Dead Presidents! - India Equity Research

Wednesday, January 02, 2008

Rupee weakens slightly

Ends at 39.43/44

Rupee eased on Wednesday, weighed by suspected central bank intervention and dollar purchases by oil firms, which spurred some dealers in foreign banks to square off short positions in the U.S. currency.

Rupee ended at 39.43/44 per dollar, weakening from the previous close of 39.41/42. It had gained 12.3 percent versus the dollar in 2007, to be the second-best performing Asian currency after the Philippine peso.

Nifty January 2008 futures at premium

Turnover in F&O segment increases

Nifty January 2008 futures were at 6224.70, at a premium of 45.30 points as compared to spot closing of 6179.40.

The NSE futures & options (F&O) segment turnover was Rs 74,186.47 crore, which was higher than Rs 49,163.28 crore on Tuesday, 1 January 2008.

Reliance Natural Resources (RNRL) January 2008 futures were at premium, at 198.30, compared to the spot closing of 194.85.

Reliance Energy (REL) January 2008 futures were at premium, at 2397, compared to the spot closing of 2365.90.

Jindal Steel & Power January 2008 futures were at premium, at 16,159.70, compared to the spot closing of 15,920.80.

In the cash market, the S&P CNX Nifty gained 35.05 points or 0.57% at 6179.40, a record closing high. It hit an all-time high of 6197 in late trade.

BSE Bulk Deals to Watch - Jan 2 2008

2/1/2008 507828 ANSAL HSG CN CLSA MAURITIUS LTD B 496576 397.72
2/1/2008 507828 ANSAL HSG CN CITIGROUP GLOBAL MARKETS MAURITIUS P LTD S 422300 399.65
2/1/2008 523457 BOC INDIA LT MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. S.V. S 286000 222.25
2/1/2008 526785 CREST ANIM HSBC FINANCIAL SERVICES MIDDLEEAST LIMITED S 157800 151.43
2/1/2008 523277 G V FILMS LT BNP PARIBAS ARBITAGE GDR S 2000000 12.90
2/1/2008 500214 ION EXCHANGE SWISS FINANCE CORP. MAU LTD S 184138 237.02
2/1/2008 523218 KILBURN OFFI IDBILTD S 42349 15.24
2/1/2008 513151 STI INDIA LI BSMA LIMITED S 240000 30.05

Reliance Power - discount for retail investors

Anil Ambani Group firm Reliance Power will give the retail investors a 5% price discount in its forthcoming IPO, through which the company will raise up to Rs11,700 crore, merchant bankers said.

Hindustan Constructions

Metals

Markets settle at record highs

The market propelled from lower levels in highly volatile trade to strike record high in late trade. The market had opened firm but it had immediately lost ground on profit booking. Banking stocks led rebound from lower level in late trade. Reliance Industries (RIL) came off lower level. IT pivotals were subdued. Turnover was high on BSE today amounting to little under Rs 11,000 crore. The market breadth was strong. BSE Mid-Cap and the BSE Small-Cap indices struck all-time high. Both the niche indices BSE Sensex and S&P CNX Nifty settled at all-time highs

Asian markets, which opened before Indian market, drifted lower. European markets, which opened after Indian market, were mixed.

The 30-share BSE Sensex surged 164.59 points or 0.81% to settle at record closing peak of 20,465.30. Sensex hit a record high of 20,529.48 in late trade. It hit a low of 20,077.40 in mid-morning trade. At day's low, Sensex had lost 233.31 points. Sensex oscillated in a wide range of 452.08 points in the day in volatile trade.

The broader CNX S&P Nifty was up 35.05 points or 0.57% at 6179.40, a record closing high. It struck an all time high of 6197 in late trade

The market breadth which was strong on BSE. 1974 shares advanced as compared to 934 that declined. 13 remained unchanged.

The BSE Mid-Cap index was up 1.25% to 10,058.94 while the BSE Small-Cap index was up 1.50% to 13,908.97. Both these indices outperformed the Sensex.

The BSE Mid-Cap index hit all-time high of 10,096.13 and the BSE Small-Cap index struck all-time high of 13,998.01 today.

