahead. We believe that the Domestic Mutual Funds have a left out feeling and they would be bouncing back at the first opportunity. We believe that the Mid caps where the results are better than expected.. will be the stocks which will jump. It is this segment where we will see mid caps turn into larger mid caps. The valuation stretch is missing here and the risk appetite has gone up. There are talks of correction and that may come.. but really all these pull backs will have the buyers waiting to get in.

Great performance for the week. Wowcalls had wonder gains in Solar Explosive in a day. Delivery Delights by Adonis was another super one with Graphite India delivering 10% gains. Shiv Vani, Idea delivered marvellous gains in Delivery Delights. Quickies call also had great returns for investors. Our Research will follow. We will be back with exciting ideas in coming weeks.

Sensex slips amid substantial volatility

Taking cue from the last three day’s gain of around 1,300 points, the Sensex opened on a weak note at 18,794, 19 point down from the previous close of 18,844. While the market witnessed a fluctuating trend for a while, the afternoon trades saw the index tumble below the 18,500 mark to touch the day's low of 18,336 amid relentless selling pressure. The Sensex finally ended the day with loss of 395 points at 18,419, while the Nifty declined by 96 points to close at 5,428.

The market breadth was extremely weak as the losers outpaced the gainers. Of the 2,801 stocks traded on the Bombay Stock Exchange (BSE), 1,693 stocks declined, 1,052 stocks advanced and 56 stocks ended unchanged. All the sectoral indices slipped sharply. The BSE Realty index dropped 3.29% followed by the BSE CG index (down 2.77%), the BSE Bankex index (down 2.72%), the BSE Teck index (down 2.02%), the BSE FMCG (down 1.91%) and the BSE IT index (down 1.66%).

Most of the index heavyweights witnessed heavy correction. Among the Bankex majors, SBI tumbled by 4.23% at Rs1,862, BOB dropped 3.47% at Rs310, ICICI Bank moved down by 3.37% at Rs1,092, and Indian Overseas Bank lost 3.29% at Rs132. Among the other major losers, L&T slumped by 3.61% at Rs3,360, Tata Motors slipped by 3.41% at Rs802, BHEL shed 3.30% at Rs2,341 and Cipla lost 3.30% at Rs185. Reliance Communication fell by 3.14% at Rs718, Bajaj Auto crumbled by 2.96% at Rs2,542 and Bharti dipped 2.45% at Rs1,069. The other front-line stocks lost between 2-3% each. Select counters, however, bucked the downtrend and ended with gains. REL advanced by 2.41% at Rs1,636 and ONGC moved up by 2.36% at Rs1,091, while MNM and Hindalco ended with modest gains.

Realty stocks were hit hard and dropped sharply. DLF crumbled by 5.76% at Rs865, HDFC lost 4.73% at Rs745, Parsvnath shed 4.39% at Rs374 and Ansal Infrastructure declined by 3.06% at Rs272. Phoenix Mill, Sobha Devlopers, IndiaBulls Realty and Akruti Nirman were down over 2% each.

Over 2.65 crore Power Grid shares changed hands on the BSE followed by RPL (2.21 crore shares), ISPAT(1.42 crore shares), Arvind Mills( 1.21 crore shares) and IDBI ( 56 lakh shares).

Reliance Industries was the most actively traded counter on the BSE and registered a turnover of Rs906 crore followed by REL(Rs575 crore), RPL(Rs396 crore), Reliance Capital (Rs394 crore) and Power Grid(Rs306 crore).

Market extends gains

Continued strong buying by foreign institutional investors, firm global markets and expectations of good Q2 September 2007 results from corporate India, took the market up further last week.

The 30-share BSE Sensex gained 645. 68 points or 3.63% to 18,419.04, while the S&P CNX Nifty gained 242.40 points or 4.6% to 5428.25 in the week ended Friday, 12 October 2007.

On Monday (8 October 2007), the market drifted lower on speculation of mid-term polls after Congress President Sonia Gandhi on Sunday, 7 October 2007, indicated her party’s readiness to face elections by saying those opposing the nuclear deal were enemies of development and peace. The 30-share BSE Sensex, on that day, lost 281.97 points, or 1.59%, to 17,491.39 points. The S&P CNX Nifty ended down 100.75 points, or 1.94%, to 5,085.10.

On Tuesday (9 October 2007), the Sensex touched a milestone of 18,000 after worries of an early election eased. The Congress-led United Progressive Alliance (UPA) government at the centre and its communist allies agreed to meet again on 22 October 2007 to resolve a row over a nuclear deal with the United States. On that day, the 30-share BSE Sensex ended up 788.85 points, or 4.51%, to 18,280.24 and the broader based S&P CNX Nifty ended up 242.15 points, or 4.76%, to 5,327.25.

On Wednesday (10 October 2007), the record-breaking trend continued on the bourses, with easing of political worries and firm Asian markets. The 30-share BSE Sensex, on that day, rose 378.01 points, or 2.07%, to 18,658.25. The broader based S&P CNX Nifty was up 114.2 points, or 2.14%, to 5,441.45.

On Thursday (11 October 2007), the market recouped its lost ground in afternoon trade and rallied sharply to at all-time high. The market was quiet in early trade as the second quarter performance of Infosys Technologies disappointed investors. On that day, the 30-share BSE Sensex ended up 155.82 points, or 0.84%, to 18,814.07. The broader based S&P CNX Nifty ended up 83.4 points, or 1.53%, to 5,524.85.

On Friday (12 October 2007), the three-day bull-run came to a halt as mixture of profit booking and global negativity acted against the market uptrend. The 30-share BSE Sensex, on that day, fell 395.03 points, or 2.10%, to 18,419.04. The broader based S&P CNX Nifty was down 96.6 points, or 1.75%, to 5,428.25. Finance Minister P Chidambaram’s statement that the steep rise in stock price was worrisome also pulled down bourses on that day.

