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Monday, December 24, 2007
Market jumps over 690 pts
Indices chalked up healthy gains on the eve of Christmas Monday as positive vibes from global shores cheered the bulls. Leadership emerged from the information technology pack, and banking and oil gas counters also supported.
"The market had corrected sharply last week and we were waiting for positive global cues to kick-start an upmove. we have caught up with the strong rally in the global markets today," said technical analyst Sumeet Rohra.
"Once 6,012 on the Nifty is crossed decisively, we are headed towards newer highs –6100-6200 levels seem possible. Nifty has strong support at 5800-5900 levels," Rohra added.
The 50-share Nifty shied just 15 points from the 6,000 mark to close at 5985, up 219 points or 3.8 per cent from Friday's close.
The 30-stock Sensex settled at 19,854.12, up 691 points or 3.61 per cent, after hitting a high of 19,879 intraday.
The four IT majors, Wipro, TCS, Infosys, and Satyam, led the Sensex. Wipro gained the most (up 8.86%), followed by Infosys (6.63%), Satyam (6.28% ) and TCS (6.07%).
Wipro shares spearheaded the IT rally on reports that India's third-biggest software exporter is expected to bid for Capgemini by January end, in a deal valuing the French firm around $7 billion.
Other significant gainers in the 30-share pack were HDFC and Reliance Energy (both up 6%), BHEL (5.08%), Bharti Airtel (6.07%), and Mahindra & Mahindra ( 4.85%).
Bajaj Auto (down 2.85%) was the only big loser, while ACC (0.08%) and Maruti Suzuki (0.18%) ended flat.
Market breadth on BSE showed 1,966 advances and 941 declines, while on NSE, 893 shares gained and 323 lost.
"Generally, global markets are buoyant during this time of the year. The Christmas rally has begun, and the Indian market, taking cues from global shores, is likely to end the year on a flamboyant note," said Rohra.
Post Market Commentary
The market closed on an upbeat note by creating a rally across the sectoral indices scrips. The market opened firmly backed by favoring cues from the global markets and keeps on marching forward through out the trading session to close with handsome gains. The cues from the domestic market was good as the BJP got a comfortable victory in the Gujarat state election that wiped off the worries of early national election by the ruling Congress. The IT scrips remained in the limelight today on the back of heavy buying from these baskets ahead of Q3 December 2007 earnings. Both the BSE Mid cap and Small Cap closed higher by 186.17 points and 167.25 points at 9,211.71 and 11,980.57 respectively. The BSE Sensex closed with strong gains of 691.55 points at 19,854.12 and NSE Nifty closed higher by 218.6 points at 5,985.10. The BSE Sensex touched its intraday high of 19,879 and low of 19,308.20 during the trading session. Overall, the market breadth was strong as 1,966 stocks are closed in green while 941 stocks are closed in red.
BSE IT index grew by 260.98 points to close at 4,581.61. Scrips that gained are Wipro (8.86%), Edocomp Sol (7.86%), Infosys (6.63%), Satyam (6.28%), TCS (6.07%) and HCL Tech (5.39%).
BSE Metal index closed higher by 547.79 points at 18,820.79. Scrips that gained are Hindal Saw (6.93%), NALCO (5.49%), Sterlite Industries (4.56%), Tata Steel (4.57%) and Sesa Goa (4.51%).
BSE Capital goods index inclined by 498.19 points to close at 19,223.88. Scrips that grew are Areva (10.50%), Punj Lloyd (5.39%), BHEL (5.08%), Alstom Project (4.62%) and SKF India (2.70%).
BSE Oil & Gas index advanced by 432.28 points to close at 12,678.32 as GAIL (9.01%), ONGC (4.75%), BPCL (4.36%), Cairn India (4.19%), RPL (4.11%) and Essar Oil (3.83%) closed higher.
BSE Bankex index advanced by 363.15 points to close at 11,101.74 as PNB (6.53%), IOB (5.69%), ICICI bank (4.40%), Oriental bank (3.66%), BOB (2.92%), HDFC bank (2.89%) and SBI (2.86%) closed in negative.
Market Close: Jingled up all the way..!
Celebration day across as Indices rallied ahead of Christmas with encouraging supportive from global markets. Sectors like Techies, Banks, Metal, Telecom and capital goods were the frontrunners for the day which took indices up 700 points. Gujarat election also supported with positive sentiments. More value buying was seen in IT index ahead of results season nearing and index ended up by 6%. Mid Caps and smallcap also joined the party of Christmas celebration up by 2% & 1.5% each and relative out performing movement seen in large caps also. The momentum was in fact maintained till the final hour to end up near to days high. Asian markets had a strong session of trade on back of positive cues from US and ended in green while Europe also continued to trade in green.
Sensex ended up by 692 points at 19854.119. It was helped up by gains in Wipro (535.3,+9 percent), Infosys (1810.9,+7 percent), HDFC (2897.3501,+6 percent), Satyam (454.55,+6 percent) and Rel Energy (2058.8999,+6 percent). Restricting the gains were Bajaj Auto (2712.95,-3 percent), Dr Reddys (719.7,0 percent), Maruti (990.15,0 percent), ACC (1001.25,0 percent).
KEI Industries was on limelight. KEI manufactures high and low tension cables, control and instrumentation cables, house wires and stainless steel wires. KEI is one of the few companies in the country to manufacture Speciality cables including braided cables, fire survival and zero halogen cables. It enjoys the switching production between HT and LT cables depending upon prevailing market conditions and demand. KEI now manufactures the wide range of product basket with nearly four decades of solid experience. KEI enjoys wide acceptability across sectors such as Oil refineries, railways, power, cement, steel and various other industrial sectors due to its ability of custom manufacture highly specialized cables to the exacting product and application needs of its prestigious clientele. The current cable capacity of the company is 40,000 kms which is expected to increase to 56,000 kms by the end of March 2008. Expansion plans are on cards. Recently Company has inaugurated a new plant for manufacturing of HT and LT power cable at Chopanki. Stock ended up 10%. We are positive on the business as company expansion for the first phase has completed and it is in line with the industry demand. Expect detailed research findings soon in this space.
Oil marketing companies witnessed a smart move today as Indian government is considering to revise oil prices as it is not possible for it to keep the present level of prices indefinitely due to upsurge in the international market. Delhi government today imposed 25 paisa cess on Diesel which turned negative for the Auto majors like Tata Motors and Maruti. Heavy subsidies had kept the prices low despite surge in international market from US$ 36 to US$ 100 per barrel. The government has so far passed on only a fifth of the hike to consumers despite the fact the crude oil prices had risen 150%. The government is giving subsidies to the tune of over Rs. 100000 crore during the current financial year in petroleum, fertilizer and food sectors. If the prices are raised then it will come as a welcome relief to the OMCs like IOC, HPCL and BPCL, which have been reeling under the under-recoveries. Stocks like IOC up by 4.8%, BPCL (up 3.4%) and HPCL up 2.3% being the key gainers for the day.
Technically speaking: Markets traded strong with positive breadth. Sensex touched intraday high of 19879 and low of 19308. Turnover was at Rs 5657 Cr. Market breadth was in favor of Advances at 1903, while Declines stood at 979. Sensex has pulled back from its lows, yet the day's volumes were comparatively less. This seems to be a pullback rally and we expect downside to start again if Sensex fails to close above 20k within this week. Traders are advised to cut their longs on pullback and stay on the sidelines. Sensex support is seen at 19640 and 19480 levels and Resistance near 19900 and 20020.
