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Sunday, February 10, 2008
Market Outlook
Banking and IT are the two sectors where you can make money by reverse trades. That is, buy one, sell the other and profit from the widening differential.
The Central Statistical Organisation’s latest update confirms what anecdotal evidence and Q3 corporate results strongly suggested – that the Indian economy was slowing down. Of course, GDP growth rates of 8.5 per cent or more would be wonderful by most standards.
However, it is slower than corporate honchos or the FM would like. It is also likely that the slowdown will continue for the next six months at least, due to a combination of several factors. One, consumer demand is slow due to rising rates. Two, industry is in the middle of building new capacity and it will need time for that capacity expansion to feed into the system. Three, uncertain global factors will retard both export growth as well as more investments into India. Four, domestic investors have seen an erosion of confidence.
The failure of Wockhardt Hospital’s IPO is a signal that indicates the latter while the mass-withdrawal of portfolio investors signals the third factor is in operation. The danger here is that the growth projections of the next five years are all built around assumptions of massive investment. If that investment isn’t available, those projections will fail. FDI and domestic household savings are all crucial sources of capital for those investments.
The consumption-investment mix of India’s GDP is changing. Consumption demand was responsible for about 65 per cent of GDP, five years ago. Two or three years hence, it will be responsible for about 50 per cent.
Now, the ratio of FDI to FII may change but FDI and FII trends run in tandem. There has never been an extended period where FDI flows have been strongly positive while FII flows were strongly negative. The foreign investor is more likely to make primary investments when he is also making (profitable) secondary investments.
Similarly, the tendency to consume and the tendency to invest are strongly linked in the domestic psyche. Indians are consuming more because they are saving more. They have also been more willing to invest in primary instruments because they have made money from investments in secondary investments. If they are consuming less and they are suffering losses in the secondary market, they are less likely to make primary investments.
There is little or nothing that the government can do to reverse this. It would have to cut interest rates drastically just to offset the wider spreads between dollar and rupee after the Fed’s cuts. It would have to cut rates even more to put the Viagra back into Indian consumption. It doesn’t want to do that for fear of letting inflation spike.
Nor can it speed up reforms. The low-hanging fruit in terms of easing the License Raj and cutting tax rates have already been consumed. What it now needs to do involves downsizing its own roles and dramatically improving its efficiency as a facilitator. Both are politically impossible with elections looming.
Without either reform or rate cuts, it is difficult to put confidence back into the economy and confidence is at the heart of attracting both fresh investments or ensuring higher consumption. Luckily the political consensus seems to be grasping this in a dim sort of way and rate cuts are relatively easier than reforms. So, there is now some political pressure for rate cuts – especially, in the key home loans market.
I think the government and the RBI will try to arm-twist banks into making commercial rate cuts while continuing to hold policy rates. If that is not forthcoming or if the Fed cuts another 50-75 basis points as is now expected in some circles, the RBI will cut policy rates – though it will do so reluctantly.
The impact of rate volatility will obviously be felt most keenly in the banking system. Banks will lose some more ground before cuts happen but they will also bounce more when cut do occur.
The IT sector (and other dollar-denominated exporters) could also see a sharp recovery if the rupee could be induced to correct say, 5 per cent. More efficient banks and IT companies will outperform peers.
This is a classic case for “couple trading”. Pick a pair of banks or a pair of IT stocks and buy one and sell the other to profit from widening differentials during the downturn. Then, reverse the trades to profit again when the differential reduces. That’s likely to be the most successful risk-adjusted trading strategy in much of calendar 2008.
Analysts’ picks
Ambuja Cement
CMP: Rs 116
Target Price: Rs 85
Morgan Stanley has maintained ‘underweight’ on Ambuja Cement (ACL) largely on concerns of a slowdown in revenues and increasing margin pressures.
“We reiterate our underweight rating on Ambuja and expect the company to continue to post disappointing numbers in the coming quarters as pricing would be under pressure and costs will escalate,” said the brokerage in a note to its clients.
The company has reported another quarter of disappointing numbers with revenues growing only by 16.5% year-on-year at Rs 1,700 crore. While the stock has underperformed, it continues to trade significantly above replacement cost.
