Eveninger - Dec 7 2007
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Friday, December 07, 2007
Weekly Newsletter
RCOM gets GSM license despite policy logjam
Even as a Government panel evaluates the enhanced subscriber base linked spectrum norms and the use of dual technology, the Department of Telecommunications (DoT) granted a pan India GSM license to Reliance Communications (RCOM). The DoT made necessary amendments to its Unified Access Service Licenses (UASL), enabling the Anil Dhirubhai Ambani Group (ADAG) company to offer GSM services in addition to its existing CDMA services. RCOM said it will, in due course, offer nation-wide GSM services in addition to its existing CDMA services. RCOM has already paid the requisite license fee of Rs16.51bn. The company had received Letters of Intent (LOI) for 20 circles at that time. However, on Dec. 6 it got licences for 14 circles only as it already offers GSM services through Reliance Telecom in the rest of the circles.
RCOM will now have to wait for the DoT to allot 4.4 MHz of GSM spectrum in each of the circles to launch commercial operations. The DoT has said that RCOM will be allotted spectrum only after existing licence holders such as Vodafone, Aircel and Idea, besides other existing players that have applied for a pan-India licence are granted spectrum. Leading GSM players like Bharti Airtel, Vodafone Essar and Idea have challenged the DoT policy on fresh spectrum allocation as also the move to allow use of dual technology. The matter is being examined by a panel set up by the Government in order to resolve the current stalemate in the telecom sector over spectrum allotment.
Separately, reports suggested that DoT was ready to issue Letters of Intent (LoIs) to 16 companies, including By Cell, Swan, Cheetah, S Tel, Parsvnath, Datacom, Unitech, Shyam, BPL Mobile and Indiabulls, for starting mobile services. All these companies had applied for licences before Sept. 25. More than 40 companies had applied for licences before the Oct. 1, deadline set by the DoT. Such marquee names as AT&T, Sterlite, Videocon, DLF, Ispat and Moser Baer, are said to have been denied the LoIs, and reports said they could go to court over the move.
Bush unveils subprime rescue plan
The Bush administration announced a rescue plan for the beleaguered housing sector that will freeze interest rates for some category of subprime mortgage borrowers for five years to stem the ongoing meltdown. "The holidays are fast approaching and this will be a time of anxiety for Americans worried about their mortgages and their homes," US President George W. Bush said. The administration's efforts, he said, are a sensible response to a serious challenge. Bush released his plan on a day the Mortgage Bankers Association reported that the number of mortgages entering the foreclosure process in the July-September period set a new record.
Bush insisted that the US economy's fundamentals were sound. But critics said his administration was slow in reacting to the housing crisis and that the delay had worsened the correction. Some termed Bush's plan as too narrowly focused. "The Bush plan is months late and more than a million families short," Democratic presidential candidate John Edwards said. One of Edwards' rivals, Sen. Hillary Clinton, dismissed Bush's effort as "too little, too late" and said it would exclude 400,000 families whose interest rates on their mortgages are resetting in the final three months of this year.
The Bush plan will only cover mortgages resetting from Jan. 1, 2008, through July 31, 2010. The freeze will be available only to homeowners who have not fallen behind on their payments at the lower introductory rates and who are living in the homes. This requirement would exclude people who bought investment properties hoping to profit from the housing boom. Also excluded are people who can afford the higher payments. The bush administration expects these people will move as soon as they can to refinance to more affordable fixed-rate loans. White House said its plan could help 1.2mn homeowners.
But, the Center for Responsible Lending estimated that only 145,000 homeowners would benefit because of the narrow criteria. An estimated 1.8mn homes have subprime mortgages that are scheduled to reset in the next two years. Those mortgages were initially taken out with rates of around 7-8%. Under the scheduled increases, the rates will climb as high as 11% in the coming months without the freeze. That increase could add an additional US$350 to a typical monthly mortgage payment of US$1,200.
Challenges increase for Indian banks: Fitch
Fitch Ratings has today said that the tightening bias of India's monetary policy, together with increased consumer leverage and the appreciating rupee could impact the immediate prospects of the country's banks.
Asset quality has come under some pressure, particularly in consumer loans that grew rapidly in the past and has now started to season, forcing banks to re-examine the loss assumptions in some parts of the business.
Fitch would therefore likely be increasingly cautious in its near-term outlook on the performance of Indian banks; the banks, however, will continue to benefit from the growth opportunities in the economy given their dominant status as financial intermediaries - the strong investment cycle currently underway is the new growth engine for bank credit.
In the report titled "Indian Banks - Annual Review and Outlook", Fitch observes that while the increase in net income of Indian banks remained strong at 25% yoy during H108 (24% in FY07), on the back of loan growth and lower mark-to-market depreciation on government securities portfolios, the rise in net interest income was more sedate at 11% in H108 reflecting the pressure on net interest margins. The slowdown in loans growth in FY08, together with any increase in loan loss provisions, could therefore affect net income.
NPL ratios will remain under focus, particularly in consumer loans where rising interest rates and increased consumer leverage has affected borrowers' repayment capacity, leading to growing delinquencies in the unsecured loan portfolio. Asset quality in residential mortgage loans (accounting for about half the retail loan portfolio) has held steady, but could be vulnerable if rising interest rates are accompanied by a correction in property prices. The appreciation of the rupee against the US dollar could affect the smaller exporters of textiles; banks have reportedly restructured some of their exposure to this segment in FY08.
The ability to raise timely capital could remain a key differentiator between banks, given that internal capital generation is unlikely to meet the requirements of growth in risk weighted assets, as well as the increased capital charge for operational risk and the need for government banks to make additional provisions for pension liabilities. The larger private banks have demonstrated greater capabilities in raising capital in a timely manner.
Preference shares have been added to the list of hybrid capital that banks can issue; however, credit spreads in the international markets (that have been the largest source of hybrid Tier 1 capital for Indian banks) has dramatically widened since July 2007 following the global tightening of liquidity, forcing banks to postpone their plans to issue these instruments overseas. The need to access capital may come into sharper focus if the credit cycle deteriorates, which could well provide an impetus for consolidation.
US adds more jobs than forecast
The US labor market was slightly stronger than expected in November, the government said on Friday, with the world's largest economy adding 94,000 nonfarm payroll jobs last month, the Labor Department said in a mixed report. Economists had been looking for around 70,000-85,000 new jobs.
Payrolls had risen a revised 170,000 in October while the September reading was revised lower by 52,000 jobs. Payroll growth in September and October was revised lower by a total of 48,000.
The unemployment rate remained at 4.7% for the third month in a row. Economists had been forecasting a rise to 4.8%. The job growth came from the service sector as manufacturing lost 11,000, while construction employment fell by 24,000.
Meanwhile, a separate survey of households showed the strongest job growth in nearly six years, with 696,000 more people saying they had jobs in November.
Ahead of the report, economists were expecting the Federal Reserve to lower its overnight lending rate by a quarter percentage point to 4.25% at its meeting on Tuesday, but some market participants are looking for a half-point cut. he Fed has cut the target rate by 0.75 percentage point over the previous two meetings.
Interest rates...BOE cuts; ECB holds
As expected, the Bank of England (BOE) slashed its key interest rate by 25 basis point while the European Central Bank (ECB) left its benchmark rate unchanged, as central bankers in the two regions remain concerned about the current turmoil in the financial markets and tightening credit standards. The BOE cut its key interest rate by a quarter-point to 5.5% after economic data in the previous few days showed a sharp slowdown in consumer confidence and in services sector growth. The rate cut is the first since August 2005 and comes after five hikes since August 2006. Meanwhile, the ECB left Eurozone rates unchanged at 4%, as the threat of slower growth in the 13-country bloc overshadows the dangers posed by higher inflation. The decision was widely expected as ECB says it needs more time to assess the fallout from the global credit squeeze. ECB President Jean-Claude Trichet threatened to raise interest rates if an oil-driven jump in inflation spurs pay increases. "There is strong short-term upward pressure on inflation," Trichet said. The ECB will not tolerate second-round effects on wages and some policy makers wanted to raise rates as early as today, Trichet said.
OECD slashes world growth forecast
The Organisation of Economic Co-operation and Development (OECD) cut its growth forecast for its 30 members, citing the ongoing correction in the housing sector and tight credit conditions. The lobby group for the world's 30 most industrialised nations also asked the US Federal Reserve, the European Central Bank (ECB) and the Bank of Japan to hold interest rates while saying that the Bank of England (BOE) could cut borrowing costs. The global economy will slow in 2008 as housing markets cool and credit conditions tighten, but the US will avoid a recession and the outlook is not that bad, the OECD said in its semi-annual "Economic Outlook" report. The government-funded economics body grouping of 30 advanced nations also warned that there are signs that China's economy is overheating, and urged the country's government that faster appreciation of its currency would be in its own interest.
