Monday, November 26, 2007
Despite the strong rally on the bourses, one group of companies has strictly remained non-participative, the public sector oil marketing companies (OMCs) IndianOil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL).
Thanks to cheaper valuations, we believe an investment opportunity exists in this sector. Comparing these three companies on various parameters, HPCL appears to be the most undervalued. It is trading at around its book value and offers over 6% dividend yield at current price.
Those looking for a value buy and dividend yield can consider investing in this scrip. HPCL is an integrated refining and marketing company operating two refineries (Mumbai and Visakhapatnam) with a total capacity of 16.2 million tonnes per annum (mtpa).
It ranks below IOC and BPCL in retail market share, which is around 17%. HPCL, in a joint venture with Mittal Energy, is setting up a 9-mtpa refinery at Bhatinda in Punjab by ’10. Currently, HPCL sells four petroleum products, petrol, diesel, LPG for domestic consumption and kerosene through the public distribution system, at administered prices determined by the government, which leads to under-recoveries.
The government shares a part of these under-recoveries by way of oil bonds, while public sector upstream companies such as ONGC and Gail share a part of the burden through discounts offered to OMCs.
BUSINESS: HPCL owns or operates 8,000 retail outlets across the country, selling auto fuels, out of which over 3,500 supported with non-fuel offerings are branded ‘Club HP’. For rural India, HPCL has launched the ‘Hamara Pump’ format, wherein farm inputs such as seeds, pesticides and fertilisers are sold along with fuel.
It also caters to the LPG requirements of over 25 million households. HPCL is one of the leading players in the domestic lubricants market and is also expanding its aviation turbine fuel (ATF) business. It has floated a number of JVs in the energy value chain to diversify risks and augment its cash flows.
Prize Petroleum, in which HPCL holds a 50% stake, is into petroleum exploration and production. It has signed a service contract for an offshore field cluster comprising three oilfields and has also been awarded an onshore block under NELP VI. These initiatives are expected to aid future growth.
Bhagyanagar Gas has commenced CNG operations in Vijayavada and Hyderabad. Similarly, Aavantika Gas is in process of launching CNG operations in Indore, with plans to extend to other major cities in Madhya Pradesh. HPCL holds 22.5% stake in each of these JVs.
HPCL has also established JVs for bitumen products, LPG storage and pipelines. It is investing in alternate energy sources and has entered into contract farming for cultivation of Jatropha in Chhattisgarh. It has set up a 10-mw windmill electricity generation capacity, which will be expanded to 100 mw in a phased manner.
VALUE DRIVERS: HPCL is progressing well in its core business of refining and marketing of petroleum products and has lined up several projects. Its major projects include lube oil base stock upgradation at Mumbai refinery, upgradation for production of Euro IV-compliant fuels, facilities for mixed xylene and propylene production at Mumbai and Vizag refineries and delayed coker unit for bottoms upgradation at Visakhapatnam.
These projects will improve product quality, resulting in better margins. It is also planning to develop a special economic zone (SEZ) near its Vizag refinery by setting up a petrochemical and petroleum investment region to produce petrochemicals and other high-value products.
FINANCIALS: HPCL’s crude throughput witnessed a compounded annual growth rate (CAGR) of 6.6% over the past five years, thanks to capacity expansion and utilisation. This helped HPCL to produce 77% of the petroleum products that it sold during FY07, compared to 68% during FY03, thereby reducing dependence on traded goods.
For H1 ended September ’07, sales grew 4% to Rs 43,761 crore, but the value of special oil bonds received from the government came down by 19% to Rs 2,356 crore. Its operating profit margins remained unchanged at last year’s level. A 155% jump in other income helped it register 25% PAT growth at Rs 766 crore.
VALUATIONS: HPCL appears undervalued compared to its peers, IOC and BPCL, on three main counts. Firstly, HPCL’s price to book value ratio (P/BV) is the lowest at just 1.01. Secondly, its market capitalisation (m-cap) to refining capacity ratio is also the lowest at Rs 5,914 per tpa.
And most importantly, its dividend yield is over 6.2%, which is substantially higher than that of its peers. At the same time, nearly one-third of its m-cap is represented by value of its quoted investments, which again, indicates its undervaluation.
While high crude oil prices in the international market and excessive dependence on government policies remain the key risks, a softening of prices or the government’s decision to hike domestic fuel prices will lead to a dramatic improvement in HPCL’s finances and may trigger a sharp rise in its stock price.
Motilal Oswal have valued Kotak Mahindra Bank (KMB) on SOTP basis to arrive at a price target of Rs1,363 – an upside of 26% from current levels. They initiate coverage on the stock with a Buy rating. On a consolidated basis, the stock trades at 15.5x FY10E earnings adjusted for value of life insurance.
According to the brokerage house, Kotak Mahindra Group is all set to emerge as a financial powerhouse in India. They expect KMB’s consolidated profits excluding life insurance to grow at a CAGR of 51% over the next three years to Rs20b in FY10. Earnings from the lending business, and asset management would maintain strong traction over the next couple of years. The share of lending business in profits would increase from 40% in FY07 to 48% in FY10, while the share of broking and investment banking (K-Sec & KMCC) would decline from 56% in FY07 to 39% in FY10.
|DEWAN HOUSING FINANCE|
Broking firm: Religare
Reco price: Rs 148
CMP: Rs 140
Target price: 302
|Dewan Housing, a part of the Wadhawan Group, has a niche positioning in providing housing loans to lower and middle income segments in the tier II and tier III cities. The company plans to increase its existing 54 branches four-fold in order to more than double the asset base to Rs 10, 000 crore in the next two-three years.|
|Besides growth in the core business followed by improvement in net interest margin to 3 per cent, the company’s business growth would be supported by unrealised gains of Rs 200 crore on shares of HDIL (the real estate company) and a capital adequacy ratio of 17 per cent.|
|The company acquired 19.9 per cent equity stake in promoter-owned Wadhawan Food-Retail, operator of the Spinach store chain.|
|Based on sum-of-parts valuation method, the company is valued at Rs 302 per share with core business valuation of Rs 212 per share and Rs 90 per share due to stakes in DHFL Vysya, HDIL and Wadhawan Food–Retail.|
|BOMBAY RAYON FASHIONS|
Broking firm: Prabhudas Lilladher
Reco price: Rs 322
CMP: Rs 302
Target price: Rs 620 (FY10)
|Bombay Rayon is investing Rs 1100 crore over three years to set-up its fabric processing and garmenting units in Maharashtra. As a result, its fabric and garment capacity will increase by 4 times and 1.6 times to 235 million meters and 164000 pieces per day by FY10E.|
|Besides, its garment capacity will further improve to 246000 pieces per day due to other new capacities, acquisition of Leela Scottish Lace and LNG apparels. The company’s revenue and earnings are expected to grow at over 70 per cent CAGR over FY07-10.|
|Further, with better governmental support and greater operational synergies, the company could witness operating margin expansion of about 740 bps over FY08-10E.|
|However the full benefits of the expansion in Maharashtra will be reflected only in FY10. The appreciating rupee will have a limited impact on the company as it has managed to change its geographic mix of its revenue from US to Europe.|
|CORE PROJECTS & TECHNOLOGIES|
Broking firm: Way2Wealth
Reco price: Rs 242
CMP: Rs 265
Target price: Rs 340
|CPTL a niche player in education vertical having huge addressable domestic education infrastructure market. Its client list includes various state Governments such as Georgia, North Carolina, Michigan, Illinois, Florida and Maine in the US.|
|The company is aggressively looking at getting orders from various state governments of India and is scouting to expand its expertise across the globe in the EU and Australian markets.|
|The company is well positioned player in the long term due to its aggressive inorganic strategy and exponential growth in revenues and margins. The stock trades at 29 times and 19 times its estimated earnings for FY08 and FY09 respectively.|
|The company’s revenues and profit are expected to double by FY09E driven by its education vertical (especially SSA Project), its recent tie-up with Centre of higher Learning (CHL) in US and inorganic growth. Operating margin is expected to improve to 32.9 per cent in FY2009.|
Broking firm: I-Sec
Reco price: Rs 445
CMP: Rs 427
Target price: Rs 591
|The target price has been upgraded from Rs 332 earlier due to recent positive developments like the addition of 3,500MW to its power portfolio, increase in selling prices of residential project at Lanco Hills by 15-18 per cent, reduction in the cap rate for rental properties from 12 per cent to 10 per cent and value emanating from the potential addition of power projects.|
|As a result, revenue and profit estimates have also been revised upwards for the next three years. The stock trades at 21.6 times, 10 times and 6.3 times for FY08, FY09 and FY10 estimated earnings respectively. Lanco intends to have 12,000MW power capacity operational by ‘13.|
|Besides generation, the company is also mulling expansion in power transmission and distribution and will bid for setting up distribution networks.|
|Further, it has signed up a strategic agreement with Gulftainer, a leading port developer and operator from the UAE, to bid for port and transportation projects and is also planning to venture into airport development.|
|Within the construction segment, Lanco is planning to expand its road portfolio and is bidding for upcoming road projects in Punjab, Rajasthan, Andhra Pradesh and NCR.|
Broking firm: Motilal Oswal
Reco price: Rs 1447
CMP: Rs 1370
Target price: Rs 1768
|Nestle is one of the best plays on huge growth potential in food processing sector in India due to resurgent urban India and rising affordability in tier II and tier III cities. Strong brands and launch of new products and variants would enable the company post sales and net profit growth of 17.2 per cent and 24 per cent over CY07-09.|
|The company is uniquely placed to tap the potential of growing middle class and rising consumer confidence due to strong brands, R&D support of the parent and SBU focus.|
|Though volumes and value growth in the first nine months ended of calendar year 2007 (CY07) was impressive, the company witnessed strong rise in prices of all major inputs like wheat flour, coffee and milk. Raw material costs continue to be a concern in future.|
|The company’s focus on innovation and renovation has enabled it to launch new products like Milkmaid Funshake, Polo Zero, Cerelac Multigrain, Orange and lemonade Juice Drinks concentrate and NescafeMild Coffee in the past few months. The stock trades at 24 times and 19 times its estimated earnings for CY08 and CY09 respectively.|
The Sensex opened with a positive gap of 318 points at 19,171 on the back of positive cues from the global markets. The index touched a high of 19,360 in morning trades.
