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Wednesday, December 05, 2007
Indiabulls gets clean chit
Capital market regulator Sebi on 5 December absolved Indiabulls Securities of charges of cornering shares meant for retail investors in IPOs and dropped an inquiry initiated against the brokerage firm.
“The present adjudication proceedings against the noticee (Indiabulls Securities Ltd) is disposed of,” Sebi adjudicating officer S Biju said.
Although the regulator had last year banned Indiabulls from carrying out trades in the market after a scam was unearthed in IPOs launched between 2003-05, the order was kept in abeyance till completion of the inquiry after the brokerage firm challenged the decision.
Sebi conducted investigation into the dealing of Indiabulls in the IPOs of 21 companies including those of Amar Remedies, Datamatics Technologies, Dishman Pharma and Chemicals, Gokaldas Export, ILFS Investmart, Indraprasth Gas, Infrastructure Development Finance, Jet Airways and NTPC.
Other companies, whose public issues were investigated included Patni Computer, Suzlon Energy, TV Today Network, TCS and Yes Bank, the regulator said in a statement.
Sebi had observed that the some entitites had cornered shares of these companies by making fictitious applications in the category reserved for retail investors.
Sebi said the after the inquiry it found that Indiabulls did violate the Sebi Act or its regulations on prohibition of fraudulent and unfair trade practices relating to securities market.
Sebi said it had noted that in the IPO of Tata Consultancy Services Ltd, 13,939 shares were received from 559 accounts to the Indiabulls’ account.
Later, on the advice of Sebi, National Securities Depository Ltd (NSDL) conducted an inspection of all these accounts, but nothing was found wrong, as the demat accounts were genuine, said Sebi.
An inspection was also carried out by a team of officials of Sebi, BSE and NSE, of the 559 clients who had transferred TCS shares to the Indiabulls. Of these, 459 clients held demat accounts with it and the remaining clients held beneficiary accounts with other depository participants.
Bulls come back
The bulls were back in action on Wednesday, after a day's break, pulling indices up nearly two per cent with good volumes. Investors turned optimistic tracking a rebound in Asian and European markets and covered short positions initiated over the last two sessions. Accumulation of long positions was also seen market, participants said.
"The Nifty convincingly crossed the 5900 mark, where it was facing stiff resistance, without any follow-up selling. The broad-based upmove, led by heavyweights ONGC, ICICI, SBI and Reliance Industries, also boosted sentiment. Today's move indicates a strong positive trend. We could be looking beyond 6000 levels by the end of the week," said Anand Kuchelan, senior analyst - derivatives & strategy at PINC Research.
National Stock Exchange's Nifty ended at 5,940, up 82 points or 1.39 per cent after hitting a high of 5,949.3 and low of 5,859.95.
Bombay Stock Exchange's Sensex closed at 19,738.07, up 208 points or 1.07 per cent. The index touched a high of 19,790.92 and low of 19,560.68.
Top Sensex gainers were ONGC (up 4.29%), Tata Motors (3.95%), State Bank of India (2.85%), Hindalco Industries (2.81%), Cipla (2.46%) and NTPC (2.15%).
However, Tata Steel (down 0.87%), Satyam Computer Services (0.49%), Infosys Technologies (0.7%) and Grasim Industries (0.45%) lagged.
The rally in tier II and III stocks continued for the third straight day with BSE Midcap Index closing 1.67 per cent higher and BSE Smallcap Index up 2.88 per cent.
Ispat Industries (up 24.75%), Zee News (16.36%), Wire & Wireless (13.18%), SRF (12.66%) and Essar Shipping (10%) kept the midcap space buzzing.
Among sectors, BSE Bankex and BSE Oil & Gas Index closed 2.07 per cent and 2.28 per cent higher, respectively.
Market breadth was positive on the BSE with 2,164 gainers and 687 losers. NSE saw 963 gainers against 256 losers, and a turnover of Rs 21280.24.
Nifty December futures ended at 40-point premium to the spot, with open interest of 2.97 crore, which indicates a build up of long positions.
Asian shares also ended higher driving the Nikkei 225 up 0.83 pr cent, Hang Seng up 1.61 per cent and KOSPI up 1.06 per cent.
European markets followed a similar pattern. At the time Indian markets closed, the FTSE gained 1.11 per cent, CAC was up 0.92 per cent and DAX was 0.67 per cent higher.
Post Market Commentary
The market closed on a firm note backed by selective buying across the sectoral heavyweight scrips. The market opened on a strong note but all of a sudden lost the momentum to pare some of its initial gains as the profit booking prevails. But the market manages to gain some grounds toward the end of the session as buying intensified. The BSE Small cap outperformed the benchmark indices by creating a rally for the past few days. Most buying is seen from the Bankex, Oil & Gas, Capital Goods and realty baskets. The BSE Sensex closed up by 208.57points at 19,738.07 and NSE Nifty closed higher by 81.65 points at 5,940. Overall, the market breadth was strong as 2,164 stocks are closed higher while 687 are closed lower. The BSE Mid cap and Small Cap surged 148.29 points and 315.45 points to close at 9,052.83 and 11,271.96 respectively.
BSE Bankex index grew by 223.51 points to close at 11,020.60 as Union bank 5.32%, Canara bank 5.21%, IOB 4.29%, SBI 2.85%, ICICI bank 1.86% and HDFC bank 1.61% closed higher
BSE Capital goods surged by 227.33 points to close at 20,403.26. Pushed up by Havell India (6.44%), Alstom Projects (4.69%), AIA Engineering (4.44%), L&T (1.90%) and SKF India (1.74%).
BSE Oil & Gas index closed up by 288.89 points at 12,939.99. Scrips that gained are GAIL India (9.56%), HPCL (6.54%), ONGC (4.29%), RNRL (3.75%) and RPL (2.01%).
BSE Metal Surged closed higher by 174.94 points to close at 19, 044.22. Scrips that gained are Ispat industries (24.75%), Jindal Saw (5.61%), Welspun Gujarat (5.19%), JSW steel (4.19%), Hindalco (2.81%) and Nalco (2.39%).
BSE Realty index advanced by 208.51 points to close at .10,953.80. Scrips that jumped are Indiabull real (10.05%), Ansal infra (2.92%), Parsvnath (2.01%), Unitech (1.39%), Purvankara (1.59%) and Anant Raj (1%).
BSE IT index fell marginally by 15.57 points to close at 4,232.03 as Karut Net (9.98%), GTL limited (1.72%), NIIT Tech (1.44%), Aptech Limited (0.96%) and Wipro (0.45%).
Market Close : Small (Cap) Is Profitable!