“We continue to believe that the slowdown in margins over the next couple of quarters will worsen as the Y-o-Y pricing growth remains too small to cover the rising costs, before pricing growth itself turns negative in financial year 2009,” it adds.
Cairn India
CMP: Rs 193
Target Price: Rs 245-247
Merrill Lynch has recommended a ‘buy’ on Cairn India (CIL), post-release of the operational update of CIL’s assets. “The operational update read together with earlier guidance suggests 17-27% upgrade in plateau production rate and a commensurate rise in reserves in its main Rajasthan block. Development cost is also likely to rise and production delayed. CIL’s base case fair value (Rs 232 share earlier), which is now also its price objective (earlier Rs 245 share), is upgraded to Rs 247 a share,” says the brokerage.
It adds that as per the operational update, plateau production from the three main fields at Rajasthan could be 175k bpd. This could mean plateau production of 180-190k bpd, including output from two other fields. This could mean 20-27% upside to plateau production vis-à-vis earlier estimate of 150k bpd.
Cadila Healthcare
CMP: Rs 248
Target Price: Rs 450
Domestic brokerage Angel Broking has initiated a ‘buy’ on pharma major Cadila Healthcare. It says that the company is trading at significant discount to its peers. During the third quarter of 2008, Cadila posted a 22% growth in net sales mainly on the back of a robust 47% growth in formulation exports.
The company’s domestic branded formulation business, on the other hand, posted a 10% growth to Rs 262 crore. “At the CMP of Rs 263 (at the time when report was released), the stock is trading at 10.5 times financial year (FY) 2009 expected and 8.6 times FY2010 expected earnings, which is at a significant discount to its peers.” The report, however, expressed concern on its overdependence on Altana.
Yet says that new client additions in the segment would aid de-risking and reduce the company’s dependence on the same. Along with this, the stock has also corrected significantly to discount the same.
Reliance Comm
CMP: Rs 646
Target Price: Rs 873
Goldman Sachs has maintained its ‘buy‘ rating on Reliance Communication (RCOM) based on the proposed listing of its tower subsidiary which could unlock value. Reliance Infratel, the tower subsidiary of RCOM, has filed a DRHP with Sebi for an IPO.
“We view the potential listing of Reliance Infratel as a positive catalyst for RCOM – one which we have highlighted in our investment thesis for the stock. Our Rs 873 per share target price for RCOM includes a valuation of $ 4.6 billion for the tower company.”
It has, however, listed some key risks that include delay in nationwide rollout of GSM services beyond the second half of financial year 2009, poor external tenancy on towers and lower-than-expected traffic elasticity yields sub-par wireless operating metrics.
Bhushan Steel
CMP: Rs 997
Target Price: Hold
PINC Research has maintained ‘hold’ on largest auto grade steel manufacturers Bhushan Steel (BSL). It expects the company to further strengthen its position upon completion of the envisaged expansion.
“We have slightly downgraded our financial year (FY) 2008 estimates considering the staid performance in nine months of FY 2008. However, post completion of hot strip mill (HSM), we expect BSL to report a marked improvement in margins and profitability as any outside dependence for HR coil would be nullified,” the brokerage says.
GSS America Infotech IPO Analysis
Investors can avoid the initial public offering of GSS America Infotech, considering the risks associated with its US-centric business model and general negative perception in the markets about the prospects of IT services companies.
At the upper end of the price band — Rs 440 — the offer values the stock at 10 times its estimated current year earnings on a fully diluted equity base. This is close to the valuation commanded by Tier-2 IT players. GSS operates on a smaller scale than most Tier-2 players; but the valuation is not at any serious discount to its larger sized peers. The company has grown its revenues manifold over the last three- four years, from a smaller base. This period coincided with the fastest phase of growth for Tier-1 and Tier-2 IT companies.
However, together with fears of a slowdown in the US and concerns over the sub-prime crisis and lowered consumer spending, the IT services sector is experiencing greater business uncertainty. Weathering the slowdown may require wherewithal that, at this point, only Tier-1 and select Tier-2 players, possess. GSS with its limited track record and complete dependence on US-based clientele may find it challenging to face a double whammy of an appreciating rupee vis-À-vis the dollar and an uncertain macro scenario.