OPEC keeps output unchanged
The Organisation of Petroleum Exporting Countries (OPEC) defied calls for production increases from consumer nations and left their current output levels unchanged, sending oil prices above the US$90 per barrel mark briefly. The oil cartel, which pumps more than 40% of the world's oil, will hold production for now and meet again in January. OPEC ministers met in Abu Dhabi to take a call on output ceilings. The freeze on supply met the expectations of most analysts. Crude oil was very volatile during the week, plunging and recovering sharply often during the course of a single trading session. It fell to a six-week low early on Thursday, but before the end of the session it recovered to settle 3% higher. US crude stood 1 cent up at US$90.24 on Friday, having jumped US$2.74 in New York on Thursday. London Brent was 4 cents up at US$90.22.
Chinese steel firms may launch rival bid for Rio Tinto
Shares of Chinese steel companies rose after a local newspaper reported that Baoshan Iron & Steel (Baosteel) may lead a rival bid by Chinese steel producers for acquiring Anglo-Australian mining major Rio Tinto. Baosteel may bid at least US$200bn for Rio Tinto, topping the US$142bn takeover proposal by BHP Billiton, Chairman Xu Lejiang told state-owned newspaper 21st Century Business Herald. However, the Baosteel Chairman later denied media reports that the company was considering a bid for Rio Tinto. Separately, China's largest steel company called on the Australian government to intervene to prevent BHP Billiton from taking over Rio Tinto. Rio Tinto's CEO Tom Albanese said that BHP Billiton's US $140bn takeover proposal to combine the two companies was "dead in the water". Albanese also revealed that other suitors had approached Rio Tinto since BHP Billiton's bid emerged last month, but added that it wanted to stay independent.
Vivendi to acquire Activision for US$9.8bn
French media giant Vivendi announced it was acquiring a majority stake in Activision for US$9.8bn to create the world's largest independent video game publisher. The new company, to be known as Activision Blizzard, will be positioned as a rival to current leader Electronic Arts. Vivendi would pay US$27.50 per share and make a cash infusion of US$1.7bn to acquire a 52% stake in Activision, valuing the combined company at US$18.9bn. Vivendi will then fold its game operations into those of Activision in the new company. The new company plans to repurchase US$4bn worth of its shares for US$27.50 each, a move the merger partners said would increase Vivendi's stake to 68%. The purchase price represents a premium of 24% over Activision’s closing price on Nov. 30 of US$22.15 a share. The new entity would trade on the Nasdaq stock market. The merger is expected to be completed in the first half of 2008.
ArcelorMittal to make mandatory offer for Chinese firm
ArcelorMittal said it would make a general offer for China Oriental Group Co. to comply with the regulatory requirements in Hong Kong. The world's biggest steel maker by production capacity will offer to pay at least HK$12.9bn (US$1.7bn) for shares in China Oriental it doesn't own. ArcelorMittal said it intended to maintain China Oriental's listing after the close of the general offer, which comes after it bought a 28% stake in the Hong Kong-listed company on Nov. 7 for US$647mn. The Hong Kong Securities and Futures Commission (SFC) accused ArcelorMittal of colluding with China Oriental's Chairman Han Jingyuan in acquiring a majority stake in China's only listed steel company not under state control. It also lambasted ArcelorMittal, Jingyan and their advisers for an almost total absence of consultation. Jingyuan controls 45% of China Oriental. The offer of HK$6.12 a share is 13% higher to the last traded stock price of HK$5.40. China Oriental has been suspended from trading in Hong Kong since Nov. 7. The bid would value the whole company for at least HK$17.9bn.
Govt asks airlines to clarify tax on airfares
The Government asked all airlines to clarify as to what are the charged tax components and provide confirmation whether all the taxes shown by them in their tickets/website are deposited with the government. The airlines were also asked to submit the record of the taxes deposited with the Government at the earliest. In a letter dated Dec. 4, the Director General of Civil Aviation (DGCA) said perusal of the fares shown on the airlines' web site has revealed that the airfares have two components - basic fare and taxes. However, it is not clarified as to whether components like Passenger Service Fee and Fuel Surcharge are included in the basic fare or have been clubbed under the heading of taxes. The actual amount passed on to the Government is only the passenger service fee (PSF) of Rs225 per sector. Therefore, passengers have complained that they are forced to pay Rs2025 under the head of 'taxes and levies' while the Government charges only Rs225 as PSF.
OVL to join Hindujas in Iran oil & gas projects
Notwithstanding pressure from the Americans to reduce trade relations with Iran, India is pressing ahead with its economic interest with the Islamic nation. In line with this trend, ONGC Videsh Ltd. (OVL), in partnership with the Hinduja Group, is eyeing a 50% stake in Iran's South Pars gas field, arguably the largest in the world. The two partners are also believed to be in talks for a 50% stake in Azadegan - one of the world's biggest onshore oil blocks. OVL and the Hindujas are in talks with Switzerland-registered NICO, a subsidiary of the National Iranian Oil Co. (NICO). OVL and the Hinduja group are planning a project-specific JV restricted to the Iranian projects, a business daily said. OVL is likely to hold a majority 51% stake in the proposed JV while the Hindujas will own a 49% interest, it added. Azadegan is estimated to have 33 billion barrels of oil while the South Pars gas field contains about 50% of Iran's gas resources. South Pars is jointly shared by Iran and Qatar.
IFCI up as Board clears loan conversion to equity
IFCI allowed banks and financial institutions to convert 100% debt worth Rs14.79bn into equity. Public sector banks agreed to convert their entire holdings in Zero Coupon Optionally Convertible Debentures (ZCOCDs) into equity and the IFCI Board approved the same. LIC, GIC and associates agreed to convert a part of ZCOCDs into equity in such a way that they would retain their holding in IFCI in percentage terms at the existing level of 13.67%. IFCI also said it was in discussion with multilateral institutions to sell a stake in it. Earlier in related news, a financial daily reported that World Bank's private investment arm IFC was to take a 20% stake in IFCI. Meanwhile, of the eight short-listed bidders, only four carried out due diligence on IFCI. These were: Sterlite Industries-Morgan Stanley; WL Ross, US Capital Partners VI Fund, Standard Chartered Bank and HDFC; Cargill Financial Services Corp. and Texas Pacific Group (TPG); Shinsei Bank, PNB and JC Flowers. The remaining bidders, namely GE, IDFC, Natixis and Blackstone are yet to conduct the due diligence. The last date of submission for financial bids has been fixed as Dec 14. The IFCI Board is expected to announce the strategic investor by Dec. 20.
Anil Ambani to inject fresh equity into REL
The Board of Reliance Energy Ltd. (REL) approved a proposal for new equity capital infusion of up to Rs80bn into the company. The new equity capital infusion is proposed through a preferential offer of equity shares and/or equity related securities to Reliance-Anil Dhirubhai Ambani Group (ADAG). The preferential offer, which is subject to necessary approvals from shareholders, will be made at a price of Rs1,812 per share. Life Insurance Corporation (LIC), New India Assurance, Oriental Insurance, General Insurance, National Insurance and United India Insurance, which have been long-term shareholders of the company over the past several decades and who collectively hold about 18% of equity, will be provided an opportunity to participate in the proposed offering. The new equity capital will substantially enhance REL's net worth, and further augment its borrowing capabilities.
Kuwait Petro eyes refinery projects in India
Kuwait Petroleum Corporation (KPC), the National Oil Company of Kuwait is keen to participate in setting up grass root projects in India in the oil and gas sector. This was conveyed by Saad A. Al Shuwaib in a meeting with the Minister of Petroleum & Natural Gas Murli Deora. Saad said KPC is exploring opportunities in the refinery and petrochemical activities. KPC is in talks with Indian private and public sector undertakings to build large-scale refinery and petrochemicals projects in the country. The company is in talks with Reliance Industries (RIL) and others, including Indian Oil Corp. Ltd (IOC) for the proposed projects. "We would like to have something in India. We are looking for something either with Reliance or any other company," Saad told reporters after meeting the Petroleum Minister. He categorically stated that KPC was not looking to buy stakes in existing refineries. "It could be greenfield or joint acquisition," he said.
DLF to enter MF biz with Prudential Financial
DLF Ltd. and US-based Prudential Financial Inc. signed an agreement to establish a joint venture company in India, subject to regulatory approval. The joint venture with Prudential Financial marks DLF's entry into the asset management business. The agreement allows Prudential Financial to expand its international investments business and marks its official entry into the Indian mutual fund market. Under the terms of the agreement, Prudential Financial will be the majority shareholder in the joint venture with a 61% stake, while DLF will own the remaining 39%. The asset management joint venture will be based in Mumbai and will provide a broad array of mutual fund and investment products. The new company will be named DLF Pramerica Asset Managers Pvt Ltd. It will use Prudential Financial's distinctive Rock brand, combined with DLF's brand.
