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Monday, November 19, 2007
Edelweiss, Kolte Patil, Renaissance, Kaushalya Infra Grey Market Premium
Reliance Power -- 62 to 63
Edelweiss 725 to 825 825 to 850
Renaissance Jewellery 125 to 150 70 to 75
Kolte Patil 125 to 145 140 to 150
Kaushalya Infra 50 to 60 25 to 30
Jyothi Lab. 620 to 690 400 to 425
Mundra Port & Sez 440 580 to 590
Empee Distilleries 400 43 to 45
Varun Ind. 60 55 to 60
Religare Enterprises 185 350 to 360
Barak Valley Cement 42 25 to 30
Rathi Bars 35 +/- 3
Allied Computers 12 12 to 14
SVPCL 42 +/- 2
Market Close: Profit booking hits the gains...
Mid caps and small caps rocked the day with great action for the day. Auto, power, realty, cement and metal stocks also caught invetsors mood as all traded up. Banking stocks witnessed selling pressure at higher levels. Positive close from US market provided some support for Indian markets to open up, but Asian had not big encouraging which brought down the market sentiments down in India. Market gave up its early gains as the fronline counters went for profit booking. During the Mid session indices managed to trade in a narrow range but slipped into negative terrain with more profit booking at the final hours of trading. Europe started of in green but soon slipped into red and as of now its trading mixed.
Sensex ended down by 65 points at 19633.35. Weighing on the Sensex were losses in ITC (198.8,-3 percent), ICICI Bk (1186.85,-3 percent), HDFC Bk (1655.2,-2 percent), Satyam (422.65,-1 percent) and SBI (2304.8999,-1 percent). Losses were restricted by gains in ACC (1083.85,+4 percent), Cipla (186.85,+3 percent), Bajaj Auto (2426.2,+3 percent), TISCO (862.75,+2 percent) and Hero Honda (708.5,+2 percent).
Plywood and laminate maker Greenply Industries performed well in the market. The company has been successful in it endeavour to become a pioneer in the interior infrastructure company in spite of all odds. It has post good set of numbers with top line growth of 27% and operating margin surged up by 120%. Recently Greenply has picked up a controlling stake in two Gujarat-based plywood manufacturing companies "Galaxy Decor" and "Platinum Veneers". The board also cleared the company's proposal to set up a new laminate-producing unit in Himachal Pradesh as well as an MDF (medium densified fibre board) production line within the premises of its existing Uttarakhand plant. The acquisition will enhance the presence of Greenply in western India and help save logistical costs substantially. Following to this the two companies will become wholly-owned subsidiaries of Greenply Industries. Valuation at the current price appear reasonably attractive. We are positive on the business on longer term basis. Do read our detailed note to know more on the stock. Greenply rocked as it ended up by 14%.
AIA Engineering, a manufacturer of high chrome mill internals, which are used as both consumables and for new projects in the cement, mining and thermal power generation industry. Cement & Mining are key end-user in industries. The company has over 90% market share in India in the cement sector. It has posted decent number for the quarter September ended 2007. The Phase I of its expansion of 50,000 MT commenced production in this quarter. Valuations are very expensive at the current market price. But we are positive on the business environment. The company drives 70% of revenues from replacement market. AIA is one of niche player in this segment and second largest player in the country. The stock on light for the day and ended up 7.5%. Do read our detailed note to know our view on the stock.
Alok Industries was also on the limelight as the company has received a conversion notice from its Paying, Conversion and Transfer Agent for conversion of 9 FCCBs of USD 50000 each aggregating to USD 0.45 million into equity shares. Board of Directors issued and allotted 309112 equity shares of the face value of Rs 10 each for cash at a premium of Rs 61.58 per share as an outcome of conversion of above referred FCCBs. After the conversion the paid up equity share capital of the Company has increased from 17,37,87,514 equity shares of the face value of Rs 10/- each to 17,40,96,626 equity shares of the face value of Rs 10/- each. The stock was up 11% on the back of this announcement.
Technically Speaking: Markets traded in narrow range, with strong positive breadth. Sensex touched intraday high of 19971 and low of 19584. Over all market turnover was decent for the day at Rs 8081 Cr. Market breadth was in favor of Advances, where the Decliners stood at 636, Advances were stood at 2157. Sensex is near its crucial supports of 19450 and 19350 levels. If both are broken, we might go down upto 18000.
Sensex pares early gains; down 65 points
The Sensex closed the session with a loss of 65 points. The market opened firm at 19,895 up 197 points and hit the day's high of 19,971 within few minutes of opening on selective buying in frontline stocks. However, the Sensex saw erosion of its early gains on the back of selling in banking, FMCG, and oil stocks. The market entered into negative territory by the afternoon. After gyrating over 387 points from the day's high, the Sensex finally closed the session with a loss of 65 points at 19,633, while the broader S&P CNX Nifty of the National Stock Exchange (NSE) closed marginally up at 5,908.
The broader market, however, continued to remain in the green. Of the 2,855 stocks traded on the Bombay Stock Exchange (BSE), 2,182 stocks advanced, 644 stocks declined and 29 stocks ended unchanged. Most of the sectoral indices ended in the green. The BSE CD was the biggest gainer and moved up by 3.04% at 5,360 followed by the BSE Auto index (up 2.45% at 5,413) and the BSE Realty index (up 2.15% at 10,748). However, the BSE bankex index, the BSE FMCG index, the BSE Oil & Gas index and the BSE PSU index closed in the red.
