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Thursday, February 21, 2008

SBI, Tata Steel February 2008 futures at premium

Turnover in F&O segment declines

Nifty February 2008 futures were at 5201, at a premium of 9.20 points as compared to spot closing of 5191.80.

The NSE's futures & options (F&O) segment turnover was Rs 43,409.74 crore, which was lower than Rs 43,987.02 crore on Wednesday, 20 February 2008.

State Bank of India (SBI) February 2008 futures were at premium, at 2185.30, compared to the spot closing of 2178.95.

Tata Steel (TSL) February 2008 futures were at premium, at 814, compared to the spot closing of 805.80.

Steel Authority of India (Sail) February 2008 futures were near spot price, at 237, compared to the spot closing of 236.90.

In the cash market, the S&P CNX Nifty gained 37.35 points or 0.72% at 5191.80.

Tantia Constructions

Tantia Constructions



V-Guard Subscription/Allotment Details

Sr.No. Category

No. of times of total meant for the category
1 Qualified Institutional Buyers (QIBs)

1(a) Foreign Institutional Investors (FIIs)

1(b) Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies)

1(c) Mutual Funds

1(d) Others

2 Non Institutional Investors

2(a) Corporates

2(b) Individuals (Other than RIIs)

2(c) Others

3 Retail Individual Investors (RIIs)

3(a) Cut Off

3(b) Price Bids

4 Employee Reservation

4(a) Cut Off

4(b) Price Bids

IT shares rally in choppy market

The market staged a strong rebound in late trade to wipe-off losses and post modest gains for the day. Firm European markets, which opened after Indian markets and good response to Rural Electrification Corporation public issue helped the recovery.

Volatility on the bourses was high today. The market had slipped into the red in afternoon trade after opening on a strong note. A firm opening was due to strength in Asian markets. The market breadth was positive after turning negative in afternoon trade. 21 shares from the 30-member Sensex pack rose.

The 30-share BSE Sensex was up 117.08 points or 0.66% at 17,734.68. It slipped to a low of 17,482.31 in mid-afternoon trade. At the day’s low, the Sensex lost 135.29 points. Sensex had opened 265.42 points higher at 17,883.02 and rose further to touch a high of 17,887.21 in early trade. At the day’s high, the Sensex rose 269.61 points. The Sensex oscillated in a range of 404.90 points for the day.

At current 17,734.68, Sensex trades at a PE multiple of 16.90 to 17.73, based on projected FY 2009 EPS of Rs 1000-to-Rs 1050 for 30 Sensex companies.

The broader based S&P CNX Nifty gained 37.35 points or 0.72% at 5,191.80. Nifty February 2008 futures were at 5201, a premium of 9.20 points as compared to spot closing.

As per provisional data, foreign institutional investors (FIIs) purchased shares worth Rs 209.43 crore today, 21 February 2008. Domestic institutional investors (DIIs) were net sellers of shares worth Rs 140.68 crore today.

Software shares surged on fresh buying even as the Indian rupee bounced back after tumbling to a 5-month low against the dollar on Wednesday, 20 February 2008. Metal shares advanced tracking firm global metal prices. Banking shares settled lower

The IPO of Rural Electrification Corporation (REC) was subscribed 3.52 times by 16:00 IST on the third day of its issue today, 21 February 2008. The price band for the IPO is Rs 90 to Rs 105. The issue closes on 22 February 2008.

The market breadth was positive: on BSE 1,465 advanced as compared to 1,253 that declined. 71 shares remained unchanged.

The BSE Mid-Cap index was up 1.05% to 7,668.93, outperforming the Sensex. The BSE Small-Cap index gained 0.64% to 9,692.99, underperforming the Sensex.

The total turnover on BSE amounted to Rs 5383 crore as compared to Rs 5,458.94 crore yesterday, 20 February 2008

Turnover on NSE’s futures & options segment amounted to Rs 43409.74 crore as compared to Rs 43987.02 crore yesterday, 20 February 2008

Most sectoral indices on BSE edged higher. The BSE IT index (up 4.77% to 4,041.97), the BSE Consumer Durables index (up 2.58% to 4,882.06), the BSE Auto (up 0.89% at 4,801.06), the BSE Health Care index (up 1.48% at 3,735.11), the BSE TecK index (up 2.73% to 3,396.18), the BSE Metal index (up 3.83% to 16,439.38), outperformed the Sensex.

The BSE Capital Goods index (down 0.60% at 15,837.90), the BSE Bankex (down 1.23% at 10,478.94), the BSE PSU index (up 0.04% to 8,302.67), the BSE Realty index (up 0.30% at 9,738.77), the BSE Oil & Gas index (up 0.26% to 10,912.26), the BSE Power (up 0.14% to 3,629.40), the BSE FMCG index (up 0.60% at 2,236.92), underperformed the Sensex.

Software shares rallied on fresh buying. India’s fourth largest software services exporter Satyam Computer Services jumped 8.71% to Rs 459.30 on 26.33 lakh shares. It was the top gainer from Sensex pack.

Infosys Technologies (up 4.56% to Rs 1639.70), TCS (up 4.64% to Rs 925), and Wipro (up 5.76% to Rs 435), surged. Tata Consultancy Services during trading hours yesterday, 20 February 2008, said it has signed a multi year contract with Chrysler LLC to provide a comprehensive portfolio of information technology services.

The partially convertible rupee was at 39.93 per dollar, rising smartly from the previous close of 40.21/23. Indian IT firms derive a lion's share of revenue from exports and they had been hit hard in the last one year by rupee’s surge.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) staged a sharp recovery from day’s low of Rs 2458.50. It ended 0.84% higher at Rs 2503 on 5 lakh shares. As per recent 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.

Metal shares rallied. Hindalco Industries (up 7.53% to Rs 190), Tata Steel (up 4.87% to Rs 810.25), Sterlite Industries (up 2.23% to Rs 801.50), JSW Steel (up 2.49% to Rs 1140.50), and Steel Authority of India (up 6.32% to Rs 238.10), surged.

Hindustan Unilever (up 3.32% to Rs 221) Ambuja Cement (up 3.45% to Rs 120), edged higher from Sensex pack.

Bajaj Auto, the country’s second largest bike manufacturer in terms of sales, rose 2.76% to Rs 2404. The company on 19 February 2008 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. The stock garnered 14.89% in the past five days from Rs 2022.20 on 13 February 2008 to Rs 2339.50 on 20 February 2008.

India’s largest dedicated housing finance company in terms of revenue Housing Development Finance Company slipped 3.69% to Rs 2650. The stock had slipped to low of Rs 2603.05 in late trade. It was the top loser from Sensex pack.

