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Friday, January 04, 2008
FDI in Media to be increased
Issue to be discussed with the PM and FinMin before the budget
On 2 January 2008, Union Minister for Information and Broadcasting informed in an interactive session organised by the Indian Chamber of Commerce on the challenges and prospects of liberalisation in the media, that discussions are on about a further increase in foreign direct investment in the media.
Dasmunsi also informed that the issue would be discussed with the Prime Minister and the Finance Minister before the budget. He added that there was pressure from big media houses to relax the present 26% cap on foreign equity, but a sudden jump could not be made without due caution or without ensuring a level-playing field for smaller players.
Mukesh v Anil Ambani
In real life, the two Ambani brothers — Mukesh and Anil — may not be close to each other but in the roller-coaster, volatile world of the stock market which decides who is the richest, they are narrowing the gap between them rapidly. One witnessed the exciting pace between the two for the number one position in "riches" in 2007.
Mukesh became the richest Indian in India in 2007. But Anil was not very far behind. The total market cap of Mukesh’s companies — Reliance Industries, Reliance Petroleum, IPCL (which has now been merged) and Reliance Industrial Infrastructure Ltd — was Rs 1,93,980 crores, or $48.5 billion, as on December 11, 2007.
Anil’s wealth in terms of market capitalisation of his six listed companies was Rs 1,66,876 crores, or $41.7 billion, as on December 11, 2007. Since wealth here is calculated on the basis of their holdings in their companies it is interesting to see how their shares suddenly shot up almost in tandem in the middle of the year without any or little change in the fundamentals of their companies.
Stocks of the Mukesh stable went up like this: Reliance Industries scrip, which was Rs 1,284 on March 15, 2007, closed at Rs 2,818 on November 29, 2007, a growth of 120 per cent, Reliance Infrastructure from Rs 416 to Rs 1,886 in the same period, a rise of 260 per cent, and Reliance Petroleum Limited from Rs 69 to Rs 215, a rise of 213 per cent from March to November, though not a single litre of petrol was produced and the refinery is yet to come up.
Stocks of the Anil group went up as follows: Adlabs Films went from Rs 407 on March 15, 2007 to Rs 939 on November 29, a rise of 131 per cent, Reliance Capital from Rs 598 to Rs 2,278, a rise of 281 per cent, Reliance Communications from Rs 391 to Rs 665, a rise of 70 per cent, Reliance Energy from Rs 462 to Rs 1,664, a rise of 260 per cent, even though the company has not added a single megawatt of new power during the year, and RNRL from Rs 22 to Rs 153, a rise of 597 per cent on no ostensible development.
Where and how stock prices move is one of the huge mysteries of the stock market and the mystery is compounded because the way that the stocks have risen is reminiscent of the way stocks went up during 2002 and ended up in what is labelled as the Ketan Parekh scam. He had a few favourites stocks and they were even called the K-10 stocks. It was later discovered that Ketan Parekh was operating through participatory notes (PNotes) and stocks were pushed up through circular trading.
Analysts taken by surprise: Till the R stocks, as they are referred to, reached these heady heights, not a single analyst or brokerage house had given these stocks the targets that were achieved in reality. The question being asked is whether all analysts were wrong. Does research really have any value? Or is there something more to the R stocks going up?
For instance, in June, Merrill Lynch had given a target of Rs 1,807 for Reliance, a rise of eight per cent; Khandwala Securities a target price of Rs 2,120, or a rise of 27 per cent, when the price was ruling at Rs 1,674; Kotak Institution had given it a negative of 10 per cent, at Rs 1,525, when the stock price was Rs 1,698.
That all analysts can go wrong is not unheard off in these days of the subprime crisis. Not a single analyst or brokerage house, for instance, predicted such a crisis which had been making for a year. But, as some brokers say, the Ambanis are a different league altogether. If some C grade promoter’s stocks had gone up at such a scorching pace, they would have been caught for price manipulation. But in the case of the Ambanis it is very cleverly called "rerating" of stocks.
Financial institutions don’t book profits: Most of the trading in the Reliance stocks seem to have been done in the futures and options sector which is like a casino. According to brokers who track the market, with all this trading, there has been no change in the shareholding pattern of these companies. It should have been reflected in the shareholding pattern in the June and September quarters but there is no change.
What is interesting in this whole ramping up of the R shares is that the institutions have been hanging on to the scrip instead of booking profits.
Ketan Parekh scam: It is an uncanny coincidence that UTI did just this during the Ketan Parekh scam. When K10 stocks like Himachal Futuristic went up without any reason and with such exuberance, the institutions did not sell but clung on to them.