Chidambaram on Friday, 12 October 2007 expressed surprise over the steep rise in stock market and said it was being driven by ample fund flows from abroad. When Chidambaram spoke, the market was down more than 1.5% and it quickly extended its losses to more than 2% on worries the government may act to counter foreign inflows.

The BSE IT index fell 1.10% to 4,687.79 in a week, following a slump in software stocks after Infosys Technologies reported its Q2 results on 11 October 2007, which lagged behind the estimates of investors.

Tata Consultancy Service, India’s largest software services firm by sales, slid 0.66% to Rs 1063.10 in the week. Infosys, the second-largest computer services provider, fell 2.98% to Rs 1930.45. Wipro, the third biggest software firm, gained 5.49% to Rs 486.45. Satyam Computer Services, the fourth biggest software firm, declined 1.32% to Rs 438.60 in the week.

Infosys Technologies’ net profit rose 19.87% to Rs 1074.00 crore on 18% rise in sales to Rs 3862.00 crore in Q2 September 2007 over Q2 September 2006.

The BSE Capital Good index was the major gainer in the week. This index gained 5.53% to 16,614.69 in a week, led by major gains in Larsen & Toubro (L&T) and Bharat Heavy Electrical (Bhel).

Larsen & Toubro (L&T) gained 8.79% to Rs 3360.75 in the week. It secured a Rs 693 crore contract to set up sulphur plants for Indian Oil Corporation. The company also won $60 million order for setting up a methyl amines & dimethyl formamide plants for Methanol Chemical Company in Saudi Arabia.

The company has agreed to buy out the switchgear business of Tamco in Malaysia for $108 million. The acquisition will be completed by March 2008.

Bharat Heavy Electrical (Bhel) moved up 8.72% to Rs 2341.35 in the week. The company bagged a Rs 394 crore contract from Rashtriya Ispat Nigam for setting up a captive power plant at Vizag Steel Pant in Andhra Pradesh.

Other stock which was in action the week was Reliance Industries, which rose 3.34% to Rs 2566.85 in a week. The stock declined on Friday, 12 October 2007 on disappointment that an expected stock split or bonus issue was not announced at company’s shareholders' meeting.

Reliance Energy grew 13.07% to Rs 1636.30 in a week. Some reports suggested that its subsidiary, Reliance Energy Transmission has bagged a transmission project worth Rs 2,000 crore.

ICICI Bank rose 1.56% to Rs 1053 and State Bank of India was virtually steady to end at Rs 1862.30 in a week. Both the banks have reduced interest rates on almost all types of loans to boost demand in festive season.

India's wholesale price index rose 3.26% in the 12 months to 29 September 2007, lower than the previous week's 3.42% rise, government data showed on Friday.

India's industrial output in August rose 10.7% from a year earlier, higher than upwardly revised annual growth of 7.5% in July due to mining, manufacturing and electricity production, data showed on Friday.

Q2 results to dictate near term trend

Given that the market has witnessed a sharp and swift surge over the past few days, correction is inevitable after the sharp spurt. Q2 September 2007 results remain the key near term trigger for the market. The near term activity on the bourses is likely to be stock-specific based on Q2 result expectations.

Decent to strong Q2 results are expected from cement, steel, and telecom firms. Cement and steel firms are seen reporting strong Q2 numbers on the back of firm prices whereas robust subscription growth is expected to drive earnings of cellular services providers. IT firms are seen reporting good numbers on the back of volume growth and also because September 2007 quarter is seasonally the strongest of the four quarters for IT firms.

On the other hand, auto firms are seen reporting dismal numbers due to fall in volumes arising from higher interest rates.

FII inflow may remain strong due to ample global liquidity further enhanced by US Federal Reserve’s last month’s steep cut in the key benchmark interest viz. the fed funds rate by 50 basis points to 4.75%. A further cut in interest rate by Fed, if any, will only add to liquidity further which in turn ensure that FII inflow in India and emerging markets remain strong.

Emerging markets including India have witnessed strong FII inflows ever since the last month’s Fed cut, given the improved fundamentals of emerging markets.

Domestic liquidity remains strong. Insurance firms have been channelising money raised through unit-linked insurance plans (with a high weightage for equities) into the markets. A sharp correction, if any, may lead to bargain bunting by domestic mutual funds which are said to be sitting on a cash pile of about Rs 14000 crore.

The market's fears that a political impasse over a nuclear energy deal with the United States would lead to early elections, too, has eased with Congress President Sonia Gandhi stating on Friday, 12 October 2007, she doesn’t want early election. Gandhi said that the Left parties, which were opposing the deal, were not being unreasonable, and that the government was not looking for a confrontation with them because that was not the "coalition dharma."

Left front which is supporting the government from outside has been against operationalisation of the nuclear deal with the US, which had caused a rift between the government and the Left front. There had been fears that possibility of an early election could see the government announcing populist measures that would widen the fiscal deficit.

The near term trigger for the market is RBI’s Mid Term Review Of Annual Policy due on 30 October 2007. It remains to be seen whether the central bank does away with a hawkish stance in the policy. However, a near term rate cut by RBI looks unlikely given that consumer price base inflation and liquidity remain high.

India’s economy is expected to post decent to strong growth for a long period of time mainly due to favourable demographics.

Market dips after three-day rally; Sensex sheds 395 points

The market snapped three-day rally and Sensex lost nearly 400 points for the day, as correction in Asian and European markets prompted traders here to book profit. The market had made a sharp recovery from lower level in mid-afternoon trade from initial fall but the recovery proved short-lived and the market soon weakened again. Reliance Industries declined sharply from day's high. Most of the sectoral indices slipped into the red. European markets, which opened after Indian markets, were weak. Asian markets, which opened before Indian market, were subdued to weak.