The current volatile market scenario where even better known names are facing challenges in garnering investor interest is another reason for investors to adopt a wait-and-watch approach to this IPO.
Heavy US dependence
The company derives all its revenues from the US, making for a concentrated geographic mix. This subjects GSS to all the vagaries of macro scenario in the US — the possibility of lowered IT spend by clientele, loss of business in the BFSI segment and a possible slowdown in consumer spends.
Geographical diversification may be the key for any company in the IT services space to mitigate these risks. A wider spread may also have aided an expanding footprint and client mining in other geographies.
Vertical Mix
Although the company’s vertical mix has not been disclosed, the list of clients indicates a good number from the retailing segment. This is a segment that is quite vulnerable to a US slowdown, with recent data on consumer spending suggesting moderating consumer spends. The top ten client list, which has many retail, financial services and insurance players, may again be a cause of concern for the company in the context of tightened/ postponed IT budgets.
Less Focus
The company operates in as many as nine verticals, indicating that there may be no specific niche or focus in operations for GSS.
Tier-2 IT services companies usually operate in a limited number of verticals (3-4) and gradually broaden their scope of operations. In a competitive environment where larger players are looking aggressively at client wins, the lack of a niche area as a differentiator, may work against the company.
The revenue concentration creates another problem for GSS, that of a possible appreciation in the rupee against the dollar. Realisations could be under pressure if the extent of appreciation continues to be pronounced. In the event of tightening IT budgets, some vendors may be forced to lower billing rates. With a relatively small scale of operations, the company may not be best placed to work with lowered realisations.
Overall, the company’s fundamentals are reasonable, as indicated by a 21.4 per cent net profit margin over a Rs 204.6 crore revenue base for nine months of this year, but at this point in time, the macro environmental risks may blunt the possibility of gains.
Issue details
The company plans to issue 3.5-million shares in the price band of Rs 400-440. The proceeds are to be used for building a global delivery centre, building offices overseas and working capital requirements. Religare Securities is the book running lead manager to the issue. The issue is open from February 11-15, 2008.
Rules of IPOs
How swiftly the mood of the markets can swing from sunny optimism to extreme scepticism! The withdrawal of two big-ticket initial public offers (IPOs) by Wockhardt Hospitals and Emaar MGF this week underline how fragile the all-important factor called ‘investor sentiment’ really is. Barely three weeks ago, IPOs from Reliance Power and Future Capital Holdings sported record subscription figures, having garnered runaway response from every class of investor. The n, those rushing to hop on to the IPO bandwagon were hardly deterred by the stiff asking price or ‘execution’ challenges that faced these companies, both of whom rolled out their IPO at a rather nascent stage of their business. Yet, it is precisely these reasons that are now being cited for the unenthusiastic response to the Wockhardt and Emaar offerings.
Institutional appetite waning
It is not merely individual investors, bruised by the recent blows to their net worth, who seem to have lost their appetite for IPOs in three short weeks.
Retail investors, in any case, tend to take their cues from the larger institutions; which is why IPO subscriptions tend to bunch up on the last days of the offer period.
The larger worry for Indian investors, and the markets in general, should be the extremely tepid response from QIBs (qualified institutional bidders).
That institutional investors cold-shouldered a globally recognised name such as Emaar in the hot real-estate sector, after lavishing their attention on a slew of lesser-known names in 2007, is disturbing.
This suggests a genuine waning of liquidity and appetite for risk, at the global level. A recent report from Thomson Financial states that globally a total of 21 IPOs, worth $6.3 billion, were withdrawn in January. India, until recently, was an exception to this trend; but no longer.
‘Superior’ growth prospects or not, liquidity remains the engine that powers stock markets. When it comes to liquidity, India’s primary market, much like its secondary market, depends heavily on the favour of global investors.
A good number of retail investors, in any case, were in the game mainly for listing gains. With present secondary market conditions making huge listings difficult, those on the speculative fringe may remain on the sidelines until the frenzy starts all over again.