Banking shares recovered some losses in late trade. State Bank of India (down 0.98% to Rs 2184, off day’s low of Rs 2127.10), ICICI Bank (down 1.76% to Rs 1146.25, off day’s low of Rs 1116) slipped.

India’s second largest private sector bank in terms of assets HDFC Bank rose 1.01% to Rs 1550, off day’s low of Rs 1496.10

Four public sector banks, led by State Bank of India (SBI), on Wednesday, announced cut in prime lending rates (PLR) by 0.25% to 0.50%, in a move that will make housing and auto loans cheaper.

India’s top small car maker in terms of sales, Maruti Suzuki India was down 0.35% to Rs 766. The company said on Wednesday, 20 February 2008 it has signed an agreement with Mundra Port And Special Economic Zone for a mega car terminal at Mundra, Kutch district, Gujarat

India’s largest private sector engineering company in terms of order book Larsen & Toubro declined 0.68% to Rs 3439 even as the company said it has bagged an order from Cairn India for laying crude oil insulated pipeline and gas pipeline from Barmer, Rajasthan to Salaya, Gujarat.

Bharat Heavy Electricals (down 1.19% to Rs 2099) and Grasim (down 0.59% to Rs 2820) were the other losers from Sensex pack.

Reliance Capital topped the turnover chart on BSE with a turnover of Rs 307 crore followed by Reliance Natural Resources (Rs 302.30 crore), Reliance Power (Rs 241 crore), Essar Oil (Rs 200.40 crore) and Reliance Energy (Rs 158.25 crore) in that order

Reliance Natural Resources led the volume chart with volumes of 2.25 crore shares followed by Centurion Bank of Punjab (1.58 crore shares), Ispat Industries (1.11 crore shares), Essar Oil (84.45 lakh shares) and Gujarat NRE Coke (83.15 lakh shares) in that order.

Among the mid-cap IT stocks, Polaris Software Labs (up 9.26% to Rs 100.90), Rolta India (up 8.18% to Rs 328.50), Hexaware Technologies (up 8.83% to Rs 78.30), MphasiS (up 4.75% to Rs 242.80), and NIIT Technologies (up 2.86% to Rs 133), advanced.

Construction stocks witnessed across the board rally on renewed buying. IVRCL Infrastructures (up 3% to Rs 468), Gayatri Projects (up 2.11% to Rs 512), Punj Lloyd (up 1.76% to Rs 377.60), Jaiprakash Associates (up 7% to Rs 260.20), Patel Engineering (up 5.10% to Rs 770), and Hindustan Construction Company (up 1.93% to Rs 166.05), surged.

Reliance Power gained 3.67% to Rs 423.20 on volumes of 57.38 lakh shares. 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.

Centurion Bank of Punjab surged 15.85% to Rs 57.75 on huge volumes of 1.57 crore shares. The stock surged on reports it is in merger talks with HDFC Bank.

HCL Technologies gained 6.16% to Rs 285 after the company said on Wednesday, 20 February 2008, it has acquired US based Capital Stream Inc. The company made this announcement after trading hours on Wednesday, 20 February 2008.

Gujarat Gas company slipped 0.21% to Rs 315. It reported 112.9% jump in net profit to Rs 38.81 crore on 46.9% rise in net sales to Rs 344.46 crore in Q4 December 2007 over Q4 December 2006. The company announced the results after trading hours on Wednesday, 20 February 2008.

Welspun Gujarat Stahl Rohren rose 0.70% to Rs 470 on reports the company is planning to set up a 2 million tonnes per annum steel plant in Mundra, Gujarat, under its backward integration plan.

Asian and European stocks rose today as Wall Street steadied overnight, helped by strong quarterly earnings and the prospect of lower interest rates.

In Europe, the key benchmark indices in United Kingdom (up 1.21% to 5,964.80), Germany (up 0.75% to 6,951.53) and France (up 1.27% to 4,873.20), edged higher.

Japan's Nikkei (up 2.84% at 13,688.28), Taiwan's Taiwan Weighted index (up 2.43% at 8,085.53), Singapore's Straits Times index (up 0.94% at 3,055.53), Hong Kong's Hang Seng (up 0.14% at 23,623) and South Korea's Seoul Composite index (up 0.99% at 1,704.55) edged higher.

However China’s Shanghai Composite slipped 0.87% to 4,527.77

US Market witnessed a roller coaster ride but finally closed modestly higher on Wednesday, 20 February 2008, helped by strong quarterly earnings and the prospect of further cut in interest rates. The Dow Jones industrial average gained 90.04 points, or 0.73%, to 12,427.26. The S&P 500 index rose 11.25 points, or 0.83%, to 1,360.03, and the Nasdaq Composite index advanced 20.90 points, or 0.91%, to 2,327.10.

Back home, the 30-share BSE Sensex had slumped 458.06 points or 2.53% at 17,617.60 on Wednesday, 20 February 2008. The broader based S&P CNX Nifty was down 126.35 points or 2.39% at 5,154.45 on that day.

Crude oil rose marginally today, 21 February 2008 after surging to a record over $101 a barrel on a gush of hedge fund inflows and Organisation of Petroleum Exporting Countries (OPEC) supply concerns. The new front-month U.S. crude for April delivery rose 21 cents to $99.91. The expired March 2008 contract struck a record high of $101.32 on Wednesday, 20 February 2008. London Brent crude rose 3 cents to $98.45 a barrel

IT stocks rally in volatile market

The Sensex showed a smart recovery towards the close after shedding over 430 points from the day's high of 17,912. The market remained volatile despite positive cues from Asian and US markets. Banking and capital goods stocks witnessed selling pressure throughout the trading session, however, select buying in IT and metal stocks saw the Sensex recover from its low of 17,482. The mood turned bullish towards the close as European indices showed tremendous strength in opening trades, and the market surged on short covering in index pivotal stocks. The Sensex finally ended firm with a gain of 117 points at 17,735. The broad-based Nifty too showed a recovery and closed firm at 5,192, up 37 points.

The market breadth was positive, with the gainers outpacing the losers in a ratio of 1.19:1 on the Bombay Stock Exchange (BSE). Of the 2,782 stocks traded on the BSE, 1,472 stocks advanced, 1,241 stocks declined and 69 stocks ended unchanged. Barring the BSE Bankex index and the BSE CG index, most of the sectoral indices recovered from their lows and ended firm. The BSE IT index surged by 5.33% followed by the BSE Metal index (up 4.12%) and the BSE Teck index (up 3.24%). While the BSE Bankex index slipped 1.05% and the BSE CG index fell 0.62%.

