Monday, December 15, 2008
BSE Bulk Deals to Watch - Dec 15 2008
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
15/12/2008 533029 ALKALI SCB CORPORATION B 70301 126.22
15/12/2008 533029 ALKALI SCB CORPORATION S 89512 129.81
15/12/2008 526881 FINANC TECHN PASSPORT INDIA INV MAU LTD B 497837 500.00
15/12/2008 530655 GOOD LUCK ST CONSOLIDATED SECURITIES LTD. B 100000 181.15
15/12/2008 530655 GOOD LUCK ST BIHAR TUBES LTD S 99755 181.15
15/12/2008 522217 GUJ APO IND PATEL AJITKUMAR TRIBHOVANDAS HUF B 350000 91.22
15/12/2008 522217 GUJ APO IND SWATI AJITKUMAR PATEL S 243750 91.35
15/12/2008 522217 GUJ APO IND MITUL A PATEL S 62950 90.70
15/12/2008 517380 IGARASHI MOT TREE LINE ADVISORS LTD HONG KONG S 129000 12.19
15/12/2008 526668 KAMAT HOTE I C E UNTERBERG TOWBIN ADVISORS LLC AC INDUSINO INTERNATIONAL B 636793 45.00
15/12/2008 526668 KAMAT HOTE I MORGAN STANLEY MAURITIUS COMPANY LIMITED S 631429 45.00
15/12/2008 590052 KIRLOSKAR EL SUNDARAM BNP PARIBAS SELECT MIDCAP B 874642 38.00
15/12/2008 590052 KIRLOSKAR EL ARISAIG PARTNERS ASIA PTE LTD SUB AC ARISAIG INDIA FUND LTD S 1000000 38.08
15/12/2008 523792 MAZDA LTD JNJ HOLDING PVT LTD B 24000 29.18
15/12/2008 523792 MAZDA LTD HSBC BANK MAURITIUS LIMITED S 105245 29.35
15/12/2008 519560 NEHA INTERNA CONSOLIDATED SECURITIES LTD. S 120001 19.00
15/12/2008 524820 PANAM PETROC SUDHIR JAIN S 68653 67.32
15/12/2008 507864 PIONEER INVE ACME CRAFT PVT LTD S 83500 13.95
15/12/2008 532543 SAHPETROLEUM RATNABALI CAPITAL MARKETS LTD. B 212520 36.88
15/12/2008 532543 SAHPETROLEUM RAJASTHAN GLOBAL SECURITIES LTD. B 161905 37.00
15/12/2008 532543 SAHPETROLEUM GLOBE CAPITAL MARKET LIMITED S 194676 36.91
15/12/2008 502563 SH BHAW PA M M C SRIKANTH S 22801 5.18
15/12/2008 532452 SOUTH ASIAPE TRIMPLEX INVESTMENTS B 1841500 8.32
15/12/2008 532452 SOUTH ASIAPE THE METHONI TEA CO S 1840300 8.32
15/12/2008 509930 SUPREM IND* THE SUPREME INDUSTRIES LIMITED B 162000 110.14
15/12/2008 509930 SUPREM IND* UBS SECURITIES ASIA LTD SWISS FINANCE CORPORATION MAURITIUS LTD S 204000 110.01
15/12/2008 505196 TIL LIMITED MARBELLOUS TRADING PVT LTD B 209000 134.83
15/12/2008 505196 TIL LIMITED WF INDIA RECONNAISSANCE FUND LTD S 197827 135.00
15/12/2008 532824 VIJAYES TEXT HSBC BANK MAURITIUS LIMITED S 236353 5.69
NSE Bulk Deals to Watch - Dec 15 2008
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
15-DEC-2008,ALKALI,Alkali Metals Limited,SCB CORPORATION,BUY,121554,124.94,-
15-DEC-2008,GREENPLY,Greenply Industries Ltd,PAYASH SECURITIES PVT LTD,BUY,511346,37.50,-
15-DEC-2008,IFCI,IFCI Ltd.,GOLDMAN SACHS INVESTMENTS MAURITIUS I LTD,BUY,6050000,22.70,-
15-DEC-2008,SAHPETRO,Sah Petroleums Limited,RATNABALI CAPITAL MARKETS LTD.,BUY,314228,36.90,-
15-DEC-2008,SKUMARSYNF,S. Kumars Nationwide Ltd,IL & FS FINANCIAL SERVICES LTD - PROPRIETARY PORTFOLIO,BUY,1600000,24.45,-
15-DEC-2008,ALKALI,Alkali Metals Limited,JOHNSON AFRAHIMBHAI TAILOR,SELL,100000,139.63,-
15-DEC-2008,ALKALI,Alkali Metals Limited,SCB CORPORATION,SELL,194154,125.91,-
15-DEC-2008,GREENPLY,Greenply Industries Ltd,CREDIT SUISSE (SINGAPORE) LIMITED,SELL,511346,37.50,-
15-DEC-2008,IGARASHI,Igarashi Motors India Lim,TREE LINE ADVISORS (HONG KONG) LTD SUB A/CTREE LINE ASIA MA,SELL,141000,12.13,-
15-DEC-2008,LLOYDELENG,Lloyd Electric & Engg Ltd,GOLDMAN SACHS INVESTMENTS MAURITIUS I LTD,SELL,221314,23.00,-
15-DEC-2008,SAHPETRO,Sah Petroleums Limited,GLOBE CAPITAL MARKET LTD,SELL,265769,36.89,-
15-DEC-2008,SKUMARSYNF,S. Kumars Nationwide Ltd,CITIGROUP GLOBAL MKTS MAURITIUS PVT LTD- SELL CODE,SELL,2000000,24.43,-
Sensex vaults 12.5% in eight trading sessions
Expectations of a second tranche of fiscal sops from the government and hopes of additional interest rate cuts by the central bank to shield the domestic economy from the global economic recession, boosted the market in what was a highly volatile trading session. The BSE 30-share Sensex advanced 142.32 points, or 1.47%, nearly 120 points down from the day's high and about 80 points off the day's low.
The market was caught between reports of a mixed bag of advance tax payment by top corporates, cutting of gains by European shares, lower US index futures and hopes of more measures by the government and central bank to revive demand in a weakening economy. Volatility in index heavyweight Reliance Industries (RIL) caused volatility in the key benchmark indices.
State Bank of India (SBI) has reportedly paid 56% higher advance tax of Rs 1,700 crore in Q3 December 2008 over Q3 December 2007. HDFC paid about 30% higher advance tax at Rs 279 crore. However, ICICI Bank paid 6% lower advance tax is at Rs 470 crore. RIL has paid almost the same advance tax as last year.
The market witnessed a bout of volatility. After an initial surge, the market pared gains before bouncing back again in morning trade. The market once again pared gains in early afternoon trade. The market lost further ground in afternoon trade. It soon came off the lower level and the recovery continued in mid-afternoon. The market once again pared gains in late trade before regaining strength later. The BSE Sensex swung 199.04 points between the day's high and low.
Factory output in India fell for the first time in more than 13 years in October 2008, the latest evidence of a rapid economic slowdown. The weak industrial output data for October 2008 has raised expectations of a suitable policy response from the government and the central bank to shield the domestic economy from the global economic recession. There is an anticipation of a second tranche of fiscal sops from the government and additional interest rate cuts by the central bank.
Shares were volatile in Europe. European shares pared gains on Monday, 15 December 2008, after three European banks announced a total of about $3.8 billion in exposure to an investment fund run by Bernard Madoff, the US investor accused of running a $50 billion "Ponzi" scheme. Stocks had recovered earlier on expectations of a further reduction in interest rate in the United States. The key benchmark indices in France, Germany and UK were up by between 0.39% to 1.29%.