Structural shift
This being the case, the failed IPOs may flag off two key trends for the stock markets in the months ahead. One, the flow in the IPO pipeline may dwindle as those with a limited track record rethink IPO plans.
Two, with global investors in a risk-averse mood, markets may no longer be willing to pay any price for a new business idea. Valuations, whether for new offers or already listed companies, may moderate. In the buoyant markets of the past few months, businesses and stocks that captured the imagination were able to justify sky-high values, on the strength of fancy “valuations” assigned to nascent businesses that were still on the drawing board.
These developments may also require retail investors in IPOs to make some changes in their investment strategy for the months ahead. The key takeaways for them from the turbulence of the last week are:
Listing gains are no longer a certainty. This means that investors cannot bank on flipping a stock on listing to recoup high funding costs incurred to bid for the IPO. Investors may be better off avoiding leveraged bets on IPOs, no matter how attractive the business or the “grey market” buzz on the stock is.
Investors should go back to evaluating every IPO much as they would a stock in the secondary market. Businesses that have alternatives in the listed space may no longer be able to command huge valuation premia, just because they are garnering funds through an IPO. Newly listed stocks may no longer remain islands of high valuation, with large trading volumes, in current market conditions.
Finally, while making their decision, investors should factor in the opportunity loss involved in taking the IPO route. Quite a few retail applicants to the Reliance Power IPO probably sacrificed attractive opportunities to buy into blue-chips of their choice when they were available at rock-bottom prices in the recent market correction.
A significant part of their funds was locked into the offer. Allocating only a portion of your overall equity portfolio to IPOs and participating only in high conviction ones may be the best way forward.
Via Businlessline
Saturday, February 09, 2008
Weekly Technicals - Feb 11 2008
The markets extended losses for the fourth straight week, and both the major indices succumbed to unabated selling in the latter half of the week ended February 8.
The Sensex, which rallied to an intra-week high of 18,895, tumbled to a low of 17,203 - a swing of 1,692 points - and finally settled with a loss of 769 points (4.2%) at 17,645. The index is down almost 18.5% (3,363 points) in the last four weeks.
The high of 18,895 was exactly at the R3 (Resistance 3) level of 18,900, and the low of 17,203 was close to the important medium-term support level of 17,150.
One needs to watch 17,150 as the crucial support level for the Sensex next week. While the Sensex will find strength above the 18,500-mark, a breakout above the week's high (18,895) could see the index rally another 1,000 points.
While the Sensex is likely to face resistance around 18,110-18,310-18,515, the index is likely to find support around 16,820-16,620-16,415.
The NSE Nifty moved in a range of 431 points. From a high of 5,545, the index dropped to a low of 5,034 before settling with a loss of 197 points at 5,120. The index ended lower for the fifth straight week, and has declined 18% (1,154 points) during the period.
The Nifty, which is currently trading close to its 200-day moving average of 4,975, may find support around this level. The 20-day moving average is at 5,413, and the 50-day moving average is at 5,779.
The Nifty is likely to find support around 4,955-4,905-4,850, while the index is likely to face resistance around 5,285-5,335-5,390.
Market may remain volatile; RPower listing eyed
The market is expected to see volatile swings as has been the trend in the recent past. Of late markets across the globe were inflicted by high volatility due to fears of a recession in United States, the world's biggest economy.
The key event watch out for is the debut of Reliance Power (RPower) on Monday, 11 February 2008. Reliance Power had, last month, completed India's largest initial public offer (IPO) of over Rs 11000 crore.
The issue was heavily subscribed. The Anil Dhirubhai Ambani Group firm Reliance Power got an aggregate commitment of over Rs 7.50 lakh crore, as against the issue size of Rs 11,560 crore. It had offered shares at Rs 450 per share, valuing the firm at $30 billion.
The Reliance Power shares quoted a premium of as high as Rs 500 per share in the grey market when the issue was open for subscription due to buoyant equity market. However, as per latest reports, it is now attracting premium of Rs 100- 200 per share as equity markets across the globe have declined in volatile trade.