Turnover on BSE was high today. It amounted to Rs 10,984 crore as compared to BSE was Rs 8,955.61 crore yesterday, 1 January 2008.

Majority of sectoral indices on BSE posted gains. BSE FMCG Index (up 0.93% at 2,397.10), BSE PSU index (up 1.32% to 10,773.91), BSE Health Care index (up 1.27% at 4,467.40), BSE Realty (up 2.93% to 13,419.67), BSE Oil and Gas index (up 0.83% at 13,391.12), Bankex (up 3.13% to 11,870.49), outperformed the Sensex.

BSE Power Index (up 0.23% at 4,658.31), BSE Auto index (up 0.78% at 5,672.46), BSE Metal index (up 0.50% at 20,160.85), BSE Consumer Durables index (up 0.03% to 6,899.22), BSE TecK index (down 0.32% to 3,960.64), BSE Capital Goods index (down 0.21% at 19,707.25), BSE IT index (down 0.46% to 4,451.02), underperformed the Sensex.

Among the Sensex pack, 16 advanced while the rest declined.

Indias largest private sector power utility company in terms of net profit, Reliance Energy rose 4.09% to Rs 2372.10. The stock hit all-time high of Rs 2378.70 today. The company owns 50% in Reliance Power, which it plans to list. It was the top gainer from Sensex pack

Housing Development Finance Company, the nationss largest dedicated housing finance company in terms of operating income rose 3.81% to Rs 3030. Recently, HDFC agreed to sell 7.15% stake in its life insurance joint venture - HDFC Standard Life Insurance Company - to its foreign partner, Standard Life (Mauritius Holdings), for about Rs 201 crore.

Banking shares surged on fresh buying. State Bank of India (up 1.17% to Rs 2413.20), ICICI Bank (up 3.42% to Rs 1273) advanced.

State run banking stocks, Canara Bank (up 14.03% to Rs 392.05), Allahabad Bank (up 7.89% to Rs 139.50), and Andhra Bank (up 7.20% to Rs 119.85), surged. Private sector banks Kotak Mahindra Bank (up 7.60% to Rs 1388), Axis Bank (up 5.65% to Rs 1028) and Federal Bank (up 4.59% to Rs 347.85), surged.

Indias largest private sector firm by market capitalization & oil refiner Reliance Industries rose 0.49% to Rs 2860.95. The stock recovered from days low of Rs 2818.10. 2.91 lakh shares were traded on the counter on BSE

Indias largest cigarette manufacturer in terms of sales, ITC rose 1.75% to Rs 221.40. It ht an all time high of Rs 227 in early trade. As per recent reports, ITC's subsidiary Fortune Park Hotels plans to invest around Rs 130 crore in three or four hotels in Bangalore, Coimbatore and Kolkata

Indias largest power generation company in terms of sales, National Thermal Power Corporation rose 0.23% to Rs 257.40 on high volumes of 64.52 lakh shares. A single block deal of 39.21 lakh shares was struck on the counter on BSE at Rs 252.45 per share at 10:35 IST

Maruti Suzuki India, the countrys top small car maker in terms of sales, rose 0.13% to Rs 993 after it posted 10% rise in sales to 62,515 vehicles in December 2007 over December 2006.

Indias top tractor maker in terms of sales, Mahindra & Mahindra slipped 0.56% Rs 860 on reports its vehicle sales rose a muted 1% to 15,316 units in December 2007 over December 2006.

Indias second largest bike manufacturer in terms of sales, Bajaj Auto declined 0.01% to Rs 2604 after it posted 7% decline in sales to 1,99,470 units in December 2007 over December 2006.

Indias second largest cement company in terms of sales, ACC lost 1.56% to Rs 1012.10. It was the top loser from Sensex pack.

IT pivotals edged lower. Wipro (down 1% to Rs 510.50), TCS (down 0.81% to Rs 1045.15), Satyam Computers (down 1.38% to Rs 437.50), edged lower. However, Infosys Technologies rose 0.59% to Rs 1760, off its days low of 1715.35

Reliance Natural Resources was the top traded counter on BSE with turnover of Rs 476.88 crore followed by Reliance Energy (Rs 230.70 crore), Essar Oil (Rs 346.50 crore), UCO Bank (Rs 81.15 crore) and Religare Enterprices (Rs 178.90 crore).