Fed fund futures showed a 76% chance of a 75 basis point rate cut. The US Federal Reserve is set to announce its rate decision on Wednesday, 17 December 2008.
Trading in US index futures indicated the Dow could rise 14 points at the opening bell, extending the previous session's gains as investors awaited news on a potential bailout of the stricken auto industry and ahead of the Fed two-day policy meeting.
The White House said on Friday, 12 December 20078, the administration would consider using part of the Treasury's $700 billion bailout package for financial institutions to keep the Big 3 automakers afloat after an autos bailout bill failed in the Senate. However, US President George W. Bush said on Monday, 15 December 2008, an announcement on a auto industry rescue was not imminent.
Stocks surged in Asia on Monday, 15 December 2008, on hopes a lifeline may be given to the struggling US automakers. Key benchmark indices in Hong Kong, China, Japan, South Korea, Singapore and Taiwan were up by between 0.52% to 5.21%.
The BSE 30-share Sensex was up 142.32 points, or 1.47%, to 9,832.39. At the day's low of 9,749.29, the Sensex gained 59.22 points in afternoon trade. The Sensex jumped 258.26 points at the day's high of 9,948.33 hit in mid-morning trade.
The S&P CNX Nifty was up 59.85 points, or 2.05%, to 2,981.20.
The BSE clocked a turnover of Rs 4,360 crore marginally lower than Rs 4,486.93 crore on Friday, 12 December 2008.
Nifty December 2008 futures were at 2989.90, at a premium of 8.70 points as compared to the spot closing of 2981.20. Turnover in NSE's futures & options (F&O) segment was Rs 37,645.87 crore, lower than Rs 41,078.17 crore on Friday, 12 December 2008.
Buying by foreign funds this month has lifted sentiments. From a recent low of 8,739.24 on 2 December 2008, the BSE Sensex has risen 1,093.15 points or 12.5% in the past eight trading sessions. Foreign funds have bought shares worth Rs 2,048.70 crore, till 11 December 2008. They are net sellers of Rs 52,688.50 crore in calendar 2008, so far.
The Sensex is down 10,454.60 points or 51.53% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11,374.38 points or 53.63% below its all-time high of 21,206.77 struck on 10 January 2008.
The BSE Realty index (up 5.53%), the BSE Metal index (up 5.19%), the BSE Consumer Durables index (up 4.9%), the BSE PSU index (up 3.49%), the BSE Oil & Gas index (up 3.25%), the BSE Capital Goods index (up 3.18%), the BSE HealthCare index (up 2.09%), the BSE Auto index (up 1.94%), the BSE Power index (up 1.67%), the BSE Bankex (up 1.51%) outperformed the Sensex.
The BSE Teck index (up 0.5%), the BSE IT index (down 0.22%), the BSE FMCG index (up 0.74%) underperformed the Sensex.
The market breadth, indicating the overall health of the market, was strong on BSE with 1,937 shares advancing as compared with 555 that declined. 80 shares remained unchanged.
Larsen & Toubro, Grasim Industries, ONGC, rose by between 4.09% to 9.32%.
India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) rose 2.44% to Rs 1,338.05 on reports the government will shortly move the Bombay High Court requesting it to vacate an interim stay order that restrained RIL from selling gas from the Krishna-Godavari (K-G) basin to companies other than Reliance Natural Resources (RNRL) and state-owned NTPC.
RIL on its part has already appealed against the order. The court's interim order in May 2007 had directed RIL not to create third party interest for the disputed volume of 40 mscmd (million standard cubic metres per day) of gas from the K-G basin.
Metal stocks rose tracking recovery in metal prices on the London Metal Exchange. Hindalco Industries, National Aluminum Company, Sterlite Industries, Steel Authority of India rose by between 2.61% to 8.81%.
India's largest steel maker by sales Tata Steel jumped 4.22% on reports of plans to merge its British unit Corus, as a cost-cutting measure which can lead to thousands of job cuts in UK.
Real estate shares surged on hopes housing demand will improve following a concessional home loan package unveiled by the state-run banks today. DLF and Indiabulls Real Estate rose by between 1.57% to 8.2%. Unitech surged 10.5% on reports it plans to finalise a buyer for its hotel property in Gurgaon in the next two weeks. It expects to earn around Rs 300 crore from the sale of the 200-room budget hotel.
PSU banks on Monday unveiled cheaper rates for home loans up to Rs 5 lakh and between Rs 5 lakh and Rs 20 lakh. Rates for home loans up to Rs 5 lakh would not be more than 8.5%. The margin requirement has been fixed at 10% for up to Rs 5 lakh loan. In addition, no processing or pre-payment fee on up to Rs 5 lakh loans would be charged.
Rates on home loans between Rs 5 lakh and Rs 20 lakh would be frozen at 9.25%. The margin requirement has been fixed at 15 %. The home loan rates under the package can fall further if rates fall more. The new home loan package is valid till 30 June 2009.
Banking shares rose on hopes further interest rate cuts by the central bank will boost lending growth. India's second largest private sector bank by net profit HDFC Bank jumped 2.72% as its American depository receipt (ADR) gained 5.89% on Friday 12 December 2008. India's largest private sector bank by net profit ICICI Bank jumped 1.7% as its ADR rose 4.91% on Friday. ICICI Bank's advance tax payment fell 6% to Rs 470 crore in Q3 December 2008 over Q3 December 2007. However, India's largest commercial bank State Bank of India (SBI), fell 0.84% despite reports SBI's advance tax payment rose 56.25% at Rs 1,700 crore in Q3 December 2008 over Q3 December 2007.
India's largest home loan lender by operating income HDFC fell 1.45% even as its advance tax payment rose 29.76% to Rs 279 crore in Q3 December 2008 over Q3 December 2007.
Indiabulls Financial Services was locked at 5% upper limit at Rs 110.90 after a block deal of 4.81 lakh shares was executed on BSE at Rs 109.80 per share.
The Reserve Bank of India (RBI) on 6 December 2008, announced a 100-basis point cut in the repo rate and the reverse repo rate each. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks.
PSU banks were in action after state-run banks unveiled a package for home loans at lower rates. Indian Overseas Bank, Bank of Baroda, Canara Bank, Allahabad Bank rose by between 0.86% to 3.03%.
IT stocks fell on a stronger rupee. India's largest IT exporter by sales Tata Consultancy Services fell 2.62%. India's second largest IT exporter by sales Infosys fell 0.57% to Rs 1,101.10 off day's high of Rs 1,138.15. Its ADR rose 1% on Friday. India's fourth largest IT exporter by sales Wipro fell 1.63%. While, India's third largest IT exporter by sales Satyam Computer Services rose 2.11% as ADR gained 3.6% on Friday, 12 December 2008. IT firms derive more than 50% of their revenues from the US.
The Indian rupee traded close to one-month highs in afternoon trade on Monday as gains in the stock market raised hopes of fresh capital inflows but dollar demand from oil firms capped further gains. The partially convertible rupee was at 48.00/02 per dollar, stronger than its Friday's close of 48.43/45. It rose to 47.92 in early deals, which was its strongest since 11 November 2008. A stronger rupee affects IT firms negatively as they earn most of their revenues from exports.
Auto stocks rose on hopes lower interest rates would boost demand for vehicles which is mainly driven by finance. Maruti Suzuki India, Mahindra & Mahindra, Hero Honda Motors, Tata Motors rose by between 0.49% to 3.5%.
Apollo Tyres galloped 3.97% after 18.90 lakh shares, or 0.37% of the company's equity changed hands in a block deal at Rs 19.60 on BSE.
Cement stocks rose on hopes government's efforts to give a boost to the realty sector will spur cement demand. ACC, Birla Corporation of India, Ambuja Cements, Grasim Industries rose by between 1.84% to 9.32%.