After a modest start markets refinemained healthy and ended on a strong note. Once again the Small caps and Mid caps proved to be the winners outsmarting the Large caps. In the last hour of trade momentum was seen in some large stocks like GAIL, ONGC and HPCL. Steel and energy stocks were the flavour of the day. Markets seemed to be in active mode and every stock with concept story was on the run. Sectorial wise Banking, Oil & Gas ,PSU?s and Realty were among the major gainers. Software stocks were out of favour due to depreciating dollar. The Organisation of Petroleum Exporting Countries (OPEC) was expected to hold the cartel's official output quota at 27.25 mn barrels of oil per day amid forecasts that demand would fall because of current global economic weakness. Hence OPEC decided to keep output unchanged at 27.25 mbpd. Cues from global peers were encouraging with most of the Asia ended in green and European markets trading higher.
Sensex ended up by 209 points at 19738.07.It was helped up by gains in ONGC (1206.3,+4 percent), Tata Motors (771.75,+4 percent), SBI (2383.55,+3 percent), Hindalco (199.2,+3 percent) and Cipla (189.35,+2 percent). Restricting the gains were TISCO (865.35,-1 percent), Infosys (1603.25,-1 percent), Hero Honda (695.3,-1 percent), Satyam (438.75,0 percent) and Grasim (3796.1499,0 percent).
Karuturi Networks was on circuit today after our recomendation. Karuturi is the largest rose player in the world. It has 2 segments of business, Horticulture and ISP. More than 90% of the revenue comes from the flower business. Karuturi has a total capacity of 650 mn stems. It has 10 hectares in India with 10 mn stems capability inhouse and another 25 mn stems which are managed through contract farming. 100 hectares are operational in Ethiopia with a capacity of over 100 mn stems. Karuturi Networks has been allotted additional 450 hectares of land by the Government of Ethiopia for its expansion and diversification projects. The Kenyan acquisition of Sher brought in abnout 525 mn stems. Globally 40,000 hectares of land is under rose cultivation. However, The field sizes globally are fragmented and are not over 200 acres. Karuturi is one of the big players here now. We have detailed research note. Do read our view to know more about the story.
Lok Housing was on fire and shot up to cross our estimated target. Lok Housing & Constructions (LHCL) a company of Lok group mainly in the suburbs of Mumbai. Lok Surabhi , Lok Kedar , Lok Everest, Lok Malhar and Lok Nisarg at Mulund, Lok Yamuna at Marol , Lok Amber at Ambernath, Lok Prabhat at Virar are some of the projects executed by the company. It is planning to commence premium projects in Mumbai and at other places like Pune, Vasai, Bangalore,Turbhe.Till date Lok Housing has completed 31 projects over 17,000 units and 9mn sq.ft area. Lok housing has a good amount of land bank and some valuable salt pans plots are still under litigation. We believe that this event is the big trigger if at all for Lok Housing. Chances are that the owners may manage it in their favour given the history of such cases between the Government and Corporates. Keep watching this space for more updates.
Technically Speaking: Sensex traded in green and witnessed an intra day high of 19,791 and low of 19,561. Advaces outnumbered Declines in the ratio of 3 :1. Volume of Rs 9,340 Crs was churned through out the day. Sensex has closed above the resistance of 19700. The immediate resistance now are at 19990 and 20150. Support for sensex is at 19540 and 19390.
Buoyancy lifts market above 19,700
The market reported a solid performance on the back of a strong all-round buying even as major Asian indices exhibited a subdued trend in morning trades. Shrugging off the global cues, the market opened with a gap of 99 points at 19,629. It remained positive but traded in a narrow range till the afternoon. However, heavy buying in heavyweights, pharma, banking, and public sector unit stocks towards the close, lifted the Sensex to the day's high of 19,791. Most of the second-rung stocks also witnessed buying interest, as the BSE Mid-Cap index rose by 1.67% while the BSE Small-Cap index gained 2.88%. The Sensex finally closed the session at 19,738, up 209 points or 1.07%. The Nifty ended the session at 5,940, up 82 points or 1.39%.
The breadth of the market was positive. Of the 2,891 stocks that traded on the Bombay Stock Exchange (BSE), 2,165 stocks advanced, 685 stocks declined and 41 stocks ended unchanged. Among the sectoral indices, the BSE HC notched up gains of 2.40% at 3,951 followed by the BSE CD index (up 2.36% at 6,226), the BSE Oil & Gas index (up 2.28% at 12,940) and the BSE PSU index (up 2.27% at 10,096).
Heavyweights witnessed lot of buying interest. ONGC soared 4.29% at Rs1,206, Tata Motors rose 3.95% at Rs772, SBI was up 2.85% at Rs2,384 and Hindalco shot up by 2.81% at Rs199. Cipla jumped 2.46% at Rs189, NTPC added 2.15% at Rs244 and L&T gained 1.90% at Rs4,310. However, Tata Steel, Infosys, Satyam Computer, Grasim, Reliance Energy, Ambuja Cement and HLL closed marginally down.
Over 8.99 crore Ispat Industries shares changed hands on the BSE followed by Tata Teleservices (3.72 crore shares), Wire & Wireless India (1.64 crore shares), Hindustan Motors (1.47 crore shares) and Reliance Natural Resources (1.20 crore shares).
Valuewise, Ispat Industries registered a turnover of Rs569 crore on the BSE followed by Essar Oil (Rs259 crore), Videocon Industries (Rs244 crore), Reliance Natural Resources (Rs214 crore) and Mundra Port (Rs210 crore).
Nifty strikes record closing high on firm global equities
After remaining range bound in afternoon trade, the market firmed up in late trade as European markets, which opened after Indian markets, started on a firm note. ICICI bank surged in late trade. Reliance Industries firmed up. Banking, oil & gas and realty stocks were in demand. IT stocks edged lower.
Buying continued in small-cap and mid-cap shares, which have been rising since the past few days. Market breadth was strong. 23 out of 30 stocks from the Sensex pack were in green. Asian markets, which opened before Indian markets, were in green.
The 30-share BSE Sensex rose 208.57 points or 1.07% to 19,738.07. Sensex hit a high of 19,790.92 in late trade. At day's high, Sensex had gained 261.42 points. Sensex hit a low of 19,560.68 in mid-morning trade. At day's low, Sensex had gained 31.18 points for the day.
The broader based S&P CNX Nifty gained 81.65 points or 1.39% to 5940, a record closing high. The previous record closing high of Nifty was 5,937.90 on 14 November 2007. Nifty had struck all-time high of 6011.95 on 1 November 2007. Sensex had hit all-time high of 20238.16 on 30 October 2007.