Intra-day profit-taking saw the index drop to a low of 19,138 in early noon deals. The Sensex, however, ended the day on a firm note at 19,248 - up 395 points (2.1%).
The BSE Metal index surged over 5% to 17,525. The Realty index rallied 3% to 10,081, and the IT index gained 2% at 4098.
The market breadth was fairly positive - out of 2,865 stocks traded, 1,813 advanced, 996 declined and 56 were unchanged today.
HDFC Bank zoomed over 5% to Rs 1,644. Bharti Airtel and Reliance Energy soared 3.7% each to Rs 948 and Rs 1,790, respectively.
Tata Steel, ONGC and Hindalco rallied over 3% each to Rs 849, Rs 1,184 and Rs 194, respectively.
Grasim surged 3% to Rs 3,734. DLF and TCS gained 2.7% each at Rs 892 and Rs 985, respectively.
Reliance, BHEL and Wipro moved up 2.5% each to Rs 2,883, Rs 2,605 and Rs 453, respectively.
Satyam, Hindustan Unilever and Bajaj Auto were up over 2% each at Rs 426, Rs 210 and Rs 2,587, respectively.
VALUE & VOLUME TOPPERS
Reliance Petroleum topped the value chart with a turnover of Rs 515.50 crore followed by Jindal Steel (Rs 312.80 crore), Reliance Energy (Rs 201.70 crore), Empee Dist (Rs 176.70 crore) and J P Hydropower (Rs 168.70 crore).
Reliance Petroleum led the volume chart with trades of around 2.46 crore shares followed by Tata Teleservices (1.57 crore), Ispat Industries (1.56 crore), J P Hydropower (1.47 crore) and Reliance Natural Resources (1.03 lakh).
Strong rally supported by the global cues propelled Indian indices. Market traded firm till the afternoon session and peered some of its gains as investors preferred profit booking at higher levels. But there was sustained buying in heavyweights which kept market to trade higher. Metals were shining throughout the day and were the star performers like Jindal & Bhushan steel. Host of steel stocks were attracting good buying followed by Realty, Cap goods and Power stocks. Technology space also bounced back and was among the top gainers. Nitco stock fired up after some reports stated that leading FII had picked up 15% stake. Both the Midcap and smallcap indices closed up over 1%. Asian markets had a strong session, barring Shanghai while other Asian Markets closed in green. Europe trading in positive terrain now. Crude at $98 is putting pressure on the Airline and Oil marketing companies as the ATF prices are expected to be hiked on December 1st 2007, but the oil marketing are also hit by the crude prices.
Sensex ended up by 395 points at 19247.539. It was helped up by gains in HDFC Bk (1643.7,+5 percent), Bharti Tele (948,+4 percent), Rel Energy (1789.55,+4 percent), TISCO (849,+3 percent) and ONGC (1184.2,+3 percent). Restricting the gains were in Tata Motors (710.2,-1 percent), SBI (2242.25,0 percent).
Apar Industries Ltd a diversified company having presence in Speciality Oil, Aluminium Conductor and Polymers. It has 3 plants located at Rabale-Thane, Silvassa and Nalagarh - Himchal Pradesh. It is the largest manufacturer of Transformer Oils in India and the second largest manufacturer of high strength overhead power transmission and distribution conductors. The Company earns around 48% of its revenues from the power sector and 42% from Speciality oil and 10% from Polymers. With the buoyancy in the power sector, the two segments of the company are expected to see immense growth. Powers sector the major drive to the company. Last quarter the top line grew by 16% to Rs 418 cr and the bottom line grew by 19%. The company has sold the non performing polymer business to concentrate more on its core business and looking for businesses to expand in power which earns more. The stock is well placed but we believe there could be better opportunities. We have detailed note on this stock. Do read to have clear idea and to know our view on this stock. Today the stock performed well and ended up by 5%.
National Aluminium Corporation (Nalco) was one of the buzzing stock for the day which ended up by 14%. Nalco reported some of its plans in coming future which supported the stock to perform. It has plans invest around Rs 20,000 crore to set up two new greenfield projects an alumina refinery in Andhra Pradesh and an integrated Aluminium complex in Orissa. Nalco has also planed to go for a follow-on public offering including a rights issue to part fund investments. It is also set to rise around Rs 6,000 crore through external commercial borrowings (ECB) to finance equipment imports. Government holds 87.15% stake in the PSU. All the process is on cards which is been discounted in the market price.
Technically Speaking: Markets traded strong following the global upswing, with strong positive breadth. Sensex touched intraday high of 19360 and low of 19138. Sensex turnover was low at Rs 5823 Cr. Market breadth was in favor of Advances, where the Decliners stood at 996, Advances were stood at 1774. Sensex today faced resistance at its 20 DMA of 19360. Low volumes are suggesting lower participation and hence we could see a volatile expiry close this Thursday as the liquidity is likely to be less. Traders can look for shorts if Sensex trades below 19000.
The market closed on an impressive note due to strong buying across the heavy weights scrips. The market got off a good start carrying it from the last closing on Friday and closed with heavy gains. Though the market tumbles in the middle but manages to overcome in the final trading hour of the session. The global cues are in favor which led o the Indian market to trade higher. Most buying is seen Metal, Capital goods, oil & gas and Realty indices scrips. The BSE Sensex surged 394.67 points to close at 19,247.54 and Nifty grew by 123.1 points to close at 5,731.70. The Sensex touched an intraday high of 19,360.23 and low of 19,137.66 during the trading session. Overall, the market breadth was strong as 1,820 stocks are closed higher while 986 are closed lower. Both BSE Mid cap and Small cap grew by 155.75 points and 171.82 points to close at 8,384.25 and 10,343.25 respectively.