India's second largest telecom services provider by sales Reliance Communications (RCom) fell 4.09% on reports department of telecom (DoT) is set to ask the Comptroller and Auditor General of India (CAG) to appoint a special auditor to examine the books of Reliance Communications (RCOM). Allegations are that the telco in the year ended March 2008 diverted revenue earned from its mobile services to a subsidiary in an attempt to bring down the total amount it had to pay to the government as licence fee and spectrum charge.
Consumer Durables stocks rose on hopes further rate cuts would boost demand. Blue Star, Rajesh Exports, Titan Industries, Videocon Industries rose by between 3.59% to 6.44%.
Gitanjali Gems soared 7.11% after the company said its board will meet on 19 December 2008 to consider buyback of own shares.
State-run oil marketing firms were mixed amid recent reports the government is considering a proposal to deregulate the pricing of petrol and diesel. HPCL and BPCL rose by between 2.5% to 4.09%. Indian Oil Corporation fell 0.3%.
The proposed deregulation of fuel prices, will provide full freedom to oil companies to set petrol and diesel prices.
Shipping stocks rose on reports government may bail out the shipping sector from rising cost of borrowings by providing 2-3% interest subsidy. Shipping Corporation of India, Essar Shipping and GE Shipping Company rose by between 4.2% to 14.9%.
Fertliser shares rallied on recent reports of government giving bonds worth Rs 10,000 crore to 23 fertiliser companies. Nagarjuna Fertiliser & Chemicals, Chambal Fertiliser & Chemicals, RCF, and Coramandel Fertiliser rose by between 1.77% to 10.36%.
Reportedly the government on 11 December 2008 issued special bonds worth Rs 10,000 crore of coupon rate 7% to 23 fertiliser companies as compensation for subsidising prices in the current financial year.
Kirloskar Electric Company jumped 10% on BSE after a block deal of 10 lakh shares was executed on BSE at Rs 38 per share.
McNally Bharat Engineering Company jumped 13.28% on bagging an order worth Rs 86.66 crore.
Elecon Engineering Company was locked at 5% upper limit at Rs 37.15 on bagging an order worth Rs 120 crore.
Vishal Retail was locked at the upper limit of 5% at Rs 109.65 on reports the company may sell stake to raise capital for sustaining its current operations and to fund planned expansion.
Reliance Natural Resources clocked the highest volume of 3.51 crore shares on BSE. Unitech (2.29 crore shares), IFCI (2.24 crore shares), Reliance Petroleum (1,5 crore shares) and GVK Power & Infrastructure (1.46 crore shares) were the other volume toppers in that order.
Reliance Industries clocked the highest turnover of Rs 505.79 crore on BSE. State Bank of India (Rs 234.15 crore), Reliance Natural Resources (Rs 206.80 crore), DLF (Rs 193 crore) and Reliance Capital (Rs 145.51 crore) were the other turnover toppers in that order.
US stocks rose on Friday, 12 December 2008, boosted by a White House statement that it would consider using some of the Treasury's $700 billion bailout package for financial institutions to keep the US "Big 3" automakers afloat. Specific bailout legislation had earlier failed to get through Congress.
Post Session Commentary - Dec 15 2008
The domestic market ended the day in green terrain after paring some of earlier gains on profit booking after sharp rally. Earlier benchmark indices gathered huge buying momentum supported by the positive Asian markets along with expectations of a second fiscal stimulus package from the government and hopes of further interest rate cuts by the central bank to protect the domestic economy from the global economic recession. Positive sentiment was also supported by the fiscal package announced by the public sector banks for the reality sector.
The Indian market opened on positive note tracking firm cues from the global markets. Market did not reacted to the negative IIP numbers for the month of October, announced on December 12, on hopes of second fiscal sops and additional interest rate cuts by RBI. . In addition, the investors were eying on the rate cut by US FED and the bailout package for Auto giants. Further stocks continued to trade higher on strong buying momentum sustained across the board. Though market came off from the days’ high to reduce its gains, due to sell off on selective stocks across the counters. From the sectoral front, most of the indices ended in green and among those Reality and Metal stocks out performed the benchmark indices as ended with gains of more than 5% each. Apart from that, Consumer Durables, PSU, Oil & Gas, Capital Goods, Pharma and Auto stocks also supported the upsurge. Midcap and Smallcap stocks also continued to gain the momentum. However IT stocks remained out of favor as witnessed some of the selling from this basket.
Among the Sensex pack 23 stocks ended in green territory and 7 in red. The market breadth was positive as 1937 stocks closed in green while 555 stocks closed in red and 80 stocks remained unchanged.
The BSE Sensex closed higher by 142.32 points at 9,832.39 and NSE Nifty ended up by 59.85 points at 2,981.20. The BSE Mid Caps and Small Caps ended with good gains of 114.59 points and 128.13 points at 3,165.07 and 3,659.09 respectively. The BSE Sensex touched intraday high of 9,948.33 and intraday low of 9,749.29.
Gainers from the BSE Sensex pack are Grasim Industries (9.32%), Hindalco (5.86%), Sterlite Industries (5.07%), L&T Ltd (4.24%), Tata Steel (4.22%), ONGC Ltd (4.09%), ACC Ltd (3.87%), M&M Ltd (3.50%), HDFC Bank (2.72%), JP Associates (2.67%) and Tata Motors (2.60%).
Losers from the BSE Sensex pack are Reliance Communication Ltd (4.09%), TCS Ltd (2.62%), Tata Power (2.49%), Wipro Ltd (1.63%), HDFC (1.45%), SBI (0.84%) and Infosys Tech (0.57%).
The PSU banks have announced fiscal package including a number of measures to boost housing, micro, small and medium enterprises (MSME), and export sectors. The home loan rates for up to Rs 5 lakh should not be more than 8.5%. Interest on loans between Rs 5-20 lakh shares will be 9.25%. There will be no process and prepayment fees for home loans up to Rs 5 lakh. New home loans package will be valid till June 30, 2009. Apart from this, the banks would not charge any processing fees and pre payment charges for loans upto Rs 20 lakh and also provide free insurance cover. They have also decided to cut the lending rates for the micro and medium enterprises by 100 basis points.
The early advance tax numbers from large corporate houses like SBI, ICICI Bank and HDFC illustrate increased payout. The SBI’s Q3 advance tax stands at Rs1,700 crore as against Rs1,088 crore (YoY). HDFC’s advance tax stood at Rs279 crore versus Rs215 crore of corresponding period of previous year. ICICI Bank’s Q3 advance tax is at Rs470 crore against Rs500 crore (YoY).
The BSE Reality index ended up by (5.53%) or 117.69 points at 2,245.87. Major gainers are Housing Dev (16.65%), Orbit Co (12.95%), Ansal Infra (11.88%), Unitech Ltd (10.50%), Pheonix Mill (9.97%) and Omaxe Ltd (9.28%).
The BSE Metal index ended higher by (5.19%) or 273.34 points at 5,538.47 as Welspan Gujarat SR (21.06%), NMDC Ltd (10.52%), Sesa Goa Ltd (9.45%), Steel Authority (8.81%), Jindal Saw (8.07%) and JSW Steel (6.44%) ended in green.
The BSE Consumer Durables index advanced by (4.90%) or 85.41 points to close at 1,763.24. Main gainers are Gitanjali GE (7.11%), Blue Star L (5.95%), Videocon Ind (5.67%), Rajesh Export (5.16%) and Titan Ind (3.59%).
The BSE PSU index ended higher by (3.49%) or 164.71 points at 4,883.22 as Hindustan Copper (15.10%), MMTC Ltd (14.11%), NMDC Ltd (10.52%), Steel Authority (8.81%), Mahanagar Tele (8.22%) and State Trad Corp (7.14%) ended in positive territory.
