US markets have a free fall

US stocks fell sharply on Friday - the third weekly decline- on warning by American Express of mounting credit-card defaults and a slowdown in consumer spending.

While the Dow declined 247 points (1.92%) to 12,606, the Nasdaq Composite dropped 48 points (1.95%) to 2,440.

Indian ADRs, too, fell sharply on Friday. Infosys plunged 6% to $40.14. Satyam and Wipro were down more than 5% each at $23.50 and $13.31, respectively. Tata Motors, HDFC Bank and ICICI also declined.

FIIs in selling mode

Outflow of Rs 630.80 crore on 10 January 2008

Foreign institutional investors (FIIs) sold shares worth net Rs 630.80 crore on Thursday, 10 January 2008, compared to their buying of Rs 274.60 crore on Wednesday, 9 January 2008.

FII outflow of Rs 630.80 crore on 10 January 2008 was a result of gross purchases of Rs 4334.20 crore and gross sales Rs 4965 crore. The 30-share BSE Sensex lost 287.70 points or 1.38% at 20582.08 on that day.

FII inflow in January 2008 totaled Rs 2545.90 crore (till 10 January 2008).

There are a total of 1,248 FIIs registered with the Securities & Exchange Board of India (Sebi).

India tops Asia PE sweepstake in 2007

For the first time, India has topped the Asian Private Equity chart in terms of deal value. India saw PE inflows to the tune of US $9.9bn from 290 deals in 2007, says the the Centre for Asia Private Equity Research (CAPER). China is second in the list with total PE amount of US $9.5bn, followed by Taiwan at US $5.8bn.

In Asia (including Japan), India has been fourth in investment volume for the 2004-2006 period. Incidentally, Japan which has been No.1 since 2003 except for last year when Australia topped the charts, dropped to sixth place with PE deals worth US $3.2bn, according to the CAPER data.

In 2007, the Asian private equity industry saw a rising number of Asia-based limited partners, says the CAPER. An additional US$36.4bn of fresh capital came into the market, but the deal value declined by 21% to US$42.2bn, it adds.

"The industry also witnessed a new high in divestment activities, with US$17.3bn of realised capital being returned to investors' coffers during the year," according to the regional PE research tracker.

Institutional Investors

• 292 institutional investors were known to have made allocations
• corporate investors dominated, accounting for 20% of the known allocations, followed by government agencies at 11%

Funds

• US$36.4bn of fresh capital was recorded during 2007, an increase of 28.3% compared to that for 2006
• venture capital funds recorded the biggest growth at US$7.1bn, an impressive 64.7% surge compared to US$4.3bn for 2006
• buyout funds accounted for US$15.1bn, while funds for growth/expansion situations amounted to US$12.3bn
• China led in recording the largest pool of fresh capital at US$6.9bn, followed by India with US$5.3bn of fresh capital

Investments

• US$42.2bn in aggregate deal value recorded, a decline of 21%
• average deal size has declined by 32.4%, to US$61.1 million
• for the first time since 2005, companies in growth/expansion stage attracted the lion's share of private equity capital, accounting for 50% of the US$42.2bn
• commitments to buyouts slipped to US$20.1bn, a far cry from the US$37.4bn for 2006
• India led in recording the largest aggregate deal value, at US$9.9bn, a fraction ahead of the US$9.5bn garnered by China

Divestments

• 380 divestment processes known to have been initiated, double that for 2006
• US$17.3bn of realised capital recorded
• Medium IRRs for realised capital surged to 67%, compared to 51% for 2006
• South Korea led in divestment performance, where investors were able to realise US$4.8bn, representing 27.7% of the returned capital.

Weekly News - DoT issues LoIs to 9 players

The Department of Telecommunications (DoT) issued Letters of Intent (LoIs) to nine eligible applicants who had applied before Sept. 25, 2007. Four companies - Unitech, Datacom (Videocon Group), Shipping Stop Dot Com (BPL Group) and Shyam Telelink - received LoIs for pan-India mobile operations. Swan Communications got LoIs for 13 circles and S Tel for 6 circles. At the same time, Parsvnath, Cheetah, Allianz Infra and HFCL failed to get any LoIs. The proposals of Indiabulls and ByCell were put on hold due to lack of statutory clearances. Moreover, Idea received LoIs for 9 new circles, Tata Teleservices for 3 new circles and Spice Communications for 4 new circles.

Around eight of these companies paid the required licence fees and bank guarantees. They also deposited financial and performance guarantees. They will now queue up for a newly introduced licence - the Wireless Operating Licence - which will be granted on a first-come, first-served basis, subject to availability of spectrum. The DoT also cleared application from Idea, Vodafone Essar and Aircel for 2G spectrum in circles where they currently hold licences. Idea holds licences in two circles, Vodafone in six and Aircel in 13 circles. In another significant development, the DoT also cleared Tata Teleservices' application for GSM spectrum. The applications of existing GSM operators such as Bharti for additional spectrum, which have been pending for close to two years, have also been cleared.