As per provisional data, FIIs bought shares worth a net Rs 480.18 crore today. Domestic funds sold shares worth a net Rs 159.71 crore today.
The BSE Mid-Cap index was up 1.67% to 9,052.83. The BSE Small-Cap index was up 2.88% to 11,271.96. Both the indices outperformed the Sensex.
Market breadth was strong. On BSE, 2164 stocks advanced, 687 stocks declined and 40 stocks remained unchanged.
BSE clocked a turnover of Rs 9340 crore compared to Tuesday (4 December 2007)'s Rs 9163 crore.
Nifty December 2007 futures were at 5980, a premium of 40 points as compared to spot closing of 5940.
NSE’s futures & options (F&O) segment turnover was Rs 57522.12 crore, which was higher than Rs 56330.05 crore on Tuesday, 4 December 2007
India’s largest private sector firm and oil refiner Reliance Industries rose 1.36% to Rs 2902.80, off day’s low of Rs 2863.
The BSE Bankex rose 2.07% to 11,020.60. It outperformed the Sensex. India’s largest private sector bank by assets ICICI Bank rose 1.86% to Rs 1161.65, off day’s low of Rs 1131.
Union Bank of India soared 5.32% to Rs 192.95, Canara Bank jumped 5.21% to Rs 290.55, Karnataka Bank gained 4.87% to Rs 222, State Bank of India rose 2.85% to Rs 2325 and HDFC Bank rose 1.61% to Rs 1730.
The BSE Capital Goods Index rose 1.13% to 20,403.26. It outperformed the Sensex. Alstom Projects gained 4.69% to Rs 1082.10, BEML gained 2.39% to Rs 1792.05, Larsen & Toubro rose 1.90% to Rs 4309.65 and Bharat Heavy Electricals rose 0.25% to Rs 2822.25.
The BSE Metal Index rose 0.93% to 19,044.22. It underperformed the Sensex. Jindal Saw jumped 5.61% to Rs 956.70, Hindalco Industries gained 2.81% to Rs 199.20, National Aluminium Company (Nalco) rose 2.39% to Rs 377.45, Steel Authority of India (Sail) rose 0.93% to Rs 287.55. Sterlite Industries fell 0.20% to Rs 1064.50 and Tata Steel declined 0.87% to Rs 865.35.
The BSE Consumer Durables index rose 2.36% to 6,226.46. It outperformed the Sensex. Blue Star spurted 4.85% to Rs 477.45, Videocon Industries gained 3.94% to Rs 613.25, Lloyd Electric & Engineering gained 3.44% to Rs 183.65 and Titan Industries rose 1.35% to Rs 1590.10.
The BSE Oil & Gas index rose 2.28% to 12,939.99. It outperformed the Sensex. HPCL gained 6.54% to Rs 310.45, Indian Oil Corporation gained 2.82% to Rs 616.20, and BPCL rose 2.64% to Rs 430.10.
The state-run gas transmission and distribution firm GAIL (India) moved up 9.56% to Rs 481.85. The company and Reliance Industries on Tuesday (4 December 2007) signed a memorandum of understanding (MoU) for joint co-operation in petrochemicals. As per the MoU, both companies will explore opportunities for setting up petrochemical complexes outside of India in feedstock rich countries.
India’s top state run oil explorer in terms of market capitalisation ONGC rose 4.29% to Rs 1206.30 on reports that the overseas arm of the company and the Hinduja group were in talks to form a partnership with Switzerland-registered NICO, a unit of National Iranian Oil Company.
The BSE Healthcare index rose 2.40% to 3,950.73. It outperformed the Sensex. Ranbaxy Laboratories gained 1.34% to Rs 393, Divi’s Lab gained 8.74% to Rs 1790.20, Pfizer soared 4.65% to Rs 708.45, Glenmark Pharmaceuticals jumped 4.69% to Rs 484.50, and Cipla rose 2.46% to Rs 189.35.
The BSE IT index fell 0.40% to 4,232.03. It underperformed the Sensex. India's second largest software exporter by sales Infosys Technologies fell 0.70% to Rs 1603.25.
Satyam Computers gave away 0.49% to Rs 438.75. However, TCS gained 0.20% to Rs 1031.60. Wipro gained 0.45% to Rs 499.
The BSE Auto index rose 0.94% to 5,691.81. It underperformed the Sensex. Hindustan Motors surged 17.27% to Rs 50.25, Apollo Tyres soared 7.25% to Rs 44.90, Escorts gained 7.47% to Rs 167.55, Tata Motors spurted 3.95% to Rs 771.75, Maruti Suzuki gained 0.39% to Rs 1032.15 and Mahindra & Mahindra rose 0.24% to Rs 773.70.
North India based cement firm Shree Digvijay Cement Company fell 3.39% to Rs 38.50, off day’s high of Rs 42.70 after Grasim Industries' board of directors approved sale of its 53.63% stake in the company to Portuguese cement maker Cimpor for Rs 322 crore.
Auto ancillaries firm Autoline Industries jumped 6.39% to Rs 172.20 after the company said it has acquired the manufacturing operations of US-based Dura Automotive Systems for $900,000.
Aluminium foil containers and rolls maker Parekh Aluminex rose 3.27% to Rs 284. A clutch of institutional investors from the Middle East — Oman Pension Fund, Emirates Industrial Development, Gulfar, Tawoos and four other institutions — are reportedly picking up an 18% stake in the company.
Nitin Fire Protection Industries (NFPIL), a fire protection and security solutions company, spurted 8.75% to Rs 551.90. The company is reportedly close to acquiring around 40% stake in a UAE-based fire protection company — New Age Company. The deal may be worth over Rs 150 crore, the reports added.
Textiles and apparels firm Alok Industries jumped 1.80% to Rs 82.20. The company is reportedly close to diluting 20% stake in its realty venture — Alok Infrastructure — to private-equity players. Reports sugget that Ernst & Young is advising Alok and the company would seal the private-equity deal by the end of current fiscal.
Infrastructure development firm GMR Infrastructure gained 1.62% to Rs 263.05. The GMR Group is reportedly planning to bid for more airports in Eastern Europe. It is actively considering a bid for the Prague airport project, the report added.
Pharmaceuticals firm Matrix Laboratories gained 0.66% to Rs 220.55 after the company said it has received a tentative approval from US Food and Drug Administration for its abbreviated new drug application or for tenofovir disoproxil fumarate tablets.
Engineering firm Lanxess ABS gained 1.95% to Rs 199 on reports it plans to invest Rs 800 crore to set up a greenfield chemical facility in Gujarat.