Sensex spurts 692 points in global rally
mThe market surged today as software shares spurted ahead of Q3 December 2007 earnings reporting season. Strong global cues also boosted the sentiments. Bharti Airtel spurted. Reliance Industries edged higher. Reliance Energy hit all time high. The market breadth was strong. 27 out of 30 stock from the Sensex pack were in green.
A stronger-than-expected US consumer spending calmed fears the world's top economy was heading into a recession. The market also cheered a comfortable victory for Bharatiya Janata Party (BJP) in the Gujarat state election, as it helped lessen worries that the ruling Congress party could call an early national election.
In a spectacular victory, the Bhartiya Janta Party (BJP) got an absolute majority in the Gujarat assembly elections capturing power for the fourth straight time propelled by Chief Minister Narendra Modi who gets a third term in office. The BJP got 117 seats, just five short of a two-thirds majority in a house of 182. The Congress, whose earlier tally was 51, got 62 seats marginally improving its position over 2002 elections. Others have got three seats.
The FTSE 100 index in UK was up 0.40%. Asian markets, which opened before Indian market, were firm.
The 30-share BSE Sensex rose 691.55 points or 3.61% to 19,854.12. Sensex hit a high of 19,879. At day's high, the Sensex gained of 716.43 points.
The broader CNX S&P Nifty rose 218.60 points or 3.79% to 5985.10.
The BSE Mid-Cap index rose 2.06% to 9,211.71. The BSE Small-Cap index climbed 1.42% to 11,980.57. Both these indices underperformed the Sensex.
The market breadth was strong. On BSE, 1966 shares advanced as compared to 941 that declined. 30 shares were unchanged.
BSE clocked a turnover of Rs 5657 crore, compared to Thursday (20 December 2007)'s Rs 6,259.25 crore.
Nifty December 2007 futures were at 6009.50, a premium of 24.4 points as compared to the spot closing of 5985.10.
The NSE's futures & options (F&O) segment turnover was Rs 80,577.10 crore, which was higher than Rs 73,067.55 crore on Thursday, 20 December 2007.
India's largest private sector firm by market capitalization & oil refiner Reliance Industries rose 2.70% to Rs 2788.05, off day's low of Rs 2714.
India’s largest dedicated housing financing firm by operating income Housing Development Finance Corporation (HDFC) soared 6.33% to Rs 2897.35.
India’s largest real estate firm by market capitalisation DLF rose 1.08% to Rs 971.65 on reports the company has received regulatory approval to launch the initial public offer of DLF Offices Trust in Singapore for raising about $1.5 billion. The IPO of DLF Offices Trust, a Real Estate Investment Trust (REIT) of K P Singh-promoted DLF Assets, is expected to come in January next year, the reports added.
India's largest listed cellular service provider by sales Bharti Airtel gained 6.07% to Rs 970.15. As per reports, Bharti Enterprises may reportedly acquire Big Apple, the Delhi-based supermarket chain with 65 stores.
The BSE Bankex rose 3.38% to 11,101.74. It underperformed the Sensex. India’s largest private sector bank by assets ICICI Bank rose 4.40% to Rs 1207.90. Recently, CLSA gave a buy rating on the stock with a price target of Rs 1,400.
Punjab National Bank soared 6.53% to Rs 661.75, Indian Overseas Bank jumped 5.69% to Rs 174.60, Oriental bank of Commerce spurted 3.66% to Rs 261.95, Bank of Baroda rose 2.92% to Rs 415.70 and HDFC Bank gained 2.89% to Rs 1694.35.
IT stocks climbed on hopes the US economy may avoid a recession. The BSE IT index 6.04% to 4,581.61. It outperformed the Sensex. India's second largest software exporter by sales Infosys Technologies soared 6.63% to Rs 1810.90.
India’s third largest software exporter by sales Wipro soared 8.86% to Rs 535.30 on reports it may bid for France's Capgemini by the end of January 2008 in a deal valuing the latter at around $7 billion.
Satyam Computer Service gained 6.28% to Rs 454.55, TCS rose 6.07% to Rs 1108.70 and HCL Technologies 5.39% to Rs 327.45. Indian software firms derive more than half of their revenue in dollar terms.
Select PSU stocks gained on reports the government plans to ask blue-chip public sector units (PSUs) to issue bonus shares, as their reserves and surplus have increased to several times their paid-up capital. The BSE PSU index rose 2.21% to 9,722.81. It underperformed the Sensex.
GAIL (India) surged 9.01% to Rs 522.75, ONGC rose 4.75% to Rs 1,247.40, Bharat Heavy Electricals climbed 5.08% to Rs 2,489.25, HPCL rose 2.33% to Rs 318.50 and BPCL gained 4.36% to Rs 450.85.
The BSE Power index rose 3.37% to 4,353.21. It underperformed the Sensex. Areva T&D surged 10.50% to Rs 2479.15, Reliance Energy jumped 6.14% to Rs 2058.90, Tata Power Spurted 3.23% to Rs 1326.10, CESC rose 3.16% to Rs 602.90 and NTPC gained 2.99% to Rs 236.25.
The BSE Metal index rose 3% to 18,820.79. It underperformed the Sensex. Jindal Saw jumped 6.93% to Rs 1014.95, National Aluminum Company (Nalco) rose 5.49% to Rs 445.50, Tata Steel rose 4.57% to Rs 862.50, Sterlite Industries rose 4.56% to Rs 1000.40 and Steel Authority of India rose 1.59% to Rs 268.45.
Two-wheeler maker TVS Motor Company gained 1.94% to Rs 71.10 on reports the Madras high court has suspended an interim order restraining TVS Motor from booking or selling its recently launched 125-cc bike 'Flame'. The bench posted the case to 4 January and 5 January 2008, for further hearing of all the petitions.
Automobile tyre maker Apollo Tyres gained 3.90% to Rs 49.25 on reports that it is close to acquiring a South East Asian tyre maker. The acquisition would be finalised early next year.
Construction firm Nagarjuna Construction Company jumped 5.51% to Rs 339.75 after it bagged an order worth about Rs 570 crore order from the Government of Oman for Wadi Adai Al Amerat road project.
India's top tractor maker by sales Mahindra & Mahindra jumped 4.85% to Rs 823.55 on reports it is in talks with Renault to assemble and market its utility vehicle Scorpio in US market.
The largest engineering conglomerate in south east Asia Larsen & Toubro rose 2.63% to Rs 4088.70 on reports it has floated a power generation firm Larsen & Toubro Power Development and is planning to generate 5,000 megawatt in the next five years.
India's largest wind turbine maker Suzlon Energy gained 3.79% to Rs 1906.30 after the company said it has secured an order from ONGC, India's leading oil & gas exploration & production company for 51 megawatt of wind turbine capacity.
Info Edge India rose 3.30% to Rs 1334.20 after the company said its board had approved raising the foreign fund limit to 40% of paid-up capital from 24% earlier. The board also approved raising Rs 500 crore through various means.