The BSE 30-share Sensex ended down 395.03 points, or 2.1%, to 18,419.04. It hit a intraday low of 18,336 in late trade. At day's low of 18,336, Sensex had declined 478.07 points for the day.

The Sensex had surged 1,323 points in last three trading sessions till Thursday, 11 October 2007.

The broader based S&P CNX Nifty ended down 96.6 points, or 1.75%, to 5,428.25.

BSE clocked a turnover of Rs 9320 crore, lower than Thursday (11 October 2007)'s Rs 10,603.46 crore.

NSE's futures & options (F&O) segment clocked a turnover of Rs 90,419.66 crore today, 12 October 2007 compared to 72,261.05 on Thursday, 11 October 2007.

Nifty October 2007 futures were at 5,461.05, a premium of 32.8 points or 0.6% over the spot price of 5,428.25.

The market had witnessed a recovery from lower level in early afternoon trade from an initial slide as political worries eased after Congress president Sonia Gandhi reiterated that she doesn’t want early election. India's index of industrial production (IIP) data showed healthly growth in August 2007. Inflation eased a little bit. Both IIP and inflation data hit the market in early afternoon trade today. Mid-cap and small-cap indices outperformed Sensex.

Finance Minister P Chidambaram today said the economy can sustain a growth rate of 9%, but the growth may dip below 9% in case of some turbulence. Chidambaram said the steep rise in stock markets is cause for concern. The rally is being driven by large inflows of overseas funds, and the markets may cool down after some time, he added.

The BSE Mid Cap index declined 0.8% to 7,529.54 and BSE Small Cap index was down 0.24% to 9,098.65. Both these indices outperformed the market.

BSE Auto index (down 1.59% to 5,514.53), BSE FMCG index (down 1.91% to 2,142.13), BSE Health Care (down 1.59% to 3,806.20), BSE IT index (down 1.66% to 4,687.79), BSE Metal index (up 0.06% to 14,841.44), BSE Oil & Gas (down 1.4% to 10,575.95) outperformed Sensex.

BSE Bankex (down 2.72% to 9,310.79), BSE Capital Goods index (down 2.72% to 9,310.79), BSE Realty index (down 3.29% to 9,878.37) underperformed sensex.

Only metal index edged higher while rest of the sectoral indices on BSE were subdued. Capital goods, banking and real estate stocks declined sharply. Reliance Industries pared gains after hitting all-time high. Market breadth was weak.

Of the 30 shares of the Sensex, 4 moved up, while the remaining were trading down. The market breadth was weak on BSE: 1,022 scrips advanced, 1,692 declined, while 377 remained unchanged.

India's industrial output in August 2007 rose 10.7% from a year earlier, higher than upwardly revised annual growth of 7.5% in July 2007 due to mining, manufacturing and electricity production, data released by the government showed on Friday, 12 October 2007.

Manufacturing production rose 10.4% in August 2007 from a year earlier, compared with provisional annual growth of 7.2% in July 2007. The leader of India's Congress party and the most powerful politician in the country, Sonia Gandhi, said on Friday, 12 October 2007, she did not want an early election and was hoping to resolve differences with communist allies.

Elections are still far away and the government has one-and-a-half years to complete, Prime Minister Manmohan Singh said today, 12 October 2007. The prime minister said if the India-United States civil nuclear deal does not come through, it will be a disappointment. He said the government was trying to reconcile the divergent points of view on the issue within the ruling coalition. Dr. Singh said ys it is his hope that on the nuclear deal, common sense will ultimately prevail.

He said it is his hope and expectation that the government will stay the course and noted there is a lot of unfinished agenda left to be completed. Left front which is supporting the government from outside has been against operationalisation of the nuclear deal with the US, which had caused a rift between the government and the Left front.

India's wholesale price index (WPI) rose 3.26% in the 12 months to 29 September 2007, lower than the previous week's 3.42% rise, government data released today, 12 October 2007, showed.

Capital goods stocks declined sharply in late trade. L&T (down 3.61% to Rs 3,360.75), Bhel (down 3.3% to Rs 2,341.35) and Suzlon Energy (down 4.5% to Rs 1,698.10) edged lower. BSE Capital Good index was the major loser from the sectoral indices on BSE.

Realty stocks witnessed heavy selling. DLF (down 5.76% to Rs 865.65), Indiabulls Real Estate (down 2.7% to Rs 634.85) and Unitech (down 0.77% to Rs 339.85) edged lower. BSE Realty index was the second highest loser from sectoral indices on BSE.

Banking stocks lost ground as strong IIP data for August 2007 dashed hopes of a near term rate cut by RBI. ICICI Bank (down 3.37% to Rs 1,053), State Bank of India (down 4.23% to Rs 1,862.30) and HDFC Bank (down 1.76% to Rs 1,430.85) edged lower.

Auto stocks declined. Tata Motors (down 3.41% to Rs 802.10), Bajaj Auto (down 2.96% to Rs 2,542.30), Maruti Suzuki India (down 1.95% to Rs 1,096.80) edged lower.

Cipla declined 3.3% to Rs 184.75.

Reliance Energy (REL) rose 2.41% to Rs 1,636.30 and was the top gainer from Sensex pack. It hit an all-time high of 1,684.70 today.

India’s largest private company in terms of market capitalization and oil refiner Reliance Industries (RIL) was down 2.39% to Rs 2,566.85. The stock came off sharply from higher level as market expectations of bonus/stock split announcement at today’s annual general meeting of the company were belied. It hit an all-time high of Rs 2,724 earlier today.

