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Wednesday, November 14, 2007

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Punting on future gains

Each bull market is based on its internal logic, one that seeks to explain the seemingly incomprehensible — a vertiginous rise of the markets. So the 1992 bull run had Harshad Mehta’s replacement cost theory. In 2000, Ketan Parekh spoke about the new economy and how it would cast aside the old order. This time, the bull phenomenon has a new logical framework, the esoteric-sounding ‘embedded value.’

This concept has been used to justify a rise in stock prices even as the fundamentals of the Indian corporate sector — operating margins, cash flow — are looking weaker than a year ago. So, is the market missing the woods of the fundamentals for the trees of “hazy” future gains?

Consider SBI, Reliance Industries and Larsen & Toubro. Over the past three months, these companies have seen their stock prices move up by around 50%. The reason for this sudden increase has been associated with the fact that these companies have wholly-owned subsidiaries that will contribute to the cash flows of the company in the near future and thus, need to be valued in the stock price.

A theory for the excesses?

Brokers have given a thumbs-up to the theory that they feel can explain current valuations of the Indian stock market. The theory has been gaining currency for the past two years, but it is only in the past six months that it has been quoted widely to explain the massive rise in certain stocks.

So much so that in August 2007, brokers and analysts believed the Sensex still had an upside of 20% on account of embedded value in certain stocks, which had not been reflected in the stock price. By the beginning of November, the market had moved up by 29% and had exhausted almost all of that value.

That, however, was not the end of the story. According to research reports, more than 20 stocks that are a part of the Sensex still have upsides that are not noticed by the market. Most reports are bullish on large cap stocks like ONGC, Tata Motors and SBI and believe there is still an upside for these stocks in a market that is hovering around 20,000.

Embedded or embattled?

Simply explained, embedded value is the market putting a valuation to earnings that are somewhat visible but may not be completely evaluated as they do not form the main aspect of the company’s business. Broking houses in India are seeing embedded value in many stocks.

Bharti Airtel for its towers, Bajaj Auto for insurance, ITC for hotels and paper — these are some of the companies that have assets or subsidiaries that are not valued in the mainline assets. The earnings are fairly visible to analysts or the markets and some amount of value can be attached to their businesses. The market, though, is now trying to attach embedded value to all companies — whether their earnings are visible or not.

Embedded value is calculated by doing a sum of the parts (SOTP) valuation — the stock price is divided into different businesses to arrive at valuations. While fund managers agree that the SOTP methodology itself is not a problem, the way it has been applied is. This happens when analysts try to value subsidiaries that will take a long time to show cash flows into present values of the stock price.

“The sum of the parts method should be used for understanding valuations as of today and not of the future. It has to do with today’s real numbers... If analysts are using embedded value to calculate values of businesses where earnings are not visible, then this becomes an exercise in fantasy. Embedded value is not about the future, but is about the present and those who are valuing the invisible future in stock prices have not understood this concept,” says Shankar Sharma of First Global.

The runaway value

Take, for example, Reliance. A research report based on August 1 prices stated that Reliance Industries had an upside of 25% when the stock price traded at 1,798. At that point in time, the valuation of the retail business worked out to Rs 80, which was constant for some time.

Much of the change in stock price was taking place due to the increasing value attached to the exploration and production side of the business. In the sum of the parts calculation of the Reliance stock price, the value of exploration and production had gone up by 135% in less than seven months and was at Rs 719 at the end of June 2007.

All broking firms that have brought out reports on embedded value use the SOTP method for companies whose subsidiaries will take a long time to show any business.

In October 2007, another broking house released a report on Reliance Industries where the E&P business was valued at Rs 745 and the retail business at Rs 182. Surprisingly, the retail business had a consensus value of Rs 80 in August 2007, which jumped to Rs 182 in a span of only three months, without any material change in business prospects.

According to the research report, the reason is associated with the fact that Reliance Industries has invested Rs 2,000 crore during the quarter into Reliance Retail and the “loyal customer base” has crossed the 1.5 million-mark. But the link between this and the cash-generation capabilities of the business is at the moment not very clear. After all, it’s cash the market values and not market share.

But Reliance Retail is not alone. State Bank of India is experiencing something similar. Analysts feel the AMC and insurance arm of SBI need to be reflected in the bank’s stock price. Insurance is a business where companies sell products for a long time before they actually start showing cash flows. But analysts feel the trick lies in grabbing the market share as this ensures future profits.

Based on this logic, both ICICI and SBI carry a part value of their insurance and AMC business in their stock price. The market feels the stock price should reflect the values of these businesses which are wholly owned subsidiaries. In August, the SOTP upside associated with SBI was around 44% when the price was at Rs 1,548. Today, the stock is up at Rs 2,237, capturing the SOTP valuations.

For most banks, their insurance subsidiaries are yet to have any impact in terms of profitability. Given the fact that some are gaining market share, it is important to see how relevant these market shares will be in terms of profitability. Tridib Pathak, CIO of Lotus Mutual fund considers embedded value only if the broader certainity of the business and cash flows are visible.

“People tend to go overboard. During the bull market phases, all aspects of the business get considered and during the bear market phase, even the main activity of the company is ignored by the market and stock prices lag behind. It is human behaviour,” he says.

A 'model' explanation

Optimistic research heads and analysts are running their spreadsheets again to rerate businesses. They believe many companies have changed strategies and there is an improvement in business — as a result, there should be a change in their embedded values as well. The trouble is, ‘embedded value’ is a broad concept. In many cases, even the simple revaluation of land gets carried forward in the stock price. Companies like Hindustan Unilever, which have undervalued real estates, are also getting rerated.

Shriram Iyer, head of research at Edelweiss Capital, which has worked on a report on embedded value, says as far as their report was concerned, the stocks achieved the target price mentioned therein. He feels that in a dynamic market, he will have to revisit the report to see if anything has changed for companies to revise their valuations in terms of their sum of total parts of businesses. But he agrees that barring a few exceptions, there may be no point in looking at embedded values or SOTP when the market is hovering at the 20,000-mark.

All this is reminiscent of the way markets had given internet companies large valuations in 2000. Back then, the revenues never materialised and stock prices collapsed. But then, these aren’t like internet companies. “The big problem today is that many companies who are ‘embedded value’ stars have real revenues in other businesses and hence, it is that much harder to disagree with valuation of loss-making subsidiaries,” says the India head of a multi-strategy fund.

Only visible earnings matter

Even if we agree that the business of wholly-owned subsidiaries should be valued into the stock price of the company, the fact remains that in many cases, the cash flows from these subsidiaries are not clear.