Among the laggards, ITC was down by 3.10% at Rs199, ICICI Bank declined by 2.67% at Rs1,187, HDFC Bank shed 1.89% at Rs1,655, Satyam Computer dropped 1.38% at Rs423, while, SBI, Reliance Industries, Bharti Airtel, Infosys, HDFC, and Wipro closed with marginal losses. However, select heavyweights attracted decent buying support. ACC surged 4.25% at Rs1,084, Cipla rose 3.43% at Rs187, Bajaj Auto jumped 3.32% at Rs2,426, Tata Steel added 2.32% at Rs863, M&M moved up by 2.19% at Rs749 and HLL gained 1.87% at Rs205.
Consumer durables stocks, however, were in the limelight. Videocon surged 8.99% at Rs438, Lloyd Electric jumped 4.46% at Rs176, Gitanjali Gems soared 3.36% at Rs388, Asian Star Company moved up by 2.46% at Rs1,322, Blue Star added 2.44% at Rs431 and Rajesh Exports closed with moderate gains.
Over 6.07 crore Tata Teleservices shares changed hands on the BSE followed by IFCI (2.30 crore shares), Essar Oil (1.48 crore shares), Reliance Petroleum (1.44 crore shares) and IDFC (1.11 crore shares).
Essar Oil topped the value list with a turnover of Rs312 crore on the BSE followed by Reliance Petroleum (Rs307 crore), Tata Teleservices (Rs293 crore), IDFC (Rs222 crore) and IFCI (Rs222 crore).
Post Market Commentary
The market closed the trading session on a negative note as BSE Sensex closed lower by 65 points at 19,633.36 while NSE Nifty closed marginally up by 0.8 points at 5,907.65. The Sensex opened on a strong note and manages to trade higher but finally lost the grip and fell to closed the session in the negative territory due to the selling pressures in the index heavy weights. Most buying is seen in BSE Reality, Metal, Capital goods, Consumer durables and Auto indices. The Sensex has touched an intraday high of 19,971.44 and low of 19,583.97 during the trading session. Overall, the market breadth was strong as 2,182 stocks are closed higher while only 644 are closed lower. Both the BSE Mid cap and Small cap closed higher by 218.44 point and 292.16 points at 8,730.82 and 10,672.89 respectively. BSE Metal index closed higher by 170.66 points at 17,668.86 as Jindal Steel (4.94%), Jindal Stainless (4.06%), Tata Steel (2.32%) and Hindalco Industries (0.81%) closed in green.
BSE Capital Goods index inclined by 162.71 points to closed at 20,806.42 as Elecon Eng.(8.16%), AIA Engineering (7.90%), Crompton Greaves (5.12%), Siemens (5.17%) closed higher.
BSE Power index grew by 61.30 points to close at 4,653.27. Pulling it up are GMR infra (8.66%), GVK power (8.05%), Siemens (5.17%), Crompton greaves (5.12%), Power Grid (3.88%).
BSE oil & gas index dropped by 12.06 points to close at 12,467.50. Pushing it down are HPCL by (4.49%), BPCL (4.42%), IOCL (3.07%) and RPL (2.61%).
BSE FMCG index fell by 5.83 points to close at 2,224.86. Leading the loss are Glaxismith (3.19%), ITC (3.10%) and REI Agro (1.09%) closed lower.
BSE bankex index fell by 82.38 points to close at 10,920.67. Pulling it down are Federal bank (22.41%), ICICI bank (2.67%), HDFC bank (1.89%) and SBI (0.89%) closed lower.
BSE IT index closed marginally higher by 1.76 points at 4,160.88 as Aptech (13.61%), Tech Mahindra (4.27%), I Flex (2.68%) closed higher while Satyam (1.38%), Infosys (0.23%) and Wipro (0.20%) closed lower.
Sensex sheds 64 points; side counters continue to gain value
The market lost ground in late trade as index heavyweight Reliance Industries dropped and ITC slipped. The market was in the green for a better part of the day though it had pared gains after an initial surge. Banking majors plunged. IT pivotals pared gains. Consumer durable, auto, realty moved higher. BSE Mid-Cap and Small-Cap indices outperformed Sensex. The market breadth was strong. 2 out of 3 key European markets were in the red. Key Asian markets ended in the red.
The 30-share BSE Sensex lost 64.53 points or 0.33% at 19,633.36. It had hit a low of 19,583.97 in late trade. At the day's low, Sensex lost 114.39 points. Sensex hit a high of 19,971.44 at the onset of the trading session. At day’s high of 19,971.44, the Sensex had gained 273.08 points.
The broader CNX S&P Nifty was up 0.8 points or 0.01% at 5,907.65.
The market breadth was strong. On BSE, 2,148 stocks advanced, 635 stocks declined and 27 stocks were unchanged. 18 out of 30 stocks from the Sensex pack were in green.
BSE clocked a turnover of Rs 8081 crore compared to Friday (16 November 2007)'s Rs 8,885.97 crore.
Nifty November 2007 futures were at Rs 5918, at a premium of 10.35 points as compared to spot closing of 5907.65.
NSE’s futures & options (F&O) segment turnover was Rs 51,841.62 crore, which was lower than Rs 61,505.32 crore on Friday, 16 November 2007.
The BSE Mid-Cap index rose 2.57% to 8,730.82 and the BSE Small-Cap index rose 2.81% to 10,672.89. Both these indices outperformed Sensex for a third day in a row.
BSE Auto index (up 2.45% to 5,413.24),BSE Capital Goods index (up 0.79% to 20,806.42), BSE Consumer Durables index (up 3.04% to 5,360.26), Health Care index (up 1.66% to 3,949.53), BSE Metal index (up 0.98% to 17,668.86), BSE Power index (up 1.33% to 4,653.27) and BSE Realty index (up 2.15% to 10,748.03) outperformed Sensex.
BSE Bankex (down 0.75% to 10,920.67), Oil & Gas index (down 0.1% to 12,467.20) and BSE IT index (up 0.04% to 4,160.88) underperformed Sensex.
