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Weekly Newsletter - May 24 2008

SBI to resume tractor loans with immediate effect

State Bank of India (SBI) found itself in the eye of a raging storm after newspapers reported that the public sector banking giant had decided to suspend fresh loan disbursements for buying tractors and other agriculture equipment. "The bank has put on hold financing New Tractor and Farm Mechanisation activities with immediate effect in view of the very high overdues in this sub-segment of agri advances," SBI said in a May 16 circular. The decision will be reviewed based on the progress achieved in reduction of overdues in due course," it added. The circular sparked a major uproar across the country, with farmers, tractor manufacturers and political parties criticizing the bank's move. The outrage reached alarming proportion and eventually SBI had to withdraw the circular. "We regret that our circular dated May 16, concerning tractor loans has been misunderstood and has given rise to concern," SBI Chairman OP Bhatt said. The intent was to sensitise the borrowers to avail the facility under the loan waiver scheme that was announced by the government, in the Union Budget, said Anup Banerjee, deputy MD and head of agri business at SBI. The bank would have resumed lending after the loan waivers were executed, he said. Finance Minister P. Chidambaram said the circular was withdrawn at his behest as it was poorly worded and not justified.

Essar's Esmark bid hits roadblock

Essar Steel too was in the limelight as its proposed acquisition of US-based steel company Esmark ran into some trouble. Russia's steelmaker Severstal matched the Essar group’s offer to buy Esmark for US$17 per share, that it said was worth US$1.2bn. The Russian company’ offer came exactly 20 days after Essar Steel Holdings announced its agreement to acquire Esmark. Severstal appointed Merrill Lynch as financial advisor. The Essar offer was approved by the Esmark board but failed to get the support of the United Steel Workers, the main trade union of Esmark. The union's contract allows it to reject any deal that changes control of the US company. Severstal said it has the support of Esmark's main union. Reports suggested that Essar Steel Holdings may raise its bid for Esmark. The Ruias will submit its revised bid after negotiating with the United Steel Workers, according to reports.

Margins under pressure: ACC

There is tremendous pressure on margins because of rising input costs and the company will have to hike prices once the freeze ends in about three months, ACC said. Core margins had fallen 4% in the January-March quarter and would see more erosion in April-June period, officials said. "Given the current situation in the industry, ACC is under tremendous pressure as costs are going up... not incrementally, but leap-frogging," ACC MD Sumit Banerjee said. He said ACC would raise prices after the three-month freeze is over. "If we can, we will," Banerjee said. Earlier this month, ACC had said it would hold prices for 2-3 months after the Government asked cement companies to help contain inflation. ACC's CFO Onne van der Weijde said core margins are being eroded by 1% each month. Core margins, which exclude interest, taxes, depreciation and amortisation, were 26% in the first quarter ended March, he said, adding they fell despite a 9.5% rise in sales. "For the last 12 months, the company's factory-gate prices are falling and costs are increasing. The next nine months will be no different," Weijde said, adding that cost had risen 18-20% in the year ended April.

HP need not make open offer for Mphasis: EDS

Electronic Data Systems Corporation (EDS) said that Hewlett-Packard (HP) will not be required to make an open offer to the shareholders of Mphasis if the proposed merger with it goes through. HP won't be required to make an open offer for buying Mphasis shares under SEBI's takeover regulations, as a result of the exemption contained in section 3(1)(j)(ii) of the regulation, EDS said in a statement. HP and EDS have noted that certain press reports in India appear to suggest that, if the proposed merger is consummated, HP may be required to make a tender offer for shares of Mphasis, which is a subsidiary of EDS, the US company said. On May 14 , HP said that it will acquire EDS for US$13.9bn. Under the terms of the deal, HP will pay US$25 per share in cash for EDS and expects the deal to close in the second-half of 2008. EDS owns 60.9% in Mphasis and according to SEBI regulations, any company buying 15% or more in another company, has to make an open offer for 20% more shares in the target company.

Tata Steel secures permit to find Iron Ore

Tata Steel bagged permit to find iron ore in Jharkhand as it doubles production to 10mn tons. The permit allows Mumbai-based Tata Steel to prospect an 1808- hectare (4,468 acres) area, the Ministry of Mines said in a statement. Last month, Tata Steel was allowed by the nation's highest court to seek the environment ministry's clearance to mine iron ore in a forest area in Chhattisgarh, where the company plans to build a five million-ton plant. Jharkhand, Chhattisgarh and Orissa account for 70% of the country's coal reserves and half its iron ore deposits.