Once the spectrum is vacated by the defence forces, the demands of existing GSM operators for additional spectrum, for further expansion in the circles where they already operate will be considered first. Vodafone, Idea and Aircel, who already hold licenses come next in queue. Next in line will be dual technology licence holders such as RCOM, Tatas, HFCL and Shyam, who will be given radio frequencies to launch GSM services. All new entrants who received LoIs on Thursday to offer telecom services come last.

Tata Motors, Infosys

Tata Motors unleashes people's car

After several months of drama, controversy over the plant site and skepticism from industry rivals, Tata Motors finally presented the one-lakh 'people's car' at the Auto Expo in New Delhi. And, contrary to popular perception, Ratan Tata, Chairman of Tata Motors said the company would keep its promise, and would price the car - named the 'Nano' - at Rs1 lakh only at the dealer level. There would be extra costs in terms of local levies, taxes, insurance, transportation etc. Tata reiterated that the Nano would meet all international safety and emission standards. "The car will meet Bharat Stage III and Euro 4 emission standards," Tata said while launching one of the most awaited launches in the global auto industry.

People's Car brings the comfort and safety of a car within the reach of thousands of families, Tata Motors said. It is 8% smaller than Maruti 800, but 21% more spacious from inside. In terms of fuel efficiency, the Nano would cover over 20 kilometers per litre of petrol. There would also be a diesel version of the Nano sometime further down the line. The Nano would house a 624 cc engine and would pump out 33 horsepower. Tata also said the Nano would be initially available in variants - standard and two luxury models, and would be able to seat 4-5 people. Production will start in the second half of the year and deliveries will begin around the festival season, which generally starts in September-October.

The initial target production volume would be 250,000 cars per annum on two shifts, expandable to 350,000 per annum on three shifts. Tata has earlier talked about a one million production target by 2010. A similar indication has reportedly been given to component suppliers during price negotiations. Tata pointed out that while the Rs1 lakh price tag was given by the media, he decided to take on the challenge. But, he also hinted that inflation could make it difficult to maintain the price tag. "My greatest fear is inflation. With steel and tyre prices going up we can’t hold the price which we have held emotionally," he said.

Infosys beats street on tax reversal

Infosys Technologies has posted a better than expected sequential bottomline growth for the quarter ended December 31, 2007 while the topline has disappointed a bit vis-a-vis market expectations. The net profit for the October-December quarter of the current fiscal year stood at Rs12.31bn versus Rs11bn in the same quarter a year earlier. This translates into a sequential growth of nearly 12%. The net sales for the reporting quarter were Rs42.71bn as against Rs41.06bn in the third quarter of last year. This represents a 4% growth over the last quarter.

The improvement in the net profit growth was partly due to a tax reversal of Rs500mn. EPS for the October-December quarter stood at Rs21.54 as against Rs19.26 in the second quarter. Excluding the tax reversal, EPS for Q3 FY08 would have been Rs20.66. For the third quarter, Infosys had forecast revenue of Rs42.38-42.58bn and EPS of Rs20.11. So, the company has managed to do a little better than the guidance. Other income was flat over the previous quarter, but operating margin increased, from 31.27% in Q2 FY08 to 32.59%. Attrition was down to 13.7% from 14.2% in Q2 FY08. Infosys saw forex loss of Rs 140m as against a gain of Rs 30mn in Q2 FY08.

Infosys sees its Q4 FY08 revenue growing at about 5% QoQ to Rs44.77-45bn. Earnings Per Share (EPS) for the fourth quarter is expected at Rs21.38. For the full-year, Infosys now sees revenue of Rs166.27-166.51bn. FY08 EPS is pegged at Rs81.07. There was a gross addition of 11,683 employees and net addition of 8,100 employees. Total employees at the end of December 2007 stood at 88,601 compared to 80,501 as at September 2007 and 69,432 at the end of December 2006. Infosys and its subsidiaries added 47 new customers during the quarter.

In dollar terms, Q3 revenue missed analysts' expectations due to lower than expected volume growth. EBITDA margins at 32.6% surprised on the higher side primarily due on account of lower sales & marketing expenses. Infosys' hiring plans are strong at ~8100 employees (net) added in the third quarter. For the year, the hiring target is up by ~1000 employees. BFSI revenues grew ~7% QoQ. Also, Infosys won 5 new deals for its Finacle product, which is a positive given the mounting worries about the health of the industry.

