Post Session Commentary - Feb 19 2008

On Tuesday, BSE Sensex ended the day on a flat note with a gain of 27.61 points, or 0.15%, at 18,075.66, while the broad-based NSE Nifty closed at 5,280.80, marginally up 3.9 points, or 0.07%.

The 30-share benchmark index, Sensex, opened with a positive gap of 167.21 points at 18,215.26 mirroring good global cues in the early trade. The index was steady in the noon trades, but after touching a day`s high of 18,314.10, it lost all its strength, due to selling pressure at the higher levels.

After losing more than 200 points from the days high, it fell into the negative for a brief period and touched a day`s low of 18,018.48. However, just before the closing, it moved up in the positive to close on a flat note.

Midcap Index rose 43.85 points (0.57%) and Small Cap Index moved up 40.19 points (0.41%).

Global markets

Asian stocks closed positive on Tuesday (Feb. 19, 2008) as concern that banks will report more subprime-related losses eased down. Investors further gained confidence after higher metals prices boosted natural-resources companies.

Market statistics



Out of the total 2,808 stocks traded at the BSE, 1,513 advanced, 1,238 declined while 57 remained unchanged.



Among the sectoral indices, BSE Auto rose 1.62%, BSE Bankex rose 0.17%, BSE Power declined 1.13%, BSE Realty dipped 1.13% and Metal was down 0.23%.



Movers and Shakers



Gainers at the Sensex were Bajaj Auto, which surged 5.58% to close at Rs 2,322.60, Ranbaxy, gained 4.81% to Rs 415.40 and ACC rose 4.42% to finish at Rs 789.45. TCS, Grasim, M&M, HUL, Cipla, L&T and Ambuja Cement also rose.



Laggards at the BSE Sensex include REL, which declined 4.41% to end at Rs 1,622.15, Hindalco dipped 2.44% to Rs 179.60 and DLF shed 2.02% to close at Rs 842.45. ITC, HDFC, RComm, Tata Steel, Satyam, ONGC and Wipro also slipped.



Top Turnover



Reliance Capital topped the turnover chart with Rs 2,652.7 million followed by Reliance Power with Rs 2,597.9 million.



New Listing



OnMobile Global (OGL), the largest telecommunications value added services provider in India, settled at a premium of 17.76%, after listing at an issue price of Rs 440 at the NSE today.

Shares touched a high of Rs 579 and a low of Rs 411. It closed with a premium of Rs 78.15, or 17.76%, at Rs 518.15. Total volume of shares traded was 25,895,949 and the total turnover was Rs 13,663.48 million at the NSE.

NSE Bulk Deal Watch - Feb 19 2008

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
19-FEB-2008,BLKASHYAP,B. L. Kashyap and Sons Li,MIREA ASSET INDIA DISCOVERY EQUITY INVESTMENT,BUY,105282,1630.00,-
19-FEB-2008,JKIL,J.Kumar Infraprojects Lim,PRASHANT JAYANTILAL PATEL,BUY,106519,120.98,-
19-FEB-2008,JKIL,J.Kumar Infraprojects Lim,TRANSGLOBAL SECURITIES LTD.,BUY,108272,118.48,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,AMBIT SECURITIES BROKING PVT. LTD.,BUY,539313,526.13,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,ASHWIN STOCKS AND INVESTMENT PRIVATE LIMITED,BUY,551920,528.02,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,B K SHAH AND CO,BUY,401752,523.93,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,DINESH MUNJAL,BUY,390360,531.43,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,FIDELITY INVESTMENT FUNDS ICVC FIDELITY SOUTH EAST ASIA FUND,BUY,600000,466.98,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,FIDELITY TRUSTEE COMPANY PRIVATE LIMITED,BUY,540000,517.95,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,KAKANI OMPRAKASH,BUY,346438,534.64,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,LATIN MANHARLAL SECURITIES PVT. LTD.,BUY,407977,541.69,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,PRASHANT JAYANTILAL PATEL,BUY,594564,529.65,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,SHAH HEMANG DINESH,BUY,835886,523.15,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,TRANSGLOBAL SECURITIES LTD.,BUY,337919,538.12,-
19-FEB-2008,RAMCOIND,Ramco Industries Ltd,ON LINE TRANSPORT CO. LTD.,BUY,26725,898.00,-
19-FEB-2008,SUNDARMFIN,Sundaram Finance Ltd.,DERIVE TRADING PVT LTD,BUY,150000,660.00,-
19-FEB-2008,TANTIACONS,Tantia Constructions Limi,PRISM IMPEX PVT LTD,BUY,123921,138.04,-
19-FEB-2008,BLKASHYAP,B. L. Kashyap and Sons Li,GOLDMAN SACHS INVESTMENT MAURITIUS 1,SELL,162838,1630.00,-
19-FEB-2008,JKIL,J.Kumar Infraprojects Lim,PRASHANT JAYANTILAL PATEL,SELL,106519,122.79,-
19-FEB-2008,JKIL,J.Kumar Infraprojects Lim,TRANSGLOBAL SECURITIES LTD.,SELL,105272,118.58,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,AMBIT SECURITIES BROKING PVT. LTD.,SELL,539313,526.33,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,ASHWIN STOCKS AND INVESTMENT PRIVATE LIMITED,SELL,536920,529.40,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,B K SHAH AND CO,SELL,386189,520.77,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,DINESH MUNJAL,SELL,390360,532.46,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,KAKANI OMPRAKASH,SELL,346438,535.05,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,LATIN MANHARLAL SECURITIES PVT. LTD.,SELL,402977,542.05,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,MORGAN STANLEY INV MGMT INC A/C MORGAN STANLEY INDIA IN FUND,SELL,350737,543.31,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,PRASHANT JAYANTILAL PATEL,SELL,594564,529.40,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,SHAH HEMANG DINESH,SELL,835886,523.97,-
19-FEB-2008,ONMOBILE,OnMobile Global Limited,TRANSGLOBAL SECURITIES LTD.,SELL,333819,535.42,-
19-FEB-2008,SMSPHARMA,SMS Pharmaceuticals Limit,CITI GROUP GLOBAL MARKETS MAURITIUS PVT LTD,SELL,100000,197.00,-
19-FEB-2008,SUNDARMFIN,Sundaram Finance Ltd.,RELIANCE CAPITAL ASSET MANAGEMENT LTD A/C. PMS,SELL,149939,660.00,-
19-FEB-2008,TANTIACONS,Tantia Constructions Limi,MARYADA BARTER PVT LTD,SELL,88703,138.00,-
19-FEB-2008,TANTIACONS,Tantia Constructions Limi,PRISM IMPEX PVT LTD,SELL,11341,148.49,-