Forthcoming events including Railway Budget and Union Budget for 2008-09, to be presented at the fag end of February 2008, may dictate the trend on the bourses in the near term.
Third quarter December 2007 results season has come to end. Most of the results were in line with market expectations. A total of 3321 companies reported 26.80% rise in net profit on 19.20% rise in net sales for Q3 December 2007 over Q3 December 2006. The net profit was boosted by 72.5% jump in other income
The market suffered losses for the fourth straight week in the week ended Friday, 8 February 2008 as selling pressure continued for index pivotals. The BSE 30-shares Sensex lost 777.69 points or 4.26% to 17,464.89 in the week ended Friday, 8 February 2008. The S&P CNX Nifty lost 196.90 points or 3.70% to 5,120.35, in the week.
However, small-cap and mid-cap indices outperformed the Sensex. The BSE Mid-Cap index declined 128.27 points or 1.65% to 7,633.27, in the week ended Friday, 8 February 2008. The BSE Small-Cap index lost 151.97 points or 1.51% to 9,920.35, in the week.
Market extends losses
The market suffered losses for the fourth straight week in the week ended Friday, 8 February 2008 as selling pressure continued for index pivotals. The market slipped in three out of five trading sessions in the week. Volatility was high throughout the week. Small-cap and mid-cap indices outperformed the Sensex
Depressed secondary market hit IPOs in the week. Emaar MGF Land became second victim of the depressed secondary market conditions as the company withdrew its IPO on Friday, 8 February 2008 due to poor response to the issue, a day after Wockhardt Hospitals on Thursday, 7 February 2008, pulled out its IPO for the same reason.
The BSE 30-shares Sensex lost 777.69 points or 4.26% to 17,464.89 in the week ended Friday, 8 February 2008. The S&P CNX Nifty lost 196.90 points or 3.70% to 5,120.35, in the week.
The BSE Mid-Cap index declined 128.27 points or 1.65% to 7,633.27, in the week ended Friday, 8 February 2008. The BSE Small-Cap index lost 151.97 points or 1.51% to 9,920.35, in the week.
The BSE Sensex has lost 3,741.88 points or 17.64% from a record high of 21,206.77 hit on 10 January 2008
Trading for the week started on an upbeat note with Sensex surging 417.74 points or 2.29% at 18,660.32 on Monday, 4 February 2008. On the same day, the broader CNX S&P Nifty gained 146.25 points or 2.75% at 5,463.50. The sentiment was boosted by Microsoft Corp's bid for Yahoo Inc and following China's buy of a large stake in takeover target Rio Tinto.
On Tuesday, 5 February 2008, the 30-share BSE Sensex rose a meagre 2.84 points or 0.02% at 18,663.16, after a weak start. The broader based CNX S&P Nifty was up 20.4 points or 0.37% to 5,483.90 on the same day.
The 30-share BSE Sensex slumped 523.67 points or 2.81% at 18,139.49 on Wednesday, 6 February 2008. On the same day, the broader CNX S&P Nifty declined 161.35 points or 2.94% at 5,322.55. Weak Asian markets played the spoilsport.
The 30-share BSE Sensex plunged 612.56 points or 3.38% at 17,526.93 following late sell-off in index pivotals. The broader CNX S&P Nifty lost 189.30 points or 3.56% at 5,133.25
On Friday, 8 February 2008, the Sensex declined 62.04 points or 0.35% to 17,464.89, after seeing volatile swings throughout the day. The broader CNX S&P Nifty slipped 12.90 points or 0.25% at 5,120.35.
India’s largest private sector firm by market capitalization and oil refiner Reliance Industries fell 4.75% at Rs 2421.75 in the week. As per reports, Reliance Industries (RIL)’s two wells in D6 block in the Krishna Godvari (KG) basin have hit a technical snag. The loss to wells runs into about $175 million.
India’s second largest listed telecom firm by sales Reliance Communications (RCom) advanced 5.61% to Rs 646.10 in the week. Reliance Infratel, a subsidiary of RCom has filed its draft red herring prospectus for an initial public offer (IPO) with the Securities and Exchange Board of India (Sebi). The company will offer 8,91,64,100 shares of Rs 5 each for cash, constituting 10.05% of its post-issue paid-up equity capital.