Banking majors declined. HDFC Bank (down 1.89% to Rs 1,655.20), ICICI Bank (down 2.67% to Rs 1,186.85), and State Bank of India (down 0.89% to Rs 2,304.90) edged lower.
Index heavyweight and India’s largest private sector firm by market capitalisation Reliance Industries declined 0.81% to Rs 2,852.50.
IT stocks declined. Satyam Computer Services (down 1.52% to Rs 422.05), Infosys (down 0.23% to Rs 1,619.70), Wipro (down 0.2% to Rs 457.40) edged lower.Tata Consultancy Services rose 0.61% to Rs 988.15.
Consumer durables stocks surged and BSE Consumer Durable index was the major gainer from BSE's sectoral indices. Videocon Industries (up 8.99% to Rs 438.25), and Rajesh Exports (up 0.18% to Rs 856.55) edged higher.
Gitanjali Gems rose 3.36% to Rs 387.90 after it acquired US jewellery retail chain Rogers for an undisclosed sum, a move that will boost the company’s retail presence in India and abroad.
Larsen & Toubro (L&T) declined 0.18% to Rs 4,368.15. The company announced during market hours today it in association with Shanghai Urban Construction (Group) Corporation has secured a design & build contract valued at Rs 275 crore from Delhi Metro Railway Corporation (DMRC).
Auto stocks were in demand.Mahindra & Mahindra (up 2.19% to Rs 749), Hero Honda Motors (up 2.03% to Rs 708.50), Tata Motors (up 0.64% to Rs 702.60) and Maruti Suzuki India (up 0.39% to Rs 1,053.50) edged higher.
Bajaj Auto rose 3.32% to Rs 2,426.20. UBS raised its 12-month price target on the stock to Rs 3,033 from Rs 2,440, saying the company was on a recovery path with its two-wheeler business improving and competition seen easing.
Tata Steel (up 2.32% to Rs 862.75), Cipla (up 3.43% to Rs 186.85) and ACC (up 4.25% to Rs 1,083.85) edged higher.
India's largest cigarette major by revenue, ITC (down 3.1% to Rs 198.80), edged lower.
Realty stocks gained. India's largest real estate firm by market capitalisation DLF rose 1.21% to Rs 947.85. It replaced Dr. Reddy’s Laboratories in Sensex today. Indiabulls Real Estate rose 3.32% to Rs 659.
Unitech rose 2.22% to Rs 398.40. As per reports Unitech plans a non-banking financial corporation (NBFC) to sell home loans.
Nirma rose 27.49% to Rs 211.50 and was the top gainer from A group. Apollo Tyres (up 19.62% to Rs 43.90), Essel Propack (up 16.37% to Rs 61.50), Vijaya Bank (up 13.98% to Rs 84), Dabur India (up 13.86% to Rs 125.70) and were other major gainers from A group.
Tata Teleservices Maharashtra rose 16.28% to Rs 50.70 and clocked the highest volume of 6.07 crore on BSE. IFCI rose 9.26% to Rs 98.55 and was the second biggest volume grosser with 2.3 crore shares. Essar Oil clocked the third highest volume of 1.48 crore and rose 6.24% to Rs 204.35. Reliance Petroleum declined 2.61% to Rs 208.85 and clocked fourth highest volume of 1.44 crore shares. Infrastructure Development Finance Company rose 1.31% to Rs 196.90 and clocked the fifth highest volume of 1.11 crore shares.
Essar clocked the highest turnover of 312.08 crore on BSE. Reliance Petroleum (Rs 307.53 crore), Tata Teleservices Maharashtra (Rs 2.93 crore), Infrastructure Development Finance Company (Rs 222.88 crore ) and IFCI (Rs 222.35 crore) were other turnover toppers on BSE.
Side counters, Maestros Mediline Systems (up 20% to Rs 42.30), Tokyo Plast International (up 20% to Rs 13.32) and Borax Morarji (up 20% to Rs 80.40) edged higher.
Federal Bank (down 22.41% to Rs 368.15), Alufluoride (down 9.87% to Rs 31.95) , VTM (down 10.62% to Rs 133) and Manali Petrochemicals (down 10% to Rs 21.21) edged lower.
Most of the European markets were in red. France’s CAC 40 (down 0.47% to 5,498.93), Germany’s DAX (down 0.3% to Rs 7,590) and UK’s FTSE 100 (down 0.72% to 6,246.30) edged lower.
Key Asian markets ended in red. Hong Kong's Hang Seng (down 0.56% at 27,460.17), Japan's Nikkei (down 0.74% at 15,042.76), Singapore's Straits Times (down 0.85% at 3,411.72), South Korea's Seoul Composite (down 1.7% to 1,893.47) and Taiwan Weighted (down 0.96% at 8,680.71) edged lower.
Volatility forced investors across the world to pull out five billion dollars from emerging market equity funds in the second week of November 2007, including over two billion dollars from funds focused on four BRIC markets viz. Brazil, Russia, India and China.
China accounted for more than half of the total outflow from BRIC funds, while India, Russia and Brazil together shared the remainder, according to international fund tracking firm EPFR Global.
During the second week of November this year, emerging market equity funds reported a net outflow of $5.58 billion, while those focused on developed markets saw an outflow of $5.07 billion. According to EPFR, the money market funds recorded a net inflow of $10.1 billion in the week, taking their total inflow since the beginning of August 2007 to $100 billion.
Market may remain choppy
The south-bound trend in the market is likely to continue on the back of a weak global indices. Most of the Asian indices have paired their early gains and currently treading in the red which may further dampen the investors' sentiment. On the positive front FIIs remained net buyers of stocks for last few sessions. Among the key domestic indices, the Nifty may test 5800 on the downside while on the upside the index could test higher levels of 6000. The Sensex has a likely support at 19500 and may face resistance at 20500.