Eicher Motors shares up on Volvo JV news
Shares of commercial vehicle maker Eicher Motors jumped on Friday amid reports that it could form a Joint Venture (JV) with Swedish auto major Volvo. A business news channel reported yesterday that Volvo could move its India business into the proposed JV with Eicher Motors. Meanwhile, a financial daily reports that Eicher Motors' commercial vehicle business is up for sale and Volvo, along with German auto giant Daimler are among the interested parties. A deal is likely to be announced shortly and will be 50% higher than the current market price, it added. Later on Friday, Eicher Motors said its Board of Directors will be held on Dec. 10, to discuss a proposal for strategic partnership in relation to the company's commercial vehicle and allied business that the company has received. The news about Volvo and Daimler being in talks with Eicher Motors, as well as other CV makers like Ashok Leyland, have been floating around for a while now. But, so far neither Volvo nor Daimler have been able to strike any deals. Japanese auto maker Nissan recently announced a tie up with Ashok Leyland for making CVs.
Suzuki aims to keep 50% market share in India
Japanese auto major Suzuki Motor Corp. said it was aiming to keep its 50% market share in India forever notwithstanding the ever growing competition. The head of Japan's leading manufacturer of compact cars said that the company will launch new models and increase its dealer network to maintain 50% share of the Indian passenger car market. "We can't let newcomers break our 50% share that easily. We're going to do everything we can to keep that level for eternity," CEO Osamu Suzuki said at the Foreign Correspondents' Club of Japan. The Japanese company plans to introduce new and improved models like the Swift hatchback and SX4 crossover to ensure that it maintains its dominant position in India. Shinzo Nakanishi, soon to be Maruti Suzuki's new Managing Director said that the company would likely boost its sales outlets to about 1,000 in the next five to 10 years from about 550 now.
Change in lot size
All eyes would be on the Fed meet in the coming week. The indices are getting dizzy at heights. The pattern has been a strong start and bouts of profit booking, which appear more like select basket selling. Global cues will continue to dictate the start. The much anticipated rate cut will give a short time spurt to indices world over and India would be no exception. The announcement of a change in lot size of F&O contracts could boost sentiment in most of the F&O counters. On the flip side, its a double whammy for counters like Infosys, IVR Prime and Sun TV. On one hand their prices have fallen while on the other hand the lot sizes have increased. Retail investors would mostly choose counters with a smaller lot size. A new high is in store for the indices. But the question is, will it sustain?
Post Market Commentary
The market closed on a positive note after struggling a lot towards the end of the session as the profit booking prevails across the counters. The market opened with a handsome gains due to he favoring global cues but unable to sustain at higher levels and pared all its gains after the mid session but buying is seen at the lower levels which led the market to closed higher. The Bankex and Realty scrips remained in the limelight as the investor''s showed more confidence towards buying these stocks. Both the BSE Mid cap and Small cap remained out of favor as they closed lower by 11.80 points and 18.46 points at 9,021.96 and 11,342.27 respectively. The BSE Sensex closed higher by 170.13 points at 19,966 and NSE Nifty closed up by 19.6 points at 5,974.30. Overall, the market breadth was strong as 1460 stocks are closed higher while 1406 stocks are closed lower.
BSE Realty index surged 229.27 points to close at 11,576.33. Scrips that gained are Mahindra Life (8.07%), Penland (6%), DLF (4.13%), Parsvnath (3.95%), Indiabull real (3.20%), Akruti City (1.13%).
BSE Bankex index closed higher by 269.68 points to close at 11,377.96. Pushed up by CENTBOP (14.14%), ICICI bank (4.02%), Oriental bank (2.31%), HDFC bank (2.09%), SBI (1.67%) and Canara bank (0.68%).
BSE IT index closed up by 157.42 points at 4,424.57. Pushed up by Tech Mahindra (9.93%), NIIT tech (7.03%), I-Flex (5.78%), Infosys (5.09%), TCS (2.62%) and Wipro (1.85%).
BSE Capital goods dropped by 158.36 points to close at 20,218.88. Scrips that fell are Crompton Greaves (3.05%), AIA Engineering (2.35%), Lakshmi machines (1.98%), BHEL (1.54%).
BSE Oil & Gas index closed lower by 100.50 points at 12,735.33. Pulled down by HPCL (2.54%), GAIL India (1.55%), IOCL (1.53%), Reliance industries (1.14%), RNRL (1.14%) and RPL (0.77%).
BSE Metal declined by 183.13 points to close at 18,738.08. Scrips that dropped are Gujarat NRE (3.55%), Bhusan Steel (3.17%), Hindalco (2.51%), Jindal Stainless (2.35%), SAIL (1.84%), Tata Steel (1.63%).
Congratulations - India is second most expensive
Indian stock market is the second most expensive after China's in the Asian region, following strong rally driven by robust economic growth, a report says.
"India is the second most expensive market in Asia after China. However, unlike China, its momentum has deteriorated rather than improved from October," global financial service major Citigroup said in a research report.
Citigroup said November was a turbulent month for Asian markets with MSCI AC Asia Pacific index ending down 8.39 per cent.
All constituents of this index, except Indonesia, generated negative returns in the period under review. Japan is not a part of this index.
The monthly report reveals that India's earning sentiment had turned negative last month, though its price momentum is still going strong.
"India is supported by strong momentum in expectation of its strong economic growth," the report said.
Rising stock prices make the market more expensive, but it also implies improving long-term price momentum and all else being equal, stronger momentum characteristics, it added.
Last month, the benchmark Sensex had witnessed global pressure and the index lost 361.16 points in the period.
The index ended at 19,363.19 points after falling to a low of 18,182.83 in November, as investors turned cautious after Foreign Institutional Investors (FIIs) pulled out sizable funds from equity.
Sensex rebounds as IT stocks outperform
The market witnessed a sharp pull-back after witnessing a slump in the afternoon. The rally was mainly triggered by the buoyancy in heavyweights, IT, banking and realty stocks. Firm openings in European markets also helped the Sensex to rally. The Sensex resumed with a positive gap of 268 points at 20,064 but slipped gradually as trading progressed and entered in negative territory by the afternoon. The Sensex touched the day's low of 19,706 on profit bookings in front-line, consumer durables and metal stocks. However, hectic buying in technology and banking stocks thereafter, saw the Sensex recover most of its losses and enter into green again. The Sensex finally closed the session at 19,966, up 170 points. The Nifty closed by adding 20 points at 5,974.
The breadth of the market was neutral. Of the 2,909 stocks traded on the BSE 1,460 stocks advanced, 1,406 stocks declined and 43 stocks ended unchanged. Among the sectoral indices the BSE IT Index flared up by 3.69%, the BSE Teck Index rose 2.73%, the BSE Bankex Index moved up by 2.43% and the BSE Realty Index was up 2.02%.
Among the Sensex stocks, Infosys flared up 5.09% at Rs1,718, DLF shot up by 4.13% at Rs1,011, ICICI Bank zoomed 4.02% at Rs1,248, HDFC moved up by 3.82% at Rs2,921, TCS scaled up 2.62% at Rs1,061, Ranbaxy surged by 2.34% at Rs407, Reliance Communication jumped by 2.17% at Rs734 and Bharti Airtel gained 2.10% at Rs960.
Over 3.69 crore Ispat Industries shares changed hands on the BSE followed by Centurian Bank of Punjab (2.51 crore shares), IFCI (1.79 crore shares), Tata Teleservices (1.58 crore shares) and Reliance Natural Resources (1.25 crore shares).
Value-wise, Ispat Industries clocked a turnover of Rs258 crore followed by Reliance Petroleum (Rs235 crore), Reliance Natural Resources (Rs221 crore), IFCI (Rs182 crore) and Reliance Industries (Rs182 crore).
Market may extend gains
The upward momentum in the stock markets is expected to continue at least till the US Federal Reserve meeting on Tuesday, 11 November 2007 since Fed is expected to cut Fed funds rate by at least 25 basis points. Recent data showing strong job creation by the US private sector in November 2007 has eased US recession worries.
Signs that the US economy is not ailing as much as has been thought caused investors to scale back expectations of the extent of an interest rate cut when the Federal Reserve meets next Tuesday. Yet, market men hope that a further cut in interest rates by the Fed will boost FII inflow in India.
Brokerage Edelweiss Securities said in a report that the benchmark index was expected to find minor resistance around 20,200-20,500 and on the lower side it had strong support around 19,200-19,000.
However, a sharp fall is not expected due to tremendous liquidity waiting to enter at market. FIIs had been the key drivers of the recent rally. They pumped in Rs 20,591 crore in the month of October 2007. However FIIs pulled out Rs 5,849.90 crore in November 2007. FII inflow in calendar year 2007 totaled Rs 67,521.60 crore (till 5 December 2007). Any slowdown in inflow by FIIs may put brakes on the rally.
Meanwhile, a slowdown in Indian economy due to high interest rates, a firm rupee, surging global oil prices and fallout of the US sub-prime crisis dented business confidence in July-September 2007, a survey said on Wednesday. The survey of 321 companies was conducted by trade body, Federation of Indian Chambers of Commerce and Industry (FICCI).
