Dead Presidents! - India Equity Research: 31 January 2010

Sunday, February 07, 2010

A relatively low asking price and a focus on government projects make the offer from ARSS Infrastructure Projects a reasonable bet, but only for investors with a high-risk appetite.

A construction contractor in the Railways and roadways segment, the company plans to raise Rs 103 crore from this issue to fund working-capital and joint ventures.

In its price band of Rs 410-450, the offer is at a valuation of 8.6 to 9.5 times the estimated FY-11 per share earnings on a post-offer equity. Reasonable valuations notwithstanding, given the risks to the business, investors are advised to exit the stock if it touches about a 21 per cent return.

ARSS has a high exposure to Railways (which offer higher margins) and roadways, a sizeable order book, strong sales and profit growth, and a secure client base in government contracts. The company also uses joint-ventures to bid for and execute bigger projects and build on execution capabilities. Strong margins and post-issue lower debt-equity are other positives for the company.

However, the order book has several contracts with a relatively short execution period. ARSS will have to keep up the pace of securing fresh orders to maintain current rate of growth.

A promoter facing criminal investigations, past instances of default in payment of power bills, default in servicing debt and decline in working capital turnover pose significant risk.

Background

ARSS executes construction contracts in Railways (laying and linking of tracks, earthwork and construction of bridges) and roadways (widening and strengthening of roads), with a recent move into irrigation. Geographically concentrated in Orissa, the company has moved into regions such as Tamil Nadu, Rajasthan, Jharkhand and so on. Almost 90 per cent of the contracts come from government-based institutions such as Ministry of Railways, Orissa Public Works Departments, and so on, providing a secure repeat client base. The company also has in-house design capacities.

Current order-book stands at Rs 2,877.5 crore (4.6 times 2008-09 revenues), and is well-diversified with 41 per cent in the Railways segment, 40 per cent in roads, 3 per cent in irrigation and the balance in other smaller works.

The order book is represented by over a hundred contracts, a smaller average contract value (about Rs 21 crore), and bulk of the order book is executable by FY-11 providing near-term earnings visibility. However, maintaining current growth rate depends on the company's ability to continually secure fresh contracts which provide similar margins.

Issue objects

ARSS has used joint ventures with players such as Kalindee Rail and Patel Engineering to execute projects where it lacks capability. Such ventures could help it build on its own expertise and allow a bidding capacity for bigger and more varied projects.

Besides, gradual build up of expertise could help it eventually qualify for projects on its own strength. About Rs 5 crore from the issue proceeds will go to funding such joint ventures and Rs 86 crore towards working capital.

Turnover of working capital, however, has gradually declined from 3.36 in FY07 to 1.67 times (as of December 09). Huge increases in inventory could partly explain this slide.

The order book just about doubled in FY-08 over the year before, but work-in-progress (WIP), a part of inventory, jumped about nine times. This has continued in FY-09 as well where WIP more than doubled against an order-book growth of 64 per cent.

Financials

Sales recorded a strong 118 per cent three-year CAGR while net profits put up a 149 per cent growth. Given a higher component of railway projects, and price escalation clauses built into a majority of the contracts, operating margins have been maintained above 10 per cent FY-07 onwards, standing at 12.5 per cent for the nine months ended December 09.

Net profit margins as well have stayed at about 8 per cent. Funding position appears comfortable with debt-equity on a post-issue basis on the lower side at 1.23 times, and interest cover at 2.7 times (December 09). The company has, however, defaulted on interest and repayment of loans in FY-06, FY-04 and FY-03.

Offer details

The issue is open from February 8-11. IDBI Capital Market Services and SBI Capital Markets are the lead managers.

via BL

Grindwell Norton

Investors with moderate risk and return expectations can consider taking exposure in the abrasive and industrial ceramics manufacturer, Grindwell Norton. Pick-up in capex spending by user industries, ability to retain significant market share and profit margins, despite competition and pricing pressures, and technology support from the French parent shore up the earnings prospects for this company.

At the current price of Rs 144, the stock discounts its likely per share earnings for FY-11 by 12 times. The valuations are at a steep discount to peer Carborundum Universal.

While the company's earnings grew at a compounded annual rate of 10 per cent over the last three years, muted growth in 2008 and partly in 2009 pulled down the overall performance.

Given the increased activity in auto, auto components and steel and non-ferrous sectors — key end-users of the company's products — we expect earnings growth to scale up over the next two years.

A low-debt profile and utilisation of internal accruals also augur well, given the expectations of a climb in interest rates by end-2010.

Demand for abrasives

Grindwell Norton derives over 70 per cent of its revenues from sale of abrasives, predominantly used in industries such as automobiles, auto components, steel, foundry and fabrication as well as a number of other manufacturing industries.

The planned increase in capacity with the entry of overseas players in sectors such as auto and steel, could see significant traction in demand for Grindwell Norton; the company is part of the Saint-Gobain group, which is a world leader in bonded abrasives.

In the local market, Carborundum Universal and Grindwell Norton together garner around 65-70 per cent of the abrasive market, with the former, in a slightly more dominant position. However, the abrasives market is not entirely insulated from competition, despite heavy investment.

Small players catering to specific low-end products, high-end precision tools offered by players from Europe through local marketing networks as well as Chinese imports post a competitive challenge. As a result, the abrasive market faces pricing pressure.

However, backing of the group's brand name could well act as a good reference for players such as Grindwell Norton, when it comes to dealing with bigger clients in the metal and auto industry.

Besides, cost-advantage by way of manufacturing units in India as well as backward integration into silicon carbide, a key raw material for abrasives, provide some edge for the company. With the aid of its parent, Grindwell Norton has also expanded in to export markets.

That the abrasive division is limping back to normalcy after a tough year in 2008, is evident from the segment's revenues for the 12 months ended December 2009 (the company plans to change its accounting year to March). Abrasives sales of Rs 366 crore for the above period is, in fact, 10 per cent higher than that of the year ending December 2007; in other words, the company has managed to beat a year of peak performance.

Operating profit of the segment, though, remains lower than the corresponding level in 2007, suggesting that pricing power could be weak.

Key demand drivers

The company's ceramics and plastics segment which produces silicon carbide and high performance refractories has witnessed robust growth and maintained profit margins, thanks to its key demand drivers — metallurgy (iron and steel) and construction industries, apart from internal consumption of silicon carbide for the abrasives division. However, this segment would be sensitive to any steep increase in input costs.

The segment could nevertheless benefit from improved volumes from any global increase in commodity demand, as the usage of its products in steel manufacturing as well as in refractories used for processing metals is quite extensive. For the 12 months ending December 2009, sales grew by a tepid 5.6 per cent to Rs 530 crore while net profits expanded by 11 per cent to Rs 61 crore.

Pick-up in business was, however, evident with a 30 per cent growth in sales and 42 per cent jump in profits in the latest ended quarter over a year ago.

via BL

Hathway Cable & Datacom IPO Review

Investors can avoid the initial public offering of Hathway Cable & Datacom, a cable distribution and broadband services provider, given the inherent challenges in driving realisations in both the segments that it operates in and the severe competition from well-entrenched players with alternative delivery platforms.

At Rs 265 (upper-end of price band), the stock trades at an EV/sales (enterprise value to sales) multiple of 5.7 times based on its FY09 numbers on a pre-offer equity base and a EV/subscriber of Rs 3,842.

The cable industry may face several scalability hurdles, what with the limited growth in television households, the pace conversion of analogue networks to digital ones and within that conversion of free-to-air viewers to pay-channel mode, all being subject to uncertainty.

Hathway has been in operations for over a decade now and has grown over the years, especially in the last two-three years largely by taking the inorganic route to expansion. Acquiring MSOs (multi-system operators) and LCOs (local cable operators) has enabled the company to grow at a fair pace in terms of revenues. With a negative return on networth and spiralling interest costs (only a small portion of debt is to be repaid from the offer), an acquisition spree, though the only way to grow in this business, may not help strengthen financials.

Cable business challenges

Between FY-06 and FY-09, the company grew its revenues at a compounded annual rate of 38.5 per cent to Rs 673.2 crore. Despite having a reach that is much higher than most other cable operators (estimated base of 8.2 million cable homes) Hathway lagged behind Den Networks in terms of revenues. This suggests that ARPUs (average revenues per user) are quite low for the company, a fact reinforced by its stated figure of Rs 55.8 per month.

