Vodafone - Sabotage was on the cards

Vodafone chief executive Arun Sarin on Saturday said his hopes that India’s regulatory bureaucracy had modernised were shaken by last-minute moves to derail his company’s $11-billion takeover of Hutchison Essar.

Mr Sarin called for greater transparency in India’s merger approval process to defeat backroom efforts by vested interests to manipulate the political bureaucracy.

“I really did not expect people—the ‘good and great’ of India—to be calling cabinet secretaries and ministers to say ‘You have to unwind this deal because we want a piece of it’,” Sarin told a conference of Indian business and academic leaders taking place in Silicon Valley this weekend.

He was speaking to hundreds of fellow alumni from the Indian Institutes of Technology. Vodafone edged out some powerful Indian business groups with an $11-billion bid for Hutchison Telecommunications’ majority stake in India’s fourth-biggest mobile firm in January.

It then underwent a three-month regulatory wait, rapid by US or European standards, he noted.

Mr Sarin said he was confident the deal would sail through until the regulatory process in New Delhi entered its final weeks and he became aware of behind-the-scenes lobbying by competitors attempting “to crater the deal”.

“The billionaire losers’ club was trying to unwind the deal,” Mr Sarin said. “What was fascinating was that there was absolutely no transparency in the process.”

What I didn’t count on was that the bureaucracy would kick in with this kind of evil spirit from our competitors who had lost,” the Vodafone chief said at a news conference after his speech.

Despite his criticisms of India’s regulatory environment, Mr Sarin said he was confident throughout the government approval process that political and economic forces at work in the country would allow Vodafone’s bid for Hutchison Essar to prevail.

Before entering the bidding for Hutchison Essar, Mr Sarin said he had spent time with government leaders to gain assurance that Vodafone’s entry into India would be welcomed.

“I was completely confident from a political standpoint that we would have the blessing and air cover to get the deal done,” he told reporters.

Despite the resistance, Vodafone’s bid gained approval in April. Previously known as Hutchison Essar, the Indian company has been renamed Vodafone Essar. Vodafone owns two-thirds while Indian company Essar owns the remaining stake.

Vodafone, the world’s biggest mobile phone operator by subscribers outside China, aims to be the top wireless carrier in India, where the customer base is expected to rise to 500 million in four to five years from around 150 million now.

Market Outlook, Daily Call

Market Outlook, Daily Call

Morning Call - July 9 2007

Market Grape Wine :

In House :

Nifty at a support of 4360 & 4333 levels with resistance at 4445 & 4470 levels .

Positive opening but profit booking not ruled out before Infy result on Wednesday .

Buy : Intraday : Petronet above 58 target 62 s/l of 56.1

Buy : Intraday : NagarConst : above 195 target of 204 s/l of 192

Buy : Cairns looks positive

Out House :

Markets at a support of 14848 & 14786 levels with resistance at 15051 & 15095 levels .

Buy : RIL & SBIN

Buy : Century & JPAsso

Buy : Maruti & M&M

Buy : Kesoram & ACC

Buy : IDBI & IFCI

Buy : Titan & PunLLoyd

Buy : MoserBaer & JPAsso

Buy : IBulls & IBReal & DLF

Dark Horse : ACC , BajajHind , IBulls , , SBIN , IbullReal , JP , Titan & Century

Bullet : AsianElec , PRAJ & VishalRetail with strict stop loss

Trading Calls

Stocks with +ve bias: Hindustan Lever, Cairn, Infosys, GTL , Voltas, ACC, HDFC Bank

Short term Delivery: Bharat Bijlee

Stocks for Investment: SEAMAC, JP Associates ,Aditya Birla Nuvo

Signals from F&O

Here is a low-down on what the various derivative indicators tell about the future course of the market.

It's just over seven years since the NSE launched its derivatives segment. Although there was initial hesitation about these exotic instruments, Indian traders have taken to them like a duck to water.

Nowadays, derivatives generate huge volumes that dwarf the cash markets. In fact, the NSE is among the world's premier exchanges in terms of F&O activity and Indian stock futures are among the most liquid, high-volume instruments in the world.

Derivatives offer high leverage and good hedging possibilities so traders naturally gravitate to these instruments. Their concerted actions generate a rich lode of data, which can be mined to provide hints about market sentiment.

Some specific signals generated by the F&O market can be understood even by non-traders or long-term investors and these can help them identify major market peaks and bottoms.

You don't need to trade the F&O market to track its signals. Since contracts expire on given dates, you know that the position in a specific contract reflects expectations that will hold until that date.

Technical analysis of cash positions revolves around price and volume data. In the F&O market, much additional data is available and we can also get a sense of the prevailing conditions by comparing F&O prices with the underlying spot prices.

