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Friday, December 14, 2007
Sensex sheds 74 points
A day after Sensex slipped over 270 points on all-round selling, the market opened on a positive note shrugging off worries about subprime crises. However, the market was gloomy amid a range-bound trend during intra-day trades influenced by subdued international markets. The Sensex saw strong optimism vanish after adding 68 points to touch the day's high of 20,172. The market zigzagged between its positives and negatives thereafter, but eased in the afternoon on sustained selling in capital goods, banking and tech stocks to touch the intra-day low of 19,936. Heavy buying in the index pivotal stocks helped Sensex trim most of its losses towards the close and end the session at 20,031, down 74 points. The Nifty closed with a loss of 10 points at 6,048.
However, the market breadth was heavily tilted in favor of gainers as 2,077 stocks advanced, 837 stocks declined and 26 stocks remained unchanged on the Bombay Stock Exchange (BSE). Most of sectoral indices closed with marginal losses. BSE Tech index and BSE Bankex index were the major losers and slipped over 1% each. However, BSE HC index soared 2.52% followed by BSE CD index (up 2.51%) and BSE FMCG index (up 1.44%).
Among the 30 Sensex stocks 15 ended in the green. Attracting strong buying support ACC surged by 3.58% at Rs1,103, Ranbaxy shot up by 2.69% at Rs422, Cipla jumped by 2.65% at Rs209, HLL advanced by 2.33% at Rs217, Reliance Industries scaled up by 1.99% at Rs2,889, ITC zoomed 1.88% at Rs201 and Hindalco added 1.84% at Rs213. Among the laggards, Bharti Airtel tumbled 3.57% at Rs953, ICICI Bank slipped 2.87% at Rs1,207, HDFC fell 2.51% at Rs3,059, Satyam Computer was down 2.36% at Rs411 and Tata Motors lost 2.03% at Rs744.
Over 3.21 crore Kaushal Infra shares changed hands on BSE followed by Ispat Industries (2.11 crore shares), IFCI (1.81 crore shares), GV Films (1.80 crore shares) and Kashyap Technologies (1.64 crore shares).
Sun TV was the most actively traded counter on the BSE and registered a turnover of Rs482 crore followed by Kaushal Infra(Rs252 crore), Kolte Patil Developers (Rs246 crore), JP Hydro (Rs207 crore) and IFCI (Rs207 crore).
Trading Call
Buy Deepak Fertilizers around Rs 175/50-Rs 154. Stop Loss at Rs 148, target Rs 223 and Rs 305.
Buy Mysore Cement around Rs 63.50-Rs 54. Stop Loss at Rs 49. Add further above Rs 72, target at Rs 97 and Rs 138
FIIs step up in buying
Inflow of Rs 1082.10 crore on 13 December 2007
Foreign institutional investors (FIIs) bought shares worth net Rs 1082.10 crore on Thursday, 13 December 2007, compared to their buying of Rs 59.80 crore on Wednesday, 12 December 2007.
FIIs inflow of Rs 1082.10 crore on 13 December 2007 was a result of gross purchases of Rs 6909.50 crore and gross sales Rs 5827.40 crore. The 30-share BSE Sensex declined 271.48 points or 1.33% to 20,104.39 on that day.
FII inflow in December 2007 totaled Rs 5655.60 crore (till 13 December 2007). FII inflow in calendar year 2007 totaled Rs 71,562.90 crore (till 13 December 2007).
There are a total of 1,194 FIIs registered with the Securities & Exchange Board of India (Sebi).
Post Market Commentary
The market closed with marginal loss after facing a lot of volatility during the trading session. The cues fro the global markets are not in favor, which led to the profit booking across the counters. The market keeps on moving in positive and negative region through out the trading session as the volatility gripped the market. But buying at the lower levels led the market to shed most of its losses to closed marginally lower. As usual, both the BSE Mid cap and Small cap outperformed the benchmark indices as they attracted the most investor''s confidence. Most buying is seen from the Health Care and Oil & Gas indices baskets. The BSE Sensex closed lower by 73.56 points at 20,030.83 and NSE Nifty fell 10.4 points to closed at 6,047.70. Overall, the market breadth was strong as 2,082 stocks are closed higher while 830 stocks are closed lower.
BSE Health Care index grew by 106.09 points to close at 4,308.27. Pushed up by Fortis health care (19.49%), Lupin (6.48%), Cadila Health (5.01%), Glennmark (4.55%)
BSE Metal index closed lower by 4.72 points at 19,763 as Gujarat NRE (5.75%), Ispat (4.15%), Sesa Goa (3.24%) and Hind Zinc (3.19%) closed in green while SAIL (1.51%), Tata Steel (1.30%) and Sterlite industries (0.54%) closed in red.
BSE Capital Goods slipped by 199.45 points to close at 20,862.51. Scrips that fell are Areva (3.67%), Crompton Greaves (2.53%), L&T (1.44%), Siemens (1.19%) and BHEL (1.16%).
BSE FMCG closed higher by 32.16 points at 2,263.93. Pushed up by Marico (2.66%), HUL (2.33%), United Breweries (2.22%), ITC (1.88%) and Dabur (0.72%).
BSE Realty index closed flat at 12,400.46 as HDIL (5.72%), Mahindra Life (5.29%), Anant Raj (2.92%) and Parsvnath (1.14%) closed up while Ansal infra (8.38%), Omaxe (5.57%) closed lower.
BSE Oil & Gas index grew by 113.71 points to close at 12,980.95. Scrips that gained are Cairn India (3.32%), Reliance industries (1.99%), ONGC (0.90%) and Aban Offshore (0.15%).
Weekly Close: 20000 conquered but will it stay ?
It was a historic week for markets. It managed to close above a big psychological level of 20000. The close at the end of the week was also above that. However, more than that, the last couple of weeks have been marked by the retail investors actually enjoying the upsides in the markets. The gains for the year had been largely limited to large caps... but it was the last couple of weeks that large caps saw profit taking but it was the mid caps and small caps which continued to flare. This week was no different though some large caps also joined the party helping the Sensex above 20000.
The most important event this week was the US fed cut which came as expected at 25 basis points and that in a way disappointed markets which had already discounted that. The global markets went soft and that had a softening impact on the Indian markets as well. The US Fed also indicated a plan to ensure that liquidity would be available.. but markets seem to be quite sombre. The event of the Fed cut is now over with and markets are wanting to know what next. Actually the wait is to understand whether the US consumer growth will pick up post all the efforts of the Central bank. Thats the key. Near term numbers even if they are not negative may be dismissed waiting for the recent cuts to impact. However, a bigger worry is in the form of inflation.
Indian markets reacted quite differently. The resilience in the Indian market was quite pleasantly surprising. Indian economy is not seen too integrated with the world economy. Sectors which had not participated or had been weak saw interest. The software sector which had seen initial interest waned and saw profit taking off on the back of worries of the US economy. The Auto sector saw interest as well but that was limited. The Auto sector is expected to benefit from lower interest rates. Bajaj, Hero Honda were the gainers. The Telecom sector was extremely volatile with Bharti Airtel first rising on hope but then falling big way on the Government ruling which will put it in a disadvantage. Clarty is lacking here still. The pharma stocks were the gainers
Sensex closed up marginally though. Amob the big gainers this week we had Jet +13%, Dr Reddys + 7%, Cipla 6%. Gail +9%. Glaxo +12%, HDFC +4%, HLL 4%, ITC +5%, HPCL +8%, Hindalco +13%, Nalco +18%, ONGC +4%, PNB +7%, Tisco +5 %. The losers were BHEL - 6% Infosys -5%, Satyam -7%,
It was a great week for our research. One company which is rarely followed, Gillette hit upper circuits and thats a big move. The company has done well under the guidance of P&G leveraging its distribution network. Valuations are too rich... but they have always been that way. The opportunity is so big that this one could go anywhere. Well its zooming for now.
Garnet Construction was another where we had a research note.. The company is into construction of Banglows on the Mumbai Pune Highway. Its a discovery from wow-india. There needs to be more confidence on the management. However the business model is what we liked. Do read the research here.
We had a research note on Sayaji Hotels as well. This is a bit risky given that its expansions are still happening and the restaurants are still in the process of opening up.
We had a research note on Garware offshore.. and though the business for now is quite bouyant, we are not impressed by the core competency or sustainability of profits in this business.
Technically speaking: Sensex has had a mild pullback, however it has closed above an important support of 20000. 19800 is another support and negatives could be expected if that goes. However the bias is positives and one could try long trading positions near the supports. However, a word of caution is that Sensex has made an engulfing bear pattern on Thursday and thats to be kept in th eback of mind.