Ispat Industries clocked highest turnover of Rs 569 crore on BSE. Essar Oil (Rs 259.12 crore), Videocon Industries (Rs 244.60 crore), Reliance Natural Resources (Rs 214.70 crore), and Mundra Port & Special Economic Zone (Rs 210.89 crore), were the other turnover toppers on BSE in that order.
Ispat Industries registered highest volumes of 8.9 crore shares on BSE. Tata Teleservices (3.72 crore shares), Wire & Wireless India (1.64 crore shares), Hindustan Motors (1.47 crore shares) and Reliance Natural Resources (1.20 crore shares), were the other volume toppers on BSE in that order.
In Europe, key indices in UK, France and Germany were up by between 0.79% to 1.10%.
Asian markets were in positive zone today, 5 December 2007. Key indices in China, Japan, South Korea, Hong Kong, Singapore and Taiwan were up by between 0.30% to 2.58%.
US markets ended lower for second straight day yesterday, 4 December 2007. The Dow Jones industrial average slipped 65.8 points to 13248.73 and Nasdaq Composite index slipped 17.3 points at 2619.83.
Oil was steady on Wednesday, 5 December 2007, as the market kept its eyes on Organization of the Petroleum Exporting Countries (OPEC's) meeting in Abu Dhabi later in the day and the organisation's big Gulf producers left the door open for a possible output increase. US crude inched up 8 cents to $88.40 a barrel. London Brent crude rose 17 cents to $89.70 a barrel.
Trading Calls
Buy SAIL with a stop loss of Rs 268 for a target of Rs 335.
Buy Tata Steel with a stop loss of Rs 830 for a target of Rs 923.
Buy BOC India with a stop loss of Rs 143 for a short-term target of Rs 198.
IPO Grey Market Premiums
eClerx Services 270 to 315 75 to 80
BGR Energy 425 to 480 400 to 410
Transformers & Rectifiers 425 to 465 260 to 280
Brigade Enterprises 351 to 390 140 to 150
Jyothy Lab. 690 220 to 225
Burnpur Cement Ltd. 12 4 to 4.50
Edelweiss 825 725 to 750
Renaissance Jewellery 150 20 to 22
Kolte Patil 145 80 to 85
Kaushalya Infra 60 12 to 14
SVPCL 42 - 5
Market to remain sideways
Lack of buying interest, not a single possible trigger to drive the market and subdued Asian indices kept the market lackluster in yesterday's trades. The benchmark indices, Sensex and Nifty, are expected to commence on a weak note today and witness significant selling in early trades, as international markets backed by weak US and Asian indices may put pressure on investor sentiment. However, prevailing strong bullish sentiment may help the market to remain positive with a sideways movement during intra-day trades. Among the Asian majors, Nikkei Index and Hang Seng Index are marginally down, nearly 0.5% each. On the technical front, the Nifty could test in the range of 5900-6000 on the upside and has supports in the 5800-5750 range, while the Sensex has a likely support at 18800 and may face resistance at 19500.
US indices slid on Tuesday on worries about banking sector profits ahead of the upcoming November jobs report and Federal Reserve policy meeting. While the Dow Jones slipped by 0.49% or 66 points at 13249, the Nasdaq was down by17 points or 0.66% to close at 2620.
Indian floats trading on the US bourses closed with the marginal gains. Among the major gainers Wipro added 3.82% while HDFC Bank, Satyam, Infosys, Tata Motors, ICICI Bank and Dr Reddy's Lab and Patni Computers gained around 1% each. However, VSNL and Rediff lost over 1% each.
Crude oil prices slipped marginally on assurance from OPEC to discuss the increase the oil production, with the Nymex light crude oil for January series rising by 99 cents at $89.31 a barrel. In the commodity space, the Comex gold for February delivery flared up by $12.90 to settle at $807.60 a troy ounce.
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 5835 and 5786 levels with resistance at 5910, 5965 and 6015 levels.
Intraday : Buy Ansal infra above 276 TGT 293 with S/L 271.
Intraday : Buy Axis bank above 957 TGT 980 with S/L 949
F & O : Intraday : Bata India above 261 TGT 283 with S/L 252.
F & O : Intraday: LT above 4260 TGT 4307 with S/L 4240
Out House :
Markets at a support of 19291 & 19119 levels with resistance at 19591 & 19691 levels .
Buy : RIL & Relcap
Buy : REL & RPL
Buy : JpAsso & Centextile
Buy : TTML & Neyvelli
Buy : GeShipping
Buy : IBUllsreal & JindalPower
Buy : JpHydro & EssarOIL
Buy : SBIN & Kotak
Buy : IBullFinanace & VdoconInd bullet
Buy : IFCI & Ngarafert
Dark Horse : JpAsso , Kotak , GeShipping ,Aban , BHEL , Akruti , SBIN & JpHydro
Bullet for the Day : JpHydro & Adhunik with strict stop loss.
Pre Market Watch
The market closed on a negative note yesterday on the back of profit booking by the investors across the counters. However, the BSE Mid cap and Small cap outperformed the benchmark indices as most buying is seen from these baskets. On Tuesday, the BSE Sensex slipped by 73.91 points to close at 19,529.50 and NSE Nifty closed lower by 6.65 points at 5,585.35. We expect that the market may remain range bound during the trading session.
On Tuesday, the US market closed in negative territory. The DJIA closed lower by 65.84 points at 13,248.73. The S&P 500 index slipped by 9.63 points to closed at 1,462.79 while NASDAQ fell by 17.30 points to close at 2,619.83.
Indian ADRs ended in mixed. In technology sector, Wipro grew by (3.82%) along with Satyam by (2.89%), Patni Computers by (1.27%) and Infosys by (0.29%). In banking sector, ICICI bank and HDFC bank advanced by (0.98%) and (0.57%) respectively. VSNL dropped by (1.40%).
The major stock markets in Asia are trading mixed. Hang Seng is trading higher by 14.75 points at 28,894.34. Taiwan Weighted is trading up by 23.90 points at 8,675.18 While Japan''s Nikkei is trading lower by 54.26 points at 15,425.93. Seoul Composite is trading down by 1.43 points at 1,916.40.
The FIIs stood as the net buyer in equity and net seller in Debt on Tuesday. The gross equity purchased was Rs5, 566 Crore and the gross debt purchased was Rs9.40 Crore while the gross equity sold stood at Rs114.40 Crore and gross debt sold stood at Rs539.90 Crore. So, the net investment of equity was Rs114.40 Crore and net debt was (Rs530.50 Crore).
Today, Nifty has support at 5,765 and resistance at 5,908 and BSE Sensex has support at 19,529.50 and resistance at 19,691.