Of its total subscribers, only a million of them are on digital cable, which is the key reason for these low ARPUs.

There are several inherent problems in the cable distribution business, which affects all companies in this business. One, there is always the menace of local cable operators understating revenues, which cripples financials for a player such as Hathway, till such time as most analogue connections are upgraded to digital ones, which could be time-consuming.

Second, even if large-scale digitisation of its cable network is achieved, the company still faces the challenge of getting its viewers to subscribe to pay channels, which is the key revenue driver. This is because a viewer has the option of not taking a set-top box and viewing only free-to-air channels. Regulatory controls on pricing also pose a threat with the regulator in fact mandating a Rs 77 package with 30 free-to-air channels. Third, the growth of the industry itself may not be that encouraging. A recent report from PricewaterhouseCoopers indicates that the number of TV households would grow at just 2.7 per cent annually over 2009-13 to 135 million. Further, the report states that the number of cable households would grow from 71 million in 2008 at just 2.4 per cent annually from 2009 to 80 million by 2013.

A FICCI-KPMG report predicts a higher 5.7 per cent annual growth rate.

Sure, the telecom regulator has mandated conditional access in 55 cities by 2011. But, experience suggests that the adoption of conditional access even in the metros has been slow, with most of the households content with free-to-air channels. A TRAI report gives out the fact that only a little over eight lakh set-top boxes have been installed in the four metros put together as of June 2009.

There may, therefore, be limited success in large-scale digitising of cables and driving revenues as a whole. Then there is competition from alternate platforms such as DTH (direct-to-home). Within just three years of its launch, this platform now boasts of as many as 18 million subscribers, thanks to large well-entrenched players such as Dish TV, Tata Sky, Airtel Digital TV, Big TV and Sun Direct, all having deep pockets. Videocon is a recent entrant to this race.

The platform, given its inherent advantage technologically, has greater scope for driving revenues for operators. Latest hit movies being made available within a month of release at a fraction of multiplex ticket rates and several other value-added services or tailored packages help enhance ARPUs.

It may, therefore, be fair to believe that this would be the preferred mode towards digitising cable viewing.

Broadband difficulties

Hathway also has a broadband business that contributes about 16 per cent of overall revenues. Given the under-penetration of Internet and, more specifically, broadband in India, there may be ample scope for expansion.

Indeed, Hathway cross-sells its broadband services to its cable subscribers. But here again, operators with strong wireline networks have made significant inroads by providing DSL broadband services. BSNL, the largest broadband service provider in India, Reliance Communications, Bharti Airtel, and Tata Communications have taken a lion's share of the internet subscribers between them.

With the increase in the shipments and usage of laptops in India, most of these companies have also been able to drive growth through sale of data cards.

With a wireless last-mile being the preferred route for all technology adoptions in India, these companies may also benefit from winning WiMax licenses for providing wireless broadband access. All this would reduce the addressable pie for Hathway.

The offer

Hathway is looking raise about Rs 735 crore by sale of around 27.75 million shares at a price band of Rs 240-265. About Rs 200 crore would go to selling shareholders, Monet and MSPI Mauritius. Acquisition of customers, investment in developing the cable and broadband infrastructure are the stated objectives towards which the issue proceeds would go.

via BL

Dr Reddy's Labs Ltd

Shareholders can consider booking profits on their holdings in Dr Reddy's Laboratories (DRL). The stock has since our last ‘buy' recommendation gained over 60 per cent. While a strong set of numbers in the just-ended December quarter, potential exclusivity revenues from products such as Prilosec OTC, Allegra D24 and Arixtra and the likely expansion in market reach through its alliance with GSK promise growth potential, the stock appears to have priced in most of these potential positives.

At the current market price of Rs 1,132, the stock trades at about 23 times and 19 times its likely FY-10 and FY-11 per share earnings, leaving little room for significant near-term upsides. Besides, the recent non-cash write-down of intangible for its German arm and lowering of the current year revenue guidance by the company will also check any near-term gains for the stock.

Strong business dynamics

The strengthening base business of Dr Reddy's (minus exclusives), with a focus on US, Europe, Russia, CIS and India provides for a sustainable source of revenues in the coming years. The company put up a strong show in most of these markets even in the latest quarter. Minus the exclusivity sales of Imitrex that helped prop up revenues last year, the company recorded a decent 17 per cent growth in overall revenues during the quarter. Growth percentage would have been even higher had it not been for the lagging contributions from its US business. DRL's US revenues suffered on account of voluntary product recalls, FDA inspection and late launches. But with all these issues resolved now, the US revenues can be expected to be back on growth track in a couple of quarters.

The management expects its US operations to drive the global generics growth in the coming years. Given its fairly strong ANDA pipeline and a stream of exclusive product launches lined up for the next couple of years, the US business does seem to hold the key to drive DRL's growth aspirations. The management expects to achieve $3 billion of revenues by fiscal 2013.

But even as the US market may be the key to future growth, DRL's improving prospects in the Russian and domestic market cannot be ignored. In the December quarter alone, it managed to grow its domestic revenues by about 34 per cent. While a low base would have also helped, what's notable is that the company has taken to launching products to support growth (18 last quarter).

Having traditionally lagged most of its peers in this respect, the company's strategy to launch products to drive domestic growth may help it keep up the momentum. So far this fiscal, DRL has launched 56 products across various therapeutic areas.

Supply-chain improvement, a strong field force and the company's rural market initiatives may further help expand its domestic footprint. Another market in which the company has been able to scale growth rates higher than the industry average is that of Russia. Helped by a combination of price hikes and volume expansion, the company managed to grow its Russia income by about 45 per cent in the quarter. Though the company may not be able to maintain similar growth rates in future — price hikes were linked to devaluation of the ruble — Russia will continue to be a key growth market.

DRL's PSAI segment (pharmaceutical services and active ingredients) also promises growth potential; the segment registered a 17 per cent growth during the quarter largely led by India and RoW markets. The cumulative DMF filings as of Dec 09 are 388.

Future growth drivers

Dr Reddy's has a fairly strong pipeline of over 62 new drug applications pending approval by the US FDA (Food and Drug Administration). Of these, 35 are Para IVs and 13 are FTF opportunities. The company expects to launch two limited-competition products in the US in the next financial year — the generic version of GlaxoSmithKline's antithrombotic drug Arixtra (expected in FY11) and a generic version of Sanofi-Aventis's Allegra-D 24 (expected in first quarter FY11, $120 million market size). In addition to this, the management has guided for at least one high-value (low-competition) opportunity every year for the next 5 years.

DRL's marketing alliance with GSK is expected to launch its first set of products in Mexico in the April-June quarter. Though the alliance may take two-three years to become a significant revenue spinner, it will help DRL spread its wings in markets it otherwise has little presence in.

Concerns

Betapharm, however, may continue to be a drag on the company's earnings. The change to a tender-based model in Germany has pressured its profitability, forcing DRL to take non-cash hits on intangible assets and goodwill. The carry-forward value of intangibles for Betapharm has now reduced to €93 million (acquisition price €480 million in Feb 2006).

While the management does not expect any further fall in the value of its brands, it has not completely ruled out the possibility either. Any further impairment of intangibles, therefore, would pose a risk to earnings. Delays in the launch of products also pose a risk to expected earnings.

via BL

PFC

Fresh investments can be considered in the Power Finance Corporation (PFC) stock that appears a good defensive bet within the financial sector.

The company's loan book grew at a strong pace of 20 per cent in 2009 despite lower demand for credit witnessed by the banking sector. At current market price of Rs 252, the PFC stock is trading at 10.5 times its estimated FY11 earnings and two times its estimated adjusted book value, which does not reflect the strong earnings growth posted by the company.

Near-zero non-performing assets and a high proportion of floating rate assets (87 per cent) allow PFC to pass on interest hikes and minimise credit risk. Strong earnings growth (36 per cent for nine months ended December 31, 2009, adjusted for extraordinary items), superior profitability (Return on Equity of 17 per cent) and the insatiable funding requirements of the power sector make for bright growth prospects.

The outlook for power financing looks promising given that investments of Rs 10 lakh crore are expected in the power generation alone over the next eight years. PFC being the market leader may corner a chunk of this pie.