GV Films was the volumes topper on BSE with total volume of 4.19 crore shares followed by Reliance Natural Resources (2.51 crore shares), UCO Bank (2.33 crore shares), Centurion Bank of Punjab (2.27 crore shares), and IKF Technologies (2.26 crore shares), in that order.

Gujarat Ambuja Exports was up 0.35% Rs 100. The company today said it has bagged orders worth Rs 200 crore for exporting groundnut oil to European countries.

PTC India rose 7.19% to Rs 169.95 after it divested a 40% stake in its wholly owned subsidiary PTC India Financial Services, to Goldman Sachs and Macquarie India for Rs 150 crore.

Parsvnath Developers was down 0.05% Rs 475.80 after the company said it has received a letter of intent from Director, Town and Country Planning, Haryana to develop an information technology park project in the state.

Godrej Industries was down 1.33% Rs 418. The company said on Tuesday, 1 January 2008, it had signed an agreement to transfer its medical diagnostics division to ICICI Venture-backed RFCL for an undisclosed amount.

Pyramid Saimira Theatre rose 1.02% to Rs 504.80 on reports that the company is set to acquire a multiplex chain in the United Kingdom that runs 60 screens across the country.

Wockhardt rose 2.48% Rs 430 after the company said late on Tuesday, 1 January 2008, it had launched its cetirizine tablets in the US, following approval from the US Food and Drug Administration.

Indiabulls Financial Services surged 20% Rs 859.10 on reports of Indiabulls group entering the gaming business by picking up a 10% stake in High Street Cruises & Entertainment.

City Union Bank surged 10% to Rs 468.60 after the bank fixed 30 January 2008 as the record date for the purpose of stock split of equity share of Rs 10 into 10 equity shares of Rs 1 each.

European markets were trading mixed. France's CAC 40 index (down 0.23% to 5,614.80) and UK's FTSE 100 index (down 0.31% to 6,456.90) slipped. However Germanys DAX (up 0.36% to 8,067.32) slipped.

Asian markets settled lower. Hong Kong's Hang Seng (down 0.91% at 27,560.52), Taiwan's Taiwan Weighted (down 2.15% at 8,323.51), Singapore's Straits Times (down 0.74% at 3,456.58) and South Korea's Kospi (down 2.30% at 1,853.10), edged lower. Shanghai Composite rose 0.2% at 5,272.81

US market was closed on Tuesday, 1 January 2008, for the New Year holiday.

Crude oil rose above $96 a barrel today, 2 January 2008 as a storm dropped snow in the Northeast and on speculation U.S. stockpiles fell for a seventh week. Crude oil for February delivery rose as much as 62 c

PVR - no tieup with Starbucks

Pvr Limited has informed the Exchange vide its letter dated December 31, 2007 that "This has reference to the news item published today in the Business Standard about PVR Starbucks tie-up. In this connection we wish to clarify that the PVR has not entered into any agreement or tie up with Starbucks for retailing their products whereas PVR is only procuring one of Starbucks pre-packaged products i.e. flavored cold coffee from one of its importer/ distributor based in Mumbai for selling at our cinemas in Mumbai and Delhi. The journalist/ reporter who has met our Mr. Ranjan Singh has wrongly conceived our procurement and selling of Starbucks' products at our cinemas as our tie-up with Starbucks. We further wish to clarify that the products are not being imported from US as reported in the newspaper but are procured from a source based in India".

Tech Reliance - the new kid on the block

The Anil Ambani group has already readied a war chest for the new initiative.

The Reliance Anil Dhirubhai Ambani group (ADAG) is foraying into the information technology consulting and services segment, for which it has formed a subsidiary, Tech Reliance.

The group is also looking to poach management- and senior-level executives from major IT firms in the country.