Select counters logged steady gains. Satyam Computer rallied sharply by 8.45% at Rs458, Hindalco surged 7.22 % at Rs189, Wipro advanced 4.95% at Rs432, Infosys added 3.96% at Rs1,630, TCS moved up 3.89% at Rs918, Ambuja Cement jumped by 3.28% at Rs120, Bajaj Auto gained 3.05% at Rs2,411 and HLL was up 2.76% at Rs220. However, HDFC slipped 3.75% at Rs2,649, while ICICI Bank, BHEL, SBI and Grasim were down over 1% each.

Over 2.25 crore RNRL shares changed hands on the BSE followed by Centurion Bank of Punjab (1.58 crore shares), Ispat Industries (1.11 crore shares), Essar Oil (84.37 lakh shares) and Gujarat NRE coke (82.92 lakh shares).

Valuewise, Reliance Capital clocked a turnover of Rs307 crore on the BSE followed by RNRL (Rs302 crore), Reliance Power (Rs241 crore), Essar Oil (Rs200 crore) and Reliance Energy (Rs158 crore).

Market Close: Bounce back on global support

Good day for Indian markets carried the way with positive global cues. However, at higher levels profit booking was seen and markets slipped in red losing all the gains made earlier. Volatility was seen despite some strong cues from Asian peers. In Mid session value buying was on cards after European markets opened in positive curve. Sectors like Metal, IT and Pharma space were in focus while selling continued in selected Bank and Capital good stocks and market trade 400 points down for days high but eventually managed to recover smartly to end in green. Depreciating rupee helped IT cheers to gain the Counter. Sugar stocks continue to hold out as global sugar prices are up while other sectors were sluggish. Mid and smallcap companies traded well to end up in green. Europe continued to trade in green.

Sensex ended up by 117 points at 17734.68. It was helped up by gains in Satyam (458.2, +8 percent), Hindalco (189.45,+7 percent), Wipro (431.65,+5 percent), TISCO (806.05,+4 percent) and Infosys (1630.3,+4 percent). Restricting the gains were HDFC (2648.55,-4 percent), ICICI Bk (1143.85,-2 percent), BHEL (2092.05,-2 percent), SBI (2179.3,-1 percent) and Grasim (2804.05,-1 percent).

Adhunik metal stock was on limelight. Company recently reported Q3FY08 results which were broadly in line with our expectation on the topline front. Stock is on buzz that it has successfully commissioned its rolling mill and SMS II taking capacity to 400,000 tpa in Q3FY08 and commenced trial production it commenced commercial production from January 1, 2008. Thus, a wide range of rolled products will now be available from the plant which earlier had to be outsourced from third party rolling mills. This is expected to add Rs 60 Cr to the topline in Q4FY08E. It is in the business of manufacturing sponge iron, TMT Bars, special grade high carbon and low carbon steel billets along with different grades of alloy steel billets. The 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). AML is expanding its steel capacity by 1.8x at a time when steel prices are expected to be firm going forward, led by robust demand in most regions, current supply tightness global capacity utilization of 90%, decreasing Chinese exports and raw material cost push pressures. We believe AML is well placed to reap the benefit of increasing iron ore and manganese ore prices. One can hold this stock looking at longer term perspective.

HCL closed 6% higher along with other IT gainers. HCL Technologies has acquired CapitalStream, a US-based lending automation solutions provider, in an all-cash deal for US$ 40 m. Capital Stream has a flagship product called FinanceCentre, which is used by top banks like Bank of America and Rabo Bank in North America. FinanceCentre, a multi-tier web-based application, provides end-to-end solutions from prospecting and sales, credit analysis, due diligence, documentation and portfolio monitoring to financial institutions and banks. The product is currently used by over 20% of top banks in North America. The acquisition of Capital Stream will enhance HCL's ability to provide end-to-end solutions through product and multi-service delivery capability to commercial and retail financial institutions. Thus, this strategic acquisition is in line with the company's objective to grow inorganically to be a global leader in selected industry verticals.

Technically Speaking: Market traded volatile with positive breadth to end in green. Sensex made an intra day high of 17887 and low of 17482. The breadth was in favor of Advances as there were 1465 against 1253 Declines. Market turnover continued to be low at Rs 5383 Cr. At this juncture Sensex support is seen at 17500 and 17250 and resistance lies at 17800 and 17900.

Post Market Commentary - Feb 21 2008

The market made a smart recovery towards the final trading hours of the session to close with handsome gains. The market opened on a strong note by taking the favoring cues from the global markets and rallied across the sectoral indices. Due to high volatility, the market dipped into the negative territory by paring all its initial gains but managed to made a good recovery at the end on the back of heavy buying across the counters. The Small Cap and Middle Cap also registered good gains as the investors also showed heir confidence in buying from these baskets. From the sectoral front, the IT stocks and Metal stocks remained the centre of attraction as most buying was seen from these counters. The BSE Sensex closed higher by 117.08 points at 17,734.68 and NSE Nifty closed up by 37.35 points at 5,191.80. The BSE Mid Cap and Small Cap closed higher by 79.54 points and 61.73 points at 7,668.93 and 9,692.99 respectively.

BSE Metal index surged by 605.85 points to close at 16,439.38 as Gujarat NRE (7.72%), Hindalco Industries (7.22%), NALCO (6.73%), SAIL (5.63%), Tata Steel (4.33%), Jindal Saw (3.14%) and Jindal Steel (2.89%) closed higher.

BSE IT index closed higher by 184.14 points at 4,041.97 as Satyam Comp (8.45%), Rolta India (7.13%), NIIT Ltd (6.84%), Mphasis (5.59%), HCL Tech (5.98%), Infosys (3.96%) and Wipro (4.95%) closed in green.

BSE CG closed lower by 94.97 points at 15,837.90 as ABB (4.02%), BEML (3.61%), Bharat Electrical (3%), BHEL (1.51%), Crompton Greaves (1.25%) and Siemens (0.69%) closed lower.

BSE Bankex index closed lower by 130.87 points at 10,478.94. Losers are Bank of Baroda (5.19%), PNB (5.09%), Union Bank (4.58%), Canara Bank (4.41%).

BSE Realty index grew by 29.53 points to close at 9,738.77. Gainers are Penland (7.22%), Purvankara (6.52%), Anant Raj (3.10%), DLF (2.58%).

BSE Oil & Gas index grew by 28.26 points to close at 10,912.26 as Aban Offshore (3.35%), Cairn India (2.23%), RNRL (2.34%), Reliance Inds (0.78%) and RPL (0.46%) closed higher.