With a minimum 70 per cent of every power generation project to be funded with debt, PFC may continue to witness high levels of sustainable loan book growth over next few years. That power companies have preferred the domestic market to overseas borrowings also benefits PFC.

The gap between PFC's sanctions and disbursements stood at around Rs 1.25 lakh crore by December 2009 due to project delays until previous quarter. However, in the third quarter, the disbursements outpaced sanctions, indicative of improving investment environment for power project development. Loans sanctioned (not disbursed) amount to 1.72 times its loan book.

A sovereign credit rating gives it opportunity to borrow at reasonable rates. The majority of liability profile is fixed allowing it to lock-in at low interest rates. Going forward, the asset-liability mismatch, however, is a lingering concern with loan tenures of over 15 years, while liabilities typically have the highest tenor of 10 years. Currently, the average maturity is 5.8 years for loans compared to 4.55 years on borrowings.

With interest rates hardening, PFC's margins may be held (4.2 per cent for nine months ended December 2009). Currently, the State electricity boards are the key borrowers, but the proportion is coming down. Incremental sanctions are likely to be driven by the private sector. PFC may also look at chipping in for the equity portion of power projects, which may bolster returns on investment.

Fee income may improve as new Ultra Mega Power Projects are awarded. The consultancy and APRDP (Accelerated Power Development and Reform Programme) also improve the fee income. The company is also entering coal mining and equipment financing.

PFC has a comfortable capital base (currently 17.6 per cent) allowing it to expand its loan book seamlessly without raising additional capital

via BL

Markets to stay weak

Weak global cues and selling by foreign institutional investors (FIIs) saw markets end weak for the third straight week. Moreover, they continue to register lower highs and higher lows during the period, which is a negative sign.

The Sensex touched a high of 16,553, but eventually ended with a loss of 442 points at 15,916. At the week’s low of 15,725, the index was down almost 10 per cent on year-till-date basis. With the Budget just three weeks away, any hope of a pre-Budget rally relies strictly on the fact that the major indices are close to long-term (200-day daily moving average) support levels.

Among index stocks, Jaiprakash Associates and SBI plunged 7 per cent each to Rs 128 and Rs 1,914, respectively. DLF, Hindustan Unilever, Reliance (at 52-week low), NTPC, Hindalco and BHEL were the other major losers. Hero Honda and Sun Pharma were the only prominent gainers among Sensex stocks.

Having broken their quarterly support, the markets are now likely to remain weak till the end of March. The Sensex will have to sustain itself above 16,625 in order to change the trend. However, the index is now very close to some other crucial support levels. The monthly support stands at 15,665, the long-term (200-day daily moving average) stands at 15,525, while the yearly support is at 15,380.

Weekly support levels for the Sensex are at 15,600-15,500-15,400 while resistance on the upside is at 16,230-16,330-16,430. The Nifty moved in a range of 259 points — from a high of 4,951, the index dropped to a low of 4,692. The index finally ended with a loss of 125 points at 4,757 and is down 495 points in the last three weeks.

Next week, the index is likely to face resistance at 4,855-4,885-4,915 and may find support around 4,700-4,625-4,595. The mid-term (50-days) average of the Nifty is currently above the short-term (20-days) average, which is a negative sign. Trend lines have turned negative on monthly charts as well. However, trend lines are positive on the weekly chart.

via BS

Saturday, February 06, 2010

PSU Banks

Weekly Support and Resistance Levels - Feb 6 2010

February, 2010
COMPANY NAME	S3	S2	S1	CLOSING PRICE	R1	R2	R3
ABB	707	726	759	778	811	830	863
ACC	745	775	815	846	885	916	956
Ambuja Cem	88	92	96	100	104	108	112
BHEL	2,092	2,146	2,242	2,296	2,392	2,446	2,542
BPCL	487	513	542	568	597	623	652
Bharti	270	279	291	300	312	321	334
Cairn	225	234	246	255	267	276	288
Cipla	274	284	299	310	325	335	350
DLF	251	267	292	309	334	350	376
Gail	365	383	397	416	430	448	462
Grasim	2,372	2,426	2,522	2,576	2,672	2,726	2,822
HCL Tech	275	296	317	337	358	379	400
HDFC Bank	1,481	1,506	1,548	1,573	1,616	1,641	1,683
Hero Honda	1,419	1,476	1,528	1,585	1,637	1,695	1,747
Hindalco	109	117	130	138	152	159	173
HUL	206	212	223	229	240	246	256
HDFC	2,125	2,204	2,311	2,390	2,497	2,576	2,683
ICICI Bank	717	739	776	798	835	857	894
Idea	49	51	54	57	60	62	66
Infosys	2,077	2,152	2,278	2,353	2,479	2,554	2,680
ITC	231	237	243	248	254	260	266
L&T	1,323	1,357	1,390	1,424	1,457	1,491	1,524
M&M	840	877	940	976	1,039	1,076	1,139
Maruti	1,213	1,259	1,313	1,359	1,412	1,458	1,512
Nalco	290	309	342	362	395	415	448
NTPC	186	191	200	204	213	218	226
ONGC	987	1,014	1,061	1,088	1,135	1,162	1,209
Powergrid	96	99	104	107	113	116	121
PNB	769	792	831	854	892	916	954
Ranbaxy	309	336	378	404	446	472	515
Rcom	139	146	156	164	173	181	191
Reliance	871	900	952	982	1,034	1,063	1,115
Reliance Infra	957	983	1,009	1,035	1,060	1,086	1,112
Reiance Power	124	128	135	140	147	152	159
Satyam	84	87	93	96	102	105	111
Siemens	540	563	599	622	657	680	716
SBI	1,506	1,613	1,791	1,898	2,076	2,183	2,361
SAIL	176	184	196	203	216	223	236
Sterlite	637	666	706	736	776	805	846
Sunpharma	1,321	1,369	1,426	1,474	1,530	1,578	1,635
Suzlon	56	60	67	71	78	83	89
Tata Com.	265	276	295	306	325	335	354
TCS	660	677	706	724	752	770	798
Tata Motors	558	590	640	672	722	754	804
Tata Power	1,189	1,221	1,254	1,286	1,319	1,350	1,383
Tata Steel	462	487	526	550	589	614	653
Unitech	54	58	65	69	76	80	87
Wipro	559	583	620	644	681	705	742
Zee	224	233	245	254	266	275	286

Obama unveils US$3.8 trillion US budget

US President Barack Obama projected that the budget deficit of the world's largest economy would peak at a new record this year before easing, as he pushed for fiscal responsibility while fighting double-digit unemployment. "In the long term, we cannot have sustainable and durable economic growth without getting our fiscal house in order," Obama said in a statement with the budget’s formal release. His budget for the fiscal year to September 30 next year, a blueprint subject to change by Congress, forecast a deficit of US$1.56 trillion this year, equal to 10.6% of gross domestic product (GDP). The rise was partly due to spending associated with a package of emergency stimulus measures Obama signed last year as the US grappled with recession. While maintaining policies this year aimed at protecting a still fragile economic recovery, with US$100bn earmarked for measures to create jobs, Obama plans to save money from next year by curbing 120 projects, including a symbolic space mission to return to the moon, but will invest more in education and research. The increase in the 2010 deficit compared with a US$1.41 trillion shortfall in 2009 that amounted to 9.9% of GDP. But this funding gap was forecast to dip to US$1.27 trillion next year - 8.3% of GDP and a third of total government spending forecast at US$3.8 trillion

Troubles mount for Vishal Retail

Ram Chandra Agarwal, founder and managing director of Vishal Retail Ltd., said that he is prepared to step down as the head of the company if that helps the beleaguered retailer. "I am agreeing to anything that is in the benefit of the company, including stepping down," he said. Vishal Retail has been posting losses over the last three quarters amid an economic slowdown that has hit retailers hard. Agarwal also said that he was also prepared to dilute an unspecified stake from his share of 63% in Vishal Retail to pave the way for any investor. Reports said that private equity firm TPG has evinced interest in acquiring a majority stake in Vishal Retail, which has gone in for corporate debt restructuring (CDR). Investment banking sources said TPG has made a Rs2.5bn offer for the stake held by Vishal Promoter and Chairman Ram Chandra Agarwal before the CDR cell. Agarwal and other promoters hold 60.23% stake in the company. The TPG proposal values the beleaguered apparel retailer at Rs4.17bn. The Mumbai-based CDR cell is holding talks with lenders as part of Vishal Retail’s debt recast. After the joint lender meeting (JLM) remained inconclusive on January 30, the next JLM is scheduled next week. According to reports, Mumbai-based Wadhawan Group may also join the race to acquire a controlling stake in Vishal Retail, though it has not submitted any proposal as of now.