Fundamentally Speaking: The Fed cut is out of the way and we mentioned in our note last week is that it would be best to wait till this is digested. We believe that the markets will remain a stock pickers market. Look for value i the weekness. Normally there is a Santa Claus rally in stock markets as fund managers prop up some stocks to get some better bonuses. This time too that may be on cards globally and that could help Indian markets a lot. We believe that the tone is set for interest rates to subside and that
Bulls feeling fatigued?
After pushing the Sensex and the Nifty to new all-time highs, the bulls appear to be running out of gas, and are looking for some stability in global markets as also in FII inflows. However, they may not be all that lucky going by the current anxiety and uncertainty surrounding the US economy and world credit markets. Asian markets were down yet again on Friday. The MSCI Asia Pacific Index declined 4.2% this week, its worst weekly loss since the five days to Aug. 17. European shares were mixed with amid growing doubts that a plan announced by leading central banks to ease the credit crunch will be effective. US stock futures were pointing to a lower start ahead of the release of the consumer price inflation figures. Citigroup's announcement that it will move about US $49bn of assets at an investment vehicle onto its balance sheet also weighed on the sentiment. Credit rating agency Moody's cut Citi's debt rating. As far as local factors are concerned, the FIIs were net sellers of Rs6.47bn in the cash segment in Friday's trading on a provisional basis. This could cloud the outlook a bit when trading resumes on Monday. Index heavyweights may remain under pressure while the broader market will continue to be active. Overall, the trend will continue to be sideways with all eyes on the pattern in global markets. Much of the action in the market will now take place only in January when the third quarter results will start to pour in. We will also have another Fed meeting and the RBI's policy meeting next month. Plus, of course there will be a lot of talk and conjecture over the budget as well.
Manaksia IPO Analysis
Manaksia manufactures value-added metal products and metal packaging products. The company, promoted by Basant Kumar Agrawal and other family members in 1984 as Hindusthan Seals to manufacture metal closures, later diversified into metal products and mosquito coils. It has 18 manufacturing facilities: 15 in India and three abroad (two in Nigeria and one in Ghana).
The business of the Manaksia can be categorised into metal products, packaging products, mosquito coils, and engineering and other goods. The metal products include aluminium alloy ingots, rolled sheets/coils, galvanised steel sheets/coils, color coated metal sheets and sponge iron, while packaging products comprise roll-on pilfer proof (ROPP) caps, crown closures, plastic caps and metal containers. Manaksia also undertakes contract manufacturing of mosquito coils for reputable brands.
Metal products comprised 72.5% of the product mix, packaging products 14.4% and mosquito coils 8.6%. The balance (4.5%) was engineering and other goods. Metal products contribute the highest margin. The total capacity for aluminium products is 55,900 tonnes, value-added steel products 58,000 tonnes, sponge iron 60,000 tonnes, and MS ingots 53,760 tonnes. The aggregate capacity to produce mosquito coils is 3,000 million coils at the five units in India. Capacity utilization of 66% was achieved for aluminium products, 62.9% for value-added steel products, 45.4% for sponge iron, and 32% for MS ingots in the year ending March 2007 (FY 2007).
With an outlay of Rs 115.50 crore, Manaksia proposed to de-bottleneck aluminium rolling mill, and invest in certain equipment for speciality alloy plant and additional machinery for the steel cold rolling plant at its Haldia, West Bengal, unit. The company also intends to repay Rs 60 crore of the Rs 285 –crore debt used largely to finance net current assets. For funding these plans and general corporate purposes, it has lined up a follow-on public offer (FPO) of Rs 217 crore to Rs 248 crore, comprising fresh issue of 155 lakh shares in the price band of Rs 140 to Rs 160 per share.
Strengths
- Has undertaken various new projects, at different stages of completion, in FY 2007. Benefits of these projects will accrue in the coming years. These projects include a 12,000-tonne each aluminium colour-coating lines in Kutch in Gujarat and Nigeria, respectively (commercial production started in May 2006 and November 2006, respectively). Other projects consist of lead and copper alloy ingot plant in Nigeria (commercial production started in November 2006); 50,000-tonne cold-rolled Coils plan at Haldia (scheduled date of commercial production is December 20’07), and 24,000-tonne steel galvanising plant in Nigeria (scheduled date of commercial production is December 2007).
- Vertically integrated across a number of products, resulting in reduction in manufacturing cost. For aluminium rolled products, for instance, backward integrated was undertaken by setting up an increasing the aluminium products capacity at Haldia in FY 2005 to overcome dependence on Pennar Aluminium’s production facility, which was being used to manufacture aluminium. For the sponge-iron capacity, MS ingot facility was set up at Haldia to consume a significant portion of the sponge-iron production. Is setting up a steel cold-rolling plant at Haldia to meet the raw materials requirement for galvanising operation at Bankura near Durgapur and Nigeria.
- Its metal-management skills and innovations in manufacturing and product enhancement have enabled it to manufacture advanced metal packaging products and retain and add customers like Hindusthan Coca Cola Beverages (Coke), Reckitt Benckiser, Dabur India, Jyothy Laboratories, Eveready Industries and McDowell Group and other major beer and liquor manufacturers. The aluminium division has attracted reputed alloy ingot users like TVS Motor, Orient Fans and Toyota Tsusho Corporation as customers.
Weaknesses
- Does not have long-term contracts with customers of the metal and packaging divisions. Typically services purchase orders without any commitment to future work orders. Derives a significant portion of the revenue in the packaging and mosquito-coil segments from a few clients. Supplies about 60% of its crown and cap production to Hindusthan Coca-Cola Beverages. Loss of any customer will adversely impact business. For instance, one of the customers for mosquito coils (Jyothi Laboratories) intends to start in-house production. This may impact the financial performance, though not significantly.
- Faces substantial competition from producers of cheaper alternative packaging products. The demand for metal packaging products has also been impacted due to increasing preference for plastic packaging products and containers. The market share for plastic beverage containers has grown substantially over the past several years. The metal packaging industry has also witnessed intense price competition since the past few years.
Valuation
Over the four years ended March 2007, revenue grew at CAGR of 15.3% and net profit 36%. Enjoys decent operating profit margin (OPM). The top line was Rs 453.28 crore, OPM 19.5% and net profit Rs 50.82 crore in the five months ended August 2007. Though OPM has slipped in comparison with FY 2007, it is expected to improve as exports benefits from the Nigerian operations will be taken into account at the end of the current fiscal.
There is policy in place to hedge for metals against orders from customers to insulate from significant risk due to fluctuation in metal prices. Further, the aluminium alloy business uses about 60% raw material requirement as scrap, which is not much related with price movement at the London Metal Exchange and trades at discount to LME prices depending on the demand-supply matrix. The cost of raw material consumed is just about 53.1% of the sale of manufactured products.
On annualised EPS of Rs 17.5 in the five months ended August 2007 on post-issue equity capital of Rs 13.91 crore, the P/E works out to 8.0 – 9.1 at the price band of Rs 140–Rs 160. There are no other listed comparables.
The shares are listed on the Calcutta Stock Exchange (CSE). However, there has been no trading since the last three years.
Precision Pipes and Profiles Company
Precision Pipes and Profiles Company (PPAP) is engaged in the business of manufacturing automobile sealing systems and exterior products. PPAP’s product range includes weather strips, trim door opening, windshield molding, roof molding, quarter window seal, A-pillar garnish, B-pillar garnish, skirt air damper, body side molding, among others. Additionally, it manufactures PVC based customised profiles for white goods and other industries. PPAP has five manufacturing facilities, which are located in New Delhi and Noida, Uttar Pradesh.
PPAP is an OEM supplier to the automobile industry and its client list includes Maruti Udyog, Honda SIEL, General Motors and Toyota Kirloskar. In the white goods industry, PPAP supplies customised profiles to Godrej, Voltas, Videocon and Carrier Refrigerators. PPAP derives around 90% of turnover from automobile customers, nearly 5% from white goods products and the remaining from other segments including electrical and construction.
The company has consistently been receiving various awards from its clients for the quality products and services provided to its clients. All its plants are TS 16949, ISO 14001 and OHSAS 18001 certified. PPAP has obtained ISO 14001:2004 certificate from BSI Management System, London for its unit 54-56, Okhla Industrial Estate, Delhi.