Weekly Newsletter

After a fairly volatile week, the bulls would be hoping for some stability next week. However, any fresh weakness in global markets, especially in the US, could put paid to the hope of a resurgence in sentiment. One will also have to keep an eye on the foreign fund flows, which have been quite erratic of late. Retail investors, who had been giving good support to the market in the absence of FII inflows could resort to some more selling to invest in the Reliance Power IPO. In that case, one should be ready for some more pain, particularly in the side counters that had shot through the roof in the recent rally. Apart from the results the two big events will be the month-end policy meetings of the Federal Reserve and the RBI. While the Fed has clearly indicated that it is ready to take substantial steps to avoid a recession in the US, the RBI still seems to be reluctant in cutting rates. One has to see if Governor YV Reddy obliges the Finance Minister, bankers and the market. With the key indices near all-time highs, there could be some softening in the near term, though the medium to long-term the market still looks strong.

India 2008

India 2008

Reliance Power IPO Analysis

Reliance Power (RPower), part of the Reliance Anil Dhirubhai Ambani Group, has embarked on setting up numerous power-generation plants. Reliance Energy (REL) is one of the promoters with a direct stake of 45% in the post-issue equity capital along with closely-held promoter group company AAA Projects, also with an equal 45% stake in RPower.

With currently no power project in operation, RPower is developing 13 power-generation projects with generation capacity of 28,200 MW. These 13 projects are to be executed over the next eight years. All power projects, except one (at Dadri in UP) are to be executed through various subsidiaries of the company and are currently under various stages of development.

The project portfolio also includes two of the first three Ultra Mega Power Projects (UMPP) finalised so far in the country: the pithead Sasan UMPP in Madhya Pradesh and import-coal-based Krishnapatnam UMPP in Andhra Pradesh.

RPower has identified six projects. Of these, Rosa Phase I (600 MW), Rosa Phase II (600 MW), ButiBori (300 MW), Shahapur TPS (1,200 MW), Sasan UMPP (3,960 MW) are coal fired. The 400-MW Urthing Sobla is a hydroelectric power project in Uttarakhand to be executed in the first phase. The aggregate generation capacity of all these projects is 7,060 MW. The seven other projects in the current project portfolio are the 7,480-MW gas-fired project at Dadri, the 2,800-MW Shahapur Gas project, the super-critical-based coal-fired 3,960-MW MP Power and three other hydroelectric projects: Siyom (1,000 MW), Tato II (700 MW), and Kalai II (1200 MW).

Reliance Natural Resources, a group company, is to supply imported coal to fire the Krishnapatnam UMPP and Shahapur coal-based power plant and gas to the Dadri and Shahapur gas power plants. Moreover, RPower, RNRL and North American Coal Corporation (NACC) have entered into a three-way MOU for coal mining in India. RNRL will be the mining operator and NACC will provide technical assistance including evaluation of geological data, mine planning and design, supervision of mining operations and training of personnel of RNRL and RPower with best mining practices. However, the company is yet to sign definitive contracts with all these collaborators.

The proceeds of the issue will be used to capitalise the subsidiaries that will execute the six identified projects.

Strengths

The Indian power sector has robust growth prospects with a large demand and supply deficit. With various proactive reforms in the power sector encouraging private-sector participation in all the three core segments of generation, transmission and distribution, players such as RPower, who will be the face of the group for power generation, will be able to capitalise on strong growth opportunities in the country.

Project portfolio and its customers are well diversified. The locations of all the 13 projects are either near the load centre or fuel source. Fuel required is also diversified. Seven are coal-based projects. Of these, two at Shahapur and Krishnapatnam will depend on imported coal, and two Sasan and MP Power are pithead projects. Their capacity aggregates 14,620 MW. Of the remaining six, two are gas based (aggregate capacity 1,0280 MW) and four are hydroelectric projects (aggregate capacity 3,300 MW), with three in Arunachal Pradesh and one in Uttarakahand. The potential customer base is also diversified with more than 25 procurers across state electricity boards (SEBs), state distribution companies, and private distribution licencees spread predominantly in power deficit northern and western parts of India.

The 300-MW Butibori project is a captive power project and is likely to get greater per unit realisation. With industrial tariff normally higher even if the company supplies power at a discount to the current industrial tariff, the margin will be greater. Further, the company intends to tie up only for 51% of the capacity of the unit with group captive players. The balance capacity could also act as a merchant power plant increasing per unit realisation.

Three out of the 13 projects employ efficient super critical technology. This three super-critical power projects account for about 11,920 MW t of the aggregate capacity addition of 28,200 MW. Moreover, implementation of the cost-efficient super-critical technology will also fetch carbon credits.

Weaknesses

Has no power project in operation and its first power generation unit, the Phase I of the 600-MW Rosa Power project, will go on stream only in December 2009. Unless there is any inorganic expansion, there will not be any operating revenue or cash flow from the core business of power generation.