Typically one considers the following data series when making an analysis of the F&O market with an eye to possible peaks and troughs. A brief general explanation of these signals follows before we get to specifics in the Indian market:

1) Divergence between futures and spot prices and the related cost of carry (CoC): The futures price of a spot contract is related to the CoC. Given neutral expectations, the CoC will be positive and close to the discount interest rate. A wide differential between CoC and the discount rate will trigger arbitrage.

In practice, CoC can be either positive or negative or even zero. A positive CoC implies bullish expectations while a negative CoC reflects bearishness. Caveat: Close to settlement, CoC may go negative.

2) Open interest in various contracts (OI): The end-of-day OI is a key signal. In a bullish market, OI tends to be high. It is a danger signal when OI is high and spot volumes are not. The implication of lower spot volumes is that the market is not that bullish, whereas high OI suggests some disconnect between spot and future expectations.

But in the Indian context, there has been an explosion of interest in the F&O segment that has led to a natural expansion in OI diluting the value of the signal. Close to a settlement, high OI suggests that there will be high carry-over and it's a bullish signal.

3) Put call ratio (PCR): The number of puts traded to number of calls traded is an important index of future expectations. If the PCR is low – that is, calls outnumber puts and the PCR is well below 1, the chances are that the market is overbought and looking to decline.

If the PCR is high, that is puts outnumber calls and the PCR is over 1, the expectations are more bullish. Some traders prefer to use a PCR modified to reflect only end-of-day OI. Others simply divide the number of puts traded by the number of puts. Both are valid methods of calculating PCR. Any PCR calculation assumes that the options market is efficient and liquid. That is not necessarily the case in India.

4) Implied volatility and historical volatility: You can look at spot prices and calculate historical volatility (HV). There are many ways to do this. Again by examining option premiums, we can derive implied volatility (IV) from the F&O market.

In a bearish market, IV tends to be higher than HV and vice-versa. The famous VIX index of Chicago tells us that IV tends to be markedly lower than HV close to market tops and IV spikes up once the market slides. At a market bottom, IV tends to fall as prices rise.

Now let's look at some of these signals with specific reference to the Indian markets

1) Futures – Spot divergence: Normally there is a marginal differential between futures price and spot Nifty price. The CoC is slightly positive until the end of settlement when it goes negative close to the last session. Normally the percent difference between the spot and near-term futures is less than 0.5 per cent.

The behaviour is different in a market crash such as May 2004. As the bearishness intensified, the near-term future was settled with a difference of more than 1 per cent on several occasions. There were several sessions (May 17-20, 2004) when the difference was over 2 percent. Again in May-June 2006, when the market crashed, the differential rose sharply.

Note that the differential dropped back to normal levels as the market bottomed. In February 2007 as well, there was a similar pattern of a rising differential in favour of spot prices. In all these bearish phases, the CoC turned negative and stayed negative. The OI dropped as well.

These seem to be consistent signals during a serious market downturn. The CoC will go negative – that is, the spot will trade at significant premium. At the bottom, the CoC will start to correct and the differential will ease off.

2) OI: As mentioned above, OI tends to be up during a bullish phase and down during a bearish phase. In key market downturns, the OI plunges. There may be a scenario where there is a lot of daily volume but much less OI.

However the market has been generally bullish through the past several years and the NSE has trebled the available underlying during that period. So OI has in general, gone up. We cannot use a historical yardstick of OI. You can at best use something like a 10-day moving average of OI to judge if it's dropping by unusual amounts. This will give a high number of false signals

The period January 2006-June 2006 provides an interesting example of how OI is affected by market movements. We've charted the Month-on-Month Nifty gains (percentage) versus the total no of contracts (F&O across stocks and indices) open. There's a sharp drop across the April-June period when the market lost ground.

3) PCR: Methodology in calculation can obviously make a difference to PCR levels. In the Indian context, stock option volume is very limited and there are very few puts. Stock option PCR tends to range between 0.15-0.3 if we're considering all traded contracts. It is nearer the lower end of this range if we only consider end-of-day OI. This is a function of illiquidity and frankly, it's impossible to make any judgment based on overall stock PCRs in the Indian market.

The overall market PCR is heavily skewed by the fact that the Nifty generates close to 90 per cent of all put volumes. The data is more easily available in terms of all traded contracts rather than in terms of OI. So, we'll use the methodology of all traded contracts.

The F&O market has gained so much depth in the past three years, previous data is probably useless in trading terms. Since January 2004, the average market PCR has been about 0.65, with a standard deviation of 0.21.

Since January 2006, it's up to 0.8 with a standard deviation of 0.15. This is a sign of a more mature and liquid market. In bearish phases, it has plunged. The chart depicting the Nifty's movement since January 2006 versus the daily market PCR shows a positive correlation. If PCR is high, the market tends to be high.

4) HV and IV: The theoretically correct way to calculate HV and IV are both very complicated. You can use a thumb-rule calculation instead which will give similar results. Take the daily high-low range as a percent of the future's settled price. Take say, a 20-day moving average of this in order to get a smoother value.