BSE Metal index surged by 930.46 points to closed at 17,524.54. Pushed up by Jindal steel (16.74%), NALCO (14.41%), SAIL (5.32%), Ispat Industries (4.60%), Tata Steel (3.47%)
BSE Capital Goods index closed higher by 435.53 points at 19,751.65. Pushing it up are Kirloskar (10.64%), BEML (9.26%), Crompton Greaves (8.45%), Praj Industries (5.59%), Suzlon Energy (4.05%) and SKF (2.38%).
BSE Realty index surged 297.91 points to close at 10,081.27. Pushing it up are Ansal Infra (11.01%), Sobha developers (7.15%), Unitech by (6.05%), Anant Raj (3.41%) and Parsvnath by (2.51%).
BSE oil & gas index surged by 227.81 points to closed at 12,215.28. Jumped by Cairn (4.38%), ONGC (3.35%), HPCL (2.81%), Reliance industries (2.54%) and Indian Oil (1.61%).
BSE Power index grew by 94.38 points to close at 4,376.73 as Crompton Greaves (8.45%), Suzlon energy by (4.05%), Reliance energy by (3.74%), GVK Power (3.67%) closed higher.
BSE IT index closed higher by 81.13 points at 4,098.23. Scrips that grew are NIIT ltd by (10.93%), I-FLEX by (7.47%) at Rs1448.80, Rolta India by (6.41%) at Rs676.10, Wipro by (2.41%)
Sensex opened on a firm note at 19,171 and rallied further on substantial buying in metal and capital goods stocks. Despite the slowdown in FII inflows, the Sensex rallied further to touch the intra-day high of 19,360 on substantial buying support. The market remained firm above the 19,150 level for the entire trading session as firm Asian and European indices helped investors to pursue buying. However, profit bookings at higher levels dragged the index to its day's low of 19,138, above 285 points its previous close. The market recovered in the afternoon but the Sensex shed some of its profits towards the close. The Sensex finally wrapped up the session with a gain of 2.09% or 395 points at 19,248. The Nifty rose by 2.19% and gained 123 points to close at 5,732.
Among the sectoral indices, the Metal index led the upsurge with gains of 5.61% at 17,525 followed by the BSE Realty index (up 3.05% at 10,081), the BSE CG index (up 2.25% at 19,751) and the BSE Power (up 2.20% at 4,377). The market breadth was extremely positive. Of the 2,865 stocks traded on the BSE 1,820 stocks advanced, 986 stocks declined and 59 stocks ended unchanged.
Out of the 30 Sensex stocks, 28 managed to end in the green while two stocks ended with losses. HDFC Bank was the lead gainer and soared 5.18% at Rs1,644. Bharti Airtel jumped 3.78% at Rs948, Reliance Energy shot up by 3.74% at Rs1,790, Tata Steel advanced 3.47% at Rs849, ONGC moved up by 3.35% at Rs1,184, Hindalco added 3.32% at Rs194 and Grasim gained 2.94% at Rs3,734. Among the laggards Tata Motors and SBI slipped marginally.
Over 2.46 crore Reliance Petroleum shares changed hands on the BSE followed by Tata Teleservices (1.56 crore shares), Ispat Industries (1.56 crore shares), JP Hydro (1.47 crore shares) and Reliance Natural Resources (1.03 crore shares).
Reliance Petroleum registered a turnover of Rs515 crore on the BSE followed by Jindal Steel (Rs312 crore), Reliance Energy (Rs202 crore), Empee Distilleries (Rs176 crore) and JP Hydro (Rs168 crore).
The market ended on a strong note as US shares were buoyed on Friday, 23 November 2007, by a strong start to the US holiday shopping period. Short covering in futures & options segment ahead of expiry of November 2007 derivatives contracts on Thursday, 29 November 2007 also boosted the market. Heavy buying was seen in metal stocks while realty and software stocks also rose. Market breadth was strong. European markets, which opened after Indian market, were in green. Asian markets, which opened before Indian market, were firm.
The 30-share BSE Sensex surged 394.67 points or 2.09% to 19,247.54. Sensex hit a low of 19,137.66 in afternoon trade. At day's low, Sensex was up 284.79 points for the day. Sensex hit a high of 19,360.23 in mid-morning trade. At day’s high of 19,360.23, Sensex had risen 507.36 points.
The broader based S&P CNX Nifty rose 123.01 points or 2.19% to 5731.70.
The BSE Mid-Cap index was up 1.89% to 8,384.25, while the BSE Small-Cap index was up 1.69% to 10,343.25. Both these indices underperformed the Sensex.
The market breadth was strong. On BSE, 1820 shares advanced and 986 shares declined. 59 shares were unchanged. 28 out of 30 shares in the Sensex pack were in green.
BSE clocked a turnover of Rs 5823 crore compared to Friday (23 November 2007)'s Rs 6,348.22 crore.
Nifty November 2007 futures were at 5761.25, a premium of 29.55 points as compared to spot closing of 5731.70.
NSE’s futures & options (F&O) segment turnover was Rs 75903.04 crore, which was higher than Rs 66744.48 crore on Friday, 23 November 2007.
India’s largest private sector firm by market capitalisation and oil refiner Reliance Industries gained 2.54% to Rs 2882.85. The company has sold 4.01% of the equity share in its subsidiary company Reliance Petroleum (RPL) by transactions through the stock exchanges. The aggregate sale consideration is Rs. 4,023 crore and post-sale RIL’s stake in RPL has come down to 70.99% from 75%.
Reliance Petroleum ended 2.60% lower at Rs 204.05 on huge volumes of 2.46 crore shares on BSE.
India’s second largest telecom service provider Reliance Communications moved up 0.87% to Rs 687.90. The company reportedly plans to sell another 5% stake in its wireless tower business in the second such transaction in this calendar year.
India’s largest commercial bank State Bank of India fell 0.40% to Rs 2242.25.
India's biggest truck maker by revenue Tata Motors slipped 0.62% to Rs 710.20.
The BSE Metal index moved up 5.61% to 17,524.54. It outperformed the Sensex. Jindal Saw gained 8.80% to Rs 814.95, Steel Authority of India (Sail) moved up 5.32% to Rs 265.15, Tata Steel rose 3.47% to Rs 849, Hindalco Industries rose 3.32% to Rs 194.32 and Sterlite Industries gained 2.01% to Rs 896.80.
The BSE Realty index jumped 3.05% to 10,081.27. It outperformed the Sensex. DLF moved up 2.68% to Rs 891.90, Unitech rose 6.05% to Rs 360.50 and Sobha Developer gained 7.15% to Rs 883.10.
The BSE IT index rose 2.02% to 4,098.23. It underperformed the Sensex. Infosys Technologies rose 1.18% to Rs 1576.35, TCS moved up 2.60% to Rs 985, Wipro rose 2.41% to Rs 452.70 and Satyam Computers gained 2.30% to Rs 426.35. The recovery in IT stocks was due to recent weakening of the rupee against the dollar. IT companies derive a lion's share of revenue from exports. They had been hit hard over the past few months due to rupee's surge.
The BSE Capital Goods index moved up 2.25% to 19,751.65. It outperformed the Sensex. Larsen & Toubro gained 1.83% to Rs 4175.50, Bharat Heavy Electricals (Bhel) rose 2.43% to Rs 2605.10, Jaiprakash Associates rose 3.285 to Rs 1679.35 and BEML jumped 9.26% to Rs 1775.70.
The BSE Bankex was up 1.70% to 10,590.95. It underperformed the Sensex. ICICI Bank rose 1.52% to Rs 1157.65, HDFC Bank jumped 5.18% to Rs 1643.70, Union Bank (India) rose 3.54% to Rs 174.20, Punjab national Bank gained 2.94% to Rs 599.60 and Axis Bank rose 0.74% to Rs 936.80.
The BSE Power index moved up 2.20% to 4,376.73. It outperformed the Sensex. Neyveli Lignite jumped 5.44% to Rs 225.95, CESC gained 2.94% to Rs 607.40, Tata Power jumped 2.53% to Rs 1178.80, and NTPC moved up 0.85% to Rs 238.60.