BSE Bulk Deals to Watch - Feb 19 2008

Scrip Code	Scrip Name	Client Name	Deal Type *	Quantity	Price **
531190	A V COTTEX I	EVERSIGHT TRADECOMM PVT LTD	B	30000	15.00
511589	ALMONDZ CMS	RAKAM MONEY MATTERS PVT LTD	S	200000	31.50
531223	ANJANI SYNTH	NATRAJ FINANCIAL AND SERVICES LTD	B	101642	45.40
531223	ANJANI SYNTH	NATRAJ FINANCIAL AND SERVICES LTD	S	103642	45.44
516064	AROW COAT PR	JASMEEN KAUR	B	77076	26.83
532719	BL KASHYAP	MIRAE ASSET INDIA DISCOVERY EQUITY INVESTMENT	B	105281	1630.00
532719	BL KASHYAP	GOLDMAN SACHS AND COMPANY	S	162838	1630.00
531682	CAT TECHNOL	SARFARAZKHAN SARVARKHAN PATHAN	B	287876	9.50
500083	CENTURY EXT	SHETH BROTHERS	S	141686	6.11
532941	CORDS CABLE	PACE FINCAP PRIVATE LIMITED	B	57640	147.41
532941	CORDS CABLE	PACE FINCAP PRIVATE LIMITED	S	57640	148.16
532271	CYBERMAT INF	SARFARAZKHAN SARVARKHAN PATHAN	B	435622	9.02
532271	CYBERMAT INF	SARFARAZKHAN SARVARKHAN PATHAN	S	630763	9.01
532903	DHANUSTECH	POONAMDEVI ANILKUMAR AGARWAL	S	100000	162.86
508918	GREYCELLS EN	PRIME SECURITIES LTD	B	16000	215.06
523062	J J FINANCE	NIPPONZONE SECURITIES PVT LTD	B	27000	10.53
523062	J J FINANCE	NANOJ KUMAR AGARWAL	S	27000	10.53
531633	LINCOLN PHAR	ISHAN MARKETING PVT LTD	S	300000	10.17
514328	NACHMO KNITE	AMARAKADAM INVESTMENTS PVT LTD	B	259183	2.50
514328	NACHMO KNITE	MANSAROVAR FINCAP PVT LTD	S	259183	2.50
531834	NATURA HUE C	SHARMISHTA MAHESHBHAI SHAH	B	50500	20.00
532944	ONMOBILE	B K SHAH AND CO	B	311979	529.93
532944	ONMOBILE	H.J.SECURITIES PVT.LTD.	B	386867	523.73
532944	ONMOBILE	FIDELITY INVESTMENTS MANAGEMENT HONG KONG LTD	B	544237	504.67
532944	ONMOBILE	B K SHAH AND CO	S	311979	528.07
532944	ONMOBILE	H.J.SECURITIES PVT.LTD.	S	386867	524.36
508941	PANASON CAR	RAJIV ARORA	B	27880	142.48
508941	PANASON CAR	NAIMISH J MEHTA HUF	B	26225	142.60
508941	PANASON CAR	RAJIV ARORA	S	25547	142.66
508941	PANASON CAR	NAIMISH J MEHTA HUF	S	26215	142.50
531219	POONAM PHARM	SWARN GANGA TRADING PVT. LTD.	B	37000	3.47
532369	RAMCO INDUSR	P.R.RAMASUBRAHMANEYARAJHA	B	30975	898.00
526753	ROSELABS LTD	MITA D.SHAH	B	30000	4.36
526753	ROSELABS LTD	H. R. JAVERI	S	56000	4.35
590071	SUNDARAM FIN	DERIVE TRADING PRIVATE LIMITED	B	150000	660.00
590071	SUNDARAM FIN	RELIANCE CAPITAL ASSET MANAGEMENT LTD ACCOUNT PMS	S	150061	660.00
506142	VYAPAR INDS	V J PATEL INVESTMENT	B	35824	220.19
506142	VYAPAR INDS	V J PATEL INVESTMENT	S	35824	217.65
512167	YASHRAJ SECR	DIAMANT INVESTMENT AND FINANCE	S	100100	16.47

Pre Budget Analysis

Pre Budget Analysis

Market ends slightly higher

After holding positive ground for most part of the day, the market succumbed to selling pressure in late trade erasing almost all gains. Subdued trend in European markets, which opened after Indian market, led to weakness later in the day.

The market witnessed a bout of volatility in the second half of the day. Strong response to the IPO of Rural Electrification Corporation, which opened for bidding today, had aided the rally on the bourses in early afternoon trade. Asian markets which opened before Indian market, were firm.

The market breadth was strong. 16 shares of 30-member Sensex pack advanced. Bajaj Auto surged 6% on fresh buying.

The IPO of Rural Electrification Corporation (REC) was subscribed 2.13 times by 16:00 IST. The IPO received bids for 33.32 crore shares as compared to 15.61 crore shares on offer. The price band for the IPO is Rs 90 to Rs 105.

The 30-share BSE Sensex rose 27.61 points or 0.15% at 18,075.66. Sensex had surged 266.05 points to hit a high of 18,314.10 in early trade. It lost 29.57 points at day’s low of 18,018.48 hit in late trade.

At current 18,075.66, Sensex trades at a PE multiple of 17.21 to 18.07, based on projected FY 2009 EPS of Rs 1000-to-Rs 1050 for 30 Sensex companies.

The broader based S&P CNX Nifty gained 3.90 points or 0.07% at 5,280.80. Nifty February 2008 futures were at 5250.25, a discount of 30.55 points as compared to spot closing

The market breadth was strong: On BSE 1,519 shares advanced as compared to 1228 that declined. 61 shares remained unchanged.

The BSE Mid-Cap index was up 0.57% to 7,685.33 and the BSE Small-Cap index rose 0.41% to 9,795.54. Both these indices outperformed the Sensex.

The total turnover amounted to Rs 5114 crore on BSE as compared to Rs 4,965.20 crore on Monday, 18 February 2008.

Turnover in NSE’s futures & options segment amounted to Rs 36397.03 crore as compared to Rs 32416.67 crore on Monday, 18 February 2008.

Sectoral indices on BSE displayed mixed trend. The the BSE Consumer Durables index (up 2.85% to 4,842.64), the BSE Auto (up 1.62% at 4,866.49), the BSE FMCG index (up 0.49% at 2,269.29), the BSE Health Care index (up 1.33% at 3,727.14), the BSE Bankex (up 0.17% at 10,963.76), the BSE Capital Goods index (up 0.43% at 16,392.27), the BSE IT (up 0.54% to 3,849.77), the BSE TecK index (up 0.21% to 3,339.65), outperformed the Sensex.