The BSE Oil & Gas index surged (3.25%) or 199.59 points to close at 6,344.94 as Cairn Ind (8.25%), Reliance Petroleum (6.95%), Aban Offshore (5.51%), Reliance Natural Resources (5.38%), Gail India (4.38%) and Essar Oil Ltd (4.19%) ended in green.
The BSE Capital Goods index gained (3.18%) or 216.94 points to close at 7,044.48. Gainers are Siemens Ltd (11.41%), Jyoti Struct (9.97%), Areva (8.13%), Everest Kanto (7.09%), Walchand Industries (6.53%) and Elecon Eng C (4.94%).
The BSE IT index lost (0.22%) or (5.13%) points to close at 2,286.20 as HCL Tech (2.75%), TCS Ltd (2.62%), Wipro Ltd (1.63%), Infosys Tech (0.57%) and Patni Computer (0.22%) ended in red.
Market ends buoyant
The 30-stock Sensex remained firm today on the back of firm Asian markets. The market opened on a positive note, tracking positive global cues at 9,822 up 132 points. The strong optimism among traders kept the Sensex above 9,900 mark. In mid-morning trades, buoyancy among frontline, realty, metal and consumer durable stocks lifted the Sensex to touch the day's high of 9,948. The market remained buoyant thereafter, but the 9,900 mark continued to elude the Sensex. The Sensex finally ended the session with a gain of 142 points at 9,832 while the Nifty closed the session at 2,981 up 60 points.
The breadth of the market was positive. Of the 2,572 stocks traded on the BSE, 1,937 stocks advanced, whereas 555 stocks declined. Eighty stocks ended unchanged. Among sectoral indices, BSE Realty jumped 5.53% followed by BSE Metal (up 5.19%), BSE CD (up 4.90%) and BSE PSU index (up 3.49%).
Most heavyweights ended higher. Among blue chips, Grasim Industries shot up by 9.32% at Rs1,173.70, Hindalco Industries soared 5.86% at Rs56, Sterlite Industries surged 5.07% at Rs307.70, Larsen & Toubro advanced 4.24% at Rs820.40, Tata Steel added 4.22% at Rs227.10, ONGC moved up 4.09% at Rs672.90, ACC scaled up 3.87% at Rs513.35 and Mahindra & Mahindra was up 3.50% at Rs303. Among laggards, Reliance Communications dropped 4.09% at Rs239, Tata Consultancy Services slipped 2.62% at Rs469.60 and Wipro shed 2.49% at Rs469.60 while Wipro, HDFC, State Bank of India and Infosys Technologies closed marginally lower.
Realty stocks were in limelight and closed with strong gains. HDIL jumped 16.65% at Rs127.15, Orbit Corporation soared 12.95% at Rs61.05, Ansal Infrastructure surged 11.88% at Rs33.90, Unitech added 10.50% at Rs37.90, Phoenix Mills gained 9.28% at Rs74.45 and Omaxe advanced by 9.28% at Rs60.65.
Over 3.51 crore shares of Reliance Natural Resources changed hands on BSE followed by Unitech (2.29 crore shares), IFCI (2.24 crore shares), Reliance Petroleum (1.50 crore shares) and GVK Power & Infrastructure (1.46 crore shares).
Reliance Industries clocked a turnover of Rs504 crore on BSE followed by State Bank of India (Rs234 crore), Reliance Natural Resources (Rs206 crore), DLF (Rs193 crore) and Reliance Capital (Rs145 crore).
Market may extend gains on positive global cues
The market may extend last week's strong gains on firm Asian stocks and on resumption of buying by foreign funds. A weak industrial output data for October 2008 has raised expectations of a suitable policy response from the government and the central bank to shield the domestic economy from the global economic recession. There is an anticipation of a second tranche of fiscal sops from the government and additional interest rate cuts by the central bank.
Meanwhile, the Q3 corporate advance tax payment numbers will indicate India Inc’s outlook for the rest of the financial year. Though advance tax collections were still in the positive territory in sectors such as mining, mineral, engineering, telecom, IT, pharma till September 2008, the turn of events in the last two months have spelt doubts on whether corporate India will be able to maintain their guidance and deposit advance tax in tandem with that of the third quarter last year.
The third quarter advance tax payment is quite significant as companies need to pay 75% of their estimated tax liability for the year by 15 December. That means, if a company finds it difficult to sustain the bottomline for the rest of the year, it will immediately lower its advance tax by the third quarter.
The BSE Sensex vaulted 724.87 points or 8.09% to 9,690.07 in the week ended Friday, 12 December 2008. A strong booster dose by the government, in the form of a fiscal stimulus package for the economy and rate cut by the central bank, aided the rally.
The market sentiment improved following resumption of buying by foreign funds this month. Foreign institutional investors bought shares worth Rs 2048.70 crore in December till, 11 December 2008. They are net sellers of Rs 52688.50 crore in calendar year 2008 so far.
Stocks surged in Asia on Monday, 15 December 2008, on hopes a lifeline may still be given to the struggling US automakers. Key benchmark indices in Hong Kong, Japan, South Korea, China, Singapore and Taiwan were up by between 0.39% to 5.4%. The White House said on Friday, 12 December 20078, the administration would consider using part of the Treasury's $700 billion bailout package for financial institutions to keep the Big 3 automakers afloat after an autos bailout bill failed in the Senate.
Pre Session Commentary - Dec 15 2008
Today we expect the market to open positive as other Asian markets are trading with strong positive trend. Despite the bad IIP numbers which stood as negative 0.4% as compared to 4.8% of earlier month, the markets showed good recovery towards the end trading session on Friday. The forex reserves have also fallen by $1.83 billion to $245.86 billion for the week ended December 5. The host of government relief packages seems to have been working as investors are showing some bullish sentiments. Hence we anticipate a good trend during today’s trading session.
On Friday, the markets opened with a negative gap and later managed to pare off the losses to end in green. The bad news of the senate not accepting the US bail out for US Auto makers brought sharp bearishness and fear across markets. The trading was no less than similar to the previous trading day where the markets moved to its full stretch on the south and north zone. The worst than expected IIP numbers pulled the sentiments. Later the rally happened in Reliance stocks which helped markets to end in green. Sensex and Nifty gained by 0.46% and %. Realty, CD, Oil & Gas and Bankex gained 3.94%, 2.93% 2.34% and 1.20% respectively. During the trading session we expect the market to be trading in a positive trend.
The BSE Sensex closed higher by 44.61 points at 9,690.07 and NSE Nifty ended slightly up by 1.20 points at 2,921.35. The BSE Mid Caps and Small Caps ended with gains of 47.40 points and 87.37 points at 3,050.48 and 3,530.96 respectively. The BSE Sensex touched intraday high of 9,745.51 and intraday low of 9,281.89.
On Friday, the US markets closed in green despite disrupting news. The Senate voted against the $14 billion bailout plan for the Auto makers. While the White House is also considering some possibility of using TARP funds in place of plan. After this news General Motors is implementing the plan to cut down its major production. The retail sales for the month of November fell by 1.8%. The drop in the consumer spending is likely to affect the GDP results. Crude oil futures for the month of January delivery fell $1.70 to $46.28 per barrel on New York Mercantile Exchange. The crude futures slipped to a low to $43.28 a barrel but managed to end above the day''s low as the Treasury Department said it would lend funds to the auto industry after a rescue plan collapsed in the Senate on Thursday night.
The Dow Jones Industrial Average (DJIA) closed higher with 64.59 points at 8,629.68 NASDAQ index gained 32.84 points at 1,540.72 and the S&P 500 (SPX) also closed higher by 6.14 points to close at 879.73 points.