Daily Call - Feb 21 2008

Daily Call - Feb 21 2008

Market Radar - Feb 21 2008

Market Radar - Feb 21 2008

Grey Market Premium - Rural Electrification

Rural Electrification 90 to 105 17 to 19

GSS America InfoTech 400 to 440 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 10 to 12

Pre Session Commentary - Feb 21 2008

The Indian Market is likely to have a positive opening due to strong favoring cues from the global markets. On Wednesday, the market closed the trading session with heavy losses on the back of more selling pressures across the sectoral indices. The domestic market opened with heavy gap down by taking the negative cues from the Asian markets as well as due to rising crude oil price above $100 a barrel, which adds to the sentiments. Then after the market keeps on drifting down further till the closing of the session as the selling pressures prevailed. The Securities and Exchange Board of India has recommended that the face value of shares will be made Re.1 in two phases. In the first phase, all the forthcoming companies coming out with IPO to be priced at a face value of Re1 and in the second phase all the listed companies having the face value of more than Re1 will be asked to bring it down. This recommendation would be discussed at the next Sebi board meeting. The BSE Sensex closed lower by 458.06 points at 17,617.60 and NSE Nifty fell by 126.35 points at 5,154.45.We expect that the market may gain some during the trading session. On Wednesday, the US market was closed in green. The Dow Jones Industrial Average (DJIA) closed higher by 90.04 points at 12,427.26. S&P 500 index fell by 11.25 points to close at 1,360.03 and NASDAQ dropped by 20.90 points to close at 2,327.10.

Indian ADRs closed mixed. In technology sector, Wipro grew by (0.87%) along with Infosys by (0.49%) and Satyam (0.34%). In banking sector, HDFC bank grew by (1.20%) while ICICI bank fell by (0.77%). MTNL increased by (0.32%).

Today, the major stock markets in Asia are trading strong. Hang Seng is trading higher by 333.02 points at 23,923.60 along with Japan''s Nikkei trading up by 282.14 points at 13,592.51 and Taiwan weighted is trading at 8,031.18 up by 136.71 points.

Today, Nifty has support at 5,091 and resistance at 5,259 and BSE Sensex has support at 17,327 and resistance at 18,168.

Market may remain firm

Rally in US markets after the Fed minutes indicated that the economy can avoid a recession, despite slower growth and rising unemployment. Positive opening in most of the Asian indices in ongoing trades may also help the local market advance further. However, investors should remain cautious on the back of high intra-day volatility. But, marginal increase in FII inflows can help the sentiment to remain positive. Among the key indices, the Nifty faces resistance at 5,500-6,300 levels and has a key support at 5,040 levels in the near-term. The Sensex has a likely support at 17,140 and may face resistance at 19,000.

Major US indices registered significant gains on Wednesday, after the Federal Reserve's minutes indicated that the economy can avoid a recession, despite slower growth, rising unemployment and more pricing pressures. While the Dow Jones flared up by 90 points at 12,427, the Nasdaq moved up by 21 points to close at 2,327.

Most of the Indian ADRs traded firm on the US bourses. HDFC Bank led the pack with gains of 1.20% while Infosys, Wipro, Satyam, Dr Reddy's, VSNL and MTNL gained over 0.50% each. However, Rediff, Tata Motors and ICICI Bank slipped over 1-2% each.

Oil prices reached another settlement high on Wednesday and closed above $101 a barrel as traders took the Federal Reserve's weak economic report as a signal that more interest rate cuts are coming. The Nymex light crude oil for March delivery gaining 73 cents to close at $100.74 a barrel. In the commodity space, the Comex gold for April delivery gained by $8 to settle at $937.80 an ounce.

Market may head higher

The market may head higher today, 21 February 2008 following positive cues from global markets. The market may get boost after four public sector banks, led by State Bank of India (SBI), announced cut in the prime lending rates (PLR) by 0.25 to 0.50%, in a move that will make housing and auto loans cheaper. Union Bank of India, Bank of India and Canara Bank are the other banks to join SBI in cutting PLR.

For the second time in less than 10 days, the country's largest lender SBI slashed PLR by 0.25 per cent to 12.25%, which will be effective from today, 21 February 2008. The bank had announced, on 11 February, cutting the PLR by 0.25% effective from 16 February 2008.

Most Asian markets were trading firm today, 21 February 2008. Hong Kong's Hang Seng (up 1.41% at 23,923.60), Japan's Nikkei (up 2.12% at 13,592.51), Taiwan's Taiwan Weighted index (up 1.73% at 8,031.18), Singapore's Straits Times index (up 1.24% at 3,064.42) and South Korea's Seoul Composite index (up 0.92% at 1,703.38) edged higher.

However China’s Shanghai Composite slipped 1.10% to 4,516.90

US Market witnessed a rollercoaster ride but finally closed modestly higher on Wednesday, 20 February 2008. The day started on a pessimistic note with indices sliding down after a couple of weak economic reports. But in the second half, few comments from Fed chief shelved the concerns and the market turned upward to finish the day in positive ground. The Dow Jones industrial average gained 90.04 points, or 0.73%, to 12,427.26. The S&P 500 index rose 11.25 points, or 0.83%, to 1,360.03, and the Nasdaq Composite index advanced 20.90 points, or 0.91%, to 2,327.10.

Back home, the 30-share BSE Sensex slumped 458.06 points or 2.53% at 17,617.60 on Wednesday, 20 February 2008. The broader based S&P CNX Nifty was down 126.35 points or 2.39% at 5,154.45 on that day.

At current 17,617.60, Sensex trades at a PE multiple of 17.61 to 16.77, 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 266.44 crore on Wednesday, 20 February 2008. Domestic institutional investors (DIIs) were net buyers of shares worth Rs 256.18 crore on that day

FIIs were net sellers to the tune of Rs 527.15 crore in the futures & options segment on Wednesday, 20 February 2008. They were net sellers of index futures to the tune of Rs 707.91 crore and bought index options worth Rs 177.41 crore. They were net buyers of stock futures to the tune of Rs 6.51 crore and sold stock options worth Rs 3.16 crore.

Crude oil rose marginally today, 21 February 2008 after surging to a record over $101 a barrel on a gush of hedge fund inflows and Organisation of Petroleum Exporting Countries (OPEC) supply concerns. The new front-month U.S. crude for April delivery rose 21 cents to $99.91. The expired March 2008 contract struck a record high of $101.32 on Wednesday, 20 February 2008. London Brent crude rose 3 cents to $98.45 a barrel.