Financial closure has been completed for only one project so far. Similarly, critical milestones such as power-purchasing agreement (PPA) for non-merchant power plants or finalising the engineering, procurement and constructirion (EPC) contractors or equipment suppliers are year to be executed. Except Rosa I and II ,core equipment suppliers or EPC players are yet to be finalised. Likewise, the PPA is not in place for most of the projects including Butibori, Rosa II, and Shahapur among the identified projects. Not crossing critical milestones is a major concern, particularly in view of the capacity constraint in power generation equipment resulting in long delivery schedules globally. Similar difficulties are likely in civil construction and for the balance of equipment, too, due to limited number of third-party contractors with huge backlog of orders. All these are expected to pose strong challenge in execution.

Coal for the Shahapur thermal power station (TPS) and Krishnapatnam UMPP and gas for the Shahapur and Dadri projects are to be procured through RNRL. But there is no definitive fuel supply agreement with RNRL for the coal and gas projects. Moreover, RNRL is in litigation on the gas reserves of Reliance Industries. This could impact the availability or the price of the fuel for the two gas-based projects of the company. Further, RNRL does not have any rights to coal resource either overseas or here right now. This is a cause of concern. Besides, the ministry of cola is yet to allocate coal for the Rosa II and Butibori projects.

Profitability largely depends on ability to maintain the actual operating cost within the budgeted limits, particularly for projects won through competitive bidding. The PPA for competitively bid projects based on imported coal provides for escalation linked to global coal prices. But the pithead power projects do not have this cushion. Any escalation in the mining and processing cost will not be insulated by the competitive tariff.

The current promoters, REL and AAA Project, have subscribed to the equity capital at par (Rs 10). They were allotted approximately 999.75 million shares each of face value of Rs 10 on 13 June 20’06. Subsequently, both REL and AAA Projects, were allotted 1,000 million shares of Rs 10 fully paid in the ratio of 1:1 when Reliance Public Power Utility (RPPUL) was merged with RPower from Sep 2007 by the order of the High Court of Mumbai. However. The current IPO is proposed at a premium based on the expected cash flows from the portfolio of projects to be executed.

Valuation

Ahead of the IPO, all the listed stocks in the power generation sector have been re-rated based on the expected price of RPower. The offer price band stands at Rs 405 to Rs 450. The discount of Rs 20 for retail investors and part payment of the issue price (Rs 115 on application and balance on call) is a sweetener. With no financial track record and no operational income expected to be generated till December 2009, when the first unit of Rosa I is expected to go on stream, the RPower scrip could end up with high volatility on news flow on the implementation of its various projects and winning of new projects.. At higher price band, RPower will have a market capitalisation of Rs 101700 crore compared with NTPC's current market capitalisation of Rs 221630 crore. While RPower has plans to implement 28,200-MW capacity with no assured returns in many projects and little experience in large project execution, NTPC already has 27,904-MW capacity with plans to set up additional 22,100 MW. Most of NTPC’s projects enjoy assured returns and it has one of the best track records of power-project execution. In the long run, RPower has many execution risks to contend with. But in the short term, the market seems willing to ignore all that.

Q3 results to dictate trend

Third quarter December 2007 earnings will guide the market in the coming week. Some of the top brokerages expect slowdown in aggregate earnings growth of 30-Sensex firms in Q3 December 2007. Earnings surprise holds key.

The 30-share BSE Sensex gained 140.56 points or 0.67% to 20,827.45 in the week ended Friday, 11 January 2008. However, the S&P CNX Nifty declined 74.20 points or 1.18% to 6,200.10 in the week.

With the beginning of the calendar year 2008, foreign institutional investors (FIIs) are expected to make fresh fund allocations. FIIs pumped in Rs 71,486.50 crore or $17.23 billion in Indian equities in calendar year 2007.

FII inflow in calendar year 2008 amounted to Rs 3176.70 crore (till 10 January 2008). Mutual funds bought shares worth a net Rs 1473 crore in the first few days of the New Year, till 10 January 2008.

There might be some liquidity drain from the seconday market as action might shift to primary market as the mega initial public offer (IPO ) of Reliance Power opens for subscription on 15 January 2008. The IPO ends on 18 January 2008. There are few other large public offers in the pipeline in the coming months.

Among the frontline companies, State Bank of India, Ranbaxy Laboratories, Housing Development Finance Corporation, ITC and Wipro will announce their December 2007 quarterly results in the coming week.

Infrastructure Development Finance Company, EMCO, KLG Systel, Monnet Ispat, Omnitech Infosolutions, Amtek India, Jubilant Organosys, Allahabad Bank, Petronet LNG, Chambal Fertilizers & Chemicals and Idea Cellular among others will also declare their December 2007 quarterly results next week.