This is your proxy for HV. As of June 6, 2007 the HV was 1.18 per cent under this method. There are 15 sessions to expiry so we can expect a maximum swing of about 17-18 per cent in either direction.

Now take the nearest to money call option and nearest to money put option premiums and calculate the breakevens to derive a range. That is, with Nifty at 4384, the 4400c (premium 65) and 4350p (75) are worth considering. A strangle breaks even outside 4100-4665.

The implied volatility is about 13 per cent. With 15 sessions to expiry, the IV is lower than the HV so, the market is not exhibiting bearish signals. If you run a similar calculation during a bearish phase, the IV will generally be higher than the HV. There may also be asymmetrical pricing in that puts and calls at the same distance from the money will be priced differently.

Conclusion: The above just scratches the surface of the research possible with F&O data. Obviously specific indicator levels will change along with market conditions. As stock options become more liquid for instance, and more traders start using sophisticated models, the market's PCR will change. However we hope that this study introduces you to the world of derivatives analysis.

Research Calls

Nucleus Software Recommendation: Accumulate Reco price: Rs 991 Current market price: Rs 1,002 Broking firm: Edelweiss

Nucleus Software focuses on the banking, financial services and insurance (BFSI) industry, with specialised products for retail banking.

It has recently won an order from ACOM - Japan’s largest consumer finance company, worth Rs 150 crore taking its total order book size to Rs 330 crore as on FY07. So far, the company has over 250 product implementations for its flagship product FinnOne.

In FY07, nearly 54 per cent of its revenues came from the product segment, which is expected to grow at a CAGR of 64.5 per cent over FY07-09E, contributing 72.6 per cent to its estimated FY09 revenues.

This is likely to result in EBITDA margins expanding from 28.61 per cent in FY07 to 29.9 per cent in FY09E.

Edelweiss expects Nucleus’ revenues and profits to grow at 42 per cent and 41 per cent CAGR respectively, between FY07 and FY09. At Rs 991, the stock traded at 21 times its estimated FY08 earning per share (EPS) of Rs 47, and at 14.5 times its estimated FY09 EPS of Rs 68.1.

Punjab National Bank Reco price: Rs 530 Target price: Rs 601 Current market price: Rs 524.25 Upside (%): 14.63 Broking firm: Karvy Stock Broking

PNB has a strong foothold in northern India, in particular with the prosperous agricultural districts. Post 2009, competition is likely to intensify as foreign banks will be allowed more leeway.

In such a scenario, PNB has to be prepared for a highly competitive environment post-FY2009 and has to also modify its business model to focus on rural or semi-urban India and in northern and central India.

At the recommended price, the stock is valued at a P/E multiple of 6.3 times its estimated earnings and 1.3 times its book value in FY09.

Gayatri Projects Reco price: Rs 301 Target price: Rs 374 Current market price: Rs 290 Broking firm: IndiaInfoline

Gayatri Projects has bagged two new projects worth Rs 880 crore in partnership with Maytas. Including these two projects, the order book stands at Rs 3100 crore translating to 6.2 times its FY07 sales.

The company is expected to witness a CAGR of 45.2 per cent in topline between FY07-09E and cross the Rs 1000 crore turnover in FY09E. During the same period, net profit is expected grow at CAGR of 57 per cent.

At the recommended price the stock is trading at a discount of 50.5 per cent to the average P/E of Gammon, HCC, NCC, IVRCL and Patel Engineering. At a recommended price, the stock trades at 5.8 times FY08E and 3.8 times FY09E EPS, making it one of the most attractive construction companies.

AIA Engineering Reco price: 1,752 Target price: Rs 1,974 Current market price: Rs 1,697.10 Upside (%): 16.3 Broking firm: Prabhudas Lilladher

AIA Engineering is a niche player in high-chrome metallurgy products catering to the cement, power and mining segments.

The three industries that it caters to, are expected to invest more than Rs 5,70,000 crore over the coming five years in capital expenditure. It is a market leader with nearly a 90 per cent share in the domestic market, while in the global market it has a 20 per cent share.

Further, it is increasing its capacity from 65,000 tonne per annum to 265,000 tonne per annum over the coming two years which will fuel its growth in the forthcoming years.

Prabhudas Lilladher expects a net profit CAGR of 40.2 per cent on the back of revenue CAGR of 46.5 per cent. At the price of Rs 1,752, the stock trades at 24.2 times and 17.8 times its estimated FY08 and FY09 earnings of Rs 72.3 and Rs 98.6, respectively.

On an EV/EBITDA basis, the stock is available at 16.4 times and 11.4 times its FY08 and FY09 estimates respectively. The target price of Rs 1,974 per share discounts FY09 earnings by 20 times.

Indian Bank Reco price: Rs 130 Target price: Rs 182 Current market price: Rs 140.85 Upside (%): 29.21 Broking firm: Motilal Oswal

Steady margins with strong asset growth, rising fee income, strong recoveries, and lower provisions towards NPAs and income tax would drive Indian Bank’s earnings for the next couple of years.