The BSE PSU index (down 0.43% to 8,535.79), the BSE Metal index (down 0.23% to 16,209.95), the BSE Oil & Gas index (down 0.38% to 11,130.88), the BSE Power (down 1.13% to 3,710.30), the BSE Realty index (down 1.33% at 10,070.74), underperformed the Sensex.

Bajaj Auto, the country’s second largest bike manufacturer surged 5.96% to Rs 2331 on 1.22 lakh shares. It was the top gainer from Sensex pack. The stock was in the red till afternoon trade. Its low for the day is at Rs 2185. Bajaj Auto today said the Bombay High Court has sanctioned a scheme of arrangement between the company, Bajaj Holdings & Investment and Bajaj Finserv and their respective shareholders and creditors.

India’s second largest cement manufacturer in terms of sales, ACC gained 4.82% to Rs 792.50, off sharply from day’s low of Rs 752.25.

Other cement shares, Ambuja Cement (up 0.83% to Rs 116), UltraTech Cement Company (up 0.20% to Rs 892), India Cement (up 1.36% to Rs 209.10) and Grasim (up 2.62% to Rs 2860), also logged gains

India’s largest private sector engineering company in terms of outstanding order book position, Larsen & Toubro rose 1.03% to Rs 3546.50. The company said on Monday, 18 February 2008, it has bagged an order worth Rs 1250 crore from Oil & Natural Gas Corporation.

India’s largest public sector engineering company in terms of net profit, Bharat Heavy Electricals rose 0.26% to Rs 2222. The company said during trading hours on Monday, 18 February 2008, it had bagged an order worth Rs 650 crore from General Electricity Company, Libya for setting up a 300 megatwatt gas turbine based power plant

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) slipped from day’s high of Rs 2616.80. It settled 0.78% lower to Rs 2532. 5.07 lakh shares changed hands. As per reports, the company is in advanced talks with the New York-based Vornado Realty Trust, one of the world’s top five real estate asset managers, to float a $1-billion plus fund.

ITC (down 2.29% to Rs 204.80) and DLF (down 2.77% to Rs 836), edged lower from the Sensex pack.

Pharma shares gained on fresh buying. Ranbaxy Laboratories (up 3.95% to Rs 412), Cipla (up 1.70% to Rs 187.95), and Lupin (up 3.63% to Rs 537.55), rose.

Banking shares posted marginal gains. HDFC Bank (up 0.54% to Rs 1565.35), State Bank of India (up 0.45% to Rs 2265), and ICICI Bank (up 0.41% to Rs 1213), rose

IT pivotals were mixed. Infosys Technologies (up 1.28% to Rs 1573), and TCS (up 3.23% to Rs 879.50), rose. Wipro (down 0.49% to Rs 412.50) and Satyam Computers (down 0.96% to Rs 421.90), declined

Mid-cap software shares outperformed their large-cap peers. NIIT Technologies (up 6.67% to Rs 128), Rolta India (up 3.33% to Rs 296.10), and KPIT Cummins Infosystems (up 4.88% to Rs 86), surged.

Shares of Anil Dhirubhai Ambani group (ADAG) slipped. Reliance Energy, the country’s largest private sector utility company in terms of sales, slipped 4.71% to Rs 1617. It was the top loser from Sensex pack.

Other losers from ADAG group were, Reliance Communications (down 2.03% to Rs 600.25), Reliance Natural Resources (down 2.39% to Rs 139.60), and Adlabs Films (down 3.63% to Rs 910), slipped.

Reliance Power was down 0.46% to Rs 411.75 on volumes of 62.50 lakh shares. The stock had surged 7.53% to Rs 413.65 on Monday, 18 February 2008, after the company said on Sunday, 17 February 2008, its board will meet on Sunday, 24 February 2008, to consider issue of bonus shares.The bonus shares will be issued to non-promoter shareholders to compensate the losses suffered by them when the company was listed last week. The stock has been consistently trading at a discount to IPO price of Rs 450, since its listing on 11 February 2008.

India’s largest oil exploration company in terms of market capitalisation Oil & Natural Gas Corporation slipped 0.75% to Rs 1013.10 after hitting a high of Rs 1054 in early trade. As per reports, the company has been registered with Iraqi authorities for tenders to develop the world's third-largest oil reserves.

India’s largest real estate developer in terms of market capitalisation DLF lost 2.77% to Rs 836. As per reports, the company has entered into a joint venutre with Italian designer Giorgio Armani in the retailing sector.

OnMobile Global settled at Rs 521.90 on BSE, a premium of 18.6% over IPO price of Rs 440. The stock debuted at Rs 440, at the same price at which the IPO was priced. The stock hit a low of Rs 421 and high of Rs 579.90. On BSE, 1.97 crore shares changed hands in the counter.

OnMobile Global topped the turnover chart on BSE with a turnover of Rs 1042.25 crore followed by Reliance Natural Resources (Rs 298 crore), Reliance Capital (Rs 265.30 crore), Reliance Power (Rs 259.80 crore) and Reliance Energy (Rs 181.75 crore) in that order.

Reliance Natural Resources led the volume chart with 2.08 crore shares followed by OnMobile Global (1.97 crore shares), Ispat Industries (1.61 crore shares), Reliance Petroleum (1.02 crore shares) and Nagarjuna Fertilisers (87 lakh shares), in that order.

Among the side counters, Shoppers Stop (up 17.90% to Rs 467), Astra Microwave (up 17.90% to Rs 95.65), and Disa India (up 10.61% to Rs 2020), surged.

Cords Cable (down 7.80% to Rs 140.70), Jaiprakash Associates (down 7% to Rs 264.25), and Dish TV (down 5.99% to Rs 66.70), slipped

Fertiliser stocks rose after the government announced the issue of 7.95% Fertilizer Companies’ Government of India Special Bonds 2026 at par worth Rs 3,610 crore in the second and final tranche.

Tata Chemicals (up 4.85% to Rs 305), Nagarjuna Chemicals & Fertilisers (up 0.57% to Rs 53.05), National Fertilisers (up 5% to Rs 67.10), and Gujarat State Fertilisers & Chemicals (up 3.10% to Rs 247) edged higher. The first tranche came in December 2007 for bonds worth Rs 3,890 crore.

NIIT slipped 2.33% to Rs 111.05. The company said it has signed a memorandum of understanding with the provincial government of Wuxi, China to set up IT training centers and offer training programmes.

Financial Technologies India was down 0.46% to Rs 2182. The company said its unit Multi Commodity Exchange of India has filed draft red herring prospectus to raise Rs 500 crore via an initial public offering. Financial Technologies India currently holds about 32% in MCX.