The group is planning to bring in all its IT departments under the subsidiary. Tech Reliance, apart from providing services to the group companies, will also provide services to diverse industry sectors in the country, a source close to the development said.

The planned services would include consultancy, business process outsourcing and software development, among others.

The company will initially look at providing services to industry sectors such as telecommunications, financial services, utilities, entertainment and healthcare.

The company intends to take on existing IT biggies, including Infosys Technologies, Tata Consultancy Services, Wipro, IBM and Accenture, by providing similar services in the country.

Anil Ambani has already hand-picked a core team of 15 members, including employees working within the group, to head the initiative.

The group is also looking at roping in senior-level executives from the existing IT firms in the company, the source said.

When contacted, a Reliance ADAG spokesperson declined to comment, but added, “The group continuously explores new avenues for growth and enhancing value for our stakeholders”.

Reliance ADAG has also readied a war chest for its IT foray, which, sources say, is “considerably large”. However, the amount of investments planned by the group could not be ascertained.

The company is looking at the IT foray, believing this will help the group enhance investor value. Despite its late entry into the sector, Tech Reliance is aiming at becoming one of the top-10 IT companies within the ensuing two-year period.

The IT arm would utilise the group’s existing domestic and international presence to win contracts and clients.

Reliance ADAG has a presence in the domestic enterprise and small and medium enterprise market through its flagship company, Reliance Communications.

The group also has an in-house technology innovation division that was engaged in R&D, and testing of new technologies.

NEW ENTRANT

# The group will bring all its IT departments under the subsidiary
# Tech Reliance will be providing services to the group companies and will also cater to diverse industry sectors
# The company intends to take on Infosys Technologies, Tata Consultancy Services, Wipro, IBM and Accenture
# A 15-member team is busy in doing the spadework for the new entity

Post Market Commentary

The market made a huge turnaround from the lower levels to touch a record high in the final trading hours of the session. The market opened on a firm note but lost the momentum all of a sudden and pared all its initial gains as the profit booking across the counters prevailed. The cues from the global markets are not in favor, which led the investors to take calculated steps during the session. But buying at the lower levels led the market to recover and closed with handsome gains. Most buying is seen from the realty and bankex baskets. The BSE Sensex closed higher by 164.59 points at 20,465.30 and NSE Nifty grew by 35.05 points to close at 6,179.40. The Sensex touched an intraday high of 20,529.48 and low of 20,077.40. Both Small Caps and Mid Caps indices closed up by 123.91 points and 205.90 points at 10,058.94 and 13,908.97 respectively.

BSE Bankex index grew by 360.18 points to close at 11,870.49. Scrips that gained are Canara Bank (14.66%), Kotak Bank (8.17%), Oriental Bank (7.16%), PNB (5.32%), AXIX Bank (6.26%) and Union Bank (5.87%).

BSE Realty index surged 381.78 points to close at 13,419.67. Scrips that jumped are Anant Raj (9.13%), Unitech (5.87%), Mahindra Life (4.69%), Indbull Real (3.14%) and Akruti City (2.75%).

BSE Oil & Gas index grew by 110.24 points to close at 13,391.12 as RNRL (7.04%), HPCL (2.13%), ONGC (1.59%), Essar Oil (1.27%) and RPL (0.82%) closed in green.

BSE Metal index increased by 99.36 points to close at 20,160.85. Scrips that grew are Bhushan Steel (6.27%), Jindal Saw (4.24%), Jindal Steel (4.11%), Nalco (2.82%) and Jindal Stainless (1.12%).

BSE Power index closed with marginal gains of 10.65 points at 4,658.31 as CESC Ltd (4.07%), Reliance Energy (3.80%), GVK Power (0.33%), Suzlon Energy (0.31%) closed higher.

BSE health Care index grew by 55.86 points at 4,467.40. Scrips that gained are Matrix Labs (7.54%), Wockhardt (3.55%), Dr Reddy''s Lab (3.55%), Cipla (3.43%) and Biocon (2.89%).