Speciality chemicals maker Jayant Agro Organics rose 2.23% to Rs 110.10 after the company said its board approved issuing 6 lakh shares to Japan's Itoh Oil Chemicals Company at Rs 105 each. The board also approved raising up to $20 million through foreign currency convertible bonds. The company will also issue 1.3 million warrants to promoters and 4 lakh warrants to public at Rs 105 each.
Industrial gas equipment maker BOC India gained 1.31% to Rs 193.95 on reports that the firm has signed a deal with a real estate firm to develop its property at Santhanagar, Hyderabad.
Engineering firm Gujarat Apollo Industries jumped 3.12% to Rs 327.60 on reports the management of the company has concluded the negotiations for the disinvestment of its 49% holding in Johnson Screens (India), a joint venture company with Johnson Screens, USA (A Weatherford company).
IFCI clocked the highest turnover of Rs 300.54 crore on BSE. Reliance Energy (Rs 242.95 crore), Mundra Port & Special Economic Zone (Rs 143.35 crore), Reliance Industries (Rs 131.91 crore) and Reliance Petroleum (Rs 130.55 crore), were the other turnover toppers on BSE in that order.
IFCI clocked the highest volumes of 3.81 crore shares on BSE. Bellary Steels & Alloys (2.42 crore shares), Ispat Industries (1.34 crore shares), IKF Technologies (1.33 crore shares) and Kashyap Technologies (1.08 crore shares), were the other volume toppers on BSE in that order.
Asian stocks edged higher today, 19 December 2007, tracking overnight gain in US stocks. Key benchmark indices in Hong Kong, Japan, Singapore, Taiwan and China were up by between 1.07% to 2.60%.
US markets ended higher on Friday, 21 December 2007, led by technology and energy stocks. The Dow Jones Industrial Average gained 205 points at 13451. The Nasdaq Composite index advanced 51 points to 2692, and the S&P 500 index rose 24 points at 1484.
Crude oil for February delivery traded 9 cents lower at $93.22 a barrel in New York Mercantile Exchange electronic trading.
The market regulator Securities & Exchange Board of India (Sebi) on Thursday, 20 December 2007, cleared proposal to allow short selling by institutional investors. In order to provide a mechanism for borrowing of securities to enable settlement of securities sold short, it has also been decided to put in place a full-fledged securities lending and borrowing (SLB) scheme for all market participants in the Indian securities market, Sebi said.
Naked short selling will not be permitted in the Indian securities market and accordingly, all investors would be required to mandatorily honour their obligation of delivering the securities at the time of settlement, Sebi said.
Annual inflation, based on the wholesale price index (WPI), rose 3.65% in the week ended 8 December 2007, lower than previous week's 3.75% rise, data released by the government during trading hours on Thursday, 20 December 2007 showed.
Market celebrates Christmas Eve, gains 692 points
Following the global market trend, the index continued its upward march ahead of the festive season. The Sensex resumed 145 points above its previous close and rallied sharply amid strong bullish sentiment. While the mood remained upbeat, the renewed buying interest in information technology and the rally in oil, metal and banking stocks gathered more steam towards the closing hours. The index surged to touch the day's high of 19,879 and added 716 points for the day. The Sensex finally ended the session with a gain of 3.61% or 692 points at 19,854 whereas the Nifty soared by 3.79% or 219 points at 5985.
The breadth of the market was extremely positive, with gainers outnumbering losers in the ratio of 2.01:1. Of the 2,937 stocks traded on the BSE 1,945 stocks advanced, 965 stocks declined and 27 stocks ended unchanged. Among the sectoral indices the BSE IT Index flared up by 6.04%, the BSE TecK Index rose 4.90%, the BSE Oil & Gas Index moved up by 3.53% and the BSE Bankex was up 3.38%. The other indices also ended with sharp gains.
Barring Bajaj Auto, Maruti Suzuki and ACC, all the other Sensex stocks ended at higher levels. IT major Wipro flared up 8.86% at Rs535, Infosys bounced back sharply and shot up by 6.63% at Rs1,811, HDFC zoomed 6.33% at Rs2,897, Satyam Computer moved up by 6.28% at Rs455, Reliance Energy scaled up 6.14% at Rs2,059, Bharti Airtel surged by 6.07% at Rs970, TCS jumped by 6.07% at Rs1,109 and BHEL gained 5.08% at Rs2,489.
IT stocks saw renewed buying interest after a brief lull earlier this year. HCL Tech spurted by 5.39% at Rs327, Patni Computer shot up by 4.97% at Rs329, Mphasis flared up 4.96% at Rs302 and NIIT Tech jumped by 4.37% at Rs241.
Over 3.81 crore IFCI shares changed hands on the BSE followed by Bellary Steel (2.42 crore shares), Ispat Industries (1.34 crore shares), IKF Technologies (1.33 crore shares) and Kashyap Technologies (1.08 crore shares).
Value-wise IFCI clocked a turnover of Rs300 crore followed by Reliance Energy (Rs242 crore), Mundra Ports (Rs143 crore), Reliance Industries (Rs131 crore) and Reliance Petroleum (Rs131 crore).
Market may add gains
Despite weak global cues, last Monday saw the market open at almost unchanged levels. Thereby indicating not only are traders deep in profits, but are confident that the market will eventually reverse from lower levels. However, a gradual selloff below the 5,900- level could lead to uneasiness.
The market remained low throughout the week due to weak parallel or global cues. The huge rollover on the F&O segment kept activity muted on Thursday, almost akin to the trend during the last expiry. This tells us that the market is heavy in terms of open positions in the F&O segment and is unable to roll over the positions as smoothly as in the past. Except technology, there were hardly any gainers on a weekly closing basis.
Micro trend of the market
Given the consistent fall, one will have to examine the micro trend of the market to get an indication about the likely trend. A closer look at the 60 minute charts of the indices shows that the market is diverging positively. (Pause of the current bearish trend and likely reversal). It means there are chances of a likely upmove if the market finds support at major levels like 5,640 and 5,600.
Also, the activity on Thursday was in a tight range between 5,740 and 5,800. This may act as a major support and resistance for the market on Monday. Here we have to follow the levels and act accordingly. In case the market trades below 5,740, then we may see a sharp selloff up to the 5,600-level. In that case, we may reach diverging levels for the market. However, sustenance of the indices above 5,800 may trigger fresh buying opportunities in the market.
Macro trend of the market
On a weekly basis, the market tells us that under a pullback mode to the bullish rally between 5,395 and 6,185 (18,182 and 20,498 for the Sensex) and till the indices remain above 5,395 and 18,182, the intermediate trend will remain intact. Levels like 18,700 and 5,575 may act as major supports for the market on a weekly basis. In case the market reverses from these levels, we may see a pullback to the bear move between 5,575 and 6,185 (18,700 and 20,500 for the Sensex).
On the higher side, the levels of 19,700 and 20,100 for the Sensex (5,910 and 6,050 for the Nifty) may act as a prudent resistance for the market. In brief, according to the micro and macro trends of the market, currently we are heading towards the major levels of 5,600 or 5,575. Around these levels, investors can buy select stocks from a medium-term investment point of view. For traders, our advice is to enter into trading long positions, only if the market reverses sharply from any of the given levels.