For the value of subsidiaries to be reflected in the stock price, the company should have made plans or announced the strategic sale of these assets; or there is an IPO or even demerger of these assets, and the subsidiary has a certainity of business and cash flows. When such things are not in the news, the value of these subsidiaries becomes at most speculative.

“Analyst reports clearly state that the main line businesses are expected to grow at 17-18% this financial year. That is fine. But the valuation of the subsidiaries into the stock prices and their growth rate is humongous.

Sometimes the growth rates for the subsidiaries are more than 150%. We understand the main businesses, and have no argument against the valuation of subsidiaries; thus, we accept whatever analysts tell us,” says a fund manager who does not agree with the sum of total part of stock prices or the embedded values in stock prices.

He believes these are concepts used in insurance, and there are people working overtime to apply the theory to stock prices. But Mr Iyer feels this approach to valuing companies is credible as significant value exists in balance sheets which is not near-term earnings accretive. “Some assets need to be valued separately to arrive at a fair price of the stock. It is a valuation tool and needs to be revisited all the time,” he says.

Via Economic Times

Eveninger - Nov 14 2007

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BIGGEST-EVER RALLY: Sensex zooms 894pts

The Sensex opened with a positive gap of 302 points at 19,337 on the back of smart gains in the global markets. Unabated buying in the market saw the index rally to higher levels as the day progressed.

The Sensex touched a high of 19,988, and finally settled with a huge gain of 894 points (4.7%) at 19,929 - the biggest-ever single-day gain in absoule terms for the index. Adding the 300-point gain yesterday, the index has nearly regained the 1,200 points it had lost in six sessions till Monday.

The BSE Bankex and the Oil & Gas indices soared 6.5% each to 11,226 and 12,139, respectively. The IT index zoomed 4.5% to 4280, and the Metal index gained 4% at 17,756.

The market breadth was fairly positive - out of 2,849 stocks traded, 2,025 advanced, 763 declined and 61 were unchanged today.

Domestic institutions were big buyers in the cash market today with net investment of Rs 567 crore


All index stocks ended with gains today.

HDFC Bank zoomed nearly 11% to 1,749. ICICI Bank soared nearly 9% to Rs 1,278.

Reliance, Hindalco and Wipro surged around 7% each to Rs 2,888, Rs 218 and Rs 471, respectively.

HDFC rallied 6.5% to Rs 2,756. Satyam and Infosys gained 5% each at Rs 431 and Rs 1,706, respectively.

ONGC moved up over 4% to Rs 1,235.

Reliance Energy, TCS, BHEL and Maruti added 3.5% each to Rs 1,920, Rs 983, Rs 2,874 and Rs 1,039, respectively.

Bharti Airtel, Grasim and Tata Steel advanced over 3% each to Rs 860, Rs 3,668 and Rs 858, respectively.


Reliance Petroleum topped the value chart with a turnover of Rs 678.80 crore followed by Reliance (Rs 541.70 crore), Reliance Natural Resources (Rs 344.25 crore), Reliance Energy (Rs 239 crore) and Essar Oil (Rs 205.50 crore).

Reliance Petroleum led the volume chart with trades of around 3.07 crore shares followed by Reliance Natural Resources (2 crore), Ispat Industries (2 crore), Essar Oil (1.88 crore) and Facor Steels (1.38 crore).

Bulls seize control; Sensex rises 900 pts

The bulls were certainly at the helm on Wednesday driving the Sensex over 900 points higher - its biggest intra-day gain ever. The rally took most market participants by surprise. Inspite of strong global cues, no one expected to see such a sharp rise given the sluggish FII participation this month.

Worries over US credit-related losses eased on Tuesday, after the CEO of Goldman Sachs said the firm would not be taking any significant charges to write off subprime mortgage losses and a positive guidance was delivered from retail giant Wal-Mart. Key US indices ended between 2.4 and 3.4 per cent higher.

Taking cues, Asian shares also posted sizable gains. The Nikkei rose 2.47 per cent, the Hang Seng added 4.90 per cent and the Straits Times climbed 1.42 per cent.

"The steep upmove has taken me by surprise. Global cues were positive, but other than that, there was no specific reason for such a huge rise. The market has clearly ignored factors like IIP numbers and the slow down of foreign money flows. Technically, we were looking at about a 500-point rise," said Suresh Kumar Iyer, technical analyst at Asit C Mehta Investment Interrmediates.

The Bombay Stock Exchange's Sensex rose to a high of 19,987.71, before settling at 19,929.06, up 894 points or 4.69 per cent over the previous close.

The rally was fueled by banking and oil stocks, and supported by metals and technology. HDFC Bank (up 10.81%), ICICI Bank (8.65%), Reliance Industries (7.11%), Hindalco Industries (6.95%) and Wipro (6.84%) were the biggest index gainers. All 30 scrips on the sensitive index finished with gains.

The National Stock Exchange’s Nifty closed at 5937.9, higher by 243 points or 4.26 per cent. The index touched a high of 5950.2 and low of 5700.05 intra day.

The market breadth showed 936 advances against 266 declines on NSE. On BSE, 2024 shares rose and 764 fell.

Banking shares were the star performers in today’s trade. The BSE Bankex shot up nearly 7 per cent to 11,225.82 on the back of gains in Punjab National Bank (up 9.46%), Oriental Bank of Commerce (7.6%), Union Bank (4.65%), Axis Bank (4.2%) and Bank of Baroda (3.95%).

Laggard sector - technology- also moved up significantly. The BSE IT Index was up over 4 per cent. Satyam Computer was up 4.92 per cent, Infosys Technologies added 4.84 per cent, Financial Technologies rose 3.97 per cent and Tata Consultancy Services gained 3.57 per cent.

Movement in the sector was attributed to value buying in stocks with good earnings and strong bottomline growth. The rupee ended higher against the US dollar at 39.32.

According to SEBI data, foreign institutional investors have been net sellers of Rs 2179.5 crore so far this month. Domestic funds, on the other hand, have been buyers, holding up the market.

"Predicting levels for tomorrow will be difficult; though traders could use a trailing stop-loss of 5830," Iyer said.

"I advise caution and expect profit booking at every rise. But if, for whatever reason, the rally does continue, we could see 6150-6200 levels on Nifty," he added.

Sensex scores biggest ever gain of 893.5 pts

Stock market barometer BSE Sensex today registered its biggest one-day gain of 893.58 points to settle at the third-highest level ever on buying by investors in bank counters and blue chips such as Reliance Industries.

