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NIFTY (4040) SUP 4001 RES 4076
BUY MOSERBAER (358.35)
SL 353 T 368, 371
BUY GAMMONIND (390.05)
SL 385 T 401, 403
SELL SAIL (113.15)
@ 115 SL 118 T 108, 106
SELL MANGLMCEM (187.05)
@ 190 SL 194 T 181, 179
SELL CIPLA (247.70)
@ 249 SL 253 T 240,237
Surprise assault, bulls may counter attack
A tactical retreat is not a bad response to a surprise assault, you know. First you survive. Then you choose your own ground. Then you counterattack
The last hour attack by bears came as a bit of a surprise because the bulls had managed to hold fort for most part of the day. Heavy selling by possibly institutional investors saw the key indices slip from a day's high and end sharply down. Some attribute the sudden fall to unwinding of long positions in the F&O segment on the last day of the settlement. In fact, for the first time since June 2006, the Nifty fell during a F&O series. But, don't despair as the March Nifty futures ended the day with a 24-point premium to the spot Nifty index.
The put-to-call (PCR) ratio is also down. The F&O rollover has been quite good, though the near-term outlook remains cloudy as investors are reluctant to build fresh long positions before the budget. Having said that we feel that the market direction post-budget will hinge more on foreign capital inflows and the emerging economic conditions like inflation and movement in interest rates. The latter will perhaps have a major impact on the market. A further hardening of interest rates may spook the bulls. So, keep an eye on inflation and the Government moves on this front.
Globally things are looking benign at the moment, though oil prices have crossed the $60 per barrel mark yet again and could spoil the bull party. From the voices heard so far, real estate may be at the receiving end this budget. In a nutshell, things are going to remain choppy and making money won't be as easy as it was in the recent past. A stock specific approach and reduction in the number of stocks you hold could be the best way to survive the choppiness. There is a chance of a bounce back after yesterday's sudden and sharp plunge. But that doesn't mean the bulls may be out of the woods yet.
FIIs were net sellers to the tune of Rs4.35bn (provisional) in the cash segment yesterday. In the F&O segment, they were net buyers at Rs770mn. On Wednesday, foreign funds offloaded stocks worth Rs402mn in the cash segment. Mutual Funds pumped in Rs178.1mn on the same day.
Shares of Power Finance Corp. (PFC) will list today. Atlanta will definitely be under pressure after SEBI barred 16 entities, including the promoters of the company from trading in the company's shares for alleged price manipulation post listing of the stock. Rolta India should advance after the RBI approved the proposed hike in the investment limit for overseas investors up to 40% of the company's paid-up capital. On the other hand, the central bank has barred further purchases by foreign investors in Jaiprakash Associates as the investment ceiling in the stock has reached 22% of its paid up capital.
Wockhardt could attract some investors after the domestic pharma major announced its results yesterday. Zensar Tech is likely to hog the limelight amid reports that the RPG Group will buy out the stake held by its Japanese partner Fujitsu. Apollo Hospitals is another scrip to watch out for after a financial daily reported that the company is eyeing UK-based Abbey Hospitals. Hexaware is also expected to make a move as it is reportedly looking at buying an IT firm in Europe or the US. Cement counters will remain in the spotlight amid reports that the Big Five companies in the country are holding back production ramp-up to gain from the current high price scenario. There is also talk of a possible ban on exports.
US stocks closed mixed on Thursday. The Dow Jones Industrial Production fell for the second straight day on the back of rising oil prices, a jump in Treasury bond yields and Iran's refusal to stop uranium enrichment. However, the Nasdaq Composite Index climbed to a six-year high on buoyant demand for semiconductors. The sentiment turned weak after Iran defied a United Nations Security Council demand to halt its atomic programme and on speculation that the US might raise its terror alert.
The Dow dropped 52.39 points, or 0.4%, to 12,686.02, its worst loss since Feb. 9. The S&P 500 finished almost unchanged at 1456.38. The Nasdaq rose 6.52 points, or 0.3%, to 2524.94, the highest since February 2001.
A jump in oil prices also aided the decline. Crude futures climbed 1.5% to $60.95 a barrel, the highest close this year. In other markets, Treasuries fell and the dollar approached the strongest in four years against the yen.
European shares closed higher, as gains in the mining sector coupled with good earnings from BASF and Nestle boosted sentiment. Italy's main stock market index also managed gains despite the resignation of the country's prime minister.
The UK's FTSE 100 rose 0.4% to 6,380.90, while the German DAX 30 closed up 0.5% at 6,973.73 and the French CAC-40 climbed 0.2% to 5,707.86.
The DAX touched a new high for the second time in two days. It reached 7,012.34, a level not seen since November 2000.
The Milan-based S&P/MIB index rose 0.4% to 42,456.00. Romano Prodi resigned as premier late on Wednesday after losing a Senate vote on foreign policy.
The pan-European Dow Jones Stoxx 600 index rose 0.3% to 379.76.
In Asia, Japan's Nikkei 225 index continued its climb above the 18,000 level, finishing the morning session at 18,127.98, a gain of 0.11%. In Asian regional markets, stocks generally advanced. Markets in China and Taiwan remained closed for Lunar New Year holidays and are scheduled to reopen on Monday.
