Bank of India, Ranbaxy Labs

Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs500
Current market price: Rs340

Generic Imitrex—exclusivity opportunity for CY2008

Key points

• As part of its settlement with Glaxo SmithKline, Ranbaxy Laboratories (Ranbaxy) has been awarded the 180-day exclusivity for Sumatriptan Succinate, the generic version of Glaxo SmithKline's Imitrex. Ranbaxy will launch the product sometime in December 2008 in the US market.
• The annual market sales for Sumatriptan Succinate (Imitrex®) were USD985 million (IMS- MAT: September 2007). Assuming a market share of 40% for Ranbaxy and a price erosion of 60%, the product can generate revenues and profits of $79 million and $47 million respectively for Ranbaxy during the 180-day exclusivity period. This will translate into incremental earnings of Rs4.5 per share.
• Ranbaxy's strategy of monetising the Para IV first-to-file (FTF) pipeline has paid off and Ranbaxy has four opportunities, including the recently announced deal on Imitrex, addressing a collective market opportunity of $12 billion lined up until 2010. Based on our discount-cash-flow (DCF) calculations, we believe that the FTF opportunities announced so far are collectively valued at Rs2,724 crore, translating into a per share value of Rs68.
• We are in the process of upgrading our revenue and earnings estimates for Ranbaxy and will update you shortly. At the current market price of Rs340, Ranbaxy is discounting our CY2008 earnings estimate by 19.3x. We maintain our Buy recommendation on the stock with a price target of Rs500.
  

Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs432
Current market price: Rs391

Q3FY2008 results: First-cut analysis

Result highlights

• Bank of India's (BoI) profit after tax (PAT) during Q3FY2008 grew by a whooping 101% year on year (yoy) and 20.4% quarter on quarter (qoq) to Rs511.9 crore. The PAT growth was significantly above our and consensus estimates. The strong PAT growth was on the back of robust rise in the interest income, spike in the non-interest income led by treasury gains, and contained operating expenses.
• The net interest income (NII) of Rs1,079.5 crore during the quarter indicates a robust growth of 25.7% yoy mainly due to continued strong growth in advances coupled with an improvement in the net interest margin (NIM).
• The reported NIM of 3.14% for the quarter reflects an improvement of 10 basis points yoy from 3.04% for the year-ago period. The NIM improvement was mainly due to the improvement in yields on advances (115 basis points) and the investments (105 basis points), which outweighed the 83-basis-points year-on-year (y-o-y) increase in the cost of funds.
• During the quarter, the advances grew by a strong 30% yoy to Rs103,657 crore indicating an uptick in the credit off take compared with H1FY2008. The growth in advances was led by a strong growth in foreign advances (up 32.7%). Meanwhile the deposits grew by 27.4% yoy to Rs135,835 crore on the back of a 36% y-o-y growth in the term deposits and a 32.5% y-o-y growth in the current account deposits. However, due to the higher growth in the term deposits, the current account and saving account (CASA) ratio declined to 37% for the quarter from 40.7% a year ago.
• The non-interest income witnessed a whooping growth of 72% yoy to Rs554.1 crore. The growth in the non-interest income was primarily due to the surge in treasury gains, which were up 109% yoy. Meanwhile the fee income grew by a strong 39.5% yoy.
• Notably, the operating expenses were up by only 5.5% yoy, whereas it declined by ~2% qoq to Rs 662.2 crore. The lower operating expense growth can be traced to the decline in other operating expenses (down 13% yoy), whereas the staff expenses were up 17% yoy. As a result of lower operating expenses and strong income growth, the cost-income ratio for the quarter improved significantly to 40.5% compared with 50.6% for the year-ago period.
• Asset quality continued to improve yoy with a 10% y-o-y decline in the gross non-performing assets to Rs1,969.3 crore and a 29.5% decline in the net non-performing assets to Rs633.5 crore. Consequently, the provision coverage for the quarter improved significantly to 78% from 66% for the year-ago period.
• Capital adequacy remains healthy with the capital adequacy ratio (CAR) at 12.5% at the end of December 2007 compared with 11.7% at the end of December 2006.
• At the current market price of Rs391, BoI trades at 10.1x its 2009E earnings per share (EPS), 5x its 2009E pre-provisioning profit (PPP) and 2x its 2009E book value. In view of the higher-than-expected Q3FY2008 numbers, we intend to revisit our earnings model.

India Strategy - Jan 24 2008

India Strategy - Jan 24 2008

Market jumps on Fed move

The Sensex opened with a positive gap of 685 points at 17,415 after the 75 basis points rate cut by the US Federal Reserve yesterday.

After extending gains in the initial trades, the index pared gains and dropped to a low of 16,951 in late morning deals.

The index then rallied to a high of 17,997 - up 1,267 points from its previous close - in early noon trades.

Some profit-taking towards the end saw the Sensex pare gains and finally settle at 17,594 - up 864 points (5.2% ) - the third best single-day gain.

The index thus broke its seven-day losing streak of 19% (4,097 points).

The BSE Midcap Index zoomed over 8% (587 points) to 7,789, and the Smallcap Index surged 4% (397 points) to 10,425.

The NSE Nifty ended with a gain of 304 points (6.2% ) at 5203.

The BSE market breadth was marginally negative - out of 2,722 stocks traded, 1,401 declined, 1,300 advanced and 21 were unchanged today.

INDEX MOVERS

Reliance Energy zoomed 16% (Rs 274) to Rs 1,990. NTPC soared 13.7% (Rs 27) to Rs 224. Satyam surged nearly 11% to Rs 393.

SBI, TCS and Reliance rallied 8.5% each to Rs 2,344, Rs 867 and Rs 2,555, respectively.

BHEL gained 8% at Rs 2,146. Bajaj Auto advanced 7.5% to Rs 2,215.

Hindalco and Reliance Communications moved up 7% each to Rs 161 and Rs 615, respectively.

HDFC Bank and DLF added 6.5% each to Rs 1,535 and Rs 924, respectively. Grasim was up 5.8% at Rs 3,025.

Mahindra & Mahindra and ITC rallied nearly 5% each to Rs 641 and Rs 193, respectively.