US indices staged a late rally to finish higher on Friday, as investors closely eyed corporate earnings and attempted to gauge the Federal Reserve's next step. The Dow Jones rose to 13177, up 67 points, while the Nasdaq moved up by 19 points to close at 2637.
Most of the Indian ADRs had a field day on the US bourses. VSNL was the major gainer and surged over 8% while MTNL, Wipro, Dr Reddy's, Tata Motors, Infosys, Satyam and HDFC Bank gained over 1-6% each.
International crude oil prices gained marginally, with the Nymex light crude oil for December delivery moved up by $1.67 to close at $95.10 per barrel. In the commodity space, the Comex gold for December series slipped by 30 cents to settle at $787 a troy ounce.
Pre Market Watch
Indian market is likely to have a positive opening as the global cues are in favor. On the domestic front, the formal clearance by the Left party to hold negotiations with International Atomic Energy Agency over the INDO-US nuclear deal. On Friday, the Indian markets ended on a negative note as BSE Sensex fell by 86.53 points to close at 19,698.36 while Nifty dropped by 5.25 points to close at 5,906.85. We expect the market to trade higher during the trading session.
On Friday, the US market closed in positive territory. The Dow Jones Industrial Average (DJIA) grew by 65.52 points to close at 13,175.57. The S&P 500 (SPX) index increased by 7.59 points to close at 1,458.74 and the NASDAQ Composite (RIXF) inched up by 18.73 points to close at 2,637.24.
Indian ADRs ended in green. In technology sector, Satyam grew by 2.91% along with Wipro by 2.78% and Infosys by 2.21%. In banking sector, HDFC bank and ICICI bank grew by (3.46%) and (2.18%) respectively. VSNL and MTNL advanced by (8.13%) and (6.98%) respectively.
The major stock markets in Asia are trading strong. Japan''s Nikkei is trading higher by 43.21 points at 15,197.82. Hang Seng index is trading up by 117.39 points at 27,731.82. Taiwan weighted grew by 25.83 points to trade at 8,790.65. Seoul Composite is trading flat at 1,925.39.
Yesterday, the FIIS stood as the net buyer as the gross equity purchased was Rs.4,464.30 (in crores) and the gross debt purchased was Rs0.00 (in crores). The gross equity sold was Rs3,675.90 (in crores), and the gross debt sold was Rs0.00 (in crores). The net investment of equity was Rs788.40 (in crores) and the net debt investment was Rs0.00 (in crores).
Today, Nifty has support at 5,861 and resistance at 6,011 and BSE Sensex has support at 19,603 and resistance at 19,997.
Market to head higher
The market is expected to rally after the Left front after market hours on Friday, 16 November 2007, formally allowed the Centre to go to International Atomic Energy Agency (IAEA) for talks on India-specific safeguards, triggering fresh optimism in the government about the US nuclear deal becoming a reality at last. This was announced after a meeting of a panel set up by the government to look into Left front's concerns over the nuclear deal. The Left, however, insisted that the shift in stand on whether government can go to IAEA would not result in the operationalisation of the deal. No timeline has been set for the next meeting of the committee. National security adviser M K Narayanan agreed that March 2008 may be set as the outer limit for the US Congress to endorse the deal.
Most Asian markets rose today, 19 November 2007. Hong Kong's Hang Seng (up 0.43% at 27,731.82), Japan's Nikkei (up 0.29% at 15,197.82), Taiwan Weighted (up 0.29% at 8,790.65), Straits Times (up 0.44% at 3,455.97) edged higher. However South Korea's Seoul Composite declined 0.23% to 1921.68
US markets closed higher on Friday, 16 November 2007 as investors ignored some credit concerns and the health of the overall economy. The Dow Jones industrial average rose 66.74, or 0.51%, to 13,176.79. Broader stock indicators also posted gains. The S&P 500 index rose 7.59, or 0.52%, to 1,458.74. The Nasdaq Composite index gained 18.73, or 0.72%, to 2,637.24
The 30-share BSE Sensex slipped 86.53 points or 0.44% at 19,698.36, on Friday, 16 November 2007. The broader CNX S&P Nifty ended down 5.25 points or 0.09% at 5906.85, on that day.
Sensex surged 790.76 points or 4.18% to 19,698.36 in the week ended Friday, 16 November 2007. S&P CNX Nifty rose 243.6 points or 4.3% to 5,906.85 in the week.
The BSE Sensex is now 539.80 points away from its all time high of 20238.16 hit on 30 October 2007.
India's wholesale price index rose 3.11% in the 12 months to 3 November 2007, above the previous week's rise of 2.97%, government data released on Friday, 16 November 2007 showed. The annual inflation rate was 5.45% during the corresponding week of the previous year.
Crude oil prices advanced on Monday, 19 November 2007 as the dollar fell and some Organization of the Petroleum Exporting Countries (OPEC) members pushed for action to stem their declining purchasing power. US light crude for January delivery rose 71 cents to $94.55 a barrel. London Brent crude rose 67 cents to $92.29 a barrel.
As per provisional data, FIIs sold shares worth a net Rs 363.14 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 239.72 crore on Friday, 16 November 2007.
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 5855 and 5810 with resis at 5950 and 6016
Positive opening likely.
Intra Day: Sell RCOM below 704 with a TGT of 688 and a SL of 713
Buy IDBI above 173.25 with a TGT of 185 and a SL of 164
F&O: Buy Vijaya bank above 75 with a TGT of 85 and a SL of 71.50
Buy Tatatea above 811 with a TGT of 840 and a SL of 796
Out House :
Markets at a support of 19494 & 19339 levels with resistance at 19898 & 20112 levels .
Maintain strict stop loss for your trades as markets to be very choppy and volatile .