Morning call - Feb 21 2008

Market Grape Wine :

In House :

Nifty at a supp of 5100 and 5025 with resis at 5200 and 5240

Mkt to open on a positive note with selling likely to be witnessed at higher levels

F&O: Buy Essaroil above 241 with a TGT of 256 and a SL of 235

Buy Tatapower above 1345 with a TGT of 1405 with a SL of 1325

Cash: Buy ITC above 202 with a TGT of 212 and a SL of 197.50

Buy Bajajhind above 277 with a TGT of 291 and a SL of 272

Out House :

Markets at a support of 17557 & 17474 levels with resistance at 17786 & 18081 levels .

Buy : RIL

Buy : Sail & JSW

Buy : SBIN

Buy : Powergrid & Neyvelli

Buy : EssarOIL

Buy : Adhunik

Buy : INFY & Satyam

Dark Horse : SKumar , RELCAP , INFY , EssarOIL , NTPC , RIL , Sbin , & Aban

Trading Calls - Feb 21 2008

Nifty (5154) Supp 5020 Res 5250

Buy Escorts (105) SL 101
Target 113, 115

Buy Bank of Baroda (401) SL 397 Target 414, 417

Buy Siemens (1580) SL 1560 Target 1620, 1630

Sell United Phos (313) SL 317 target 304, 300

Sell Ansal Properties (211) SL 215 target 203, 199

A link to get ahead!

It is a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time – Winston Churchill.

The important link to our markets remain the global cues. Talking about links, the ADAG group (consortium) added some power by bagging the Mumbai Trans Harbour Link, which will drastically cut travel time between Mumbai and Navi Mumbai. REL-led group has won the $1.5bn Mumbai sea-link. Nothing much has changed between yesterday and today except for oil prices rising further by a dollar. But then global cues look better and so we expect a better opening. However, issues like record-high crude oil prices, mounting inflation jitters and the populist stance adopted by the Government could limit the gains. So don’t look too far ahead. High risk short term investors can look at stocks which could gain from some budget-proposals

Wednesday's crack just goes to show how fragile is the market sentiment and investor confidence. Even one bad day in the US market is enough to set the cat among the pigeons. It also shows that one cannot take any rally for granted, as all the gains of a day or a week can easily be wiped out in a jiffy. As a result, one should be very careful at this stage and not get carried away by aggressively going long. We expect the market to be rangebound and volatile ahead of the budget, and may be even after that as the specter of US slowdown will continue to haunt the bulls.

One positive factor is that FII selling has ebbed considerably over the past few days. This needs to turnaround into sustained FII buying for the market to gradually start inching towards their previous peaks. Obviously, this will take some doing and could take a significant amount of time as the negatives still outweigh the positives (if there are any other than sustainable growth story). After the recent correction, valuations have turned quite cheaper, but one must do proper homework before picking any stocks.

FIIs were net sellers of Rs2.66bn (provisional) in the cash segment yesterday while local institutions were net buyers of Rs2.56bn. In the F&O segment, foreign funds were net sellers of Rs5.27bn. On Tuesday, FIIs pumped in Rs15.85bn in the cash segment. Mutual Funds were net sellers of Rs3.27bn on the same day.

Most Asian markets - barring China - are up this morning. The Nikkei in Tokyo was up 282 points to 13,592 while the Hang Seng in Hong Kong rose 290 points to 23,881. The Kospi in Seoul gained 11 points to 1699 while the Straits Times in Singapore advanced 35 points to 3061.

The Shanghai Composite in China was down 47 points to 4519 and the Taiex in Taiwan jumped 127 points to 8021.

US stocks jumped on Wednesday after the Federal Reserve reiterated its resolve to prevent the world's biggest economy from slipping into a recession. Investors chose to ignore a spike in crude oil prices to a record close of $100.74 a barrel.

Shares rebounded from earlier losses as banks rallied on hedge-fund manager William Ackman's plan to restructure bond insurers. Technology and energy shares advanced after Hewlett-Packard's profit topped analysts' estimates and crude oil climbed to a record for a second day.

Exxon Mobil and Chevron jumped to the highest prices in more than a month. Benchmark indexes extended gains after the Fed said that relatively low interest rates will be needed to boost economic growth.

The S&P 500 Index climbed 11 points, or 0.8%, to 1,360.03. The Dow Jones Industrial Average added 90 points or 0.7%, to 12,427.26. The Nasdaq Composite rose 21 points, or 0.9%, to 2,327.1.

Market breadth was positive. Five stocks advanced for every two that fell on the New York Stock Exchange.

Stocks had dropped earlier, led by telephone companies, after a bigger-than-expected rise in consumer prices last month spurred concern that faster inflation will give the Fed less leeway to lower borrowing costs.

The Fed released the minutes from the last two policy meetings. According to the minutes, the central bankers reckon that the US economy has weakened, conditions in the labor market has deteriorated and pricing pressures are growing.

In addition, the Fed released its updated economic outlook for 2008-2010. The bankers now expect a bigger 2008 slowdown than their last reported forecasts in October. Looking to 2009, they expect real GDP growth to accelerate and by 2010 for it to rise further.

The CPI rose 0.4% in January, matching December's rise and surprising economists who were looking for a gain of just 0.3%. The so-called core CPI, which eliminates volatile food and energy prices, rose 0.3% in the month, after growing 0.2% in December. Economists had predicted a gain of 0.2% in core CPI.

The CPI report, along with the recent run up in commodity prices, exacerbated worries that the slowing US economy may also have to contend with higher inflation.

Another report showed that January housing starts grew, although less than expected, while January building permits fell less than expected.

Oil retreated a bit off the highs for much of Wednesday's session, before gaining steam in the afternoon. Crude oil for March delivery hit a trading record of $101.32 on the New York Mercantile Exchange before ending just short of that at $100.70.

Treasury prices slipped, boosting the yield on the benchmark 10-year note to 3.97% from 3.9% late on Tuesday. In currency trading, the dollar fell versus the euro and the yen. COMEX gold for April delivery rose $8 to $937.80 an ounce.

European shares fell for the first time in three sessions. The pan-European Dow Jones Stoxx 600 index fell 1.2% to 320.33. The UK's FTSE 100 closed down 1.2% at 5,893.60, while the German DAX 30 fell 1.5% to 6,899.68 and the French CAC-40 declined 1.5% to 4,812.81.

Mexican and Brazilian stock markets closed higher. In Brazil, the benchmark Bovespa index closed 2.3% higher at 63,748. In Mexico, the IPC index rose 1.1% to close at 29,224.44. Argentina's Merval index gained 0.6% to end at 2,074.70. Chile's IPSA climbed 1.3% to 2,911.28.