Polaris Software Lab rose 6.75% to Rs 90.90. The company announced today that it has entered into a strategic partnership with City Networks. City Networks is a leader in the development and implementation of software and services for the treasury, securities and derivatives markets.

3i Infotech surged 6.57% to Rs 125.70 after the company said it has signed a non-binding memorandum of understanding with Yucheng Technologies, China to set up a 51:49 joint venture.

United Phosphorus slipped 2.45% to Rs 322.90. The company said on Monday, 18 February 2008, it has acquired Colombian marketing firm Evofarms group. Evofarms has several product registrations in Colombia and has a distribution network covering over 100 customers.

Everest Kanto Cylinder fell 0.43% to Rs 299.15. The company said its board has granted in-principle approval for acquiring the assets of a US-based manufacturing firm for $70 million

The Union Buget 2008-09 will be the key event to watch out for in the near term. The Budget would be presented by the finance ministry at the fag end of the month.

European markets fell today, 19 February 2008. Key benchmark indices in United Kingdom (down 0.21% to 5,934.10), France (down 0.61% to 4,832.23), and Germany (down 0.59% to 6,926.55) declined.

Asian markets settled with gains. Hong Kong's Hang Seng (up 1.53% at 24,123.17), China’s Shanghai Composite index (up 2.10% to 4,664.25), Japan's Nikkei (up 0.90% at 13,757.91), Taiwan's Taiwan Weighted index (up 1.69% at 8,024.22), South Korea's Seoul Composite index (up 1.45% at 1,720.91) and Singapore's Straits Times index (up 0.74% at 3,106.13) edged higher.

The US market was closed on Monday, 18 February 2008, for the Presidents' Day holiday.

Crude oil slipped today, 19 February 2008, as the market grappled with worries over an economic slowdown in the United States and supply concerns from Venezuela and Nigeria. U.S. light crude for March delivery was down 16 cents at $95.95 a barrel

Market Close: Downswing after losing gains..

Indices followed its counterparts the Asian markets as they open firm and and lost bit of gains but ended in green. But, Indian markets opened firm up by 200 points and continued to trade ranged. Sensex lost its early gains as profit booking was witnessed at higher levels. Europe opened in red which also impacted the market. Ther was new listing by OnMobile Global which listed with modested gains at the start but had decent acceptance as it ended up by 19% gains. Banking, Auto , IT sector were among gainers while Power, Oil & gas Metals and Realty showed weakness. Bajaj Auto rallied 5% ahead of its demerger news.

Sensex ended up by 28 points at 18075.66. It was helped up by gains in Bajaj Auto (2322.6001,+6 percent), Ranbaxy (415.4,+5 percent), ACC (789.45,+4 percent), TCS (874.85,+3 percent) and Grasim (2861.6499,+3 percent). Restricting the gains were Rel Energy (1622.15,-4 percent), Hindalco (179.6,-2 percent), ITC (205.4,-2 percent), HDFC (2859.5,-1 percent) and RCVL (605.75,-1 percent).
Paramount Communication is one of the leading manufacturers of Power Cables, Railway Cables and Telecom Cables. Paramount has two manufacturing units located at Dharuhera, Haryana and Khushkhera, Rajasthan. Paramount drives 85% of revenues from Power and Railway cable, 10% from Jelly Filled Telephone cables and rest 5% from Optical Fibre cable. Paramount is expanding the capacity in three phases with an investment of Rs 120 cr. Paramount acquired, AEI cables in UK one of the oldest cable manufacturing companies with a strong reputation. Paramount enjoys the acquisition synergy in terms of marketing network and good distribution in UK and helps to enter other countries also. The valuations are attractive compared to its peers. We are positive on the business with long term view. Do read our note to know more. The stock rallied and got locked up in uppar circuit

Adhunik Metals is into manufacturing of sponge iron, TMT Bars, special grade high carbon and low carbon steel billets along with different grades of alloy steel billets. AML has focused itself in Eastern India because of easy access to high quality raw materials. With an integrated business model from Iron ore to finished products, it caters to the requirement of major Automotive, Construction and Engineering Industry by manufacturing value added products. Majority of revenues are from OEMs that contribute close to 35% of the total revenues. This is followed by automobile (30%), steel (25%) and railways (10%). Its manufacturing facility is at Rourkela, Orrisa. Expansion plans are getting completed in next quarter and from next quarter Adhunik will have 4.5-lakh tonne capacity available from 2.5 currently. We believe primarily growth will be driven by higher realization as a result of rolled products ( rolled from outside rolling companies as its own rolling mill is likely to come in FY08). One can hold this stock looking at longer term perspective. This also got locked up in circuit.

Technically Speaking : Markets closed flat marginally in green. Sensex made an intra day high of 18314 and low of 18018. The breadth was in favor of Advances as there were 1519 Advances against 1228 Declines. Market turnover improving a bit at Rs 5114crs. Sensex support lies at 17800. Resistance lies at 18018.

Post Market Commentary - Feb 19 2008

The market closed with marginal gains after a strong start to the session. Taking the strong cues from the Asian markets, the domestic market opened with a bang and created a rally across the sectoral indices scrips. The market tumbled after the mid session to pare all its initial gains as the profit booking across the sectoral indices prevailed and finally managed to close with little gains. The Small Cap and Mid Cap scrips seemed to attract the investor''s confidence as most buying was seen from these baskets. The BSE Sensex closed higher by 27.61 points at 18,075.66 and NSE Nifty closed up by 3.9 points at 5,280.80. The BSE Mid Cap and Small Cap closed higher by 43.85 points and 40.19 points at 7,685.33 and 9,795.54 respectively.

The IPO of Rural Electrification Corporation (REC) was subscribed 1.63 times by the end of the day. The IPO received bids for 25.46 crore shares as compared to 15.61 crore shares on offer.

BSE Metal index closed down by 37.25 points at 16,209.95 as Hindalco Industries (2.44%), Ispat Industries (1.85%), Sterlite Industries (1.76%), Tata Steel (1.05%) closed in red.

BSE Bankex index closed higher by 18.91 points at 10,963.76. Gainers are ICICI Bank (0.80%), HDFC Bank (0.73%), Bank of India (0.54%), SBI (0.39%), PNB (0.35%) and Union Bank (0.25%).

BSE Realty index fell by 136.21 points to close at 10,070.74. Major losers are Purvankara (4.29%), Mahindra Life (2.30%), Omaxe Ltd. (2.03%), India Bull Real (2%).

BSE CG closed higher by 69.62 points at 16,392.27 as Havell India (3.88%), BEML (3.61%), AIA Eng (3.01%), Crompton Greaves (2.35%), L&T (1.26%), closed higher.