Top picks in a medium term
Real Estate: If we use comparative theory in the current bearish move, then we can clearly see that the fall in the real estate sector is lesser compared with other sectors. It means money is not flowing out of the sector. Based on the above observation, we would recommend a ‘buy’ on DLF (Rs 962) with a medium-term price target of Rs 1,080. Stoploss below Rs 900 is a must.
Infrastructure: The leadership is changing from front liners to second liners. It is clearly visible if we look at stocks like GMR Infra, Lanco Infrastructure, and Housing Development Infra. Based on the above observation, we would recommend a ‘buy’ on Lanco Infrastructure (Rs 730) with a medium-term price target of Rs 900. Stoploss below Rs 670 is a must.
Via ET
Crude remains steady for the week
Price firms up in the later part of the week as crude inventory drops to lowest level in almost three years
Crude-oil future prices for sweet light crude for February delivery ended the week almost unchanged. Though prices witnessed some volatile trading during the week, and also witnessed the shift from January contract to February contract.
For the week ending Friday, 21 December, 2007, crude-oil futures for light sweet crude for February delivery closed at $93.31/barrel (higher by $2.25/barrel or 2.5%) on the New York Mercantile Exchange. Futures rose as high as $93.84 earlier in the day. Prices are 53% higher than the year before.
Prices slipped earlier in the week as Turkish troops began to withdraw from Iraq. Price also fell on speculation that warmer weather in the eastern U.S. will curb fuel use.
Then prices once again firmed up as Energy Department reported more than expected slump in crude inventories for the week ended 14 December. The drop took the inventory level to lowest level in almost three years.
As per the weekly inventory report by the Energy Department on Wednesday, 19 December, U.S. crude inventories fell by 7.6 million barrels to 296.9 million barrels in the week ending 14 December, the lowest since February 2005. That was the fifth straight week of drop. U.S. refineries operated at 87.8% of their operable capacity last week, down 1% from the previous week's 88.8%.
As per EIA, at 296.9 million barrels, U.S. crude inventories were in the lower half of the average range for this time of year and at lowest level since February, 2005. U.S. crude-oil imports averaged 9.1 million barrels per day last week, down 952,000 barrels per day from the previous week.
Market to head higher in volatile trade
The market is likely to head higher following strong global cues. However volatility may increase during the week as December 2007 derivatives contracts are set to expire on Thursday, 27 December 2007. Trading for the week will be truncated, as market will remain closed on Tuesday, 25 December 2007 on account of Christmas. Volumes are also expected to be dull as foreign fund managers will be on annual vacation.
In a spectacular victory, the Bhartiya Janta Party (BJP) got an absolute majority in the Gujarat Assembly elections capturing power for the fourth straight time propelled by Chief Minister Narendra Modi who gets a third term in office. The BJP got 117 seats, just five short of a two-thirds majority in a house of 182. The Congress, whose earlier tally was 51, got 62 seats marginally improving its position over 2002 elections. Others have got three seats. Modi, who will is likely to be sworn in on 27 December 2007.
Asian markets were trading higher today, 24 December 2007. Hong Kong's Hang Seng (up 1.49% at 28,037.93), Taiwan's Taiwan Weighted (up 2.14% at 8,111.70), Singapore's Straits Times (up 1.21% at 3,439.25), and South Korea's Seoul Composite (up 2.06% at 1,917.02) edged higher
US markets ended higher on Friday, 21 December 2007, led by technology and energy stocks. The Dow Jones Industrial Average gained 205 points at 13451. The Nasdaq Composite index advanced 51 points to 2692, and the S&P 500 index rose 24 points at 1484.
Crude oil for February delivery traded 9 cents lower at $93.22 a barrel in New York Mercantile Exchange electronic trading.
Back home, the 30-share BSE Sensex rose 70.61 points or 0.37% to 19,162.57 on Friday, 21 December 2007. The S&P CNX Nifty gained 15.35 points or 0.27% to 5,766.50 for the day.
On a weekly basis, the 30-share BSE Sensex declined 868.26 points or 4.33% to 19,162.57 in the week ended Thursday, 20 December 2007. The S&P CNX Nifty slipped 281.20 points or 4.64% to 5,766.50 in the week. The market was closed on Friday, 21 December 2007 on account of Bakri Id.
Annual inflation, based on the wholesale price index (WPI), rose 3.65% in the week ended 8 December 2007, lower than previous week's 3.75% rise, data released by the government during trading hours on Thursday, 20 December 2007 showed
PSU Bonus
The government reportedly plans to ask blue-chip public sector units (PSUs) including NTPC, Bharat Electricals, Steel Authority of India, ONGC, Indian Oil Corporation, BPCL, HPCL and Gail to issue bonus shares, as their reserves and surplus have increased to several times their paid-up capital. The Prime Minister’s Office (PMO) may issue a directive to PSUs having paid-up capital over Rs 100 crore to consider issuance of bonus shares, the report added.
Madras high court has reportedly suspended an interim order restraining TVS Motor Company from booking or selling its recently launched 125-cc bike 'Flame'. The bench posted the case to 4 January and 5 January 2008, for further hearing of all the petitions.
Apollo Tyres is reportedly close to acquiring a south east Asian tyre maker. The acquisition would be finalised early next year. The target firm or likely deal value were not disclosed.
DLF has REPORTEDLY received regulatory approval to launch the initial public offer of DLF Offices Trust in Singapore for raising about $1.5 billion. The IPO of DLF Offices Trust, a Real Estate Investment Trust (REIT) of K P Singh-promoted DLF Assets, is expected to come in January next year, the reports added.
IFCI has reportedly invited bids from merchant bankers to value and buy its shares in 100 unlisted firms to enable the company to sell them.
Anil Dhirubhai Ambani promoted Zapak.com, an online gaming portal, is all set to acquire Sony Online Entertainment (SOE) for around $300 million (Rs 1,200 crore). The deal, which has been brewing for the past two weeks or so, will be finalized in the next few days. Possibly by next week, Zapak will have full rights to all content owned and published by SOE, the reports added.
Bharti Enterprises may reportedly acquire Big Apple, the Delhi-based supermarket chain with 65 stores.
Anil Dhirubhai Ambani (ADA) group is on course to dilute 5% stake in the privately held Reliance Entertainment, the holding company for the group's entire entertainment business. The stake sale is planned to be a purely financial one, to a clutch of institutional investors, and not to strategic partners like any global major in the entertainment or movie business, the reports suggest.
Wipro is reportedly expected to place a bid to acquire French consulting firm Capgemini by January-end next year, according to investment banking sources. The bid could be close to Euro 48 per share, valuing Capgemini at $6.4-7 billion.
MRF reportedly expects to get possession of 500 acres at Tamil Nadu, by next month where it plans to invest Rs 1,000 crore to set up a new facility.
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 5740 ,5700 and 5670 with resis at 5804, 5910 and 6075
Intra day Nifty wld find resis at 5805 and 5849
Intra Day: Buy Indiacement above 301 with a TGT of 314 and a SL of 296
Buy aptech above 366 with a TGT of 380 and a SL of 362
Delivery Buy: Infosys with a TGT of 1848 (2~3 mths)
Satyam and Sunil Hitech
F&O: Buy NDTV above 439 with a TGT of 457 and a SL of 431
Buy HCLTECH above 310 with a TGT of 320 and a SL of 304
Out House :
Wisk U all a Very Merry Christmas .