Reliance Industries (RIL) chairman Mukesh Ambani today said the company will pursue organic and inorganic growth opportunities. The new Jamnagar refinery plant will be completed ahead of the scheduled time, and at half the capital cost at which international refineries are built, Ambani said while speaking at RIL's annual general meeting (AGM) in Mumbai.

Ambani also said RIL would raise its paraxylene capacity to 4.5 million tonne a year from 1.9 million tonne a year in two phases. The company is also looking at expanding its petrochemical businesses in other regions like Egypt and Russia, he said. Going ahead, the company would focus on new sectors like retail, infrastructure and agro-rural industry, Ambani said.

ONGC rose 2.36% to Rs 1,091.60. It hits an all-time high of Rs 1,118 today.

Mahindra & Mahindra (up 1.79% to Rs 828.45) edged higher.

IT stocks declined further. Strong rupee and possible US recession had hit the stocks since yesterday after Infosys had announced its Q2 September 2007 results before trading hours. Infosys (down 2.31% to Rs 1,930.45), Wipro (down 0.34% to Rs 486.45), Satyam Computer Services (down 2.09% to Rs 438.60), TCS (down 0.82% to Rs 1,063.10) edged lower.

Metal index was the lone gainer from sectoral indices on BSE. Hindalco Industries (up 1.73% to Rs 178.90), JSW Steel (up 1.15% to Rs 884.75) edged higher.

Koutons Retail India ended at Rs 590.45 on BSE, a premium of 42.28% over the IPO price of Rs 415.

Gujarat Mineral Development Corporation hit 5% upper circuit at Rs 1,851.20, on setting record date for 5-for-1 stock split.

Mastek soared 13.15% to Rs 364.05, after the company set maximum buyback price at Rs 750 per share, much above the ruling market price.

Unity Infraprojects moved up 4.7% to Rs 704.55 on bagging two major orders worth Rs 147.82 crore and Rs 77 crore.

Assam Company was locked at upper limit of 5% at Rs 26.20 on BSE on reports the company struck oil in the North-East region of India

Rolta India soared 7.55% to Rs 625.75 after the firm said its board will consider bonus issue on 22 October 2007.

Allcargo Global Logistics moved up 1.3% to Rs 951.15 ahead of its board meeting to consider raising Rs 400 crore by issue of equity shares and/or equity-linked instruments.

Exide Industries was down 2.53% to Rs 67.40, after the company said its net profit rose 42.30% to Rs 62.24 crore in Q2 September 2007 over Q2 September 2006.

Punj Lloyd declined 0.88% to Rs 353.80, on bagging Rs 389 crore contract from Qatar Petroleum for constructing a multi-product pipeline on engineering, procurement, construction basis, in Qatar.

European markets opened weak today. France’s CAC 40 (down 1.24% to 5,789.84), UK’s FTSE 100 (down 0.8% to 6,670.90) and Germany’s DAX (down 0.57% to 7,987.88) edged lower.

Asian markets, which opened before the Indian markets, were subdued today. Hong Kong’s Hang Seng (down 1.01% to 28,838.37), Singapore’s Straits Times (down 0.48% to 3,857.25), Japan's Nikkei (down 0.73% at 17,331.17), South Korea’s Seoul Composite (down 1.57% to 2,026.44), Taiwan's Taiwan Weighted (down 2.07% to 9,496.47) edged lower.

On Wall Street on Thursday, 11 October 2007, Chinese Internet company Inc. tumbled 10% after JPMorgan cut its third quarter revenue target, spurring concerns that the recent US tech rally may be coming to a close. The tech-heavy Nasdaq Composite Index lost 39.41 or 1.4% at 2,772.20, while the blue-chip Dow which hit an intraday record high earlier, settled 63.57 points or 0.45% lower at 14,015.12.

As per data released by Association of Mutual Funds in India (AMFI) on Thursday, 11 October 2007, equity schemes witnessed a net outflow of Rs 957 crore in September 2007. Equity schemes collected Rs 2282 crore in new fund offers (NFO) (this pertains to NFOs for which allotment was concluded in the month), in the month. Existing opened ended equity schemes witnessed a net outflow of Rs 2951 crore in the month.

Consolidated Construction Listing

Consolidated Construction will list on Oct 15 2007

Market Radar - Oct 12 2007

Market Radar - Oct 12 2007

Market Radar

Market Radar

Market Mantra and Future-O-Scope

Market Mantra and Future-O-Scope

Parekh Aluminex

Parekh Aluminex

August 2007 industrial production data, outcome of RIL AGM to dictate trend

A number of events and data are scheduled today which will impact the bourses today. The market has been on a roll on the back of robust FII inflow. But correction in Asian markets today may trigger correction on the domestic bourses as well.

Reliance Industries (RIL) holds its annual general meeting (AGM) today, 12 October 2007. Expectations have been running high about RIL declaring bonus or stock split in the AGM. If expectations of stock split or bonus from RIL are belied, the market may edge lower given that RIL is a heavyweight in the two key indices Sensex and Nifty.

The government will unveil industrial production data for August 2007 today. The data is expected to hit the market at about 12:00 IST. The industrial production growth was at annual 7.1% in July 2007.

The data on wholesale price based inflation for the year through 29 September 2007 is also due at about 12:00 IST today. Inflation moved up 3.42% in the week ended 22 September 2007 from 3.23% in the week ended 15 September 2007.

The market has been a roll with the Sensex hitting record highs almost every day since the past few days. Heavy FII buying and hopes of a further cut interest rates by the US Federal Reserve has boosted bourses.

As per provisional data, FIIs bought shares worth a net Rs 795 crore on Thursday, 11 October 2007. Domestic institutions sold shares worth a net Rs 420 crore on that day.