DLF, the largest real estate developer in terms of market capitalisation gained 0.39% to Rs 816.70 in the week. The stock will replace Glaxosmithkline Pharmaceuticals, in S&P CNX Nifty index from 14 March 2008.
India’s third largest software services exporter Wipro declined 3.40% to Rs 422.45 in the week. As per reports the company plans to build electronic warfare systems, radars and flight simulators locally for US defence contractors.
Tata Motors, the country’s largest truck manufacturer in terms of sales, shed 5.72% to Rs 711.15 in the week. It reported 11.76% fall in its passenger car sales in the domestic market during January 2008 at 20,119 units compared with 22,801 units in the same month a year ago.
India’s largest oil exploration company in terms of market capitalisation Oil & Natural Gas Corporation (ONGC) lost 4.52% to Rs 997.25 in the week. As per reports, British oil major British Gas is all set to pick up a 30% stake in ONGC’s Krishna Godawari basin block and 25% in Mahanadi basin block.
India’s top small car maker in terms of sales Maruti Suzuki India slumped 11.15% to Rs 803.85 in the week. The company has raised prices of many of its models by Rs 1,000 to Rs 11,000 per unit.
Banking stocks were mixed during the week. ICICI Bank declined 10.94% to Rs 1066.70 and HDFC Bank lost 7.74% to Rs 1445.95. However, India's largest commercial bank in terms of net profit State Bank of India rose 0.27% to Rs 2,191.45.
Third quarter December 2007 results season has come to end. Most of the results were in line with market expectations. A total of 3321 companies reported 26.80% rise in net profit on 19.20% rise in net sales for Q3 December 2007 over Q3 December 2006. The net profit was boosted by 72.5% jump in other income
Annual inflation based on the wholesale price index rose 4.11% in the week ended 26 January 2008 from 3.93% in the week ended 19 January 2008, government data released on Friday, 8 February 2008 showed.
The Bank of England on Thursday, 7 February 2008, cut its key interest rate by a quarter percentage point to 5.25% to help shore up the economy but policymakers remained worries about inflation, dampening hopes of rapid-fire rate cuts. The European Central Bank kept euro-zone rates unchanged at 4% on the same day.
Meanwhile, Reliance Power, which raised a record $3 billion in its initial share sale in January 2008, will list on exchanges on Monday, 11 February 2008. The initial public offer had received bids for $190 billion.
The Bombay Stock Exchange (BSE) has decided to change the eligibility criteria for inclusion of scrips in ‘A’ group. The revised list will be announced on 18 February 2008 and will come into effect from 3 March 2008. A total of 200 companies will find place in A group. BSE has also discontinued the division of group ‘B’ into group ‘B1’ and ‘B2’. All companies not included in group ‘A’, ‘S’ or ‘Z’, will constitute group ‘B’, according to a BSE circular.
On 7 February 2008, the Central Statistical Organisation released the advance estimates of national income for 2007-08. Gross domestic product (GDP) growth is estimated at 8.7% compared with 9.6% in 2006-07. Agriculture is expected to advance 2.6% in 2007-08 as against 3.8% in 2006-07. Manufacturing is expected to gain 9.4% in 2007-08.
On 4 February 2008, the International Monetary Fund (IMF), in a report summarising its annual consultation on India's economic policy, estimated India's growth at 8.75% for 2007-08 as a result of rising productivity and investment.
Small-cap, mid-cap stocks slide
Volatility was the hallmark for the day as the market swung like pendulum in negative and positive terrain throughout the day. The market recovered from lower level in mid-afternoon trade on positive cues from European markets. The market had swung between positive and negative zone in mid-morning trade after undergoing high initial volatility. Sensex fell below 17,500 mark. Most of the Asian markets were closed today.
Emaar MGF Land became another victim of the depressed secondary market conditions as the company today withdrew its IPO due to poor response to the issue, a day after Wockhardt Hospitals on Thursday, 7 February 2008, pulled out its IPO for the same reason. Recently, volatility in the secondary market conditions had forced Emaar MGF Land to extend its initial public offer until 11 February 2008 and lower its indicated price for a second time.