RIL, the country`s most valued firm, soared by 7.11 per cent. HDFC Bank gained 10.81 per cent, while HDFC rose by 6.51 per cent at close.

"The market gain was because of global cues. Besides, the political development also gelled well with the sentiment. The rally was driven by short covering, strong buying by domestic investors. However, there was not much involement by foreign investors," ASIKA Stock Brokers` Paras Bodhra said.

The rally came after a downward correction of about 10 per cent from the intra-day peak of 20,238.16 on October 30 to a trading low of 18,333.21 on November 12.

The previous biggest one-day gain was on October 23 this year, when the Bombay Stock Exchange barometer rose 878.85 points after market regulator SEBI allowed sub-accounts of Foreign Institutional Investors (FIIS) to trade.

The broader S&P CNX Nifty of the National Stock Exchange also zoomed by 242.50 points or 4.26 per cent to 5,937.90 from previous close of 5,695.40.

Strong global cues, easing worries over the US credit crisis and indications of a softening of hardline by the left parties on the Indo-US Civilian Nuclear Deal powered the rally, market players said.

Post Market Commentary

The market today reported handsome gains with the Sensex rallied over by 950 points, which is its highest ever-single day rally. The market toady boosted on the back of strong global cues as well as due to easing down of US credit crisis after the executives from US assured the investors that the banking system could survive from the shocks of credit losses. The buying activity is seen across the board but scrips from banking, capital goods, metal reportd the highest gains. The market opened on a strong note and keeps on marching forward through out the trading session. Finally, BSE Sensex closed with a hand some gains of 893.58 at 19,929.06 and NSE Nifty surged by 242.5 points to closed at 5,937.90. Overall, the market breadth was strong as 2,024 stocks advanced whereas 764 stocks declined. The BSE mid cap and Small cap closed higher by 171.91 points and 238.09 points at 8,285.63 and 10,039.38 respectively.

BSE oil & gas index improved by 729.94 points to close at 12,138.87 as Essar Oil (36.50%), ONGC (4.39%), Indian Oil (4.18%), Cairn (4.16%) and Gail (2.24%) closed higher.

BSE Metal index grew by 709.30 points to close at 17,756.03 as NALCO (14.71%), Jindal Saw (8.20%), Hindalco Industries (6.95%) and SAIL (5.67%) are closed in green.

BSE bankex index surged by 687.77 points to close at 11,225.82 as HDFC Bank (10.81%), PNB (9.46%), ICICI Bank (8.65%), Oriental Bank (7.60%) and AXIX Bank (4.20%) closed higher.

BSE Capital goods index surged by 574.29 points to closed at 20,866.85. Pushing it up are Siemens by (6.42%), Areva by (5.83%), BEML by (5.40%), BHEL (3.49%), L&T (2.82%) and ABB by (2.56%) closed higher.

BSE IT index closed firmly at 4,280.32 as it was up by 184.59 points. Wipro 6.84%, Infosys 4.84%, Satyam 4.92%, TCS 3.57% and Patni Computer 3.12% closed in green.

BSE Reality index closed higher by 317.70 points at 10,316.36. Leading the rally are Indbul Real by (7.65%), Ansal infra by (6.48%), Omaxe (4.24%), Unitech (2.66%) and Parsvnath (2.25%).

Sensex surges on firm overseas markets

Solid gains in the Asian markets helped the domestic index open with a huge positive gap of 302 points at 19,337 and rise over 5% during intra-day trades. Correction once again took a back seat as bulls went on a rampage and provided healthy support to the market. The market, which gained around 300 points in yesterday's trades, remained firm as hectic buying was witnessed since early trades that lasted through the session. The Sensex received major support from the firm US and Asian markets. Relentless buying in index heavyweights, banking, oil, and information technology stocks propelled the index to an intra-day high of 19,988, up 952 points over its last close. The Sensex finally ended the session with a gain of 894 points at 19,929, while the Nifty surged 243 points at 5,938.

The market breadth was very positive, with the gainers outpacing the losers in the ratio of 2.65:1 on the Bombay Stock Exchange (BSE). Of the 2,850 stocks traded on the BSE, 2,024 stocks advanced, 764 stocks declined and 62 stocks ended unchanged. All the sectoral indices notched up significant gains. BSE Bankex was the biggest gainer and soared 6.53% followed by BSE Oil & Gas index (up 6.40%), BSE IT index (up 4.51%), BSE Metal index (up 4.16%), BSE PSU index (up 3.91%) and BSE Teck index (up 3.83%).

All the 30 stocks in the Sensex basket ended at higher levels. HDFC Bank led the upsurge and flared by 10.81% at Rs1,749. Among the other major gainers ICICI Bank surged 8.65% at Rs1,278, Reliance Industries moved up by 7.11% at Rs2,888, Hindalco advanced 6.95% at Rs218, Wipro vaulted 6.84% at Rs471, HDFC shot up by 6.51% at Rs2,756, Satyam Computer added 4.92% at Rs431 and Infosys rose 4.84% at Rs1,706.

Banking stocks were the star attraction during the day and rallied sharply. Punjab National Bank soared 9.46% at Rs601, Oriental Bank jumped 7.60% at Rs256, Union Bank added 4.65% at Rs186 and Axis Bank gained 4.20% at Rs989.

Over 3.05 crore Reliance Petroleum shares changed hands on the BSE followed by Ispat Industries (2 crore shares), RNRL (1.99 crore shares), Essar Oil (1.88 crore shares) and Faccor Steel (1.38 crore shares).

Reliance Petroleum was the most actively traded counter on the BSE and registered a turnover of Rs682 crore followed by Reliance Industries (Rs541 crore), RNRL (Rs344 crore), Reliance Energy (Rs238 crore) and Essar Oil (Rs205 crore).

Market close: Govt. subsidise market !

Clearity regarding the nuclear deal from the left coupled with good support from the global indices set the stage for the markets to rally. Indices zoomed up in the positive territory right from the start of the trading session and there was no looking back thereafter. Index heavy weights like Reliance, Suzlon, SBI and L&T were the leaders for the day. The small and mid caps also outshined. Investors rushed for the fertilizer stocks after the Govt announced its proposal to issue fertilizer bonds worth Rs 4,000 cr. Oil marketing companies were also a part of the rally as the crude prices dropped. Telecom stocks were in demand after the major services providers reported their monthly sales numbers for the month of October. The major gainers for the day were on the Banking, metal, Power, reality and consumer goods sector. European indices continues to trade in green.