Power utility Reliance Energy gained 3.74% to Rs 1789.55. The company has entered into a joint venture with the country’s main transmission utility Power Grid Corporation of India to execute about 300 kilometre (km) transmission lines from Parbati to Koldam and Koldam to Ludhiana. The company will have a 26% equity holding in the venture while Reliance Energy will have 74% stake.
State-run transmission utility Power Grid Corporation of India was up 0.53% to Rs 152 on volumes of 45.46 lakh shares on BSE.
Walchandnagar Industries, which makes boilers for sugar and cement industry, hit upper circuit of 5% at Rs 8,478.25. The board of the company has approved the issue of one bonus share for each held and splitting each share into five. The board also set a special dividend of Rs 10 a share.
Infrastructure development firm Lanco Infratech rose 2.89% to Rs 444.70 after the company said it has received five letters of acceptance for supply and erection of 33/11 kilo volt substations and 33/11 kilo volt lines in five districts in Andhra Pradesh.
Television maker MIRC Electronics was up 3.48% to Rs 31.20. Sonu Mirchandani, who has a 33% stake in the company, has now offered to buy out his elder brother Gulu’s share in the company.
Sadbhav Engineering, which constructs roads and highways, moved up 3.10% to Rs 1091.35 after the company received road development projects worth Rs 99.01 crore from the government of Chhattisgarh.
Brokerage firm India Infoline spurted 3.42% to Rs 1153.05 on reports that foreign investors Goldman Sachs and Blackstone are in final stages of negotiations to buy a 26% stake in India Infoline Distribution Company, a distribution subsidiary of the brokerage.
Ceramic tiles maker Nitco Tiles soared 6.05% to Rs 302.25 on reports that leading foreign investors Lehman Brothers, Citigroup, Merrill Lynch, Deutsche Bank and Reliance Capital have picked up a total 15% stake in the company for around Rs 170 crore.
Balaji Telefilms, which provides content to most Hindi satellite channels, surged 12.46% to Rs 376.30 on reports that the company plans to offload 10% to 15% stake in its wholly owned subsidiary Balaji Motion Pictures.
Reliance Petroleum clocked the highest turnover of Rs 516.79 crore on BSE. Jindal Steel & Power (Rs 312.80 crore), Reliance Energy (Rs 202.21 crore), Empee Distilleries (Rs 176.85 crore) and Jaiprakash Hydro-Power (Rs 168.93 crore), were the other turnover toppers on BSE in that order.
Reliance Petroleum registered highest volumes of 2.46 crore shares on BSE. Tata Teleservices (1.56 crore shares), Ispat Industries (1.56 crore shares), Jaiprakash Hydro-Power (1.47 crore shares) and Reliance Natural Resources (1.03 crore shares), were the other volume toppers on BSE in that order.
Friday’s US rally boosted stocks across Asia and Europea. In Europe, key indices in France, Germany and United Kingdom were up by between 0.47% to 0.60%.
In Asia, key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 2.23% to 4.65%. China’s Shanghai Composite was down 1.46% to 4,958.849.
The Dow Jones industrial average jumped 181.84 points, or 1.42%, to close at 12,980.88 on Friday, 23 November 2007. The Standard & Poor's 500 Index gained 23.93 points, or 1.69% to finish at 1,440.70. The Nasdaq Composite Index advanced 34.45 points, or 1.34%, to end at 2,596.60.
FII sales caused by redemption pressure in their home countries and fears of a US recession arising from housing slump and credit crisis had spooked stocks across Asian over the past few days. Concerns about the health of the US economy remain.
As per provisional data, FIIs bought shares worth a net Rs 50.40 crore today, 26 November 2007. Domestic institutions bought shares worth a net Rs 274.06 crore today.
FIIs sold shares worth a net Rs 173.40 crore on Friday, 23 November 2007. Domestic funds bought shares worth a net Rs 525.86 crore on that day.
Buy Power Grid with a stop loss of Rs 135 for targets of Rs 167 and Rs 200.
Buy Neyveli Lignite with a stop loss of Rs 175 for target of Rs 290.
Buy Hindustan Petroleum with a stop loss of Rs 260 for a short-term target of Rs 360.
Buy LIC Housing Finance with a stop loss of Rs 307 for a short-term target of Rs 390.
Market Grape Wine :
In House :
Nifty at a supp of 5572 and 5515 with resis at 5668 and 5725
Mkt to give a gap up opening with selling at higher levels not ruled out.
Intra day: Buy LITL above 443 with a TGT of 465 and a SL of 436
Buy NTPC above 239 with a TGT of 253 and a SL of 234
F&O: Buy CESC with SL
Buy Welspun Guj above 404 with a TGT of 420 and a SL of 398
Out House :
Markets at a support of 18484 & 18686 levels with resistance at 18986 & 19229 levels .
Buy : RIL & RPL bullet
Buy : RELCAP & REL
Buy : JpAsso & JpHydro
Buy : Aban & Skumar
Buy : GeShipping & SCI
Buy : IBUllsreal & IBulls
Buy : IciciBnak & SBIN & HdfcBank
Dark Horse : RPL , REL , JpAsso , Aban, RIL , GeShipping , SBIN & JpHydro
Bullet : RPL & JpHydro with strcit stop loss
US markets recovered and helped to trim down some of the weekly losses made. The recovery was largely due to positive cues from European markets and Canadian stocks posted a triple digit gain. Mean while on hopes of black Friday; markets expect a boost in the retail sales; traditionally this is one of the important day of year sales. This boosted the sentiments of investors and helped the indices to close on strong bounces back. Dow ended up by 181 points at 12,981 while the Nasdaq closed at 2,597 up by 34 points. The S&P index ended up by 24 points at 1441. Asain markets are trading in green following the US Positive move. Expect Indian Markets to have positive start.
Indian ADR?s ended strong. The major gainers were HDFC Bank (+7.74%), Tata Motors (+7.46%), ICICI Bank (+4.74%) and Satyam (+4.67%).
Reliance Power -- 60 to 65
Jyothy Lab. 620 to 690 380 to 400
Edelweiss 725 to 825 765 to 775
Renaissance Jewellery 125 to 150 48 to 50
Kolte Patil 125 to 145 95 to 100
Kaushalya Infra 50 to 60 15 to 17
Mundra Port & Sez 440 600 to 615
Empee Distilleries 400 35 to 40
SVPCL 42 - 3 to -5
Indian market is likely to have positive opening as the global cues are in favor. On Friday, the market opened with heavy gains and closed on a impressive note due to heavy buying in the index heavyweights. Also the market got a boost as the India''s whole price index grew by 3.01% in the 12 months ended November 10, 2007 as compared to previous week rise of 3.11%. The Indian markets closed in a positive territory as BSE Sensex surged 326.55 points to close at 18,852.87 and NSE Nifty closed up by 89.25 points at 5,608.60. We expect the market may gain some ground during the trading session.
On Friday, the US market remains closed in green. The DJIA closed up by 181.84 points at 12,980.88. The Nasdaq and S&P 500 index grew by 34.45 points and 23.93 points at 2,596.60 and 1,440.70 respectively.
Indian ADRs ended in green. In technology sector, Satyam grew by (4.67%) along with Wipro by (2.96%) and Infosys by (1.14%). In banking sector, HDFC bank ICICI bank surged (7.74%) and (4.74%) respectively. VSNL and MTNL advanced by (2.66%) and (1.84%) respectively.
The major stock markets in Asia are trading strong. Hang Seng is trading up by 863.33 points at 27,404.42. Japan''s Nikkei is trading higher by 195.34 points at 15,084.11. Singapore Strait times is trading at 3,399.31 higher by 73.42 points. Taiwan weighted grew by 155.40 points to trade at 8,497.60 and Seoul Composite advanced by 54.20 points to trade at 1,827.08.
Today, Nifty has support at 5,567 and resistance at 5,718 and BSE Sensex has support at 18,696 and resistance at 19,229
The gains in the US markets, decline in Yen against dollar and positive opening in the most of the Asian indices may help the local market to add gains. However, bouts of high volatile moves and rising crude oil prices could dampen the sprit of the market. Among the key indices, the Nifty has a strong resistance at 5750 and has a key support at 5394 levels in the near-term. The Sensex has a likely support at 18250 and may face resistance at 19000.