The 30-share BSE Sensex declined 62.04 points or 0.35% to 17,464.89. Sensex shed 323.87 points at the day's low of 17,203.06, hit in afternoon trade. Sensex touched a high of 17,688.73 at the onset of the trading session. At day's high, Sensex surged 161.80 points.
The broader CNX S&P Nifty was down 12.9 points or 0.25% at 5,120.35.
IT stocks surged. Reliance Industries and State Bank of India came off lower level. Realty, metal and consumer durable stocks dropped. Hindustan Unilver and ITC rose. Even as the Sensex recovered, the market breadth remained quite weak.
Annual inflation based on the wholesale price index rose 4.11% in the week ended 26 January 2008 from 3.93% in the week ended 19 january 2008, government data released today showed.
The BSE Mid-Cap index was down 1.9% at 7,633.27, while the BSE Small-Cap was down 2.77% at 9,920.35.
The market breadth was quite weak: on BSE 506 advanced as compared to 2,259 that declined. 37 stocks remained unchanged. 16 out of 30 Sensex stocks were in red.
BSE clocked a turnover of Rs 6334 crore compared to Thursday (7 February 2008)'s Rs 6570 crore.
Nifty February 2008 futures were at 5,070, at a discount of 50.35 points as compared to spot closing of 5,120.35.
The NSE's futures & options (F&O) segment turnover was Rs 39,421.27 crore, which was lower than Rs 40,921.83 crore on Thursday, 7 February 2008.
BSE Auto index (down 0.88% to 4,741.49), BSE Bankex (down 2.17% to 10,159.42), BSE Consumer Durables index (down 3.2% to 4,737.15), BSE Capital Goods index (down 1.62% to 15,859.11), BSE Metal index (down 2.67% to 15,114.84), BSE Power index (down 1.23% to 3,736.31), BSE PSU index (down 0.9% to 8,275.98) and BSE Realty index (down 2.46% to 9,783.85) underperformed Sensex.
BSE FMCG index (up 2.34% to 2,175.09), BSE IT index (up 3.73% to 3,843.34), BSE Oil & Gas index (down 0.28% to 10,638.44) outperformed Sensex.
Among Sensex stocks, Hindustan Unilever rose 6.09% to Rs 211.75, ONGC rose 0.89% to Rs 997.25, ITC rose 2.47% to Rs 196.95 and Ranbaxy Laboratories rose 2.32% to Rs 382.30.
HDFC, India's biggest dedicated housing finance firm by revenue, fell 4.47% to Rs 2,796.20.
IT stocks strengthened on bargain hunting after they fell for the last three consecutive trading sessions. Infosys (up 4.76% to Rs 1,551.35), Satyam Computer Services (up 4.9% to Rs 410), Tata Consultancy Services (up 1.93% to Rs 899.95) and Wipro (up 3.07% to Rs 422.45) edged higher.
Metal stocks declined. Steel Authority of India (down 4.61% to Rs 200.60), Sterlite Industries (down 2.76% to Rs 737.55), Tata Steel (down 2.72% to Rs 750.40) and Hindalco Industries (down 1.71% to Rs 160.50) edged lower.
Banking stocks declined after the latest data showed rise in inflation. ICICI Bank (declined 3.49% to Rs 1,066.70), HDFC Bank (down 3.06% to Rs 1,445.95) edged lower. State Bank of India rose 1.68% to Rs 2,191.45. It recovered from a low of 2,150.97.
Capital goods stocks fell. India’s largest engineering & construction firm by revenue Larsen & Toubro fell 2.84% to Rs 3,527.30. It recovered from low of Rs 3,465. India's biggest power equipment maker by sales Bharat Heavy Electricals declined 0.31% to Rs 2,013.70 despite winning a contract worth Rs 3,390 crore.
India’s largest wind turbine maker by sales Suzlon Energy rose 0.88% to Rs 310.10. Suzlon Energy, through its step-down wholly owned subsidiary company, SE Drive Technik, Germany in joint venture with REpower Systems AG, Germany has established a new company Renewable Energy Technology Centre. Both the firms hold 50% stake each in the new company.