Buy : RIL
Buy : REL
Buy : JpAsso & JpHydro bullet
Buy : Centextile
Buy : SKumar bullet
Buy : IBUlls
Buy : MRPL , Noida , Neyvelli
Buy : MRPL , Neyvelli , Petronet & EssarOil
Dark Horse : Petronet , EssarOil , Aban , REL , IBulls , RIL , Centextile , JPASSO & SBIN
Bullet : Kotak & JpAsso with strict stop loss .
Crude ends $1 lower for the week
Mixed comments from OPEC affect crude prices
Crude-oil future prices for sweet light crude for December delivery which had ended at $96.3/bbl last week (09 November) finished $1.03 lower this week (16 November) at $95.1/bbl. Price had dipped to $90/barrel during the first three days of the week but then perked up. Mixed comments from OPEC affected prices.
On Friday, 16 November, crude oil for December delivery rose $1.67 to end at $95.10 a barrel on the New York Mercantile Exchange. The December contract expired on Friday, with crude for January delivery becoming the new front-month contract.
Prices initially fell at the start of the week after OPEC said that it might consider increasing output in its forthcoming meeting, either this month or the one in December. The price further fell after The International Energy Agency cut its forecast for global demand through 2008 as record prices could curb fuel use. Then Energy Department reported unexpected build up in crude inventories further softening prices. Finally, price rose once it was reported that an OPEC official has stated that increase in production is not necessary immediately.
As per the weekly inventory report by the Energy Department, U.S. crude inventories rose by 2.8 million barrels to 314.7 million in the week ending 9 November. This was the first build up in five weeks. U.S. refineries operated at 87.7% of their operable capacity last week, the highest in five weeks.
The report also stated that gasoline supplies rose by 700,000 barrels to 195 million barrels in the latest week, while distillate fuel stocks decreased by 2 million barrels to 133.4 million barrels.
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.
OPEC, also reduced its fourth-quarter estimate of global oil demand growth to 1.97%, down from 2.1%, citing warmer winter weather in the Northern Hemisphere and the higher price of gasoline. The cartel also trimmed this year's world oil demand growth to 1.4% from 1.5%, but the cartel kept the first quarter of next year unchanged at 1.8%.
An unsteady US Market ekes out gain for the week
Wal-Mart earning report and Technology sector fight hard to keep credit turmoil away
US Market ended the week with modest gains on Friday, 16 November, 2007. Indices registered substantial gains on Tuesday, 13 November and Friday, 16 November. Other days, market slipped. Ongoing concerns about the health of the financial sector and the overall economy continued. A profit warning from Fed-Ex dampened the outlook sentiment on the economy.
But amid that, couple of good earning reports, a dillydallying crude price and mainly the technology sector, helped market eke out some gains. The Dow Jones Industrial Average gained 134 points for the week. Tech - heavy Nasdaq gained 9 points. S&P 500 gained 5 points.
Market started off on a shaky note on Monday, 12 November mainly because of E*Trade Financial. There were reports in the market that company could face bankruptcy. E*Trade gave up almost 60% of its share price on that day. On the week, prior to that, the company announced it had observed continued declines in the fair value of its $3 billion asset-backed securities portfolio. The company stated that it expected the declines in fair value to result in further securities write-downs in the fourth quarter.
On Tuesday, 13 November, all ten economic sectors posted gains, headed by Financials and Technology sectors. Reassuring words from Goldman Sachs' chief executive that the investment bank won't be announcing a write-down like many of its peers, also added further fuel to the rally. Dow gained 320 points on that day.
On that day, Apple shares were up more than 10% on news that the company has almost finalized a deal to sell iPhon in China.
On Wednesday, a late hour sell-off triggered by some bad news in the financial sector sent stocks down and Dow closed 92 points lower for the day. Bear Stearns said it will write-down $1.2 billion of subprime-related assets in the fourth quarter and report a loss for the period. The write-down amount, though, was less than the market expected.
On Thursday, 15 November, above-expectation economic reports were overshadowed by the credit concerns in the market and market ended once again lower for the day. The financial sector came under pressure today after London - based Barclays disclosed net charges and write-downs of $2.67 billion. But the amount was far less than what was expected.
But on Friday, 16 November, it was all Cisco Systems. The company announced that its board had authorized an additional $10 billion for stock repurchases, bringing the total authorization for the buyback plan to a whopping $62 billion. This news provided a boost to Cisco's stock that contributed to the relative outperformance of the Nasdaq, as well as the technology sector.
Among major news in the merger and acquisitions sector, IBM announced a $5 billion all-cash offer to acquire Canadian software company Cognos. It was also reported that the nation's second and third largest airlines, United Airlines and Delta Airlines are in talks regarding a possible merger.
On the earnings front, Wal-Mart reported third quarter results ahead of analysts' expectations on improved performance in the U.S. The company also raised its projected earnings for the year as it heads into the important holiday selling season. On the other hand, Dow component Home Depot reported disappointing earnings.
Among major economic news hitting the market during the week, the government reported a 0.3% increase in the consumer-price index in October, with a 1.4% gain in energy prices fueling the rise. The core CPI, which excludes food and energy costs, gained 0.2% in October. The data were in line with economists' expectations. Data showed no sign of significant inflationary pressure.
New claims for unemployment for the week ended 10 November which rose to 339,000 from 319,000 the week before remained at levels well below recessionary trends. Economists were expecting a reading of 325,000.
Other than the above, two regional manufacturing surveys were released, the Empire State Index and the Philadelphia Fed, both topping economists expectations.
Federal Reserve reported on Friday, 16 November, that industrial production fell 0.5% last month, due in part to continued problems in automotive and housing-related industries. That was much weaker than the 0.1% gain that had been expected.