US indices posted gains on Friday ahead of holiday season, as investors speculated a weak dollar will make exports more competitive. While the Dow Jones added 182 points at 12981, the Nasdaq was up 34 points at 2597.
Crude oil prices rose on the New York Mercantile Exchange on speculation that OPEC won't increase production and rise in household spending may boost consumption pull down the US stockpiles as peak winter demand approaches. The Nymex light crude oil for August delivery gaining by 32 cents to close at $71.41 a barrel. In the commodity space, the Comex gold for August series declined by $3.80 to settle at $655.40 a troy ounce
Reliance Industries (RIL) has sold 4.01% of the equity share in its subsidiary company Reliance Petrochemical (RPL) by transactions through the stock exchanges. The aggregate sale consideration is Rs. 4,023 crore and post-sale RIL’s stake has come down to 70.99% from 75%. Reports suggest that the sale of 18.04 crore RPL shares would help maximise shareholder value and it monetised only a small share of Reliance Industries’ holding in RPL.
Leading investors Lehman Brothers, Citigroup, Merrill Lynch, Deutsche Bank and Reliance Capital have reportedly picked up 15% stake in Nitco Tiles, a leading tile manufacturing firm, for around Rs 170 crore. The institutional investors are believed to have picked up the stake at Rs 270 per share.
Power Grid Corporation of India, the country’s main transmission utility, has entered into a joint venture with Reliance Energy to execute about 300 km transmission lines from Parbati to Koldam and Koldam to Ludhiana. The company will have a 26% equity holding in the venture while Reliance Energy will have 74% stake.
US-based Xcel Telecom is learnt to be in talks to buy out the telecom tower business of cellular operator Spice.
Chennai-based Indowind Energy is reportedly in advanced stages of negotiations to acquire a wind energy company in Europe for an estimated price of around $100 million (Rs 400 crore). The acquisition, if successful, will help the wind energy and farming company to expand its footprint both in domestic and global markets.
Videocon Industries, the oil-to-consumer durables company, has reportedly joined the race for the acquisition of the London-based Burren Energy, which recently rejected several approaches including one worth $3.5 billion (Rs 14,000 crore) from the Italian major ENI. Videocon has submitted an expression of interest for Burren, which produces oil in Congo and Turkmenistan, the report added.
Reliance Power, which is awaiting regulatory nod for its IPO, that could be the largest in the Indian history, is reportedly willing to convert the par value of its shares to Rs 10 from the current Rs 2. Last week the company wrote a letter to Sebi to this effect, the report suggested.
Reliance Communications (RCOM) reportedly plans to sell another 5% stake in its wireless tower business in the second such transaction in this calendar year.
Leading foreign investors like Goldman Sachs and Blackstone are reportedly in final stages of negotiations to buy 26% stake in India Infoline Distribution Co (IILD), the distribution subsidiary of the brokerage firm India Infoline. The investors are willing to offer $100 million for the strategic stake in IILD.
Balaji Telefilms reportedly plans to offload 10-15 stake in its wholly owned subsidiary Balaji Motion Pictures. Reports suggest that the company is valued at Rs 1,000 crore. Centrum Finance is said to be the financial advisor to the company. The company is reportedly in talks with private equity investors. It is considering roping in only one private equity, instead of a cluster of investors. However, the plan is at a nascent stage.
Foreign institutional investors (FIIs) were net sellers of equity worth Rs 541.88 crore on Friday, 23 November 2007, while domestic institutional investors bought Rs 525.86 crore of equity on that day, according to provisional data released by NSE.
The market is expected to extended Friday (23 November 2007)’s surge after US shares were buoyed on Friday (23 November 2007) by a strong start to the US holiday shopping period.
Friday’s US rally boosted stocks across Asia. Key benchmark indices in Hong Kong, China, Japan, South Korea, Singapore and Taiwan were up by between 0.6% to 3.5%.
The Dow Jones industrial average jumped 181.84 points, or 1.42%, to close at 12,980.88 on Friday, 23 November 2007. The Standard & Poor's 500 Index gained 23.93 points, or 1.69% to finish at 1,440.70. The Nasdaq Composite Index advanced 34.45 points, or 1.34%, to end at 2,596.60.
Bargain hunting had triggered a surge in Sensex on Friday, 23 November 2007. The 30-share BSE Sensex rose 326.55 points or 1.76% at 18,852.87. FII sales caused by redemption pressure in their home countries and fears of a US recession arising from housing slump and credit crisis had spooked stocks across Asian over the past few days. Concerns about the health of the US economy remain.
As per provisional data, FIIs sold shares worth a net Rs 542 crore on Friday, 23 November 2007. Domestic funds bought shares worth a net Rs 525.86 crore on that day.
FII outflow in November 2007, till 22 November 2007, reached Rs 4455.40 crore. FIIs had made heavy purchases in September 2007 and October 2007. FIIs had bought shares worth a net Rs 16132.60 crore in September 2007 and Rs 20590.90 crore in October 2007.
India's wholesale price index rose 3.01% in the 12 months to 10 November 2007, below the previous week's rise of 3.11%, government data released on Friday, 23 November 2007 showed. The annual inflation rate was 5.39% during the corresponding week of the previous year.
Nifty (5609) Sup 5525 Res 5741
Buy GMR Infra (244) SL 239 Tgt 252, 255
Buy DLF (869) SL 863 Tgt 884, 888
Buy Hero Honda (715) SL 709 Tgt 726, 730
Sell Corp Bank (419) SL 424 Tgt 409, 406
Sell Dishman Pharma (266) SL 270 Tgt 258, 256
The R-factor of a surface determines how quickly heat is conducted across it.
For the markets, the R-factors include Reliance and Randomness. Both will come into play. Over the weekend, Reliance disclosed that it has sold RPL shares to broad base the shareholding. Reports caution that when an ‘insider’, quietly offloads shares it’s time to think whether the share price has become over-valued. The real story may be its just a move to get it off the F&O curb and increase the floating stock. Then there is the other R, which is Reliance Power. Reports say Anil Ambani group has sought SEBI's nod to float Reliance Power's IPO at a face value of Rs 10 a share instead of Rs 2. This may be yet another attempt to speed up the IPO process.
The outlook for today is a positive open on the back of buying witnessed on Friday. With F&O expiry this week wild swings could set in anytime. While FIIs have been covering their shorts, they were net sellers in the cash segment. Domestic Mutual Funds on the other hand turned net buyers.
Expect some action in Hexaware today. R-Com could gain on reports of further stake sale in its tower business. Videocon is another counter which could see gains in the near term. Besides buzz of a placement at higher levels, reports say the company is in the fray to acquire London-based Burren Energy. UCO Bank could remain in action on reports that it plans to raise Rs4.5bn through a follow on public offer. Kalindee Rail could gain on reports that the company could bag some major orders soon. Nucleus Software could be in action on reports that it could benefit from the subprime crisis thanks to its loan originating software.
Following are reports from the various media:
Indian companies raised US$12bn through external borrowings in first five months of fiscal 2008.
Inflation falls to 3.01% on decline in food prices for week ended November 10th.
Government plans to reduce assured return on equity on negotiated projects for power generation companies.
Container train operators request railway ministry to lower the access fee charged for usage of container terminals by 10-15%.
Government approves 22 FDI proposals worth Rs5.1bn.
Investments to the tune of Rs380bn planned in the cement sector over the next three to five years.Government likely to reduce 16% central excise duty on ethanol and classify it as a declared good in a move to impose a uniform levy on the product across the country.
Bulls look to continue momentum!
Markets ended their six day losing streak as bulls were back on bourses led by gains in the index frontrunners like Reliance Industries, L&T, HDFC and Reliance Energy. Key indices almost lost their gains as markets reacted sharply to blast which took place in the U.P. region. But showed strong resilience as benchmark Sensex recovered almost 300 points from its day’s low finally closing at 18,852 and the Nifty closed 89 points higher at 5,608.