Indian ADRs ended positive. In technology sector, Infosys gained by 1% and Wipro ended high by 2.41% followed by Satyam that gained 3.60% and Patni Computers closing high by 3.56%. In banking sector ICICI Bank gained 4.91%, while HDFC Bank gained by 5.89%. In telecommunication sector, Tata Communication inclined by 1.92%, while MTNL inclined by 4.75%.
Today the major stock markets in Asia opened positive. The Shanghai Composite is trading high by 8.38 at 1,962.60 Hang Seng is high by 453.26 points at 15,211.65. Further Japan''s Nikkei is high by 426.14 points at 8,662.01. South Korea’s Seoul Composite is high by 48.53 points at 1,152.35 and Singapore’s Strait Times is high by 37.64 points at 1,777.98.
The FIIs on Friday stood as net buyer in equity and net seller in debt. Gross equity purchased stood at Rs 2078.80 Crore and gross debt purchased stood at Rs 591.80 Crore, while the gross equity sold stood at Rs 1745.40 Crore and gross debt sold stood at Rs 961.10 Crore. Therefore, the net investment of equity and debt reported were Rs 333.30 Crore and Rs (369.20) Crore respectively.
On Friday Indian rupee weakened on lower IIP data offering evidence of a rapid economic slowdown. Rupee settled at 48.43/45 a dollar, 0.2% down than Thursday''s close of 42.33/34 but off the low of 49.
On BSE, total number of shares traded were 40.08 Crore and total turnover stood at Rs 4,486.93 Crore. On NSE, total number of shares traded were 80.59 Crore and total turnover was Rs 11,186.43 Crore.
Top traded volumes on NSE Nifty – Unitech with 44597294 shares, Suzlon Energy with total volume traded 38338499 shares, followed by Reliance Petro with 25656378 shares, DLF with 19396753 shares and SAIL with 15308173 shares.
On NSE Future and Options, total number of contracts traded in index futures was 1064562 with a total turnover of Rs 14,136.13 Crore. Along with this total number of contracts traded in stock futures were 1082695 with a total turnover of Rs 10,890.81 Crore. Total numbers of contracts for index options were 1040542 with a total turnover of Rs 15,163.20 Crore and total numbers of contracts for stock options were 81360 and notional turnover was Rs 888.02 Crore.
Today, Nifty would have a support at 2,955 and resistance at 3,045 and BSE Sensex has support at 9,610 and resistance at 9,980.
Exide Industries
The Exide Industries stock has declined by 37 per cent since our earlier buy recommendation at Rs 68 in August this year. A broad market decline and continued slowdown in the automobile sector, which in the last few months has dampened passenger car sales volumes too, have triggered the decline.
While the slowdown may have led to lower demand for automotive batteries from OEMs (original equipment manufacturers), we feel the company can tide over this, given the strong demand for replacement batteries. Besides, the recent excise duty cuts and steps to make credit cheaper might also boost auto sales over the medium-term.
Besides, growing demand in the industrial batteries segment, moderation in lead prices and the company’s acquisition of lead smelting units to combat volatility in lead prices and improve margins also lend long term earnings visibility.
At the current market price of Rs 43, the stock trades at a price-to-earnings ratio of about 11 times estimated FY-09 earnings. This provides a good entry point for investors with a two-three year perspective.
Replacement demand to drive growth
Exide Industries derives about 55 per cent of its revenues from the sale of automotive batteries. Exide batteries power most of the models including Toyota, Honda, Hyundai and Tata Motors. The near-term growth in supplies to the OEMs may be capped due to the ongoing slowdown in the industryHowever, after-market demand for batteries can boost volumes. Buoyant automobile sales in the past few years implies good demand for batteries currently as the factory-fitted batteries would typically need to be replaced after three-four years. The company will be a beneficiary of this expected rise in demand as it has a share of about 70 per cent in the market for branded replacement batteries.
One trend that has been observed in the last one or two years in automobile sales is the strong demand from the semi-urban and rural markets. Like several automakers, the company too is tapping this rapidly growing market in Tier-2 and Tier-3 cities by setting up its marketing infrastructure. This initiative will help boost volumes and expand margins as retail sales generally yield higher margins than sales to OEMs.
Promising prospects for industrial batteries
The expanding network of telecom service providers could also translate into increased demand for batteries that support tower and exchange infrastructure. UPS battery sales too could see strong demand from households and offices, amid continued power shortages. To cater to this increasing demand, the company is investing about Rs 300 crore in expanding capacities and modernising existing plants for both the industrial and automotive batteries this year.
Focus on exports
With the acquisition of a stake in Ceil Motive Power, Australia, last year, the company aims to be the market leader in the traction battery segment in Australia by 2010. To serve this end, the company has set up an EoU (Export Oriented Unit) at Haldia with the capacity to manufacture one million traction batteries per year.
Besides, the company is also setting up a distribution network in Europe and expects Germany and the Scandinavian countries to be major contributors to its export growth this year. Exide is also looking for a joint venture partner in the US. The company expects all these initiatives to help double its exports this year .
Margins to expand
For the quarter ended September 2008, net sales stood at Rs 900 crore, growing by about 34 per cent year-on-year. For the same period, net profits grew by 26 per cent to Rs 78 crore. Spiralling lead costs during the last financial year saw the company’s operating margins steadily decline from 20 per cent in the June 2007 quarter to about 15 per cent in the third and fourth quarters of FY08. For the first and the second quarters of 2008-09 though, margins have stabilised at about 17 per cent. Operating margins in the next few quarters will improve further as the company expects the full impact of the decrease in international lead prices to kick in then.
Besides, the company has also sought to shield itself from lead price volatility and reduce dependence on imported lead by acquiring two smelting companies — Tandon Metals and Leadage Alloys India. Through these acquisitions, the company aims to save 10 per cent on raw material costs through captive sourcing of up to 50 per cent of its total lead requirement over the next three years.
Precious metals gain 9% for the week
Gold and silver drop on the last day of the week
After four days of successive rise, bullion metals fell on Friday, 12 December, 2008. Prices fell as the bailout news in the auto industry hit a block as the senators did not vote for the $14 billion package at Washington.
On Friday, Comex Gold for February delivery fell $6.1 (0.8%) to close at $820.1 an ounce on the New York Mercantile Exchange. For the week, gold gained 9%. On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (19.3%) since then.
For the month of November, gold prices ended higher by 14%. Prior to this, for the month of October, gold had ended lower by 18%. It was the biggest percentage loss for gold since February, 1983.
This year, gold prices have lost 1.9% till date. Futures have averaged $878 in 2008. The dollar index has gained 9% this year. For the third quarter ended September, 2008, gold prices ended lower by 5.1%. It was the first quarterly loss for the yellow metal since the second quarter in FY 2007. Prior to that, the yellow metal ended second quarter with a marginal gain of 0.7%. For first quarter prices gained 10.7%.
On Friday, Comex silver futures for December delivery fell 20 cents (2%) to $10.23 an ounce. For the week, silver gained 80 cents (9%). For the month of November, silver prices had gained 5%. Till date, silver has lost 30.4% this year.
For the month of October, silver had slipped by 20%. Silver had ended month and quarter of September 2008 with a loss of 10%. For the second quarter, it had gained a paltry 1.4%. Silver had gained 16% in Q1. The metal also had gained for seven straight years.
As per the latest developments in the auto deal workout, the Senate refused to provide U.S. automakers with $14 billion in bailout money.
Earlier this year, the weakening dollar and higher global demand for raw materials had led to records this year for commodities including gold. Gold reached a record in March as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the latest move, the Federal Reserve has cuts its target bank lending rate to 1% from 5.25% in September, 2007. The Fed did it in eight steps.
