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Saturday, February 23, 2008

Sensex drops 750 pts for the week

The markets declined on thin volume during the week ended February 22 on worries about the impending recession in the US. Investors, however, have pinned hopes on the budget scheduled to be presented on February 29.

Analysts are expecting a significant move next week as the derivatives contracts expires on February 28 - a day ahead of the budget.

The main index of the Bombay Stock Exchange, the Sensex, moved between a high of 18,314.10 and low of 17,294.73 before ending the week at 17,349.07 - a fall of 766.18 points over the last weekend close of 18,115.25.

The National Stock Exchange's S&P CNX Nifty declined 192.15 points to 5,110.75 from the previous weekend close of 5,302.90.

Indiabulls Real Estate,Tanla Solutions,Banking

Indiabulls Real Estate,Tanla Solutions,Banking

India Strategy - Feb 22 2008

India Strategy - Feb 22 2008

REL, ICICI Bank, RPower February 2008 futures at discount

Turnover in F&O segment declines

Nifty February 2008 futures were at 5077.50, at a discount of 33.25 points as compared to spot closing of 5110.75.

The NSE's futures & options (F&O) segment turnover was Rs 36,386.23 crore, which was lower than Rs 43,409.74 crore on Thursday, 21 February 2008.

Reliance Energy (REL) February 2008 futures were at discount, at 1547, compared to the spot closing of 1560.60.

ICICI Bank February 2008 futures were at discount, at 1093.20, compared to the spot closing of 1099.80.

Reliance Power (RPower) February 2008 futures were at discount, at 413, compared to the spot closing of 417.15.

In the cash market, the S&P CNX Nifty lost 81.05 points or 1.56% at 5110.75.

Indian Hume Pipe

Indian Hume Pipe

SKF India

SKF India

Hexaware Technologies, HDIL, Banking

Hexaware Technologies, HDIL, Banking

HDFC Bank to buy CBoP in all-stock deal

HDFC Bank, India’s third largest bank, is all set to buy Centurion Bank of Punjab in an all-stock deal.

The boards of both the banks will meet on Saturday to finalise the contours of the deal, which will be the biggest banking merger in India.

The banks’ top brass have been involved in marathon meetings in the past two days to work out the details of the proposed merger.

The swap ratio will be decided later. Initial calculations suggest that a Centurion shareholder will get one share of HDFC Bank for every 20 shares, according to sources familiar with the development.

However, the exact ratio will be arrived at after a consensus, said an HDFC executive. Post the deal, HDFC Bank will get around 400 branches and thus surpass ICICI Bank in terms of branch presence.

More importantly, the bank’s presence in the north and south will receive a boost. Centurion has nearly 170 branches in the north and around 140 branches in the south, whereas HDFC Bank has 250 branches in the north and 150 in southern India.

“We will also acquire a strong small and medium enterprises portfolio from Centurion,” the executive added. HDFC Bank has almost 10 million customers compared with Centurion’s 2.5 million.

The proposed merger has been spearheaded by Housing and Development Finance Corporation chairman Deepak Parekh, Centurion Bank of Punjab chairman Rana Talwar and Ambit CEO Ashok Wadhwa, said a senior HDFC Bank executive.

The shares of Centurion, which rose sharply yesterday due to the merger buzz, declined today by 1.14 per cent to end at Rs 56.40 on the Bombay Stock Exchange. The HDFC Bank scrip closed lower by 4.40 per cent to Rs 1474.95

Via Business Standard

DLF Ltd, HCL Technologies, Punj LLoyd

DLF Ltd, HCL Technologies, Punj LLoyd

ABB, Castrol India, Dish TV

ABB, Castrol India, Dish TV

ABB, Sesa Goa, Nicholas Piramal, India Telecom, India Cement

ABB, Sesa Goa, Nicholas Piramal, India Telecom, India Cement

Weekly Snippet

A very choppy week lays in store. We have the Budget on Feb 29. Before that we have an F&O expiry. Stock specific action would be seen in Reliance Power, depending on what the board decides to shore up investor sentiment. Clarity will also emerge on whether Centurion Bank of Punjab will merge with HDFC Bank. The start of the day will hinge a lot on the global markets. Only improvement in global cues can bring some rally irrespective of the budget. Volumes may be a little higher on account of expiry.

Few companies meet 25% ‘public’ stake limit

Indian primary stock market, presently facing poor investors responses could be flooded with fresh issues if the Government’s proposal for a minimum 25% public holding is implemented in one go because the average individuals’ holding is mere 1.8% in PSUs and that of 13.56% in private sector, an ASSOCHAM Eco Pulse (AEP) study has revealed.