Markets at a support of 19092 & 18898 levels with resistance at 19345 & 19591 levels .
Buy : RIL & REL
Buy : VSNL & HdfcBank bullet
Buy : JpAsso & Jphydro
Buy : Adhunik , Ispat & JSW steel
Buy : Geshipping & MtEverest
Buy : IBUllsreal & IBullsFin
Buy : Neyvelli & MRPL
Buy : SBIN
Buy : Primesecu Bullet
Dark Horse : REL , Aban , PrimeSec , JpAsso , IBullReal , GeShipping , RIL & SBIN
IPO Grey Market Premiums
eClerx Services 270 to 315 23 to 25
BGR Energy 425 to 480 325 to 335
Transformers & Rectifiers 425 to 465 315 to 325
Brigade Enterprises 351 to 390 20 to 25
Burnpur Cement Ltd. 12 4 to 6
SVPCL 42 DISCOUNT
Aries Agro 120 to 130 15 to 20
Manaksia Ltd. 140 to 160 20 to 22
Porwal Auto Components 68 to 75 DISCOUNT
Precision Pipes & Profiles 140 to 150 25 to 27
Pre Market Watch
The Indian Markets today is likely to have a positive opening due to favoring cues from the global markets. On Thursday, The market closed higher after facing a lot of volatility throughout the trading session. The cues from the global markets are not in favor that led the domestic market to struggle a lot to close with marginal gains. The BSE Sensex closed higher by 70.61 points at 19,162.57 and NSE Nifty closed up by 15.35 points at 5,766.50. We expect the market to gain some grounds during the trading session.
On Friday, the US market closed green. The Dow Jones Industrial Average (DJIA) closed higher by 209.97 points at 13,455.61. S&P 500 index grew by 23.38 points to close at 1,483.50 while NASDAQ closed up by 51.13 points to close at 2,691.99.
Indian ADRs ended in positive territory. In technology sector, Patni Computers grew by 6.30% along with Wipro by 3.29%, Satyam by 2.88% and Infosys by 1.64%. In banking sector, HDFC bank and ICICI bank surged (5.49%) and (2.81%) respectively. In telecommunication sector, VSNL and MTNL increased by (6.70%) and (0.55%) respectively. Sterlite industries inched by (2.50%).
The major stock markets in Asia are trading strong. Hang Seng is trading higher by 411.01 points at 28,037.93. Taiwan weighted is also trading up by 170.26 points at 8,111.70. Singapore Strait Times is trading at 3,439.25 up by 41.15 points. South Korea''s Seoul Composite advanced by 38.70 points to trade at 1,917.02.
On Thursday, the FIIs stood as the net seller in equity while net buyer in debt. The gross equity purchased was Rs2,585 Crore and the gross debt purchased was Rs6.50 Crore while the gross equity sold stood at Rs3,677.50 Crore and gross debt sold stood at Rs5.80Crore. Therefore, the net investment of equity reported was (Rs2,1,092.50 Crore) and net debt was Rs0.70Crore.
Today, Nifty has support at 5,690 and resistance at 5,861 and BSE Sensex has support at 18,982 and resistance at 19,512.
Market may gain amid volatility
The Market may log gains due to optimism amongst the investors and positive global cues. However, the market may remain volatile ahead of expiry of December derivative contracts. Among the indices, the Nifty could test higher levels around the 6,000, while on the downside it has a key support around 5,600. The Sensex has a likely support at 18,600 and may face resistance at 19,830.
US Indices posted gains on Friday with the Dow Jones to close at 13,45, up 205 points. Tech heavy weight Nasdaq closed at 2,692, 51 points up.
Most of the Indian ADRs posted gains on the US bourses. VSNL led the pack with the gains of 6.70%, while Patni computer and HDFC Bank gained aover 5-6% each. Satyam, Wipro, Dr Reddy's, Tata Motors, ICICI Bank and Rediff which gained around 1-3% each.
Crude oil prices moved up , with the Nymex Light Crude oil for February delivery gaining $2.25 to close at $93.31 a barrel. In the Commodity space, the Comex gold for February delivery jumped by $12.20 to settle at $815.40 an troy ounce.
Daily Trading Calls
Nifty (5767) Sup 5716 Res 5835
Buy M&M (785) SL 779
Target 798, 802
Buy Cairn (223) SL 219
Target 231, 233
Buy Dr Reddy’s (722) SL 716 Target 734, 738
Buy Tata Chem (384) SL 379 Target 394, 397
Sell S Kumars (151) SL 155 Target 143, 141
Jingle bells...bulls dashing thru the snow!
Oh, for the good old days when people would stop Christmas shopping when they ran out of money.
Looks like Santa Claus is coming to town for some last minute shopping on Christmas eve. The global cues too are encouraging. But remember to shop not till you drop. Buy only what you can afford to hold for some time. And you don't need to wait till new year to ring out the old and bring in the new. Use any rise to do just that. Also, given the slowdown in FII inflows, uncertainty surrounding the subprime crisis in the US and the upcoming F&O expiry, things will continue to be volatile. All the more reason for one to be on guard for any sudden and sharp change in sentiment on an intra-day basis.
While the positive vibes coming from Wall Street and the announcements on short-selling front could cheer up the bulls, there is no guarantee that the festive mood will sustain for long. In the near-term the market is likely to remain choppy and rangebound. To say that we won't have a big crash on any given day will be foolhardy, as can be seen from last Monday's fall. The rally in small-cap and mid-cap stocks may continue for a while till their large cap counterparts regain lost glory. As usual, we will advise caution as this bunch of shares tend to be highly volatile and risky to trade.
On Friday, US stocks rallied on the back of upbeat earnings from BlackBerry maker Research In Motion and a report that Merrill Lynch could receive an investment from Singapore's state-owned investment fund Temasek Holdings, helping offset concerns about the ongoing tension in housing and credit markets.
The Dow Jones Industrial Average rallied 205 points to 13,450 while the S&P 500 index gained 24 points to 1,484 and the the tech-laden Nasdaq Composite index added 51 points to 2,692.
On the week, the Dow was up 0.8% while the S&P 500 gained 1.2% and the Nasdaq jumped 2.1%.
Volume was heavy due to simultaneous expiration of a number of contracts including stock index futures and options. Market breadth was positive. Monday brings an early close for the US stock market for Christmas Eve and will remain closed on Tuesday on account of Christmas.
Consumer spending in the US posted its biggest gain in three-and-a-half years during the month of November, the Commerce Department reported. Personal income also came in higher than expected, but a key reading on inflation provided a mixed picture.
Treasury prices retreated sending the yield on the benchmark 10-year note to 4.16% from 4.03% in the previous session. The Fed lent another $20bn to banks at an interest rate of 4.67% as part of its continuing effort to fire up the credit markets.
US light crude for February gained $2.25 to $93.31 a barrel on the New York Mercantile Exchange. COMEX gold for February rose $12.20 to $815.40 an ounce. The dollar was lower versus the euro but gained against the yen.
The US economy is in for some more bleak news in the coming week, which will offset recent positive numbers on retail sales, consumer spending and jobs. Weak numbers are expected on consumer confidence and new home sales as well as business activity in the Chicago area.