DS Kulkarni gained 2% to Rs276 after the company announced that it would develop 250Acre of SEZ along with GTC Real Estate. The scrip touched an intra-day high of Rs300 and a low of Rs268 and recorded volumes of over 99,000 shares on NSE.
Reliance Industries surged by 3% to Rs2811 after reports stated that the company completed the purchase of the assets of Hualon Corp. of
NTPC advanced 4.5% to Rs236 after the company announced that it formed a subsidiary Company under the name and style of "Bhartiya Rail Bijlee Company Ltd" on November 22, 2007 for setting up a captive power plant of 1000 MW (2X250MW) at Nabinagar,
The company would be establishing and operating 2X660 MW coal based thermal power project at Meja Tehsil or any other suitable site in
Siemens advanced over 2.5% to Rs1978 after the local unit of
Hindustan Copper was locked at 5% lower circuit to Rs475.2. The company announced that it was considering entering into two joint ventures with overseas partners, according to reports.
The reports added that the company applied for licences of prospecting and have decided to look for foreign partners to enter into copper prospecting and exploration in
XL Telecom slipped 2% to Rs335. The company declared that the company secured Rs658mn export order. The scrip touched an intra-day high of Rs357 and a low of Rs330 and recorded volumes of over 46,000 shares on NSE.
ICRA was marginally up by 0.5% down 939. The company announced that the company signed MoU with United Bank of
PTC India is frozen at 10% upper circuit to Rs149.05 following reports that the company’s arm would sell 40% stake to two FIIs. The scrip touched an intra-day high of Rs149.05 and a low of Rs135 and recorded volumes of over 15,00,000 shares on NSE.
Simplex Infrastructure dropped by over 2% to Rs601. The company declared that they secured a contract worth Rs5.87bn from DP World. The scrip touched an intra-day high of Rs647 and a low of Rs583 and recorded volumes of over 68,000 shares on NSE.
Stocks in News:
Supreme Court has denied approval to the Rs40bn alumina refinery project of Sterlite Industries and Vedanta Alumina in Orissa.
BEML to buy government owned mining equipment plant for Rs1bn.
Power Grid Corp, in a JV with Reliance Energy, would set up 300km of transmission lines.
PTC India to float offshore arm, jointly with strategic partners, to acquire coal assets abroad.
Tata Chemicals has lined up a capital expenditure of Rs10bn for expanding capacities at its facilities in India, Kenya and the UK.
Vodafone Essar to raise US$500mn overseas to roll out network infrastructure and expansions into newer towns.
Air India incurs loss of Rs4.5bn in year ended March 2007 on rising fuel costs and wage arrears.
PTC India would sell 40% stake in its newly-formed financial services arm for Rs1.5bn to Goldman Sachs and Macquarie, Singapore.
Zydus Cadilla plans to launch 100 generic drugs that are expected to go off patent in the next five years in US and Europe
Future Group, Future Logistics Solutions will invest Rs4bn in next three years to operate additional mega merchandising hubs and warehouses.
SBI seeks government approval for merger of State Bank of Saurashtra with itself.
UCO Bank plans to raise Rs4.5bn through a follow on public offer; may approach SEBI by end of December
Balaji Telefilms may offload 15% stake in its wholly owned motion pictures arm
Kamat Hotels is working on a plan to set up 50 hotel properties in five-star, four-star and fort segments by 2012 at an investment of Rs5bn.
Walchand Industries, PTC India, Usha Martin, GTC Industries, Kothari Products, Marg Construction, Prakash Industries, Mukta Arts.
National Fertilizer, MMTC, Marathon Nextgen
Reliance Communications (RCOM) plans to sell another 5% stake in its wireless tower business in the second such transaction in this calendar year. JP Morgan, which advised RCOM in the last transaction announced in July this year, invited bids from financial investors last week amidst indications that the deal will be bigger than the previous one, which fetched a value of $6.75 billion for the tower business.
Reliance wants the business to be valued at about $9 billion. It believes that the profitability of the tower business will increase as tenants increase. For instance, the roll-out of RCOM’s GSM business in 16 circles will be considered another tenant. The introduction of 3G and WiMax next year will give opportunities for further tenancies. The bidders are likely to be financial investors such as hedge funds and institutional firms. Reliance Communications spokesperson declined comment on the issue. The wireless tower business is witnessing frenetic activity as companies begin to see immense benefits in spinning off the asset and are either listing it separately, or selling a small stake to investors at a premium.
A wireless tower enables smooth passage of signals across a wide expanse of territory and is crucial in helping telecom companies achieve penetration. Big telecom companies own thousands of towers, but it need not always be on their books. The companies can spin off the tower business and lease space on them to other telecom companies, their competitors.
The tower business becomes an independent company with its own revenue stream and a relatively stable business model.
The telecom operators benefit as they get much-needed cash from such a spin-off for their operations. Their shareholders also benefit from an increase in share price and market capitalisation. Companies with no major infrastructure to boast of can ride piggyback on those with towers after paying rental and other pass-through charges.
Reliance Communications has spun off its business earlier this year and sold a 5% stake to investors such as Fortress Capital, HSBC Principal Investors, GLG Capital, Quantum Fund, New Silk Route Advisors, Galleon Group and DA Capital.
Other telecom companies have quickly followed suit. Bharti Airtel, the country’s largest wireless services provider, has announced the spin off of its business. The firm is also in talks with Vodafone and Idea Cellular to create a single mega business. Spice Telecom has decided to sell the business while Tata Teleservices wants to sell a substantial stake.
A tower business needs to have at least two tenants in order to be profitable.
RTIL now has Reliance Communications’ CDMA business as one of its major clients. Its other tenant is Reliance Telecom which runs GSM services in the seven circles. A third tenant will be added when RCOM rolls out GSM services in the remaining 16 circles. It has already got a licence and is waiting for spectrum to be allocated.
On Friday, Reliance Industries (RIL) undertook the biggest stock market operation by an Indian company when it offloaded a 4.01% stake in its 75% subsidiary Reliance Petroleum (RPL) for Rs 4,203 crore.
An RIL spokesman said the sale would reduce volatility in the stock and further broadbase shareholding in RPL.
But when one of the major index drivers sees its promoter, an insider, quietly offloading shares on unwary investors, it’s time to think whether the share price has become over-valued.
Analysts said that RPL will find a higher representation in the BSE Sensex, which represents the floating stock of 30 leading companies.
Mutual funds could now buy more of RPL, in view of the higher representation.
With promoters selling, the floating stock (owned by non-promoters) in RPL increased by 4.01% to 24%. Chevron owns 5%. The number of RPL shareholders since IPO has increased from 12 lakh to 16 lakh.
However, the modus operandi of the sale is still not known.
Whether RPL shares were sold in small lots or in huge block deals to small investors or private equity firms is still a matter of conjecture.
These details were neither available in the block or bulk trade details of BSE and NSE, nor was it put on the stock exchange notice board till Saturday night.
The details were neither available in the block or bulk trades of BSE and NSE nor was it put on the stock exchange notice board till Saturday night.
Since the two exchanges are closed on Saturdays and Sundays, the the company will be able to keep the secret till Monday.
Sebi rules say that any person holding 5% shares or voting rights in a listed company shall disclose to the company in Form C, if such change exceeds 2% of the total shareholding.
The disclosure, according to the rules, shall be made in four working days and the listed company should, within five days from the receipt, disclose to all exchanges. The companies in question have the same management at the helm.
Legally, they may still be on the right side as Sebi’s insider trading norms give enough time for an insider to sell, but morally the ‘blind faith’ many investors have reposed on Reliance for decades may get tested after the event.
RPL shares hit a high of Rs 295 on November 1. The counter surrendered value and moved downhill ever since, when curbs on fresh positions in futures & options were instituted by the regulators. The market-wide limit of 95% had breached in the RPL counter.
Earlier this month, the RPL share was on the rise on a market rumour that Chevron could pay $6 billion for 21% in RPL.