Executive Summary
For the week, indices registered gains. DJIx closed up by 1.02% and S&P 500 closed up by 0.3%. Nasdaq too gained a paltry 0.4%. A profit warning from Fed-Ex dampened the outlook sentiment on the economy. Worrying news from Financial sector continued.
Good news from Wal-Mart regarding its earnings report and a strong news from Cisco Systems at the end of the week, helped market register the gains for the week.
For the year, Dow is up by 5.7%, Nasdaq is up by 9.2% and S&P 500 is up by 2.9%.
Trading Calls
Nifty (5907) Supp 5843 Ress 5957
Buy BILT (163) SL 159 tgt 173, 175
Buy Gitanjali Gems (373) SL 369 tgt 383, 386
Buy ABB (1643) SL 1620 tgt 1685, 1695
Sell Aurobindo (523) SL 529 tgt 511, 509
Sell Bharat Forge (345) SL 349 tgt 335, 333
Uncertain gains
If America shows weakness and uncertainty, the world will drift toward tragedy. That will not happen on my watch. – George Bush.
With no major events to look forward to in the near term and due to the heightened uncertainty surrounding the US economy, the market here will remain sideways with no specific bias. We will continue to witness regular bouts of advances and declines till a fresh event - local or global - pushes the market players into action again either way. We keep hearing bad news from the global financial majors as well as regulators and experts on the US sub-prime crisis. This is unlikely to go away in a jiffy and will cap any sharp movement on the way up. At the same time, the downside too doesn't appear to be much. As a result, the key indices will remain stuck in a range for the short term.
FII inflows have also slowed considerably, though they continue to storm the primary market, as can be seen from the strong response to big-ticket IPOs like Mundra Port, Religare and now Edelweiss. This also confirms that interest from overseas investors remains unaffected by the recent regulatory curbs imposed on P-Notes and renewed volatility across global markets. In a nutshell, the medium to long-term outlook remains robust owing to the now well articulated 'India Shining' story.
In the near term, the action will be concentrated on the small-cap and mid-cap counters as can be seen from last week's spurt in some of these counters. Having said that one must be extra careful with these stocks as they tend to be pretty volatile and risky. Select large caps will also remain in the thick of things based on the news flow. Today, we expect a cautious to slightly higher opening and another choppy trading with lots of stock-based action.
Essar Oil will remain in the limelight. After market hours on Friday, the company announced that it no longer was planning to delist the shares from local bourses. Instead, it announced a US$6bn expansion plan for its Vadinar refinery. Essar Oil will raise part of the funds from a preferential allotment to promoters at Rs200 per share.
VBC Ferro Alloys could be another stock that might see some action amid market grapevine of a placement at Rs450 per share. The company is also holding substantial shares of Konaseema Gas Power and Orissa Power. Of this, Konaseema is slated to come out with an IPO. Karuturi Networks is likely to rise as billionaire investor George Soros has bought 1.4 million shares of the floriculture company.
Also watch out for stocks like Ashok Leyland, BILT, Yes Bank and Gujarat State Petronet Ltd.
Oswal Chemical might also perk up on news that it may sell its Chembur property to Reliance Capital. Plethico Pharma is likely to gain amid reports that it could announce an acquisition in the US. Gitanjali Gems may also advance as the company is expected to make 'an important' announcement today. Last week, an overseas brokerage firm also came out with a 'buy' report on the stock.
US stocks posted their first weekly gain this month after investors speculated that the worst of Wall Street's mortgage losses could be over and Wal-Mart boosted its earnings forecast.
Financial stocks rebounded from two weeks of declines after Goldman Sachs said it was not planning a significant write down. Wal-Mart surged the most since March 2003 after the world's largest retailer lured customers with discounts.
The Standard & Poor's 500 Index added 0.4% to 1,458.74. The Dow Jones Industrial Average rose 1% to 13,176.79, and the Nasdaq Composite Index gained 0.4% to 2,637.24. The Russell 2000 Index of small companies retreated for a third straight week, losing 0.4% to 769.50.
Crude oil lost 1.3% last week, only the second weekly decline since August. Gold lost 5.7%, the most since March, on speculation the dollar will rebound from record lows, reducing the appeal of the precious metal as an alternative investment.
European shares closed lower on Friday. The pan-European Dow Jones Stoxx 600 index lost 0.9% at 362.72. The UK's FTSE 100 declined 1.1% to 6,291.20, the German DAX 30 shed 0.7% to 7,612.26 and the French CAC-40 dropped 0.7% to 5,523.63.
In the emerging markets, the Bovespa in Brazil finished flat at 64,609 while the IPC index in Mexico jumped 1.6% to 29,631. The RTS index in Russia was down 1.3% at 2189 and the ISE National 30 index in Turkey rose by nearly 1% at 68,826.
Asian stocks were mostly up this morning but not all that much. The Morgan Stanley Capital International Asia Pacific Index advanced 0.3% to 158.90 as of 11:27 a.m. in Tokyo. Seven of 10 industry groups rose on the index, which slid 2.5% in the previous two days.
Japan's Nikkei 225 Stock Average added 0.3% to 15,197.82. Most stock benchmarks in the region gained, with Australia's S&P/ASX 200 Index climbing 1.3%. South Korea's Kospi lost 0.5%, while key indexes in Hong Kong, China, Taiwan and New Zealand were little changed.
Yet again bulls failed to make a come back on Friday as markets ended on the receiving end for third consecutive trading session. Although the
Finally, benchmark Sensex lost 86 points to close at 19,698. NSE Nifty closed flat at 5,906.
Among the non index gainers, Essar Oil was yet again the star performer, the scrip gained over 22% to close at Rs192. The Fertilizer stocks were also in the limelight led by Nagarjuna Fertilizer and Chambal Fertilizer.