Reemergence of political concern arising from the Indo-US nuclear deal may impact the market. The United Progressive Alliance government expressed its firm resolve to operationalise the Indo-US nuclear deal, rejecting opposition and Left front’s charges that it barred India from conducting nuclear tests and threatened the country’s independent foreign policy. Replying to the nuclear deal debate in the Rajya Sabha on Wednesday 5 December 2007, the external affairs minister, Mr Pranab Mukherjee, stuck to the government view that the deal was essential for India’s economic growth. The Left front continued its opposition to the deal in the debate in Rajya Sabha.
Annual inflation, based on the wholesale price index (WPI), dipped 3.01% in the week ended 24 November 2007 compared with a 3.21% rise in the week ended 17 November 2007. The market estimate stood at 3.20%.
Sensex garners 602 points
The market witnessed a strong upward momentum on expectation that the US Federal Reserve will cut the Fed funds rate by at least 25 basis points at its meeting on Tuesday, 11 December 2007. Stocks rose across global markets as data showing strong job creation by the US private sector in November 2007 eased US recession worries. US recession worries continued to ease after after a plan announced by President George W Bush to stem US home foreclosures. BSE Sensex gained in 4 out of the 5 trading sessions in the week.
The 30-share BSE Sensex rose 602.81 points or 3.11% to 19,966 in the week ended 7 December 2007. The S&P CNX Nifty gained 211.55 points or 3.67% to 5,974.30 in the week.
BSE Small Cap index surged 816.25 points or 7.75% to 11,342.27 in the week. BSE Mid Cap index rose 468.40 points or 5.48% to 9,021.96 in the week.
The Sensex rose 240.22 points or 1.24% to 19,603.41 on Monday, 3 December 2007. Strong buying interest in some index pivotals including Reliance Industries boosted the bourses. IT pivotals, Wipro, TCS and Satyam Computer edged higher. Reliance Energy spurted. The market breadth was strong. Last week's sharp fall in global crude oil prices supported the rally on the bourses. The BSE Small-Cap and BSE Mid-Cap indices outperformed the Sensex.
The BSE Sensex lost 73.91 points or 0.38% to 19,529.50 on Tuesday, 4 December 2007. The market edged lower led by fall in index heavyweights Reliance Industries and ICICI Bank. Select IT stocks weakened. Tata Steel soared. Metal, consumer goods and auto stocks were in demand.
The BSE Sensex rose 208.57 points or 1.07% to 19,738.07 on Wednesday, 5 December 2007. 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.
The BSE Sensex rose 57.80 points or 0.29% to 19,795.87 on Thursday, 6 December 2007. Though the market ended in the green, it came off higher level as index heavyweight Reliance Industries slipped. Volatility on the bourses was high. ICICI Bank edged higher. Cipla surged. Consumer durables stocks dwindled. Realty stocks were the star performers in today’s trade. Market breadth was strong. European markets, which opened after Indian markets, were trading firm. Key Asian indices, except China, were in green.
The BSE Sensex rose 170.13 points or 0.86% to 19,966 on Friday, 7 December 2007. Data showing slide in inflation helped the market end the choppy session on a firm note but fall in index heavyweight Reliance Industries capped the rise. Infosys Technologies and ICICI Bank spurted. IT, banking and realty stocks were in demand. Market breadth moved between positive and negative. 16 out of 30 stocks from the Sensex pack were in the red. European markets, which opened after Indian market, were firm in early trade.
Bajaj Auto shed 0.22% to Rs 2,703.15 on reports it may take a majority stake in Austria’s sports bike maker KTM Power Sports. On 2 December 2007, Bajaj Auto increased its stake in KTM Power Sports from 14.5% to 18.8%. In November 2007, Bajaj Auto had picked up a 14.5% stake in KTM Power Sports for around Rs 300-350 crore from open market purchases.
India's largest private sector entity by market capitalisation and oil refiner Reliance Industries (RIL) declined 0.32% to Rs 2,841.85 after the company said it has signed a memorandum of understanding with Gail (India) for joint co-operation in petrochemicals. As per the memorandum of understanding (MoU), GAIL India and Reliance Industries (RIL) would explore opportunities for setting up petrochemical complexes outside of India in feedstock rich countries. GAIL and RIL will set up a special purpose vehicle (SPV) for setting up petrochemical complexes abroad.
Auto major and India’s largest commercial vehicle maker by sales Tata Motors rose 5.15% to Rs 771.10. Its total sales slipped 4% to 46,947 units in November 2007 over November 2006.
India’s largest carmaker by sales Maruti Suzuki India rose 2.95% to Rs 1,042.25 after its sales rose 26.6% to 69,699 units in November 2007 over November 2006.
India's second largest power utility by revenue Reliance Energy jumped 11.16% to Rs 1,932.10. The company's board of directors at its meeting held on 2 December 2007 approved proposal to raise upto Rs 8,000 crore through a preferential offer at Rs 1,812 per share to promoters and institutions. Reliance Energy (REL) said the new equity capital infusion will substantially enhance the net worth, and further augment its borrowing capabilities, to enable greater participation in mega growth opportunities in high growth areas. Meanwhile, Reliance Power, a 50% owned subsidiary of REL reportedly received a Letter of Intent for setting up a 4,000 mega watt ultra mega power project in Andhra Pradesh.
India’s second largest listed telecom service provider by sales Reliance Communications rose 8.81% to Rs 734.30 after the Department of Telecommunications (DoT) on Thursday, 6 December 2007 awarded a pan-India GSM licence to the company.
ICICI Bank (up 5.51% to Rs 1,247.50), Infosys (up 7.11% to Rs 1,718.15), Larsen & Toubro (up 3.21% to Rs 4,261.35), State Bank of India (up 5.93% to Rs 2,436.60), HDFC (up 4.9% to Rs 2,920.90) , DLF (up 7.15% to Rs 1,011.35) were other major gainers from the Sensex pack.
The term-lending institution IFCI surged 6.71% to Rs 100.95 on reports International Finance Corporation will pick up stake in the term lending institution. International Finance Corporation (IFC), the investment arm of World Bank, is likely to hold less than 20% stake in IFCI. IFCI needs funds to meet its capital adequacy requirements.
Essar Steel galloped 43.9% to Rs 67.85 after the Securities Appellate Tribunal (SAT) kept the company's delisting proposal in abeyance. SAT came out with an interim order on Wednesday, 5 December 2007, after an investor moved the authority alleging that the discovered price of the share for delisting was below the intrinsic value of the company. SAT has directed Essar Steel to file its response in this regard. The matter will come up for hearing on 12 December 2007.
Cement shares pared gains after the government on 4 December 2007 warned that it will crack down on the cement industry if it detects any cartelisation in the sector.
Securities Exchange Board of India (Sebi) on 3 December 2007, relaxed guidelines for companies raising funds through the issue of bonds. The requirement for corporates to obtain credit ratings from two agencies has been relaxed to one agency. This relaxation would reduce the cost of issuance of debt instruments, the regulator said. Sebi has also decided to allow issue of bonds below the investment grade. The regulator also decided to remove structural restrictions currently placed on debt instruments such as those on maturity and put or call option on conversion.
Meanwhile, the market regulator on, 5 December 2007, passed an order disposing the adjudication proceedings against Indiabulls Securities in the IPO-demat scam.
At the sidelines of the India Economic Summit 2007 on 3 December 2007 commerce secretary Gopal Krishna Pillai announced that the government may lift the cap of 5,000 hectares for multi-product special economic zones (SEZs) in view of the new Relief and Rehabilitation Policy and the proposed amendments to Land Acquisition Act.
Merchandise exports gained 36% to US$ 13.3 billion in October 2007 over US$ 9.80 billion in October 2006. Exports exports jumped 25% to US$ 130 billion in April-October 2007 over US$ 70.7 billion in April-October 2006. Imports rose 24.55% to US$ 20.8 billion in October 2007 compared with US$ 16.7% billion in October 2006. It gained 25.26% to US$129.9 billion in April-October 2007 from US$ 103.7 in April-September 2006. Trade deficit widened to US$ 7.48 billion in October 2007 compared with US$ 6.92 billion in October 2006. It touched US$ 4.4 billion in April-October 2007 over US$ 32.9 billion April-October 20
Speaking at the India Economic Summit in new Delhi on 4 December 2007, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia estimated that India would require an investment of US$ 500 billion in infrastructure in the Eleventh Five Year Plan (2007-2012).
Global rating agency Standard and Poor's outlook for Asia-Pacific financial market for 2008 observed that the Reserve Bank of India's (RBI) tight monetary policy is expected to moderate India's economic growth rate to 8.1%-8.6% in 2008 as against 8.5%-9% in 2007.
The tussle over the Indo-US nuclear deal continued in a nine-and-a-half-hour debate in the Rajya Sabha. The debate which was initiated by Communist Party of India-Marxist (CPI-M) leader Sitaram Yechury on 4 December 2007 resulted in a walk-out of by the members of the opposition BJP, Left and the Third front External affairs minister Pranab Mukherjee staunchly defended the 123 agreement argued that India's foreign policy is independent of the deal and the country would be bound only by the 123 Agreement and not by the Hyde Act . He noted that the crux of the debate was whether India could conduct nuclear tests, he clarified a decision in this regard will be taken on the basis of the geo-political scenario. In the 123 Agreement nuclear tests has not been banned.