Cipla, ACC and Tata Steel were up around 4% each at Rs 182, Rs 750 and Rs 697, respectively.

VALUE & VOLUME TOPPERS

Reliance Natural Resources topped the value chart with a turnover of Rs 466 crore followed by Reliance Petroleum (Rs 356.80 crore), Reliance (Rs 332.30 crore), ICICI Bank (Rs 256.80 crore) and Reliance Energy (Rs 231.10 crore).

Ispat Industries led the volume chart with trades of around 3.46 crore shares followed by Reliance Natural Resources (3.44 crore), Reliance Petroleum (2.13 crore), Tata Teleservices (1.53 crore) and IFCI (1.49 crore).

Bank of India, Tech Mahindra, Idea Cellular

Bank of India, Tech Mahindra, Idea Cellular

Eveninger - Jan 23 2008

Eveninger - Jan 23 2008

Market Close : Fed leads smart recovery

It was a good day for the markets which saw biggest single day gain of over 1200 points and finally ended with substantial gains. After few turmoil sessions in Indian markets today it saw a clear bounced back after US fed cuts rate by 0.75 Bps. Even Asian markets also responded smartly. Rate cut by US will lead to more money inflow into emerging markets as to leverage the arbitrage available between economies. Markets with this perception continued its upward journey in green. Major large caps especially in the FnO segment which were smashed in the break down rally bounced back with vigor with superb gains. Investors and traders which saw red blood in recent sessions remained cautious. Value buying was seen across the board as long term investors saw this fall as an ?opportunity?. Realty and Power counter were the frontliners followed by other sectors. All other sectoral indices were up over 4% Hang Seng ended up 2330 points (+10%) while Asian indices ended in green. Europe is trading weak under cautious mood.

Sensex closed up by 864 points at 17594.07.It was helped up by gains in Rel Energy (1989.95,+16 percent), NTPC (223.7,+14 percent), Satyam (393.1,+11 percent), TCS (867.1,+8 percent) and RIL (2554.8501,+8 percent). Restricting the gains were Bharti Tele (846.75, 0 percent)

Titan posted good set of numbers for Q3 FY2007-08. Revenue stood at Rs.802 crs with an annualised growth of 52% led by higher gold prices. EBITDA margins stood at 6.2% vs 11% on yoy basis which were a bit disappointing, due to high gold prices. PAT stood at 31crs up by 6% compared to same period last year. Margins tend to be reduced in a high gold price scenario as making charges are not related to gold prices. Making charges are of fixed nature for the gold jewelry in terms of Rs/per gm for the pure gold jewelry. Titan is the largest player with 50% market share among organised player followed by HMT in watches.Titan has strong brand and now its trying to leverage on this. The new segment that the company intends to cater is exciting. There is a risk though. We have been positive on Titan for a while and the stock has lived upto expectations. Post the recent fall the stock seem more attractive to get in. It seems good bet. Do read our note to know more?

Greenply continued its superb performance. Top line grew by 39% to Rs.139crs. EBITDA improved significantly on yoy basis as the plant streamlined. The company is basically a interior infrastructure company manufacturing plywood and laminates. Unorganised sector was the major road block to growth but Greenply has managed well to overcome this. Greenply is a bet on growth in housing and commercial office. Increasing earning and desire for better standard of living makes Greenply a perfect play on lifestyle. So far unorganised sector was a spoiled brat but with implementation of VAT there the unorganised sector clearly faces strong headwinds. Greenply is the undisputed leader here. The stock has performed will since our coverage and we remain positive on this one. Do read our note.

Technically Speaking: Sensex managed to record the highest ever gains in its history. Sensex made an intra day high of 17997 and low of 16951. The breadth was taken over by Declines as there were 1401 Declines against 1302 Advances. Market turnover was low at Rs 7099 crs. Sensex was on a pullback rally. We expect this rally to get over near 18900. Traders are advised to sell on rise.

Omaxe, Sterlite, Edelweiss all lead the pack

Sterlite Technologies, Ispat Industries, Lanco Infratech and Edelweiss Capital are among the other gainers.

Real estate developer Omaxe surged 42.31% to Rs 319.85. It topped gainers in the BSE's A group shares.

Telecom cables maker Sterlite Technologies soared 41.88% to Rs 224.10. It was the second biggest gainer in the A group.

Steel maker Ispat Industries spurted 30.56% to Rs 44 and stood third among the top gainers in A group.

Engineering and construction firm Lanco Infratech moved up 30.13% to Rs 563.45. It was the fourth biggest gainer in A group.

Brokerage Edelweiss Capital rose 29.73% to Rs 1,112.95. It was the fifth biggest gainer in A group.

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Market rebounds with vengeance

The market showed a big sign of relief after the Federal Reserve cut the interest rates by 75 basis points to hold the US economy from slipping into recession. After battering for two consecutive sessions, the market had a sharp turn-around today helped by strong buying in realty, power, oil, and metal stocks. The bounce-back came after a steep fall of over 4,000 points in the market since the downslide began the last week. Despite resuming 685 points higher over its last close at 17,415, the index faltered under selling pressure and quickly touched the day's low of 16,951. However, the sentiment turned bullish by the afternoon and the Sensex surged 1,267 points or 7.57% to touch the day's high of 17,997. The Sensex finally ended the session with gains of 5.17% or 864 points at 17,594, whereas the Nifty soared by 6.21% or 304 points at 5,203.

However, the market breadth was negative. Of the 2,722 stocks traded on the Bombay Stock Exchange (BSE) 1,401 stocks declined, 1,300 stocks advanced and 21 stocks ended unchanged. All the sectoral indices were back in action and moved up sharply. The BSE Realty Index was the major gainer and rose 11.44%. The BSE Power Index jumped 9.81%, the BSE Oil & Gas Index added 8.73%, the BSE Metal Index gained 6.85% and the BSE PSU Index was up 6.77%.