Meanwhile, most economists expect the Federal Reserve to ease interest rates further in late January to help keep the US economy above water. Some Wall Street experts see more cuts coming in 2008 and predict that the Fed will cut rates to 3.5% by the middle of next year.
Asian stocks started the week on an upbeat note in a shortened pre-Christmas session as investors bought resources shares after metals prices rose in London. Markets in Japan, Indonesia and Philippines are closed for public holidays.
Gains from technology companies such as Nokia coupled with strength in the mining sector lifted European shares on Friday. The pan-European Dow Jones Stoxx 600 index rose 1.4% to 364.49.
The German DAX 30 climbed 1.7% to reclaim the 8,000 mark, ending at 8,002.67. The French CAC-40 advanced 1.7% to 5,602.77 and the UK's FTSE 100 rose 1.4% to 6,434.10.
In the emerging markets, the Bovespa in Brazil surged 2.2% to 63,097 while the RTS index in Russia gained 0.6% at 2296 and the ISE National-30 index in Turkey rose by nearly 1% to 68,404.
Dull trading likely!
After a strong start, markets ended the day with modest gains. Yet again it was a volatile trading session with benchmark Sensex gyrating over 190 points during the session. Alternate bouts of buying and selling often tossed the key indices in negative and positive territory.
Major index losers were Bajaj Auto (down 1.42%), HDFC Bank (1.02%), Cipla (0.72%), ICICI Bank (0.65%) and NTPC (0.41%).
Technology stocks were in the limelight lifting the BSE IT Index over 3%. Satyam Computer gained 5.6% to Rs427, MphasiS surged 4.4% to Rs287, Infosys gained 3.4% to Rs1695 and HCL Tech added 3% to Rs312.
IFCI plunged 23% to Rs76 after the Indian project financier bailed out by the government scrapped a plan to sell a 26% stake after failing to agree terms with investors led by Sterlite Industries Ltd and Morgan Stanley. The company announced the conditions laid down by the bidders weren't acceptable. The scrip touched an intra-day high of Rs98 and a low of Rs71 and recorded volumes of over 14,00,00,000 shares on NSE.
Deccan Aviation fell 6% to Rs277. According to reports Kingfisher Airlines Ltd., would absorb
SAIL advanced 2.1% to Rs264. Reports stated that the company has signed a pact with Rail Vikas for transportation of 5 lac tones of imported coking coal per year. The scrip touched an intra-day high of Rs271 and a low of Rs255 and recorded volumes of over 1,00,00,000 shares on NSE.
Tata Steel ended flat at Rs824. Reports stated that Vale, world’s largest iron ore pellets manufacturer, in talks with the company to set up a steel slab plant in
Ramsarup Industries gained 1% to Rs263 after the Board of Directors of the company announced that they would consider merger of group companies. The scrip touched an intra-day high of Rs271 and a low of Rs259 and recorded volumes of over 88,000 shares on NSE.
Pratibha Industries dropped 4.8% to Rs409 after the company announced they it sold Rs2.4mn shares at Rs253 per share. The scrip touched an intra-day high of Rs433 and a low of Rs401 and recorded volumes of over 26,000 shares on NSE.
M&M advanced 1% to Rs784 after
What the FIIs are doing
FIIs were net sellers of Rs7.67bn (provisional) in the cash segment on Thursday while the local institutions pumped in Rs8.9bn. In the F&O segment, foreign funds were net buyers of Rs3.67bn.
On Tuesday, FIIs were net sellers of Rs24.5bn in the cash segment. Mutual Funds were net sellers of Rs3.81bn on the same day.
Stocks in News:
IOC to venture alone for small onland blocks in NELP VII. (BL)
MRF expects to get possession of 500-acre land at Tiruchi, Tamil Nadu by January for setting up a new facility. (BL)
Reliance Entertainment is divesting a 5% stake at an enterprise value of US$1.5bn. (BS)
Gail to issue bonus shares in next 3-6 months. (BS)
Ford plans to make India the hub for supply of petrol and diesel engines. (Mint)
Ansal Properties looks at development of ports in partnership with UEM Builders of Malaysia. (Mint)
ONGC will increase spending to increase output. It will pay mid year dividend of Rs18 per share. (Mint)
The Maharashtra State Consumer Disputes Redressal Commission has charged ICICI Bank with forging of documents to recover loan. (Mint)
Dunlop raises US$90mn from hedge funds to restructure loan and meet other corporate needs. (BS)
Attrition prompts Voltas to go for massive recruitment in next three years. (BS)
Bharti Enterprises to acquire Delhi-based retail chain Big Apple. (ET)
RPG group’s Spencer Retail to venture into specialty retailing. (ET)
Dr Reddy’s to shift output of 12 Betapharm drugs to India. (ET)
Rallis India plans to set up formulations unit in Jammu & Kashmir and an agrochemical facility at Dahej SEZ at an estimated outlay of Rs2bn. (ET)
LT Overseas acquires US rice firm Kusha Inc lock for US$20mn. (ET)
ACC, Ambuja Cement together form a separate Waste Management Company. (ET)
Reliance Industries’ plans to provide city gas to Andhra Pradesh might get delayed owing to delay in petroleum ministry’s approval. (FE)
The Karnataka Government approves high speed rail project to the new Bangalore international airport. (BL)
The Finance Ministry plans to exempt companies from paying FBT on employee stock option issue to non-executive directors. (ET)
The Government is planning to change existing policy to allow second cargo airport within 150km range of an existing airport. (ET)
The Government to treat mortgage guarantee companies as non-baking finance companies (NBFC) to enable foreign direct investments. (FE).
A clean sweep by Technology stocks at US Market
Strong earning reports from Oracle and RIMM help market finish higher for the week
It was with clear help from the technology stocks that the US Market managed to end higher for the week that ended on Friday, 21 December, 2007. The week witnessed volatile trading as persisting concerns about the economy and a troubling outlook for the financial sector continued to bother the US Market. But strong earnings report from Oracle on Thursday, 20 December and Research in Motion (RIMM) on Friday, 21 December guided market for a strong end.
Credit market jitters continued in its own way. Investment bank Bear Stearns reported its first ever quarterly loss and announced an additional $700 million in write-downs for mortgage-related securities. Morgan Stanley reported more than expected losses for the fourth quarter. The larger than expected loss was due to $5.7 billion in additional mortgage-related write-downs. But news of $5 billion Chinese investment in the company sent smile to investor’s face.
On the other hand, FedEx, which is considered as proxy of economy, reported fiscal second quarter results ahead of analysts' lowered expectations. But the company provided disappointing guidance for the current quarter. Among other earnings reports, Goldman Sachs and Bestbuy – both topped expectations. But Goldman Sachs issued a cautious near tem outlook in 2008.
Nevertheless, with the help of technology stocks, the Dow Jones Industrial Average gained 110 points for the week. Tech - heavy Nasdaq gained 56 points. S&P 500 gained 16 points.
During the week, the Fed proposed new consumer protections for mortgage borrowers. The proposal would require mortgage broker to disclose to borrower any incentives from the lender. The new mortgage rules will "apply to all mortgage lenders," not just those supervised by the Fed.
Also, the European Central Bank surprised market with an unprecedented $500 billion two-week injection to the banking system. Estimates suggested that the operation was about twice the size technically needed.