Markets may be under pressure

It was a disappointing session on Wednesday, as markets tanked. Weak global cues coupled with selling pressure in the large cap stocks like ICICI Bank, RIL, HDFC and L&T dragged the benchmark Sensex to close below the 17k mark. While most stocks lost ground, the IT sector, led by Infosys and TCS bucked the trend after the rupee fell to Rs40.20, the lowest since September.

Finally, the 30-share Sensex closed at 17,617 losing 458 points. It touched an intra-day high of 17,991 and a low of 17,505. The NSE Nifty closed at 5,154 slipping 126 points after hitting an intra-day high of 5,267 and a low of 5,116.

Overall about 830 stocks advanced, 1,911 stocks declined while 54 stocks remained unchanged. Among the BSE 30 index only 5 stocks advanced while 25 stocks declined.

Among the BSE Sectoral indices, BSE Realty index (down 3.5%), BSE Bankex index (down 3.5%), BSE Capital Good index (down 2.8%), BSE PSU index (down 2.7%) and BSE Power index (down 2.3%)

Maruti Suzuki dropped over 5% to Rs769. Mundra Port and Special Economic Zone Ltd signed an agreement with Maruti for a mega car terminal at Mundra, District Kutch, Gujarat. This car terminal is expected to be operational by December 2008. The scrip touched an intra-day high of Rs808 and a low of Rs763 and recorded volumes of over 7,00,00 shares on NSE.

Wockhardt was down 1.3% to Rs340. The company posted a net profit of Rs1069mn for the quarter ended December 31, 2007 as compared to Rs870mn for the quarter ended December 31, 2006. Total Income increased from Rs5341mn for the quarter ended December 31, 2006 to Rs7657mn for the quarter ended December 31, 2007.

The scrip touched an intra-day high of Rs348 and a low of Rs338 and recorded volumes of over 41,000 shares on NSE.

Canara Bank declined by over 6% to Rs287. The bank announced that it further reduces its Prime Lending Rate by another 25bps. The scrip touched an intra-day high of Rs306 and a low of Rs285 and recorded volumes of over 8,00,000 shares on NSE.

Accentia Technology gained by 1.6% to Rs184 after the company announced that it entered into an accord with 5 US Hospitals. The scrip touched an intra-day high of Rs190 and a low of Rs179 and recorded volumes of over 13,000 shares on NSE.

Hexaware rallied by 8.8% to Rs72 ahead of the results to be announced on February 21, 2008. There were also media reports stating that there was a block deal of over 1.4 crore shares on BSE. The scrip touched an intra-day high of Rs75 and a low of Rs67 and recorded volumes of over shares 1,00,00,000 on BSE.

Welspun Gujarat was down 2.2% to Rs466. The company announced that they won orders worth Rs1.2bn. The scrip touched an intra-day high of Rs474 and a low of Rs460 and recorded volumes of over 2,00,000 shares on NSE.

Sun Pharma slipped by over 4% to Rs1071. The company said that it acquired Taro Pharma shares from Brandes. The scrip touched an intra-day high of Rs1138 and a low of Rs1051 and recorded volumes of over 3,00,000 shares on NSE.

News Snippets:

SBI, BoI, Union Bank and Canara Bank cut their benchmark prime lending rates (PLRs). (BS)

A consortium of Reliance Energy and Hyundai have bagged the contract for the Mumbai Trans Harbour Link (MTHL), edging out another consortium led by Mukesh Ambani. (BS)

Sun Pharma has acquired an additional 9.4% stake in Israel’s Taro Pharma for US$38mn, raising its total holding to 34.4%.(BS)

Reliance Communications has consolidated its global businesses into a newly-formed subsidiary, Reliance Globalcom. (BS)

Bharti Retail may not use the Wal-Mart name for its front end retail stores. (FE)

The Government plans to float special bonds which will be used to subscribe to the Rs167bn rights issue of SBI. (FE)

HC has allowed Dabur India to use the name Glucose-D as also the green colour for its packaging. (FE)

Tata Motors’ Nano rollout from its Singur factory would coincide with the Durga Puja in October. (BS)

Global private equity major Blackstone Group will invest around US$60mn in Allcargo Global Logistics. (BS)

HCL Tech has acquired CapitalStream, a US-based lending automation solutions provider, for Rs1.6bn in an all-cash deal. (BS)

GSPC is in talks with Adani and Essar groups for its upcoming 5-10 mtpa LNG terminal in Gujarat. (BS)

Indian Hotels has won the bid to develop a resort on Radhanagar beach at Havelock Island of Andaman & Nicobar. (BS)

Fiat's component arm Magneti Marelli has signed two JVs with SKH Metal and SKH Sheet Metal Components, part of the Krishna group, to manufacture automobile exhaust systems. (BS)

Essel Group is re-evaluating its plans to build the proposed special economic zone in Gorai, in suburban Mumbai, following agitation from local residents. (BS)

Economic Front Page

The Reserve Bank of India (RBI) has suggested that the government should auction surplus funds in the system rather than park it with RBI at the end of the financial year, a move aimed at easing liquidity crunch during financial year-end. (BS)

Strong demand for Dollars from importers and a lack of fresh inflow into the market led the spot Rupee to breach the crucial barrier of 40.00 and close at a five-month low of 40.21/22. (BS)

Foreign holding companies are likely to be allowed to invest in downstream ventures without prior permission of the Government. (FE)

Net direct tax collections rose 41% during the period April 1,2007 to February 15, 2008. (BL)

The DoT has approved to allow service provider to share active infrastructure. (ET)

Water bottles may be exempted from excise duty. (ET)

Private airlines may soon be allowed to fly to Mauritius. (ET)

Indo-US investment protection pact likely by year end. (ET)

Communications Minister says DoT to sign spectrum deals soon. (ET)

Centre weighs refund for exporters at state level. (ET)

Daily Trading Picks - Feb 21 2008

Daily Trading Picks - Feb 21 2008

Daily Technicals, Futures - Feb 21 2008

Daily Technicals, Futures - Feb 21 2008

Reliance Communications to consolidate its global business

Reliance Communications on Wednesday said it is consolidating its international businesses under Reliance Globalcom, the newly incorporated umbrella brand for all its overseas businesses.

"By integrating the international businesses under Reliance Globalcom, we are presenting a single face to our customers, to our partners and to our vendors," Reliance Globalcom president Punit Garg told reporters.