The company has chalked out capacity expansion plan at a project cost of Rs 106 crore. At present, PPAP has five manufacturing facilities in the National Capital Region (NCR) region of Delhi, with an aggregate capacity of 4.75 million kg. It has proposed a capital expenditure of Rs 95.80 crore to increase its capacity. The company plans to increase its capacity from 4.75 million kg currently to 7 million kg by March 2008, to 9.15 million kg by March 2009 and to 11.26 million kg by March 2010. The balance Rs 10.2 crore would be spent on General Corporate expense and Public Issue expense. PPAP plans to fund its expansion initiatives through term loans of Rs 25 crore and internal accruals of Rs 6 crore. The balance amount of Rs 75 crore will be met through this IPO. This expansion will be undertaken to set up a new plant in Surajpur to manufacture automobile profiles, expand the capacity of its existing facility at Noida, upgrade in-house tool manufacturing and designing capability, and set up a new plant at Badarpur dedicated to electrical outlet system products to be manufactured under the agreement with Power and Data Corporation, Australia.
Strengths
PPAP has a technical agreement with Tokai Kogyo Co (TKCL), Japan, which is a manufacturer of specialised profile sand extrusions for automobile industry. This agreement helped PPAP in diversifying into specialised products for the automobile industry.
PPAP has also entered into an Automotive Parts Licensing agreement with Nissen Chemitec Corporation, Japan. Nissen would provide PPAP new product technology in order to manufacture and deliver products in connection with automotive interior parts and related products to Honda SIEL Cars India and its affiliated companies. The company also has entered into an agreement with Power and Data Corporation, Australia for the manufacturing of electrical outlet systems for supply to the authorised distributors of PDC.
Weaknesses
PPAP’s top five customers collectively contributed approximately 83% of sales in FY 2006-07 out of which about 53% is contributed by a single customer (Maruti Suzuki). Thus like other auto ancillaries, PPAP is also vulnerable to these large clients.
Valuation
At a price band of Rs 140– 150, PPAP’s P/E works out to 14.5 – 15.1 times FY 2007 earning and 10.2-10.6 times there-months FY 2008 annualised earning on post-IPO equity. Peer group companies such as Setco Automotive, JBM Auto, ANG Auto and Lumax Automotive are trading at TTM P/E of 13.1, 6.4, 9.4 and 18.5, respectively.
Sensex, Nifty strike record high
The market surged in the week ended Friday 14 December 2007 boosted by steady buying for index pivotals. Both the niche indices – BSE Sensex and S&P CNX Nifty struck lifetime highs during the week. Small and mid-cap shares surged on momentum buying. Strong Index of Industrial Production (IIP) and a 25 basis points rate cut by US Federal Reserve in US boosted the sentiment.
Global markets though were subdued during the week on disappointment that the US Federal Reserve cut interest rates a 25 basis point, not the more aggressive 50 basis point that some had hoped for.
The 30-share BSE Sensex rose 64.83 points or 0.32% to 20,030.83 in the week ended 14 December 2007. The S&P CNX Nifty gained 73.40 points or 1.22% to 6047.70 in the week.
The BSE Small-Cap index surged 853.23 points or 7.52% to 12,195.50 in the week. The BSE Mid-Cap index rose 449.98 points or 4.99% to 9,471.94 in the week. Both these indices outperformed the Sensex.
On 10 December 2007, the market edged lower as the political concerns resurfaced after communist allies warned the government against going ahead with a civilian US nuclear deal. The 30-share BSE Sensex shed 35.32 points or 0.18% to 19,930.68. The broader S&P CNX Nifty lost 13.7 points or 0.23% at 5,960.60.
On 11 December 2007, the market surged on renewed buying in blue chips in anticipation of the United States Fed rate cut. The 30-share BSE Sensex jumped 360.21 points or 1.81% to 20,290.89. The broader S&P CNX Nifty jumped 136.65 points or 2.29% at 6,097.25.
On 12 December 2007, the market surged on steady buying for index pivotals. The 30-share BSE Sensex rose 84.98 points or 0.42% to 20,375.87, a record closing high. The broader S&P CNX Nifty closed at an all time high of 6175.65 on that day.
On 13 December 2007, the market tumbled in the late trade following a sudden sell-off in blue-chip stocks, in sync with other markets across the globe. The 30-share BSE Sensex slumped 271.48 points or 1.33% to 20,104.39. It struck an all time high of 20,498.11 in early trade. The S&P CNX Nifty declined 101.2 points to 6,058.10. It also hit a record high of 6,185.40 in early trade.
On 14 December 2007, the market ended slightly lower in what was a highly volatile trading session, seeing series of gyrations in either direction. The 30-share BSE Sensex declined 73.56 points or 0.37% to 20,030.83. The S&P CNX Nifty declined 10.4 points or 0.17% to 6,047.70.
India’s largest private sector firm by market capitalisation and oil refiner Reliance Industries gained 1.67% to Rs 2889.05. As per reports, Reliance Industries (RIL) has struck a deal to explore uranium in Australia, as soaring demand and prices turn the heavy radioactive metal into a lucrative commodity. RIL, through its subsidiary RIL (Australia), has signed an agreement with Uranium Exploration Australia (UXA) to buy 49% in eight exploration blocks owned by the company in South Australia and Northern Territory, reports suggest.
Anil Dhirubhai Ambani Group (ADAG) led Reliance Energy (REL) fell 1.17% to Rs 1909.45 in the week. As per reports, ADAG will invest Rs 8,000 crore in REL that would help the company to double its net worth and increase its borrowing limit. The infusion is proposed through a preferential offer of shares to Reliance-Anil Dhirubhai Ambani Group. The preferential offer will be made at Rs 1,812 per share. After the equity infusion, the promoter’s stake will increase to 43-45% from the current 35.89%.
India’s largest listed cellular service provider by market share Bharti Airtel fell 0.74% to Rs 952.55 in the week after the telecom minister rejected its Rs 2,650 crore offer for 4.4 megahertz of additional spectrum.
Maruti Suzuki India rose 0.01% to Rs 1042.35 in the week. The company's domestic sales rose 24% to 65,216 units in November 2007 over November 2006. This is its highest ever monthly domestic sales.
ONGC rose 4.09% to Rs 1238.80 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.
India's top tractor maker by sales Mahindra & Mahindra rose 1.37% to Rs 790.70 in the week. As per reports Mahindra & Mahindra’s (M&M’s) all-Indian utility vehicle, Scorpio, will enter the quality-conscious US market, which is also the largest in the world with 15 million vehicles in annual sales. The company already has firm orders for 45,000 units of Scorpio for the first year, which is more than the 40,000 it sold in India in the last financial year. More importantly, 285 US dealers have signed up to sell the vehicle and are investing $178 million in setting up sales and service outlets.
Diversified firm Videocon Industries spurted 17.06% to Rs 648.85. The scrip rallied on reports that the company is spinning off its energy business. According to reports, Videocon Industries plans to spin off its energy business, including coal fields in Indonesia and oil and gas blocks in Brazil, into a separate company called Videocon Natural Resources, and retain a substantial stake in the new firm.
Power producer and distributor Tata Power declined 1.72% to Rs 1300.95 in the week. The company is reportedly eyeing a bid for Singapore electricity companies Tuas Power, PowerSeraya and Senoko. The report suggests that Singapore's state investor Temasek Holdings is selling its interests in the three firms and Tata Power was evaluating the opportunity.
India’s second largest real estate firm by market capitalisation Unitech rose 11.52% to Rs 478.35 in the week. As per reports, Unitech has major plans, which look beyond real estate. After announcing its plans of entering the telecom business, Unitech now wants to concentrate on positioning itself as a full fledged infrastructure development company with interests in power, roads, airports and also in other areas wherever it sees an opportunity. Besides, it also plans to enter the international market.
India’s third largest real estate firm by market capitalisation Indiabulls Real Estate rose 7.69% to Rs 740.40 in the week. The company said on 10 December 2007, its wholly owned subsidiary, Indiabulls Wholesale Services (IWSL), is proposing to make an open offer for Piramyd Retail, a retail company.
The Index of Industrial Production (IIP) jumped 11.8% in October 2007 from 4.5% in October 2006. IIP stood at 9.7% in April-October 2007 compared with 10.1% in April-October 2006. Industrial output data for September 2007 was revised upwards to 6.8% from 6.4%.
Indian inflation jumped to its highest in 3 months as food and energy prices rose. The central bank is likely to keep its tight monetary stance with a possible hike in fuel prices to come. Annual inflation, based on the wholesale price index (WPI), climbed up 3.75% in the week ended 1 December 2007 from 3.01% in the week ended 24 November 2007.