Inox snaps up Fame India

Inox Leisure approved the purchase of 43.28% in Shroff family promoted, Fame India for an all-cash deal of Rs664.8mn. Inox bought up to 1,50,57,760 shares of Rs 10 each of Fame India, by way of a series of block trades. Inox Leisure bought an additional 7.21% stake in Fame India, taking its total shareholding in the later to 50.48%. The transaction through a block deal in the Bombay Stock Exchange (BSE) represents 2.5 million shares in Fame for a consideration of Rs50.75 a share, totaling Rs127.7mn, Inox said in a statement. The deal takes Inox's total investment at Fame to Rs792.5mn, it said. The acquisition would be funded through a loan from Inox's founders, Gujarat Fluorochemicals Ltd. This acquisition will be followed by an open offer to buy another 20% in Fame. This acquisition will create the largest multiplex networks with a total of 55 multiplexes, 204 screens and 57,891 seats. Enam Securities was the investment banker and Khaitan & Co. was the legal advisor to Inox. Yes Bank was the investment banker for Fame India and Naik & Co. was the legal advisor.

Maruti sales continue to vroom

Maruti Suzuki India Ltd. sold a total of 95,649 vehicles in January 2010. This included 14,562 units of exports. This was the highest ever domestic as well as total sales for the company. Maruti had sold 67,005 vehicles in the domestic market in January 2009. For April-January 2009-10, sales grew 31.8% to 826,592 units over the like period in last fiscal. Maruti's sales in the compact car (A2) segment rose 24.8% at 58,540 units over January 2009. Sale of models in its mid-sized (A3) segment grew by 36.5% to 8,995 cars in January this year.

Manufacturing, Services PMIs show traction

Health of India's manufacturing sector got better in January, with a private barometer growing at its fastest pace in nearly one and a half years, as recovery takes a firmer hold in one of Asia's leading economy. A measure of India’s manufacturing output rose to 57.6 in January, the highest since August 2008, according to the Purchasing Managers’ Index (PMI) compiled by HSBC Holdings Plc and Markit Economics. The index was at 55.6 in December. A reading over 50 indicates expansion and a fall below 50 means contraction. The big jump in the PMI was boosted by a sharp rise in new export orders that underpin a recovery in the industrial sector, the HSBC-Markit survey showed. "Any lingering concern that India's manufacturing recovery was tailing off should be well and truly put to rest by this strong release," said Robert Prior-Wandesforde, senior Asian economist at HSBC. "A second consecutive rise in the PMI has taken the series to a new cycle high, consistent with ongoing double-digit rises in industrial production."

Separately, a key business index showed that India's service sector output expanded at its fastest rate in 16 months in January as the country shook off the impact of the global slowdown. The strong performance of the sector was attributed to a sharp rise in new orders. The HSBC India Services Purchasing Managers' Index (PMI) posted a reading of 59.0 last month - its highest since September 2008, just before the global slump hit Asia's third-largest economy.

Food inflation continues to bite...prices edge up further

Food inflation, based on the annual wholesale price index (WPI), climbed further to 17.56% during the week ended January 23, higher than the previous week's annual rise of 17.40%. Food inflation gained for the second week in a row after easing for three successive weeks. Food inflation, which had begun easing after touching its highest levels in nearly a decade at around 20% in December, rose mainly because potatoes were up 44.91% and pulses 44.43% year-on-year in the latest week. In the Primary Articles group, annual rate of inflation, stood at 14.56% compared to 14.66% the previous week and 8.89% in the corresponding week of the previous year. Inflation in the Fuel group stood at 5.88% for the latest week as compared to 5.70% for the previous week. The annual WPI-based inflation had surged to 7.31% in December 2009, compared with 4.78% in November. In its January monetary policy review, the RBI recently raised its projection for inflation to 8.5% from earlier 6.5% by this fiscal-end. But, the RBI expects inflation to moderate starting in July, assuming a normal monsoon and global oil prices holding at current levels.

Govt revisits oil price deregulation

The Kirit Parikh panel submitted its much-awaited report on fuel pricing to the Petroleum Ministry. The experts group, headed by the former Planning Commission member Kirit Parikh, recommended freeing of petrol and diesel prices, while raising kerosene and domestic LPG rates by Rs. 6 per litre and Rs. 100 per cylinder respectively. The committee recommended that prices of kerosene and domestic LPG should be raised in line with the per capita income. At current levels of global prices, the proposal if implemented would result in hike of the petrol and diesel prices by around Rs3.9/litre and Rs3.2/litre, respectively. The move will lead to nil under-recoveries on auto fuels as the entire burden would shift to the consumers. However, chances of deregulation of diesel prices are fairly slim on account of its impact on inflation. Currently, under-recoveries on these products are Rs287/cylinder and Rs16.5/litre. The recommendation, if implemented, would result in reduction in the subsidy burden by around Rs70.2bn on kerosene and Rs78.8bn on the domestic LPG, resulting in reduction in under-recoveries by around Rs149bn. Petroleum Ministry has given an assurance that the matter will be processed in a week's time. The Cabinet will then take up the report. It will be put up before the Cabinet in a week's time and it will be considered by the Government at the highest level in about 15 days.

Weekly Wrap - Feb 6 2010

Midcap IT Picks

Indian Telecoms Sector outlook in 2010 :Fitch

Fitch views the credit outlook for incumbents with stronger balance sheets and comfortable liquidity profiles as stable, while its outlook for new entrants and public sector telecoms operators is negative.

The revision in the Stable Outlook from 2009 is primarily due to stiff competition and a faster-than-expected decline in tariffs, which has had an impact on revenue and profitability.

Fitch notes that the credit profiles of all operators are subject to the event risk of 3G and broadband wireless access (BWA) auctions.

Wireless services are likely to remain the principle driver of industry growth, with penetration still moderate at 43.2% at end-November 2009.

Fitch expects this strong subscriber growth to be sustained at a compound annual growth rate (CAGR) of about 25%-30% over the next three years to CYE12, due to network roll-out by new operators and expansion by regional operators across different Indian circles.

However the agency notes that wireless pricing turned aggressive from September 2009, with the major operators reducing tariffs and/or switching to per second billing (from the previous per minute format).

Competitive pressures are expected to continue in 2010; consequently, Fitch expects revenue growth to decelerate in CY2010, which in turn will put pressure on EBITDA margins. However, average revenue per minute will decline at a lower rate in 2010, after declining at a faster than expected rate in 2009.

Weekly Stock Picks - Feb 6 2010

Buy Century Textile

Buy Essar Oil

Buy Bombay Dyeing

Buy Dabur India

Buy OFSS

Weekly Watch - Feb 6 2010

Disinvestment in doldrums...NTPC FPO draws poor response

The Government's big bang disinvestment plans to curb spiraling fiscal deficit kicked off on a sour note with the NTPC follow-on-offering (FPO) failing to generate enough interest amid a carnage in global stocks. Several reasons were being speculated for the dismal performance of the NTPC issue, including low fees paid to the merchant bankers by the Government. But, chief among those reasons was said to be the high bid placed by state-run institutions - LIC and SBI. According to reports, the high bids quoted by LIC and SBI in the first ever French auction for a public issue in India managed to drive away potential investors of all categories.

The Rs83bn NTPC FPO managed to scrape through and was fully subscribed primarily due to the support from public sector banks and insurance monolith LIC. The issue was subscribed only 1.2 times. It received a little over 100,000 applications from the retail investors. It received bids for 49.36 crore shares against the 41.2 crore shares on offer. NTPC owns the country’s 20% power generation capacity.

While the QIB portion was fully subscribed the response from the Retail investors and HNIs was highly disappointing. Retail investors did not see much opportunity in the NTPC issue as the floor price of Rs 201 was not much higher than the current market price. The duration of the issue saw the scrip run up from Rs 205 to a high of Rs 211.65 and fall 3.4% since then.