Asian stocks edged lower today. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 0.6% to 2.4%.

On Wall Street on Thursday, 11 October 2007, Bidu tumbled 10% after JPMorgan cut its third quarter revenue target, spurring concerns that the recent US tech rally may be coming to a close. The tech-heavy Nasdaq Composite Index lost 39.41 or 1.4% at 2,772.20, while the blue-chip Dow which hit an intraday record high earlier, settled 63.57 points or 0.45% lower at 14,015.12.

Sensex in sight of 19k

The Sensex could breach the psychological 19000 level for the first time provided the market continues with the Thursday's uptrend. The bullish sentiment on the back of strong buying, higher fund inflows into the equities, global crude oil price trading around $83 a barrel and key interest rates being kept unchanged by the US Fed are indications that the Sensex may soon surpass the 19k mark. The market may come under pressure in early trades following extensive selling in morning trades in Nikkei, Hang Seng, Straits Times and Kospi.

US indices faltered on Thursday. The indices ended in the red , While the Dow Jones dropped 64 points at 14015, the Nasdaq ended 39 points lower at 2772.

Barring few, majority of the Indian floats ended at lower levels. Infosys, Wipro and rediff was the biggest loser and tumled nearly 6% each. Satyam and Patni Computers shed over 5% each while HDFC bank, Dr Reddy and ICICI Bank, declined over 1% each. However, VSNL bucked the downtrend and soares 3% while MTNL and Tata Motors was up nearly 2%.

On the crude oil front, the Nymex light crude oil for November series moved up by $1.07 at $83.09 a barrel and Comex gold for December delivery rose $10.70 settle at $756.70 a troy ounce.

Daily Technicals - Oct 12 2007

Daily Technicals - Oct 12 2007

Trading Calls

Nifty (5525) Sup 5446 Res 5616

Buy Rolta (521) SL 516
Target 531, 534

Buy Bombay Dyeing (702) SL 696
Target 712, 716

Buy Crompton Greaves (344) SL 339
Target 352, 355

Sell HPCL (264) SL 269
Target 256, 253

Sell Dr Reddy’s Labs (631) SL 637
Target 621, 618

Bears hope for a weak end!

Our age knows nothing but reaction, and leaps from one extreme to another.

Infosys numbers may have been below our expectations. But it does not warrant the kind of reaction seen yesterday. The metrics like pricing were in fact good. A partial recovery may be seen on the Infosys counter and other IT shares. If it wasn't for the steep drop in software shares, the Sensex may have crossed the 19K mark yesterday itself. Nevertheless, one should not be too obsessed with these landmarks and focus on one's own portfolio.

The bulls seem to be betting big on Reliance AGM. Any big bang announcement could cause a spurt. But don’t be surprised if weakness sets in sooner than later. For the medium to long term a lot of announcements are expected in the coming months and 3000 mark may be just a few months away.

Today's IIP numbers (for August) and the following reports will give some clues on the health of the economy. We expect a soft opening due to the weak trend across global markets. Reliance alone may find it difficult to hold the indices. If the current momentum continues, bears hopes of a weak end will remain just that.

Koutons Retail India will list on the bourses today. The IPO of apparel retailer was subscribed 45.21 times and the company has set an issue price of Rs415 per share. It could open at a premium of over Rs100 at least. Shares of Raymond have been on an upswing of late, ahead of Kouton's listing. Today also, Raymond is likely to do well. Mastek will be in action. The company has reported good result for the July-Sept quarter, but its guidance is muted, just like that of Infosys.

IT sector is clearly losing favour with the investors due to the continuous rise in the rupee. What's worse, the future too looks bleak, as the rupee is expected to appreciate in line with the strength in the Indian economy. Also, the dollar will remain under pressure with the slowdown in the US economy. Another concern is that starting FY10, the IT sector will have to pay higher taxes as the tax holiday they currently enjoy will come to a close. Still, we expect a slight bounce back in IT shares today after yesterday's thrashing.

On the whole, the sentiment remains bullish purely because of the strong foreign capital inflows, though valuation-wise the market looks overbought. We expect the market to remain choppy this month with a positive bias. Results will continue to drive the sentiment. Globally, the scenario is quite good, barring oil prices, which have crossed $83 per barrel and is close to the all-time trading high of $83.90 set on Sept. 20. But with the government announcing issuance of bonds, oil PSUs as well as consumers can heave a sigh of relief.

One worry is what the RBI will do in its mid-term review of the annual monetary policy on Oct. 30, which will be announced a day before the FOMC meeting in the US. Given the unprecedented overseas inflows, the RBI may decide to go for another CRR hike. At the same time, credit growth is moderating, which is also a worry.

Among the prominent companies announcing their results today are: Aban Offshore, Exide, Geojit, HDFC Bank, Omnitech, Rallis India and Tata Metaliks.

Technology shares led a broader stock market sell-off on Wall Street, with investors locking in some gains after pushing the Dow Jones Industrial Average and S&P 500 index to record intra-day highs.

The S&P 500, which rose as much as 0.9% to a record earlier in the day, lost 8 points, or 0.5%, to 1,554.41. The Dow, which also hit an intra-day record, dropped 64 points, or 0.5%, to 14,015.12. The Nasdaq Composite Index decreased 39 points, or 1.4%, to 2,772.2.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 5 to 3 on volume of 1.52 billion shares. On the Nasdaq, decliners topped advancers 7 to 3 on volume of 2.54 billion shares.

In economic news, the trade deficit fell to a seven-month low, thanks to strong sales overseas and the impact of the weak dollar.

The number of Americans filing new claims for unemployment fell last week, versus expectations for no change in the number. The four-week moving average, considered to be a more reliable number, also dropped.