Market to see volatility
The market may turn volatile in the coming week as the FII selling may continue in the near term as they may resort to year-end profit taking. FIIs follow calendar year as their accounting year. FIIs had been the key drivers of the recent rally. They had pumped Rs 66,079.70 crore in the Indian equity market for the calendar year 2007 till on 13 December. So far, till 13 December 2007, FIIs have been net buyers to the tune of Rs 4573.50 crore.
The 30-share BSE Sensex rose 64.83 points or 0.32% to 20,030.83 in the week ended 14 December 2007. The S&P CNX Nifty gained 73.40 points or 1.22% to 6047.70 in the week.
However small and mid-cap stocks may continue their rally on momentum buying, as indicated by strong market breadth in the past few days. The BSE Small-Cap index surged 853.23 points or 7.52% to 12,195.50 in the week. The BSE Mid-Cap index rose 449.98 points or 4.99% to 9,471.94 in the week. Both these indices outperformed the Sensex.
Reemergence of political concern arising from the Indo-US nuclear deal may impact the market. Prime Minister Manmohan Singh brushed aside on Tuesday, 11 December 2007, a new threat from his communist allies to force early elections over a controversial nuclear deal with the United States.
Off late, global markets have come under selling pressure on concerns that credit market crisis may intensify further. Any majot sell-off there may cast its shadow here as well.
The Index of Industrial Production (IIP) jumped 11.8% in October 2007 from 4.5% in October 2006. IIP stood at 9.7% in April-October 2007 compared with 10.1% in April-October 2006. Industrial output data for September 2007 was revised upwards to 6.8% from 6.4%. The government released the IIP data early afternoon today, 12 December 2007.
Meanwhile, the Government of India has reportedly allowed the Postal Life Insurance Fund (POLIF) and Rural Postal Life Insurance Fund (RPOLIF) to enter the stock markets through investments in public sector mutual funds. The Union Cabinet on Thursday, 13 December 2007 appointed UTI MF and SBI MF as managers for the over Rs 10,000-crore corpus of these two funds.
20,000 level still holds good for Sensex
The market ended slightly lower in what was a highly volatile trading session, seeing series of gyrations in either direction. Global cues were negative. The BSE Sensex cracked below the physcological 20,000 level at one point of in mid-afternoon trade, but managed to crawl back on buying support at lower levels.
Most of the European markets which opened after Indian market were subdued after strong opening while Asian markets which opened before Indian market also edged lower. US markets settled on a mixed note yesterday, 13 December 2007.
Despite the fall, there was plenty of action outside the index stocks, visible from the strong market breadth on BSE. BSE Mid-Cap and BSE Small-Cap indices struck fresh lifetime highs in afternoon trade.
Shares from FMCG, consumer durables, and Healthcare stocks rose while those of capital goods, IT, power and banking stocks declined. Annual inflation, based on the wholesale price index (WPI), climbed up 3.75% in the week ended 1 December 2007 from 3.01% in the week ended 24 November 2007.
The 30-share BSE Sensex declined 73.56 points or 0.37% to 20,030.83. It hit a high of 20,171.57 and a low of 19,936.49 during the day.
The S&P CNX Nifty declined 10.4 points or 0.17% to 6,047.70.
BSE clocked a turnover of Rs 9,122 crore in cash market today compared to yesterday’s 10,212 crore.
Nifty December 2007 futures settled at 6074.25, a premium of 26.55 points as compared to the spot closing of 6047.70.
The NSE futures & options (F&O) segment turnover declined to Rs 61,326.39 crore as compared to Rs 70,156.51 crore on Thursday, 13 December 2007.
Market breadth was strong on BSE. On BSE, 2,048 stocks advanced, 827 stocks declined and 27 stocks remained unchanged. 15 out of 30 stocks from the Sensex pack advanced.
BSE Mid-Cap index rose 1.02% to 9,471.94. It hit an all time high of 9,518.86. BSE Small-Cap index rose 1.57% to 12,195.50. It struck all time high of 12,262.12. Both these indices outperformed Sensex.
Sectoral indices displayed mixed trend. BSE PSU index (down 0.04% to 10,079.08), BSE Metal index (down 0.02% to 19,763),BSE Oil & Gas index (up 0.88% to 12,980.95), BSE FMCG index (up 1.44% to 2,263.93), BSE Consumer Durables index (up 2.51% to 6,204.25) and BSE Health Care index (up 2.52% to 4,308.27) outperformed Sensex.
BSE Auto index (down 0.38% to 5,743.80), BSE IT index (down 0.57% to 4,259.76), BSE Power index (down 0.76% to 4,435.53), BSE Capital Goods index (down 0.99% to 19,862.51) ,BSE Bankex (down 1.39% to 11,335.47) underperformed Sensex.
Banking stocks showed mixed trend. ICICI Bank (down 2.87% to Rs 1,206.85), HDFC Bank (down 1.65% to Rs 1,728.60). However State Bank of India rose 0.68% to Rs 2,410.55.
Power stocks paused after the recent rally. Reliance Energy (down 0.11% to Rs 1,909.45), Power Grid Corporation (down 1.09% to Rs 145.65), Neyveli Lignite (down 1.5% to Rs 248.85) and Tata Power Company (down 0.49% to Rs 1,301) edged lower.
IT stocks declined weighed by firm rupee against the US dollar. Infosys (down 0.72% to Rs 1,646.80), Satyam Computer Services (down 2.36% to Rs 411.10) and Wipro (down 1% to Rs 495.20) edged lower.However Tata Consultancy Services rose 1.43% to Rs 1,044.45.
Capital goods stocks declined. Bharat Heavy Electricals (down 1.16% to Rs 2,561.45), Larsen & Toubro (down 1.44% to Rs 4,174.10) and Bharat Earth Movers (down 2.75% to Rs 1,672.15) edged higher.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries rose 1.99% to Rs 2,889.05. Oil refining major is reportedly exploring ways to sell its petroleum products directly in the US and Europe. At present, the company sells its petroleum products through traders. Mulls setting up retail outlets in US.
Healthcare stocks rose. Fortis Healthcare (up 20% to Rs 104.30), Wockhardt (up 5.37% to Rs 429.65), Cadila Healthcare (up 5.01% to Rs 335.10), Cipla (up 2.65% to Rs 209.15), Dr. Reddy’s Laboratories (up 1.03% to Rs 717.90), Ranbaxy Laboratories (up 2.69% to Rs 422.20) edged higher.
FMCG majors rose. Marico Industries (up 2.66% to Rs 71.40),ITC (up 1.88% to Rs 200.60) and Hindustan Unilever (up 2.22% to 216.70) edged lower.
Consumer durable stocks rose. Videocon industries (up 6.75% to Rs 648.85), Blue Star (up 0.66% to Rs 488.25) and Gitanjali Gems (up 4.59% to Rs 416.75) edged higher.
Hindalco Industries rose 2.35% to Rs 213.80.
Tata Motors (down 2.03% to Rs 744.45),HDFC (down 0.26% to 3,058.80) and Bharti Airtel (down 3.57% to Rs 952.55) edged lower.
Sun TV Network clocked the highest turnover of Rs 482.36 crore on BSE. Kolte Patil Developers (Rs 246.7 crore), Jaiprakash Hydro Power (Rs 207.97 crore),IFCI (Rs 207.08 crore) and Lanco Infratech (Rs 179.01 crore) were the other major turnover grossers on BSE in that order.
Debutant Kaushalya Infrastructure Development Corporation settled with 37.08% premium at Rs 82.25 over issue price of Rs 60 per share on huge volumes of 3.21 crore shares on BSE.
Most of the European markets were weak. France’s CAC 40 (down 0.26% to 5,575.79) ,UK’s FTSE 100 (down 0.04% to 6,361.80) edged lower. Germany’s DAX (up 0.06% to 7,929) edged higher.
Asian markets were trading lower today, 14 December 2007. Hong Kong's Hang Seng (down 0.65% at 27,563.64), Taiwan's Taiwan Weighted (down 0.85% at 8,118.82), Singapore's Straits Times (down 0.37% at 3,466.38), South Korea's Seoul Composite (down 1.09% at 1,895.05), Japan’s Nikkei (down 0.14% to 15,514.51) edged lower. However Shanghai Composite rose 1.01% to 5,007.91.
US markets finished on a mixed note yesterday, 14 December 2007 as worries about a weakening economy and credit crunch continued. The Dow Jones Industrial Average gained 44.06 points, or 0.33%, to 13,517.96. The Standard & Poor's 500 index rose marginally by 1.82 points, or 0.12%, to 1,488.41, while the Nasdaq Composite index slipped 2.65 points, or 0.10%, to 2,668.49.