The result was that when the scam blew up, UTI was left with worthless pieces of paper of stocks like DSQ, Pentamedia, Global Tele etc.
In the case of R stocks, too, financial institutions do not seem to be booking profits and continue, according to information provided to the stock exchange, to hold the same number of shares.
Olga Tellis
Via Asian Age
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Selling your Reliance Power IPO Application ?
Current Rates in the Grey Market are Rs 7500 for every application of Rs 1 lakh.
Current Grey Market Premium is around 380
Want to sell ? You have to be in the heart of the grey market trades at Ahmedabad :-)
Tata Motors, Cement Sector
Tata Motors
Cluster: Apple Green
Recommendation: Hold
Price target: Rs792
Current market price: Rs790
December sales decline by 2%
Key points
- Tata Motors' sales for December 2007 stood at 47,678 vehicles. Total sales declined by 2.2% year on year (yoy) and grew by 1.6% month on month (mom).
- Commercial vehicle (CV) sales in the domestic market for the month grew by 6.6% to 28,661 vehicles. Light commercial vehicle (LCV) segment continued to exhibit strong growth of 19% yoy. Medium and heavy commercial vehicle (M&HCV) sales declined by 9.2% to 15,689 vehicles. However on a month-on-month (m-o-m) basis M&HCV sales grew by 8.8%.
- Passenger vehicle segment continued its weak performance and losing its market share, as no new products were launched. Further, being the last month of the year, off take to dealers was curtailed to limit year-end stock. The domestic sales declined by 12.3% to 14,316 vehicles. Passenger car sales for the month declined by 14.1%. Indica sales declined by 10% yoy to 9,497 units, while Indigo sales fell by a whopping 33.6% yoy to 1,379 vehicles. Sales of Utility vehicles declined by 10.6% yoy to 3,440 units. However, sales of Safari recorded a growth of 10% to 1,161 units mainly due to recent launch of Safari Dicor VTT.
- Export sales for the month grew by 15.7% yoy and 26% mom to 4,701 vehicles.
- Tata Motors has recently launched six new products in the M&HCV segment, which includes multi-axle trucks, heavy-duty trucks (31-49 tonne capacity), tractor-trailers and tippers. These vehicles have multiple applications and will cater to sectors like mining, construction, road works and logistics.
- The company also plans to unveil its new one-lakh car scheduled for launch by mid 2008 at the forthcoming Auto Expo.
- At the current market price of Rs790, the stock discounts its FY2009E consolidated earnings by 12.4x and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.2x. We maintain our Hold recommendation on the stock with a price target of Rs792.
SECTOR UPDATE
Cement
Strong demand buoys volumes
Traditionally, December is a good month for cement companies in terms of volume and price realisation, as construction activities gather pace post-monsoon. For the month, all major cement manufacturers barring ACC reported positive growth in their dispatches. ACC dispatches for December 2007 stood at 15.7 lakh tonne against 16.7 lakh tonne for December 2006, which is 6% lower compared with that of the corresponding period last year. The volume dip was on account of lower production in one of its facilities in the South due to maintenance shut down and rains.
Gold near all time high
Gold Prices are a dollar short of kissing the all time high record price of $873
Precious metals once again ended considerably higher today, 03 January, 2008. Gold prices rallied and crossed the $870/ounce mark during intraday trading after crude oil prices continued to hover around $100/barrel mark. Weakening of the dollar also contributed to higher gold prices.
Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.
Comex Gold for February delivery rose $9.1 (1.1%) to close at $869.1 an ounce on the New York Mercantile Exchange on Thursday, 03 January, 2008. Prices touched $872 during intraday trading. With today’s gain, gold has gained 3.7% in 2008. Last year, on 7 November, prices had touched $848/ounce. Today’s closing prices was the highest price after a record $873 that gold hit on 21 January, 1980.
Comex Silver futures for March delivery rose 21 cents (1.4%) to $15.5 an ounce. Prices touched 26 year high on 7 November, 2007, after reaching $16.275. With today’s gain, silver has gained 3.9% in 2008. The metal had climbed 15.5% in FY 2007. The metal also has gained for seven straight years.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
In the currency market today, the dollar drifted lower against most major currencies, unable to hold earlier gains on the eve of key data about the state of employment in the U.S. economy. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, edged down 0.2% to 75.835. The dollar traded near a one-month low against the euro.
In the energy market today crude oil continued to hover around $100/barrel mark. Oil reached a record $100.09 a barrel before erasing gains. It closed marginally lower after an Energy Department report showed that U.S. gasoline and diesel inventories rose as refineries increased operating rates. In FY 2007, crude prices gained $57%.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
Gold had climbed 31% in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record.