The spectrum committee meeting at the Department of Telecommunications (DoT) on 6 December 2007 remained inconclusive. The body is scheduled to meet on 10 December 2007 to deliberate on the norms for allocation of spectrum. The debate involves two sets of norms - recommendation of the Telecom Regulatory Authority of India (TRAI) and that of the Telecom Engineering Centre (TEC). The TRAI criteria is tougher than the current allocation norms, but the TEC specifications are even more stringent.
IT, telecom stocks lead 170-points Sensex surge
Data showing slide in inflation helped the market end the choppy session on a firm note but fall in index heavyweight Reliance Industries capped the rise. Infosys Technologies and ICICI Bank spurted. IT, banking and realty stocks were in demand. Market breadth moved between positive and negative. 15 out of 30 stocks from the Sensex pack were in the red. European markets, which opened after Indian market, were firm in early trade.
The government today warned that increased capital inflows could endanger the growth process, although the economy is buoyant in tune with the trend witnessed since the last four years. "Increased capital inflows can impact macro-economic aggregates through the exchange rate, trade and monetary variables," said a half-year economic review tabled by Finance Minister P Chidambaram in Parliament today.
The review said increased inflows have been witnessed especially in the first half of current financial year 2007/08, while the economy's capacity to absorb it has not risen at the same pace, as indicated by the level of current account deficit. "There are short term challenges of managing inflows without endangering the growth and price stability," the review said.
The wholesale price index rose 3.01% in 12 months to 24 November 2007, below the previous week's rise of 3.21%, government data released today, 7 December 2007, afternoon showed. The annual inflation rate was 5.55% during the corresponding week of the previous year.
Some Asian markets edged lower after initial rise that was triggered by easing of US recession worries after US President George W. Bush, on Thursday, 6 December 2007, unveiled plans aimed at stemming US home loan foreclosures.
The 30-share BSE Sensex rose 170.13 points or 0.86% to 19,966. Sensex hit a low of 19,706.43 in afternoon trade. At day’s low it shed 89.44 or 0.45%. Sensex had hit a high of 20,094.56 in early trade. At day's high, Sensex had gained 298.69 points.
Sensex had hit all-time high of 20,238.16 on 30 October 2007 but was not able to sustain at higher levels and it is yet to close above the physcological 20,000 level. The Sensex’s all time closing high is 19,977.67 on 29 October 2007.
The broader S&P CNX Nifty rose 19.60 points or 0.33% at 5974.30. It touched a high of 6042.10 in early trade today, which is a new record high. Nifty had hit an all-time high of 6027.05 on Thursday, 6 December 2007.
The BSE Mid-Cap index fell 0.13% to 9,021.96. The BSE Small-Cap index was down 0.16% to 11,342.27. Both these indices underperformed the Sensex.
Market breadth was positive. On BSE, 1460 stocks advanced, 1406 stocks declined and 43 stocks remained unchanged.
BSE clocked a turnover of Rs 8598 crore compared to yesterday (6 December 2007)’s turnover of Rs 9,762.59.
Nifty December 2007 futures were at 5993, a premium of 18.70 points as compared to spot closing of 5974.30.
NSE’s futures & options (F&O) segment turnover was Rs 61359.41 crore, which was lower than Rs 66472.74 crore on Thursday, 6 December 2007
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries slipped 1.14% to Rs 2841.65, off day’s low of Rs 2915.
The BSE IT index rose 3.69% to 4,424.57. It outperformed the Sensex. India’s second largest software exporter by sales Infosys Technologies soared 5.09% to Rs 1718.15.
Tech Mahindra soared 9.93% to Rs 1224.50, I-Flex Solutions gained 5.78% to Rs 1614, TCS rose 2.62% to Rs 1061.25, Wipro gained 1.85% to Rs 502.55 and Satyam Computers rose 1.59% to Rs 443.75.
Telecom stocks edged higher. India’s largest listed cellular service provider by market share Bharti Airtel jumped 2.10% to Rs 959.65.
India’s second largest listed telecom service provider by sales Reliance Communications rose 2.17% to Rs 734.30 on reports that Department of Telecommunications (DoT) on Thursday, 6 December 2007 awarded a pan-India GSM licence to the company.
The BSE Bankex rose 2.43% to 11,377.96. It outperformed the Sensex. India’s largest private sector bank by assets ICICI Bank jumped 4.02% to Rs 1247.50.
Centurion Bank of Punjab soared 14.14% to Rs 55.70, Oriental Bank of Commerce rose 2.31% to Rs 276.80, HDFC Bank rose 2.09% to Rs 1721.25 and State Bank of India rose 1.67% to Rs 2436.
The BSE Realty index rose 2.02% to 11,576.63. It outperformed the Sensex. DLF rose 4.13% to Rs 1011.35, Mahindra Lifespace Developers soared 8.075 to Rs 797.80, Peninsula land jumped 6% to Rs 150.15, Parsvnath Developers gained 3.95% to Rs 396.95, Indiabulls Real Estate rose 3.20% to Rs 687.55, and Omaxe rose 2.44% to Rs 493.80. However, Unitech fell 0.51% to Rs 428.95, and Sobha Developers declined 1.48% to Rs 895.65.
The BSE Metal index fell 0.97% to 18,738.08. It underperformed the Sensex. Hindalco Industries fell 2.51% to Rs 188.15, Jindal Stainless declined 2.35% to Rs 226.65, Hindustan Zinc gave away 1.99% to Rs 806.05, Steel Authority of India fell 1.84% to Rs 274.20, and Tata Steel shed 1.63% to Rs 833.40.
The BSE Auto index fell 0.85% to 5,651.30. It underperformed the Sensex. MICO slumped 4.06% to Rs 4954.20, Amtek Auto declined 3.70% to Rs 443, MRF fell 3.49% to Rs 7202.55, Hindustan Motors shed 2.86% to Rs 47.60, and Tata Motors fell 0.56% to Rs 771.10. However, Maruti Suzuki was steady at Rs 1042.25.
Auto components maker Bharat Bharat Forge jumped 2.43% to Rs 351.60 on reports that the company is joining hands with NTPC to set up a new greenfield manufacturing facility in the country. The joint venture will look at manufacturing power plant equipment, including turbines, components and accessories, through technological tie-ups with other manufacturers. NTPC was up 0.27% to Rs 245.65.
Automobile tyre maker CEAT rose 2.83% to Rs 218.05 on reports that company plans to invest more than Rs 1000 crore to expand capacity and is hopefull of selling surplus land in Mumbai by March 2008.
United Breweries (Holdings), the flagship firm of UB Group, fell 3.36% to Rs 1085.90 after Kingfisher Airlines posted a net loss of Rs 577 crore in the financial year ended March 2007. The loss was on revenue of Rs 1,553 crore earned during the year.
Commercial vehicles maker Eicher Motors soared 8.22% to Rs 545.45 on reports that Swedish auto major Volvo is close to a joint venture with the company. Eicher Motors is expected to spin off its commercial vehicle unit into the venture. The valuation of the venture would be around $1 billion after the merger.
India’s second largest iron castings manufacturer by sales Electrosteel Castings fell 2.18% to Rs 80.95 on reports that the company is planning an expansion, for which it may raise $25 million through private placement route.
Textile firm Modern India was locked at upper limit of 5% at Rs 952.95 after the company said on Friday, 7 December 2007 its board would meet on 17 December 2007 to consider stock split.
Solvent extraction firm Sanwaria Agro Oils rose 1.23% to Rs 111.45 after its board approved 2-for-1 stock split plan.
Infrastructure development firm GMR Infrastructure fell 6.05% to Rs 242.20 after National Stock Exchange curbed fresh positions in the derivatives contracts of the firm.
Speciality chemicals maker Jayant Agro Organics jumped 2.30% to Rs 104.50 after Japan's Mitsui & Company and Mitsui & Co (Asia Pacific) formed a joint venture to take a 24% stake in its speciality chemicals unit.
Ispat Industries clocked the highest turnover of Rs 259.06 crore on BSE. Reliance Petroleum (Rs 236.80 crore), Reliance Natural Resources (Rs 221.49 crore), IFCI (Rs 182.74 crore) and Reliance Industries (Rs 182.29 crore), were the other turnover toppers on BSE in that order.
Ispat Industries registered the highest volumes of 3.69 crore shares on BSE. Centurion Bank pf Punjab (2.51 crore shares), IFCI (1.79 crore shares), Tata Teleservices (Rs 1.59 crore shares) and Reliance Natural Resources (1.25 crore shares), were the other volume toppers on BSE in that order.
In Europe, key indices in UK, France, and Germany were up between 0.62% to 1.17%.