Market stages gains on late buying

After slipping over 224 points in early trades, the Sensex staged a recovery in afternoon on hectic buying in frontline and banking stocks. The bulls were back in action after closing flat for last couple of sessions as the market registered sharp gains on the back of all-round buying support. Taking a cue from positive Asian indices the Sensex resumed 92 points above its previous close of 20,301. However, profit bookings in the Sensex heavyweights, IT and capital goods stocks dragged the Sensex to the day's low of 20,077. The market soon overcame the early hitch on positive opening in most of the European markets and made steady progress before a strong bout of buying lifted the index past the 20,500 level to touch the intra-day high of 20,529. The Sensex finally closed with gains of 165 points at 20,465, while the Nifty rose 35 points to close at 6,179.

The market breadth was positive with gainers outpacing the losers in the ratio of 2.18:1. Of the 2,948 stocks traded on the Bombay Stock Exchange (BSE), 2,010 stocks advanced, 919 stocks declined and 19 stocks ended unchanged. All the sectoral indices barring few ended in the positive territory. The BSE Bankex index was the major gainer and soared 3.23% followed by the Realty (up 2.97%), the BSE PSU index (up 1.25%) and the BSE HC index (up 1.14%).

Among the index heavyweights, HDFC was the star performer and surged 4.76% at Rs3,058. Tata Motors spurted 4.08% at Rs794, Reliance Energy scaled up 3.80% at Rs2,366, Cipla soared 3.43% at Rs219, ICICI Bank advanced 2.88% at Rs1,266, ITC moved up by 1.63% at Rs221 and ONGC added 1.59% at Rs1,269. Ranbaxy, SBI and DLF gained over 1% each. However, Satyam Computer slipped 1.59% at Rs437, BHEL lost 1.33% at Rs2,550, HLL fell 1.31% at Rs215 and Reliance Communication dipped 1.06% at Rs733.

Banking stocks registered significant gains. Canara Bank surged 14.66% at Rs394, Kotak Bank soared 8.17% at Rs1,395, Allahabad Bank firmed up by 8% at Rs140, Andhra Bank added 7.33% at Rs120 and Oriental Bank surged 7.16% at Rs305. Karnataka Bank, Federal Bank, Axis Bank, Union Bank and Punjab National Bank gained over 5-6% each.

Over 4.19 crore GV Films shares changed hands on the BSE followed by RNRL (2.51 crore shares), UCO Bank (2.33 crore shares), IKF Technology (2.26 crore shares) and Ispat Industries (1.96 crore shares).

RNRL was the most actively traded counter on the BSE and registered a turnover of Rs476 crore followed by Reliance Energy (Rs230 crore), Essar Oil (Rs194 crore), UCO Bank (Rs190 crore) and Relegare (Rs178 crore)

Market strikes record high in choppy trade

Short selling for Institutional investors from Feb 1 2008

Securities and Exchange Board of India (Sebi) today said it would allow institutional investors to start short selling, which was banned way back in 2001 in the aftermath of the Ketan Parekh scam, from February 1.

Reserve Bank of India (RBI) has given its nod to FIIs for short selling, and now Sebi will allow it for all institutional investors from February 1, Sebi chairman M Damodaran told reporters on the sidelines of a conference on corporate governance here.

It would be for all institutional investors - FIIs and domestic institutions like mutual funds, Damodaran said.

Damodaran's comments came a day after the Reserve Bank allowed foreign institutional investors and their sub-accounts to short sell shares.

Retailers are already allowed to short sell - selling shares they do not own and cover the trade at a later date.

Small is beautiful but many is scary!

Caution is the eldest child of wisdom

When many small caps hit upper circuit, the situation could turn scary soon. The markets may have ended flat but deep inside, investors enjoyed as the number of stocks hitting the upper circuit filter stood at 1,146. On Monday, it was even higher at 1,223. No prizes for guessing that most of the circuit stocks were from the T-group.

The outlook for today is again a narrow range for the main indices. With US markets closed and Asian markets nothing much to write about, the action will continue more on the side counters. Making gains on the small counters is enjoyable as long as it hits the upper circuit. Those dealing in such stocks will well remember that the reverse could also happen. At lower circuits there is no exit mode. So allocate only a small part of your asset to high risk counters.