BSE Oil & Gas index fell by 42.03 points to close at 11,130.88. Losers are BPCL (3.25%), GAIL India (2.66%), Cairn India (2.42%), RNRL (1.99%), IOCL (0.75%) and ONGC (0.68%).

BSE Consumer Durables index closed higher by 134.08 points at 4,842.64. Gainers are Titan Inds (5.46%), Gitanjali (3.23%), Blue Star (2.71%), Lloyd Ele (2.20%) and Videocon Ind (1.62%).

Daily Technicals, Futures - Feb 19 2008

Daily Technicals, Futures - Feb 19 2008

Pre Market Watch - Feb 19 2008

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Category : Market Commentary
Headline : Pre Session Market
Date : 19 Feb 2008 09:29 AM

The Indian Market is likely to have a positive opening due to favoring cues from the Asian markets. On Monday, the market closed on a negative note as the profit booking across the counters prevailed. The market opened with hand some gains tracking the firm cues from the Asian markets but all of a sudden lost the momentum and fell to pare all its initial gains. The market from there on kept on hovering in the negative territory throughout the trading session. Reliance Power registered the highest turnover from the BSE as the company announced a bonus issue of shares. He company''s board will be meeting on February 24 to consider the ratio on issuing bonus shares. However, the Small Caps and Mid Caps remained in the limelight as most buying was seen from these baskets. From the sectoral front, the Realty index faced heavy selling pressures across the counters. The BSE Sensex closed lower by 67.20 points at 18,048.05 and NSE Nifty slipped by 26 points to close at 5,276.90. We expect that the market may gain some ground during the trading session.

On Monday, the US market was closed for the celebration of President''s day.

Today, the major stock markets in Asia are trading strong. Hang Seng is trading higher by 382.65 points at 24,141.90 along with Japan''s Nikkei trading up by 75.45 points at 13,710.85 and Taiwan Weighted trading at 7,978.28 up by 87.38 points.

The FIIs on Monday stood as net buyer both in equity as well as in debt. The gross equity purchased was Rs3,898 Crore and the gross debt purchased was Rs368.70 Crore while the gross equity sold stood at Rs2,750.50 Crore and gross debt sold stood at Rs0.30 Crore. Therefore, the net investment of equity reported was Rs1,147.50 Crore and net debt was Rs368.40 Crore.

Today, Nifty has support at 5,187 and resistance at 5,362 and BSE Sensex has support at 17,736 and resistance at 18,479.

Siemens

Siemens

GSS America Infotech, Rural Electrification, IRB Infrastructure, OnMobile Global

Rural Electrification 90 to 105 16 to 20


GSS America InfoTech 400 to 440 Discount


On Mobile Global 440 10 to 15 (Listing Today!)


Bang Overseas 207 10 to 13


Shri Ram EPC 300 Discount


IRB Infra 185 12 to 15


Manjushree Extrusion 45 5 to 7


Tulsi Extrusions 85 10 to 12


V. Guard Ind. 80 to 85 7 to 10

Market may gain on firm Asian equities

PRE-SESSION

Market may gain on firm Asian equities

The market may advance today tracking firm Asian equities. The Union will be the key event to watch out for in the near term. The Budget 2008-09 would be presented by the finance ministry at the fag end of the month.

Asian markets were trading higher today, 19 February 2008. Hong Kong's Hang Seng (up 1.61% at 24,141.90), Japan's Nikkei (up 0.55% at 13,710.85), Taiwan's Taiwan Weighted index (up 1.11% at 7,978.28), South Korea's Seoul Composite index (up 1.18% at 1,716.34) and Singapore's Straits Times index (up 0.56% at 3,100.68) edged higher.

The US markets were closed on Monday, 18 February 2008, for the Presidents' Day holiday.

Back home, the 30-share BSE Sensex slipped 67.20 points or 0.37% at 18,048.05 in volatile trade. The broader based S&P CNX Nifty was down 26 points or 0.49% at 5,276.90 on that day.

At current 18,048.05, Sensex trades at a PE multiple of 17.18 to 18.04, based on projected FY 2009 EPS of Rs 1000-to-Rs 1050 for 30 Sensex companies.

As per provisional data, foreign institutional investors (FIIs) sold shares worth Rs 342.08 crore on Monday, 18 February 2008. Domestic institutional investors (DIIs) were net sellers of shares worth Rs 134.16 crore on that day.

FIIs were net buyers to the tune of Rs 90.15 crore in the futures & options segment on Monday, 18 February 2008. They were net buyers of index futures to the tune of Rs 89.45 crore and sold index options worth Rs 21.38 crore. They were net buyers of stock futures to the tune of Rs 6.01 crore and bought stock options worth Rs 16.07 crore.

Crude oil slipped today, 19 February 2008, as the market grappled with worries over an economic slowdown in the United States and supply concerns from Venezuela and Nigeria. U.S. light crude for March delivery was down 16 cents at $95.95 a barrel

Market may remain firm

Gain in European markets and rise in Asian indices trend in the present trades could move up the local indices in early trades. Although the bias remains positive, investors should maintain caution as profit taking at higher levels may pull down the market. Among the local indices the Nifty could test 5000 on the downside while on the upper side it may move up to 5300. The Sensex has a likely support at 17000 and may face resistance at 18200.

Today's Pick - National Aluminium

We recommend a buy in National Aluminium Company (Nalco) from a short-term perspective. From the charts of Nalco it is evident that the stock has been on a long-term uptrend from its August 2007 low of Rs 237. However, in the medium-term the stock had been on a downtrend between early January to mid February (from its life high of Rs 546 to low of Rs 325). More recently the stock found support at the long-term support level at around Rs 325 (April 2006 peak) and bounced off resuming the uptrend. Following this, on February 18, the stock penetrated the medium-term down trendline. We note that there is an increase in volume for the past three trading sessions. The daily momentum indicator has entered the neutral region from the bearish zone. In addition, the long-term uptrend is still in place. We are bullish on the stock in the short-term. We expect the stock’s up move to persist further to our target price of Rs 430 in the short-term. Investors with a short-term perspective can buy the stock with stop-loss at Rs 355 levels.

Trading Calls - Feb 19 2008

Nifty 5277 Supp 5200 Res 5450

Buy Axis Bank (1051) SL 1035 Target 1071, 1079

Buy Glenmark (496) SL 491
Target 506, 509

Buy Gail (433) SL 429
Target 443, 446

Buy Educomp (4084) SL 4060 Target 4130, 4150

Sell Wipro (388) SL 393
Target 378, 375

Bulls hope to bowl’ them over!