Asian markets were mixed today, 7 December 2007. Key indices in China, Japan, Singapore and Taiwan were up 0.15% to 1.13%. However, Key indices in Hong Kong and South Korea were down between 0.97% to 2.42%.
US markets surged on Thursday, 6 December 2007 on optimism that a plan announced by President George W Bush to stem US home foreclosures would keep the economy from sliding into a recession. The Dow Jones industrial average surged 174.93 points, or 1.30%, to end at 13,619.89. The Standard & Poor's 500 Index .SPX climbed 22.33 points, or 1.50%, to 1,507.34. The Nasdaq Composite Index soared 42.67 points, or 1.60%, to 2,709.03.
The Bank of England lowered its key interest rate on Thursday, 6 December 2007 citing signs of slowing growth. The Monetary Policy Committee, or MPC, voted to reduce the official bank rate paid on commercial bank reserves by 0.25 basis points to 5.5%. However the European Central Bank Monetary Policy Committee decided to keep interest rates on hold at 4% after their monthly policy meeting yesterday, 6 December 2007.
Crude oil was little changed in New York after rising the most in almost three weeks as U.S. inventories dropped as refiners prepared to meet heating demand. Crude oil for January delivery rose 3 cents to $90.26 a barrel on the New York Mercantile Exchange in Singapore. Brent crude oil for January settlement yesterday rose $1.69, or 1.9%, to settle at $90.18 a barrel on the London-based ICE Futures Europe exchange.
Trading Calls
Buy Unitech with a stop loss of Rs 380 for a target of Rs 550.
Buy Nucleus Soft with a stop loss of Rs 320 for a target of Rs 490.
Buy GIC Housing Finance only on declines with a stop loss of Rs 74 for a short-term target of Rs 105.
IPO Grey Market Premiums
eClerx Services 270 to 315 40 to 45
BGR Energy 425 to 480 380 to 390
Transformers & Rectifiers 425 to 465 370 to 380
Brigade Enterprise 351 to 390 80 to 90
Jyothy Lab. 690 220 to 230
Burnpur Cement Ltd. 12 6 to 7
Edelweiss 825 680 to 700
Renaissance Jewellery 150 20 to 25
Kolte Patil 145 85 to 90
Kaushalya Infra 60 12 to 14
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 5915 and 5865 with resis at 5981 , 6030 and 6060
Mkt to remain positive
Intra Day: Buy Cipla above 198.50 with a TGT of 208 and a SL of 194
Buy gitanjali above 461.50 with a TGT of 470 and a SL of 456.50
Delivery Buy: Lincpen
F&O Buy DLF above 976 with a TGT of 1020 and a SL of 947
Buy Suzlon above 1958 with a TGT of 2010 and a SL of 1936
Out House :
Markets at a support of 19595 & 19681 levels with resistance at 19997 & 20221 levels .
Buy : RIL & REL
Buy : RelCap & RNRL
Buy : JpAsso & Jphydro
Buy : TTML & EssarOil bullet
Buy : SKumar & ABAN
Buy : IBUllsreal bullet
Buy : MRPL & RPL
Buy : Kotak & SBIN
Buy : IOlBroad
Dark Horse : JpAsso , IBullReal , KOTAK , GeShipping , RNRL , RIL , SBIN & JpHydro
Bullet for the Day : Primesecu , Noida & Adhunik metal with strict stop loss .
TGIF : Thank God its Friday : Markets to try crossing 20 K book profits at 20 k levels .
Bullish mood may continue
The sentiment is likely to remain bullish following the surge in the Asian and US indices, and persistent buying in the domestic market. FIIs remaining net buyers of stocks for the forth straight session may help the market to march further. However, rising oil prices and expected rise in inflation numbers could put pressure on investor sentiment. Among the local indices, the Nifty crossed the psychological 6,000 mark in yesterday's trades and if it sustains at that level, it can target 6,200 to 6,400, while it has a likely support at 5,740 on the downside and a break below this level could see the index slip to 5,594. The Sensex has a likely support at 19,300 and may face resistance at 21,000.
US markets rallied on Thursday as investors welcomed the White House's plan to help troubled homeowners. While the Dow Jones flared up by 175 points at 13620, the Nasdaq moved up by 43 points to close at 2709.
Except Dr Reddy's and Tata Motors all the Indian ADRs traded firm on the US bourses. MTNL led the pack with gains of over 5% while Wipro, ICICI Bank and Rediff jumped over 2-4% each. Among other gainers Satyam, Infosys, VSNL and Patni Computer added around 1% each.
Crude oil prices advanced further, with the Nymex light crude oil for January delivery gaining by $2.74 to close at $90.23 a barrel. In the commodity space, the Comex gold for February delivery gained $3.40 to settle at $807.10 an ounce.
Market to rally on strong global cues
Market is expected to rally today, 7 December 2007, following strong cues from global markets. The Sensex struck 20,000 mark yesterday, 6 December in early trade but was not able to sustain at higher levels and it is yet to close above the physcological 20,000 level. Sensex had hit all-time high of 20,238.16 on 30 October 2007 while its all time closing high is 19,977.67 on 29 October 2007.
Asian markets posted strong gains today, 7 December 2007. Hang Seng (up 1.25% to 29,929.33), Taiwan Weighted index (up 0.87% to 8,769.98), Straits Times index (up 1.79% to 3,616.28), Nikkei (up 0.93% to 16,021.12), Shanghai Composite index (up 0.81% to 5,075.65) and Seoul Composite index (up 0.03% to 1,953.7), all edged higher.
US markets surged on Thursday, 6 December 2007 on optimism that a plan announced by President George W Bush to stem US home foreclosures would keep the economy from sliding into a recession. The Dow Jones industrial average surged 174.93 points, or 1.30%, to end at 13,619.89. The Standard & Poor's 500 Index .SPX climbed 22.33 points, or 1.50%, to 1,507.34. The Nasdaq Composite Index soared 42.67 points, or 1.60%, to 2,709.03
The Bank of England lowered its key interest rate on Thursday, 6 December 2007 citing signs of slowing growth. The Monetary Policy Committee, or MPC, voted to reduce the official bank rate paid on commercial bank reserves by 0.25 basis points to 5.5%. However the European Central Bank Monetary Policy Committee decided to keep interest rates on hold at 4% after their monthly policy meeting yesterday, 6 December 2007.
Back home, the 30-share BSE Sensex rose 57.80 points or 0.29% to 19,795.87 on Thursday, 6 December 2007. The broader S&P CNX Nifty rose 14.70 points or 0.25% to 5954.70 for the day.
As per provisional data, foreign institutional investors (FIIs) purchased shares worth a net Rs 492.10 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 227.45 crore on Thursday, 6 December 2007.
FIIs were net sellers to the tune of Rs 235.96 crore in the futures & options segment on Thursday, 6 December 2007. They were net buyers of index futures to the tune of Rs 613.43 rore and bought index options worth Rs 80.99 crore. However they were net sellers of stock futures to the tune of Rs 929.43 crore and sold stock options worth Rs 0.95 crore.
Crude oil was little changed in New York after rising the most in almost three weeks as U.S. inventories dropped as refiners prepared to meet heating demand. Crude oil for January delivery rose 3 cents to $90.26 a barrel on the New York Mercantile Exchange in Singapore. Brent crude oil for January settlement yesterday rose $1.69, or 1.9%, to settle at $90.18 a barrel on the London-based ICE Futures Europe exchange.
Pre Market Watch
The Market is likely to have positive opening on the back of favoring global cues. The market yesterday closed with marginal gains as the selling the selling towards the end intensified. On Thursday, the BSE Sensex closed up by 53.27 points at 19,791.34 and NSE Nifty closed higher by 14.7 points at 5,954.70. We expect that the market to see some bull run during the trading session. Also, releasing of weekly inflation data by the government today will again set the directions for the market.
The Bank of England cuts the interest rate by a quarter point to 5.5%, which was for the first time in two years. This cut was on the back of inflation concerns as the surging cost of credit threatens to derail growth.
On Thursday, the US market closed in green. The DJIA surged 174.93 points to close at 13,619.89. The S&P 500 index grew by 22.33 points to close at 1,507.34 and NASDAQ advanced by 42.67 points to close at 2,709.03.
Indian ADRs ended in positive territory. In technology sector, Patni computers grew by 2.63% along with Wipro by 2.31%, Satyam by 1.24% and Infosys 1%. In banking sector, ICICI bank and HDFC bank grew by (4.40%) and (1.52%) respectively. In telecommunication sector, MTNL and VSNL advanced by (5.26%) and (1.51%) respectively.
The major stock markets in Asia are trading firm. Hang Seng is trading higher by 272.95 points at 29,831.87. Japan''s Nikkei is trading up by 147.04 points at 16,021.12. Taiwan Weighted inched up by 58.60 points to trade at 8,753.01. Seoul Composite is trading at 1,941.06 up by 12.11 points.