Sensex closed higher by 894 points at 19929.061. It is helped up by gains in HDFC Bk (1749.1,+11 percent), ICICI Bk (1277.9,+9 percent), RIL (2887.5,+7 percent), Hindalco (217.65,+7 percent) and Wipro (471.2,+7 percent).

Mcnally zoomed and ended higher by 5% after the company bagged order of Rs 34 cr. Company received an Order from Maharashtra State Power Generation Co. Ltd., Mumbai for Design, Manufacture, Supply, Erection, Testing and Commissioning of Ash Handling System with all accessories for their Paras Thermal Power Station Expn. Project. The company provides turnkey solutions in the areas of Power, Steel, Alumina, Material Handling, Mineral Beneficiation, Coal washing, Ash handling and disposal, Port Cranes, Civic and Industrial water supply etc. McNally also manufactures wide range of equipments used in construction, mines and metal production. It is a leading Engineering Company involved in Turnkey solutions with its advantage of being located in the East. Steel and Power sector projects are lined up and they are expected to boost top line / order book in a big way. Results were healthy but valuations appear expensive. . Do read our note on the company to know why the L1 status of the company is a strong investment rationale in favor of the company.

Navneet publications continued to rally and ended higher by 9% after delivering a good set of numbers for the September ended quarter. Topline grew to Rs 82 cr from Rs 60 cr up by almost 35%. The publishing division reported sales growth of 48% to Rs62 cr. The operating profit from publishing department alone grew by 85% on a yearly basis to Rs 16cr. The EBITDA earnings were up 44% to Rs 12.5 cr while the EBIDTA margins improved marginally. Net profit increased to Rs 8.4 cr up by 77% yoy. The company?s NPM improved by 240 bps to 10.2% from 7.8% a year ago. Company enjoys monopoly when it comes to the orienting of the text books. That coupled with other e learning initiatives taken by the company makes navneet a long term investment story. Do read our note to know why the valuations seem to fair as the stock trades at 15 times its earnings.

Technically speaking: Indices traded between a broad range of nearly 600 points. Sensex traded between an intra day high of 19,988 and low of 19,337. Advances outnumbered declines in the ratio of 2:1. Volume for the day stood at Rs 8,796 cr. Markets close just below 20050 which could be a good resistance. As we have been talking recently for big moves in Midcaps and smallcaps, the markets still look good for buy on dips for midcaps and smallcaps.

Sensex vaults 894 points in global rally

Sensex registered its biggest intra-day absolute gains on the back of strong global cues and huge gains in index heavyweights Reliance Industries and ICICI Bank. Banking, oil & gas, IT and metal stocks were star performers. Essar Oil, Ispat Industries surged. Fertiliser stocks were in demand. Market breadth was strong.

The market spurted today as worries about the US credit crisis eased after several top US executives reassured investors that the US banking system could withstand shocks from credit-related losses. Asian markets, which opened before Indian market, surged. European markets, which opened after Indian markets, were trading firm.

Reports that a number of prominent overseas investors are applying for FII registration with the market regulator Securities & Exchange Board of India (Sebi), also boosted the sentiment.

The 30-share BSE Sensex ended up 893.58 points or 4.69% to 19,929.06. At day’s high of 19,987.71, Sensex gained 952.23 points, its biggest ever single day rise.

The broader CNX S&P Nifty gained 242.5 points or 4.26% to 5937.90.

With today's rise, Sensex has gained 1191.79 points or 6.36% in the past two trading sessions. Sensex had risen 298.21 points or 1.59% to 19,035.48 on Tuesday, 13 November 2007, boosted by reports that the Left front may allow the government to negotiate safeguards for a civilian nuclear agreement with the US.

Just before the current rally, the market had witnessed a major correction as worries of widening credit-related losses in the United States rattled global equity markets.

The market breadth was strong. On BSE, 2024 stocks advanced, while 764 stocks declined and 62 stocks remained unchanged. All the 30 Sensex stocks were in green.

BSE clocked a turnover of Rs 8796 crore, compared to Tuesday (13 November 2007)'s Rs 7,964.71 crore.

The NSE futures & options (F&O) turnover was at Rs 68270.99 crore compared to Tuesday (13 November 2007)'s Rs 67336.02 crore.

The Nifty November 2007 futures were at 5952.05, a premium of 14.15 points over spot closing of 5937.90.

The BSE Mid-Cap index was up 2.12% to 8,285.63 and the BSE Small-Cap index was up 2.43% to 10,039.38. Both these indices under performed the Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries surged 7.11% to Rs 2887.50.

Essar Oil surged 36.50% to Rs 120.80. The company and RIL have reportedly increased petrol and diesel prices by Rs 4.50 to Rs 5 per litre. As the international crude oil prices are hovering around the $100 a barrel mark, oil companies in the country are finding it difficult to maintain the profitability. The private sector fuel retailers will lose market share to the government-owned companies as PSUs sell at a lesser price.

The BSE Bankex surged 6.53% to 11,225.82. It outperformed the Sensex. Index heavyweight ICICI Bank soared 8.65% to Rs 1277.90. HDFC Bank spurted 10.81% to Rs 1749.10, Punjab National Bank soared 9.46% to Rs 601.35, Oriental Bank jumped 7.60% to Rs 256.20 and Axis Bank gained 4.20% to Rs 989.15. State bank of India rose 2.20% to Rs 2346.15.

The BSE Oil & Gas index moved up 6.40% to 12,138.87. It outperformed the Sensex. ONGC soared 4.39% to Rs 1,235.25, Indian Oil Corporation moved up 4.18% to Rs 540.70 and Cairn India moved up 4.16% to Rs 214.05.

IT stocks surged as worries over US credit crisis eased. The BSE IT index gained 4.51% to 4,280.32. It underperformed the Sensex. Index heavyweight Infosys Technologies rose 4.84% to Rs 1706.35. Wipro soared 6.84% to Rs 471.20, Satyam Computers gained 4.92% to Rs 430.75, TCS rose 3.57% to Rs 982.85.

The BSE Metal index moved up 4.16% to 17,756.03. It underperformed the Sensex. Jindal Saw soared 8.20% to Rs 808.60, Steel Authority of India (Sail) gained 5.67% to Rs 263.90, Sterlite Industries moved up 3.61% to Rs 1012.25 and Tata Steel gained 3% to Rs 857.95.