Several index heavyweights notched up significant gains. Among the major gainers, Reliance Energy flared up 15.94% at Rs1,990, NTPC zoomed 13.73% at Rs224, Satyam Computer shot up by 10.84% at Rs393, TCS flared up 8.48% at Rs867, Reliance Industries vaulted 8.35% at Rs2,555, BHEL advanced 8.09% at Rs2,146, SBI scaled up 7.64% at Rs2,324, Bajaj Auto surged 7.44% at Rs2,215 and Hindalco added 6.95% at Rs161. Other front-line stocks also moved up by 2-6% each. However, Bharti Airtel dropped marginally at Rs847.

Over 3.45 Ispat Industries shares changed hands on the BSE followed by RNRL (3.44 crore shares), Reliance Petroleum (2.12 crore shares), Tata Teleservices (1.53 crore shares) and IFCI (1.49 crore shares).

Valuewise, RNRL clocked a turnover of Rs466 crore followed by Reliance Petroleum (Rs357 crore), Reliance Industries (Rs332 crore), ICICI Bank (Rs256 crore) and Reliance Energy (Rs231 crore)

Market bounces back after two-day carnage

The market surged today after a two-day rout on speculation more funds will move to emerging markets after an emergency 75 basis points announced by the US Federal Reserve on Tuesday, 22 January 2008. Despite the sharp spurt, the market breadth was negative on BSE.

Trading was choppy throughout the day. The market opened with a spurt but immediately pared gains. It started firmed up again in mid-morning trade supported by firm Asian markets. European markets opened higher but most of them slipped in the red as the day progressed.

The BSE Sensex advanced 931.61 points or 5.57% to 17,661.55, as per provisional closing. Sensex today registered its biggest ever intra-day rise in absolute terms. It had surged to an intra-day high of 17,997.11. At the day’s high, the Sensex gained 1267.17 points. Sensex hit a low of 16,951.03 in early trade. At the day’s low, the Sensex was up 223.02 points for the day.

The broader CNX S&P Nifty surged 318.95 points or 6.51% to 5,218.25 as per provisional closing. It struck a high of 5,328.05 in mid-afternoon trade.

The US Federal Reserve in a surprise move on Tuesday, 22 January 2008, cut Fed funds rate and discount rate by 75 basis points each. The Fed funds rate is now at 3.5%. It is the largest rate cut in one shot for the first time in 24 years. The US central bank's move followed two days of steep losses in Asian and European equities on worries that a deteriorating US economy would drag other regions down with it.

The total turnover on BSE amounted to Rs 7099 crore as compared to Rs 5545 crore by 14:30 IST.

Despite the rally, the market breadth was negative on BSE: 1401 shares declined as compared to 1302 that rose. 23 shares remained unchanged.

The BSE Mid-Cap index surged 8.15% to 7,789.31 and the BSE Small-Cap index gained 3.96% to 10,425.34, as per provisional closing

All the 30-members of Sensex pack advanced.

India's largest power utility company Reliance Energy surged 16.76% to Rs 2004 after the company today said it had won a railway project worth Rs 2500 crore from the Delhi Metro Rail Corporation, in consortium with Spain's CAF. It was the top gainer from Sensex pack.

India’s largest generation company in terms of net profit National Thermal Power Corporation galloped 13.25% to Rs 222.75 on high volumes of 65.99 lakh shares. As per reports the company plans to invest Rs 1,729 crore for development of the Jharkhand coal mine.

IT pivotals saw value buying. Satyam Computers (up 10.25% to Rs 391), TCS (up 7.47% to Rs 859), Infosys (up 2.86% to Rs 1417), and Wipro (up 1.43% to Rs 435) logged gains

Banking and financial shares surged on hopes of a rate cut from the Reserve Bank of India following the Fed rate cut. India’s largest dedicated housing finance company in terms of revenue Housing Development Finance Company surged 3.21% to Rs 2560.

ICICI Bank, the country’s largest private sector bank in terms of net profit, gained 4.89% to Rs 1179.70. State Bank of India, the country's largest bank in terms of net profit vaulted 8.56% to Rs 2344

HDFC Bank jumped 6.83% to Rs 1538. On Monday, 21 January 2008, HDFC Bank reported 45.2% rise in net profit to Rs 429.36 on on 59.70% rise in total income to Rs 3405.79 crore in Q3 December 2007 over Q3 December 2006.

India’a largest private sector firm by market capitalization and oil refiner Reliance Industries surged 8.48% to Rs 2558. 13.10 lakh shares changed hands on the counter on BSE

India's top commercial vehicles maker by sales Tata Motors rose 1.76% to Rs 669.80 on reports that the company has signed a development contract with Chrysler LLC for developing electric vehicles.

European markets, which began trading after Indian markets, slipped into the red. Key benchmark indices in Germany (down 1.51% to 6,667.45), France (down 0.23% to 4,831.33), and United Kingdom (down 0.19% to 5,729.40) declined.

Asian markets, which began trading before Indian markets, were trading higher today 23 January 2008. Hong Kong's Hang Seng (up 10.72% at 24,090.17), China’s Shanghai Composite (up 3.14% to 4,703.77), Japan's Nikkei (up 2.04% at 12,829.06), and South Korea's Seoul Composite (up 1.21% at 1,628.42) advanced.

However, Taiwan's Taiwan Weighted slipped 2.29% at 7,408.40

The Dow Jones industrial average which was down 465 points at one point of time staged a solid intra-day rebound to close 128.11 points lower at 11,971.19 on Tuesday after the Fed rate cut. The Standard & Poor's 500 index, fell 14.69, or 1.11%, to 1,310.50, while the Nasdaq Composite index lost 47.75, or 2.04%, to 2,292.27.

Back home market suffered fall for the seventh straight day on Tuesday, 22 January 2008 triggered by selling by foreign institutional investors (FIIs), margin calls and weak global markets. The BSE Sensex plunged 875.41 points or 4.97% to 16,729.94, on Tuesday 22 January 2008. The S&P CNX Nifty lost 309.50 points or 5.94% to settle at 4,899.30, on Tuesday 22 January 2008.

As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 4265.19 crore on Tuesday, 22 January 2008, their highest single day outflow since they started investing in the market in 2001. Domestic institutional investors (DIIs) were net buyers of shares worth Rs 2278.71 crore on Tuesday, 22 January 2008.