The big worry is that the forthcoming public issues of Rural Electrification Corporation (REC) and NMDC could also suffer the similar fate, especially if the market sentiment doesn't improve materially. REC is set to open on February 19 while NMDC issue will open on March 10. What's worse, both these issues are also going to be done under the French auction route. These two issues are expected to raise a combined Rs185bn. Meanwhile, in another setback to the Government's efforts in curtailing the fiscal deficit, the Power Ministry has decided to postpone the IPO of Satluj Jal Vidyut Nigam Ltd. The issue is unlikely to hit the markets in the current fiscal years, according to reports.

Meanwhile, several smaller IPOs that preceded the NTPC FPO also saw lukewarm retail participation. In some of these, the institutional investor portion was also low. Non-institutional investors helped these issues to sail through. Of the six IPOs in the last one week, only DB Realty (issue size: Rs12.88bn) did well. The others just about managed to get fully subscribed.

Weekly Technical Newsletter - Feb 6 2010

European debt troubles pummel global equities

Stocks across the world sank amid growing concerns of a potential sovereign debt default in Europe, even as global markets were recovering from the recent turbulence owing to concerns on China and new bank regulations in the US. Portuguese bonds come under renewed pressure as fears of Greece’s debt problems spreading in the other parts of the eurozone persisted. Banking stocks from Portugal, Spain, Greece and Ireland slid further as worries about sovereign debt and its potential impact on the eurozone continued to spread. European Central Bank (ECB) President Jean-Claude Trichet said that the eurozone still faces major challenges but is heading in the right direction. He was speaking shortly after the ECB kept interest rates steady. Eurozone governments have borrowed a record €110bn from the markets so far this year, forcing up borrowing costs for those countries with the weakest public finances as they pay a heavy price for their ballooning debt levels.

Meanwhile, China’s government, seeking to stem property speculation, told banks to raise interest rates on third mortgages and demand bigger down payments for such loans. In addition, a senior policy adviser to China's central bank said that asset bubbles were a concern for the nations' policy makers, reflecting official unease about the rapid gains in real estate prices. Overseer of US$700bn government bank bailout program said that Fed policies could be creating US housing bubble similar to one that triggered the 2008 global financial crisis.

Risk premium escalated further amid mounting worries that last year's astonishing recovery could lose steam, particularly in the matured economies, notwithstanding the ultra-loose monetary policies and the unprecedented fiscal stimulus. Gains in the US dollar accelerated as investors and fund managers fled risky assets and sought refuge in the relative safety of the greenback. The US dollar rose to an eight-month high against the euro. The dollar gained amid discouraging signals in several European countries as well as a mixed US jobs report for January.

The cost to protect against a default on European sovereign debt exceeded that of US investment-grade companies for the first time. Bond prices rose, pushing the yields down, amid heightened fears about the fiscal stability of Greece, Spain and Portugal. The dollar’s climb reduced the appeal of commodities as an alternative investment. Crude oil tumbled to a seven-week low as the dollar surged on speculation that European efforts to reduce deficits will curb growth in that region. Crude oil futures posted their worst loss in six months on Feb. 4.

Asian currencies dropped for a fourth week, the longest run of losses since June, as concern that some European nations will struggle to contain and finance budget deficits eroded demand for emerging-market assets. The MSCI Asia-Pacific Index of regional shares slumped to a 10-week low. Emerging-market equity funds lost US$1.6bn in the week ended Feb. 3, the biggest outflow in 24 weeks, according to US-based research company EPFR Global.

The Dow Jones Industrial Average fell below 10,000 level for the first time since Nov. 6. The blue chip US benchmark recovered on the last trading day, albeit marginally, to end above the key level. All the three major US indexes touched three-month lows before recovering on Friday. A three-session rout had sent the US market to its lowest point since last fall. European stocks suffered the biggest weekly slump in 11 months. The Dow Jones Stoxx 600 Index retreated extended the measure’s fourth straight weekly decline to 3.9%.

Weekly Newsletter - Feb 6 2010

If it wasn't for strong rallies on Wednesday and Saturday's special session, the Indian market would have suffered more losses. So, to that extent the bulls should consider themselves lucky. However, fortunes may not be favourable to them all the time amid a spate of external concerns besides anxiety over the prospects for the Indian economy. If all goes well in Asian markets, we may extend the gains made in Saturday's special session on Monday. But, since we have already reacted to the US market's recovery, the advance could run out of gas. The sentiment might change for the better if a bailout of the troubled European economies is announced over the weekend. On the flip side, the market could slip anew in the absence of any concrete solution to the region's worsening fiscal issues.

The dismal show by the NTPC FPO and its fallout on the upcoming public issues is another cause for concern, as is the relentless selling by the FIIs. The overseas investors seem to be biding time given the escalated uncertainty and the fact that Budget is just round the corner. So, expect volatility to persist, though chances of a snap-back rally cannot be ruled out completely after the recent reversals. At the same time, one should not jump the gun and resume the buying binge as things might turn ugly again in case of further deterioration in the external environment. Next week will be a truncated one as markets will be shut on Feb. 12 on account of Mahashivratri. IIP data for December will be out next week and is likely to show continued improvement in the industrial sector. Industrial output grew by 11.7% in November.

Derivatives: Outlook appears bearish

Market appears oversold, but the mood has remains bearish in the absence of any positive trigger, index can correct further before consolidating; global cues remain a key factor

Extremely bleak global markets kept the domestic benchmark S&P CNX Nifty also at lower levels with significant correction witnessed all through out the week. Although the market was open on Saturday for around 90 minutes, the data till Friday 5th February is only taken as there would be only minor interest in the F&O segment on Saturday. For the week till Friday the market corrected 163.40 points to close at 4718.65. Although on Saturday the market marginally corrected upward by 38.6 points evidently due to some short covering.

Negative global markets and benign mood emanating from the major economies has been a major reason behind the week's mayhem. The trend continues to remain negative although one gets a feeling that it is currently oversold. All throughout the week there was significant short built-up both at the nifty and stock futures, while on the nifty options front also the trend indicated bearishness.

All throughout the week the nifty future closed at a discount to the underlying and the average volume in the F&O space remained higher at Rs 76061.19 crore. For the full week under review, the nifty February future added 14.53 lakh shares in open interest to take the total OI on Friday to 3.14 crore shares. Most of the front-line stock futures also added OI evidently due to short built-up. For e.g. Reliance February futures added 8.66 lakh shares in OI while Tata Steel and Tata Motors added 31.11 lakh shares and 3.13 lakh shares in OI during the week ended 5th February 2010. Now in these situations when the market appears oversold, any positive news flow either domestically or globally may induce significant short covering, which may sharply pull back the underlying. In the absence of any positive news, the market appears bearish.

Overall the market wide OI on Friday stood at 189.74 crore shares, thus rising by 2.32 crore shares as compared to the previous day. Major activity was witnessed in the stock futures & options segment.

Extremely bearish scenarios were evident in the nifty option front where the most active strikes were the 4600 & 4700 calls besides 4400, 4800 and 4900 puts. Aggressive call writing was witnessed at the 4600 and up strikes, while puts were bought at the 4700 and below strikes. The surprising was the activity at the 4400 strike put which added significant buying. These are flat negative indicators suggesting further downward pull.

On Friday, 5th February 2010 the OI of 4600 and 4700 call increased by 5.75 lakh shares and 10.88 lakh shares respectively to take their total OI to 6.61 lakh shares and 20.03 lakh shares respectively. The 4700 strike put added 9.36 lakh shares in OI while the 4400 put witnessed addition of 12.47 lakh shares in OI on Friday

The market may seem oversold at this level but in the absence of any positive trigger, the mood remains bearish. It looks as though that there is further correction left before the index consolidated at some level. The mood in the global market will remain a key factor in the forthcoming weeks.