India's largest aluminium producer by sales Hindalco Industries jumped 6.95% to Rs 217.65 on reports the company had raised prices of primary aluminium by Rs 2,000 a tonne.

The newly launched BSE Power index moved up 3.15% to 4,670.19. It underperformed the Sensex. CESC soared 8.35% to Rs 618.70, Areva T&D gained 5.83% to Rs 3084.50, Neyveli Lignite rose 5.41% to Rs 214.15, Tata Power gained 4.13% to Rs 1309.95 and Reliance Energy rose 3.59% to Rs 1920.35.

The BSE Capital Goods index rose 2.83% to Rs 20,866.85. It underperformed the Sensex. Siemens moved up 6.42% to Rs 1881.05, BEML rose 5.40% to Rs 1718.25, Bharat Heavy Electricals (Bhel) 3.49% to Rs 2873.85, and Larsen & Toubro (L&T) rose 2.82% to Rs 4492.25.

Fertiliser stocks soared on reports that the government will issue bonds worth Rs 7500 crore to fertiliser firms by end-November 2007 to compensate them for selling the commodity at discounted prices. Rashtriya Chemicals and Fertilisers soared 20% to Rs 72.10, Fertilisers and Chemicals Travancore spurted 10% to Rs 35.85, National Fertilizers soared 10% to Rs 76.10 and Mangalore Chemicals & Fertilisers jumped 8.59% to Rs 41.10.

India's largest cellular service provider by market share Bharti Airtel rose 3.19% to Rs 859.65, off session’s high of Rs 889. Bharti added 2.03 million subscribers in October 2007 against 2.06 million additions in September 2007, taking its total mobile user base to 50.9 million. Meanwhile, Bharti's chairman Sunil Mittal on Wednesday, 14 November 2007, he favours mobile number portability across the country and not just in the four big metro cities.

India’s second largest listed cellular service provider Reliance Communications moved up 2.42% to Rs 724.60.

India’s largest dedicated housing finance company by revenue Housing Development Finance Corporation (HDFC) was up 6.51% to Rs 2755.85 on reports that the company has received a premium commitment of Rs 170 crore from German insurer Ergo for the latter’s 26% stake in its non-life insurance company.

Tata Coffee surged 12.68% to Rs 268.30 on reports that it is looking at buying a Russian brand to market its instant coffee in that country.

GTC Industries jumped 5% to Rs 471.60 after CLSA Mauritius acquired 2.45 lakh shares of the company in a block deal yesterday, 13 November 2007 on the Bombay Stock Exchange at Rs 449.15 per share.

India’s largest real estate firm by market capitalisation DLF rose 2.38% to Rs 926.70 on reports that the real estate firm is buying Singapore-based luxury chain Amanresorts for around $250 million.

Power transmission equipment maker KEC International moved up 4.24% to Rs 855.90 on reports it had secured orders worth Rs 637 crore for transmission line projects in Abu Dhabi and Algeria.

Ispat Industries jumped 10% to Rs 46.60 on speculative buying on market talks it will be included in National Stock Exchange’s futures & options segment shortly.

In Europe, UK’s FTSE 100 moved up 1.20% to 6,438.50, France’s CAC 40 rose 1.36% to 5,614 and Germany’s DAX rose 0.83% to 7,842.41.

Asian markets surged today, 14 November 2007, boosted by a strong rebound on Wall Street yesterday, 13 November 2007. Hong Kong's Hang Seng (up 4.90% at 29,166.01), Japan's Nikkei (up 2.47% at 15,499.56), Taiwan Weighted (up 2.47% at 8,942.93), Straits Times (up 1.82% at 3,538.73) and South Korea's Seoul Composite (up 2.05% at 1,972.58) edged higher.

US markets rallied yesterday, 13 November 2007, after reassuring news from Goldman Sachs Group Inc. and Wal-Mart Stores Inc. calmed some of the market's worst fears about the credit crisis and the economy. The Dow Jones industrial average surged 319.54 points, or 2.46%, to 13,307.09. The S&P 500 index jumped 41.86 points, or 2.91%, to 1,481.04, and the Nasdaq Composite index gained 89.52 points, or 3.46%, to 2,673.65.

Market may open on a firm note

The Market may log gains due to optimism amongst the investors. The market is also likely to see more action on the back of a firm US markets and over 1-3% gains in majority of the Asian indices in the prevailing trades. Further slide in crude oil prices may help the sentiment remain bullish and trigger rally in oil stocks. Among the key local indices, the Nifty could test 6200 on the upside and has supports at 5400. The Sensex has a likely support at 18000 and may face resistance at 21000.

In the US markets, the broader Dow Jones was up by 320 points at 13307, and the tech-heavy Nasdaq was up by 90 points to close at 2674 .

Among the Indian ADRs trading on the US bourses, MTNL was the major gainer by 13.65%, followed by HDFC Bank up by 13.26%,ICICI Bank 12.37% and VSNL 11.14, while Infosys, Satyam, Patni Computer & Wipro were up by 4-7% each. However, Dr Reddy's slipped into the red.

Crude oil prices slipped marginally, the US light crude oil for December delivery moved down by $3.45 at $91.17 a barrel. In the commodity segment, the Comex gold for December delivery slipped by $8.70 to settle at $807.70 an ounce.

Market Mantra and Future-O-Scope

Market Mantra and Future-O-Scope

Market to rally on strong global cues

The market is expected to rally on the back of strong global cues. US markets finished strong yesterday, 13 November 2007. Asian markets were trading firm in early trade today, 14 November 2007.

The market may get further booster on reports that the Employees Provident Fund (EPF) Board may examine the option of investing 5% EPF corpus money in stock markets, in an effort to pay higher returns to its subscribers. The over four crore EPF subscribers are presently getting 8.5% interest despite a strong demand by Left Parties to raise the rate to 9.5%.

Asian markets advanced today, 14 November 2007, boosted by a strong rebound on Wall Street yesterday, 13 November 2007. Hong Kong's Hang Seng (up 3.41% at 28,751.71), Japan's Nikkei (up 1.84% at 15,405.45), Taiwan Weighted (up 2.8% at 8,971.50), Straits Times (up 1.62% at 3,531.86) and South Korea's Seoul Composite (up 1.48% at 1,961.56) edged higher.

US markets rallied yesterday, 13 November 2007, after reassuring news from Goldman Sachs Group Inc. and Wal-Mart Stores Inc. calmed some of the market's worst fears about the credit crisis and the economy. The Dow Jones industrial average surged 319.54 points, or 2.46%, to 13,307.09. The S&P 500 index jumped 41.86 points, or 2.91%, to 1,481.04, and the Nasdaq Composite index gained 89.52 points, or 3.46%, to 2,673.65.