The bank’s earnings is expected to grow at a CAGR of 24 per cent over FY07-09. The bank has progressively reduced its gross NPAs over the last five years to 1.9 per cent, in line with the best in the sector. It has been speeding up recovery and is containing fresh slippage.

Recoveries could bring earnings surprises for the next couple of years. The stock recommended price trades at 1.1 times FY09E book value and 4.8 times FY09E EPS.

Based on its RoE of 25 per cent, which is highest amongst state-owned banks, the stock should trade at 1.6 times FY09E book value.

India Telecom IT Services - Worth a Punt!

T service providers specialising in the telecom domain are poised to leapfrog thanks to the explosive growth in the telecom sector.

India’s telecom sector is the third largest network after China and the US. However, with just 19 people out of every 100 in the country owning a phone, there is tremendous potential for Indian telecom operators (telcos) to grow, at least for the coming few years.

The sector is set to explode with telecom operators eyeing rural penetration (the current rural tele-density is a pathetic 1.9 per cent), and waiting to introduce 3G (third generation) services in a bid to increase the dipping average realisation per user (ARPUs).

Moreover, analysts estimate the capital expenditure of Indian telecom operators to be in the region of $20 billion over the next 3-4 years.

These measures offer a host of opportunities to players who offer information technology (IT) services to telecom operators.

The companies featured below are doing precisely this. And the strategy is paying dividends. While IT stocks in general have been registering 40-60 per cent growth in net profit rates year-on-year (y-o-y), these firms have been registering anywhere between 75 and 200 per cent growth rates.

However, since a majority of these companies derive a major share of their revenues from outside India, particularly the UK, they remain exposed to the risks of rupee appreciation versus the UK Pound Sterling (4.8 per cent from March 31-June 30) and euro (5.8 per cent from March 31-June 30).

These are, however, better off than most other IT service providers who have a larger portion of their revenues coming from the US, as the rupee appreciation against the dollar has been relatively higher at eight per cent.

Tech Mahindra BT holds the key Tech Mahindra’s recent $1 billion five-year deal with British Telecom makes the stock attractive.

ENAM Securities analyst says the first year “would entail investments and transition pains (thus lower margins)” while revenues would scale up from the second year onwards.

They expect higher revenue and PAT accretion from FY09 onwards. Strategically, the analyst argues, the deal will enable the company leverage additional wins from BT and other players too.

For the FY07, the consolidated net profit, excluding exceptional and prior period items, stood at Rs 612.6 crore – an increase of 160 per cent over the previous financial year.

Its consolidated revenue grew by 136 per cent and stood at Rs 2,937 crore. Analysts expect the revenues to rise around 60 per cent in FY08 to touch Rs 4,650 crore and the earnings per share to touch Rs 65.5.

The headcount of the company was up by 88 per cent and totalled 19,749. The utilisation percentage including trainees was at 67 per cent.

The company – estimated to have a 9 per cent share in telecom vertical exports – derived 18 per cent, 73 per cent and 9 cent of its revenues from the US, Europe and rest of the world respectively, and the number of clients increased to 83 in FY07 from 62 in FY 2005-06.

The company’s top client (British Telecom) contributed 67 per cent to the revenue. The top five clients contributed 83 per cent whereas the top 10 generated 89 per cent to the revenue. The top client concentration is also perceived as a risk to the company’s fortunes.

Tech Mahindra has been expanding its services portfolio in growth areas like BPOs and remote infrastructure management.

The company also entered into a joint venture with Motorola known as CanvasM to deliver targeted solutions in the form of value-added services (VAS).

And recently, it announced a strategic alliance with Sun Microsystems to provide systems and software for internet protocol television (IPTV) services to customers in India and the Asia-Pacific markets.

GTL Networking pays GTL is a Rs 1,160 crore (consolidated) leading network services provider that has alliances with original equipment manufacturers (OEMs) like Alcatel, Nortel, Nokia, Oracle and Motorola to provide solutions to local carriers.

This helps GTL to get bulk orders. The management expects to rollout 200,000 towers over the next 2-3 years.

Around 75 per cent of the company’s business comes from India. It is now focusing on international markets and wants to increase the share to around 50 per cent.

Last October, GTL acquired Genesis Consultancy in an all-cash deal of $9 million (around Rs 40 crore) to help it expand its footprint into European markets and foray into the 3G services space.

GTL expects Rs 100 crore to be added to the revenue by Genesis in FY08. The company has earmarked Rs 1,000 crore for acquisitions and has made non-binding offers to companies with operations in the US, Europe, Middle East and Asia-Pacific regions. It has already raised Rs 682 crore through external commmercial borrowings.

Around 65 per cent of the company’s business comes from network deployment which has the lowest margins among all segments of the network services’ chain. GTL, therefore, is now concentrating on increasing its share in the network operations and maintenance and professional services business.