Daily Trading Calls
Nifty (5858) Sup 5803 Res 5915
Buy Satyam (441) SL 436
Target 450, 453
Buy Apar Ind (327) SL 322 Target 336, 340
Buy Patel Eng (785) SL 778 Target 798, 802
Sell Jubilant (301) SL 305
Target 293, 291
Sell Sterling Bio (156) SL 160 Target 149, 146
Enjoy the Side effects!
The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.
With FII activity slowing down in the past few weeks the side counters are attracting all the attention even as the large caps go through some consolidation. Those with positions on the moving side counters will like to be part of the insane movements as long as it is on the positive side. How else does one explain the sharp spurts on counters, which have hardly moved for years! We expect the market to open flat to positive. The intra-day swings will continue with lots of stock centric action. Investors should also stick to selective buying of fundamentally sound scrips. No run away rise is expected from here. At the same time, chances of a major crash are also slim.
Even the global trend is hard to predict these days with no major ups or down days. Crude oil has cooled after being within striking distance of crossing US$100 per barrel mark. No big events - local or global - are on the horizon, barring of course the Dec. 11 Fed meeting and the relatively less significant advance tax data. OPEC is meeting today to discuss whether its members should increase output to soften spiraling prices. As of now, it is not clear whether the cartel will agree on shoring up production or refrain from it. In any case, the outcome may not have a big impact on crude oil prices.
Apar Industries could gain as the company is likely to announce a tie up with an Italian company. Raymond could also see some buying as the company is set to announce a strategic tie-up tomorrow. MICO, which skyrocketed on Tuesday, will share some strategic announcements on Thursday. Suryachakra Power is another counter which could gain as a leading MF is said to be accumulating it.
Shree Digvijay Cement is likely to be in the limelight amid reports that Portuguese cement major CIMPOR will purchase Grasim's 53% stake in the troubled company for about Rs3.22bn. Shree Digvijay Cement has also been removed from the BIFR purview.
Pharma shares may be in focus as a financial daily reports that the Government is considering reducing trade margins on all medicines sold in the country. Parekh Aluminex could gain as a clutch of Gulf-based funds have reportedly bought an 18% stake in the company.
Nitin Fire Protection is also expected to be in the limelight amid reports of an acquisition in Dubai. The company has also achieved ISO 11439:2000 (E) for CNG cylinders. This certification will enable Nitin Fire to enter the export market in Iran, Egypt, Pakistan, Bangladesh, Malaysia, Thailand and other CIS countries.
George Soros is on the prowl again in India and the billionaire investor's Quantum Fund is believed to have picked up a 5.8% stake in Ahmedabad-based agro processing company Gujarat Ambuja Exports.
Jacob Ballas Capital India and JM Financial Equity Fund are reportedly in talks to pick up a stake in Indore-based Sayaji Hotels.
ONGC may be in action as a business newspaper reports that the PSU oil giant, along with the Hinduja Group are planning to buy a 50% stake in Iran's South Pars gas field - the world's largest, and Azadegan - one of the world's biggest onshore oil field.
BL Kashyap says it is contemplating divesting its stake in its subsidiary Soul Space Projects Ltd., which is engaged in the development of real estate projects. BL Kashyap owns a 97.9% stake in Soul Space Projects.
US stocks ended lower on Tuesday, falling for a second session as the nagging worries about the health of the financial sector kept investors at bay ahead of the upcoming November jobs report and the Fed policy meeting on Dec. 11.
JP Morgan Chase said deteriorating credit markets will reduce profits at the four biggest securities firms, while lower oil prices dimmed the earnings outlook for energy companies.
Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers declined after JP Morgan analysts said the brokerages may announce further write downs linked to the turmoil in the subprime mortgages.
Exxon Mobil and Chevron led energy companies to their first drop in five days after crude prices fell to a six-week low.
The Standard & Poor's 500 Index lost 10 points, or 0.7%, to 1,462.79. The Dow Jones Industrial Average dropped 66 points, or 0.5%, to 13,248.73. The Nasdaq Composite Index slid 17 points, or 0.7%, to 2,619.83.
Market breadth was negative. More than two stocks fell for every one that rose on the New York Stock Exchange.
According to analysts, Wall Street is now looking to Friday's November jobs report and next week's Fed meeting for guidance. That sense of anticipation could keep stocks in a tight range ahead of the events.
Wall Street is betting that the employment report will be positive. Additionally, investors are also hoping that the Fed will cut a key short-term interest rate by at least a quarter-point, if not a half-point.
US home prices showed the biggest quarterly drop in 25 years in the third quarter, according to a report. Wednesday brings the revised reading on third-quarter productivity, the weekly oil inventories report and the monthly reports on factory orders and the services sector of the economy.
Treasury prices slipped, boosting the yield on the 10-year note to 3.86% from 3.85% late on Monday. In currency trading, the dollar dipped versus the euro and the yen.
US light crude oil for January delivery fell 99 cents to settle at $88.32 a barrel in New York. COMEX gold for February delivery rose $12.90 to settle at $807.60 an ounce.
European shares registered their biggest one-day drop since mid-November as banking shares tumbled. Nokia shares came under pressure after the Finnish mobile phone maker announced a conservative outlook.
The pan-European Dow Jones Stoxx 600 index fell 1.5% to 363.34, the worst day for the index since losing just over 2% on Nov. 21. Nokia fell 4.4%. The UK's FTSE 100 closed down 1.1% at 6,315.20, while the German DAX 30 slipped 0.4% to 7,808.94 and the French CAC-40 declined 1.5% to 5,547.21.
In Latin America, Chilean stocks finished lower while Mexican stocks managed slim gains. Chile's IPSA fell 1.3% to 3,154.88. Mexico's IPC rose 30 points, or 0.1%, to 29,998.79. Brazil's Bovespa gained 0.5% to end at 63,481.53 and Argentina's Merval shed 5 points, or 0.2%, to close at 2,186.94.
In other emerging markets, the RTS index in Russia rose 0.2% to 2204 and the ISE National-30 index in Turkey shed 0.7% to 68,409.
Asian markets were mixed this morning. Shares of banks and commodities companies fell after JP Morgan Chase said subprime losses will require larger writedowns and oil fell to a six-week low. Mizuho Financial led regional banks lower. Woodside Petroleum and Inpex Holdings slid among oil producers.
The MSCI Asia Pacific Index fell 0.4% to 161.46 as of 10:57 a.m. in Tokyo, extending yesterday's 0.1% drop. An index of finance-related stocks contributed the most to the decline.