An analysis of Nifty and Sensex companies done by the industry chamber has found out that while 94% of them already satisfy the minimum 25% of non promoter shareholding criteria along with holdings of qualified institutional bodies, only a handful meet the ‘public’ quota as proposed by the Finance Ministry.

If the share of FIs, FIIs, MFs, Employees, NRIs/OCBs, Private Corporate Bodies is kept out from the non-promoters, the average individuals' holding is far below the limit under the amendments in the Securities Contracts (Regulation) Rules, 1957 (SCRR). "Implementation of the proposed changes in the Act, will lead to a huge flow of IPOs and Follow-on offers by a large number of companies into the primary markets," says Venugopal Dhoot, President of ASSOCHAM.

The Study has revealed that only two companies among Sensex and Nifty scrips satisfy the proposed criteria of 25% of ‘public’ shareholding- Bajaj Auto and Larsen & Tourbo with a share of 27.7% and 35.5% respectively. In majority of the companies, FIIs occupy the maximum share of non-promoter holdings which fall in a range of 60% to 40%.

They are followed by insurance companies with a range of 20% to 5% and mutual funds ranging between 3% to 1%. Interestingly, the average individual shareholding of the public sector companies is only 1.81% which is far less than the average individual’s share of 13.56% in the private sector companies. Among the Sensex firms, the average retail shareholding was estimated by the AEP to be 11.89 per cent and 10.08 per cent among the Nifty companies.

The Finance Ministry has proposed raising the ‘public’ shareholding limit for listed companies from the existing 10% to at least 25% in a move to encourage more public participation, transparency and overall governance in the market. With the implementation of proposed changes in the Act, the listed firms will have to dilute their shares within a period of three months.

If the proposal is implemented in one go, public sector companies will have to shed their promoter’s stake like BHEL with the least percentage of ‘public’ shareholding of 0.37%, ONGC with a share of 1.99%, NTPC (2.03%) and SBI at 2.86%.

The phenomenon is not restricted to public sector companies alone. Even private sector companies would have to dilute their equity to stay listed on the stock exchange. Bharti Airtel with the least percentage of the individual shareholding would have to dilute 23.65% of its promoter’s stake. Maruti Suzuki and TCS would have to follow the suit having a very small percentage of Individual shareholding of 2.46% and 5.34% respectively.

The study also found that promoters of the company own over 70-80% stake in most of the energy, IT and telecom companies like TCS (77.78%), Wipro (79.50%), Reliance Petroleum (75.38%), ONGC (74.14%), NTPC (89.50%).

SBI leads another round of rate cuts

The moral suasion of the RBI forced many public sector banks to slash lending rates earlier this month. If that was not enough, political pressure from North Block (the home of the Finance Ministry) has prompted another round of rate cuts from nationalised banks. State Bank of India (SBI) led from the front, by revising down the Benchmark Prime Lending Rate for the second time this month. The Benchmark Prime Lending Rate (referred to as SBAR) was revised down by 25 basis points (bps) from 12.50% p.a. to 12.25% p.a. with effect from Feb. 27. SBI had cut PLR by 25 bps on Feb. 11. Other public sector banks to trim their PLRs included Bank of India, Union Bank and Canara Bank (also second time this month).

Union Bank cut its PLR by 50 bps to 12.75% after a board meeting in Lucknow. The bank also lowered floating rates on its home loans by 75 bps. Bank of India lowered its PLR by 50 bps to 12.75%, a week after it cut rates on auto loans by 50 bps, educational loans by 100 bps and consumer loans by 250 bps. The new rate cut would lower these rates by another 50 basis points. The new rates would come into effect from Feb 21 for Union Bank and Bank of India. Canara Bank also cut its PLR by 25 basis points, to 12.75%, effective Feb 25. Bank of Baroda slashed its PLR by 50 bps to 12.75% late on Friday. However, none of the banks have cut their deposit rates so far, and ICICI Bank, the country’s second-largest bank, has not yet lowered rates.

The slew of rate cut announcements by nationalised banks smacks of political interference at a time when rates in the inter-bank call money market have shot up, and bond yields too have inched higher. Liquidity conditions, which were pretty comfortable when the RBI announced its quarterly monetary policy have tightened, with the central bank now injecting money through its daily repo auctions. So, clearly the policymakers and markets are at a variance as far as the near-term direction of interest rates is concerned. The North Block wants rates to head south to boost consumption and overall economic activity, bankers are finding life difficult as liquidity has suddenly dried up. At the same time, they have been asked to cut lending rates.

Weekly Positional Calls - Feb 23 2008



Buy Hindalco

Buy Tata Steel

Buy Siemens

Rural Electrification Allotment - Subscription Details

Rural Electrification Corporation Limited - Bid 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

Updated as on 22 Feb 2008 at 2130 hrs