Around 6 per cent of the company’s revenues comes from its largest customer; 46 per cent from the top 5 customers; 56 per cent from its top 10 customers. Around 78 per cent of GTL’s revenues come from the telecom vertical. During the quarter ended March 2007, turnkey projects formed the greater part of the company’s revenue.

Its operating profit for the third quarter was Rs 55.65 crore as against Rs 36.62 crore for the corresponding period in the previous year or y-o-y growth 52 per cent.

Sasken It’s all about research Sasken Communication Technologies offers a hybrid model of services and products, and works with network OEMs, semiconductor vendors, terminal devices OEMs and operators.

For the full year ended March 2007, Sasken posted a consolidated profit after tax of Rs 44.3 crore, an increase of 93 per cent as compared to previous fiscal. The consolidated revenue of the company for the full year at Rs 477 crore, grew by 55 per cent y-o-y. The consolidated earning per share went up 73 per cent to Rs 15.75 as against Rs 9.08 in FY06.

Offshoring of research and development (R&D) work to India is expected to grow from $3.1 billion in 2005 to $6.6 billion in 2010 at a CAGR of 16 per cent. Sasken is a direct beneficiary of this global trend. Citigroup rates Sasken as a Buy with Medium Risk.

They expect Sasken’s services business to record a 42 per cent CAGR over FY06-09. The acquisition of Botnia has helped in accelerating growth. Rajiv Mody, chairman & CEO, Sasken said the company would continue to focus strongly on the product business.

“Going forward, we should see Design-Wins (phone launches) happen on the multimedia subsystem product with various customers, including a global tier-1 customer, in the first quarter.”

Analysts expect a ramp-up and a turnaround in the products business in the current financial year.

This is despite the fact that the share of the product business, which the company had been showcasing of late, has just contributed a minuscule 4.6 per cent to the total revenue of Rs 477 crore. Citigroup forecasts a 52 per cent CAGR in revenues over FY06-09 and see the business turning around from losses to a 30 per cent-plus margin in FY09.

The company has filed for more than 40 IPRs till date. Royalty revenues are expected to drive the product revenue growth in FY08. Analysts expect the company to generate around Rs 34-35 crore out of annual license fees and customisation fees in FY08 as against Rs 24.5 crore in FY06.

The company has 84 active clients. Revenue contribution from the top five customers stood at 73.6 per cent and from top 10 customers at 86.3 per cent.

Sasken’s total employee strength in March 2007 stood at 3,611. The company improved the revenue share from Europe to 43 per cent although the share of North America to the consolidated revenue of the company dropped to 29 per cent, from 35 per cent in the FY06.

India and APAC contributed 22 per cent and 6 per cent to the company’s consolidated revenue for the year. Sasken is now seeking to become a service provider to telecom operators, and is exploring the possibility of acquiring a company in this space.

Spanco Integrating businesses Spanco is a networking and systems integration player in India. From providing telecom integration services (over 90 per cent of its business), it is now extending its expertise to the Business Process Outsourcing (BPO) sector too.

The company’s revenues for FY07 increased by 197 per cent to touch Rs 403 crore (excluding Sparsh) with a 282 per cent increase in the revenues from the telecom integration business. Its standalone net profit increased by 107 per cent to Rs 34.8 crore (not comparable).

Spanco’s telecom integration division caters to the networking and networking infrastructure requirements of its target customers/segments. It assumes a turnkey responsibility in the supply of the requisite products and services under the PDIM (Plan Design Implement-Manage) model.

It recently bagged a 10-year contract to set up, operate and maintain call centres for the Indian Railways. The contract is expected to bring in revenues of Rs 800-900 crore for Spanco over this period.

Analysts expect a nearly 80 per cent jump in revenues in financial year 2007-08. BRICS Securities estimates revenues of Rs 778 crore and net profit of Rs 67.3 crore for FY08 – translating into a fully diluted earnings of Rs 28.6 per share. Emkay analysts expect the revenues for the current year to increase 81 per cent to Rs 777.2 crore.

Subex-Azure Betting on products The company ended the year registering a 78 per cent growth in net profit for the entire fiscal to touch Rs 67.57 crore.

The revenue grew by 87.9 per cent to reach Rs 340.9 crore. The product revenue grew by 96 per cent to Rs 228.76 crore. While products contributed 67 per cent of the revenue, services accounted for the balance 33 per cent.

While 37 per cent of the revenue came from Europe and West Asia, another 36 per cent was contributed by the Americas. The APAC region accounted for 27 per cent of the revenue. And just last month, the promoters of Subex increased their stake in the company.

The product line witnessed a nearly 85 per cent growth during the fourth quarter ended March 2007. With the company acquiring Toronto-based Syndesis, the guidance for FY08 has been revised.

The company has projected Rs 615 crore of product revenue (an 80 per cent jump) and Rs 155 crore of net profit. The firm is a leading player in the fraud management and revenue assurance space and is estimated to have a 25 per cent market share. The addressable market is around Rs 1,600 crore and growing at 20 per cent CAGR.