Market suffered losses during the first and middle of the week. All the three indices closed lower on Monday, 17 December, 2007. But on Wednesday, 19 December, Dow and S&P 500 closed lower but Nasdaq registered some gains. Other than that, indices ended in green in all other trading sessions.
A tepid outlook for bond insurers weighed on sentiment during the middle of the week. Standard & Poor's cut the credit rating of ACA Financial Guaranty and placed Financial Guaranty Insurance on watch for a downgrade, given their exposure to risky debt securities.
Moody's also announced during the week that it was considering downgrading the debt ratings of several bond insurance companies as strain in the credit market continues to take its toll on the financial sector. Also, weighing on the financial market was the news that bond insurer, MBIA has $8.6 billion in collateralized debt obligations.
Market rallied on Thursday, 20 December, 2007 and on Friday, 21 December, 2007. On Friday, Dow gained more than 205 points after RIMM announced above expected earnings after Thursday’s close. Also, news that Merrill Lynch might sell a stake to Singapore based investment fund help market fuel a good rally.
On the economic front during the week, November housing starts dropped 3.7% and housing permits slipped 1.5%. The data show a continued weak housing market. But the data were largely in line with expectations.
Also, the regional manufacturing report reported that the New York Empire State Index stood at 10.3 for November. While a number above zero reflects growth, the reading was well below the prior month's reading of 27.7 and the consensus estimate of 20.
Third quarter real GDP was unchanged at a 4.9% annual growth rate. Core PCE rose 2% quarter over quarter and the GDP Price Index rose 1%. The report was just the final revision, so it did not have much of an impact on the market. The weekly initial jobless claims for the week ended 15 December rose to 346,000 from 335,000 the week before.
Executive Summary
For the week, indices registered modest gains. DJIx and S&P 500 closed up by 0.8% and 1.1% respectively. Nasdaq outperformed the market gaining 2.13%. Though market started off on a weak note, strong earning reports from a couple of tech bell weathers took market to new highs and helped the indices register modest gains for the week.
Oracle and RIMM were the companies in focus which came out with stronger than expected earning reports. Other than that, Goldman Sachs and Fed Ex also came out with good reports, though both issues cautious guidance for FY 2008.
For the holiday shortened week in the coming week, market will mainly focus on the holiday sales figures. For the year, Dow is up by 7.9%, Nasdaq is up by 11.5% and S&P 500 is up by 4.7%.
Market may get a boost
| The support between Nifty 5675-5750 seems quite strong and there is further support at 5600. |
| Copy starts: Monday saw one of those meltdowns where sympathetic vibrations lead to collapses in every global market. The Nifty lost over 300 points intra-day before it turned from the depths of 5740. It dropped further on Wednesday when it hit 5676. |
| By the end of a truncated week, the Nifty closed at 5766.5 points for a loss of 4.65 per cent. The Defty was down 5 per cent as the rupee lost ground. The Sensex was off 4.34 per cent at 19162.57 points. The Nifty Junior was down 5.21 per cent. |
| Needless to say, the breadth wasn't good. Declines far outnumbered advances. Volumes were exceedingly high on Monday and Tuesday as there was panic selling. The BSE 500 was off 4.7 per cent while the CNX Midcap lost 4.86 per cent. |
| The CNX IT did however, gain marginally due to the rupee decline. In terms of institutional activity, FIIs were massive sellers while the mutual funds were marginally net buyers. |
| Outlook: The support between 5675-5750 seems to be quite strong and there is further support at the 5600 level. The market could easily bounce back to 5950. But it's likely to be stuck within the zone of 5650-5950 until the settlement at least. Volumes are likely to be lower than normal. |
| Rationale: Technical considerations of liquidity and outstanding futures and options positions will be top of the mind until Thursday. Short-covering may generate enough impetus to drive the market close to Nifty 6000 but there will be massive selling pressure above 5950. |
| On the downside, there seems to be genuine investment buying at below 5700. Any breakout beyond this range will be unexpected because that will require unusually high volumes and next week is likely to be light since FIIs will be closing their FY 2007. |
| Counter-view: It's been two swing weeks in succession and bears would have been trapped by the false rally above 6100 followed by bulls being trapped by the steep decline. |
| Settlement considerations could mean another big swing week. Up is more likely than down but a close below 5650 on Monday could herald another big fall. A change in government in Gujarat could be a potentially bearish trigger. |
| Bulls & Bears: There were practically no bullish performers last week except for IT stocks that held their own with large positive contributions from CMC and Satyam on Thursday. Sugar was the only other sector, which maintained a perky profile until massive profit-booking on Thursday. |
| Banks and financial stocks took a hammering but HDFC, ICICI and Yes Bank could make an early comeback. Quite a few other futures and options stocks could see a bounce on the basis of strong carryover and short-covering. Bharti Airtel, Cairn India, Century Textiles, Reliance Energy and Sun Pharma have promising profiles in this regard. |
| MICRO TECHNICALS |
| CMC Current price: Rs 1191 Target price: Rs 1250 |
| The stock broke an important resistance at Rs 1165 on a large volume expansion. It has a potential upside till around the Rs 1250 mark. Keep a stop at Rs 1165 and go long. Start covering above the Rs 1240 mark. |
| DECCAN AVIATION Current price: Rs 277.9 Target price: Rs 250 |
| The market's reaction to the merger with Kingfisher has been a decided thumbs-down. The stock has a possible downside till at least Rs 250 levels with some support at Rs 270. Keep a stop at Rs 280 and go short. Hold the short position till the Rs 250 level with perhaps a partial cover around Rs 265-270. |
| HDFC Current price: Rs 2722.95 Target price: Rs 2950 |
| The stock has collapsed from the Rs 3200 level within the last five sessions. It looks as though it has reached reasonable support and is due to bottom out. The upside on a bounce could be as much as Rs 2950. Keep a stop at Rs 2710 and go long. |
| IFCI Current price: Rs 76.85 Target price: Rs 65 |
| Massive selling has driven the stock down from Rs 120 to current levels within the past five sessions. There is a potential downside till about Rs 65. Keep a stop at Rs 82 and go short. Cover below Rs 67. The long-term trend of the scrip may have changed to negative – it is testing the 200 day moving average. |
| RELIANCE ENERGY Current price: Rs 1940.15 Target price: Rs 2250 |
| The stock held its own last week and although it has seen volume reduction, it has made net gains. It is testing resistance between Rs 1920-1980. A close above Rs 1980 would set up a potential target of Rs 2250. Keep a stop at Rs 1910 and go long. Book partial profits at Rs 1975. |
Weekly Technical Analysis
Support Around 5676
Nifty — The index closed on a negative note on the opening session of the week after which it saw a sharp decline towards 5676 towards the closing session of the week. It ended the week with a loss of 281 points.
Moving Averages — The 50 dma = 5748, 20 dma = 5850 and 10 dma = 5933. The index is facing price congestion from 20 & 50 dma, close above the 20 dma at 5850 should see the index exhibit strength for the current week’s trading.
Momentum Oscillators — On the daily charts MACD is in sell mode but in positive territory. RSI (14) - Relative Strength Index is exhibiting a reading of 47 (reading above 70 signifies overbought and reading below 30 signifies oversold). Stochastic (5,3) on daily chart is in oversold zone.