Another report showed that the number of mortgage delinquencies fell in September after hitting a 32-month high in August.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.63% from 4.65% late on Wednesday. COMEX gold for December delivery rose $10.70 to settle at $756.70 an ounce.

US light crude oil for November delivery rose $1.78 to settle at $83.08 a barrel on the New York Mercantile Exchange. Oil prices gained after the weekly government report showed a drop in crude inventories.

European shares closed higher. The pan-European Dow Jones Stoxx 600 index rose 0.57% to end at 390.43. The UK's FTSE 100 rose 1.38% to 6,724.50, the German DAX 30 added 0.59% to 8,033.69, and the French CAC-40 climbed 0.42% to 5,862.83.

Latin American stocks dropped. Brazil's Bovespa fell 1.2% to end at 62,455.77, giving back 741 points as it retreated from an all-time high above the 64,000-point level. Mexico's IPC fell 0.5% to 31,980.95. Chile's IPSA slipped fractionally to 3,392.86 as investors waited an interest-rate decision from the central bank. Argentine stocks fell 1.3% to 2,246.85.

Most Asian markets were down this morning following the decline in US shares.

Bulls eye 19k

Another impressive session ended with sharp gains shrugging off all the negative sentiments from the poor quarterly figures of Infosys. All the other IT stocks followed as the whole of IT index lost 5.6%.

However, bulls fought back as both the key indices closed at new all time highs. NSE Nifty closed above the 5,500 mark for the first time. Auto, Capital Good and Metal stocks led from the front.

Finally, BSE 30-share benchmark Sensex ended 155 points higher to close at 18,814. NSE Nifty advanced 83 points to close at 5,524.

Reliance Industries gained by 0.6% to Rs2630 after the company announced that would receive formal approval from the government for its KG basin gas pricing formula. The scrip touched an intra-day high of Rs2659 and a low of Rs2582 and recorded volumes of over 49,00,000 shares on NSE.

DLF surged by over 3% to Rs918 after the company announced that they would raise $1.5bn debt via overseas arm. The scrip touched an intra-day high of Rs929 and a low of Rs897 and recorded volumes of over 23,00,000 shares on BSE.

IDFC surged by over 7.5% to Rs184 after reports stated that the company’s Private Equity, a wholly owned subsidiary of the company is expected to raise $700mn. The scrip touched an intra-day high of Rs194 and a low of Rs166 and recorded volumes of over 93,00,000 shares on NSE.

L&T spurred by over 3% to Rs3484 after the company announced that they have acquired Switchgear Company in Malaysia. The scrip touched an intra-day high of Rs3508 and a low of Rs3380 and recorded volumes of over 11,00,000 shares on NSE.

Maruti Suzuki regained 1.6% to Rs1119. The company announced that they are in venture with Magneti and Suzuki Motor. The scrip touched an intra-day high of Rs1134 and a low of Rs1084 and recorded volumes of over 12,00,000 shares on NSE.

Infosys dropped by over 7% to Rs1976 after the company reported a consolidated net profit of Rs11bn in the second quarter versus Rs10.79bn in the quarter ended June, translating into a sequential growth of 2%. Consolidated net sales have risen by 8.8% QoQ at Rs41.06bn versus Rs37.73bn in the quarter ended June. The scrip touched an intra-day high of Rs2100 and a low of Rs1963 and recorded volumes of over 44,00,000 shares on NSE.

Hindustan Zinc slipped by 2% to Rs853. The company announced that it has cut Zinc prices by Rs4,000 per ton and cuts Lead prices by Rs8,800 per ton. The scrip touched an intra-day high of Rs865 and a low of Rs823 and recorded volumes of over 96,000 shares on NSE.

IT stocks were badly beaten up on back of disappointing Q2 numbers by IT bellwether Infosys, the scrip was down by over 7% to Rs1976, Satyam Computer slipped 7% to Rs478, Wipro declines 3% to Rs488 and TCS dropped 4.7% to Rs1072.

Oil marketing stocks were in limelight after Cabinet approved Rs234.58bn of oil bonds to refiners. Bongaigaon Refinery rallied by over 9.5% to Rs68, BPCL rose 1.1% to Rs376 and Cairn was up 2.5% to Rs183.

Stocks in News:

L&T to buy the switchgear business of Tamco in Malaysia for US$108mn.

Patni stake sale is said to be back on track after Ashok Patni and Gajendra Patni quit as EDs.

DLF plans to raise US$1.5bn through a global debt float.

Kotak Mahindra Bank raises US$410mn via stake sale.

Jai Corp plans to raise a VC corpus of Rs400bn through its wholly owned subsidiary for its real estate business.

Bharati Shipyard has bagged Rs3.5bn order from SCI for four anchor handling tugs cum supply vessels.

Gitanjali Gems is close to buying a US jewellery retailer for $100mn.

IDEA has tied up long-term financing of Rs30bn from IDBI led consortium of banks and financial institutions.

Wipro takes over Nokia Siemens Networks radio access related R&D activities in Germany along with 58 employees.

United Phosphorous plans to raise up to Rs20bn through an issue of equity shares, FCCBs or GDRs to QIBs.

Nokia Siemens Networks bags a order from BSNL to deploy broadband access across 7,000 villages.

ITC's paper arm plans to invest Rs15bn to set up a pulp and paper manufacturing unit in AP.

Maruti Suzuki forms JV with Fiat group company Magneti to produce electronic control units for diesel engines.

Tata Motors has signed a definitive JV agreement with the Fiat for manufacture of passenger cars and engines at Ranjangaon.

Bajaj Auto has launched its new 200cc motorcycle Avenger DTS-i.