The US oil major promptly repudiated the news, but the Indian company was slack in denying it. RPL shares climbed northwards probably on this rumour, to a 52-week high of Rs 295. Suddenly thereafter, sellers emerged. Who were the sellers in the F&O segment? Did they know something that others didn’t? For instance, that at least for now, Chevron was not planning to buy shares.
Market observers were amazed by the way Reliance Petroleum, a refinery which is still under construction and to be ready by only next fiscal, has overtaken the combined shareholder wealth of the three PSU refiners-cum-marketers - IOC, HPCL and BPCL. These are exuberant times, one may say.
Reliance Natural Resources controlled by Anil Ambani is also commanding huge values.
That’s not all. A company slated for delisting, Essar Oil, suddenly decided against it and wants to enjoy the maddening roller-coaster ride in the stock markets.
Has the tide in the markets changed? Or, are some insiders in the know booking profits and holding cash as they know for sure that share prices have become too ripe? Or is this a one-off operation in stock market?
What might embitter small investors is that the entire transaction was done under cover. The promoter sold the shares on unwary investors who apparently had no clue that last week it was the main promoter, RIL that was selling RPL shares.
If Sebi is curious, it may well want to see the short sale positions in RPL counter. To be fair to RIL, what with its legal eagles guiding them, it may well be on the right side legally. On corporate governance issues and the moral angle, it may well be another matter.
We recommend a buy in SKF India at current price levels. It is evident from the weekly chart of SKF that it has been on a long-term uptrend since June 2003 low of Rs 210. However, after touching a life-time high of Rs 513, the stock was on a medium-term downtrend. The stock’s downtrend retraced 61 per cent of the fibonacci retracement level of its prior uptrend and found support at Rs 360 levels, which also coincides with 200-day moving average line. Subsequently, th e stock resumed the long-term uptrend and penetrated the medium-term down trendline on November 19. The daily momentum indicators are signalling a buy. The immediate support for the stock is at Rs 390 and the next support is at Rs 360. Investors with short-term horizon can buy the stock with stop-loss at Rs 400. We expect the stock to move up further to Rs 500 level in the short-term, with a minor pausing at around Rs 475 levels.
|Prices likely to recover till Nifty 5750 ahead of settlement.|
|Four negative sessions were followed by a partial recovery on Friday but week-on-week, the market lost considerable ground. The Nifty ended down 5.05 per cent at 5608 points after hitting an intra-day low of 5394 on Thursday.|
|The Sensex was down 4.29 per cent. The Defty lost 5.75 per cent as the rupee softened somewhat. The FIIs were massive sellers while the Indian mutual funds were almost neutral. Breadth was negative on week-on-week basis but it was positive on Friday.|
|The broad BSE 500 was down 4.06 per cent while the CNX Midcap lost 4.07 per cent. The Nifty Junior was the best performing index with a loss of only 1.55 per cent. Volumes were low through the week and lowest on Friday during the recovery.|
|Outlook: The market is most likely to swing through the range of Nifty 5350-5750 through settlement week. Monday is quite likely to be uptrending but there is powerful resistance starting at 5675. Intra-day volatility is likely to be in the 250-300 Nifty range.|
|Rationale: Friday’s upmove was driven by short-covering in both cash and derivatives. This week is likely to see profit-booking by the “shorts” in the F&O segment. That could push prices up but there seems insufficient volume to cause a full-fledged recovery.|
|The market has performed a double (actually multiple) top, which is bearish. On the downside, support at 5400 seems strong. If that breaks, the next reliable support is 5200.|
|Counter-view: If FII attitude changes to positive or volumes jump beyond expected levels with the short-covering, the market could swing beyond 5750 and all the way to 5950. This doesn’t seem likely but it could happen.|
|Bulls & bears: Quite a few stocks made strong recoveries on Friday but most of the price gains were obviously due to short covering. The IT sector saw some hope in the rupee correction and Infosys and Tech Mahindra were among the best performers. Among other stocks, Tata Tele and Bajaj Auto looked genuinely promising.|
Current Price: 502
Target Price: 480
|The stock broke an important support at 520 and it saw a volume expansion on the downside breakout. It is already at a 20-month low and it has a likely target of 480. Keep a stop at 515 and go short.|
Current Price: 2543
Target Price: 2675
|One stock that rose steadily through a bearish week. It has a possible target of 2675. Keep a stop at 2530 and go long. Book partial profits at 2575 where there is some resistance. The stock is showing signs of coming out of a long bearish phase, so it may be worth keeping a delivery position for another six weeks.|
Current Price: 1558
Target Price: 1650
|After hitting a 15-month low, Infy developed a promising short-term formation in the last three sessions. It has the potential to bounce till the 1650 level but this is very likely to be a correction inside a long-term bearish trend. Keep a stop at 1535 and go long. Book partial profits at above 1605.|
Current Price: 214
Target Price: 225, 260
|The stock rose strongly on Friday with a big volume expansion. It will hit a resistance between 220-225 and that's a minimum intra-day target. If it closes above 225, the stock has a target of 260. Keep a stop at 205 and go long. Book partial profits above 220.|
Current Price: 1028
Target Price: 1100
|The stock has made a bottoming formation at current levels after seeing a 50 per cent correction. It could move back up till the level of 1100 before it hits serious resistance again. Keep a stop at 1020 and go long.|
Crude-oil future prices for sweet light crude for January delivery which had ended at $93.84/bbl last week (16 November) finished $4.34 (4.4%) higher this week (23 November) at $98.18/bbl. Price increased during the week after OPEC kept production levels unchanged and traders scrutinized every detail of the weekly inventory report released by the Energy Department.
In the currency market also, the dollar was lower across the board, hitting a new low against the euro and the same also spurred up crude price.
On Friday, 23 November, crude oil for December delivery rose $0.89 to end at $98.19 a barrel on the New York Mercantile Exchange. The session saw an intraday low of $96.55 and touched an intraday high of $98.45 earlier in electronic trading.
Prices rose on Monday, 19 November after Organization of Petroleum Exporting Countries (OPEC) left production unchanged at a weekend meeting in Riyadh. As per OPEC, the oil market was well-supplied and recent gains were due to speculation and beyond the group's control. OPEC is scheduled to discuss oil production for the first quarter of 2008 at a meeting in Abu Dhabi on 5 December.
As per the weekly inventory report by the Energy Department on Wednesday, 21 November, crude stockpiles dropped by 1.1 million barrels in the week ending 16 November as against an expected build-up. Crude oil for January delivery rose 55 cents to $98.60 a barrel after the report. But then price fell after traders realized that crude at Cushing, Oklahoma, the delivery point for crude traded on the Nymex, rose 1.2 million barrels to 14.6 million in the latest week.
OPEC has 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%.
It was a holiday shortened week in the US Market. In recognition of the Thanksgiving holiday, the markets were closed on Thursday, 23 November. Trading took place for half day on Friday, 24 November and market closed at 1.00 p.m E.T. Though US stocks registered good gains on that day, the indices slipped more than 1% for the week ending on Friday, 23 November, 2007.
Concerns about overall economy weighed on investor sentiment during the whole week as disappointing earning reports came from a couple of retailers. Traders continued to worry about consumer spending in coming months. Persisting weakness in the housing market, further credit write-downs, and rising oil prices added further woes and worries.
The Dow Jones Industrial Average lost 196 points for the week. Tech - heavy Nasdaq lost 40 points. S&P 500 lost 18 points.
Market started off on a shaky note on Monday, 19 November, 2007 after the financial sector came under pressure once Citigroup was downgraded to sell from neutral by Goldman Sachs. The investment banker said that it foresees up to $15 billion in write-downs from collateralized debt obligations during the next two quarters. Dow shed 218 points on that day. General Motors added further fuel to the downslide after the stocks slipped by 8.5% on reports that GMAC Financial Services, the old General Motors Acceptance, is seeing more delinquencies among its auto loans.
On Tuesday, 20 November, Freddie Mac shares dropped by almost 30% today after the U.S. mortgage lender reported a $2 billion quarterly loss and said it might slash its fourth-quarter dividend. Fellow mortgage investor Fannie Mae also came under selling pressure and the news weighed on the overall financials sector. After quite a few zig-zag rides, Dow managed to gain 51 points.