FIIs were net buyers to the tune of Rs 7,669.88 crore in the futures & options segment on Tuesday, 22 January 2008. According to data released by the NSE, FIIs were net buyers of index futures to the tune of Rs 2,823.06 crore and sold index options worth Rs 137.26 crore. They were net buyers of stock futures to the tune of Rs 4,989.56 crore and sold stock options worth Rs 5.49 crore.

Buying from insurance firms and mutual funds has supported the market at declines in recent months. Insurance firms have been raising lots of funds through unit-linked insurance plans with high weightage for equity. The money is being pumped in the secondary market. It now remains to be seen whether the investors in a unit-liked insurance plan (ULIP) stick to a plan with high exposure to equity if the market continues to remain weak. Insurance companies provide ULIP investors an option to switch over to debt funds from equity funds with certain restrictions.

Fundamentals of the Indian economy remain strong. Corporate profits continue to grow at a good pace

Meanwhile, Bhartiya Janata Party (BJP) has decided to take a measured approach to the crisis with no demand for the resignation of Finance Minister P Chidambaram, reacting to second sharp day of market meltdown on 22 January 2008. Instead, party president Rajnath Singh has asked party workers to wait at least for a week and allow the panic to die down.

Post Market Commentary -Jan 23 2008

The market closed on a strong note on the back of heavy buying across the sectoral indices scrips. The market opened with hand some gains backed by favoring cues from the Asian markets and soon pared some of its gains but gained the momentum there after to closed on an upbeat note. The market also took the news by surprise of an intermeeting cut in the fed funds rate 75 basis point to 3.50% by the Federal Open Market Committee and a 75 basis point cut in the discount rate to 4.00%. The BSE Sensex touched an intraday high of 17,997.11 and low of 16,951.03. The BSE Sensex closed up by 864.13 points at 17,594.07 and NSE Nifty grew by 304.1 points to close at 5,203.40. The BSE Mid Cap and Small Cap closed higher by 587.06 points and 396.95 points at 7,789.31 and 10,425.34 respectively.

BSE Realty index surged 1,088.83 points at 10,609.67 as Omaxe (42.31%), Penland (41.05%), Ansal Infra (30.24%), Anant Raj (20%), Sobha Dev (18.18%) and Unitech (11.99%) closed in green.

BSE Metal index closed higher by 966.97 points at 15,081. Scrips that advanced are Ispat Inds (30.56%), Hind Zinc (15.73%), Sesa Goa (15.45%), Jindal Stainless (14.52%) and SAIL (12.12%).

BSE Oil & Gas index grew by 870.80 points to close at 10,845.58. Scrips that jumped are Essar Oil (27.11%), RNRL (20.68%), RPL (15.30%), GAIL India (8.64%) and Reliance Inds (8.35%).

BSE Capital Goods index grew by 768.40 points to close at 17,221.13. Scrips that gained are Elecon Eng (17.80%), Kir Oil Eng (17.12%), Praj Inds (15.10%), Bharat Elec (13.26%), BHEL (8.09%) and Areva (7.37%).

BSE Bankex index closed up by 572.89 points at 10,731.24. Scrips that grew are Union bank (21.94%), Allahabad bank (19%), Andhra bank (15.47%), IOB (11.99%), BOB (11.78%) and Oriental bank (10.18%).

BSE IT index advanced by 187.78 points to close at 3,631.37 as NIIT Techno (15.37%), Aptech (13.50%), GTL Ltd (12.70%), Rolta India (11.92%), Satyam (10.84%) and TCS (8.48%) closed higher.

Fed cuts rates, can it boost the market ?

The market may advance today, reversing its seven day fall on the back of global recovery, triggered by the US Federal Reserve’s surprise rate cut. The US Federal Reserve in a surprise move on Tuesday, 22 January 2008, cut Fed funds rate and discount rate by 75 basis points each. The Fed funds rate is now at 3.5%. This comes as an attempt to limit the risks of a recession, after huge selling in global financial markets. It is the largest rate cut in one shot for the first time in 24 years.

Most Asian markets were trading higher today, 23 January 2008. Hong Kong's Hang Seng (up 7.28% at 23,342.18), Japan's Nikkei (up 3.35% at 12,994.32), Singapore's Straits Times (up 2.97% at 2,951.82), and South Korea's Seoul Composite (up 1.74% at 1,637.02) advanced. However, Taiwan's Taiwan Weighted (down 0.17% at 7,569.05) and China’s Shanghai Composite (down 0.24% to 4,548.80) declined..

The Dow Jones industrial average which was down 465 points at one point of time staged a solid intra-day rebound to close 128.11 points lower at 11,971.19 on Tuesday after the Fed rate cut. The Standard & Poor's 500 index, fell 14.69, or 1.11%, to 1,310.50, while the Nasdaq Composite index lost 47.75, or 2.04%, to 2,292.27.

Back home market suffered fall for the seventh straight day on Tuesday, 22 January 2008 triggered by selling by foreign institutional investors (FIIs), margin call and weak global markets. the BSE Sensex plunged 875.41 points or 4.97% to 16,729.94, on Tuesday 22 January 2008. At one point of time it was down 2273.93 points. But value buying and short covering helped the markets erase some of sharp losses. The S&P CNX Nifty lost 309.50 points or 5.94% to settle at 4,899.30, on Tuesday 22 January 2008.

The BSE Sensex lost 4,097.51 points or 19.67% in just seven consecutive sessions from a recent high of 20,827.45 on 11 January 2008. The S&P CNX Nifty lost 1300.80 points or 20.98% from 6200.10 on 11 January 2008.

Sensex has now pared 4476.83 points or 21.11% from its record high of 21,206.77 hit on 10 January 2008. The S&P CNX Nifty is down 1457.80 points or 22.93% from all-time high of 6,357.10 hit on 8 January 2008.

As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 4265.19 crore on Tuesday, 22 January 2008, their highest single day outflow since they started investing in the market in 2001. Domestic institutional investors (DIIs) were net buyers of shares worth Rs 2278.71 crore on Tuesday, 22 January 2008.