To win you've got to stay in the game.

The lackluster markets may cause many to shift to their television screens to watch cricket. It’s a do or die situation for the Indian team which needs a good win to avoid being knocked out of the tournament. They’ve struck well with a couple of wickets at start. This is similar to our market movement which opens with a bang and ends with a whimper. But, the stock market is not a one-day game. It’s like a Test match though in the current conditions you have to play it one day at a time.

Bulls will hope for a much improved performance today. We see a positive start, but again like yesterday, trading may turn choppy and the mood will swing to the beat of the Asian and European markets.

Shares of OnMobile Global Ltd. will get listed today. The IPO of public sector power lending company Rural Electrification Corp. will open today. The issue is expected to do well despite the recent turbulence in the primary market and the disappointing listing of Reliance Power. Most brokerages have recommended a 'subscribe' to the issue.

Financial Technologies has informed that its subsidiary, the Multi Commodity Exchange of India Ltd. (MCX) yesterday filed the Draft Red Herring Prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) in connection with the proposed IPO.

A number of uncertainties remain, especially on the global front. On the local front too, things are slowing down and India Inc. is clamouring for a rate cut. Whether the RBI Governor obliges them and the markets only time will tell. For now though, all eyes are on the Union Budget. Some say its become a non-event. We tend to agree to this growing view. But, the markets still look forward to it as quite a few proposals announced in the budget have a bearing on the sentiment.

The overall mood of the market tends to be positive in the run up to the budget. This year has been an exception so far, but the sentiment may improve over the next few days provided there are no new negative surprises from the global markets.

Nifty February futures discount decreased to 5 points from 12 points and around 6.46 lakh shares were added in open interest. But, volume in Nifty futures were significantly lower amidst huge volatility.

FIIs were net sellers of Rs3.42bn (provisional) in the cash segment on Monday. Local institutions too were net sellers of Rs1.34bn. In the F&O segment, FIIs were net buyers of Rs901.5mn. On Friday, foreign funds pumped in Rs11.47bn into the cash segment. Mutual Funds were also net buyers of Rs1.62bn on the same day.

The Government will give bonds worth Rs36.1bn to companies for selling fertilizer to farmers below cost. The bonds will have a coupon rate of 7.95% and will mature in 2026, the ministry said in a statement. This is the second and final tranche of bonds offered to the 23 fertilizer companies, it said.

Asian markets have extended their gains from yesterday. The Nikkei in Tokyo was up 75 points or 0.6% at 13,710 while the Hang Seng in Hong Kong climbed 381 points or 1.6% to 24,140. The Kospi in Seoul gained 17 points or 1% to 1713 while the Straits Times in Singapore advanced 17 points or 0.6% to 3100. The Shanghai Composite in China was flat at 4569 while the Taiex in Taiwan was up 77 points or 1% at 7968.

Mining companies rose after Rio Tinto said it was seeking price increases for its iron ore. Rio, the world's second-largest producer of iron ore, climbed to a two-month high on speculation that it will succeed in getting a bigger increase than its larger rival.

Toyota and Canon gained in Japan after the yen weakened against the dollar. National Australia Bank advanced after Qatar bought a stake in Credit Suisse.

The MSCI Asia Pacific Index gained 0.9% to 145.17 at 11:11 a.m. in Tokyo, with nine of its 10 industry groups climbing. All of Asia's benchmarks open for trading advanced, except in New Zealand and Vietnam.

Meanwhile, China's inflation accelerated to the quickest pace in more than 11 years last month after heavy snowstorms disrupted food supplies. Consumer prices rose 7.1% in January from a year earlier, the statistics bureau said today, after a 6.5% gain in December. The reading was more than the 7% average estimate of economists.

US financial markets were shut on account of the President's Day holiday. Investors will hope for the continuation of last week's rally in US stocks, but the nagging concern over the credit crisis and recession fears will continue to weigh on the market.

Market players will turn their attention to results from retailing giant Wal-Mart and a consumer-price inflation report. Wall Street will also consider reports from the beleaguered housing sector and results from JC Penney and tech heavyweight HP.

Results from European banks, many of which have been hit by the US mortgage meltdown, will also be keenly watched. Britain's Barclays will report on Tuesday and France's BNP Paribas will report on Wednesday.

Meanwhile, European shares rose on Monday with National benchmarks advancing in all 18 western European markets except Greece.

The pan-European Dow Jones Stoxx 600 index climbed 1.9% to 323.53, buoyed by big gains in UK banks after the British government said it will nationalize Northern Rock temporarily until it can find a buyer.

The UK's FTSE 100 closed up 2.8% at 5946.60, while the German DAX 30 advanced 2% to 6,967.55 and the French CAC-40 rose 1.9% to 4,861.80.

Credit Suisse rose the most in three weeks in Zurich after Qatar said it was buying shares in the second-biggest Swiss bank, while Barclays and Lloyds TSB climbed in London as traders speculated on higher dividends.

BHP Billiton followed metal prices higher in Europe, while Cia. Vale do Rio Doce rallied in Sao Paulo after winning a 65% price increase for iron ore from Japanese steelmakers.

Copper rose to a four-month high in London as imports from China, the world's largest user, increased to the highest level since April. Copper for delivery in three months rose 3.2% to $7,975 a ton on the London Metal Exchange, the highest intraday price since Oct. 18.

Most emerging markets ended sharply higher. The Bovespa in Brazil climbed 2.5% to 62,801 while the IPC index in Mexico gained 1.5% to 29,172. The RTS index in Russia rose by nearly 1.9% to 2026 and the ISE National 30 index in Turkey surged 3.5% to 57,253.

Markets to consolidate further

Markets snapped four day wining streak as selling gathered momentum. Key indices turned choppy and dull as benchmark indices were trading in a range for major part of the day. Selling pressure was seen in the IT, Realty and Oil & Gas stocks. However, it was the Small-Cap and the Mid-Cap stocks which ended with smart gains. Also, recently listed RPower which fell sharply hogged the limelight, as board of the company announced that they would consider bonus issue.

Finally, the 30-share Sensex closed at 18,048 losing 67 points. The NSE Nifty closed at 5,276 losing 26 points. Overall about 1,847 stocks advanced, 875 stocks declined while 50 stocks remained unchanged. Among the BSE 30 index 11 stocks advanced while 19 stocks declined.

KNR Construction provider of engineering, procurement and construction services across roads & highways, irrigation and urban water infrastructure management got listed on the bourses at Rs189 against its issue price of Rs170. However, immediately lost ground as investors preferred booking their profits. Finally the scrip ended at Rs154 slipping by almost 9% after hitting an intra-day high of Rs210 and a low of Rs151 and recorded volumes of over 54,00,000 shares on NSE.