Support — The index has support around the 5676-5595 band. Lower support around 5517 (low of 28 November 07). Declines during the week should find support around the 5676-5595 band.
Resistance — The index faces resistance around the 20 dma at 5850, close above the 20 dma could see the index exhibit strength during the week’s trading. Higher resistance can be expected around 5933 (10 dma) and 6012 levels.
Conclusion — Expect strength above 5850 during the current week’s trading.
Stocks you can buy this week
Northgate Technologies
Research: Citigroup
Rating: Buy
CMP: Rs 580
Citigroup has initiated a coverage on Northgate Technologies with a ‘buy’ rating and Rs 700 as the target price. Northgate is a leading provider of internet marketing and advertising technology services, combined with a number of unique products (VoIP, social networking) and high-capacity, highly scalable data centres. It is a beneficiary of the strong secular growth in online advertising due to its online ad agency business, online ad serving technology and multi-pronged aggregation strategy.
The company’s business model is straightforward: It aggregates internet traffic from various sites and through various means; monetises this traffic with comprehensive, targeted advertising solutions via its in-house developed ad serving engine; and takes advantage of a more cost-effective approach by operating the data centres and telecom connections. Northgate has three primary businesses: 1. Axill, an interactive ad network with a strong presence in the UK and a growing presence in Asia; 2. Globe7, a leading VoIP-based product/community with a significant presence in China; and 3. Bharatstudent.com, one of India’s fastest-growing social networking sites.
The story, however, is about more than just what Northgate is currently doing. Using its data centres, Northgate plans to grow, particularly in Asia, via both new company-owned sites and managed hosting arrangements.
Centurion Bank of Punjab
Research: Credit Suisse
Rating: Underperform
CMP: Rs 55
Credit Suisse has raised its target price for Centurion Bank of Punjab (CBoP) to Rs 44.5, but downgraded the rating to ‘underperform’. The stock has risen 34% in a week and currently trades at 4.2x FY3/09E book value (BV) and 36.0x EPS. Credit Suisse expects growth to remain strong, though the focus is shifting toward lower-yielding small and medium enterprise (SME) lending and mortgages. This, and a lower current account and saving account (CASA) ratio, should lead to a modest pressure on margins.
Credit Suisse has reduced the EPS estimates by 17-19% over the next two years due to the recent dilution for Lord Krishna Bank (LKB) merger, capital-raising, lower margins and higher loan-loss provisioning. Credit Suisse has valued CBoP on 3.15x FY3/09E P/BV, or Rs 44.5 (3.25x FY03/08E earlier) and has increased the discount to HDFC Bank’s target multiple to 25% (earlier 20%) on a weaker deposit profile and a challenging retail lending environment.
The target price increase factors in recently raised capital and a lower cost of equity assumption from 14% to 12.5%, in line with Credit Suisse’s assumption for private banks. Factoring in the dilution for warrants/Esops, the target price implies a valuation of 3.3x FY3/09E BV and 27.4x EPS, for a return on equity (RoE) of 13.5% in FY09E. CBoP is likely to need capital infusion in FY10.
Indian Oil
Research: ABN Amro Bank
Rating: Buy
CMP: Rs 628
Indian Oil (IOC) was formed in 1964 by the merger of Indian Refineries (1958) and Indian Oil Company (1959). IOC is India’s largest company by sales and controls 10 of India’s 19 refineries. Its refining capacity is 60.2 mmtpa or 1.2 million barrels per day — the largest share among refining companies in India. It accounts for 40.4% of the national refining capacity. IOC also has a cross-country pipeline network of nearly 9,300 km length and 61.72 mmtpa capacity.
IOC is on its way to becoming a major player in petrochemicals, besides making large investments in exploration and production (E&P) and import/marketing ventures for oil and gas in India and abroad. IOC has outlined ambitious growth plans with an outlay of about Rs 45,000 crore for capacity augmentation, de-bottlenecking, bottom and quality upgradation. In addition, petrol quality upgradation projects are underway at Panipat, Mathura, Barauni, Guwahati and Digboi refineries and are expected to be completed by the end of ’09.
In-principle approval of the company’s Board to set up a 15-mmtpa grassroots refinery integrated with petrochemicals units (paraxylene, propylene and styrene) at Paradip (scheduled to be completed by October ’11) has been obtained and the detailed feasibility report is under preparation. During FY07, the company’s consolidated net sales grew by 24% to Rs 2,01,500 crore, while net profit grew by 47% to Rs 6,690 crore. In H1 FY08, its standalone net sales grew 2.5% to Rs 1,09,000 crore. Net profit rose 25% to Rs 5,290 crore, buoyed by higher operating EBITDA margin at 6% (2.4% in H1 FY07).
ICICI Bank
Research: CLSA
Rating: Buy
CMP: Rs 1,157
ICICI Bank is a direct play on the fast-growing Indian economy due to its dominance across all financial services segments. It is the largest retail bank in India and is also a key beneficiary of rising demand for project financing. It is the largest private sector insurance player and a leader in asset management, broking and private-equity. The bank has also built up strong international operations and now has a presence in 18 markets, with international loans accounting for 22% of its consolidated asset base. The recent concerns about rising non-performing loans (NPLs) are exaggerated, as most of the increase is due to rising proportion of unsecured loans, which are priced for higher loss rates.
The net profit growth forecast of 33% CAGR over FY07-10 factors in a 3x rise in provisioning for NPLs over FY07-10 due to increasing proportion of unsecured loans. Key earnings growth driver will be strong volume growth, margin expansion of 50 bps (due to changing loan mix and re-pricing of high-cost liabilities) and healthy growth in fee revenue (38% CAGR). CLSA has valued ICICI Bank’s insurance, asset management, broking and venture fund businesses at $12.2 billion (Rs 442/share) in FY10. The price target of Rs 1,400 is based on sum of parts methodology, in which, we have valued the banking operation at 2.2x FY10CL adjusted book. ICICI Bank is awaiting regulatory approvals to form a holding company to transfer its stake in the insurance and asset management business, and plans to list the holding company over the next 12 months.
DLF
Research: Merrill Lynch
Rating: Buy
CMP: Rs 961
Merrill Lynch has maintained its ‘buy’ rating on DLF with a target price of Rs 1,160 per share. DLF has recently signed a joint venture with Prudential Financial of the US to enter into the asset management business in India. DLF will hold a 39% stake in the venture. The total amount expected to be brought in by the parties is $50 million. Prudential Financial, based in the US, had $637 billion of assets under management (AUM) as of September 30, ’07.
DLF has stated that it expects to receive regulatory approval and set up the distribution in 3-6 months. While DLF is expected to bring its brand name and distribution network, Prudential Financial will bring in the fund management experience.
The company is close to finalising a chief executive officer, who is expected to be a new hire from the financial services industry. Asset management companies are normally valued at 9-12% of the AUM. However, since the company has stated that these are early days to determine the size of the AUM, Merrill Lynch has not given any value to the JV.
While it is concerned about the entry of DLF into financial services, which is unrelated to real estate, Merrill Lynch draws comfort from the fact that DLF will be a minority partner and the involvement will be limited to helping in the distribution network and providing a known brand.
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