Mid-Cap, Small-Cap indices slump

The two key indices, BSE Sensex and S&P CNX Nifty witnessed a divergent trend last week. While Sensex rose, Nifty declined. Both the niche indices struck all-time highs in the week. Sensex hit all-time high above 21,000. Small-cap and mid-cap indices underwent a major correction ever since they hit all-time highs on 8 January 2008. Volatility was high throughout the week.

The 30-share BSE Sensex gained 140.56 points or 0.67% to 20,827.45 in the week ended Friday, 11 January 2008. The S&P CNX Nifty declined 74.20 points or 1.18% to 6,200.10 in the week.

The BSE Mid-Cap index lost 674.58 points or 6.67% to 9,438.48 in the week. The BSE Small-Cap index declined 1190.09 points or 8.57% to 12,694.02 in the week. Both these indices underperformed the Sensex.

Trading for the week started on an upbeat note with the BSE Sensex rising 125.76 points to 20,812.65, on 7 January 2008 on selective buying in index pivotals.

Buying support continued on 8 January 2008, with Sensex gaining 60.68 points to 20,873.33, a record closing high. The BSE Mid-Cap index struck an all time high of 10,245.81 while the BSE Small-Cap index hit an all time high of 14,239.24 on that day.

The 30-share BSE Sensex declined 3.55 points or 0.02% to 20,869.78 on 9 January 2008. The broader CNX S&P Nifty lost 15.85 points or 0.25% to 6,272.

The 30-share BSE Sensex slumped 287.70 points to 20,582.08 on 10 January 2008 on profit booking in index pivotals. It hit a record high of 21,206.77 in mid-morning trade.

The market showed volatile swings on Friday, 11 January 2008. The 30-share BSE Sensex surged 245.37 points to 20,827.45, led by Reliance Industries and ICICI Bank.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries advanced 4.77% to Rs 3128.15.

India’s largest private sector bank by assets ICICI Bank surged 12.02% to Rs 1439.90 on reports the bank will list at least 4 arms starting with ICICI Securities in next 6 months though board is yet to decide on securities arm listing.

India’s second largest software exporter by sales Infosys Technologies declined 6.77% to Rs 1580.10 in the week. Infosys’ consolidated net profit as per Indian GAAP rose 11.9% to Rs 1231 crore on 4% rise in net sales to Rs 4271 crore in Q3 December 2007 over Q2 September 2007.

Tata Motors was down 2.80% to Rs 762.45 in the week. The company unveiled people's car (Rs 1 lakh) christened Nano on 10 January 2008. Tata Motors will commercially launch Nano in the second half of 2008.

India's largest engineering & construction firm in terms of revenue, Larsen & Toubro (L&T) declined 1.63% to Rs 4175.10 in the week. It secured two major contracts from Cairn India for its project located near Barmer in Rajasthan.

India's biggest power equipment maker by revenue, Bharat Heavy Electricals (Bhel), declined 4.34% to Rs 2435.15 in the week. The company signed a joint venture agreement with NTPC for establishment and operation of a joint venture company for taking up engineering, procurement and construction business.

Mahindra & Mahindra, India's biggest tractor and utility vehicle maker by revenue, slipped 5.87% to Rs 774.75 in the week. It acquired the business of G R Grafica Ricerca Design S.r.l (GRD), an Italian auto designing, body engineering and feasibility and styling company based in Turin, Italy.

On 8 January 2008, Manaksia settled at Rs 168.10 on BSE a premium of 5.06% over the IPO price of Rs 160. Manaksia’s business is spread across aluminium sheets, galvanised steel sheets, mosquito coils and metal packaging products.

On 11 January 2008, Precision Pipes and Profiles Company settled at Rs 138.65 on BSE, a discount of 7.57% over the IPO price of Rs 150. Precision Pipes and Profiles Company (PPAP) is engaged in the business of manufacturing automobile sealing systems and exterior products. On the same day, Aries Agro settled at Rs 251.60 on BSE, a premium of 93.54% over the IPO price of Rs 130. Aries Agro is engaged in the manufacture of agricultural products.

FII inflow in calendar year 2008 amounted to Rs 3176.70 crore (till 10 January 2008). Mutual funds bought shares worth a net Rs 1473 crore in the first few days of the New Year, till 10 January 2008.

Based on data from fund groups reporting activity daily and weekly, flows into global emerging markets funds surged 380% in 2007 and flows into Latin America equity funds were up 308% from 2006.

India will continue to witness dynamic growth in 2008, on account of investment in the manufacturing and service sectors, and will be largely insulated from weakness in the global economy, as per a report dated 10 January 2008 by the United Nations

Union oil minister Murli Deora scheduled first meeting of a ministerial panel on fuel pricing on 17 January 2008 to discuss a response to scorching global crude oil prices.

Car sales climbed up 8.9% to 88,220 units in December 2007 over December 2006. Sales of commercial vehicles, trucks and buses, edged up 1.4% to 42,508 in December 2007 on an annual basis.