Australia's S&P/ASX 200 was up 0.33% at 6,037.10 after touching a new intraday high; South Korea's Kospi reversed early losses to add 0.09% to 1,466.71; Hong Kong's Hang Seng shed as much as 0.13% to 20,781.26; the Singapore Straits Times was nearly flat at 3,2090.52 and Kuala Lumpur's Composite too was barely changed at 1,276.85.
Insider Trades:
Vishal Exports Overseas Limited: Subhash Chandra C Mehta, Director has sold in open market 291,439 equity shares of Vishal Exports Overseas Limited on 15th February, 2007.
Market Volumes:
The turnover on NSE was up by 38% to Rs117bn. BSE Bank index was the major loser and lost 2.48%. BSE Pharma index (down 2.10%), BSE Auto index (down 1.86%), BSE PSU index (down 1.29%) and BSE FMCG index (down 1.01%) were among the other major losers.
Volume Toppers:
IFCI, First Source, Zee News, SAIL, Hindalco, TTML, Ashok Leyland, R Com, HLL, Tata Steel, India Cement, TV Today, Aftek, MTNL, Arvind Mills, Escorts, GBN and Reliance Industries.
Delivery Delight:
ABG Shipyard, BRFL, CEAT, Deepak Fertilizers, Escorts, Gujarat NRE, I-Flex, IOC, IndusInd Bank, ING Vysya, Jagran Prakashan, JINDAL SAW, Lloyd Electric, Maharashtra Seamless, Moser Baer, Nitco Tiles, Pantaloon Retail, Reliance Communications, TCS and TV Today.
Lower Circuit Filters:
Ansal Infrastructure, SSI Ltd, RMCL, Aviva Industries, Flawless Diamond, Shree Precoated, Ganesh Housing, Heritage Foods and Nirlon.
Long Term Investment:
TCS
Major News Headlines:
Wockhardt Q4 net at RsRs871mn (up 19.4%), revenues at Rs5.34bn (up 44.7%)
Wockhardt to pay Rs5 dividend per share for 2006
Sterlite optical secures orders worth Rs1.5bn
House of Pearl acquires new warehouse in UK
Ganesh Housing signs MoU with Gujarat Govt
Cement stocks fall on concern that Govt may ban exports
Max India hikes FII investment limit to 49%
Max India to raise Rs10bn via QIP issue
Morgan Stanley ends JV with JM Financial
Govt denies reports of income-Tax raids on stock brokers
India Cements to consider merger with Visaka Cement Industry
Gail plans to spend $2.7bn for pipeline expansion
Jindal Saw gets US order worth $355mnCadila Healthcare Ltd (Q3FY07): BUY - Investment Update
Cadila Healthcare Limited’s (CHL) Q3 FY07 results were better than expectations. Key positives are significant growth (188.3% yoy and 106.1% qoq) and declining losses of Zydus France as well as maintaining the growth momentum in the US market. Domestic formulations sales were muted for the third quarter in a row, growing a dismal 6.2% for 9M FY07. Implementation of VAT in Tamil Nadu in December, which accounts for nearly Rs70mn of sales per month affected domestic formulation sales. However growth is likely to return to normal in Q4 FY07. Despite this strong topline growth, OPM contracted by 200bps due to higher spending on R&D (6.3% of sales vs 4.3%) and advertising for the quarter. One time income of Rs196mn on account of sale of branded business in France propelled 66% bottomline growth to Rs659mn translating into an annualized EPS of Rs21.
Post result conference call with the management has further reaffirmed our view about increasing clarity on CHL’s international operations. The management has highlighted that Q3 FY07 figures for Zydus France were not one off in nature and 60-70% growth in this market was achievable for FY08. Further the company is on track to turn EBIDTA positive for this market in FY07. US sales are going strong and with a wide basket of products, we believe 40% growth is achievable in US. CRAMS business has not run out of steam with CHL signing additional 3 contracts for the quarter, taking total contracts to 20 with peak revenue potential of US$27.5mn. The JV with Mayne for oncology products continues despite the latter being acquired by Hospira and the management believes that numbers would be bigger than estimated earlier due to wider geographic reach of Hospira. The domestic formulations business is likely to clock above average growth after a muted 9M FY07. Post the strong performance in 9M FY07 and increased visibility on earnings, we have increased our FY07 & FY08 estimates by Rs1.3 and Rs2 respectively. We thereby raise our target price to Rs416. We maintain BUY on the stock.
RAILWAY BUDGET SPECIAL
Turnaround Express going strong
Indian Railways (IR) could be one of the best Indian turnaround stories of recent times. Last year in our special report on Union Railway Budget, we had told you how after coming very close to a financial crunch the loss-making national carrier managed to turn around its operations. The good news is IR continues to impress us with its performance. Thanks to the buoyancy in the freight rates, euphoric growth in the gross domestic product (GDP) and steady rise in passenger traffic, the total traffic receipts of the IR are expected to have grown by 15.5% in FY2006 and are estimated to grow at 9.6% in FY2007. With the leverage effect coming into play, the top line of IR too is growing at a good pace, leading to strong operating cash flows and higher capital expenditure (capex).
The man who is responsible for the magical transformation of IR, Union Railways Minister Lalu Prasad Yadav, is all set to present his fourth Union Railway Budget on February 26. The event is keenly awaited by the stock market since any proposal to increase IR's capex in the forthcoming railway budget would bode well for the capital goods companies. In this report we shall tell you which companies stand to benefit the most from a possible hike in IR's capex.
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