Market Gossip -May 30 2008

Shorties make a sweet killing

The sharp fall in indices in the last 30 minutes of trade on Thursday caught many people by surprise. Some analysts attribute this fall to some smart work by traders at a time when market was nervous ahead of the expiry of the May series on Thursday. These deep-pocketed traders are believed to have made a killing in the late fall on Thursday.

A derivatives analyst from a leading brokerage said there was a sharp rise in the premium of Nifty 4,900 puts just ahead of the late fall, indicating some traders would have had prior knowledge of a sell-off.

According to provisional data on the BSE, foreign institutional investors net sold Rs 1,277 crore worth of shares. Indices traded choppy for most of Thursday’s session. The Nifty closed at 4,835.30, down 83 points or 1.7% from Wednesday’s close.

Lacking embedded value

The embedded value (EV) concept was widely used till early January by analysts to justify the sharp jumps in share prices beyond their real value. In this, analysts take into account the valuation of the companies’ subsidiaries, listed or unlisted, and certain assets including real estate, that are not part of its core business.

The fall in stock markets, however, does not seem to deter analysts from using this concept widely. For example, real estate shares have tumbled 40-50% on an average from their record levels to factor in a likely slowdown in the realty sector in the coming years.

But, the same logic does not seem to be applicable to companies with real estate arms. Some analysts continue to factor in value of real estate arms, while assigning price targets to the parent stock.

Traders prefer to go short

It may not be the best of times for investors, but the sustained bearishness in the market is turning out to be a relief for day traders. Till the second week of January this year, the safest strategy was to go long first thing in the morning and then unwind those positions later in the day.

But ,with the mood having changed, traders have reversed their strategy. Given the gloomy outlook, these players now go short at frontline counters first thing in the morning, hoping to cover their positions at a lower price later in the day. And of late, this strategy appears to be yielding fruit.

via ET

Market Buzz

Pitti Lamination up on talk of REL buy

The stock of Pitti Lamination has risen 48% over the past week on buzz that Reliance Energy (REL) is eyeing a minority stake in the company. Pitti manufactures electric-grade steel stampings and laminations, the key components in motors, rotors and other electrical components. Its clients include ABB, BHEL, Siemens, Suzlon and GE (US).

Dealers tracking the counter say REL is looking to have strategic tie-ups with key vendors for effective inventory management as it will be handling large projects. When contacted, REL spokesman refused to comment on the issue. At roughly 9 times trailing full-year earnings — the company reported an EPS of Rs 11.35 for FY07 — the stock may not appear overly expensive. But the performance for the first six months of the current financial year has been anything but impressive, with the company clocking an EPS of Rs 3.59. Local mutual funds do not appear to be hot on this stock.

Total institutional holding in the stock as on September 30 was 6.4% and all of it foreign. Also, there have not been any major institutional purchases in the stock over the past couple of months, as per data on BSE website. The stock on Friday closed at Rs 98.75, up 14% over its previous close.


Zenith Birla soars on capacity expansion buzz

The scrip of Yash Birla group company, Zenith Birla, is soaring on the bourses on talk that the company is planning to expand its pipe mak-ing capacity. Shares were up 4.9% on Friday, and 28% in the past week.

Confirming the move, a company official said a greenfield project will be put up on the west coast — Gujarat or Maharashatra — in-creasing capacity to 320,000 tonnes from 120, 00 tonnes. The company currently produces its pipes at its existing plant at Khopoli, about 80 km from Mumbai, which has two lines of production.

Such pipes are mainly used for oil and gas distribution through cross-country pipelines. Zenith has some presence in the global market, chiefly in the US and West Asia, with about 60% of its turnover com-ing from exports.


Tata Chemicals counter witnesses’ frenzied activity

Tata Chemicals has appreciated by over 20% in the past one week. The counter is witnessing sustained accumulation by various institutional investors. According to market sources, the Life Boat Fund — a biggie among domestic investors — has sold about 10-15 lakh shares at an average price of Rs 365, which in turn has been accumulated by informed investors.

The story doing the rounds is that the cash-rich company would post improved quarter-on-quarter performance and would also benefit from the rising soda ash prices (up about 25%). Its strategic tie up with Praj Industries is another positive. The stock closed at Rs 381, up 1.5% from the previous close.

Via ET

Market Gossip

Maharashtra Seamless up on order buzz

The stock price of Maharashtra Seamless has risen around 24% in the past one month. Market talk is that the DP Jindal Group company has bagged an export order worth Rs 160 crore from the US and Latin America. Dealers tracking the counter expect the announcement to be made over the next couple of days.

When contacted, company officials declined to comment on the issue. The stock closed at Rs 613, down 3% from the previous day. Last month, JP Morgan had initiated coverage on the stock with an overweight rating and a target price of Rs 580.

According to the broking house, margins could be under pressure during the current financial year because of high price of steel billets, which the company buys in the spot market. JP Morgan expects margins to improve in the next financial year as new orders would be booked at higher realisations.

Acquisition talk breathes life into Wockhardt stock

Until some days ago investing in pharma stocks was not considered a wise decision by market mandarins. However, over the past two trading sessions there has been sustained buying in the counter of Wockhardt.

According to market sources, domestic funds and operators are buying Wockhardt on expectations that the company will soon go in for one more acquisition in the US. The company recently acquired US-based Morton Grove Pharmaceuticals, a liquid generic and speciality dermatology company, for around $80 million.

A section of the market, however, feels while the company would be scouting for acquisitions, but it maybe some time before Wockhardt signs a deal. Wockhardt ended 2.5% higher at Rs 408 on BSE on Thursday.

Aditya Birla Nuvo gains from Rel Cap valuation

Aditya Birla Nuvo stock was in demand despite the overall weakness in the market on Thursday. The stock hit a new high of Rs 1,820 before closing at Rs 1,797.50, up 6.4% over the previous close. Dealers tracking the counter say the sudden flurry of activity on Thursday was largely sentiment driven and could have to do with the valuation assigned to Reliance Mutual Fund following Eton Park buying a 5% stake for Rs 501 crore.

Reliance Mutual Fund has been valued at Rs 10,000 crore, which works out to 13% of its total assets under management. If a similar yardstick is applied, the valuation of Birla Sun Life AMC — in which Aditya Birla Nuvo holds 50% — works out to around Rs 4,500 crore.

Market Gossip - Morepen Labs

Allotment of shares and naked warrants through

Market Gossip - Patni Computers

We are hearing that Patni management is playing some fun and games with their shareholders. They want to sell or not ?

We are hearing that deal might happen at around Rs 700 but looks like they don't want to give out any statements or make as if nothing is happening

Disclaimer: This is just gossip, so you need not believe it.

Market Gossip - Rajendra Mechanical

Rajendra Mechanical is headed for a target of Rs 350

We hear that Andheri Realty Block is going for Rs 350cr

Disclaimer: Not to be construed as true, keep appropriate stop losses, this gossip may be nothing more than bullsh??