It was reported earlier last week that gold production in South Africa fell by 14% year-on-year in October. The country's total mining production, however, rose by 3.5% year-on-year in October, with non-gold output rising 6.5%.
Gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
Crude registers strong weekly gains
Prices rise more than 13% as traders anticipate big production cut by OPEC
Crude prices fell on Friday, 12 December, 2008. Prices fell but were off their intra day lows after the auto bailout plan hit a brake at Washington on Friday.
On Friday, crude-oil futures for light sweet crude for January delivery closed at $46.28/barrel (lower by $1.7 or 2.8%) on the New York Mercantile Exchange. Earlier in the day, prices touched a low of $43.32. Prices reached a high of $147 on 11 July but have dropped almost 63% since then. On 5 Dec, 2008, prices touched a low of $40.5. For the week, prices ended higher by almost 13%. Prior to that, prices coughed up 25% in the week before that. That was the largest weekly loss for crude in past twenty five years. For this year in 2008, crude prices have dropped 43%.
For the month of November, crude prices ended lower by 19.7%. Before this, for the month of October, 2008, crude prices had ended lower by 32.6%, the biggest monthly drop since 1983.
As per the latest developments in the auto deal workout, the Senate refused to provide U.S. automakers with $14 billion in bailout money.
The Organization of Petroleum Exporting Countries ended meeting in Cairo last month without any decision on a production cut to restore crude prices. OPEC President and Algerian Oil Minister Chakib Khelil said he expects oil demand to decline from a month ago, and said the group would take necessary action on 17 December when it meets in Oran, Algeria.
Trading Calls - Dec 15 2008
Buy Aban (762) SL 756 Target 772, 775
Buy Punj Lloyd (150) SL 146 Target 158, 160
Buy L&T (788) SL 780 Target 803, 810
Buy Adlabs (186) SL 182 Target 194, 197
Daily News Roundup - Dec 15 2008
- Reliance Industries suspends production at KG Basin block after pipe burst.(ET)
- Government to move to Bombay high court to allow Reliance Industries third-party gas sales.(BS)
- Chevron to decide on acquiring 24% stake in Reliance Petroleum and holding on to the 5% it already has in the company by January.(ET)
- Reliance Communications diverting mobile revenues, says TRAI.(ET)
- HCL Technologies is considering more buyouts.(ET)
- Maruti Suzuki India to shut production for maintenance for ten days.(BL)
- NTPC, BHEL to start their engineering and power equipment business by enhancing authorized share capital to Rs7.5bn.(ET)
- ONGC, IOC sign pact on exploration, sale.(BS)
- S&P lowers credit rating of Tata Motors to BB-.(ET)
- Nagarjuna Construction to put on hold two proposed airport projects in Karnataka.(DNA)
- Biocon to increase it’s spending on R&D by about 20% to 30% every year.(BS)
- JSW Steel withdraws bid for US based United Coal.(ET)
- JSW Bengal Steel gets three coal reserves in West Bengal to source coal for its 10mn tonne steel plant project.(DNA)
- HDFC Bank cuts deposit rate by up to 100bps.(ET)
- SKF India, Trinity declares block closures at Pune plant. (BS)
- SRF suspends operations at Chennai plant.(BS)
- Future Group plans to take high-end cosmetic brand Faces to the Middle East in Africa.(ET)
- IOC and Tata Power are close to signing a JV deal to set up a 500MW power plant in Orissa.(TOI)
- TVS Motors cuts two-wheeler prices by up to Rs2,000.(ET)
- Nava Bharat Ventures approves the buyback of equity shares from the existing shareholders from the open market; price cap has been pegged at Rs170 a share.(BL)
- Government turns down Reliance Petroleum request for exporting LPG from its soon to be commissioned refinery at Jamnagar.(BL)
- Asian Paints shuts down its chemical plant in Gujarat.(ET)
- Tanla Solutions set to provide 3G products to MTNL which launched its 3G services recently.(BL)
- Standard Chartered Bank increases its stake in Standard Chartered-STCI Capital Markets (formerly UTI Securities) to 74.9%.(BL)
- DLF Assets is likely to get US$450mn from private equity firm Texas Pacific Group and JP Morgan Asset Management in January.(DNA)
- Reliance Infrastructure approaches Himachal Pradesh HC over the decision of the state government to allot the 960MW Jhangi-Thopan hydro-power project to Brakel Corporation.(BS)
- Unitech to finalise a buyer for its hotel property in Gurgaon in the next two weeks.(BS)
- Indian Hotels to re-open Taj Mahal Tower on December 21.(BL)
- Omaxe plans to restart its land-buying process from April to take advantage of the distress sales as it expects land prices to go down further.(DNA)
- GHCL looking to acquire an Italian home furnishing brand in the next three to five months.(ET)
- DoT to bring Reliance Communications book under CAG scanner.(ET)
- UTI AMC is in discussions to divest 26% to a strategic partner. (BS)
- ACC to decide on Shiva Cement warrant conversion this week. (ET)
- LIC may have picked up illiquid bonds of real estate firms worth Rs18bn from its unit LIC MF.(Mint)
- DLF cuts its current fiscal deliverable targets by about 33% following the deterioration in the housing and commercial property market.(DNA)
- Jet Airways in negotiations with foreign airlines to lease out six aircrafts.(ET)
- Bajaj Auto has increased its stake in Austrian sports bike maker KTM to 25% and is planning to go for more.(FE)
- Vishal Retail plans to raise capital by selling stake.(ET)
- Supreme Court asks Mundra SEZ to submit fresh request for forest land use.(Mint)
- Nalco, which has put its Rs150bn South Africa projects on hold, has done an encore with its Saudi Arabia plans too.(DNA)
- IIP fell 0.4% in October for the first time in fifteen years.(FE)
- Tax collection from Mumbai grew 20% to ~Rs674bn in the current financial year till December 11, 2008.(ET)
- India’s steel import jumped more than 70% in November yoy. (ET)
- India aims two fold rise in steel output by 2012.(ET)
- Drug price regulator NPPA has reduced prices of all scheduled drugs by 2.84%.(BS)
- No windfall tax proposed on oil refineries says government.(BL)
- Production of consumer durables dips by 3% in October.(BS)
Profits and profit-booking!
It is no profit to have learned well, if you neglect to do well.
The lessons in the past make not help one profit given the wild swings the market has been witnessing. The least you can do is prevent losses. Last week, the indices moved ahead against all odds to finish the week higher by 8%. Bulls ignored the dismal IIP numbers, which fell into the negative territory for the first time.
For the time being the bulls are all set to continue the momentum even today. The biggest factor is the positive comments from the US Treasury Department who may step in and bail out the troubled automakers after a US$14bn bill collapsed in the Senate. Asian markets too have opened sharply higher this morning.
The main indices could advance a little more in the near term, investors are still skeptical about a sustained turnaround. That is because considerable amount of headwinds still persist, both on the local as well as global front. India too remains vulnerable to a sharp slowdown despite the slew of measures unleashed by the government and the RBI to arrest the slide. Its move to increase planned expenditure by Rs20,000cr is a step in this direction. However, considering it is just about 0.4% of the GDP, it is not significant.
Remain guarded even though the ongoing rally may prompt traders to reckon that the worst is near an end. Put higher trading stop losses and ride the brief rally for now.
The Fed is expected to cut interest rates at the conclusion of a two-day meeting this coming Tuesday. And if the central bank does lower its key federal funds rate, that would be the 10th cut since September 2007.
A lot of attention will be paid as usual to the global developments. Reports are due this week on housing, manufacturing and consumer prices. Goldman Sachs, Best Buy and Oracle are among the companies expected to report weaker results than they did a year ago.
Gas prices rose for the second consecutive day following eighty-six consecutive declines.The average price for a gallon of gas rose to $1.663 a gallon from $1.66 the previous day.