RPower rallied by over 7.5% to Rs413 after the Board of Directors of the company announce that it would consider a proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group (comprising of Reliance Energy Ltd. and the ADA Group), and/or other measures, which will result in reduction of the cost of Reliance Power Ltd. shares below the IPO price of Rs430 per share for retail investors, and Rs450 per share for institutional and other categories of investors. The scrip touched an intra-day high of Rs430 and a low of Rs397 and recorded volumes of over 1,00,00,000 shares on NSE.

Nalco advanced by 7.5% to Rs389 as the company said that it raised prices by Rs8,000 per metric ton to Rs127,000. It raised prices for the second time this month after the metal gained in London. The scrip touched an intra-day high of Rs394 and a low of Rs364 and recorded volumes of over 99,000 shares on NSE.

Sesa Goa surged by over 6% to Rs3335 on reports that Japanese steelmakers, led by Nippon Steel Corp., have agreed to a 65% increase in annual iron ore prices could prove beneficial for the iron ore producer. The scrip touched an intra-day high of Rs3444 and a low of Rs3170 and recorded volumes of over 3,00,000 shares on NSE.

L&T slipped 1% to Rs3508. The company announced that it won Rs12.50bn order from ONGC. The scrip touched an intra-day high of Rs3598 and a low of Rs3410 and recorded volumes of over 3,00,000 shares on NSE.

BL Kashyap ended flat at Rs1576. The company announced that it won new project worth Rs11bn. The scrip touched an intra-day high of Rs1750 and a low of Rs1575 and recorded volumes of over 2,000 shares on BSE.

Goldiam International was locked at 5% upper circuit to Rs56.35 after the company announced that it would consider buy back of shares on February 25, 2008. The scrip touched an intra-day high of Rs56.35 and a low of Rs56.25 and recorded volumes of over 9,000 shares on NSE.

Flawless Diamond was down 2% to Rs80.50. The company announced that it launched 8 New Series of Designer Diamond Studded Jewellery. The Company developed 5000 exclusive Designer Jewellery for their valuable customer. After launching this Series of Jewellery, the product portfolio of the Company becomes more wider and giving better choice to the customer. The scrip touched an intra-day high of Rs85.90 and a low of Rs79 and recorded volumes of over 19,000 shares on BSE.

Bank of Baroda surged by over 4% to Rs427 after the bank announced that it would consider cutting lending rates on Feb. 23, 2008. The scrip touched an intra-day high of Rs432 and a low of Rs412 and recorded volumes of over 6,00,000 shares on NSE.

Kalindee Rail advanced by 2% to Rs424 after the company announced that it would mull raising Rs1.5bn via QIP. The scrip touched an intra-day high of Rs425 and a low of Rs402 and recorded volumes of over 7,000 shares on NSE.

News Snippets:

NTPC may partner MCX’s power exchange. (Mint)
Reliance Industries is in advanced talks with the New York based Vornado Realty Trust to float an over US$1bn fund. (ET)
IOC along with HPCL and BPCL would be importing an additional 73,000 ton LPG during February-March. (DNA)
ONGC has been registered with Iraqi authorities for tenders to develop the world’s third-largest oil reserves. (Mint)
Bharti Airtel has overtaken BSNL as the largest national long distance service provider in terms of revenues. (BL)
Tata Power has tied up with Thales to offer optronics solutions for India’s multi-role combat aircraft and other air-borne platforms. (BS)
Indiabulls has entered into the aviation sector with the launch of chartered aviation services. (BS)
Coal India plans to float a global tender for private participation in eight coal blocks on a long-term basis, by end-February. (BL)
Coal India may enter into fuel supply agreements with consumers beginning March. (BL)
Reliance Industries has accused the Petroleum Ministry of violating Parliament approved norms for oil and gas exploration. (BS)
RCOM has added 1.6mn mobile subscribers in January, taking its user base to 42.6mn. (ET)
Unitech is developing 97 acres under slum redevelopment project near the Vakola flyover. (DNA)
United Phosphorus has acquired Colombia-based Evofarms, a marketing company in the crop protection industry, for an undisclosed amount. (BS)
Hindalco and Nalco have raised prices by Rs8,000 a ton. (Mint)
Polaris Software plans to enter six new markets with its banking software products. (ET)
Everest Kanto Cylinders is acquiring a US company for ~US$70mn. (DNA)
Dredging Corp of India is in talks with Belgium based Dredging International for a JV. (DNA)
Apar Industries has completed sale of its polymer division for Rs1.1bn and will use the proceeds for expansion. (ET)
Hindustan Motors to expand dealerships for Mitsubishi products to 45 by FY09. (ET)
Bank of Baroda will consider lowering lending rates on February 23. (Mint)
Educomp Solutions has joined hands with Ansal Properties to set up schools in 16 integrated townships over the next three years. (BL)
Ansal Properties has deferred its proposed follow-on-public offer by couple of months. It is also planning to raise US$250-300mn from international private equity firms. (BL)
Rane Group will set up a components unit at Singur to extend support to the Tata Nano car plant. (BL)
Elecon Engineering plans to invest Rs2bn in the next two years to expand capacities in windmill gearbox manufacturing. (BL)
Deepak Fertilisers and Petrochemicals has launched a clean development mechanism project at its manufacturing plant in Taloja. (BL)
Fortis Healthworld has tied up with Godrej Adhaar to extend its reach to rural India. (BL)
The Orissa Pollution Control Board has issued a closure notice to Bhushan Power and Steel for not making arrangements for the suitable disposal of solid waste. (BS)
Essar Steel is considering setting up a 6mn tons a year slab making facility in Brazil. (BS)
Assam Co is planning to list one of the group companies on the AIM part of the London Stock Exchange, by October. (BS)
Uttar Pradesh Power Corporation will soon sign a MoU with NTPC to set up a 4,000 MW power plant in Lalitpur district of the Bundelkhand region. (BS)
Indian Overseas Bank has entered into a joint venture with a private financial company to start a new asset reconstruction company. (BS)
Aditya Birla Group is likely to enter into alloy steel production with a 2mn tons per annum plant through Vikram Ispat. (BS)
Satyam Computer Services has lined up Rs8bn investment in SEZs. (BS)
Merrill Lynch has increased its stake in Vakrangee Software to 7.72%. (BS)
The Reserve Bank of India has cleared the branch licence of Swiss bank UBS AG. (BL)
Real estate firm Landcraft Developers plans to invest about Rs10bn in the next five years. (BS)
Tata Sons has made Tata Investment Corporation its subsidiary by consolidating its stake to ~55%. (DNA)