BSE Bulk Deals to Watch - Feb 6 2010

Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
6/2/2010 532995 Avon Corp VINODAMRATLALNAAI B 387294 9.74
6/2/2010 505923 Ceekay Daikin RAJASTHAN GLOBAL SEC LTD B 32986 163.85
6/2/2010 504351 Empower Inds KIRAN MULJI SHAH HUF B 75000 24.22
6/2/2010 504351 Empower Inds JIGNESHCHANDRAKANTSHAH B 76000 24.94
6/2/2010 504351 Empower Inds JAYESH BHAGWANJI SHAH HUF S 69189 23.89
6/2/2010 530263 Global Capital VARSHAJAYANTKUMARJAIN S 130000 93.12
6/2/2010 505576 Goldcrest Fin PADMAKSHI COMMODITIES PVT LTD B 100000 32.00
6/2/2010 505576 Goldcrest Fin PADMAKSHI EDUCATION PVT LTD B 100000 31.94
6/2/2010 505576 Goldcrest Fin PADMAKSHI FINANCIAL SERVICES PVT. LTD. S 195000 32.00
6/2/2010 523467 Jai Mata Glass JITENDRARAMESHKUMARAGRAWAL B 93500 3.06
6/2/2010 523467 Jai Mata Glass MANSI MILAN CHOKSI B 114211 3.08
6/2/2010 523467 Jai Mata Glass MANSI MILAN CHOKSI S 75385 3.10
6/2/2010 523467 Jai Mata Glass DHEERAJLOHIA S 146799 3.07
6/2/2010 517554 Midpoint Soft NILESH DATTATRAYA JADHAV S 5273 38.58
6/2/2010 512097 Oregon Comm HALAN PROPERTIES PRIVATE LTD. B 7590 191.09
6/2/2010 512097 Oregon Comm HALAN PROPERTIES PRIVATE LTD. S 7590 193.30
6/2/2010 512097 Oregon Comm NARESH S RUPANI S 6000 180.33
6/2/2010 512097 Oregon Comm SELECT PRODUCTS PVT LTD S 6677 180.01
6/2/2010 512097 Oregon Comm JYOTINARESHRUPANI S 4800 180.86
6/2/2010 590077 Ranklin Sol OMPARKASHGUPTA B 29994 55.83
6/2/2010 590077 Ranklin Sol RAMESH KUMAR TUMMAPALA B 27644 55.17
6/2/2010 532311 Tutis Tech SHINGAR DYES AND CHEMICALS LTD B 89650 22.44
6/2/2010 531249 Well Pack Papers LAXMAN DHIRUBHAI PARMAR S 35000 422.80

NSE Bulk Deals to Watch - Feb 6 2010

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
06-FEB-2010,DECOLIGHT,Decolight Ceramics Limite,BLUE PEACOCK SECURITIES PVT LT,BUY,104586,12.82,-
06-FEB-2010,RMEDIA,Rel. Media World Ltd,KALASH SHARES & SECURITIES PRIVATE LIMITED,BUY,319758,89.35,-
06-FEB-2010,RMEDIA,Rel. Media World Ltd,SETU SECURITIES LTD,BUY,404155,92.23,-
06-FEB-2010,RMEDIA,Rel. Media World Ltd,VIJIT SHARES AND COMMODITIES PVT.LTD.,BUY,316522,92.36,-
06-FEB-2010,SHREEASHTA,Shree Ashtavinayak Cine V,SUMAN,BUY,817335,26.91,-
06-FEB-2010,DECOLIGHT,Decolight Ceramics Limite,BLUE PEACOCK SECURITIES PVT LT,SELL,50000,12.97,-
06-FEB-2010,RMEDIA,Rel. Media World Ltd,KALASH SHARES & SECURITIES PRIVATE LIMITED,SELL,319758,89.35,-
06-FEB-2010,RMEDIA,Rel. Media World Ltd,SETU SECURITIES LTD,SELL,378641,92.15,-
06-FEB-2010,RMEDIA,Rel. Media World Ltd,VIJIT SHARES AND COMMODITIES PVT.LTD.,SELL,280240,92.34,-
06-FEB-2010,SHREEASHTA,Shree Ashtavinayak Cine V,SUMAN,SELL,816337,26.68,-

Sensex bounce back on special live trading

News Headlines

RIL looks at $2-billion acquisition in Canada
Dubai PE firm sells 13% stake in SpiceJet
NTPC clouds primary market prospects
Telcos set to go TO HC over 'illegal' towers

Markets currently

On Special live trading on Saturday Feb 06, 2010 for first time in history of domestic market, the Sensex resumes firm and opens above 15800. As day progressed on the back of buying in reality and Metal stocks helps Sensex to touch the intraday high of 15933. Currently the Sensex trading at 15919 up 127 points and Nifty is trading above 4750 mark at 4755 up 36 points.

Market Breadth

The market breadth on the BSE is strong. Out of 1776 stocks trading on thye BSE, there are 1289 advancing stocks as against 443 declines. The broader indices are trading up the BSE Mid cap index was up by 1.25% and BSE Small cap index is gains by 1.54%.

Stocks Screening

Major gainers in the 30-share index were Hindalco Industries (2.43%), D L F (2.25%), Sterlite Industries (India) (2.08%), Tata Steel (1.50%), Tata Motors (1.30%), and ACC (1.19%). On the other hand, and Hero Honda Motors (0.70%) were the biggest losers in the Sensex

Global Markets

The Asian market trades lower as exporters hurt by a stronger yen, while escalating sovereign debt problems in Europe dented investor confidence in riskier assets including equities.

Sensex rebounds as US stocks stage strong intraday recovery

The key benchmark indices jumped during the 90-minutes special trading session held today, 6 February 2010, tracking a strong intraday rebound of US stocks on Friday, 5 February 2010. The US unemployment rate surprisingly fell to a five-month low in January 2010, data showed on Friday. The BSE 30-share Sensex rose 124.72 points or 0.79%, off close to 35 points from the day's high and up close to 110 points from the day's low.

Index heavyweight Reliance Industries (RIL) edged higher. Metal, realty, infrastructure, IT, auto and banking stocks gained. All the sectoral indices on BSE were in the green. The market breadth was strong.

Indian stock tumbled over the past few weeks as stocks fell worldwide. From a recent high of 17686.24 on 5 January 2010, the Sensex tanked 1895.31 points or 10.71% to settle at 15790.93 on Friday, 5 February 2010.

The top two stock exchanges, the National Stock Exchange (NSE) and the BSE held a special 90-minute trading session today, 6 February 2010, to enable the National Stock Exchange test an upgraded trading system. The trading in the cash and futures market began at 11:00 IST and ended at 12:30 IST

Chairman of the prime minister's economic advisory council C. Rangarajan on Friday said the government is no hurry to roll back economic stimulus measures in one go. He also said that efforts will be made in the budget later this month to lower the fiscal deficit. It has been pointed out repeatedly that the process of exit must be gradual, coordinated and must not be sudden, should not disrupt the economy and efforts will be made to bring down the fiscal deficit in the coming budget, Rangarajan said.

India can gradually start raising interest rates as Asia's third-largest economy is among the first to recover after the global financial crisis, the International Monetary Fund (IMF) said in a report published on Thursday 4 February 2010 on its website. India's economy is one of the first in the world to recover and the central bank should take a gradual approach to ensure the recovery reaches its full potential, the IMF report said.

The International Monetary Fund sees the Indian economy coming back to potential by 2010-11 to log 8% growth from the current year's 6.75 per cent. Still, the IMF's assessment of GDP growth for the current fiscal is in contrast to the government's projection of more than 7% and the RBI's latest forecast of 7.5%

Following rising prices of potato and pulses, food inflation rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week, government data released on Thursday showed. The inflation for primary articles, which include food and non-food items, marginally eased to 14.56% in the reporting week from 14.66% in the previous week. The fuel price index rose 5.88%

Pronab Sen, the country's chief statistician, said on Wednesday the government should wait till May to roll back stimulus, as the strength of the demand recovery visible in available data may not be for real, pulling the finance minister, Pranab Mukherjee, away from a policy direction which the Reserve Bank of India (RBI) desires.

European stocks declined for a third day on Friday, 5 February 2010, extending the biggest weekly slump in 11 months, on concern efforts by Greece, Portugal and Spain to reduce their deficits will hurt the region's economic recovery. The key benchmark indices in France, Germany and UK fell by between 0.03% to 1.79%.

European Central Bank President Jean-Claude Trichet has struggled to convince investors the euro region shouldn't be punished for Greece's budget problems. As Greece tries to control a record deficit and stem a slide in its bonds, Trichet said the economy of the 16-nation euro area is solid and its budget shortfall will probably be smaller than those of the US and Japan this year.