FIIs were net buyers to the tune of Rs 7,669.88 crore in the futures & options segment on Tuesday, 22 January 2008. According to data released by the NSE, FIIs were net buyers of index futures to the tune of Rs 2,823.06 crore and sold index options worth Rs 137.26 crore. They were net buyers of stock futures to the tune of Rs 4,989.56 crore and sold stock options worth Rs 5.49 crore.

Buying from insurance firms and mutual funds has supported the market at declines in recent months. Insurance firms have been raising lots of funds through unit-linked insurance plans with high weightage for equity. The money is being pumped in the secondary market. It now remains to be seen whether the investors in a unit-liked insurance plan (ULIP) stick to a plan with high exposure to equity if the market continues to remain weak. Insurance companies provide ULIP investors an option to switch over to debt funds from equity funds with certain restrictions.

Fundamentals of the Indian economy remain strong. Corporate profits continue to grow at a good pace

Reliance Energy gets New Delhi order

Reliance Energy (REL) has reportedly bagged the New Delhi-Indira Gandhi International Airport link of the Delhi metro. Delhi Metro Rail Corporation (DMRC) has issued a letter of intent (LOI) to a consortium of REL and CAF of Spain, the reprots suggested.

Infosys and Wipro may reportedly bid for specific verticals of $13-billion Capgemini. The Indian IT majors who have enough cash assets for a large buyout are not interested in complete company acquisition because of stringent labour laws in France (where the Capgemini is headquartered) and other parts of Europe, reports suggested.

GHCL is reprotedly demerging its businesses into three separate firms which would all be listed entities. According to reports, the firm is likely to demerge into three companies which would be involved in soda ash, home textiles and retailing.

Consolidation of associate banks’ of State Bank of India (SBI) with their parent bank is likely to get delayed. The crucial board meeting of the six associate banks of SBI slated on 24 January 2008 to consider an in-principle nod for merger with their parent bank has been put off, the reports suggested.

Balaji Telefilms reported 13.55% decline in net profit to Rs 18.82 crore 5.95% fall in sales to Rs 79.97 crore in Q3 December 2007 over Q3 December 2006.

SpiceJet reported net profit of Rs 9.34 crore in the quarter ended December 2007. Sales reported at Rs 408.51 crore in the quarter ended December 2007

Punjab Tractors reported 3.25% rise in net profit to Rs 25.40 crore 15% increase in sales to Rs 302.90 crore in Q3 December 2007 over Q3 December 2006.

Lanco Industries reported 30% rise in net profit to Rs 8.06 crore on 28.28% increase in sales to Rs 130.29 crore in Q3 December 2007 over Q3 December 2006.

Swaraj Engines reported 24.80% rise in net profit to Rs 4.68 crore on 12.28% increase in sales to Rs 38.96 crore in Q3 December 2007 over Q3 December 2006.

Tamil Nadu Newsprint & Papers reported 27.71% rise in net profit to Rs 28.48 crore on 9.65% increase in sales to Rs 235.14 crore in Q3 December 2007 over Q3 December 2006.

Tata Teleservices Maharashtra (TTML) reported net loss of Rs 27.43 crore in the quarter ended December 2007 as against net loss of Rs 59.17 crore during the previous quarter ended December 2006. Sales rose 21.25% to Rs 439.76 crore in Q3 December 2007 over Q3 December 2006.

Ballarpur Industries, Bank Of Maharashtra, Bongaigaon Refinery & Petrochemicals, Canara Bank, Chennai Petroleum, Dena Bank, Fortis Healthcare, Hind Zinc, Mid-Day, Nagarjuna Fertiliser, Polaris Software, PVR, Shree Renuka Sugars, Shriram Transport Finance, Sonata Software, SRF, Sun TV Network, Bank Of Rajasthan, Union Bank of India, Varun Shipping, will declare their December 2007 ended results today.

Pre Market Watch - Jan 23 2008

The Indian Market is likely to have a positive opening due to favoring cues from the Asian markets. Yesterday, the Indian market closed in red but considering the initial set back, it has managed to recover some ground during the final trading hours of the session. The market opened with circuit down on the back of negative cues from the global markets and was suspended for an hour. The BSE Sensex closed lower by 875.41 points at 16,729.94 and NSE Nifty fell by 309.5 points to close at 4,899.30. We expect that the market may remain volatile during the trading session. The Federal Open Market Committee has approved the 75 basis point inter meeting cut in the fed funds rate to 3.50%.

On Tuesday, the US market closed in red. The Dow Jones Industrial Average (DJIA) closed lower by 127.62 points at 11,971.68. S&P 500 index slipped by 14.69 points to close at 1,310.50 and NASDAQ dropped by 47.75 points to close at 2,292.27

Indian ADRS closed in mixed. In technology sector, Satyam grew by (3.46%) along with Wipro by (1.32%) and Infosys by (0.13%). In banking sector, HDFC bank and ICICI bank slipped by (4.61%) and (1.06%) respectively. MTNL and VSNL dropped by (17.22%) and (12.05%) respectively.

The major stock markets in Asia are trading firm. Hang Seng is trading higher by 1584.55 points at 23,342.18 along with Japan''s Nikkei trading up by 421.27 points at 12,994.32 and Singapore Starit Times is trading at 2,951.82 up by 85.27 points.

On Tuesday, the FIIs stood as net seller both in equity and debt. The gross equity purchased was Rs4,896.90 Crore and the gross debt purchased was Rs142.40 Crore while the gross equity sold stood at Rs7,322.50 Crore and gross debt sold stood at Rs236.40 Crore. Therefore, the net investment of equity reported was (Rs2,425.70 Crore) and net debt was (Rs93.90 Crore).

Today, Nifty has support at 4,789 and resistance at 5,043 and BSE Sensex has support at 16,372 and resistance at 17,681.