Crude oil prices rose slightly today, 14 November 2007, on expectations data will show that US oil inventories fell for a fourth straight week. US light crude for December delivery rose 25 cents to $91.42 a barrel.

On 13 November 2007, the market ended its six-day losing streak to post gains on value buying. The 30-share BSE Sensex surged 298.21 points or 1.59% to 19,035.48. The broader S&P CNX Nifty gained 78.30 points or 1.39% to 5695.40, on that day. Reports that the Left front may allow the government to negotiate safeguards for a civilian nuclear agreement with the US, aided the surge.

As per provisional data, FIIs sold shares worth a net Rs 332.84 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 264.15 crore on Tuesday, 13 November 2007.

Market Outlook - Nov 14 2007

Market Outlook - Nov 14 2007

Crude price plunges

Crude prices close more than $3 lower as IEA cut its forecast for global demand

Crude oil prices fell today once again and closed almost $3/barrel lower as The International Energy Agency cut its forecast for global demand through 2008 as record prices could curb fuel use. Yesterday, also, prices had slipped almost $2 after Organization of Petroleum Exporting Countries (OPEC) spoke out and hinted about increasing production in near term. Prices fell after OPEC said that it might consider increasing output in its forthcoming meeting, either this month or the one in December.

For the day ending Tuesday, 13 November, 2007, crude-oil futures for light sweet crude for December delivery closed at $91.17/barrel (lower by $3.45/barrel or 1.8%) on the New York Mercantile Exchange. Price had fell to $90.18 during intra day trading. Last week, prices rose to $98.62/barrel during intra day trading on 7 November, 2007. Oil prices had rose 16% in October, 2007, the biggest one-month gain since September 2004.

Brent crude oil for December settlement fell $3.15 (3.4%) to $88.83 on the London-based ICE Futures Europe exchange.

The Paris-based IEA cut its estimate for fourth-quarter demand by 500,000 barrels a day as record prices reduced energy consumption. The IEA also said next year's demand is forecast at 87.69 million barrels a day, or 300,000 barrels a day less than a previous estimate. It was due to higher prices and weaker-than-expected economic data from the U.S. and the former Soviet Union.

The IEA has cut its fourth-quarter forecast three times since August on expectations higher gasoline prices and an economic slowdown in the U.S. will restrain demand.

Yesterday, as per reports, Saudi Arabia’s oil minister had commented that OPEC, will discuss increasing production at its next meeting later this year. OPEC heads of state are reported to gather in Riyadh for a summit this weekend. The next scheduled OPEC policy meeting is on 5 December in Abu Dhabi.

All eyes set on tomorrow’s inventory report

Natural gas in New York was little changed amid speculation record U.S. inventories are ample to meet demand in a winter forecast to be warmer than average. Gas for December delivery declined 1.2 cents to settle at $7.949 per million British thermal units.

Against this backdrop, December reformulated gasoline fell 9.98 cents to $2.3167 a gallon and December heating oil dropped 8 cents at $2.5021 a gallon.

At the MCX, crude oil for November delivery closed at Rs 3590/barrel, lower by Rs 125 (3.4%) against previous day’s close. Natural gas closed at Rs 314.2/mmtbu as against previous close of Rs 316.2/mmtbu, lower by Rs 2/ mmtbu.

OPEC has planned to boost daily oil production by 500,000 barrels. OPEC's production target is 27.2 million barrels a day, beginning 1 Nov. OPEC, has decided to raise their daily output by 500,000 barrels per day, starting 1 November.

Attacks on oil facilities in Middle East 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 Energy Department will come out with the weekly inventory report on crude oil and fuel products for week ended Friday, 9 November tomorrow morning at Washington at 10.30 E.T.

Daily Trading Calls

Nifty (5695) Sup 5659 Res 5807

Buy BHEL (2777) SL 2760
Target 2820, 2830

Buy NDTV (354) SL 349
Target 363, 366

Buy RNRL (165) SL 161
Target 172, 175

Buy AXIS Bank (949) SL 938
Target 977, 981

Sell Hero Honda (661) SL 668
Target 650, 646

Left right, bulls march in!

Our chief defect is that we are more given to talking about things than to doing them – Jawahar Lal Nehru.

Looks like the Left is doing the talking for the bulls! For a change, television talk by AB Bardhan, a senior Left party leader managed to give a fillip to the stock market. He told a news channel that the communists were willing to permit the Government to start negotiations with IAEA on India-specific safeguards. This is a big relief for the Government, though a formal announcement to this effect will be made after the meeting of the UPA-Left panel on the Indo-US nuke deal, on Nov. 16. What's more, the Government will need to have the safeguards approved from the Left parties before signing the same. If the communist allies stick to the current stance, there is a likelihood that the landmark pact between India and the US could still see the light of day. That is still in the realm of speculation and conjecture, for now the bulls seem to have found some positive trigger to latch on to.

Things also appear to be bright as far as global markets are concerned. Call it short covering, a technical pull-back or a dead-cat bounce, US stocks managed to stage a smart rally overnight amid some soothing words from the CEO of battered Wall Street firms. Better than expected earnings from retail giant Wal-Mart also added fuel to the fire. As a result, equity markets surged across the world. We expect the local market to behave similarly. The main indices will witness a gap-up opening in line with the trend in Asian markets. Lower crude oil prices could help boost sentiment though one cannot say the same about FII inflows, which are not showing any sign of revival. This could be a major hindrance for the market in the near term. So, despite the buoyant global trend, the Indian market will remain rangebound yet choppy after initial gains. Stock specific action will continue. And like we mentioned yesterday, hold on to strong counters.

US stocks rallied the most in two months after Wal-Mart's profit beat analysts' estimates and Goldman Sachs said it doesn't plan any significant writedowns on mortgage-related assets. Apple led the Nasdaq Composite Index to its biggest gain in four years after China Mobile said it's in talks to sell the iPhone in China.

The Standard & Poor's 500 Index climbed 42 points, or 2.9%, to 1,481.05, the biggest gain since the Federal Reserve cut interest rates on Sept. 18. The Dow Jones Industrial Average surged 320 points, or 2.5%, to 13,307.09. The Nasdaq added 90 points, or 3.5%, to 2,673.65.

Goldman Sachs CEO Lloyd Blankfein says the company won't take any further significant charges related to the subprime mortgage mess. JP Morgan CEO Jamie Dimon says his company is doing fine and sought to downplay its exposure to subprime and other debt.