The Fed reduced federal funds rate three times in FY 2007. The current interest rate stands at 4.5%. The Fed also lowered its discount rate twice, the interest it charges on direct loans it makes to banks, and currently it stands at 4.75%. With these interest rate cuts, dollar has been tumbling down. Market anticipates that there will be more rate cut in the coming year.
At the MCX, gold prices for February delivery closed higher by Rs 96 (0.88%) at Rs 10,975 per 10 grams. Prices rose to a high of Rs 11,014 per 10 grams and fell to a low of Rs 10,831 per 10 grams during the day’s trading.
At the MCX, silver prices for March delivery closed Rs 169 (0.84%) higher at Rs 20,053/Kg. Prices opened at Rs 19,853/kg and went to a high of Rs 20,144/Kg during the day’s trading.
Gold is expected to rally to all-time highs in the first quarter in FY 2008 as higher oil prices and a weaker dollar will continue to boost demand.
Crude fails to sustain $100
Crude prices end lower as gasoline and diesel inventories rise
Crude prices crossed the $100/barrel mark once again during intraday trading today, but gave up earlier gains and closed finally lower for the day. Crude oil fell after weekly inventory report by Energy Department showed that U.S. gasoline and diesel inventories rose as refineries increased operating rates.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
Today crude-oil futures for light sweet crude for February delivery closed at $99.12/barrel (lower by $0.50/barrel or 0.5 %) on the New York Mercantile Exchange. Earlier, during the trading hours, crude oil for February delivery rose 47 cents $100.09 a barrel on the New York Mercantile Exchange, the highest since trading began in 1983. At today’s close, prices are 70% higher on a yearly basis.
As per today’s weekly inventory report, EIA reported that U.S. gasoline supplies rose by 1.9 million barrels during the week ended 28 December, 2007, while distillate supplies, which include heating oil and diesel, grew by 600,000 barrels. Inventories of heating oil, however, were surprisingly up, rising for the first time in four weeks.
EIA also reported that U.S. crude inventories fell for a seventh week, down by 4 million barrels to 289.6 million barrels in the week ended 28 December. U.S. refineries operated at 89.4% of their operable capacity last week, up from the previous week's 88.1%.
Brent crude oil for February settlement today fell 20 cents to $97.64 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.
Natural gas drops for first time in six days
Natural gas in New York fell for the first time in six days on forecasts that milder weather will curb U.S. demand to heat homes and businesses. Gas for February delivery fell 17.6 cents (2.2%) to settle at $7.674 per million British thermal units. The futures are up 25% from a year ago.
Against this backdrop, February reformulated gasoline lost 2.75 cents to $2.5414 a gallon and February heating oil fell 2.13 cents to $2.7191 a gallon.
At the MCX, crude oil for January delivery closed at Rs 3,900/barrel, higher by Rs 2 (0.05%) against previous day’s close. Natural gas for December delivery closed at Rs 305.6/mmtbu, lower by Rs1/mmtbu (0.32%).
Members of the OPEC left production targets unchanged at the 5 December meeting in Abu Dhabi. The group, which produces 40% of the world's oil, will review output at a 1 February, 2008 meeting in Vienna.
As per EIA, global oil markets will likely remain tight through 2008 and monthly average oil prices are expected to near $85 per barrel over the next year. The IEA, an adviser to 27 nations, said global demand in 2008 will rise 2.5% to 87.8 million barrels a day.
FIIs in selling mode
Outflow of Rs 244.50 crore on 2 January 2008
Foreign institutional investors (FIIs) sold shares worth net Rs 244.50 crore on Wednesday, 2 January 2008, compared to their buying of Rs 142.30 crore on Tuesday, 1 January 2008.
FII outflow of Rs 244.50 crore on 2 January 2008 was a result of gross purchases of Rs 4083.80 crore and gross sales Rs 4328.30 crore. The 30-share BSE Sensex surged 164.59 points or 0.81% to settle at record closing peak of 20,465.30 on that day.
There are a total of 1,219 FIIs registered with the Securities & Exchange Board of India (Sebi).
Thursday, January 03, 2008
Analysts Meet - Reliance Power
RELIANCE POWER LIMITED
cordially invites you to a
ANALYSTS' MEET
In connection with the Company's Initial Public Offer of Equity Shares
Day/Date: Friday, 4th January 2008 Venue: The Crystal Room, Hotel Taj Mahal
Time: 6.45 pm Service: Cocktail & Dinner
RSVP:
Venaktesh.somayaji@relianceada.com ; Cell: 9312782480
Sharad.goe@relianceada.com ; Cell : 9323835459
Girish.gangawat@adfactorspr.com ; Cell : 9892016641
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