US stocks rose on Friday, with the Dow Jones Industrial Average erasing a 167-point drop in the final hour of trading, on speculation the European Union may propose a solution for Greece's budget deficit. The Dow Jones Industrial Average gained 10.05 points, or 0.1%, to 10,012.23. The Nasdaq Composite Index was up 15.69 points, or 0.74%, to 2141.12. The Standard & Poor's 500 Index was up 3.08 points, or 0.29%, to 1066.19.

The US unemployment rate surprisingly fell to a five-month low of 9.7% in January 2010 and factory payrolls grew for the first time since 2007, hinting at a labour market recovery even though the economy lost 20,000 jobs.

Closer home, the BSE 30-share Sensex rose 124.72 points or 0.79% to 15,915.65. The index rose 16.82 points at the day's low of 15,807.75 in early trade. The Sensex rose 160.14 points at the day's high of 15,951.07 at the fag end of the trading session.

The S&P CNX Nifty rose 38.60 points or 0.82% to 4757.25.

The market breadth, indicating the overall health of the market was strong. On BSE, 1806 shares advanced as compared with 657 shares that declined. A total of 56 shares remained unchanged.

From the 30 share Sensex pack, 25 rose and one fell.

The BSE Mid-Cap index rose 1.59% and the BSE Small-Cap index rose 1.74%. Both the indices outperformed the Sensex. The BSE clocked a turnover of Rs 825 crore.

Index heavyweight Reliance Industries (RIL) rose 1.66% on bargain hunting after the stock fell 3.74% on Friday. As per reports, RIL has submitted a $2 billion expression of interest for Value Creation Inc, a Canada-based private firm which holds oil sands assets.

Infrastructure stocks rose on reports the government is considering new guidelines for private equity investment in infrastructure companies in an attempt to open new sources of equity funding for the sector. The move comes in the backdrop of the poor response from private companies and banks in financing projects, especially those in sectors like highways and urban transport and infrastructure. Larsen & Toubro, Bharat Heavy Electricals, Jaiprakash Associates, Era Infra Engineering rose by between 0.52% to 2.16%.

Simplex Infrastructures gained 0.29%, after the company said one of the promoter group companies revoked a substantial portion of pledged shares.

Auto stocks rose on strong vehicle sales in the month of January 2010. Tata Motors, Mahindra and Mahindra, Maruti Suzuki India, TVS Motor Company, Hero Honda Motors, Bajaj Auto rose by between 0.07% to 1.27%.

Banking stocks rose on bargain hunting. India's largest private sector bank by net profit ICICI Bank rose 0.85%. The bank's American depository receipt (ADR) slumped 3.54% on the New York Stock Exchange on Friday, 5 February 2010.

India's largest private sector bank by net profit HDFC Bank was flat at Rs 1573.10. The bank's American depository receipt (ADR) slumped 3.77% on the New York Stock Exchange on Friday, 5 February 2010.

India's largest bank by net profit and branch network State Bank of India rose 1.02%.

IT pivotals gained after a mixed US job data for January 2010. US is a key market for Indian IT firms. India's second largest IT exporter by sales Infosys rose 1.31%. Its ADR rose 0.57% on Friday.

India's third largest software services exporter Wipro rose 1.42%. Its ADR fell 1.11% on Friday. As per recent reports, Wipro Consumer Care and Lighting, the FMCG arm of Wipro, is in advanced talks to buy Nigeria-based skincare company, Tura International.

India's largest IT exporter by sales Tata Consultancy Services rose 0.81%. Reportedly TCS' Passport Seva Project, which aims to issue passports in flat three days, is all set to be launched in a week or two.

The National Association of Software and Service Companies (Nasscom) has projected export revenue to grow 13% to 15% to $56-$57 billion in the year to March 2011, below the previous outlook for $60-$62 billion.

Realty stocks rose on bargain hunting. DLF, Unitech, Indiabulls Real Estate, Anat Raj Industries and Housing Development & Infrastructure rose by between 2.15% to 6.76%.

Metal stocks also rose on bargain hunting after a recent sharp fall. Sterlite Industries, Hindalco Industries, National Aluminium Company, Sesa Goa and Hindustan Zinc rose by between 1.16% to 2.82%.

Tata Steel the world's eighth-largest steel maker rose 2.03% after the company said on Friday steel sales from its Indian operations rose 9% in to 5,56,000 tonnes in January 2010 over January 2009. Crude steel output for the month rose 14% from a year ago to 5,96,000 tonnes.

The Indian operations account for about a quarter of the group's total annual capacity of 30 million tonnes, which includes unit Corus, Europe's second-largest steelmaker. Sales of long products, used in construction, rose 10 % in January from a year earlier, while sales of flat products, used in automobiles and consumer goods, increased 8 %, the company said in a statement.

McNally Bharat Engineering Company rose 1.11%, after the company bagged two orders aggregating Rs 56.64 crore from Hindalco for its smelter projects.

Indo Asian Finance was locked at 5% upper limit at Rs 27.35, after the company's board approved issue of bonus shares in the ratio of 2:1.

Friday, February 05, 2010

Asian Markets Feels European Pain

Taiex lead losers pack with 4% fall, Hang Seng, Kospi follows with 3% loss

Stock markets in Asian region fell further to near five month low on Friday, 5 February 2010, as investors dumped riskier assets after rising sovereign debt problems in the euro zone and poor jobs data sent US and European stocks tumbling.

On Wall Street, stocks nosedived and closed near their lows Thursday, pressured by global debt fears and labor market uncertainty ahead of Friday's government jobs report. The Dow Jones Industrial Average plunged 268 points, or 2.6%, to 10,002. The S&P 500 lost 34 points, or 3.1%, to 1063 and the Nasdaq stumbled by 65 points, or 3%, at 2125.

On the economic front, the Labor Department said initial jobless claims rose by 8,000 to 480,000 in the final week of January. In other economic news, the Labor Department also said U.S. nonfarm productivity in the fourth quarter rose at a swifter-than-expected pace of 6.2%. Unit labor costs, meanwhile, fell 4.4% in the fourth quarter. The figure, which is watched as a measure of inflation and profit margins, was expected to decline only 2.5%. In separate release from the Census Bureau showed the factory orders growing at 1% in December.

In the commodity market, crude oil traded near $73 a barrel after falling yesterday as an increase in U.S. jobless claims raised concern fuel consumption may be slow to recover and a stronger dollar reduced demand for commodities.

Crude oil for March delivery was at $73.46 a barrel, up 32 cents, in electronic trading on the New York Mercantile Exchange at 3:18 p.m. Singapore time. It earlier fell as much as 33 cents, or 0.5 percent, to $72.81 a barrel.

Brent oil for March settlement was at $72.26 a barrel, up 13 cents, on the London-based ICE Futures Europe exchange at 3:19 p.m. Singapore time. It earlier fell as much as 50 cents, or 0.7 percent, to $71.63 a barrel. The contract declined $3.79, or 5 percent, to settle at $72.13 a barrel yesterday.

Gold fell to a three-month low in London as the dollar’s rally cut bullion’s appeal as an alternative investment. Gold for immediate delivery fell as much as $14.13, or 1.3 percent, to $1,049.57 an ounce and traded at $1,056.22 at 9:42 a.m. London time.

In the currency market, the US dollar rose in Asian trading Friday ahead of a key U.S. jobs report later in the session, getting a lift from safety-seeking investors as Asian equities markets sold off.

The Japanese yen softened slightly in afternoon trade against its major counterparts after surging up yesterday on growing concerns over the global economy. The unexpected rise in U.S. jobless benefit claims and growing fears about the sovereign debt crisis in Greece and other parts of Europe pushed the yen up sharply yesterday. Japan’s currency yen was quoted at 89.49 against the greenback.

The Hong Kong dollar was trading at HK$ 7.7718 against the dollar. Actually the Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trades, the Aussie dollar fell to multi-month lows today as investors fretted about sovereign debt problems in Europe amid concerns strained budgets could force fiscal retrenchment in many developed nations. The Aussie hit a 4-month low at $0.8639, shedding two US cents overnight as risk appetite collapsed on worries about the health of the global economy. At the local close, the dollar was buying $0.867 US cents. The 2.1% drop against the US dollar was the biggest daily slide in over seven months.