Reliance Communications has three international businesses namely Flag, Yipes and Voice. Now, all these three verticals would come under Reliance Globalcom.

Reliance Globalcom would be a subsidiary "directly and indirectly" of reliance communications and headquartered in London.

Reliance Globalcom would come into being in the next 60-90 days after the necessary regulatory approvals, he said.

Pre Budget - Income Tax payers may get relief

Income Tax payers are likely to get a major relief in the budget 2008-09, as the government prepares itself to please the middle class in the election year.

Finance Minister P Chidambaram can give a marginal but visible relief to personal income tax assesses this year, as tax collections have substantially improved over the past three years, sources said.

With buoyant tax collections in 2007-08, there is significant pressure on Chidambaram to reduce the effective rates. The minister himself has acknowledged that with better tax compliance, there could be a case for cut in rates.

The minimum income threshold limit for income tax payer could be raised from Rs 1,10,000 to Rs 1,25,000 or Rs 1,30,000, sources said.

Similarly, the income threshold for 30 per cent tax rate could be raised from the current Rs 2,50,000 per annum, sources said, adding that this had been kept constant since fiscal year 2005-06.

Tax payers would get a relief of Rs 1,500 to Rs 2,000 even if the Finance Minister decides to raise the minimum income threshold limit of income tax by Rs 15,000 to Rs 20,000 to offset the impact of inflation and submission of sixth pay commission report later this year.

An announcement on the new income tax code is also expected in the budget.

The Finance Minister had earlier said that the code, aimed at simplifying the tax laws, would be put for public comments shortly.

Pre Budget - Cut excise duties to boost manufacturing

Concerned over the slump in industrial production and to maintain inflation around 4 per cent, the government is likely to provide relief to the manufacturing sector by marginally cutting excise duty rates or sector-specific duties in the budget 2008-09.

Finance Minister P Chidambaram may announce cut in excise duty rates across the board from 16 per cent to 14 per cent or sector-specific duty cuts in the budget to be presented on February 29, official sources said.

Sectors like pharmaceutical, textile machinery, food processing, paper and auto including two wheelers, tyres are expected to get relief in excise duty, but like last year Chidambaram could also prune excise duty exemptions to maintain revenue collections, sources said.

According to Finance Ministry, due to various excise duty exemptions the estimated revenue foregone touched Rs 99,690 crore in 2006-07 as against Rs 66,760 crore in the previous year. It includes area-specific tax exemptions of Rs 7,000 crore in 2006-07.

With the approval of over 400 special economic zones, the revenue-foregone figures could be much higher for 2007-08, although some tax exemptions were withdrawn in the last budget.

Finance Minister had earlier said that tax exemptions would have to go in a phased manner. While commenting on the fall in industrial production till November, he indicated that the government could take steps to boost consumption and investment to sustain the GDP growth close to 9 per cent.

The growth rate for manufacturing sector declined to 9.6 per cent in the first nine months till December for 2007-08 from 12.2 per cent in the previous fiscal.

Prime Ministers economic advisory council chairman C Rangarajan has also favoured cut in excise duty especially on consumer durables to spur economic growth. The government expects that manufacturers might pass on cut in duties to consumers, thus dampening inflation.

Sources said there is a strong likelihood that the oil sector may also get a relief of at least re one a liter in excise duty on petrol and diesel besides downward revision of customs duty to compensate oil marketing companies selling subsidised oil products.

The government is also worried about the impact of fall in growth in high-employment sectors like textile and food processing.

Sources said the textile sector, which is estimated to order Rs 1,00,000 crore-worth machinery over the next 5 years, might also get a relief in excise duties especially on machinery.

Some sectors like packaged drinking water, which attract 16 per cent excise duty are also expecting downward revision of central levy to eight per cent.

Meanwhile, industrial chambers like FICCI have asked the Finance Minister to bring down excise duty rate of 16 per cent to 12 per cent in two years as part of its commitment to implement Goods and Services Tax (GST) with effect from April 1, 2010.

Pre Budget Analysis - Feb 20 2008

Pre Budget Analysis

Nifty February 2008 futures at discount

Turnover in F&O segment rises

Nifty February 2008 futures were at 5130, at a discount of 24.45 points as compared to spot closing of 5154.45.

The NSE's futures & options (F&O) segment turnover was Rs 43,987.02 crore, which was higher than Rs 36,397.03 crore on Tuesday, 19 February 2008.

Reliance Capital February 2008 futures were at premium, at 2007.95, compared to the spot closing of 2004.95.

Reliance Natural Resources February 2008 futures were at premium, at 133.40, compared to the spot closing of 132.70.

Reliance Energy February 2008 futures were at premium, at 1595, compared to the spot closing of 1573.

In the cash market, the S&P CNX Nifty lost 126.35 points or 2.39% at 5154.45.

Crude closes above 100$ mark again

Fed Chairman’s comment keeps crude above $100 mark

Crude prices ended once again higher today, Wednesday, 20 February, 2008. Prices rose today after comments from Federal Reserve Chairman’s that Fed is quite ready to ease interest rates further to help US economy find a solid footing. Oil also rose after the U.S. dollar fell enhancing the appeal of commodities as an inflation hedge.

Crude-oil futures for light sweet crude for March delivery today closed at $100.74/barrel (higher by $0.73/barrel or 0.7%) on the New York Mercantile Exchange. Earlier in the session, the March contract, which expired today, hit a record all-time high of $101.32 a barrel.

The Federal Reserve confirmed today that it is willing to do more to help the economy find its footing, but warned that inflation worries might necessitate swift rate hikes once growth resumes.

Yesterday crude prices had rallied more than 5% after it was reported that Iranian oil minister said over the weekend that reducing production is very normal for OPEC in March. Iran is OPEC’s second largest oil producer.

Brent crude oil for April settlement today fell $0.14 (0.1%) to $98.42 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.

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

Natural gas remains unchanged

Natural gas in New York was little changed, erasing an earlier gain, on speculation supplies are ample for the remaining cold-weather months. Gas for March delivery fell 0.9 cent to $8.968 per million British thermal units. Gas surged 3.7% and has advanced 20% so far this year.

Against this backdrop, March reformulated gasoline ended down 1 cent at $2.59 a gallon and March heating oil dropped 1 cent to end at $2.75 a gallon.

In a monthly report released last week, EIA said the world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand.