In a conference in New Delhi held on 9 January 2008, Commerce and Industry Minister Kamal Nath said domestic cement prices were high due to a demand-supply mismatch and higher imports were necessary to bridge the gap. The minister also informed that the government is monitoring cement prices.

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Heavyweights lift Sensex 245 points

The market surged in late trading building on the recovery from lower level which it had witnessed in mid-afternoon trade. The market had slipped into the red in afternoon trade from an early surge after the industrial production data for November 2007 fell short of market expectations. The data hit the market in early afternoon trade today.

Reliance Industries (RIL) surged. IT stocks were mixed after Infosys posted better than expected Q3 December 2007 results before trading hours. Banking, Oil & gas and realty stocks gained. Capital goods and consumer durables stocks declined. The market breadth was weak. BSE Mid-Cap and Small-Cap indices underperformed Sensex.

European markets which opened after Indian markets were weak. Asian markets which opened before Indian market were weak today.

Industrial output rose 5.3% in November 2007 from a year earlier, well below market expectations and sharply lower than an upwardly revised annual growth of 12% in October 2007, data showed on Friday. Manufacturing production rose 5.4% in November 2007 from a year earlier, compared with a provisional annual growth of 13.3% in October 2007.

Annual inflation, based on the wholesale price index (WPI), remained unchanged at 3.5% in the week ended 29 December 2007 compared with the week ended 22 December 2007. WPI was 5.89% in the corresponding week of the previous year.

The 30-share BSE Sensex rose 245.37 points or 1.19% to 20,827.45. It hit a high of 20,894.79 in the late trade. At day’s high Sensex gained 312.71 points. It hit a low of 20,505.81 in afternoon trade. At the day’s low Sensex lost 76.27 points.

The broader S&P CNX Nifty rose 43.15 points or 0.7% to 6,200.10.

The BSE Mid-Cap index was down 0.02% to 9,438.48. The BSE Small-Cap index was down 1.28% to 12,694.02.

The market breadth was weak on BSE with 732 shares advancing as compared to 2,101 that declined. 30 remained unchanged. 15 shares in Sensex pack were in green.

BSE clocked a turnover of Rs 7403 crore, lower than Thursday (10 January 2008)'s Rs 9123 crore.

Nifty January 2008 futures were at 6219, at premium of 18.90 points as compared to spot closing of 6200.10.

The NSE's futures & options (F&O) segment turnover was Rs 68,449.32 crore, which was lower than Rs 78,346.87 crore on Thursday, 10 January 2008.

BSE Realty index (up 1.6% to 13,482.88), BSE Oil & Gas index (up 2.24% to 13,832.60) and BSE Bankex (up 3.6% to 12,478.96) outperformed Sensex.

BSE HealthCare index (up 0.71% to 4,182.94), BSE PSU index (up 0.17% to 10,398.73), BSE Metal index (down 0.1% to 18,750.60), BSE FMCG index (down 0.22% to 2,394.83), BSE Power index (down 0.34% to 4,684.42), BSE Auto index (down 0.5% to 5,413.01), BSE Capital Goods index (down 0.92% to 19,485.88), BSE IT index (down 1.04% to 4,103.88) and BSE Concumer Durables index (down 2.16% to 6,210.44) underperformed Sensex.

IT stocks were mixed after Infosys announced its results today. India’s second largest software exporter by sales Infosys Technologies declined 1.38% to Rs 1,580.10 after the company today reported stronger-than-expected growth in net profit in Q3 December 2007. Infosys’ consolidated net profit as per Indian GAAP rose 11.9% to Rs 1231 crore in Q3 December 2007 over Q2 September 2007. Sales rose 4% to Rs 4271 crore in Q3 December 2007 over Q2 September 2007.

Infosys has raised both earnings and revenue guidance for the year ending March 2008 (FY 2008). The company has forecast 18.6% growth in EPS in FY 2008 as per Indian GAAP at Rs 79.30. It has forecast a between 19.7% to 19.9% growth in revenue in FY 2008 as per Indian GAAP to between Rs 16627 crore to Rs 16657 crore.

As per US GAAP, the company has forecast 33.8% growth in consolidated earning per American depository share in FY 2008 at $1.98. The company has forecast a between 35% to 35.2% growth in revenue as per US GAAP in FY 2008 to between $4.17 billion to $4.18 billion.

India’s largest exporter of IT services by sales Tata Consultancy Services rose 1.47% to Rs 989.05. India's fourth largest IT exporter by sales Satyam Computer Services shed 2.24% to Rs 410.75.

Wipro, India's third largest IT exporter in terms of sales declined 0.34% at Rs 485.95. The company on Thursday said its unit Wipro Infotech, had won a nine-year outsourcing contract Aircel Cellular.