Grey Market - Bang Overseas, Reliance Power, Cords Cable

Future Capital Holding 765 380 to 400


Reliance Power 450 180 to 200 (Not bad, eh ? after all the panic)


Emaar MGF 610 to 690 250 to 275


J. Kumar Infraprojects 110 to 120 10 to 12


Cords Cable Ind. 125 to 135 12 to 15


Bang Overseas 200 to 207 30 to 35

India Strategy - Jan 23 2008

India Strategy - Jan 23 2008

Investment Picks

GMR Infrastructure

RPL

Sterlite Industries

Axis Bank

L&T

The recommendations are for long-term purpose and one should hold on to these scrips for at least six months to earn reasonable returns.

Via Indiainfoline

Wall of Worry…sit on the fence!

The greatest of worries can't pay the smallest of debts.

It’s cuts and bruises all around. The Federal Reserve has yet again attempted to rescue not just the US economy, but global markets. The unscheduled, yet expected rate cut was prompted by the global meltdown over the past couple of days and a weak start to the year for Wall Street. Though the Fed rate cuts may improve things across global markets for the time being, the worries are far from over. There could be more pain in the offing. Pain is bearable for a short time. But prolonged pain leads to torture so ensure that your positions are good enough to climb over any wall of worry. Else, sit on the fence till the situation stabilizes. We expect a gap-up opening and another highly volatile day of trading. Trend across Asia and later on in Europe will be key to watch out for.

There is a growing feeling that the US is speeding into a recession in the wake of the housing sector bust and the ensuing strain in the credit markets. There are fears that a slowing US economy could hurt 4-5 years of strong global expansion. Hence, the carnage across global markets. But, the Fed move has managed to stem the tide for the time being. There is talk of another 50-basis-point cut by the Fed at its Jan 29-30 meeting. Given the dire situation that the US and the global economy find themselves, that could turn out to be true. In that case, global markets should stage a strong comeback. Not only that, now there is also talk that even the generally conservative RBI Governor YV Reddy could relent and loosen his tight monetary policy. That will surely fire up the bulls. Even an indication of rates having peaked out will be suffice to shore up the gloomy sentiment. A good, market-friendly and reform-oriented budget will be the icing on the cake. However, there is also a chance that the rosy scenario may not work out the way we all wish it to.

FIIs pulled out Rs42.65bn (provisional) from the cash segment yesterday. Domestic institutions pumped in Rs27.79bn. In the F&O segment, they were net buyers of Rs76.7bn. On Monday, FIIs were net sellers of Rs24.26bn. In the past five trading sessions, the overseas investors have sold Indian stocks worth US$3bn. Mutual Funds were net buyers of Rs19.98bn.

Results Today: Avaya Global, BILT, Bank of Maharashtra, Bank of Rajasthan, Bongaigaon Refinery, Canara Bank, Chennai Petroleum, D-Link, Dena Bank, Euro Ceramics, Fortis Healthcare, Foseco India, Graphite India, Hindustan Zinc, Ion Exchange, Mid-Day Multimedia, Mirc Electronics, Monsanto India, MRO-TEK, Polaris Labs, PVR, Renuka Sugar, SRF, Sun TV, Union Bank, Varun Shipping and Vivimed Labs.

Kinetic Engineering has decided to sell some of its surplus assets near Pune for Rs480mn. A buyer has been identified and MOU has been entered into. The formalities including obtaining various approvals is under process and expected to be completed by March 31.

Kinetic Engineering's Board has also approved the merger of the Auto Component Division of Jaya Hind Sciaky with the company

Asian stocks have rebounded after the Fed rate cut. The MSCI Asia Pacific Index added 2.6% to 135.47 as of 10:30 a.m. in Tokyo, headed for its biggest gain since Nov. 29. The regional benchmark tumbled 10% in the previous two sessions. It yesterday completed its worst two-day drop in almost 18 years.

The Nikkei in Tokyo was up 3.35% at 12,994 while the Hang Seng in Hong Kong gained 6.3% at 23,132. The Kospi in Seoul advanced 2.1% to 1643 while the Straits Times in Singapore rose 2.9% to 2949. The Shanghai Composite was up 1.15% at 4611 but the Taiex in Taiwan was flat at 7582.

US stocks closed well off their day's lows after the Fed announced a 75-basis-point cut in benchmark interest rates to ward of the looming threat of a recession. The global market selloff prompted the Fed to hold an emergency telephone conference Monday night, and slash the fed funds rate to 3.5%.

Treasury Secretary Henry Paulson says the Fed's emergency rate cut may boost investor confidence and has called on Congress to quickly enact legislation to buttress growth. His remarks came after a two-day rout across global equity markets fueled by mounting concerns that the US is headed into a recession.

The S&P 500 dropped 15 points, or 1.1%, to 1,310.5. The Dow Jones slid 128 points, or 1.1%, to 11,971.19, its first close below 12,000 since November 2006. The Nasdaq lost 48 points, or 2%, to 2,292.27.

Market breadth was negative. About five stocks declined for every four that rose on the New York Stock Exchange.

US stocks have had a miserable start to 2008. Year-to-date, the Dow is down 9.8%, the S&P 500 is down 10.8% and the Nasdaq has fallen 13.6%.

In a statement, the Fed said it was making the move due to the weakening economic outlook and increased risks to growth. This was the first emergency interest rate cut since the Sept. 2001 terrorist attacks in New York. It was also the biggest interest rate cut since 1984.

Treasury prices surged in a classic flight-to-quality, with the yield on the 10-year note falling to 3.45% from 3.65% late on Friday. The dollar fell versus the euro and gained against the yen.

US light crude oil for February delivery fell 72 cents to settle at $90.57 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery rose $8.60 to settle at $890.30 an ounce.

After the close, Apple reported fiscal second-quarter earnings and revenue guidance that missed Wall Street forecasts. The company also reported higher fiscal first-quarter sales and earnings that topped estimates, but investors focused on the forecast, sending shares lower in extended-hours trade.

Texas Instruments reported higher fourth-quarter earnings and weaker revenue. The chipmaker also issued a mostly in-line first-quarter forecast. Shares gained about 1%.

The European Central Bank (ECB) and the Bank of England (BOE) may have to follow the Fed in cutting rates. The widening interest-rate differential between the US and Europe may spur gains in the euro, which is not good for EU. Bank of Canada, in a scheduled meeting, lowered its main rate by a quarter percentage point to 4% and signaled it will act again to shield Canada from the US slowdown.