Tanla Solutions Signals growth Tanla Solutions, a telecommunications software products and services provider, registered a total income of Rs 221.84 crore as against Rs 63.12 crore in FY06, registering a growth of 252 per cent.

The company’s net profit of Rs 92.79 crore for FY07 is higher by 207 per cent when compared with the profit of Rs 30.25 crore in the previous year. Its earnings per share stood at Rs 18.56 during FY07. The consolidated results include Tanla Solutions (UK), a wholly-owned subsidiary, and Tanla Mobile, a wholly-owned subsidiary of Tanla Solutions (UK).

Tanla Solutions is a provider of integrated telecom infrastructure solutions and products. The company commenced business in the telecom products space, specialising in telecom signalling solutions.

In this area, Tanla has developed products such as SMS Centre, High Density Media Servers, Voice Mail Servers and Caller Ring Back Tone Servers.

In 2005, Tanla entered the aggregation business (now accounting for 71 per cent of its revenues) in the UK through Mobizar (now known as Tanla Mobsile), offering a range of SMS, MMS, WAP and 3G services.

Aggregators work on a revenue-sharing model. The company also provides Offshore Development Services, through which it provides technical expertise to some of its signalling solutions and aggregator customers, mainly content developers and mobile virtual network operators (MVNOs).

All the three businesses have high margins ranging between 35-90 per cent and enables Tanla to offer end-to-end telecom solutions. The company has strong business ties with Vodafone, O2, T-Mobile, Virgin, Orange and 3 (Hutchison). It plans to expand its geographic presence by entering newer markets.

Market may start buoyant

The benchmark indices, Sensex and Nifty, are expected to commence on a firm note and witness significant rally during intra-day trades, as international markets backed by firm US and Asian indices may help the sentiment remain buoyant. Among the Asian majors, Kospi Index has surged 1.34% at 1885.89 while Straits Times & Jakarta Composite Index has scaled up nearly 1% each. On the technical front, the Nifty could test in the 4450-4470 range on the upside and has supports in the 4349 - 4325 range, while the Sensex has a likely support at 14890 and may face resistance at 15007.

US indices posted significant gains on Tuesday as investors' cheered the strong consumer confidence report. As a result, the Dow Jones flared up by 46 points at 13,612, while the Nasdaq added 10 points to close at 2662.

All of the Indian ADRs traded firm on the US bourses. Wipro led the pack with gains of 5.10% while Infosys, Satyam, Rediff, Patni Computers, Tata Motors and HDFC Bank gained around 2-4% each. However, VSNL, MTNL and ICICI Bank ended with marginal gains.

Crude oil prices in the US market surged, with the Nymex light crude oil for August delivery raising by $1 to close at $72.81 a . In the commodity segment, the Comex gold for August series gained $4.02 to settle at $654.80 a troy ounce.

Market to head higher

The market is expected to scale further ground, as buying momentum is likely to continue. Also the local markets will be further boosted from strong cues from Asian indices.

The BSE Sensex rose 102.23 points to 14,964.12, an all-time closing high, on Friday, 6 July 2007, after striking a record high of 15,007.22 in intra-day trade. The S&P CNX Nifty also struck an all-time high of 4,411, and finally settled 30.90 points, or higher at 4,384.85, an all-time closing high.

Sensex has gained 313 points to 14,964.12 in the week ended 6 July 2007 while the S&P CNX Nifty rose 67 points to 4,384.85. Steady fall in inflation, easing fears of interest rate hike, steady progress of monsoon, fresh build-up of positions in derivatives markets were the factors that triggered rally on the bourses.

Asian stocks rose today, Monday 9 July 2007, with Japan's Nikkei 225 index lifted by machinery makers such as Komatsu and Fanuc after the government reported core machinery order increases more than doubled expectations, suggesting corporate capital spending is on a strong footing. Japan's Nikkei surged 0.55% at 18,240.84.

Hang Seng (up 0.51% at 22,647.50), Taiwan Weighted (up 0.97% at 9,277.56), Singapore's Straits Times (up 1.24% at 3,606.28) and South Korea's Seoul Composite (up 1.40% at 1,887.02), all edged higher.

As per provisional data, foreign institutional investors (FIIs) were net buyers of Rs 541.39-crore equities on Friday, 6 July 2007, while domestic institutional investors (DIIs) were net buyers of Rs 16.39- crore equities.

Emkay - TVS Motors

Emkay - TVS Motors

Cairn India, Wipro

Cairn India, Wipro

Weekly Strategist - July 9 2007

Weekly Strategist - July 9 2007

Indiainfoline - Intraday Stock Ideas

NIFTY (4385) Supp 4361 Res 4311

BUY CESC (390) SL 385 Target 398, 401

BUY SRF (175) SL 171 Target 182, 185

BUY Gammon (432) SL 427 Target 440, 443

SELL Rolta (455) SL 460 Target 442, 440

SELL Tata Chem (241) SL 245 Target 234, 231

Positive, Negative Breakouts

Positive Breakouts

Jindal Saw
ICICI Bank
Dr Reddys
Infosys
Ranbaxy
HCL Tech


Negative Breakouts

IDFC
Hindalco
Tata Chems
Jubilant Org
Auro Pharm
ONGC

Bigger mountains to climb!