Meanwhile, the Government of India has reportedly allowed the Postal Life Insurance Fund (POLIF) and Rural Postal Life Insurance Fund (RPOLIF) to enter the stock markets through investments in public sector mutual funds. The Union Cabinet on Thursday, 13 December 2007 appointed UTI MF and SBI MF as managers for the over Rs 10,000-crore corpus of these two funds.
Market may move sideways
The market is currently driven by the movement in international market. The mood of the market is likely to remain subdued after witnessing the fall in yesterday's trades and on concerns that the move by the central banks to bailout the seized credit markets is going to help. However, fall in the oil prices and FIIs remaining net buyers in equities may help the sentiment to remain positive. Among the indices, the Nifty could test higher levels around 6200 and 6400 while on the downside the index has a strong support at 5995-5895 levels. The Sensex has a likely support at 19833 and may face resistance at 21000.
US indices staged recovery in a late session on Thursday, driven by worries about the economy after a report showed a big jump in wholesale prices. While the Dow Jones gained by 44 points at 13518, the Nasdaq slipped three points to close at 2668.
The Indian ADRs had a mixed outing on the US bourses. HDFC tumbled nearly 3% and Infosys slipped 2.43% while Infosys, Satyam, Tata Motors, ICICI Bank and HDFC Bank lost over 1% each. However, Wipro, Dr Reddy's and VSNL gained over1% each.
Crude oil prices in the global market slipped marginally, with the Nymex light crude oil for January series slipping by $2.14 at $92.25 a barrel. In the commodity space, the Comex gold for February delivery tumbled $14.80 to settle at $804 a troy ounce.
Market may come under pressure
The markets opened on a positive note, but yielded to the weak Asian cues. Sensing weakness, the bears pressed sales and caused technical stop losses to be triggered en masse.
The market breadth was positive as combined exchange figures were 2454:1631. The capitalisation of breadth was also positive as the commensurate figures were Rs 16898 crore:Rs 14430 crore.
The indices have closed at the lower end of the intraday range and that too on steady volumes, on higher end of the 10 day average.
The positive market breadth is a minor plus as the Nifty closed below the 6105 pivot.
The coming session is likely to witness a range of 6150 on advances and 5965 on declines. That indicates a falling daily range and some profit taking bias on declines. Watch the 6095 bearish pivot below which the Nifty may continue to remain under pressure in the absolute short term.
The number of trades have risen accompanied with a decline in the average ticket size, indicating a lack of institutional support.
The outlook for the markets on Friday is that of continued caution as the weekend factor coupled with overseas cues will dominate the near term sentiment.
Vijay L. Bhambwani
Via Business Standard
Trading Calls
Buy Bhushan Steel with a stop loss of Rs 1300 for target of Rs 2010.
Buy Ispat Industries with a stop loss of Rs 66 for target of Rs 106.
Buy Sical Logistics with a stop loss of Rs 229 for short-term targets of Rs 270-290.
Market may remain choppy
The market is expected to stay sideways in absence of major positive trigger in near term. However high volatility may be seen as the market consolidates at higher levels. Overseas cues will also to some extent dictate the near term sentiment. However small and mid-cap stocks may continue their rally on momentum buying, as indicated by strong market breadth in the past few days.
The 30-share BSE Sensex slumped 271.48 points or 1.33% to 20,104.39, yesterday 13 December 2007 after striking an all time high of 20,498.11 in early trade. The S&P CNX Nifty declined 101.2 points or 1.64% to 6,058.10. It had also hit a record high of 6,185.40 in early trade.
Asian markets were trading lower today, 14 December 2007. Hong Kong's Hang Seng (down 0.19% at 27,692.63), Taiwan's Taiwan Weighted (down 0.80% at 8,122.54), Singapore's Straits Times (down 0.30% at 3,468.85), South Korea's Seoul Composite (down 0.53% at 1,905.82) declined. However, Japan's Nikkei gained 0.62% at 15,632.72.
US markets finished on a mixed note yesterday, 14 December 2007 as worries about a weakening economy and credit crunch continued. The Dow Jones Industrial Average gained 44.06 points, or 0.33%, to 13,517.96. The Standard & Poor's 500 index rose marginally by 1.82 points, or 0.12%, to 1,488.41, while the Nasdaq Composite index slipped 2.65 points, or 0.10%, to 2,668.49.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 401.76 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 226.65 crore on Thursday, 13 December 2007.
FIIs were net sellers of Rs 1,127 crore in the futures & options (F&O) market on Thursday, 13 December 2007. They were net sellers of Rs 1,170 crore in index futures, and Rs 291 crore in stock futures. However they bought Rs 334 crore worth index options.
Oil rose marginally in thin trade on Friday, 14 December 2007. U.S. light sweet crude futures for January delivery rose 36 cents to $92.61 a barrel. London Brent crude rose 41 cents to $92.53.
Pre Market Watch
The Market is likely to have positive opening, as the US market closed mixed. The market yesterday closed lower as it tumbled towards the end of the trading session on the back of profit booking by the investors across the counters. Though the market opened on a strong note to touch its all time high but all of a sudden lost the grip to pare all its initial gains on the back of heavy selling pressure. On Thursday, the BSE Sensex closed lower by 271.48 points at 20,104.39 and NSE Nifty fell by 101.2 points to close at 6,058.10. We expect the market to remain range bound during the trading session.
On Thursday, the US market closed mixed. The DJIA closed higher by 44.06 points at 13,517.96 along with S&P 500 index grew marginally by 1.82 points to close at 1,488.41 while NASDAQ slipped by 2.65 points to close at 2,668.49.
Indian ADRs ended in mixed territory. In technology sector, Infosys dropped 2.43% along with Satyam (0.26%) while Wipro and Patni Computers dropped by (0.73%) and (0.29%) respectively. In banking sector, HDFC bank and ICICI bank slipped by (2.98%) and (1.59%) respectively. In telecommunication sector, VSNL grew by 1.68% while MTNL decreased by (1.85%). Sterlite industries fell (2.80%).
The major stock markets in Asia are trading weak. Hang Seng is trading lower by 51.82 points at 27,692.63. Taiwan weighted is trading down by 65.41 points at 8,122.54 Singapore Strait Times is down by 10.46 points to trade at 3,468.85. While Japan''s Nikkei is trading up by 96.20 points at 15,632.72.
Today, Nifty has support at 5,946 and resistance at 6,143 and BSE Sensex has support at 19,829 and resistance at 20,319.
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 6000 with resistance at 6125 .
Sell: ACC below 1055 target of 1015 s/l of 1072
Buy : IDBI above 174.45 target 184 s/l of 170
Buy : IVRPRIME in F&O above 497 target 515 s/l of 490
Buy : AXIS Bank above 977 target 1005 s/l of 965
Out House :
Markets at a support of 19786 & 20012 levels with resistance at 20292 & 20351 levels .
Buy : RIL & RNRL
Buy : Praj & Lupin
Buy : JpAsso & Jphydro bullet
Buy : EssarOil , ISPAT & Nagarfert
Buy : Centextile
Buy : IBUllsreal
Buy : Neyvelli & Geshipping bullet
Buy : PNB , Kotak & SBIN at dips
Buy : IOlBroad & Primesecurities
Dark Horse : JpAsso , IBullReal , PNB , GeShipping , RIL & SBIN
TGIF : Thank God its Friday : markets at all time high keep strict stop loss for your trades .
Bullet for the day : JpHydro , GEship & ISPAT
US Market manages a comeback in final hour
Dow and S&P 500 manage to eke out gains as Honeywell provides bullish guidance
US Market remained under pressure for the most part of the day today, Thursday, 13 December, 2007 but at the end ended mixed with Dow and S&P 500 managing to eke out some gains. Mixed economic data ruled the market momentum for most part of the day. . Six out of ten sectors ended higher today led by utilities and industrials. Financials continued to be under pressure for the fourth consecutive day. A good guidance from Honeywell was the main reason for this turnaround. An analyst upgrade on Microsoft also contributed to the same.
Market was down by almost 85 points in the morning hours. Indices lingered in the red for almost entire day. But one hour before closing bell was to ring, indices made a turnaround. The Dow Jones industrial Average ended the day with a gain of 44 points at 13,517.96. The Nasdaq Composite Index, finished lower by 2.65 points at 2,668.49. S&P 500 finished higher by 1.82 points at 1,488.41.