E*Trade shares bounced back nearly 41% after slumping 60% on Monday on bankruptcy talk.

Market breadth was positive and volume was strong. Almost nine stocks gained for every one that fell on the New York Stock Exchange.

While the day's advance was positive, it doesn't indicate a new direction for the US market going forward, according to some analysts. Because of the lingering questions about the state of the world's largest economy, a fragile banking sector, high oil prices and consumer spending, US stocks will stay choppy between now and the end of the year.

Laurence Fink, who helped create the market for mortgage-backed securities, says the credit losses that have already cost American banks and securities firms $45bn are about to get worse. Fink, CEO of New York-based fund manager BlackRock, says many institutions don't understand what the credit crunch is going to do to earnings and their balance sheet.

There were more warnings on the US sub-prime crisis. The chaos in the mortgage markets is only going to get worse in 2008 and will put a dent in US mortgage bank earnings, says a report released by Standard & Poor's (S&P). Next year will be the worst for mortgage bank earnings since the 1990s, the ratings agency adds.

US light crude oil for December delivery fell $3.45 to settle at $91.17 a barrel on the New York Mercantile Exchange, sliding after the International Energy Agency cut its monthly forecast on crude demand.

COMEX gold for December delivery fell $8.70 to settle at $799 an ounce on the New York Mercantile Exchange, stalling after a big selloff in the previous session. In currency trading, the dollar continued to slump against the euro. The greenback inched higher against the yen.

Treasury prices fell, raising the yield on the 10-year note to 4.26% from 4.22% late on Monday.

European shares moved off lows to close broadly higher. The pan-European Dow Jones Stoxx 600 index edged up 0.2% to 368.52. The French CAC-40 rose 0.1% to 5,538.91, but the German DAX 30 lagged, slipping 0.4% to 7,777.56. The UK's FTSE 100 closed up 0.4% at 6,362.40.

Stock markets in Mexico and Brazil also advanced. Brazil's benchmark Bovespa stocks index closed up 2.3% to 62,927 while Mexico's IPC index gained 4.6% to 29,484.78. The RTS index in Russia lost 0.9% at 2222 and the ISE National-30 index in Turkey climbed 1.5% to 69,464.

Asian stocks rose for the first time in five days, led by Toyota and Canon, after the yen weakened against the dollar and Wal-Mart's profit beat estimates.

Mitsubishi UFJ Financial Group and National Australia Bank led lenders higher after Goldman Sachs said it doesn't plan significant writedowns on mortgage-related securities.

The Morgan Stanley Capital International Asia Pacific Index added 2.2% to 161.65 as of 11:15 a.m. in Tokyo, after a four-day, 5.4% drop. All markets open for trading climbed.

Japan's Nikkei 225 Stock Average gained 278 points to 15,405.45, its first increase in nine days. South Korea's Kospi index climbed 32 points to 1965, while the Hang Seng in Hong Kong soared by 914 points to 28,717.

The yen dropped to 111.21 against the dollar recently, from as high as 109.22 yesterday.

The rally may not sustain

Markets snapped a six day losing streak after softening of Left’s stance on Indo-US nuke deal lifted the sentiments on Dalal Street. The Left parties on Tuesday said that they may allow government to initiate negotiations on Nuke Deal.

The rally was also fueled by sharp recovery in the Asian markets and buying momentum in the Power, Capital Good and the banking stocks.

All the BSE sectoral indices ended in green except for the BSE IT index the only losing index (down 0.95%). Among the leading gainers, BSE Bankex (up 3.45%), BSE Capital Good index (up 3.40%) and BSE Power index (up 3.04%)

Among the Sensex pack, 19 stocks ended in green. While, 11 scrips finished in negative terrain. L&T, ICICI Bank, HDFC Bank and NTPC were among the major gainers. However, IT bellwether Infosys, Wipro, M&M and TCS were among the major laggards.

Finally, benchmark Sensex surged 298 points to close at 19,035. NSE Nifty closed 78 points higher to close at 5,695.

Reliance Industries edged higher 0.5% to Rs2693 after the company announced that they signed production sharing agreement for deep water offshores in Oman. The scrip touched an intra-day high of Rs2723 and a low of Rs2660 and recorded volumes of over 4,00,000 shares on NSE.

ONGC ended flat at Rs1180. Reports stated that shortage of rigs is likely to delay development of the company’s KG basin block by a year. The scrip touched an intra-day high of Rs1215 and a low of Rs1156 and recorded volumes of over 1,00,000 shares on NSE.

Reliance Communications advanced by 2% to Rs708 as reports stated that the company is in race for acquiring 51% stake in Telkcom Kenya. The scrip touched an intra-day high of Rs720 and a low of Rs695 and recorded volumes of over 63,00,000 shares on NSE.

Ashok Leyland gained 1.2% to Rs37 after reports stated that they are eyeing Joint Ventures in Europe and US for manufacturing of buses. The scrip touched an intra-day high of Rs37 and a low of Rs36 and recorded volumes of over 31,00,000 shares on NSE.

Power stocks sparked up after Left announced that it would allow the government to talk to IAEA for on Nuke deal. Areva T&D was the top gainer, the scrip rallied by over 13% to Rs2914 after the Communist’s move on Nuclear deal. Others like REL gained 2.2% to Rs1857, BHEl was up 2% to Rs2777 and NTPC rose over 7% to Rs272.

IT stocks continued to be on the receiving end as rupee stayed under the Rs40 per USD. Wipro was the top loser, it slipped 3% to Rs442, Infosys was down 1% to Rs1627, Satyam Computer slipped 0.5% to Rs410.

India Cement gained 2.5% to Rs267 after the Board of Directors of the company announced that they would consider raising funds on November 19. The scrip touched an intra-day high of Rs274 and a low of Rs259 and recorded volumes of over 6,00,000 shares on NSE.

Infosys slipped 1% to Rs1627. The company announced its plans to buy European rivals, consulting firms. The scrip touched an intra-day high of Rs1693 and a low of Rs1607 and recorded volumes of over 29,00,000 shares on NSE.

Pratibha Industries surged by over 9% to Rs279 after the company announced that they have secured Rs413.5mn contract. The scrip touched an intra-day high of Rs281 and a low of Rs242 and recorded volumes of over 1,00,000 shares on NSE.