I've learned that everyone wants to live on top of the mountain, but all the happiness and growth occurs while you're climbing it.

The bulls didn't want to postpone their celebrations and climbed Mount 15K in a hurry on Friday. Now, people are already talking about ' Sweet 16k', 'Going on 17k' and one of the reports mentions 18K this fiscal year. Even if we get there within the specified timeframe there is surely going to be more than a few hiccups along the way. In the immediate term, things appear to be bright (not weather wise though) for the bulls, buoyed by persistent inflow of liquidity. Global markets too are on a firm footing, though high crude oil prices are a cause of concern. We expect the positive undertone to continue this morning. But, given the big event risk in terms of quarterly earnings, particularly from the IT firms, the market could turn volatile and rangebound any moment.

The event to watch out for this week is undoubtedly the Infosys results on Wednesday. The market is very keenly waiting to hear from the IT bellwether on the business outlook given the sharp appreciation in the rupee this year. Any negative surprise from Infy, and the IT sector will get hit further. And, because IT has sufficient representation in the key indices, they too might be knocked back slightly. Today, the market is likely to remain sideways with a positive bias. Having said that, the IT stocks rallied on Friday and as did Infosys. If one is brave enough, one can bet on the IT sector as it has already been pegged back quite a lot in the past three months or so. But, here we are only talking about the large caps.

US stocks rose on Friday, on the back of encouraging jobs report and continuation of the M&A deals. The Standard & Poor's 500 Index had its biggest weekly gain since April.

Last week's reports, especially the jobs data, provided further evidence that a strengthening economy will sustain corporate profit growth. Oil companies, led by Exxon Mobil advanced after crude oil prices jumped above $72 a barrel.

The S&P 500 climbed 1.8% to 1530.44 last week. The Dow Jones Industrial Average added 1.5% to 13,611.68. The Nasdaq Composite index gained 2.4% to 2666.51, the biggest rise since the week ended March 23.

US markets were closed July 4 for Independence Day.

Treasury prices fell after the jobs report, raising the yield on the benchmark 10-year note to 5.18% from 5.14%. Oil prices rose, with US light crude for August delivery up $1 to $72.81 a barrel in New York. COMEX gold for August delivery rose $4.20 to $654.80 an ounce.

European shares advanced on Friday. The Dow Jones Stoxx 600 index gained 0.5% at 396.80. The French CAC-40 closed up 0.7% at 6,102.69, the UK's FTSE 100 rose 0.8% to 6,690.10 and the German DAX increased 0.8% to 8,048.32.

In the emerging markets, the Bovespa in Brazil was up 0.9% at 56,443 while the IPC index in Mexico gained 0.7% at 32,411 and the RTS index in Russia added 0.08% to 1974.

Asian markets were all up this morning. The Morgan Stanley Capital International Asia-Pacific Index added 0.5% to 156.94 as of 10.34 a.m. in Tokyo, set for a record. The index slipped 0.1% at 156.23 on July 6, after gaining 2.3% in the first four days of the month.

Japan's Nikkei 225 Stock Average advanced 0.5% to 18,239.42. Benchmarks in other markets open for trading also rose. The Hang Seng in Hong Kong was up 114 points at 22,645.

Bulls marked a historical run as it settled on an all time closing high after the benchmark Sensex breached the 15000mark in intra-day. In a Historical trading session the index closed at a new all time high of 14957.64 led by the Techies. IT bellwether Infosys was at the forefront along with Satyam Computer and Wipro. The IT index gained by over 3%, others like Auto and Capital Good index followed suit. The mining stocks also gained momentum on news of new policy. Even the Small Cap and the Mid-Cap index participated in the historical rally. However, Banking, Metal and Pharma index lost ground.

Heavyweight Infosys was the top mover as the scrip lifted the benchmark index Sensex by 41 points. Finally, the 30-share Sensex added 102 points to close at 14964. NSE-50 Nifty was up 30 points to close at 4384.

Rolta advanced by 0.5% to Rs452 after the company announced that they have acquired Orion Technology Inc. The scrip touched intra-day high of Rs470 and a low of Rs454 and recorded volumes of over 7,00,000 shares on NSE.

Wipro gained by 3% to Rs519 as its consumer care arm has acquired Singapore-based Unza. Earlier, Dabur India was to buy the company but dropped the plan. Reports also suggested that Godrej and Emami had thrown their hats in the ring for Unza. The scrip touched intra-day high of Rs521 and a low of Rs504 and recorded volumes of over 17,00,000 shares on NSE.