The Nikkei in Tokyo was down 49 points at 15,430 while the Hang Seng in Hong Kong fell 101 points to 28,778. The Kospi in Seoul was down 5 points at 1912 and the Straits Times in Singapore dropped 25 points to 3500. All markets open for trading fell except China, Taiwan and Malaysia.
Global cues to dictate trend!
Markets ended on a soft note as key indices were unable to hold on to their early gains. It was yet another sloppy session for the frontrunners as the limelight was towards the Mid-Cap and the Small-Cap counters.
Select Mid-Cap and Refinery stocks were in action. Stocks like IOC, HPCL, MRPL and BPCL all surged by over 5% each. Mid-Caps like WWIL, Pearl Global, Videocon Industries, Chambal Fertilizer.
Among the index gainers, Tata Steel, L&T, BHEL and IT bellwether Infosys were among the major gainers. However, RIL, ICICI Bank, ONGC and TCS were among the major laggards. Finally, 30-share Sensex ended 73 points lower to close at 19,529 and Nifty closed flat at 5,858.
M&M gained 3% to Rs773 after the company on Monday announced that total sales of its automotive division totaled 18,585 units in November as against 13,597 in the same month a year earlier, registering a growth of 36.7% over the corresponding month last year.
M&M clocked total vehicles sales of 17,846 units in the domestic market as against 13,154 in the corresponding month last fiscal, a growth of over 35.7%. The scrip touched an intra-day high of Rs779 and a low of Rs751 and recorded volumes of over 4,00,000 shares on NSE.
3i Infotech advanced 1% to Rs141 after the company declared that it purchased majority stake in Linear Financial. The scrip touched an intra-day high of Rs148 and a low of Rs141 and recorded volumes of over 10,00,000 shares on NSE.
NTPC edged lower by 0.4% to Rs239. India's biggest power producer announced that they would spend Rs110bn to increase its production capacity and meet the nation's increasing demand for energy. The scrip touched an intra-day high of Rs243 and a low of Rs238 and recorded volumes of over 71,00,000 shares on NSE.
Pearl Global was frozen at 20% upper circuit to Rs100.5 after the company signed collaboration agreement with DLF retail. The scrip touched an intra-day high of Rs100.5 and a low of Rs86 and recorded volumes of over 62,000 shares on NSE.
Ambuja Cement advanced 1.2% to Rs154 after media reports stated that Hoclim hiked stake in Ambuja Cement by 13% to 46% via open offer. The scrip touched an intra-day high of Rs160 and a low of Rs151 and recorded volumes of over 37,00,000 shares on NSE.
Siemens was up 1.2% to Rs1862 as the company inaugurated its state-of-the-art Power Transformer factory at Kalwa near Mumbai. This is the eighth factory of Siemens in Maharashtra and the fifth factory belonging to its Power business.
The facility is spread over an area of 40,000 square meters, the new factory was set up with an investment of Rs2bn and will cater to the domestic as well as export markets. The scrip touched an intra-day high of Rs1927 and a low of Rs1846 and recorded volumes of over 6,00,000 shares on NSE.
FSL rallied by over 6% to Rs70 after the company announced that they have completed $275mn overseas Bond sale. The scrip touched an intra-day high of Rs73 and a low of Rs66 and recorded volumes of over 9,00,000 shares on NSE.
Parsvnath spurred by over 3% to Rs368 after its SEZ signs agreement with Rajasthan government and would invest Rs14bn in developing 112 acres. The scrip touched an intra-day high of Rs375 and a low of Rs357 and recorded volumes of over 11,00,000 shares on NSE.
Cement stocks lost early gains after government asked MMTC to import cement to stabilize prices. Grasim was down 0.6% to Rs3815, ACC edged lower by 0.5% to Rs1086, and Ultratech Cement was flat at Rs999.
What the FIIs are doing
FIIs were net sellers of Rs3.33bn (provisional) in the cash segment on Wednesday while the local institutions pumped in Rs1.16bn. In the F&O segment, foreign funds were net buyers of Rs6.18bn on the same day.
On Monday, FIIs were net buyers to the tune of Rs1.14bn in the cash segment. Mutual Funds too were net buyers of Rs4.49bn on the same day.
Stocks in News:
Matrix Laboratories has announced that it has received tentative approval from the US Food and Drug Administration (FDA) under the President’s Emergency Plan for
AIDS Relief (PEPFAR) for its Abbreviated New Drug Application (ANDA) for Tenofovir Disoproxil Fumarate Tablets, 300 mg. The company’s Tenofovir Disoproxil Fumarate is the first and only generic tentative approval of Gilead Sciences' Viread Tablets, 300 rug.
Rig shortage may affect exploratory activities of Reliance Industries in 11 deepwater blocks. Also, RIL's proposed plant shutdown may hit LPG supplies by 25% in December.
IOC says crude oil in Cairn India’s Rajasthan block may be waxy, but it has found it to be sweet.
Reliance Entertainment has formed a 50:50 JV with London based Great Wheel (GWC).
National Australia Bank and Japan’s Shinsei Bank are likely to be the two strategic partners in UTI Mutual Fund’s pre-IPO placement.
Reliance Retail is reportedly in talks with UK’s health and beauty giant Boots for its wellness business.
RIL and GAIL have announced that they would set up a SPV for petrochemical complexes outside India in feedstock rich countries.
Bajaj Auto is considering picking up majority stake in Austria KTM.
Dolce & Gabbana's joint venture with DLF gets approval from Foreign Investment Promotion Board.
Air India to divest 10-15% equity in its IPO to be floated next year.
The Bajaj Brothers have made an open offer to acquire 1.2mn shares of Bajaj Electricals at Rs389 per share.
The swap ratio of the BRPL-IOC merger, which awaits final clearance from the Government, is set at 37:4.
The Government is considering a proposal to scrap withholding tax on overseas borrowings by infrastructure companies and financial institutions servicing the power sector.
The Government says it has collected over Rs938bn in taxes and duties from public sector oil companies.
The Government may allow FDI in multi-branding retailing.
TRAI to set up a panel on number portability.
The Government approves 16 FDI proposals worth Rs6.47bn.
Major Bulk Deals:
Reliance MF has sold Jindal South; Lotus Global Investment has sold Kashyap Tech; UBS has sold Pyramid Saimira.
Stock Picks
Max India
CMP: Rs 238.25
Target Price: Rs 316
SSKI Securities has ‘initiated’ coverage on Max India with a price target of Rs 316. “Having formidable presence in insurance and healthcare, two of the fastest-growing sectors, Max India (Max) is an unique play on India’s economic prosperity. We expect the buoyant economy to provide a strong growth momentum to the hitherto underserved/
underpenetrated life insurance and healthcare sectors,” the SSKI note to clients said. “The life insurance venture, armed by industry’s most productive agency force, is set to reclaim market share led by a multi-channel distribution approach and an enhanced ULIP portfolio. With hospital beds likely to double in the next 4-5 years, superior margins (20-22%) and a strong brand, healthcare business too is a robust model,” the note added.