Seventeen out of thirty Dow stocks ended in green today. Honeywell shares climbed almost 5% today after the manufacturer said it expects to meet or beat its earnings target for next year. Financial stocks continued to be the laggards for the day, namely Citigroup, American Express and JP Morgan.
November Producer Price Index (PPI) surged 3.2% caused by a 14% spike in energy prices. The core rate was also up more than expected at 0.4%. This is the largest jump in PPI since 1973. The reading was well above the expected 1.5% gain. The data reflected the inflation issues that the Fed noted in their last policy statement.
Among other economic data, that hit the wires today, new claims for unemployment for the week ended 8 December fell to 333,000 from 340,000 the prior week. The number remains below recessionary levels.
November retail sales were strong across the board. Total sales were up 1.2% and excluding autos the gain was 1.8%.
Crude eases a bit after yesterday’s whopping gains
Barring VSNL and Dr Reddys Laboratories, all Indian ADRs ended in the red today. HDFC Bank and Infosys Technologies were the main two losers shedding 2.9% and 2.4% respectively.
Crude prices eased partly today after traders speculated that recession in the US is avoidable as Federal Reserve will inject cash in the system. Profit booking was another reason as to why prices eased today after rallying by almost 5% yesterday. Crude-oil futures for light sweet crude for January delivery closed at $92.62/barrel (lower by $1.8/barrel or 1.9%) on the New York Mercantile Exchange. Price earlier slipped by more than $2/barrel during the day.
Volume on the New York Stock Exchange hit 1.4 million and losing stocks outran those advancing 2 to 1. On the Nasdaq, more than 2.1 billion shares traded hands, and declining issues ran ahead of advancers about 3 to 1.
Tomorrow, investors will focus on economic reports to set the tone of trading. The Labor Department's influential Consumer Price Index report is expected to hit the wires at 8:30 ET, and will be followed by Industrial Production and Capacity Utilization reports, all before opening bell rings.
Grey Market - Precision Pipes, Porwal, Manaksia, Aries Agro
eClerx Services 270 to 315 40 to 42
BGR Energy 425 to 480 390 to 400
Transformers & Rectifiers 425 to 465 330 to 350
Brigade Enterprises 351 to 390 40 to 50
Jyothy Lab. 690 180 to 200
Burnpur Cement Ltd. 12 4 to 5
Kaushalya Infra 60 10 to 12
SVPCL 42 - 5 to -7
Aries Agro 120 to 130 30 to 35
Manaksia Ltd. 140 to 160 40 to 45
Porwal Auto Components 68 to 75 15 to 20
Precision Pipes & Profiles 140 to 150 45 to 48
Brigade Enterprises IPO Allotment Status
Brigade Enterprises IPO Allotment Status can be checked here in 2 weeks
Daily Trading Calls
Nifty (6058) Sup 5986 Res 6106
Buy IOC (674)
SL 668 Target 684, 688
Buy AB Nuvo (1795)
SL 1770 Target 1845, 1855
Sell Pantaloon (661)
SL 668 Target 649, 645
Sell Crompton Greaves (411)
SL 416 Target 402, 400
Buy IDBI (174)
SL 170 Target 181, 183
No firm plans for weekend!
Reality is that which, when you stop believing in it, doesn't go away.
After Wednesday's smart gains, the bulls decided to have a reality check and took a breather of sorts. Most global markets were down in red yesterday as nagging worries over the turmoil in world credit markets refuse to go away . Even a concerted effort led by the Federal Reserve to boost global liquidity failed to have any sobering effect on global markets. As a result, the Sensex and the Nifty slipped into the negative zone around noon and failed to recover . At the same time, small-cap and mid-cap shares continued their winning streak, which explains the positive market breadth.
The outlook for today is a cautious undecided start. The key indices will remain choppy, and the broader market will continue to attract buyers. Trends across the global markets will continue to drive sentiment here in India . A recovery in Asia or later in Europe could prop up the mood, but one should not read too much into that. Banking stocks are expected to see positive action in the coming days.
FIIs have been net sellers for the past couple of days. This could have a bearing on the undertone, especially they do not resume their buying spree. Being the last month of the year, historically, FIIs are not expected to be very active. Local Funds have been steadily picking up shares even as their overseas counterparts have turned net sellers.
We expect the market to be rangebound and sideways for the rest of the month. In the near year, the direction will hinge on latest quarterly results, pre-budget speculation, liquidity flows and of course the global markets. Till then, investors should remain on the fringes and do selective buying in quality scrips or in stocks where they have some firm information. Large, aggressive purchases can be postponed for a while. And, be careful of the almost non-stop movement in certain small-cap and mid-cap stocks . Book profit before you are refused an exit.
US stocks closed mixed after a late recovery on Thursday. Trading was choppy amid continuing worries about the state of the US economy. A report showed a big jump in wholesale prices. On the positive side though, a strong reading on retail sales cooled some concerns about consumer spending.
After dropping more than 100 points during the session, the Dow Jones Industrial Average gained 44 points, or 0.3%, to 13,517.96, led by a 5% rally in Honeywell International. The S&P 500 index finished flat at 1,488.41 and the Nasdaq Composite Index fell 3 points, or 0.1%, to 2,668.49.
Market breadth was negative. About three stocks declined for every two that rose on the New York Stock Exchange.
Financial shares remained under pressure on concerns that a coordinated attempt by central banks in North America and Europe to relieve the tension in the credit markets will fail. Bear Stearns, Goldman Sachs and Merrill Lynch led declines in brokerages after Lehman Brothers said some precautions against mortgage losses were ineffective.
JetBlue Airways shares surged over 14% on news that German carrier Deutsche Lufthansa will buy a roughly 19% stake in the discount air carrier for $7.27 per share, confirming earlier rumors. Dow Chemical said it will sell a 50% stake in five of its businesses to a Kuwaiti company for $9.5bn. Shares jumped 6%.
The Producer Price Index (PPI) jumped 3.2% in November, due in large part to a spike in energy prices, the government reported. PPI was well above forecasts and followed a rise of 0.1% in October. So-called "core" PPI, which excludes food and energy prices, also rose more than expected.
A separate report showed a stronger-than-expected jump in November retail sales and in sales excluding autos. Another report showed a bigger drop in weekly jobless claims than economists were expecting. Meanwhile, business inventories rose 0.1% in October, shy of forecasts.
Treasury prices slipped, raising the yield on the 10-year note to 4.2% from 4.09% late on Wednesday. In currency trading, the dollar rose versus the euro and yen. US light crude oil for January delivery fell $2.09 to settle at $92.30 a barrel in New York. COMEX gold for February delivery fell $14.80 to $804 an ounce.
Most Asian stocks fell this morning, led by raw material shares after metals and oil prices dropped on speculation that a US slowdown will slow demand for commodities. BHP Billiton and Rio Tinto led the decline.
The MSCI Asia Pacific Index fell 0.2% to 159.40 as of 9:50 a.m. in Tokyo, extending a two-day, 3.4% drop. Seven of the 10 industry indexes on the benchmark fell.
Japanese exporters rose, paced by Nintendo and Sony after the yen weakened against the dollar, boosting the value of overseas sales. The Nikkei in Tokyo was up 96 points at 15,632.
The Hang Seng in Hong Kong was nearly flat, down only 24 points at 27,720. The Kospi in Seoul fell 10 points to 1906 and the Straits Times in Singapore dropped 14 points to 3465.
European shares tumbled with banks such as HSBC bearing the brunt of the sell-off, amid growing doubts about a Federal Reserve-led move to boost global liquidity will ease the global credit crisis. The pan-European Dow Jones Stoxx 600 index lost 2.5% to 365.61. The UK's FTSE 100 closed down 3% to 6,364.20, while the German DAX 30 slid 1.8% to 7,928.31 and the French CAC-40 dived 2.7% to 5,590.91.
Brazilian stocks fell as the government failed to win an extension for a key tax measure. Mexican stocks too ended its session with losses. In Sao Paulo, the benchmark Bovespa index slid 2.9% to close at 62,861. In Mexico, the IPC index of 35 most-traded issues fell 0.8% to 30,088.04. Argentina's Merval stock index fell 1.3% to 2,196.48 and Chile's IPSA was down 2.6% at 3,009.55.
In other emerging markets, the RTS index in Russia was down 1.8% at 2317 and the ISE National 30 index in Turkey slumped 3% to 70,419.
All eyes on global markets
Markets opened with a positive gap hitting the days high of 20,498, thereafter key indices gradually lost ground snapping a three day winning streak. Markets lost ground as weakness in the Asian and the European markets dampened the sentiments of the traders on D-street dragging the benchmark Sensex over 400 points and Nifty index over 100 points from their respective highs. Finally, 30-share Sensex slipped 271 points to close at 20,104 and Nifty closed at 6,058 losing 101 points.