On Wednesday, 21 November, the financial sector once again came under pressure and Dow gave up another 211 points after Lehman Brothers said investors should brace for more write-downs from AIG.
But on Friday, 23 November, stocks rebounded sharply in a bargain hunting trade that was led by financial and retail stocks. Dow and Nasdaq added 181 points and 34 points respectively to their kitty.
On the earnings front, H-P came out with its quarterly result beating market expectations. The company’s fiscal-fourth-quarter profit rose 28% from a year ago. The company also raised guidance for the current quarter.
But retailers disappointed. Home retailer, Lowe's posted a lower third quarter profit that was slightly ahead of analysts' expectations, but the company lowered its outlook for the current period in anticipation of further weakness in housing. On the other hand, Target reported earnings missing expectations also led to some negative sentiments among traders.
Among major economic news hitting the market during the week, new claims for unemployment for the week ended 16 November fell to 330,000 from 341,000 the week before. The November University of Michigan Consumer Sentiment Index was revised to 76.1 from 75.0. The other report, October Leading Indicators, fell to -0.5%, compared to last month's reading of 0.3%. Economists expected the reading to come in at -0.3%.
Other than the above, the minutes from the 31 October meeting were released on Tuesday, 20 November. The same prompted some mixed interpretations. It included the downgrade of the Fed's GDP forecast for 2008 to 1.8% -2.5% from 2.5%-2.75%. The minutes noted that the risks to inflation balance the risks to the economy and discussed the possibility of leaving rates unchanged.
For the week, indices registered losses. DJIx closed down by 1.5% and S&P 500 closed down by 1.2%. Nasdaq too shed 1.5%. Disappointing earning reports and guidance from a couple of retailers, Target and Lowes, sent trader sentiments to new lows.
Good news from H-P regarding its earnings report failed to keep up the indices in good spirit. Crude prices continued to stay at high levels while dollar continued to slip against most of its rival currencies.
For the year, Dow is up by 42%, Nasdaq is up by 7.5% and S&P 500 is up by 1.6%.
Research: Morgan Stanley
CMP: Rs 137
Morgan Stanley has maintained its ‘overweight’ rating on Indian Hotels. It believes that trends in the hospitality industry remain strong, with increase in average room rate (ARR) leading growth in revenue per available room (RevPAR).
Further, room supply from other industry players seems to have been pushed into FY10/11, and hence, the demand-supply mismatch may continue for at least the next 18 months. While Citigroup forecast a 29% a compound annual growth rate (CAGR) in earnings for FY07-09, earnings per share (EPS) will be diluted due to the planned rights offering.
Subsidiary companies constituted about 36% of consolidated revenue in FY07, but recorded very low profitability, largely due to international properties. Any improvement in the financial performance of these properties can boost the overall profitability. For instance, a turnaround in Pierre Hotel alone can push up overall net margins by more than 180 basis points.
The company intends to raise Rs 1,440 crore through a rights issue of equity shares and non-convertible debentures. Further, it will issue warrants that will be convertible into equity 12 months after the rights offering. This should raise an additional Rs 780-90 crore.
However, these rights offerings will dilute earnings by 30%. The stock has underperformed by 35% year-to-date (YTD) and in the past 12 months, largely due to acquisitions of international properties. IHCL’s valuations are cheaper than that of its Asian peers on most metrics.
CMP: Rs 715
CLSA has maintained its ‘buy’ rating on Tata Motors. However, near-term risk for the stock continues to be the potential acquisition of Jaguar and Land Rover. Freight rates witnessed an improvement in October. CLSA’s Index of Freight Rates went up 2% in October on a month-on-month basis.
The index tracks freight rates across 25 major routes across India. While part of the improvement can be attributed to the pick-up in construction and industrial activity after the rainy season, CLSA also believes that demand-supply in the commercial vehicle (CV) industry is returning to normal after the lacklustre volume growth in the first half (H1) of FY08.
Improving freight rates typically act as an incentive for truck operators as the latter start buying trucks and the rates also point toward an improvement in the CV cycle. Historically, CLSA’s Index of Freight Operator Profitability has acted as a good leading indicator of the CV cycle.
Truck finance rates have dropped ~ 300 bps in the past 2-3 months to about 11% from a peak of 14% in April. Large truck operators are even getting deals at 10%. The conducive factors for CV industry recovery are now in place. CLSA maintains its view that the current weakness in medium and heavy CV (M&HCV) sales will be limited to the current fiscal and that the industry will return to growth in FY09.
Research: Merrill Lynch
CMP: Rs 33
Merrill Lynch has reiterated its bullish stance on Rico Auto, albeit it has lowered its price target to Rs 60 from Rs 66. Negatives related to high input costs (aluminium, power, labour), exchange fluctuations and low capacity utilisation will be largely reflected in this fiscal performance.
Growth will be driven by a ramp-up in exports to outsource requirements by Honeywell, Caterpillar, Volvo and an increase in domestic share through new parts such as crankcases, cylinder head and blocks, and new customers like Tata Motors. New JVs with global vendors such as Continental, Zhejiang Jinfei and Magna Powertrain will also help.
The price target of Rs 60 is based on 12.5x 1-year forward P/E multiple, which is the same as earlier. This represents a ~40% discount to larger auto part companies like Bharat Forge, which is warranted, given its relatively smaller scale and erratic track record.
CMP: Rs 685
Citigroup has maintained its ‘buy’ rating on Hindustan Zinc with a price target of Rs 1,007. Citigroup’s global forecasts for FY08-09 have been lowered for zinc (by 15-20%) and raised for lead (by 16-22%) based on recent price trends and future expectations.
Following these changes and cost adjustments, Citigroup has reduced its EPS estimates for HZL by 11% in FY08-09E, and increased EPS estimates by 7% in FY10E. Zinc prices have fallen 32% since January ’07 on concerns about increasing mine supply, Chinese supply worries and speculative selling.
Citigroup’s new forecast prices in these concerns. However, China does not appear to be a threat, inventories remain low, and uncertainty on a smooth ramp-up of new mine production remains. Any delays to mine supply will lead to a deficit in ’08E and an upward trigger to prices. Lead prices are expected to benefit from strong Chinese demand in the auto and electric bicycle segment.
Supply has been disrupted in western Australia and the US. The upgrade in lead prices partially offsets the impact of the downgrade to zinc forecasts. In addition, HZL will benefit from higher volumes as its zinc smelting capacity will increase by 63% to 669,000 tpa by Q1 FY09 and from the company’s continued focus on cutting initiatives. Citigroup continues to value HZL at 10x FY09E EPS.
CMP: Rs 75
Vijaya Bank is now emerging as a mid-sized bank, a change from its earlier image of a smaller bank. Over the longer term, Macquarie remains positive on the growth prospects of the bank; and has raised the target price to Rs 92. It has also maintained its ‘outperform’ rating on the bank.
It has increased its loan book by 11% YoY, with strong growth in small and medium enterprises (SME) and the retail segment. The bank expects loan demand to remain strong — the low growth was due to a spike of Rs 5,000-6,000 crore in undisbursed sanctions. It expects these to be disbursed in H2 FY03-08, which should drive loan growth of 28% for FY03-08.
The bank was caught on the wrong side of the liquidity squeeze late in FY03-07, leading it to rely on wholesale deposits. It suffered margin erosion in the first two quarters of FY03/08. However, the bank is making a conscious effort to reduce its dependence on wholesale deposits (from 30% of total deposits) to 25% by the end of FY03/08E. Non-interest income growth in Q2 was a surprise, primarily led by equity sales and bad debt recoveries.
Given the continued buoyancy in the equity market, coupled with a favourable environment for recoveries (due to high real estate prices), the bank will be able to record strong numbers in H2 FY03/08E. The bank plans to increase the number of branches by 5%, taking the total number of branches to 1,050 by FY03/08E. Though this will put pressure on its operating expenditure, the lack of significant employee additions (as the bank plans to reallocate existing employees to these branches) should act as a cushion.