BBHL
CMP: Rs 89.15
Target Price: Rs 120
Prabhudas Lilladher has ‘initiated’ coverage on Gujarat-based Bhagwati Banquets & Hotels (BBHL), an organised player in high-end catering for conferences, weddings, parties and social gatherings. “The company has established a 3-star hotel with banquet facility in Ahmedabad and also manages three elite clubs and a revolving restaurant in the city. In addition to these, BBH has also started supplying corporate lunch packs in Ahmedabad,” the Prabhudas note to clients said. The brokerage estimates an earnings per share of Rs 3.3 in FY08 and Rs 4.3 in FY09. “It has also started catering services in Mumbai and plans to expand its business into other major cities in the country. We expect the company, led by its ambitious expansion plans, to report 49% CAGR in net sales and 45% CAGR in net profit over the next three years,” the note added.
SBI
CMP: Rs 2,317.40
Target Price: Rs 2,750
Merrill Lynch has raised its price target on State Bank of India (SBI) to Rs 2,750 from Rs 2,500 while retaining its ‘buy’ rating on the banking behemoth. “We believe the risk-return is likely to remain very positive even post rights, and SBI would have the requisite capital to capitalise on the growth opportunities,” the Merrill note to clients said. According to the brokerage, the bank currently trades at a price of 1.4 times estimated book value for FY10. “We believe SBI can trade up to 1.5x FY10 book (post rights issue), given an earnings growth of +23% in FY09-10, RoE(return on equity) of +15.5%, upside in asset quality, visible upswing in non-interest income and low-interest risk. Further, with Tier I to be +10%, the bank would be very well positioned to capitalise on growth opportunities,” the note added.
Bharat Forge
CMP: Rs 326.70
Target Price: Rs 270
Morgan Stanley has reiterated its ‘underweight’ rating on Bharat Forge and lowered its Target Price for the stock to Rs 270 from Rs 290. “We continue to believe the stock is subject to near-term pain, given its exposure to the North American heavy vehicles and domestic commercial vehicles markets, as well as margin pressure from the appreciating rupee. Relatively poor performance of its overseas subsidiaries should continue to be an overhang on BHFC’s consolidated performance,” the Morgan Stanley note to clients said. The brokerage has trimmed its estimated EPS for the company by 17% to Rs 12.84 and 9.8% to Rs 14.49 for FY08 and FY09, respectively. “What could make us more positive on the stock is a stronger turnaround in Chinese joint venture operations, signs that growth in Europe and in the engine components segment is sustainable, and improved performance from the overseas subsidiaries,” the note added
Bombay Dyeing
We recommend a buy in Bombay Dyeing & Manufacturing Company at current market price. From the daily chart of Bombay Dyeing it is apparent that it has been on a medium-term uptrend since August low of Rs 500. However, the stock met with a significant resistance at Rs 750 in late October and has been trading sideways in the range between Rs 650 and Rs 750 since then. On December 4, the stock broke-out of the sideways consolidation range, accompanied with good volumes. Re cently, the stock has moved above the 21-day and 50-day moving average lines too. The medium-term uptrend in the stock is intact. The weekly as well as daily momentum indicators are featuring in the bullish region, resulting in a short-term bullish outlook. The immediate support for the stock is at Rs 650 and the next is at Rs 600. Short-term investors can buy the stock while keeping their stop loss at Rs 727. We expect the stock’s current up move to continue up to Rs 850.
Via Businessline
FII buying slows down
Inflow of Rs 114.40 crore on 3 December 2007
Foreign institutional investors (FIIs) bought shares worth net Rs 114.40 crore on Monday, 3 December 2007, compared to their buying of Rs 1480.40 crore on Friday, 30 November 2007.
FIIs inflow of Rs 114.40 crore on 3 December 2007 was a result of gross purchases of Rs 5566 crore and gross sales Rs 5451.60 crore. The 30-share BSE Sensex rose 240.22 points or 1.24% to 19,603.41 on that day.
FII inflow in calendar year 2007 totaled Rs 67502 crore (till 3 December 2007).
There are a total of 1,174 FIIs registered with the Securities & Exchange Board of India (Sebi).
Precious metals gain for second straight day
Increasing chances of rate cut help gold cross the $800 mark once again
Dollar slipping against most of the major currencies for second consecutive day helped precious metals once again gain some of the glitter today, Tuesday, 4 December, 2007 that they had lost last week. Gold again crossed $800 mark for the first time this week. Dollar slipped against its major rival currencies on anticipation that the Federal Reserve will cut interest rates by another half percentage point in its upcoming policy meeting on 11 December, 2007. Gold generally moves in the opposite direction of the U.S. currency.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
Comex Gold for February delivery rose $12.9 (1.6%) to close at $807.6 an ounce on the New York Mercantile Exchange today. Last week, prices had slipped by more than 4.5%. On, 7 November, prices had touched $848/ounce. It was the highest price after a record $873 on 21 January, 1980.
Comex Silver futures for March delivery rose 25.5 cents (1.8%) to $14.465 an ounce. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 12% this year.
In the currency market today, the dollar slipped versus most major counterparts, undermined by increasing expectations that the U.S. Federal Reserve will further cut interest rates next week. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 0.4% at 75.685.
In the energy market, oil prices fell by almost a dollar today and closed at $88.32/barrel. Prices fell as traders became more certain that OPEC will decide t increase production in tomorrow’s meeting.
Gold had climbed 27% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 12% down against the euro this year.
In 2006, silver had jumped 46% while gold gained 23%.
Dollar had been witnessing a free fall since Federal Reserve cut interest rates in September. On 31 October, 2007, Federal Reserve again cut the fed funds rate by a quarter-point to 4.50% and said that the recent spike in commodity prices may put renewed upward pressure on inflation. Prior to that, Federal Reserve had cut interest rates by half percentage point on 19 September, 2007.
At the MCX, gold prices for February delivery closed at Rs 10,286 per 10 grams. The closing price is Rs 137 (1.35%) higher as against previous closing price. Prices rose to a high of Rs 10,309 per 10 grams and fell to a low of Rs 10,107 per 10 grams during the day’s trading.
At the MCX, silver prices for March delivery closed Rs 244 (1.3%) higher at Rs 19,158/Kg. Prices opened at Rs 18,925/kg and went to a high of Rs 19,238/Kg during the day’s trading.