Kolte Patil Developers a real estate developer got listed at Rs230, translating into a premium of 58% or Rs85 against issue price of Rs145 per share on NSE. However, the stock was unable to hold on to its gains as it closed at Rs180, up 24%.
The company develops and constructs properties mainly in Pune and Bangalore. Since its incorporation in 1991, it has completed 25 projects, including 22 in Pune and three in Bangalore, covering 4.01mn sqft of saleable area. The scrip touched an intra-day high of Rs230 and a low of Rs176 and recorded volumes of over 1,00,00,000 shares on NSE.
Bharti Airtel slipped over 6.5% to Rs988. The company had its debt rating raised to investment grade by Standard & Poor's which cited stronger-than- anticipated earnings. The scrip touched an intra-day high of Rs1064 and a low of Rs983 and recorded volumes of over 39,00,000 shares on NSE.
Hindustan Zinc gained 1.1% to Rs822 after the company announced that it kept zinc prices unchanged and had cut lead prices to Rs1,15,900 per ton. The scrip touched an intra-day high of Rs847 and a low of Rs816 and recorded volumes of over 2,00,000 shares on NSE.
BHEL lost 2.1% to Rs2591. The company announced that it had won Rs1.2bn contract. The scrip touched an intra-day high of Rs2688 and a low of Rs2585 and recorded volumes of over 10,00,000 shares on NSE.
L&T was down 1.2% to Rs4239. Reports stated that the company is floating a JV with Technip a French company to expand its play in the offshore exploration sector and secure global orders. The scrip touched an intra-day high of Rs4334 and a low of Rs4221 and recorded volumes of over 4,00,000 shares on NSE.
Reliance Energy also fell 1% to Rs1912. The company yesterday bagged an EPC contract worth Rs37.25bn from Damodar Valley Corporation to set up 1,200MW coal based power station in West Bengal. The scrip touched an intra-day high of Rs1960 and a low of Rs1905 and recorded volumes of over 14,00,000 shares on NSE.
Ispat Industries gained over 6% to Rs76 after reports stated that the company would sign pact with MP Government. The scrip touched an intra-day high of Rs78 and a low of Rs71 and recorded volumes of over 9,00,00,000 shares on NSE.
Sterlite Industries was down 2.7% to Rs1074. Reports stated that the company’s power arm secured nod for 2400 MW. The scrip touched an intra-day high of Rs1115 and a low of Rs1061 and recorded volumes of over 25,00,000 shares on NSE.
JSW Steel surged by over 7.5% to Rs1336 after media reports stated that the company would launch Energy unit IPO before FY08. The scrip touched an intra-day high of Rs1389 and a low of Rs1252 and recorded volumes of over 16,00,000 shares on NSE.
What the FIIs are doing
FIIs were net sellers of Rs4.02bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs2.27bn. In the F&O segment, foreign funds were net sellers of Rs11.3bn on the same day.
Stocks in News:
Reliance Industries (RIL) is planning to directly market petroleum products in US and Europe. (FE)
Videocon Industries is planning to spin-off its energy business in to a separate company. (ET)
The DoT has cleared Idea, Vodafone Essar and Aircel requests for grant of 2G spectrum where they currently hold licenses; rejects Bharti and Idea's offer for buying additional spectrum. (ET)
AstraZeneca files litigation against seven drug makers, including Sun Pharma and Aurobindo to protect its rights over US$2bn cholesterol pill, Crestor. (DNA)
Lanco Infratech has secured a mandate to supply 390MW of power to Haryana and 600 MW to Madhya Pradesh. (BL)
GMR Infra mulls acquisition of coal mines which will be partly funded by the recent QIB issue. (BL)
SBI has asked prospective partners for its general insurance foray to pay Rs33.5bn as entry premium. (BS)
Tata Tele to invest Rs3bn to rollout mobile services in Assam and North East by April/May 2008. (ET)
Ispat Industries to invest Rs15bn in Madhya Pradesh for setting up a coke oven plant. (DNA)
Oman Oil in talks with Tata Group for jointly setting up industrial salt and soda ash plants in Oman. (FE)
TV18 Group to launch a business magazine in India in partnership with Forbes. (BS)
TVS Motors launches a four-stroke 125cc bike Flame at Rs45,000. (DNA)
Vivimed Labs is close to acquiring a Germany-based cosmetics chemicals manufacturing firm. (FE)
Ford looking to partner M&M all over again including for a possible alliance for passenger vehicles. (ET)
The Government is set to fix onetime spectrum fee for all new players planning to offer 2G mobile services. This will be in addition to Rs16.5bn entry fees. (ET)
The Government has proposed to raise expenditure on education to 19% of the planned outlay during the 11th plan (2007-12) (FE)
The Government has invited exploration bids for 57 oil & gas blocks under the seventh New Exploration Licensing Policy (NELP VII). (ET)
The Government may offer 51% stake in the proposed Delhi-Mumbai Industrial Corridor Development Corporation to financial investors. IDFC, IL&FS, Srei Capital and IFCI in talks to pick up stake. (ET)
S Kumars Nationwide
We recommend a buy in S.Kumars Nationwide at current market price. From the weekly chart of S.Kumars Nationwide it is evident that it has been on steady long-term uptrend since March 2007 low of Rs 59. The stock has multiplied three times since this low. However, from the daily chart, we note that after touching an all-time high of Rs 177 on March 16, the stock began moving sideways. Moreover, we see that the stock has been constantly bouncing from the support around the 2 1-day moving average line. The daily as well as weekly momentum indicators are featuring in the bullish region. The moving average convergence divergence is in the positive region and is signalling bullishness. The immediate support for the stock is pegged at Rs 146 and the subsequent support is at Rs 128. Currently the stock is testing the resistance at Rs 165. Considering the above bullish arguments, we expect the stock to break through the current resistance and move up to Rs 185 in the short-term. Short-term investors can buy the stock with stop-loss at Rs 149.
Via Businessnline
Crude eases partly
Crude prices slip by almost $2 after gaining more than $4 yesterday
Crude prices eased partly today after traders speculated that recession in the US is avoidable as Federal Reserve will inject cash in the system. Profit booking was another reason as to why prices eased today after rallying by almost 5% yesterday.
For the day ending Thursday, 13 December, 2007, crude-oil futures for light sweet crude for January delivery closed at $92.62/barrel (lower by $1.8/barrel or 1.9%) on the New York Mercantile Exchange. Price earlier slipped by more than $2/barrel during the day. Prices reached a high of $99.2 on 21 November. Prices are up 47% from a year ago.
Yesterday, Fed came up with new plans and said it would inject cash into money markets through some term-auction facilities. The Fed, along with the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Canada, will provide cash to the money market to get through in the coming months.
In the currency market today, the dollar rose against the euro, yen and pound, after data showed bullish retail sales and wholesale inflation at a 34-year high in November reduced investors' expectations of further aggressive interest rate cuts by the U.S. Federal Reserve. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.6% at 76.595.
On 11 December, Tuesday, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.
Yesterday, EIA had reported in the weekly inventory report that U.S. crude inventories dropped for a fourth week in the week ending 7 December, down 700,000 barrels. At 304.5 million barrels, U.S. crude inventories were at their lowest since March, 2005, but are still in the upper half of the average range for this time of year. U.S. refineries operated at 88.8% of their operable capacity last week, down from the previous week's 89.4%.
Brent crude oil for January settlement fell $1.84 (2%) to $92.18 on the London-based ICE Futures Europe exchange.
Natural gas gives up earlier gains
Natural gas futures in New York today gave up earlier gains and finally finished lower for the day. EIA reported that U.S. supplies last week declined more than expected. Stockpiles fell 146 billion cubic feet to 3.294 trillion cubic feet in the week ended 7 December as against an expected figure of 130 billion cubic feet.
Against this backdrop, January reformulated gasoline fell 3.88 cents to $2.347 a gallon and January heating oil dropped 2.37 cents at $2.6195 a gallon.
Members of the Organization of Petroleum Exporting Countries left production targets unchanged at the 5 December meeting in Abu Dhabi. The group, which produces 40% of the world's oil, will review output at a 1 February meeting in Vienna.
As per EIA, global oil markets will likely remain tight through 2008 and monthly average oil prices are expected to near $85 per barrel over the next year. World oil consumption in 2008 is projected to rise by 1.4 million barrels.