Strength in the banking sector helped European markets to a higher. The pan-European Dow Jones Stoxx 600 index ended up 2.4% at 316.17. The UK's FTSE 100 finished up 2.9% at 5,740.10, while the French CAC 40 ended 2.1% higher at 4,842.54, and the German DAX 30 ended down 0.3% at 6,769.47.

In the emerging markets, the Bovespa in Brazil was up 4.45% at 56,097 while the IPC index in Mexico surged 6.4% to 26,892. The RTS index in Russia was down 1.6% at 1967 and the ISE National-30 index in Turkey fell 1.7% to 56,314.

Bulls hope for some stability!

Markets slumped second day in running as both the exchanges were halted after benchmark Sensex and Nifty hit the 10% lower circuit limit at open. The fall was attributed to margin pressure amid fears of US economic slow down. Markets extended the down fall to the seventh straight trading session marking a fall of more than 20% since reaching a record high of over 21,200 on January 10, 2008.

However, after wildly gyrating 2,200 points between its high and low, benchmark Sensex staged a swift recovery after crashing by more than 12% early Tuesday. The rebound could be attributed to a reassuring statement about the health of the Indian economy from Finance and the Prime Ministers. Finally, the 30-share Sensex closed at 16,729, plunging 875 points (4.9%). The NSE Nifty nose-dived 309 points or 6% to close at 4,899.

Satyam recovered lost 3.5% to Rs353. The company posted a consolidated profit after tax of Rs4.34bn for the quarter compared to Rs4.09bn in the previous quarter. This represents a sequential growth of 6%. The company also announced that corresponding revenue growth under Indian GAAP consolidated is expected to be between 29 % and 29.2 %. EPS for the full year is expected to be Rs25.50, implying a growth rate of 18.9 %.

The company on Monday announced that it entered into a definitive agreement to acquire Bridge Strategy Group, a Chicago-based management consulting firm. In making the US$35mn, all-cash purchase, Satyam said it significantly reinforces its strategy consulting and business transformation capabilities. The scrip touched an intra-day high of Rs379 and a low of Rs305 and recorded volumes of over 38,00,000 shares on NSE.

Bank of India was among the gainer, the scrip was up 2.5% to Rs390. The company announced that it posted a net profit of Rs5118.90mn for the quarter ended December 31, 2007 as compared to Rs2548.70mn for the quarter ended December 31, 2006. Total Income has increased from Rs25794.50mn for the quarter ended December 31, 2006 to Rs37052.10mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs399 and a low of Rs305 and recorded volumes of over 15,00,000 shares on NSE.

BHEL ended at Rs1993 down 5.2%. The company declared that the company won Rs8.66bn contract from Reliance Industries. The scrip touched an intra-day high of Rs2075 and a low of Rs1800 and recorded volumes of over 17,00,000 shares on NSE.

Grasim Industries slipped over 5% to Rs2862. The company posted a net profit (after minority share) of Rs7218.60mn for the quarter ended December 31, 2007 as compared to Rs5593.10mn for the quarter ended December 31, 2006. Total Income has increased from Rs37329.90mn for the quarter ended December 31, 2006 to Rs44488.30mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs3110 and a low of Rs2570 and recorded volumes of over 98,000 shares on NSE.

Corporation Bank dropped over 6% to Rs352. The company announced that it posted a net profit of Rs1909mn for the quarter ended December 31, 2007 as compared to Rs1464.20mn for the quarter ended December 31, 2006. Total Income has increased from Rs10276mn for the quarter ended December 31, 2006 to Rs12658.30mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs404 and a low of Rs270 and recorded volumes of over 2,00,000 shares on NSE.

Lupin declined by over 6.6% to Rs501. The company announced its Q3 results with net profit at Rs1.7bn Vs Rs560.3mn and net sales at Rs7.50bn Vs Rs5.11bn. The scrip has touched an intra-day high of Rs538d a low of Rs425d has recorded volumes of over 2,00,000 shares on NSE.

Provogue is down 5.3% to Rs1200. The company declared that it acquired majority stake in Sporting & Outdoor. The scrip touched an intra-day high of Rs538 and a low of Rs425 and recorded volumes of over 2,00,000 shares on NSE.

Vijaya Bank declined by over 12% to Rs56. The company declared its Q3 result with net profit at Rs1.27bn Vs Rs927.3mn and interest income at Rs10.2bn Vs Rs7.3bn. The scrip touched an intra-day high of Rs65 and a low of Rs45 and recorded volumes of over 29,00,000 shares on NSE.

News Snippets:

SBI group's consolidation is likely to be delayed. (BL)

L&T may form a JV with US arms major Lockheed Martin to develop Mark 41 Vertical Launching Systems in India. (ET)

NTPC and Gail might have to pump in more money into the Dabhol power project. (ET)

Tata Motors has signed a development contract with Chrysler’s electric vehicle unit to develop and market an electric version of the Ace in the US. (BL)

Tata Power, GMR Energy and GVK Power are eyeing New Delhi's ’s Rs1.75bn first waste-to-energy project. (BS)

An Empowered Committee of Secretaries has allowed ONGC Videsh to acquire stake in Venezuela’s San Cristobal oilfield. (BL)

NTPC is looking to invest Rs17bn in a Jharkhand coal mine. (FE)

GAIL and Engineers India have jointly submitted an EoI to Oman Gas Company for setting up a gas processing plant in Oman. (FE)

United Spirits has launched Dalmore and Jura from its Whyte & Mackay portfolio along with W&M blended scotches. (ET)

Piaggio is planning to increase production and launch new scooters in India. (ET)

Sobha Developers is planning to develop a 156-unit luxury residential project in North Bangalore. (ET)

Infosys and Wipro may bid for specific verticals of Capgemini. (ET)

Supreme Court has rejected a petition seeking stay on construction of DLF Cyber city in Gurgaon. (ET)

Arvind Mills is planning to invest Rs4bn to expand its retail business in four years. (ET)

GHCL is planning to demerge its business into three listed entities. (ET)