Realty stocks fell. Indiabulls Real Estate (down 4.73% to Rs 630), Housing Development Infrastructure (down 2.79% to Rs 908.25), DLF (down 3.33% to Rs 816.70) and Unitech (down 2.76% to Rs 351.05) edged lower.
Consumer durables stocks fell. Titan Industries (down 5.69% to Rs 1,061.65), Videocon Industries (down 4.71% to Rs 411.45), Rajesh Exports (down 3.39% to Rs 128.25) and Blue Star (down 3.95% to Rs 460) edged lower.
India’s largest private sector firm by market capitalization and oil refiner Reliance Industries declined 0.13% at Rs 2,421.75. It recovered from its lows of Rs 2,391.50.
India’s largest telecom services provider by sales Bharti Airtel rose 2.12% to Rs 880.80.
India’s second largest listed telecom firm by sales Reliance Communications declined 1.61% to Rs 633.70. Reliance Infratel, the tower subsidiary of Reliance Communications (RCom), will reportedly build 56,596 telecom towers by financial year 2010, increasing the total number of towers to 1 lakh.
Reliance Natural Resources clocked highest volume of 3.79 crore shares on BSE. Ispat Industries (1.54 crore shares),Reliance Petroleum (1.29 crore shares), Nagarjuna Fertilisers and Chemicals (1.24 crore shares) and IFCI (1.09 crore shares) were the other volume toppers on BSE in that order.
Reliance Natural Resources clocked the highest turnover of Rs 573.83 crore on BSE. Reliance Energy (Rs 408.07 crore), Reliance Industries (Rs 267.90 crore), Reliance Petroleum (Rs 211.76 crore) and Reliance Communications (Rs 181.71 crore) were other turnover toppers on BSE in that order.
A poor response to the IPO due to depressed secondary market conditions caused Wockhardt Hospitals to withdraw its IPO on Thursday, 7 February 2008. The IPO was subscribed just 20% by Thursday, the last day of the issue.
The Bank of England on Thursday, 7 February 2008, cut its key interest rate by a quarter percentage point to 5.25% to help shore up the economy but policymakers remained worries about inflation, dampening hopes of rapid-fire rate cuts. The European Central Bank kept euro-zone rates unchanged at 4% on the same day.
European markets were firm. Stock markets in France, Germany and UK were higher between 0.54-1.14%.
Markets in China, Hong Kong, South Korea, Singapore, and Taiwan were closed today for the Lunar New Year holiday. Japan’s Nikkei 225 average was down 1.44%.
US stocks rose on Thursday, as relatively cheap valuations tempted investors back to Wall Street after a three-day losing streak. The Dow Jones industrial average was up 46.90 points, or 0.38%, at 12,247.00. The Standard & Poor's 500 Index was up 10.46 points, or 0.79%, at 1,336.91. The Nasdaq Composite Index rose 14.28 points, or 0.63%, at 2,293.03.
Even if the US goes into the recession, it may not impact India’s economic growth in a big way given that domestic demand is a key driver of the Indian economy. India’s economy is expected to post strong growth for a long period due to favourable demographics. Moreover a healthy investment cycle will continue to support India’s growth through a self-perpetuating cycle of income creation, savings and investment.
India's economy is expected to expand at 8.7% in fiscal 2007/08, slower than 9.6% growth in 2006/07, which was its strongest pace in 18 years, government's central statistics office (CSO) said on Thursday, 7 February 2008. CSO has pegged manufacturing output growth at an annual 9.4% this fiscal compared with 12% growth in the previous year. Farm output growth is estimated at 2.6% for the full year 2007/08 compared with 3.8% growth in 2006/07. Services sector growth is estimated at 10.7% for the year against 11.1% growth in 2006/07.
Corporate earnings growth remains decent. Deutsche Bank expects 20% compounded annual growth rate in earnings of 30-Sensex firms during the period from FY 2007 (year ended 31 March 2007) to FY 2009 (year ending 31 March 2009).
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