PFC has decided to charge Rs50mn each to the developers of the remaining seven identified 4,000MW power projects.

IFC has decided to fund the 4,000MW ultra mega power project to be built by Tata Power at Mundra in Gujarat.

Hyundai India will lose Rs1.56bn this financial year due to the
appreciation of Rupee which works out to Rs13,000 per car.

PFC is in talks with several international private equity players for establishing an equity fund for financing power projects in India.

Government announces Rs235bn bonds to partly compensate under recoveries of PSU oil companies.

Government has scaled down current year’s power capacity addition target from 16,875MW to about 14,000MW.

Bank of Japan holds the key interest rate steady at 0.5%.

Government mulling over a proposal to allow FDI in commodity brokerages.

Fund Activity:

FIIs were net buyers of Rs7.95bn (provisional) in the cash segment on Thursday while the local institutions pulled out Rs4.2bn. In the F&O segment, foreign funds were net buyers at Rs3.5bn.

FIIs were net buyers of Rs17.48bn in the cash segment on Tuesday. With this, their net investment in the month has crossed US$4bn and year-to-date the same is US$16.3bn.

Major Bulk Deals:

Reliance Capital has bought Emami while Sundaram MF has sold it; UBS has picked up Genus Power; Macquarie Bank has purchased JK Tyre but HDFC MF has sold the same.

Upper Circuit:

RIIL, Jindal Drilling, Deep Industries, Tourism Finance, Evinix, REI Agro, Jai Corp, IID Forgings and KEI Industries.

Lower Circuit:

Malu Paper, Genus Power and Lloyd Metal.

Dhanus Technologies Allotment Status

Dhanus Technologies IPO Allotment

Grey Market - Dhanus, Reliance Power, Supreme Infra

Reliance Power 40 to 41 (increase)

Dhanus Tech 295 70 to 75

Koutons Retail 415 100 to 105

Consolidated Construction 510 205 to 210

Supreme Infra 108 60 to 65

Saamya Biotech 10 5 to 7

MAYTAS Infra 320 to 370 135 to 140

Circuit Systems (India) Ltd. 35 3 to 4

Daily Technicals, Futures, Outlook - Oct 12 2007

Daily Technicals, Futures, Outlook - Oct 12 2007

Supreme Infrastructure Allotment

Supreme Infrastructure Allotment

Bharati Shipyard, Educomp, India Oil and Gas, INFY, SBI, Spice Communications

Bharati Shipyard, Educomp, India Oil and Gas, INFY, SBI, Spice Communications

Daily Technical Analysis

Nifty — The index opened on a flat note and witnessed a rally throughout the day’s trading session. It ended the day with a gain of 84 points.

Upswing continues — Post its breakout from the 5000-5261 range, the index is exhibiting strength and has closed on a strong note. Support is around 5455-5424 range. Intra-day dips should find support around these levels.

Conclusion — Expect the upswing to continue with intra-day support around

Nifty futures at substantial premium to spot price

Turnover declines

Nifty October 2007 futures were at 5555.05, at a premium of 30.2 points as compared to spot closing of 5524.85.

NSE's futures & options (F&O) segment turnover was Rs 72,261.05 crore, which was lower than Rs 79,786.18 crore on Tuesday, 9 October 2007.

Reliance Capital October 2007 futures settled at premium, at 1,858, compared to the spot closing of Rs 1,840.40.

IBDI October 2007 futures settled at premium, at 154.25, compared to the spot closing of Rs 153.70.

Bharti Airtel October 2007 futures settled at discount, at 1,089, compared to the spot closing of Rs 1,096.25.

In the cash market, the S&P CNX Nifty was up 83.4 points or 1.53% at 5,524.85. Nifty hit a lifetime high of 5,532.75 today.

Crude shoots above $83

Crude futures soar as data shows unexpected decline in crude inventories

Crude oil futures rose today for the third consecutive day and closed above $83/barrel. Prices rose for the first time this month after an Energy Department report showed an unexpected decline in U.S. inventories.

For the day ending Thursday, 11October, 2007, crude-oil futures for light sweet crude for November delivery closed at $83.08/barrel (higher by $1.78/barrel or 2.2%) on the New York Mercantile Exchange. Futures reached $83.67 during intra day trading.

As per the weekly inventory report by the Energy Department, stockpiles fell 1.67 million barrels in the week ended 5 October. At 320.1 million barrels, U.S. crude-oil inventories are still above the upper end of the average range for this time of year. Refinery activity rose to 87.8% from 87.5% the previous week.

The data also showed motor gasoline inventories rose by 1.7 million barrels last week. Distillate fuel supplies (which include heating oil) fell by a larger-than-expected 600,000 barrels.

Brent crude oil for November settlement rose $1.55 (2%) to $80.15 a barrel on the London-based ICE Futures Europe exchange.

OPEC has said previously that a falling dollar justified higher prices because oil- producing countries sell crude oil in dollars and often buy goods in euros.

Heating oil futures touch all-time high during intra day trading

November natural gas fell 13.4 cents to settle at $6.876 per million British thermal units. The Energy Department also released the report on natural-gas supplies. Natural-gas inventories rose by 73 billion cubic feet for the week ended 5 October. Total stocks now stand at 3.336 trillion cubic feet, down 44 billion cubic feet from the year-ago level, but 237 billion cubic feet above the five-year average.

Against this backdrop, gasoline for November delivery climbed 3.3 cents (1.6%) to settle at $2.0666 a gallon. Heating oil for November delivery increased 3.01 cents (1.4%) to close at $2.2473 a gallon in New York. Futures touched $2.2711 during intra day trading, the highest since 1978.