In Wellington trades, the New Zealand dollar had a volatile session reacting to offshore markets after taking a pounding yesterday from worse-than-expected unemployment statistics. Investors were increasingly worried about the levels of sovereign, or government debt, in Europe. They were seen dumping shares and non-US dollar currencies. Non-farm payroll data due in the US tonight adds another uncertainty to the mix. The NZ dollar was US 69.01 cents at 5 pm from US68.83c at 8 am and US 69.80 cents at 5 pm yesterday. It fell to a five-month low of US 68.45 cents on Thursday night and spent today's session between around US 69 cents and US 68.58 cents.

The South Korean won declined 1.62% against the U.S. dollar Friday as fears about ballooning budget deficits in the euro-zone sparked a flight to safer assets. The South Korean won ended at 1,169.90 won to the greenback, down 19 won from Thursday’s close after the global concerns sent investors to flee to the safety of the U.S. currency. The Korean unit fell to as low as 1,177.50 won at one point, but its losses were trimmed later due to exporters' sale of the greenback.

The Taiwan dollar weakened against the greenback. The Taiwan dollar was trading lower against the US dollar at NT$ 32.0670, 0.0470 down from Thursday’s close of NT$32.0200

In equities, Asian equity markets tumbled Friday as heavy losses on Wall Street and heightened concerns over European sovereign debt prompted a sell-off across sectors.

In Japan, the share market tumbled to 7-week low, barely clinging to the 10,000 line, suffered by steep losses in Wall Street overnight on disappointing US jobs figures, escalating debt jitters in Europe, and a sharply strengthening yen. The Nikkei index stumbled 1.38% or 140.95 points in a week. At the closing bell, the Nikkei 225 Stock Average index was at 10,057.09, tumbled 298.89 points or 2.89%, after touching an intraday low of 10,036.33. The broader Topix of all First Section issues on the Tokyo Stock Exchange slumped 19.31 points, or 2.12%, to 891.78.

In Mainland China, the stock market tumbled with key indices breached the 3,000 line fist time since 30 October 2009, as investors abandoned riskier assets in a wake of triple digit slumps in Wall Street overnight on disappointing US jobs data and escalating debt jitters in Europe.

The benchmark Shanghai index registered weekly decline of 1.7% or 49.9 points. At the closing bell, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, tumbled 55.91 points, or 1.87%, to 2,939.40, while the Shenzhen Component Index on the smaller Shenzhen Stock Exchange slipped 252.34 points, or 2.07%, to 11,917.14. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, sank 2.04%, to 3,153.09.

On the economic front, China’s current-account surplus, the broadest measure of its trade balance, fell sharply in 2009, according to preliminary estimates by the State Administration of Foreign Exchange. The current-account surplus dropped to $284.1 billion, as compared surplus of $426.1 billion for 2008. The Ministry of Commerce Friday imposed preliminary duties of as much as 105.4% on US chicken products, saying the imports are hurting the domestic poultry industry.

In Hong Kong, the key benchmark indices fell on Friday, joining a global stock market rout, as broad based selling across the sector amid risk aversion after global markets plunged overnight on renewed concerns over global economic uncertainties. Selling was also intensified after unexpected rise in US jobless claims, cautious over Greece and other European nation’s debts, and sharp fall in commodity prices. The Hang Seng Index tumbled 676.56 points, or 3.33%, to 19,655.08, while the Hang Seng China Enterprise, which tracks the overall performance of 43 Mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, shrank 474.10 points, or 4.08%, to 11,131.78.

In Australia, the index fell sharply, ending a fourth consecutive week of losses on heavy selling across the sectors, hurt by falls in offshore markets and weaker commodity prices. Market participants pulling out money from risky asset after European and US share-markets plunged into the red overnight on concerns about the financial health of the Euro zone and unexpected rise in US jobless claim. The All Ordinaries registered weekly declines of 1.4% or 64.40 points. At the closing bell, the benchmark S&P/ASX200 index fell 107.50 points, or 2.33%, to 4,514.10, meanwhile the broader All Ordinaries shrank 111.60 points, or 2.4%, to 4,532.50.

On the economic front, the RBA issued its quarterly Monetary Policy Statement Friday in Sydney, saying that if the forecasts materialize, more interest rate hikes are possible. The RBA predicted modest increases in inflation and gross domestic product, along with a moderation in joblessness. The central bank forecasts underlying inflation will ease from about 3.25% through 2009 to 3% by mid 2010 and 2.5% by the end of 2010 before rising to 2.75% by the end of 2011 and into 2012. The bank previously forecast 2.25% inflation by the end of 2010.Gross domestic product is forecast to rise by 3.25% through 2010 and 3.5% through 2011.

In New Zealand, equities ended deep in the negative region on the last trading day of the week after inching up slightly yesterday despite loses in international markets. New Zealand benchmark index dipped sharply on Friday by almost 1.5%, reaching close to 3100; near its mid December 2009 lows after achieving a level close to 3300, early this year. NZ shares remained dull throughout the week except for edging forward yesterday. At the closing today, the NZX 50 lost 1.40% or 43.95 points to 3104.99. Meanwhile, the NZX 15 declined 1.69% or 96.04 points to close at 5592.69.

In South Korea, stocks closed lower as snowballing sovereign debt woes in Europe prompted skepticism over a fledgling global economic recovery. In a broad-based slump, the Korea Composite Stock Price Index (KOSPI) gave up 49.30 points or 3.05% to end at 1,567.12. Today’s steep losses pushed the key index back to the lowest level since it ended at 1,555.70 on 30 November 2009, after foreigners sold a net $293 billion in shares following three days of buying.

In Singapore, the key stock index tanked, driving the index to a fourth straight weekly losses on concerns the global recovery may falter on weak cues from Asian and European bourses and Wall Street overnight triggered by concerns over sovereign debt problems in Europe and U.S. unemployment. At the closing bell, the blue chip Straits Times Index was at 2,683.56, dropped 61.42 points or 2.24%. The gauge tumbled 2.1% or 58.2 points this week, its fourth week of decline.

In Taiwan, stock market flunked to five month low, by posting the biggest single day loss since 22 January 2008, as investors step up the selling activity following Wall Street losses on rising debt problems in Europe. All sectoral indices registered broad base losses. The benchmark Taiex share index followed the global cues by extending the losses for the fourth session, finishing the day lower by 324.21 points or 4.30% at 7217.83 – the biggest single day fall since 22 January 2008 when market tanked 528.54 points. It is also the lowest closing since 4 September 2009 when market finished the day at 7153.13.

On the economic front, Taiwan’s industrial production index jumped 47.34% year-on-year to reach 114.51 points in December last year, a historical high, thanks to the relatively low comparison base and the widely-reported economic recovery globally,.

According to statistics compiled by the statistics department under the Ministry of Economic Affairs (MOEA), the production index for the manufacturing industry also hit a historic-high record with an annual growth of 50.16% in the same month.

In Philippines, cautiousness and risk aversion once more ruled the Philippines stock market, with PSEi plummeting more than 2% following a two-day rebound. Market players remained jittery following the razor sharp losses on Wall Street overnight. Aside from that, investors remained pessimistic over the monetary board’s moves over the interest rates. Though the CPI figures released today, slightly eased for the first time in five months in January, it is still holding near an eight months high level, supporting the central bank's view that current policy settings were appropriate. At the final bell, the benchmark index PSEi plummeted 2.03% or 59.23 points to 2,855.64, while the All Shares index declined 1.68% or 31.22 points to 1,822.56.

In India, sustained selling pressure kept key benchmark indices suppressed throughout the day. World stocks fell as Europe’s sovereign debt, indications of weak US jobs data and a crash in commodity and energy prices raised fresh concerns over global economic recovery. The barometer index slipped below the psychological 16,000 mark. The BSE 30-share Sensex was down 434.02 points or 2.68% to 15,790.93. The S&P CNX Nifty was down 126.70 points or 2.61% to 4718.65.

Elsewhere, Malaysia’s Kula Lumpur Composite index finished slightly lower at 1247.90 while stock markets in Indonesia’s Jakarta Composite index gave up by 74.24 points ending the day lower at 2518.98.

In other regional market, European shares fell for the third straight day on Friday, as investors continued to fret about the health of Greek, Portuguese and Spanish finances ahead of the release of U.S. jobs data. The major European regional markets held up a bit better, with the German DAX index down 1.3% or 74.31 points at 5,459, the French CAC-40 index lost 2.4% or 89.29 points to 3,600 and the U.K. FTSE 100 index down 1.7% or 87.32 points to 5,052.

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