Precious metals register fall
Gold prices tumble to three weeks low and silver drops more than 4%
Gold and silver prices fell today, Thursday, 13 Decemebr, 2007, as dollar strengthened against its rivals. Gold was back trading below $800/ounce in the morning hours. It was the lowest trading price of gold in three weeks. Gold generally moves in the opposite direction of the U.S. currency.
Comex Gold for February delivery fell $14.8 (1.8%) to close at $804 an ounce on the New York Mercantile Exchange today. Last week, prices rose by more than 1.4%. 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 dropped 60 cents (4%) at $14.225 an ounce. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 11% this year.
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.
In the currency market today, the dollar rose against the euro, yen and pound, after data showed bullish retail sales and wholesale inflation at a 34-year high in November reduced investors' expectations of further aggressive interest rate cuts by the U.S. Federal Reserve. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.6% at 76.595.
Yesterday, the Federal Reserve said it would inject cash into money markets through some term-auction facilities. On Tuesday, 11 December, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.
In the energy market, oil prices slipped by more than $1/barrel.
Gold had climbed 26% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 11% 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. Before 11 December, Federal Reserve had cut the fed funds rate by a quarter-point to 4.50% on 31 October, 2007. Prior to that, Federal Reserve had cut interest rates by half percentage point on 19 September, 2007.
Market may hit 21000 soon
With a rate cut in the US and its prior expectations driving the Sensex beyond 20,000 mark, analysts expect the next thousand point milestone well before the US central bank's next rate review meeting in January.
Sensex has gained close to 450 points in the past two days and today settled above the 20,000 mark for the second consecutive day.
Wednesday's rally came on the back of a 25 basis points rate cut by US Federal Reserve last night, while marketmen said that expectation to this effect had contributed to yesterday's gain.
"The markets are going to rally from here onwards. Gain of 500 or more points is not a big thing now a days as the base of the market has increased. A level of 21,000 for Sensex and 6,500 for Nifty is quite achievable," domestic brokerage firm SMC Global vice-president Rajesh Jain said.
"Consequent to this rate cut by the Federal Reserve, there would be more liquidity in the market. However, it would be marred with volatility," Asika Stock Brokers Research Head Paras Bodhra said.
Markets have absorbed the adverse news on subprime, which was a tremendous global shock, Bodhra added.
"The Fed cut of 25 basis points is not all that bad. The markets were expecting a 50 basis points cut. But the current decision is a neutral one," Jain added.
US markets plunged after the decision that was opposed to the widely anticipated 50 basis point cut.
The Indian equity market is moving in a different orbit as against the way the Asian fraternity is progressing. Markets are showing a high level of decoupling factor, analysts added.
Market Gossip
Maharashtra Seamless up on order buzz
The stock price of Maharashtra Seamless has risen around 24% in the past one month. Market talk is that the DP Jindal Group company has bagged an export order worth Rs 160 crore from the US and Latin America. Dealers tracking the counter expect the announcement to be made over the next couple of days.
When contacted, company officials declined to comment on the issue. The stock closed at Rs 613, down 3% from the previous day. Last month, JP Morgan had initiated coverage on the stock with an overweight rating and a target price of Rs 580.
According to the broking house, margins could be under pressure during the current financial year because of high price of steel billets, which the company buys in the spot market. JP Morgan expects margins to improve in the next financial year as new orders would be booked at higher realisations.
Acquisition talk breathes life into Wockhardt stock
Until some days ago investing in pharma stocks was not considered a wise decision by market mandarins. However, over the past two trading sessions there has been sustained buying in the counter of Wockhardt.
According to market sources, domestic funds and operators are buying Wockhardt on expectations that the company will soon go in for one more acquisition in the US. The company recently acquired US-based Morton Grove Pharmaceuticals, a liquid generic and speciality dermatology company, for around $80 million.
A section of the market, however, feels while the company would be scouting for acquisitions, but it maybe some time before Wockhardt signs a deal. Wockhardt ended 2.5% higher at Rs 408 on BSE on Thursday.
Aditya Birla Nuvo gains from Rel Cap valuation
Aditya Birla Nuvo stock was in demand despite the overall weakness in the market on Thursday. The stock hit a new high of Rs 1,820 before closing at Rs 1,797.50, up 6.4% over the previous close. Dealers tracking the counter say the sudden flurry of activity on Thursday was largely sentiment driven and could have to do with the valuation assigned to Reliance Mutual Fund following Eton Park buying a 5% stake for Rs 501 crore.
Reliance Mutual Fund has been valued at Rs 10,000 crore, which works out to 13% of its total assets under management. If a similar yardstick is applied, the valuation of Birla Sun Life AMC — in which Aditya Birla Nuvo holds 50% — works out to around Rs 4,500 crore.
Indian Hotels, Mahindra and Mahindra
AMCs to see a change in benchmark valuations
Asset Management Companies (AMCs) in India could see a change in their benchmark valuations after the recent deal involving Reliance Capital and Eton Park, a global investment fund. The benefit of such change in valuations is likely to impact listed players like Reliance Capital, HDFC, ICICI Bank and State Bank of India (SBI) who have AMC as subsidiaries. SBI, Punjab National Bank (PNB) and Bank of Baroda (BOB) also stand to gain as they hold 25% each in UTI AMC (likely to be listed soon).
STOCK UPDATE
Indian Hotels Company
Cluster: Apple Green
Recommendation: Buy
Price target: Rs180
Current market price: Rs150
On the right(s) track
Result highlights
- Indian Hotels Company Ltd's (IHCL) Q2FY2008 revenues grew by 15.7% year on year (yoy) to Rs341.4 crore. Room revenues continued to grow robustly and grew at 19% yoy for H1FY2008, as the average room rate (ARR) grew by 17.7% yoy to Rs8,581. The growth in room revenues appears strong considering the fact that a fair proportion of room inventory was under renovation in H1 (off season) and the fact that weak dollar adversely impacted the revenues.
- Stringent cost controls and operating leverage due to higher ARR's improved the operating profit margin (OPM) by 420 basis points yoy to 29%. The net interest charge was up by a hefty 64.4% yoy to Rs25.7 crore as proceeds from foreign currency convertible bond (FCCB) were fully deployed for recent international acquisitions. Incremental debt raised during the quarter also contributed to a rise in interest cost.
- Profit before tax (PBT) increased by 25.7% yoy to Rs77.7 crore, however a higher tax incidence at 31.5% in Q2FY2008 against 25.7% in Q2FY2007 led the net profit rise by 16% to Rs53.2 crore.
- IHCL acquired an 11.01% stake in Orient Express Hotels Ltd during the quarter and has further raised its stake to 11.5%. IHCL seeks a strategic alliance with the later, however Orient Express has rejected IHCL's offer for such a strategic alliance.
- We believe IHCL's strategy of expansion both in domestic and overseas markets and better profitability of its international operations would ensure that IHCL maintain the growth momentum. At the current market price of Rs150, IHCL trades at 20.9x its consolidated earnings per share (EPS) of Rs7.2 (post dilution on account of the rights issues) for FY2009E. We maintain Buy recommendation on the stock with a price target of Rs180.
Mahindra & Mahindra
Cluster: Apple Green
Recommendation: Buy
Price target: Rs900
Current market price: Rs794
New launches to drive growth
Key points
- A diversified play in the auto sector Mahindra & Mahindra (M&M) aims to become a speciality player and continue its domination in the utility vehicle (UV) segment.
- In the current year, the automotive segment has grown by 22% year till date (ytd). The growth was driven by UVs other than Scorpio (such as Bolero and Maxx Maxi Truck) and revenues from exports.
- Farm equipment contributing 35% to sales has under performed in the current year. Year-till-date (y-t-d) volumes were down by 5% as compared with 6% decline witnessed by the auto industry as a whole. The focus of integration of recently acquired Punjab Tractors Ltd (PTL) is recovery of outstanding dues.
- The new UV platform code named Ingenio is slated for launch in August 2008. A new Sports UV is planned to be launched from its Chennai facility. The joint venture (JV) with International Truck for manufacturing medium and heavy commercial vehicles (M&HCV) is expected to start by CY2009.
- The management continues to unlock value in its various subsidiaries and group companies. We have estimated value of Rs40 per share from its subsidiary Mahindra Holiday Resorts which is to be listed in 2008. Any higher value on listing would further add to its holding.
- All new product launches would commence from FY2009 onwards, triggering good growth.
- At the current market price of Rs794, the stock quotes at 11.4x its FY2009E consolidated earnings. We continue to value M&M on the sum-of-the-parts basis and maintain Buy with a price target of Rs900.
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