Sugar stocks gained slight momentum after UP government said that they would move SC against High Court order on cane prices. Renuka Sugar advanced 1% to Rs765, Balrampur Chini edged higher 0.2% to Rs85.
Fertilizer continued to be in the limelight as the government announced its plans to issue Rs75bn worth of bonds to pay for compensation to be awarded to fertilizer makers after officials agreed to sell farmers growing agents at below- market prices.
Chambal Fertilizer was the top gainer, the scrip gained over 28% to Rs72, Nagarjuna Fertilizer was up over 14% to Rs82, Deepak Fertilizer rose over 10% to Rs165 and GNFC added 8.5% to Rs190.
Orchid Chemical advanced by 4.7% to Rs238 after the company declared that it has secured US FDA approval for Cefpodoxime. The scrip touched an intra-day high of Rs240 and a low of Rs225 and recorded volumes of over 4,00,00 shares on NSE.
Satyam Computers edged higher 0.2% to Rs429. Reports stated that the company targets three $100mn deal globally. The scrip touched an intra-day high of Rs434 and a low of Rs415 and recorded volumes of over 20,00,000 shares on NSE.
Cambridge Solution surged 2.2% to Rs88 after the company announced that they would raise $40mn by selling securities. The scrip touched an intra-day high of Rs96 and a low of Rs85 and recorded volumes of over 78,000 shares on NSE.
Ranbaxy slipped 3% to Rs411 after the company declared that the company has recalled 75mn tablets of 600mg and 800mg dosages of Gabapentin from the
Ashok Leyland was up 0.5% to Rs41 after the company announced that it forayed in the 49-ton category with the launch of its new 4910TT truck which is currently dominated by Volvo and AMW. The scrip touched an intra-day high of Rs42 and a low of Rs40 and recorded volumes of over 92,00,000 shares on NSE.
Pantaloon Retail was trading flat at Rs671. Reports stated that the company has planned to hive-off its sports business into a new entity, Planet Sports Retail. The scrip touched an intra-day high of Rs685 and a low of Rs655 and recorded volumes of over 1,00,000 shares on NSE.
Info Edge edged lower by 0.3% to Rs1360. Reports stated that the company has planned to expand in
Stocks in News:
BSNL to rollout WiMax services in rural areas by 2010; to invest Rs20bn from the USO fund.
Sovereign Government funds of Singapore, Dubai and Abu Dhabi in the race to buy 5% stake in Reliance Power in pre-IPO placement.
Reliance Industries' D6 block in KG basin to start gas production at 2.8bcf per day from Q3 2008 instead of H1 2008.
United Spirits to invest Rs1.4bn to increase wine production capacity and launch 100 brands in four years.
ADAG group is planning to invest Rs15bn in airports in MP and AP.
Essar Oil to triple its annual oil refining capacity to 34mn tons by 2010; to invest Rs240bn.
The private equity arm of ICICI Bank plans to invest US$800mn in Jaypee Infratech, part of the Jaypee Group.
Essar Steel to delist from exchanges; promoters to buy back shares at Rs48 each.
Educomp Solutions to invest Rs20bn to ‘enable’ setting up of 150 schools over next four years.
Oil blocks acquired by ONGC-LN Mittal group combine in Nigeria may face regulatory scrutiny.
Deccan Aviation may wipe out accumulated losses of Rs7.8bn by June 2008, according to its CEO.
National carrier Air India unlikely to launch IPO before 2009.
Bank of Baroda to form a life insurance JV with Andhra Bank and British insurer Legal & General.
13 cement companies show interest in forming a JV with SAIL for a slag cement plant at Rourkela.
RBI panel recommends introduction of trading in currency futures on dedicated exchanges, initially only for resident Indians.
Jawaharlal Nehru Port Trust to invest Rs70bn in various expansion projects over the next 4-5 years.
Government owned oil marketing companies asked to consider new discounts on ATF prices to domestic airlines.
SEBI would amend regulations to allow mutual funds to short-sell securities.
FDI limit in insurance to stay at 26% till political consensus evolves, according to Ministry of Finance.
India needs to sign a fresh agreement if it wants to go ahead with its plan to purchase 5mn tons of LNG, says Iran.
Companies planning to build city gas distribution networks would have to go through a competitive bidding process.
TRAI issues guidelines to telecom companies on employing recovery agents for the collection of dues from their customers.
FII Investment Trend:
FIIs were net sellers of Rs3.63bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs2.4bn.
In the F&O segment, FIIs were net sellers of Rs8.69bn.
Foreign funds were net buyers of Rs7.88bn in the cash segment on Thursday.
Mutual Funds were net buyers of Rs4.83bn on the same day.
Weekly Stock Ideas
Moser Baer
Research: JP Morgan
Rating: Underweight
CMP: Rs 274.70
JP Morgan rates Moser Baer as ‘underweight’. Moser Baer reported muted Q2 FY08 results with 5% QoQ decline in revenue and 70 bps drop in EBITDA margins. This was despite the fact that Moser benefited from a refund of duties in Europe, excluding which, sales declined 8% QoQ and EBITDA margins fell 3% QoQ. Optical media volumes fell 8% QoQ with 8% QoQ decline in average selling price (ASP). Overall, net profit fell 66% QoQ to Rs 3.3 crore. The management expects a volume pick-up in H2 FY08, but expects subdued pricing especially in DVDR as Philips has cancelled licenses for major optical media manufacturers. JP Morgan expects margins to remain weak. During the quarter, the photovoltaic (PV) business generated revenues of $12 million with net level break-even. The management expects PV revenues of $80-100 million and margins may improve through the year, stabilising at ~20%. By adding the entertainment business to the estimates, JP Morgan expects decent 80+% volume CAGR over the next 2-3 years with sharp margin improvement. However, Moser will take at least three years to recover its initial investment of $100 million.