Reports say the outlook for Goldman Sachs and Morgan Stanley has turned increasingly bleak.
Morgan Stanley was expected to report a narrow profit,now expectations are it will post a loss of $351mn, or 37 cents a share. For Goldman Sachs reports say it could report a loss of $1.45 billion, or $3.50 a share, when it reports its quarterly results.
Among other domestic news:
Unprovisioned bad loans of Indian banks rose 22.8% in the fiscal year 2007/08, junior finance minister told parliament.(FE)
- TRAI proposes per second based mobile tariffs; asks operators to cut SMS rates.(BL)
- NSE has reduced the margins for its stock lending and borrowing scheme.(ET)
- Indian Railways has planned a Rs300bn infrastructure spend which envisages upgrade and procurement of new assets of rolling stock during current fiscal.(FE)
- Government plans to bail out the shipping sector by providing 2-3% interest subsidy.(ET)
- FMCG prices set to come down with decline in input costs.(TOI)
- 3G auctions to begin on January 16, says DoT.(BL)
- Foreign exchange reserves fell by US$1.83bn to US$246bn for the week ended December 5.(FE)
- Textile companies top the distressed list for corporate debt recast.(BL)
- Domestic air traffic declined 21.3% yoy in November.(TOI)
Indian market recovered sharply from its day’s lows ignoring poor economic data and weak cues from the international markets.
Weak global cues coupled with heavy selling witnessed in the Auto stocks dragged the markets to open with negative gap. However, as the day progressed, buying momentum picked up as bulls ignored poor economic data and a sharp cut in the equity markets across Europe.
The rally was led by the index pivotal like Reliance Industries, RCom, HDFC and Reliance Infrastructure.
India’s industrial production fell for the first time in 10 years. Output at factories, utilities and mines dropped 0.4% in October from a year earlier after a revised 5.45% gain in September. Market has expected an increase of 2.1%. IIP last declined in output in April 1993.
The BSE benchmark Sensex finally ended at 9,690 adding 44 points and the NSE Nifty index ended flat at 2,921.
Market breath was positive, 1,545 stocks advanced against 82 declines, while, 82 stocks remained unchanged.
Among the 30-components of Sensex, 17 stocks ended in the green and 13 stocks ended in the negative terrain, the big gainers were DLF (7%), Reliance Infra (6.5%), Reliance Industries (4.1%) and RCom (4%).
On the other hand, major losers were TCS (5%), Wipro (3.5%), Tata Motors (3.5%), ONGC (3%) and Infosys (2.6%).
Tulip Telecom sky rocketed after 1.4% of equity changed hands in a single transaction.
~399,960 shares of the company were traded at an average price of Rs433.95 per price on the BSE.
The scrip surged over 15% to Rs51 hitting an intra-day high of Rs558 and a low of Rs420 and recorded volumes of over 5,00,000 shares on BSE.
Shares of TVS Motor gained by 3% to Rs25 after the company announced the launch of its premium segment motorcycle, the Apache RTR 160 RD, reports stated. The scrip touched an intra-day high of Rs26 and a low of Rs23 and recorded volumes of over 1,00,000 shares on BSE.
NMDC slipped by 1.5% to Rs142 after the company announced that it would need to cut production because of falling demand for the steelmaking raw material.
The company said that iron-ore sales in the domestic market fell as much as 30%. The scrip touched an intra-day high of Rs147 and a low of Rs132 and recorded volumes of over 36,000 shares on BSE.
Shares of Ranbaxy declined by 1% to Rs209 after reports stated that the company’s US sales dropped 45% in 60 days. The scrip touched an intra-day high of Rs214 and a low of Rs198 and recorded volumes of over 2,00,000 shares on BSE.
The coming week will again dance to the global market music. On the domestic front there will be leaks of advance tax numbers. More focus would be on a Fed meet likely next week and industrial production data in the US which is expected to be negative.
ICICI Bank
Shareholders can stay invested in the ICICI Bank stock, as it trades at compelling valuations. Exaggerated concerns about the bank’s financial troubles, rumours of promoter stake sales (which have been proved wrong) and its exposure to troubled assets (doubtful assets have been provided for) have depressed valuations.
At the current market price of Rs 411, the ICICI Bank stock trades below (0.94 times) its September book value and 11 times its trailing one-year earnings. Its peers — Axis Bank and HDFC Bank — trade at 12 times and 18.8 times respectively.
At its peak in January, the stock commanded a PEM of 36 and was trading at 3.6 times book value. Though further downside in the stock cannot be ruled out given the challenges to earnings growth over the next one year, prospects over a two-three year time-frame seem brighter. Investors can consider accumulating the stock on declines.
The bank has significant scope to expand corporate lending and step up fee income. As it consciously slows down retail lending and reduces costs by restructuring its deposit base, the risks associated with its operations may moderate.
Business mix
ICICI Bank’s advances book is dominated by retail advances (55 per cent of total advances), followed by overseas advances (26 per cent), corporate advances (9 per cent), SME (3 per cent) and rural (6 per cent).
The bank has already discontinued small ticket personal loans and is going slow on other unsecured retail advances.
The corporate and SME advances portfolio of the bank is small vis-a-vis its peers. The focus on this segment can drive growth without compromising on asset quality.
Housing loans make up 28 per cent of total advances for the bank. Provisions relating to investments and defaults have been a key drag on the bank’s valuations in recent months. In this respect, ICICI Bank’s gross NPA/advance of 4.18 per cent, as of September, is among the highest in the sector. But provision coverage of 52 per cent helped it to contain net NPAs at 1.9 per cent. About 57 per cent of net NPA pertains to unsecured products, which remains a concern. In the coming quarters, write-backs in the gilts portfolio, may also reduce the provisioning requirements and bolster profits. However, the bank is well placed on capital adequacy, with the ratio at 14 per cent; reducing the need for raising capital in the near future.
Standalone Financials
After growing aggressively to capture market share, ICICI Bank has recently witnessed a significant slowdown. From 2004-2008, the bank’s advances grew at 40 per cent compounded annually, while profits grew at 26 per cent. But provisioning towards NPAs and investments have weighed on profit growth over the past two quarters.
In the first half of 2008-09, net interest income (NII) grew at 30 per cent, driven mainly by margins improving from 2.2 per cent to 2.4 per cent.
This was driven partially by the hike in lending rates in the September quarter, as also a lower cost of deposits. Going forward, NIMs may moderate, following the recent 1.5 per cent home loan rate cut and likely lending rate cuts, which the bank is expected to undertake in the near future. The bank’s efforts to curtail high-cost wholesale deposits may offset the impact of lower rates on NIMs to some extent. In the first half, the bank retired bulk deposits worth Rs 24,000 crore and improved its low-cost deposits ratio to 30 per cent.
It also made considerable progress in reducing operating costs with the cost-income ratio falling sharply from 52 per cent to 47 per cent in the first half. Fee income may be another key growth driver.
In the first six months of FY-09, non-interest income chipped in as much as 45 per cent of ICICI Bank’s net revenues, despite a massive treasury loss of Rs 747 crore. As ICICI Bank remains a leading distributor of third party products, even a moderate recovery in the investment markets over a two-three year time-frame, may drive fee income growth. A large branch network may give ICICI Bank an edge over competitors in this context.
Subsidiaries
Concerns about the bank’s exposure to toxic assets in overseas subsidiaries have also been a matter of concern. However, after taking a loss in its UK subsidiary and making additional provisions from its reserves for the entire sub-prime exposure, further risks from source appear unlikely. The Canada subsidiary (profits of CAD 21 million in the first half), focuses mainly on India-related investments.
A sharp improvement in earnings from the other subsidiaries (ICICI AMC, Ventures and Securities) or unlocking of value from a listing of these subsidiaries appears unlikely for now.