BSE Oil & Gas stocks rose. India’s largest private sector firm by market capitalization and oil refiner Reliance Industries was up 3.34% to Rs 3,128.15. GAIL (India) (up 3.29% to Rs 506.10), ONGC (up 1.14% to Rs 1,306.90) and Reliance Petroleum (up 0.69% to Rs 219.75) edged higher.

Banking stocks spurted. India’s largest private sector bank by assets ICICI Bank rose 6.13% to Rs 1,439.90. The stock rose for the second day in a row on reports the bank will list at least 4 arms starting with ICICI Securities in next 6 months though the board is yet to decide on securities arm listing.

India’s second largest private sector bank in terms of net profit HDFC Bank rose 2.47% to Rs 1,762.35. India’s largest public sector bank by operating income State Bank of India rose 1.19% to Rs 2,437.25.

Realty stocks gained. Ansal Properties & Infrastructure (up 9.27% to Rs 386.70), Unitech (up 0.39% to Rs 519.55), DLF (up 4.71% to Rs 1,196.05), Indiabulls Real Estate (up 1.03% to Rs 738.90) edged higher.

Consumer durables stocks declined. Videocon Industries (down 5% to Rs 632.30), and Blue Star (down 4.74% to Rs 480) edged lower.

Capital goods stocks declined. Bharat Heavy Electricals (down 0.03% to Rs 2,435.15), Larsen & Toubro (down 0.76% to Rs 4,175.10) and Suzlon Energy (down 3.92% to Rs 2,124.95) edged lower.

Tata Motors rose 1.8% to Rs 762.45. Keeping his promise, made four years ago, to deliver a “people’s car,” Tata Group Chairman Ratan Tata unveiled on Thursday the Rs.1-lakh car christened ‘Nano.’ The world’s cheapest car from the Tata Motors stable comes with a rear mounted all-aluminium two-cylinder 623 cc petrol engine, promises a mileage of 20 kilometer per litre, and meets all emission and safety standards.

Some of the major losers from the Sensex pack were HDFC (down 2.18% to Rs 3,060.75), Mahindra & Mahindra (down 3.54% to Rs 774.75), ACC (down 4.32% to Rs 898), Ambuja Cements (down 2.01% to Rs 138.95).

Precision Pipes and Profiles Company settled at Rs 138.65 on BSE, a discount of 7.57% over the IPO price of Rs 150. The stock debuted at Rs 160, a premium of 6.67% over the IPO price.

Aries Agro settled at Rs 251.60 on BSE, a premium of 93.54% over the IPO price of Rs 130. The stock debuted at Rs 150, a premium of 15.38% over the IPO price.

Reliance Natural Resources clocked the highest volume of 2.76 crore shares on BSE. The scrip declined 0.55% to Rs 207.20. Reliance Petroleum clocked the second highest volume of 1.79 crore shares on BSE. The scrip rose 0.69% to Rs 219.75. Ispat Industries clocked the third highest volume of 1.27 crore shares on BSE. The scrip rose 2.99% to Rs 68.90. IFCI clocked the fourth highest volume of 1.19 crore shares on BSE. The scrip rose 3.02% to Rs 85.40. Centurion Bank of Punjab clocked the fifth highest volume of 1.03 crore shares on BSE. The scrip rose 3.27% to Rs 67.80.

Reliance Natural Resources clocked the highest turnover of Rs 561.16 crore shares on BSE. Reliance Petroleum (Rs 392.67 crore), Reliance Industries (Rs 296.02 crore), Reliance Capital (Rs 255.62 crore) and Reliance Energy (Rs 230.11 crore) were the other turnover toppers in that order.

European markets were weak. France’s CAC 40 (down 0.44% to 5,376.75), Germany’s DAX (down 0.4% to 7,681.91) and UK’s FTSE 100 (down 0.74% to 6,176.60) edged lower.

Asian markets were weak today. Key benchmark indices in Hong Kong, Japan, Taiwan and South Korea were down by between 0.35% to 2.33%. China’s Shanghai Composite rose 0.52% to 5,484.67.

The Dow Jones industrial average surged 117.78 points, or 0.92%, at 12,853.09 on Thursday, 10 January 2008. The Standard & Poor's 500 Index rose 11.20 points, or 0.79%, at 1,420.33. The Nasdaq Composite Index advanced 13.97 points, or 0.52%, at 2,488.52.

Weekly Close: A nano rally.. ! Can it be a big one ?

Great optimistic start for the week with upcoming IPO of Reliance Power and touched 21k on second day of the week. Global markets are falling prey to financial crises and economic slowdown. But, India was a different story. India had great start led with optimism amongst investors. Result season is on and Infosys came with big bang. The numbers posted were better than expected. However, the last two sessions saw huge profit booking and mid caps and small caps were major losers. Overall sessions were choppy and volatile.