Ranbaxy Laboratories
Research: Merrill Lynch
Rating: Buy
CMP: Rs 411.70
Merrill Lynch maintains ‘buy’ rating on Ranbaxy Labs. Last week, the company announced it has settled the patent infringement suit with Astellas/Boehringer Ingelheim on generic Flomax, which allows launch of the generic in March ’10 with 180-day exclusivity. Merrill Lynch views this development as a significant positive and estimates over $200 million revenues and $120 million one-off profits during the six-month period. This implies Rs 20 NPV per share, assuming limited 40% discount, delayed authorised generic entry and 50% market share for Ranbaxy. The company expects to continue pursuing this strategy of monetising on its pipeline of first-to file (FTF) opportunities. Based on this, Merrill Lynch sees visibility on several FTF launches for the next three years. These include: (a) Possible Para IV launch/settlement in ’08 (not yet announced); (b) Generic Valtrex in ’09 (Rs 18-20 NPV); and (c) Generic Lipitor in the US in ’10 (Rs 30-35 NPV). Merrill Lynch estimates robust core earnings growth of 40.5% in CY07E and 20.5% in CY08E (Rs 22.7), driven by higher growth and EBITDA margins from the US and emerging markets. There is possibility of 30%+ EPS upside in CY08E from generic Lipitor launch in Canada and possible R&D milestones from GSK.
Gitanjali Gems
Research: Morgan Stanley
Rating: Overweight
CMP: Rs 375.30
Morgan Stanley initiates coverage on Gitanjali Gems with an ‘overweight’ rating. The company is a pioneer in branded jewellery and is leveraging its brand equity to drive growth in the retail market. On excluding the value of the company’s real estate business from its CMP, standalone jewellery valuation looks cheap at 9x FY09E earnings, given 80%+ growth (FY06-07) in branded jewellery. The company is set to benefit from a shift in consumer buying patterns towards branded and diamond jewellery. Morgan Stanley expects jewellery retail and exports to grow by 46% and 40%, respectively, at the top line and by 78% and 43%, respectively, at the operating profit level over FY07-FY10. The company is likely to deliver 51% growth in earnings during FY07-10. Morgan Stanley values the jewellery business at Rs 417/share and the real estate business at Rs 130/share.
Maruti Suzuki
Research: CLSA
Rating: Buy
CMP: Rs 1,049.45
CLSA assigns ‘buy’ rating on Maruti Suzuki. The company believes the domestic car market will continue to see strong secular growth in coming years at ~15% CAGR and will hit 2 million units by ’10. Maruti will launch two new compact segment cars in Q3 FY09. These will include the recently unveiled small car ‘Splash’ and a new small car called ‘A Star’. The ‘A Star’ has been designed for the export markets. 50,000 units of the ‘A Star’ will be contract manufactured for Nissan, while another 100,000 units will be exported to Europe under the Suzuki badge. ‘A Star’ will also be launched in India. These launches, together with the expected launch of the ‘Swift’ sedan, will drive volume growth for Maruti in FY09-10. With this, Maruti’s export volumes will hit 200,000 units in FY10 from 55,000 units in FY08. However, margins on these exports will be lower than existing export margins. Maruti aims to transform itself into a complete pan-segment car manufacturer in coming years and new launches in future will reflect this. Maruti and Suzuki plan to invest $2.2 billion to increase capacities over the next three years. Diesel engine capacity, as well as capacity at the second car plant, will increase to 300,000 units each by ’10. Maruti also plans to set up a new engine plant and upgrade its Gurgaon facilities.
ABG Shipyard
Research: Citigroup
Rating: Buy
CMP: Rs 807.65
Citigroup maintains ‘buy’ rating on ABG Shipyard, aided by an order book cover of 6.7x FY08E sales and 59% FY08-10E EPS CAGR. It has increased the company’s price target primarily on the back of changes to margin estimates after better-than-expected margin performance in the past two quarters. ABG reported strong EBITDA (ex-subsidy) margins of 23% each in Q1 and Q2. While margins may not be sustainable at such high levels, Citigroup believes that its earlier 17-18% margin assumptions over FY08-10E were conservative, given that a combination of new orders at higher prices and operational efficiencies may result in sustained margin improvement from historical levels (18% in FY07). This reflects Citigroup’s new operating margin (ex-subsidy) assumptions of 21-22%, which the company is expected to achieve over the forecast horizon, though unexpected raw material (primarily steel) price increases pose a risk to these estimates.
Indraprastha Gas
Research: ABN Amro
Rating: Buy
CMP: Rs 154.60
Indraprastha Gas (IGL) is a joint venture of Gail, BPCL and the government of the National Capital Territory (NCT) of Delhi. Over the years, IGL has set up 153 CNG stations, including 67 mother stations, 42 online stations, 38 daughter booster stations and six daughter stations. IGL supplies piped natural gas (PNG) to homes and commercial/industrial establishments such as hotels, hospitals, embassies, restaurants etc. As on March ’07, IGL had provided PNG connections to over 75,000 domestic and 300 commercial customers. The company also supplies regasified liquefied natural gas (R-LNG) to industrial consumers in NCT. During FY07, the company’s net sales grew by 17% YoY to Rs 614 crore and net profit increased by 30% YoY to Rs 138 crore. In H1 FY08, IGL’s net sales grew by 16% YoY to Rs 336 crore, while net profit grew 30% YoY to Rs 81.3 crore. Demand for CNG is expected to rise with introduction of CNG-based cars and LCVs, besides incremental demand generated from new users such as the Northern Railways and introduction of radio taxis & high capacity buses for the Commonwealth Games. Hike in fuel prices will lead to more consumers converting their vehicles to CNG. Innovations such as ‘Mobile CNG Dispensing Schemes’ along highways will also encourage CNG conversions.
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