Crude slips by a dollar
Crude price ease further as settles at lowest level in two months
Crude prices slipped by almost a dollar today after traders were almost certain that OPEC will take the decision to increase production in early 2008 in tomorrow’s meeting at Abu Dhabi. The cartel, which produces 40% of world’s total crude, have been doing some mixed talks since the past few days. Reports that Iran has halted its nuclear weapons program four years ago also weighed on oil prices.
For the day ending Tuesday, 04 December, 2007, crude-oil futures for light sweet crude for January delivery closed at $88.32/barrel (lower by $0.99/barrel or 1.11%) on the New York Mercantile Exchange. Prices reached a high of $99.2 on 21 November. Prices are up 41% from a year ago.
OPEC members are expected to meet on 5 December in Abu Dhabi to discuss the level of production in early 2008. Over the last weekend, different OPEC officials made different comments regarding production but it was not clear whether the cartel is going for an increase in production in its next meeting.
On the currency markets, the dollar slipped versus most major counterparts, undermined by increasing expectations that the U.S. Federal Reserve will further cut interest rates next week. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 0.4% at 75.685.
Brent crude oil for December settlement fell $0.27 (0.3%) to $89.53 on the London-based ICE Futures Europe exchange.
Natural gas declines for third consecutive day
Natural gas in New York fell for a third day on an outlook for a warming trend that would trim demand. Gas for January delivery fell 5.9 cents (0.8%) to settle at $7.155 per million British thermal units.
Against this backdrop, January reformulated gasoline rose 0.16 cents at $2.2517 a gallon and January heating oil edged up 0.07 cent at $2.5118 a gallon.
Attacks on oil facilities in Middle East and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.
At the MCX, crude oil for December delivery closed lower at Rs 3467/barrel, lower by Rs 3 (0.08%) against previous day’s close. Natural gas closed at Rs 281.9/mmtbu as against previous close of Rs 283.2/mmtbu, lower by Rs 1.3/ mmtbu.
Nifty December futures at premium
Turnover in F&O segment rises
Nifty December 2007 futures were at 5889, at a premium of 30.65 points as compared to the spot closing of 5858.35.
The NSE's futures & options (F&O) segment turnover was Rs 56,330.05 crore, which was higher than Rs 54,816.50 crore on Monday, 3 December 2007.
Steel Authority of India December 2007 futures were at premium, at 287.90, compared to the spot closing of Rs 285.
Reliance Natural Resources December 2007 futures were at premium, at 174.40, compared to the spot closing of Rs 173.50.
Neyveli Lignite Corporation December 2007 futures were at premium, at 247.20, compared to the spot closing of Rs 244.60.
In the cash market, the S&P CNX Nifty lost 6.65 points or 0.11% at 5,858.35.
Time for IT to move
The appreciating rupee, sub-prime concerns and the makings of a recession in the US notwithstanding, IT counters are once again catching attention. And clearly, the bigger they are, the more beautiful they appear.
While their rock-bottom valuations may be the immediate cause for this attention, the long-term story of the sector, particularly of the big four counters, is the logical reason why analysts have been recommending them to investors over the last week.
First Global Securities India Ltd, which downgraded IT late August to underperform, revised its call to market perform on Monday.
JP Morgan analysts Bhavin Shah, Mythili Balakrishnan and Nishit Jasani, on the other hand, said long-term fundamental investors should begin accumulating top-tier names with a 12-24 month view in mind, even though IT stocks may not outperform in the near term.
Ajay Mathrani and Aniruddha Bhosale of Deutsche Bank, too, put a buy call on the top four as it believed the structural growth for Indian IT services was completely on track, though a US slowdown could have a cyclical impact on the sector, an aspect that is already factored in.
While the jury is still out on the impact of a potential US slowdown and a cut in tech spends in its wake, the appreciating rupee was certainly the dampener in the first half of FY07.
Two months since, there is evidence the biggies seem to be learning to live with a stronger rupee.
They are finding ways to mitigate its impact. For instance, Satyam Computers has started servicing US customers out of Malaysia and China, with incremental work being shipped out to new development centres in these countries.
“Billing in local currencies and cheaper resources in alternative outsourcing destinations definitely ensure margins in a scenario of a strengthening rupee,” said Virender Aggarwal, director and senior vice-president, Asia-Pacific, Africa and Middle East territories, Satyam Computers.
Clients, too, now prefer getting work done out of sites other than India for various reasons.
So, to that extent, while the overall offshoring story remains intact, there seems to be a new twist to the tale with nearshoring and alternative offshoring destinations gaining preference, thanks to the strong rupee vis-Ã -vis the dollar.
Cognizant Technology Solutions is also reportedly planning to reduce onsite operations by 10-15% to move them to near-shore locations like Canada and Argentina.
It would thus appear that India would incrementally lose out to other offshoring destinations, though, increasingly, globalising Indian companies themselves may not lose out on business.
Mexico and China emerge the most attractive destinations in this respect, with the peso actually depreciating 1.2% against the dollar and the Chinese yuan appreciating just 5% vis-Ã -vis the greenback. The rupee has appreciated almost 15% over the past 12 months.
As Mathrani and Bhosale of Deutsche Bank observe Indian biggies have also learnt to manage their costs well by better utilisation rates, lower travel costs and more fine-tuned capital expenditure are leading to lower depreciation, without negatively impacting growth.
On the flip side, however, as outgoing Nasscom president Kiran Karnik observed on Tuesday, the rupee has hit the smaller companies much harder than the big guys.
“The appreciating rupee, by itself, is not the worry. It is just the fact that it has gone up too much too fast that is causing the pain particularly for smaller companies”, he said.
While the bigger companies, which account for almost 80% of the total IT exports from India, have the cushion of offshoring from elsewhere, the smaller ones clearly do not have that option.
But overall, the India offshoring story, even at a higher rupee, remains intact.
A Deutsche Bank analysis shows that even if the rupee appreciates a further 15-20%, cost advantages for outsourcing clients still remain attractive with a 30% arbitrage, even assuming that Indian vendors pass on all the margin pressure to them.
Talking of the makings of a US slowdown, analysts are unanimous there are no signs yet of IT budgets being affected, though there are concerns on this count going into late December and early January when the budgets are actually finalised.
However, even assuming that overall IT budgets do get cropped, opinion is that outsourcing and offshoring budgets will, in fact, increase precisely because of the smaller kitty now available for IT spends.
Clearly then, the medium- to long-term IT story remains intact, which, perhaps, explains the call put out on the tech counters by analysts.
Via DNA
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