The conditions in US have been worsening and it continued despite Feds efforts to smoothen the economic landing. Now, the final solution which prevails is to cut rate. Fed Chairmen Ben Barnanke has indicated rate cut and market is expecting 50 bps cut. Let see how rate cut helps the economy stuck between slowdown and inflationary pressure at same time. Indian markets have been ignoring these cues..but we don't think that it may ignore these signals for long !

Inflation was 3.5%. This has been under control but more because of a base effect. Inflation remains a concern and it is a supply side issue. Food articles have seen a major upsurge and this is on the back of poor agriculture growth. Agriculture thus would be an area of focus. Crude is at an all time high and it would be really difficult for Govt. to cope up with this. If the Govt. doesn't hike petrol and diesel prices.. it would only postpone the problem. If it does hike then the Govt would face the irk of the Left and certainly it cannot afford this when elections staring it. This would be a big issue going ahead and certainly there are no easy answers. The easy way out is not the best one Economicaly for the country.

Sensex Gained 0.7% for the week. Sensex was dragged by ACC (-10.6%), Hindalco (-7.25%), Maruti (-7.1%), Infosys ( -6.66%), Ranbaxy(- 6.92%), Grasim (-5.86%), M&M ( -5.24%) Ambuja Cem (-4.31%), CIPLA (-3.64%), BHEL (-3.56%) and ONGC (-3.07%) While Sensex was supported by ICICI (+12.5%), DLF (+7.6%), RIL(+ 5%) RCOM( +5.12%), HDFC Bank (+4.39%), ITC ( +2.53%) and Bharti (+2.27%)..Infosys numbers were good on the face and market reacted to it positively. However, macro worries like US slowdown, high salary cost and appreciating rupee are certainly a concern for Infosys.

Tata Motors finally unveiled the much awaited 1 lakh car. Its named as Tata "Nano" which will come into commercial basis in H2 FY08. Tata motos was in news across but stock failed to rally as market weakness pulled it down.

Shree Cement reported impressive results for the Q3 FY08, the top line grew by 44% and the bottom dip due to change in depreciation policy. Outlook is good but the worry is Govt. regulations. Tamil Nadu Govt. has forced the cement manufactures to reduce the prices. It has also asked the companies to give cement on subsidised rates for Govt projects and to economy weaker class people. This certainly put pressure on the companies located in TN like India Cement, Madras Cement, Dalmia and other players. The coal prices and fright rates are going up which puts margins under pressure.

We had our Sayaji Hotel this week. The company has two businesses; Hotels and Restaurants. Sayaji Hotel operates two hotels, one at Indore and another at Baroda. FOOD and Beverage is an area of expertise and Sayaji is well versed here. The new businesses have large investments. The company has already tied up the funding. Macro factors seem to be in favor of the company. Since our coverage last month the stock is up over 30%. We believe that post the current run up the risks have increased. Of course being a small company the risks are higher and the restaurant business is fast catching up as well the Pune hotel..Do read to know our view on this one.

ABG Shipyard Ltd (ABG) reported impressive results. The top line grew by 55% to Rs 275 cr and bottom line was up 61% to Rs 47 cr. The EBITDA profit grew by 55% to Rs 82 cr from Rs 53 cr on yoy basis. Subsidy factor was Rs 17 cr for the quarter. ABG is the first private company to get the subsidy disbursement. A big issue is the form of 30% (Valid till Aug 2007) subsidy from the Govt which remains an event risk. The Finance Ministry is not in favour where as shipping ministry is keen on at least 20% subsidy. The argument is that without the subsidy, the Indian ship manufactures wont able to compete in the global scenario against the Chinese and Koreans who are being subsidised. We believe that the case for the subsidy to continue at 20% for 5 years is strong. The macro scenario is extremely positive but then valuations down leave much upside. Do have a look at our results update.

Greenply showed some strength in weak market. The company has performed really well and given amazing returns. It is pure play on Indian infrastructure where Greenply focus on interior infrastructure.

KEI is into manufacture of high and low tension cables (HT and LT)..a play on power sector. The company is growing aggressively by expanding capacity to meet domestic and international demand. The macro scenario is extremely good for power cable manufactures; we feel their wont be any such major risks in near term. Our recent note would give more idea on this one.

Technically Speaking: Sensex traded volatily for the week. After a healthy corection the markets are ready to take on 22k. Sensex Support seen at 20500 , 20250 and Resistance at 20970 and 21220.

Merrill Lynch - $15 billion writedown

Merrill, the nation's largest brokerage firm, is expected to disclose the huge write-down when it reports earnings next week, according to people who have been briefed on its plans. The loss far exceeds the $12 billion hit many Wall Street analysts had forecast.


To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.