At the MCX, crude oil for February delivery closed at Rs 3,952/barrel, higher by Rs 51 (1.3%) against previous day’s close. Natural gas for February delivery closed at Rs 360.6/mmtbu, higher by Rs 3.3/mmtbu (0.9%)

Ranbaxy Labs

Ranbaxy Labs

Sun Pharma

Sun Pharma

Patel Engineering

Patel Engineering

Today's Pick - ABG Shipyard

We recommend a buy in ABG Shipyard from a short-term perspective. From the charts of ABG Shipyard, we see that the stock had formed a double top pattern spanning almost two months between November 2007 and January 2008 with baseline at Rs 870. On January 21, the stock conclusively penetrated the baseline of the double top and achieved the pattern price target. Thereafter, the stock continued to decline and found support at around Rs 600. This level almost coincides with 20 0-day moving average and a key support level. Triggered by positive divergence in the daily momentum indicator, the stock has recently commenced a short-term up-trend. This up move has breached the medium-term down trendline and 21-day moving average. We notice a crossover in the daily moving average convergence divergence, which indicates establishment of bullishness. Our short-term outlook for the stock is bullish. We expect the stock’s existing up move to continue to our target price of Rs 840 in the short-term. Investors with a short-term perspective can buy the stock while keeping the stop loss at Rs 698.

AllCargo Logistics, Hotel Leela, Ramsarup Industries

AllCargo Logistics, Hotel Leela, Ramsarup Industries

Rural Electrification IPO Note

Rural Electrification IPO Note

Ranbaxy, SEAMEC, Crompton Greaves

Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs412

Board clears proposal for hiving off discovery R&D

Key points

  • The board of Ranbaxy Laboratories (Ranbaxy) has cleared a scheme of demerger of the company's New Drug Discovery Research (NDDR) unit into a subsidiary, Ranbaxy Life Science Research Ltd (RLSRL). The demerger scheme is subject to requisite approvals.
  • Under the scheme of demerger, all assets, liabilities, research personnel and pipeline related to the NDDR unit will be transferred to RLSRL. In consideration, each shareholder of Ranbaxy will receive one equity share of Re1 each of RLSRL for every four equity shares of Rs5 each held in Ranbaxy.
  • The demerged company will be an independent company, the equity shares of which will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), while global depositary receipts (GDR) will be listed at the Luxembourg Stock Exchange. All approvals required for the scheme to come into effect are expected in the 2nd half of 2008.
  • The demerger will enable the company to explore various funding options for the NDDR projects as well as allow for enhanced focus and dedicated resources for long-term value creation.
  • The demerger will also improve the profitability of the core manufacturing business. The management has indicated that the demerger will result in savings of approximately $25 million in CY2008. The savings have already been factored into our estimates.
  • At the current market price of Rs412, Ranbaxy is trading at 19.3x its base CY2008E earnings and 16.8x its base CY2009E earnings. We maintain our Buy recommendation on the stock with the sum-of-the-parts price target of Rs558 (20x CY2009E earnings of base business plus Rs68 for exclusivity opportunities).

Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs273
Current market price: Rs165

Price target revised to Rs273

Result highlights

  • Q4CY2007 results of SEAMEC have been quite disappointing. The revenues during the quarter declined by 64% year on year (yoy) to Rs22.3 crore from Rs61.6 crore due to lesser deployment of vessels. During the quarter, SEAMEC III was the only vessel that was fully deployed, while SEAMEC II and SEAMEC IV were not operational due to up-gradation or repair work for longer duration than expected. SEAMEC I was also under-utilised due to premature termination of contract.
  • The company registered an operating loss of Rs11.6 crore as against the operating profit of Rs30.4 crore during the corresponding quarter last year (Q4CY2006). The company incurred dry docking expense of Rs10.3 crore during the quarter.
  • The company suffered a net loss of Rs15.9 crore during the quarter as against the net profit of Rs25.9 crore during Q4CY2006 on account of lower revenue generation and higher dry docking expenses.
  • On yearly basis, the revenues registered a modest growth of 7.1% to Rs170.4 crore, while the operating profit declined by 28.2% to Rs50.8 crore.
  • With SEAMEC II to be out of operations for a minimum of six-month duration and delay in up-gradation of SEAMEC IV, we expect the company's performance to suffer during H1CY2008. Consequently, we are downgrading our CY2008 estimates to Rs23.1 per share from the earlier estimate of Rs33.5 per share.
  • At the current market price, the stock trades at 7.2x CY2008 and 5.2x CY2009 estimated earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs273 (8.5x CY2009 earnings).

Crompton Greaves
Cluster: Apple Green
Recommendation: Buy
Price target: Rs423
Current market price: Rs313

Price target revised to Rs423

Key points

  • The M9FY2008 performance of Crompton Greaves Ltd (CGL) has been below our expectations. The power system business of the company displayed sluggish growth in its revenues. While in Q2 the revenue growth saw a set back due to a fire in a transformer plant, the Q3 revenues grew by only 13.1% due to logistical problem and delay in the delivery of orders.
  • In the recent conference call, the management of the company has guided for a revenue growth of 19% in the power business, 20% in the industrial business and 15% in the consumer business in FY2008. The guidance was below our earlier estimates, leading us to the downgrade our estimates.
  • In this report, we are also introducing our FY2010 earning estimates and expect CGL revenues and profits to grow at a compounded annual growth rate (CAGR) of 21.6% and 33.7% respectively over FY2007-10E.
  • The standalone order book of the company remained flat at Rs2,175 crore, while the consolidated order book of the group stood at USD1.3 billion. We expect the order inflow to pickup from Q4FY2008 onwards.
  • On a consolidated basis, the company reported net sales of Rs1,713.5 crore, while the net profit was at Rs82.7crore. The consolidated operating profit margin (OPM) increased by 80 basis points quarter on quarter (qoq) to 10.9%. An year-on-year (y-o-y) comparison could not be made, as the quarterly consolidated numbers were not reported earlier.
  • We have downgraded our earnings estimates by 8.8% and 4% respectively for FY2008 and FY2009. Our revised earning per share (EPS) estimates now stands at Rs10.6 and Rs14.4 for FY2008 and FY2009 respectively.
  • We remain bullish on the stock and reiterate Buy recommendation with a revised price target of Rs423. We have valued CGL based on 23x FY2010E EPS, which is based at 15% premium to our target multiple of Thermax.
  • CGL is one of the largest players in the power sector and with the acquisition of Pauwel, Ganz, and Microsol has plugged the gaps in its products and services offerings. We believe these valuations are attractive because of (a) Robust operating performance of the company on a standalone basis; (b) Higher geographical width and product depth of the company due to its subsidiaries and (c) Management's expertise in turning around the operations of the subsidiaries. At the current market price, the stock trades at 21.7x and 17x its FY2009E and FY2010E consolidated earnings.