Economic Front Page

The Finance Ministry has announced that fertilizer bonds for Rs36bn are being issued at par to 23 fertilizer companies. (BL)
Banks will now have to make withdrawals from ATMs free of charge for their own customers. Requests for balance enquiries would have to be made free to customers of other banks as well. (BL)
Payments of Rs10mn and above between banks, NBFCs, primary dealers and any other entities regulated by the RBI may be allowed only through electronic mode from April 1. (BL)
Income generated from agricultural advances by state cooperative banks and district central cooperative banks is likely to be exempted from tax from 2008-09. (BS)
The Union government has cleared seven projects, estimated to fetch a combined investment of about US$7bn over the next 10 years to the “Fab City” project in Hyderabad. (BS)
Negotiations for iron ore prices for the financial year beginning April 1 began at 30% higher and it appears that it would be more than 65%. (BS)
The information technology sector in West Bengal is likely to see addition of 20,000 jobs in 2008. (BS)
To increase transparency in the banking system, the Government and the regulator are considering bringing the risk-based assessment of banks in the public domain. (FE)
In the first one-and-half-months of 2008, 68 new FIIs have registered, almost a third of the total FIIs registered with Sebi in 2007. (FE)
The Government proposes to extend the Industrial Infrastructure Upgradation Scheme in the 11th Plan period. (ET)
The Government is considering one more tax-free year for 100% export-oriented units. (ET)
SEZ exports increased to US$10bn during Apr-Dec’07. (ET)

Morning Call - Feb 19 2008

Market Grape Wine :



Out House :

Markets at a support of 17786 & 17971 levels with resistance at 18228 & 18393 levels .

Buy : RIL

Buy : Sail & tisco

Buy : SBIN & IciciBank

Buy : JpHydro & Neyvelli

Buy : MRPL & EssarOIL

Buy : IBullsReal & Ibulls

Buy : JPAsso & IndiaGlycol

Buy : RPower & Adalbs

Dark Horse : SKumar , Aban RELCAP , Adlabs , EssarOIL , Neyvelli , RIL , Sbin , & Aban

Videocon Industries

Videocon Industries

KEC International

KEC International

SEAMEC

SEAMEC

Construction Sector

Construction Sector

Nifty February 2008 futures at premium

Turnover in F&O segment declines

Nifty February 2008 futures were at 5280.10, at a premium of 3.2 points as compared to spot closing of 5276.90.

The NSE's futures & options (F&O) segment turnover was Rs 32,416.67 crore, which was lower than Rs 42,675.67 crore on Friday, 15 February 2008.

Reliance Natural Resources February 2008 futures were near spot price, at 142.60, compared to the spot closing of 142.95.

Essar Oil February 2008 futures were at premium, at 231.30, compared to the spot closing of 230.20.

ICICI Bank February 2008 futures were at premium, at 1212, compared to the spot closing of 1209.80.

In the cash market, the S&P CNX Nifty lost 26 points or 0.49% at 5276.90.

Rural Electrification Corporation Review

Rural Electrification Corporation (REC), a public institutions financing power infrastructure in India, proposes to enter the capital markets with a public issue of 156.12 million equity shares of Rs 10 each through 100% book building process.

The issue comprises a fresh issue of up to 78.06 million equity shares by REC and an offer for sale of up to 78.06 million equity shares by the president of India acting through the ministry of power. The net issue to the public will be up to 152.21 million equity shares, after allowing for reservation of up to 3.90 million equity shares for subscription by eligible employees. The issue shall constitute nearly 18.18% of the fully diluted post-issue capital of REC.

Net proceeds from the fresh issue are to be utilised to augment capital base to meet the future capital requirement arising from the growth in assets, primarily its loan and investment portfolio.

REC was originally promoted to finance transmission and distribution (T&D) schemes aimed at improving the supply of electricity in rural areas and energise agricultural pump sets.

By this legacy, as the nodal agency for the RGGVY (Rajiv Gandhi Grameen Vidyutikaran Yojana), formed to promote electrification of all villages in India, REC has powers to administer grants and provides loans. It is also responsible for overseeing this programme from conception to completion.

Earlier, Power Finance Corporation (PFC) was the only government controlled financial institution focused on the power sector to fund across the entire chain of generation, T&D. But in 2002, the Union government granted permission to REC to fund power generation projects, too. Now the role of REC and PFC is almost identical: financing all types of power projects including T&D and generation throughout the country. REC enjoys an additional advantage: it gets 1% of the total disbursement under RGGVY as commission. The estimated share of REC in the approved outlay for RGGVY is about Rs 33000 crore in the current five-year plan (FY 2008-12), which is set to touch Rs 50000 crore in the next five-year plan.

Strengths

• The Eleventh Five-Year Plan (FY 2008-12) envisages addition of 70,000 MW of power capacity in the plan period. The investment needed in the T&D sectors in this plan period is expected to be Rs 1000000 crore.
• The loan sanctions and disbursements have grown at a CAGR of 28.37% and 13.51%, respectively, between the year ending March 2003 (FY 2003) and FY 2007.
• The overall cost of funds was 6.55% in the six months ended September 2007, favorably low compared with competitors. The relationship with the government of India provides access to lower cost funds and source of additional foreign currency loans at competitive rates.

Weakness

• Aggregate loans outstanding to state electricity coards (SEBs) and state power utilities (SPUs) stood at Rs 33764 crore, constituting 96.33% of the total loans outstanding, largely long-term, end September 2007. Thus, the weak credit quality of these public enterprises remains a business challenge as lending to these enterprises forms a major chunk of business.
• Asset quality remains poor compared with peer. The gross non-performing assets (NPA) and net NPA as a percentage to advances stood at 0.90% and 0.67% end September 2007. This is high compared with peer PFC, whose gross NPA and net NPA as a percentage to advances was 0.06% and 0.02%.
• Despite access to low-cost funds, net interest margin was comparable with PFC’s 3.76% end September 2007.
• Financial growth in the past is not encouraging with hardly any growth in profit over the years.
• There is a possibility of the business operations being used as tool for public policy than engine for profit maximisation by the government. This remains a major concern for shareholders and their wealth creation would remain vulnerable.

Valuation

FY 2007 EPS of REC on post-IPO equity comes to Rs 9. At the offer price band of Rs 90- Rs 105, the P/E works to 10 (on lower band) to 11.7 (on upper price band). Post-IPO, FY 2007 book value will be Rs 52.6- Rs 53.9 (depending on the final issue price). P/book value (BV) is 1.7-1.9. PFC currently trades around P/ FY 2007EPS of 21.5 and P/FY 2007 BV of 2.1.