The FIIs stood as the net buyer on Thursday . The gross equity purchased was Rs5, 515.50 Crore and the gross debt purchased was Rs533.70 Crore while the gross equity sold stood at Rs4, 434.20 Crore and gross debt sold stood at Rs45.10 Crore. Therefore, the net investment of equity was Rs1, 081.30 Crore and net debt was Rs488.60 Crore.
Today, Nifty has support at 5,905 and resistance at 6,031 and BSE Sensex has support at 19,616 and resistance at 20,189.
Daily Trading Calls
Nifty (5955) Sup 5902 Res 6036
Buy LIC Hsg Fin (380) SL 375 Target 390, 394
Buy Praj Ind (207) SL 203 Target 215, 217
Buy Reliance Capital (2248) SL 2235 Target 2280, 2285
Buy Glenmark (503) SL 497 Target 514, 518
Sell Hero Honda (690) SL 696 Target 680, 676
Market may remain positive
Equities are likely to open higher on Friday on the back of strong global cues. US stocks surged on Thursday on optimism that a plan announced by President George Bush to stem US home foreclosures would keep the economy from sliding into a recession.
Dow Jones Industrial Average shot up 174.93 points or 1.30 per cent to end at 13,619.89, a day after it gained nearly 200 points. Standard & Poor's 500 Index climbed 22.33 points or 1.50 per cent to 1,507.34. Nasdaq Composite Index soared 42.67 points or 1.60 per cent to 2,709.03.
Asian stocks picked US cues with Nikkei climbing 0.93 per cent, Hang Seng up 1.15 per cent and Shanghai adding 0.3 per cent.
“Technical indicators showed the market was in an over bought zone on Thursday morning, so the momentum eased in the latter half of the day. But the undertone remains strong; there are no signs of weakness,” said Suresh Kumar Iyer, technical analyst at Asit C Mehta Investment Interrmediates.
Thursday, National Stock Exchange’s Nifty soared to an all-time high of 6027.05 before settling at 5954.7, up 15 points or 0.25 per cent from the previous close.
Bombay Stock Exchange’s Sensex ended up 58 points or 0.29 per cent at 19,795.87. From an intra-day high of 20,064.31, the index dipped to 19,716.57 before the close.
Foreign institutional investors were net buyers of equity worth Rs 492.1 crore, while mutual funds net bought Rs 227.54 crore, according to provisional data on NSE.
Faith for bulls, freeze for bears!
The beginning of true faith is the end of anxiety.
President George W. Bush’s freeze on some subprime mortgage rates could end up freezing the bears for a while. The anxiety if any for the bulls can wait till next week. On the domestic front, both, FIIs and local funds were buyers yesterday (provisional). Key technical indicators like volume and market breadth were also encouraging. The underlying sentiment appears positive and chances of the market going up seem better.
The bailout plan unveiled by the US Government for some sub-prime borrowers, coupled with the first rate cut by the Bank of England and expectations of a similar move by the Fed, on Dec. 11, are likely to keep the bulls in high spirits.
The Sensex and the Nifty may close above 20k and 6k, respectively today. Trading will be choppy as investors may develop cold feet with the indices at new lifetime highs. Small-cap and Mid-cap stocks will continue to hog the limelight. We expect another strong start and hopefully, a better closing than yesterday.
US stocks rallied on Thursday for the second day running, as investors welcomed the White House prescription to help troubled homeowners and braced for Friday's jobs report and next week's Fed policy meeting.
Also bolstering investor sentiment is an expectation of another interest-rate cut by the FOMC when the central bank policy makers meet on Tuesday. A 25 basis-point cut is a foregone conclusion. But, there's a camp that believes there's a possibility of 50 basis points.
Financial shares and home builders led the rally on expectations that the government plan to limit subprime mortgage defaults will boost bank profits and ease the housing slump. Countrywide Financial and Fannie Mae rallied after President George W. Bush said some borrowers will be able refinance or freeze interest rates on adjustable-rate loans.
Lennar Corp. and D.R. Horton led an index of builders to its biggest advance ever. Thirty-two of 34 energy companies in the Standard & Poor's 500 Index gained after crude-oil prices rebounded from a six-week low.
The S&P 500 added 22 points, or 1.5%, to 1,507.34. The Dow Jones Industrial Average climbed 175 points, or 1.3%, to 13,619.89. The Nasdaq Composite Index increased 43 points, or 1.6%, to 2,709.03.
Market breadth was positive. More than six stocks gained for every one that fell on the New York Stock Exchange.
The number of Americans filing new claims for unemployment fell last week by more than expected. However, the report was overshadowed a bit ahead of Friday's bigger monthly report.
Treasury prices fell, boosting the yield on the 10-year to 4% from 3.94% on Wednesday. A recent rally in Treasury prices has left the 10-year note yield now more than 50 basis points below the fed funds target rate of 4.5%.
In currency trading, the dollar gained versus the yen and fell versus the euro. US light crude oil for January delivery rose $2.74 to settle at $90.23 per barrel on the New York Mercantile Exchange. COMEX gold for February delivery rose $3.40 to settle at $807.10 an ounce.
Across the Atlantic, the Bank of England opted to cut interest rates by a quarter-percentage point to 5.5%, providing some encouragement to US investors ahead of next week's Fed meeting. The European Central Bank held rates steady though.
Stocks in the UK ended lower, as investors factored in a rate cut from the Bank of England, although a strong update from the Royal Bank of Scotland lifted banking stocks. The rate cut from the Bank of England was the first since August 2005 and came after five hikes since August 2006. The FTSE 100 index closed down 0.1% or 8 points, at 6,485.60.
Other European shares were mixed. The pan-European Dow Jones Stoxx 600 index gained 0.1% at 369.87, off earlier high as a 3.2% slide for Roche shares led healthcare stocks lower. The German DAX 30 dropped 0.1% to 7,940.58 and the French CAC-40 rose 0.3% to 5,673.76.
In the emerging markets, the Bovespa in Brazil advanced 1.3% to 65,790 while the IPC index in Mexico rose 1.6% to 31,257. The RTS index in Russia fell 0.1% to 2259 and the ISE National-30 index in Turkey gained 1.5% to 71,617.
Asian markets were trading mixed this morning despite the overnight rally on Wall Street. The Nikkei in Tokyo was up 147 points at 16,021 while the Hang Seng in Hong Kong rose 283 points to 29,642. The Kospi in Seoul dipped by 12 points to 1940 and the Straits Times in Singapore jumped 55 points to 3608.
Bulls may continue to reign supreme
It was a strong start to the day the Nifty index hit all time high and benchmark Sensex crossed the 20k mark. The rally was led by strong cues form the International markets and buying momentum in the index heavyweights like ICICI Bank, HDFC and Infosys.
However, markets turned choppy and bulls were unable to hold on to their early gains as key indices faced stiff resistance at higher levels. Traders preferred to book some profits as a sharp bout of selling dragged the benchmark Sensex to hit an intra-day low of 19,716. Finally, 30-share Sensex ended 57 points higher to close at 19,795 and Nifty closed at 5,954 adding 14 points.
Reliance Industries was down 1% to Rs2873. According to reports the company would make an acquisition in the energy sector for up to US$15bn and also plans solar power projects in Bengal, Rajasthan and Maharashtra reports said. The scrip touched an intra-day high of Rs2988 and a low of Rs2865 and recorded volumes of over 24,00,000 shares on NSE.
Maharashtra Seamless advanced by 0.5% to Rs581 after reports stated that the company is close to acquiring a plant in Romania for an estimated Rs2.5bn. The scrip touched an intra-day high of Rs610 and a low of Rs575 and recorded volumes of over 2, 00,000 shares on NSE.
Shiv-Vani Oil & Gas dropped 1.5% to Rs595. Reports stated that the Private equity firm Citi Venture Capital purchased a 7% stake in the company for Rs1bn. The scrip touched an intra-day high of Rs630 and a low of Rs590 and recorded volumes of over 3,00,000 shares on NSE.
Hindustan Zinc gained 0.6% to Rs822. The company announced that the company cut lead prices by 5.2%. The scrip touched an intra-day high of Rs842 and a low of Rs816 and recorded volumes of over 1,00,000 shares on NSE.
GVK Power spurred by over 8% to Rs845 after the company announced that it would split each stock in to 10. The scrip touched an intra-day high of Rs929 and a low of Rs790 and recorded volumes of over 4,00,000 shares on NSE.
Aegis Logistics declined 4.5% to Rs298. Reports stated that the company would set up 300 auto LPG stations. The scrip touched an intra-day high of Rs323 and a low of Rs292 and recorded volumes of over 63,000 shares on NSE.
Gayatri Projects surged 5% to Rs386 after reports stated that the company achieved financial closure for the outer ring road projects in Hyderabad. The scrip touched an intra-day high of Rs395 and a low of Rs375 and recorded volumes of over 1,00,000 shares on NSE.