At the MCX, crude oil for October delivery closed at Rs 3269/barrel, higher by Rs 106 (3.3%) against previous day’s close. Natural gas closed at Rs 273.4/mmtbu as against previous close of Rs 275.2/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.





Infosys, PFC

As the rupee continues to appreciate, the tech major has not upped its top line guidance significantly.

Despite an increase in billing rates and a 257 basis points increase in the operating profit margin to 31.27 per cent q-o-q, Infosys’ bottom line growth for the September quarter is up barely 2 per cent q-o-q to Rs 1,100 crore.

The quarter, a good season for technology companies, however saw the top line in line with expectations at 8.8 per cent q-o-q to Rs 4106 crore.

It indicates that it will not be easy for tech firms to negotiate better billing rates to counter the appreciating rupee. As the management points out, the greater value in products alone can fetch the firm better revenues.

Moreover, the US economy could impact order flows though there are few indications of that in the September quarter because volumes for key verticals such as BFSI and retail are up.

The BPO business has done well with a margin improvement of 3 per cent despite a hit of 100 basis points because of the Philips acquisition.

The concern for both BPO and the company as a whole lies in attrition, which was up marginally by 0.5 per cent in the quarter.

However, the management attributes it to people opting for higher studies and says wage inflation is under control. The reason why Infosys has hired fewer people - 4500 - is because its Mysore facility is behind schedule and it has had to postpone recruitments.

Even though the performance has more or less met expectations and horizontals such as consulting and package implementation are beginning to contribute more, the tech major hasn’t really upped the guidance significantly.

Compared with $4.05 billion earlier, the top line guidance has seen a muted rise in the range of $4.16-4.17 billion. Meanwhile, the rupee could continue to appreciate. Infosys says it will end FY08 with an earnings per share of Rs 79.49-79.88 or an 18 per cent increase y-o-y.

On Thursday, the stock crashed 7 per cent to close at Rs 1976, and trades at just under 25 times FY08 estimated earnings and does not deserve to be re-rated at the current juncture. The stock has rallied about 22 per cent from its low three weeks ago to Thursday’s high of Rs 2130, and could take a breather.

Power-focused non-banking financial company, Power Finance Corporation (PFC), reported a satisfactory performance in its business.

Sanctions jumped more than 150 per cent y-o-y to Rs 21,900 crore in the second quarter of the current financial year though disbursements, which are spread over four to five years, grew 6 per cent to Rs 3,340 crore.

Loan assets grew 21 per cent. The net interest income grew 38 per cent to Rs 447 crore, thanks to improving yield on advances by 88 basis points and stable borrowing costs, which rose at a lower rate of 67 basis points.

Nearly two-thirds of its advances have a reset clause every three years, and the company has priced 48 per cent of its loans upwards during the current quarter. As a result, net interest margins improved 33 basis points to 3.76 - one of the highest when compared to its peers.

Even on the operational front, the company has delivered good performance as costs as a percentage of total assets came down to 0.06 per cent against 0.23 per cent a year ago. Its low NPAs fell even further from 0.23 per cent in second quarter of FY07 to 0.06 per cent in September 2007 quarter.

However, forex losses of Rs 22.9 crore resulted in operating profit increasing at 25 per cent and a 30 per cent higher tax provisioning led to a net profit growth of about 23 per cent.

This was lower than analysts’ expectations and much below the net profit growth of 95 per cent in the June quarter. The business potential for PFC is immense as around 78,000 MW of new generation capacity is going to be added by FY12, and the company will play a pivotal role in financing.

At Rs 211, the PFC stock trades at about 1.9 times its estimated price to book value for FY09. While the stock has double since its listing in February 2007, all the near-term upsides are factored in.

Infy tumbes on poor guidance

For investors used to seeing positive surprises in the financial results of Infosys Technologies quarter after quarter, a performance that was merely in line with expectations and a sober guidance came as a disappointment, analysts said.

The stock was beaten down 7% on BSE on Thursday as traders liquidated the positions built up over the past two weeks, when it had rallied up nearly 13% on buoyant sentiment.

“The market had worked up a lot of expectation which got diluted today,” an analyst with a Mumbai brokerage said. “The mood could spill over to Friday and the selling pressure continue in the short-term, but the outlook is not all that bad,” he added.

Infosys has projected a consolidated revenue growth of 34.5-35% for the full year, which is superior to the average industry growth rate, analysts said. “If the demand-supply situation was turning adverse, they would not have seen a 1.9% rise in rates. So when one begins to objectively study the numbers and listen to what the management has to say, it is clear that the business environment is favourable, despite Re levels.”

Analysts said Infy has met market expectations in its Q2 performance, but the market had hoped for a significant increase in guidance and fresh optimism on future profitability.

One analyst said investors had expected Infosys to add as many as 7,000 people during the July-September quarter and interpreted a net addition of 4,500 as a cautious move. The company’s explanation that the expansion of its Mysore campus had been delayed and hiring held up by a month failed to cheer up investors.

While the impact of an appreciating rupee has been well debated, the visible hit taken by the company and its statement that operating profit margins could slip by as much as 100 bps for the fiscal year were also factored in.

“Operating profit margins had expanded for the quarter, but the pressures remain in terms of how the US market is going to move and whether the rupee will be stable at least at these levels,” a market watcher said.

Concern over whether the subprime credit defaults in the US would have a cascading effect on its economy and subsequently, technology spending by companies, has dominated sentiment for IT stocks in recent months. Infosys results, the first major one in this earnings season, did not suggest anything that would justify that concern.

“But it is too early to say if the US subprime crisis has blown over. We have to wait to see what happens in the next quarter... If there is any impact, it will only be in the fourth quarter or in the first quarter of FY09. The volumes are a little weak but for the full year they have increased their hiring target — so I don’t see any concerns there,” another analyst said.