L&T advanced by 1.5% to Rs2364 after the company yesterday announced that they would start 3 units for railways, power and shipbuilding. The scrip touched intra-day high of Rs2388 and a low of Rs2330 and recorded volumes of over 8,00,000 shares on NSE.

MRPL surged by over 3.5% to Rs42 after the Oil Minister said the company would earn $2bn in 3 years from Mauritius exports. The scrip touched intra-day high of Rs42 and a low of Rs40 and recorded volumes of over 10,00,000 shares on NSE.

Reliance Communication gained 1.3% to Rs550 amid reports of a proposed Rs30bn expansion for its existing GSM business. The scrip touched intra-day high of Rs567 and a low of Rs545 and recorded volumes of over 6,00,000 shares on NSE.

PTC rallied by over 10% to Rs69 after the company is another stock to keep an eye on as Blackstone and Goldman Sachs may pick up 49% stake in the finance arm of the power trading firm. The scrip touched intra-day high of Rs73 and a low of Rs64 and recorded volumes of over 2,00,000 shares on NSE.

Cipla lost by 1.9% to Rs212. According to reports that Reliance Lifesciences is contemplating acquiring the pharma major. The scrip touched intra-day high of Rs219 and a low of Rs211 and recorded volumes of over 29,00,000 shares on NSE.

Mining stocks hogged the limelight on news of new mining policy. Ashapura Minechem surged by over 5% to Rs401, Sesa Goa pared its gains by 0.5% to Rs1790 and Gujarat Mineral spurred by over 2% to Rs850.

IT stocks gained momentum despite rupee strengthening against the US Dollar. Satyam Computer surged by over 5% to Rs488, Wipro gained by 3% to Rs519 and Infosys added 3% to Rs1971. Polaris, Mphasis BFL and HCL Tech were the major gainers among the Mid-Cap stocks.

Fund Activity:

FIIs were net buyers of Rs5.41bn (provisional) in the cash segment on Friday. Local institutions were net buyers at Rs163.9mn. In the F&O segment, FIIs pumped in Rs4.92bn on the same day. On Thursday, FIIs were net buyers of Rs12.75bn. Part of this may be towards the ICICI Bank issue. Mutual Funds were also net buyers of Rs1.93bn.

Major bulk Deals:

Citigroup has picked up Ahmednagar Forgings; Fidelity has bought ANG Auto while Morgan Stanley has sold it; Principal MF has purchased Balaji Films while Merrill Lynch has sold it; UBS has bought Evinix Accessories; Citigroup has sold Gayatri Projects; IL&FS has purchased 3.15mn shares of IL&FS Investment Managers from Bank of India; Deutsche Securities has picked up Tricom India while Emerging Capital has sold the stock and Nomura Funds has bought Vishal Retail.

Insider Trades:

Prithvi Information Solutions Limited: V Satish Kumar, Managing Director has purchased from open market 50000 equity shares of the company on 2nd July, 2007.

Great Offshore Limited: Vijay Sheth, Managing Director has sold in open market 300000 equity shares of the company on 29th June, 2007.

Karuturi Networks Limited: 1) Morgan Stanley & Co. International Limited a/c Morgan Stanley Mauritius Co. Ltd. 2) Morgan Stanley & Co. International Limited A/C Morgan Stanley Investment Mauritius Ltd has purchased from open market 995625 equity shares of the company on 27th June, 2007.

Lower Circuit:

Anant Raj, ION Exchange, DS Kulkarni, Surana Industries and Nagarjuna Agri.

Upper Circuit:

Ambalal Sarabhai, Emkay Share, Bag Film, Tanla, Aarti Industries, Pritish Nandy, Prime Focus, Asian Electronics, Ganesh Forgings, Classic Diamond, Shree Precoated, Nirlon, IOL Broadband, IKF Technology, Tripex Overseas, Silverline Technologies, Prism Cement, Diamond Cables and IID Forgings.

Delivery Delight (Rising Price & Rising Delivery):

ACC, Balaji Tele, Balrampur Chini, BEML, Crompton Greaves, GAIL, Grasim, Gujarat Ambuja Cements, HCL Tech, Hero Honda, HLL, India Cements, IPCL, Kesoram Inds, Ranbaxy and Satyam Comp.

Abnormal Delivery:

SRF, Dabur India, Nicolas Piramal, GAIL, NALCO, Escorts, BEL, Rolta, Wockhardt, Nagarjuna Fertilizers, Federal Bank, Polaris, Cipla and Siemens.

Major News & Announcements:

India's Inflation rate was 4.13% against expectation of 4.02%

Cairn India oil pipeline plan has been approved by ministry says ONGC

Oil Minister says MRPL to earn 2bn dollars in 3 years from Mauritius exports – Reports

India's cabinet may consider new mining policy in 15 days

Rolta acquires Orion Technology Inc
Wipro's consumer care arm has acquired Singapore-based Unza.