Matrix Labs edged lower 0.5% to Rs223. The company yesterday announced that they secured US FDA approval for Aids drug. The scrip touched an intra-day high of Rs231 and a low of Rs222 and recorded volumes of over 42,000 shares on NSE.
What the FIIs are doing
FIIs were net buyers of Rs4.9bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs2.28bn. In the F&O segment, foreign funds were net sellers of Rs2.36bn on the same day.
On Wednesday, FIIs pumped in Rs10.8bn in the cash segment. Mutual Funds were net sellers of Rs1.9bn on the same day.
Stocks in News:
Eicher Motors could attract attention amid reports that it could form a JV with Swedish CV major Volvo.
Reliance Communications gets all-India GSM license from DoT. (ET)
Glaxo pulls-out patent applications of two anti-AIDS medicines in India. (ET)
Middle East-based Switz Group, owned by Khorakiwala family, is s et to buy Modern Foods from Hindustan Unilever for Rs1bn. (ET)
Infosys and Wipro drop out of the race to acquire the captive unit of the Europe-based publishing group Springer. (ET)
NTPC and Coal India to float a SPV to build two power plants of 1,500 MW and develop two coal mines in Jharkhand for an estimated cost of Rs80bn. (ET)
Unitech has earmarked Rs200bn to develop 48 malls and shopping centres across the country over the next six years. (BS)
Flag Telecom, a wholly-owned subsidiary of RCOM, has tied-up with US-based Glasshouse Technologies to provide IT services to global clients. (ET)
M&M on lookout for further alliances in passenger vehicles, trucks and busses segment. (ET)
Essar Power to divest 10% stake to private equity investors to raise up to US$700mn. (ET)
NTPC and Bharat Forge likely to form a JV to make power plant equipment, including turbine components and accessories through technological tie-ups. (FE)
Various PE players have approached the Wadia Group for picking up stake in GoAir. (ET)
BOSCH is likely to supply fuel-injections systems for the Bajaj-Renault sub US$3000 small car. (ET)
Tata Power, Monnet Ispat & Energy and Jindal Photo Film are forming a JV to develop a 290mn tone coal mine at Mandakini in Orissa. (ET)
Kuwait Petroleum in talks with Reliance Industries and IOC to set-up greenfield refinery-cum-petrochemical complex in India. (ET)
Mercator Lines, Singapore-based subsidiary would raise US$254mn through an IPO on the Singapore exchange.
Major infrastructure players like L&T, Reliance and GMR are among the 18 bidders for Rs300bn 1,047KM Ganga Expressway project in UP. (BS)
Jubilant Organosys has entered into an agreement with US-based Forest Laboratories for drug discovery candidates for a metabolic disorder.
Sintex to acquire three companies by next year and has earmarked Rs6bn capex in 2008. (BL)
Electrosteel Castings to raise US$25mn for backward integration program. (BL)
Peak custom duty on non-agricultural products is likely to be reduced to 7.5% from 10% in the Budget 2008. (ET)
The DoT set to issue letter of intent to 16 companies for starting mobile services. (ET)
Futures at a premium
Turnover in F&O segment rises
Nifty December 2007 futures were at 5984, at a premium of 29.30 points as compared to the spot closing of 5954.70.
The NSE's futures & options (F&O) segment turnover was Rs 66,472.74 crore, which was higher than Rs 57,522.12 crore on Wednesday, 5 December 2007.
Reliance Energy (REL) December 2007 futures were at premium, at 1975.15, compared to the spot closing of 1946.50.
NTPC December 2007 futures were at premium, at 247.95, compared to the spot closing of 245.20.
State Bank of India (SBI) December 2007 futures were at premium, at Rs 2414, compared to the spot closing of 2395.55.
In the cash market, the S&P CNX Nifty gained 14.70 points or 0.25% at 5,954.70.
FIs come back
Inflow of Rs 1081.30 crore on 5 December 2007
Foreign institutional investors (FIIs) bought shares worth net Rs 1081.30 crore on Wednesday, 5 December 2007, compared to their buying of Rs 19.50 crore on Tuesday, 4 December 2007.
FIIs inflow of Rs 1081.30 crore on 5 December 2007 was a result of gross purchases of Rs 5515.50 crore and gross sales Rs 4434.20 crore. The 30-share BSE Sensex rose 208.57 points or 1.07% to 19,738.07 on that day.
FII inflow in calendar year 2007 totaled Rs 68,602.90 crore (till 5 December 2007).
There are a total of 1,180 FIIs registered with the Securities & Exchange Board of India (Sebi).
Transformers and Rectifiers IPO Analysis
One of the largest manufacturers of furnace transformers in India
Transformers & Rectifiers India (TRIL) manufactures electrical transformers for the power sector and industrial applications. Promoted by Jitendra U Mamtora and his family, the company was originally incorporated in 1994 as Triveni Electric Company. It subsequently changed its name to the present in 1995.
The two manufacturing units of TRIL are located at Changodar and Odhav near Ahmedabad in Gujarat. They had an aggregate installed capacity of 7,200 MVA end of the financial year ending March 2007 ( FY 2007). The company is in the midst of setting up a Rs 66.68-crore greenfield transformer manufacturing facility at Moraiya near Ahmedabad. The installed capacity of the new plant will be around 16,000 MVA per annum.
With an installed capacity of 6,000 MVA, the Changodar plant manufactures power transformers from 66 KV up to 220 KV. With an installed capacity of 1,200 MVA, the Odhav plant manufactured distribution and industrial transformers up to 33 KV class. The new plant at Moraiya will have the capacity to manufacture transformers up to 765 KV. But TRIL initially plans to manufacture 220-KV and 400-KV transformers at this facility. The Odhav plant came into the fold on the acquisition of the business of the sole proprietary concern of the promoters of the company, from August 20’06.
The average capacity utilisation over the last three years stood at 68%. Capacity utilisation peaked to 80% in FY 2007. Power transformers constituted 77% of the total sales in FY 2007, followed by furnace transformers, accounting for 13% of the sales, and distribution transformers 10%. Sales to state electricity utilities constituted about 51% of the total sales, and the remaining contributed by industrial and other sectors.
TRIL has two subsidiaries: Transweld Mechanical Engineering Works (TMEW) and Tanspares. While the wholly owned subsidiary TMEW manufactures tanks and core channels, Transpares (with 51% stake held by TRIL) produces pressed steel radiators. Aart from meeting captive requirement of its parent, TMEW also caters to a range of third-party public- and private-sector clients.
TRIL also proposes to undertake turnkey projects for setting up substations that form part of the power transmission and distribution (T&D) network, leveraging its established relationship with utilities, power T&D companies and in-house engineering capabilities. Once the new plant at Moraiya becomes operational (expected in FY 2009), the aggregate capacity of the company is expected to touch 23,200 MVA end March 2009.
To part fund the Rs 60.75-crore project and to meet incremental working capital requirement, TRIL is tapping the capital market with an initial public offering.
Strengths
Has wide product portfolio comprising power transformers, distribution transformers and industrial transformers such as furnace transformers and special transformers including mobile substation, rectifiers, and testing transformers. The wide product range is backed by strong longstanding relationship with customers, specially state electricity utilities. Is one of the largest manufacturers of furnace transformers in India.
The standalone order book was Rs 360 crore on 15 November 2007, with the order for power transformers amounting to Rs 325 crore and balance for distribution transformers.
The acquisition of 100% stake in TMEW and 51% in Transpares in FY 2007 has resulted in backward integration to critical components for manufacturing of transformers such as tanks, core channels, and pressed steel radiatiors.
Strong investment envisaged in the power sector, translating into strong demand growth for electrical equipment such as transformers.
Cushion of price-variation clause for supply to state and central power utilities to insulate margin from highly fluctuating inputs costs such as CRGO and copper. Derives around 50% of standalone sales from state utilities. But the share of sales to utilities has eased from 51% in FY 20’07, 51% to 47% in the six months ended September 2007.
Weaknesses
Still to pre-qualify for the supply of 400-KV and 765-KV transformers. Lacks strong technology in this class of transformers and will also face strong competition from MNC players with proven technology with domestic manufacturing facility in this category.
The Gujarat Pollution Control Board (GPCB) has rejected the application for no-objection-certificate for the Changodar unit, citing its operation without consent. The GPCB has stopped any expansion of the Changodar unit without prior permission and to obtain necessary approval for the existing production capacity. Application for Consolidated Consent and Authorisation (CC&A) for the unit is processing. However, if consent is not received in time, operations will be hampered.
Valuation
Consolidated revenue was Rs 221.20 crore and net profit after minority interest Rs 17.62 crore in FY 2007. On standalone basis, sales grew 67% to Rs 218 crore and net profit 118% to Rs 16.66 crore. The EPS on consolidated earning of FY 2007 on post-IPO equity is Rs 14.9 and the PE 28.5 times at the lower price band of Rs 425 and 31.2 times the upper price band of 465. Peers EMCO quotes at a PE of 37.1 times, Bharat Bijlee at a PE of 34.7 times and Indo Tech at a PE of 28.5 times.
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