Jet Airways is to set up a Maintenance Repair and Overhaul facility and a flight catering facility. (BL)

Aegis Logistics intends to set up 70 outlets of Auto Gas LPG in Andhra Pradesh. (BL)

Delay on the part of Essar Oilfield Services in deploying a semi-submersible rig has affected GSPC’s exploration plan in its deepwater K-G Basin block. (BL)

IOC is setting up an LPG import facility at the land allotted to it by Cochin Port Trust at an investment of Rs1.7bn. (BL)

SIDBI has reduced its prime lending rate by 0.5% and its deposit rates by 0.25%. (BL)

Tanishq, the jewellery division of Titan Industries is embarking on a retail expansion with an aim to increase sales by 50% to Rs30bn in FY09. (BL)

A consortium comprising Reliance Energy and Spanish firm CAF has bagged the project to operate and manage a 22.7 km metro rail link between New Delhi city centre and international airport for 30 years. (BL)

Huawei Tech, Telefon AB LM Ericsson and Nokia Siemens Networks are pursuing a supply contract worth ~US$4.8bn with Tata Tele. (Mint)

Apollo Tyres expects revenues of US$350mn from Hungarian unit in the second year of operations. (DNA)

HDFC Bank is looking to foray into investment banking in the next 3-4 months. (DNA)

PNB may quit JVs with Principal Financial Group in the asset management and insurance broking businesses. (BS)

India added 8.17mn new telecom subscribers in December, taking overall telecom density to 23.89%. (ET)

The RBI has temporarily allowed banks to increase their ceilings on capital market exposures. (ET)

The Government is planning a Rs70bn package to revive the irrigation sector. (ET)

The Government is planning to relax few ECB norms for Ultra Mega Power projects. (ET)

Freight rates for bulk commodities like coal and iron ore could go down by 3-5% in the forthcoming railway budget. (ET)

Indian Railways has managed to negotiate a discount of Rs150 per kilolitre of HSD from oil marketing firms for 2008. (BL)

The EGoM on SEZs will discuss a finance ministry proposal on February 4, to impose export obligation in excess of 50% on such zones. (BS)

CBoP, HDFC Bank, HCC, IPCA Labs

CBoP, HDFC Bank, HCC, IPCA Labs

Crude drops despite fed cut

Prices recover from intra day lows but ends lower as traders fail to overcome recession fears

Crude prices once again fell today, Tuesday, 22 January, 2008. Price recovered from intra day lows but traders could not get outs of the recessionary fears despite Federal Reserve slicing benchmark interest rates by 75 basis points to 3.5%. Global stocks markets worldwide plunged in the last couple of days on fears that US economy would be hitting a recession soon. There was no floor trading in New York yesterday because of the Martin Luther King Day holiday.

Crude-oil futures for light sweet crude for February delivery today closed at $89.85/barrel (lower by $0.72/barrel or 0.8%) on the New York Mercantile Exchange. Futures touched $85.42 before the Fed announcement. Prices are 76% higher than a year ago.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.

The Federal Reserve today slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations.

Brent crude oil for March settlement today rose $0.94 (1.1%) to $88.45 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.

Natural gas and crude oil drop by 1.4% at MCX

Natural gas fell for a fifth day amid speculation an emergency interest rate cut by the Federal Reserve won't be enough to prevent the U.S. economy from sliding into recession, paring demand for gas. Gas for February delivery fell 32.3 cents (4%) to settle at $7.67 per million British thermal units.

Against this backdrop, February reformulated gasoline dropped 2.28 cents to $2.2806 a gallon and February heating oil fell 3.48 cents to $2.4726 a gallon.

In the currency markets, the dollar fell against its major counterparts today pressured by expectations of further rate cuts from the Fed. The dollar index, which tracks the performance of the greenback against other major currencies, was down about 0.7% at 76.311, after earlier dropping as low as 76.251.

Members of the OPEC 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, 2008 meeting in Vienna.

At the MCX, crude oil for February delivery closed at Rs 3,489/barrel, lower by Rs 50 (1.4%) against previous day’s close. Natural gas for January delivery closed at Rs 308.2/mmtbu, lower by Rs 4.3/mmtbu (1.3%).

Gold ends higher on fed cut

Gold and silver prices erase earlier loss and close moderately higher

Bullion metals ended higher today, Tuesday, 22 January, 2008 after the greenback slipped after Federal Reserve declared an emergency interest rate cut to save the Us economy from plunging into a recession. Since the past couple of days, stocks markets worldwide, mainly in Asian region, plunged on fear that U economy would be hitting a recession soon. Silver also gained after dropping earlier in the day.

Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.

Comex Gold for February delivery rose $8.6 (1%) to close at $890.3 an ounce on the New York Mercantile Exchange. Earlier in the day it slipped by more than 3.5%. This year, prices have gained 6% till date. Last week, gold suffered a loss of 1.8%.

Comex Silver futures for March delivery fell 11 cents (0.7%) to $16.105 an ounce. Silver has gained 9.2% in 2008. Earlier in the day it slipped by more than 3.5%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.

The Federal Reserve today slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations.

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.

Gold prices had closed above the $900 mark for the first time on Monday, 14 January, 2008. Since then it has dropped by more than $12.

Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.

On the currency markets, the dollar fell against its major counterparts today pressured by expectations of further rate cuts from the Fed. The dollar index, which tracks the performance of the greenback against other major currencies, was down about 0.7% at 76.311, after earlier dropping as low as 76.251.

In the energy market today, crude oil fell to a six-week low on recession concerns and oil closed lower by 72 cents today at $89.85 barrel.

Gold had climbed 31% in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. The Fed reduced federal funds rate three times in FY 2007.

At the MCX, gold prices for February delivery closed lower by Rs 166 (1.5%) at Rs 11,025 per 10 grams. Prices rose to a high of Rs 11,194 per 10 grams and fell to a low of Rs 10,991 per 10 grams during the day’s trading.

At the MCX, silver prices for March delivery closed Rs 530 (2.5%) higher at Rs 20,368/Kg. Prices opened at Rs 20,911/kg and fell to a low of Rs 20,296/Kg during the day’s trading.