Select banking stocks are being accumulated. Action is also picking up in RPL, RNRL. Reliance Energy is a counter which could see action ahead of Reliance Power IPO.

Most auto numbers will be released today and depending on the numbers expect some action. On Tuesday, TVS Motors announced December two-wheeler sales figures which declined 5.4% yoy to 97,576 units.

RBI has permitted SEBI-registered FIIs and sub-accounts of FIIs to short-sell, lend and borrow equity shares of Indian companies. SEBI has proposed that an insider should surrender short-term profits made on insider trades to the company.

Expect action in IDBI Bank, CHD Develop and Dollex Industries today. Satra Properties, Kopran and Vishal Exports are other counters which could see action.

HCL Technologies could gain as it has won a Rs1bn contract from RBI to set-up two large data centres in Maharashtra and for completely overhauling the latter’s IT infrastructure.

UCO Bank is expected to see heightened activity as it plans to raise Rs4.5bn from the proposed FPO. Reports also mention a possible merger with another bank.

BHEL and NPC are to enter inyto a JV for manufacturing nuclear reactors, according to reports.

Reliance Power IPO has goty a four-star rating from Crisil and ICRA.

Parvnath Developers is closey to tying up with JW Marriott, Starwood, Intercontinental and ITC for several hotels it is planning to build, according to a report.

PTC has raised Rs1.56bn by selling 40% in the financial arm, PTC Financial Services (PFS), to financial investors.

Glenmark Pharma is to transfer its API and generic business to new subsidiary, Glenmark Generics Ltd, for a consideration of Rs6.98bn, according to reports.

What the FIIs are doing

FIIs were net sellers of Rs4.61bn (provisional) in the cash segment on Tuesday while the local institutions pumped in Rs3.06bn.

In the F&O segment, foreign funds were net sellers of Rs685mn.

Bulk deals:

Among the major bulk deals on Tuesday, Reliance Capital Partners offloaded over 19 lac shares of Assam Company at an average price of Rs57. Merrill Lynch sold 3 lac shares of Vivimed Labs at an average price of Rs150. While, Citigroup picked up over 2.20 lac shares of Rajesh Exports around Rs894.

News Snippets:

FM hints at moderation in tax rates in the 2008-09 Budget. (BS)
Steel majors hike prices by up to Rs1,500 per ton. (BL)
Consumer Durable companies planning to hike prices of branded ACs and refrigerators by 10-12% in first quarter of 2008. (FE)
Exports grow 26.8% in November 2007 to US$12.4bn. (ET)
Government is planning corporatisation of cargo operations at non-metro airports. (ET)

Bhushan Steel to expand steel manufacturing capacity to 7mtpa over the next five years.

Godrej Consumer (GCPL) to raise Rs4bn via rights issue for its expansion plans and acquisitions.

Wockhardt has received US FDA approval to sell generic copies of Pfizer’s anti-allergy drug, Zyrtec, in the US.

GMR Infrastructure has set-up a subsidiary in Mauritius for routing equity investments in overseas ventures.

The consortium led by LN Mittal and HPCL is weighing the option of housing its US$6bn greenfield refinery-cum-petrochemical project in a SEZ, says a report.

Brigade Hospitality Services planning to invest Rs10bn over the next three years in six hospitality projects.

ITC to increase focus on health and wellness oriented products.

HPCL and Total JV have commissioned Rs3.33bn underground cavern facility to store 60,000 MT of LPG in Vishakhapatnam.

TVS Motors to roll-out ‘Flame’ across five cities in January, according to a report.

Godrej Industries enters into an agreement to transfer its medical diagnostics division to ICICI Venture-backed RCFL Ltd.

Venus Remedies gets European Good Manufacturing Practice certification for two of its plants.

Ramsarup Industries increases prices of steel wires by Rs1,000-2,500 per ton.

South Asian Petrochem (SAPL) has decided to set-up Rs6bn polyester fibre manufacturing unit in Haldia, West Bengal.

Bhagwati Banquets to raise Rs2bn through issue of shares in domestic or international markets.