Outlook
Shareholders of ICICI Bank may require a three-year horizon to reap the full rewards of their investment. Steps initiated by the bank to reorient its focus — going slow on risky advances and stepping up exposure to corporates — may take time to pay off.
The next one year will be challenging for the bank, as further asset quality slippages and subdued earnings (on the back of slower advances growth and lower NIMs) cannot be ruled out.
The heightened risk perception relating to the bank may also peg up costs and could force the bank to raise capital at a stiff cost.
However, on the positive side, ICICI Bank may be one of the key beneficiaries of the recent RBI measures — the CRR reductions, interest rate cuts and more liberal provisioning and capital adequacy norms.
The bank’s housing finance company will also benefit from the recent RBI move of classifying the HFC loans also as priority lending sector.
Educomp Solutions
Investors can buy the shares of Educomp Solutions, considering the bright growth prospects for its key verticals and the stock’s sizeable valuation discount to its historic levels.
At Rs 2,088, the stock trades at 26 times its likely 2008-09 earnings. This is not cheap under current market conditions. But Educomp has locked into most if its contracts where it licenses digital teaching content on long-term basis, typically over a five-year period.
Continuing triple digit growth in high-margin segments such as Smart Class and retail & consulting, a healthy order pipeline for its services that cater to IT-enablement of government schools, support the valuations. Educomp’s focus on the education sector also lends resilience against any broader slowdown as schools are unlikely to scale down investments in innovative teaching methods. With the Government’s IT-enablement programme continuing on course, the company appears well placed to ride out the present slowdown in the economy.
Smart Class, where Educomp provides teaching content and education solutions across classes, boards and subjects, accounts for nearly 70 per cent of its revenues and enjoys a an EBIT (earnings before interest and tax) margin of 60 per cent. This segment continues to add hundreds of schools under its fold, with a current roster of 1,267 schools and 1.43 million students using this service. For the past six quarters this segment has managed triple digit growth, over same periods in the preceding years.
The retail segment, a tutorial service led by the math Web site mathguru.com is growing at over 600 per cent, and from insignificant contribution a couple of years ago now contributes 11 per cent of its revenues. The business enjoys a 70 per cent margin and would contribute to higher margins as it adds users.
Educomp’s Information Communication Technology (ICT) business continues to win a string of Rs 50-100 crore orders and works with as many as 14 State governments. These projects are for a five-year duration and are mainly volume driven as they involve IT-enablement of Government schools. Given the present economic crisis and Government thrust on public spending, Educomp may continue to be well placed to tap into increased budgetary allocations on education. But Government deals may mean longer receivable cycles and expanding working capital requirement.
Most of Educomp’s projects involve upfront capex for which additional debt may be required. But the company has tied up loans for its capex requirements over the next few years. An increase in its debt-equity ratio, at 1.22 for 2007-08, would mean increasing interest costs.
My Portfolio - Dec 15 2008
There have been no additions or deletions since the last portfolio update. Click on the My Portfolio label below to view the last portfolio update.
Poll Results - General Elections, I'll vote for
Congress 101 (29.x%)
BJP 226 (66.x%)
Third Front (CPM,Mayawati..etc) 12 (3.x%)
Total VOTES - 339
Please note that most of the visitors to this site are from Mumbai, Bengaluru, Delhi, Ahmedabad and Chennai
We would like to hear what the 12 people who vote for Third Front were doing on this site ;-). Surely they weren't trying to make any money in the markets or they have been short on the markets
Sun Pharma
Growing presence in the US generics market, strong domestic franchise in chronic segments and a promising pipeline of ANDA (abbreviated new drug applications) filings make a strong case for remaining invested in the stock of Sun Pharmaceuticals. At the current market price of Rs 1,104, the stock trades at about 16 times its likely FY-09 per share earnings.
Shareholders may be better off adopting a wait-and-watch approach given the lack of clarity on USFDA’s stance on Caraco Pharmaceuticals and the potential fall in revenues from the sale of Protonix, earlier launched ‘at risk’.
Besides, the pending court ruling in Sun’s takeover of Taro and the opportunity loss due to the now delayed launch of non-AB rated generic version of Effexor XR also add to the near-term concerns on the stock.
Key growth drivers
In the domestic market, the company has a strong presence in the chronic therapy segment, which enjoys not just high margins but also high entry barriers in terms of prescription-driven sales. Sun currently has a market share of over 3.4 per cent in India.
Besides its stronghold in therapy areas, Sun’s continuous efforts to strengthen customer relationships and improve marketing initiatives may help it clock steady growth in its domestic formulations business. The domestic branded generics segment, which has enjoyed a three-year CAGR over 29 per cent, contributed about 43 per cent of revenues in FY-08.
That said, it is Sun’s presence in the US generics market that offers growth momentum. This segment, which made up 41 per cent of revenues, has grown at a CAGR of over 70 per cent in the last three years.
Apart from sales of distributed products, which include Sun’s Para IV products — Protonix and Ethyol — that were launched ‘at-risk’, the company’s long pipeline of new drug application filings also offer potential for long-term growth.
That between Sun and Caraco , there are over 96 new drug applications pending approval by the FDA stands testimony to the growth opportunities that lie ahead of the company.
Inorganic growth
With valuations of many global generics players trimmed in recent times, Sun has indicated that it could pursue growth opportunities through acquisitions. In that context, Sun’s cash-rich status (net cash of $550 million) and strong cash flows, plus its track record of turning around the companies it acquires, lends comfort. While Sun’s acquisition of Israel-based Taro Pharmaceuticals continues to remain under a cloud, Sun’s position has been strengthened by a Tel Aviv district court ruling in its favour.
In a recent development in this case, the Israeli Supreme Court has given both Sun and Taro a month’s time to reach an out-of-court settlement. While it is difficult to predict the outcome, Sun has so far not given any indication of backing out from the deal, even as it scouts for other takeover candidates to further growth.
Sun’s recent acquisition of the US-based Chattem Chemicals furthers this strategy. This acquisition will give Sun a better launch pad in the US, given Chattem’s narcotic import registration as well as its fully operational USFDA and DEA approved facilities in mainland US.
Potential opportunities in US
The ‘at risk’ launch of Protonix has so far yielded good revenues for Sun, but could taper off in the coming quarters as the management has said after reaching its internal sales target it will consider going slow on its sales.
In terms of the other exclusive revenue opportunity, Ethyol, while the exclusivity period has expired, Sun continues to rake in profits as prices have remained firm.
That there are only two more players, the innovator and an authorised generic player besides Sun in the market, may explain the firm price trends.
But, the USFDA’s decision to uphold the petition filed by Osmotica may cap it the near-term earnings prospects. Sun may now have to file an ANDA citing Osmotica’s drug as reference which, in essence, will delay its launch, resulting in an opportunity loss.
Shree Renuka Sugars
We recommend a buy in Shree Renuka Sugars from a short-term perspective. It is apparent from the charts of Shree Renuka Sugars that after encountering resistance at around Rs 140 in early August, it experienced selling pressure and declined sharply to record a 52-week low of Rs 41 during late October. The stock, however, reversed direction triggered by positive divergence in the daily relative strength index (RSI). Since its 52-week low, the stock has been on a medium-term up trend. Recently Shree Renuka breached its 21-day moving average. Moreover, the stock’s 8 per cent gain on December 12 reinforced its bullish momentum. We note that there is an increase in volume over the past three trading sessions. The daily RSI is on the brink of entering the bullish zone from the neutral region and the weekly RSI is likely to enter the neutral region. We are bullish on the stock from a short-term horizon. We expect the stock to move up until it hits our price target of Rs 69 in the approaching trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 58.50.
Subscribe to:
Posts (Atom)