Stocks in News:

DLF to buy ultra-luxury Aman Resorts for US$250mn

Vodafone to sell 0.6% stake in Bharti by November 2008

Ranbaxy increases stake in Zenotech Lab to 34%

Pratibha Industries wins Rs410mn order for the expansion of the domestic terminal at the Delhi airport

Mcnally Bharat receives a Rs340mn order from Maharashtra State Power Generation Company

Bombay Rayon Fashions to spend Rs11bn on building new fabric and garment facilities in Maharashtra

Texmaco signs a MOU with Australia's United group for building joint facilities in West Bengal

KPIT Cummins plans to set up two offshore development centres for Japanese semi-conductor companies

Jindal Steel and Power’s proposed 6mn tons steel plant in Orissa halted due to land acquisition delays

Noida Toll Bridge expects its net profit to double in FY08 to Rs220mn

Faze Three buys 76% of German bath rug maker Pana Textil GmBH for Rs333mn

Indian arms of Pfizer and GSK to benefit from global job cuts

Petronet LNG plans second gas based power plant of 1,000MW at its proposed Kochi LNG terminal

JSW Energy is planning to transfer a power plant, currently under its fold, to the group’s flagship company JSW Steel

Wockhardt Hospitals is planning to set up 14 super-specialty hospitals over the next two years.

SAIL to invest Rs20bn to set up 10 steel processing units

Samsung India would invest US$100mn in four years at its new manufacturing facility at Sriperumbudur near Chennai

Infosys plans to acquire smaller competitors in Europe

Usha Martin has announced a Rs8.5bn hike in its planned capital expenditure to Rs21bn

ITC is likely to buy Parle Products confectionery business

Gail India is likely to pick up stakes in pipelines in Libya, Algeria and Nigeria

HDFC gets Rs1.7bn brand premium from Ergo for the latter’s 26% stake in its non-life insurance company

ONGC has filled for a three year extension of petroleum exploration license for its Assam Arakan block

The Government to infuse Rs200bn as equity capital in PSU banks

The Government plans not to revise retail fuel prices until crude oil prices stabilize

The screening committee of the coal ministry will consider allocation of 23 blocks in December

The Government says a total investment of US$6.5bn is in pipeline for medical tourism industry

Crude oil production is expected to increase by more than 25% over the next five years.

FII Investment Trend:

FIIs were net sellers of Rs3.32bn (provisional) in the cash segment on Tuesday while the local institutions were net buyers of Rs2.64bn.

In the F&O segment, FIIs were net sellers of Rs11.21bn. Foreign funds net sold Indian equities worth Rs8.2bn on Monday.

Mutual Funds pulled out Rs1.86bn from the cash segment on the same day.

FII net sellers

The Foreign Institutional Investors (FIIs) were net sellers to the tune of Rs 1,120.87 crore in the futures & options segment on Tuesday.

According to data released by the NSE, FIIs were net buyers of index futures to the tune of Rs 213.34 crore and bought index options worth Rs 121.82 crore. They were net sellers of stock futures to the tune of Rs 1,446.97 crore and sold stock options worth Rs 9.06 crore.

Subros, PNB

Subros, PNB

Edelweiss Capital IPO

Edelweiss Capital IPO

Jyothy Laboratories IPO

Issue opens on 22 November 2007

Jyothy Laboratories, the maker of household care and fabric care products including Ujala, has set a price band of Rs 620-690 for its initial public offering (IPO) of 44.3 lakh shares.

Shareholders selling stake in the IPO include South Asia Regional Fund, Canzone, ICICI Bank and CDC Investment Holdings. The issue will be open between 22 November 2007 and 27 November 2007.

The company has, over the years, entered other product categories like mosquito repellents (Maxo), personal care products (Jeeva), detergents (Speed), cleaners (Exo) and air fresheners (Maya).

REL, NTPC, SBI November 2007 futures at premium

Turnover in F&O segment rises

Nifty November 2007 futures were at Rs 5736, at a premium of 40.60 points as compared to spot closing of Rs 5695.40.

NSE’s futures & options (F&O) segment turnover was Rs 67,336.02 crore, which was higher than Rs 56,771.23 crore on Monday, 12 November 2007.

Reliance Energy (REL) November 2007 futures were at premium, at Rs 1882, compared to the spot closing of Rs 1857.50.

NTPC November 2007 futures were at premium, at Rs 276.05, compared to the spot closing of Rs 272.15.

State Bank of India (SBI) November 2007 futures were at premium, at Rs 2334.95, compared to the spot closing of Rs 2294.30.

In the cash market, the S&P CNX Nifty gained 78.30 points or 1.39% at 5695.40.

Edelweiss Capital IPO Analysis

Promoted by Rashesh Shah, Venkatchalam Ramaswamy and their wives, Edelweiss Capital (ECL) commenced its operations in 1996. Headquartered in Mumbai, the company has 43 branch offices in 19 Indian cities and employs around 843 full-time employees including 40 research professionals. It operates through its 13 subsidiaries under two streams:: agency business and capital business. The agency business includes investment banking, institutional equities, private client broking, asset management and investment advisory services, wealth management and insurance broking. The capital business comprises wholesale financing services and internal treasury operations.

ECL’s institutional clients stood at 150 institutional investors end September 2007. This is much less compared to its peer Motilal Oswal Financial Services, with 251 institutional clients end March 2007. Nevertheless, the base is high compared to Religare Enterprises, catering to 79 institutional investors end September 2007.

ECL is coming out with public issue to fuel its future growth.


The consolidated income from operation and net profit after minority interest have grown at a CAGR of 130% to Rs 368.96 crore and 142% to Rs 109.01 crore between the year ending March 2004 (FY 2004) and FY 2007.

Well established brand name offering diversified financial services under one roof. An integrated service platform allows for leveraging relationships across lines of businesses, thereby increasing the ability to cross-sell services.


Weak in the retail business.

Most of the revenue is directly/indirectly dependent on the performance of the equity markets.


ECL’s consolidated income from operations surged 135% to Rs 284.58 crore and net profit after minority interest 169% to Rs 109.01 crore in FY 2007. On consolidated net profit after minority interest on post-issue equity of Rs 37.46 crore, EPS works out to Rs 14.6.

At the offer price band of Rs 725- Rs 825, P/E works to 49.7 (on lower band) to 56.5 (on upper price band) times. P/E of listed players Motilal Oswal Financial Services is 51.0 times, India Bulls Financial Services 37.2 times, Emkay Shares 47.5 times, India Infoline Financial Services 71.9 times, IL&FS Investsmart 30.4 times, and Geojit Financial Services 34 times.