Tanti talk turns REpower shares volatile

Shares of REpower Systems turned volatile amid reports that Suzlon Energy, which had acquired a 34% stake in the German company a year ago, was looking to sell shares in the open market. "We may think of selling some stake in the market as it will lead to value creation," Suzlon chairman Tulsi Tanti was quoted as saying while announcing financial results for the year ended March. Following Tanti's reported remarks, REpower stock fell to €225 in Frankfurt before recovering. On Monday, it had touched a 52-week high of €243.54. However, later in the day, Tanti denied reports about stake sale in REpower. The company also released a clarification in the evening, saying that there was no change in its overall strategy regarding REpower and that it will proceed as originally planned. Suzlon currently holds 33.6% in REpower and has an option to acquire 30.9% from French energy giant Areva and another 23% from Martifer by May 24, 2009.

Ranbaxy launches operations in Yemen

Ranbaxy Laboratories said it has commenced operations in Yemen, introducing its products to around 350 doctors. Ranbaxy has tied up with Pharma Ltd. (Natco) as business partner for its Yemen operations. Pharma is one of the pioneers in the healthcare sector in Yemen. Ranbaxy has robust plans for the Yemen market and will focus on therapy areas such as Anti infectives, Gastro-intestinal, Cholesterol lowering and Anti-Allergic categories. Ranbaxy is the first Indian company to have established such a major presence in

Educomp Solutions picks 51% stake in Learning.com

Educomp Solutions announced that it has acquired a 51% stake in leading US-based elearning company Learning.com. The majority stake has been acquired at an investment of US$24.5mn, which included the purchase of existing shares as well as an infusion of new capital. Founded in 1999, Learning.com is the premier provider of Web-delivered curriculum and assessment, and partners with schools and districts throughout US to improve student learning outcomes. It currently serves nearly two million students in schools across the US. This investment provides Educomp with unparalleled distribution access to over 800 districts and 2mn students across the US and leverages its substantial content development and IP capabilities to reach out to North American markets.

Firstsource wins 3-year order from Bharti Airtel

Firstsource Solutions, one of the leading global BPO services providers and Bharti Airtel, India's largest private telecom services provider, signed a three-year outsourcing agreement. Firstsource will provide a suite of BPO services covering both voice and backoffice in areas such as customer accounting, VAS provisioning, fraud & credit monitoring, customer service, collections, customer retention and the likes to Airtel from its centres in Chennai and Mumbai. It will set up centres in Vashi, New Bombay and Chennai for Airtel and expects to have over 1000 employees in the first year focused on providing services in English and 8 other regional languages to Airtel’s customers.

Tale of two dubious re-listings

An obscure company by the name KGN Industries caught the attention of most market players after its shares zoomed to a jaw-dropping Rs55,000 in a matter of just a few minutes on May 21. KGN, which is an NBFC (formerly known as Royal Finance) got re-listed and resumed trading at Rs72 on the BSE. Early in the session trading was light, but as time progressed bids for the stock slowly inched towards the Rs1,000 mark. Within no time, the stock's prices surged from Rs10,000 to Rs55,000. Since it was the day of re-listing, as per current rules no circuit-breakers were in place, allowing the stock a free run. Fortunately, BSE officials found that orders were being placed at unrealistic prices. As a result, trading in the scrip was suspended after nearly two-and-half hours of trading. KGN stock closed at Rs15,001 on thin volumes of just 827 shares. As if that wasn't enough market participants were stunned to witness another dubious re-listing the very next day. This time, the beneficiary was a company called Sylph Technologies. The company's shares got re-listed at Rs152, and then surged to an intra-day high of Rs800. The stock had closed at Rs0.80 per share before getting suspended. Sylph Tech closed the day at Rs200 amid volume of only 6,500 shares. Shares of KGN was locked in 5% lower circuit on Friday, slipping from its high to end at Rs4,863. The total number of shares traded on the counter was only 36 shares.

Food prices remain high despite higher output: FAO

High food prices have particularly hit vulnerable populations in many countries that spend a substantial part of their income on food, according to a report released today by the UN Food and Agriculture Organization (FAO).

The latest Food Outlook indicates that the food import bill of the Low Income Food Deficit Countries (LIFDCs) is expected to reach US$169bn in 2008, 40% more than in 2007. FAO calls the sustained rise in imported food expenditures for vulnerable country groups “a worrying development,” and says that by the end of 2008 their annual food import basket could cost four times as much as it did in 2000.

International prices of most agricultural commodities have started to decline, but they are unlikely to return to the low price levels of previous years, Food Outlook reports. The FAO food price index has remained stable since February 2008, but the average of the first four months of 2008 is still 53 percent higher when compared to the same period a year ago.

Hunger likely to worsen:

“Food is no longer the cheap commodity that it once was. Rising food prices are bound to worsen the already unacceptable level of food deprivation suffered by 854 million people,” said FAO Assistant Director-General Hafez Ghanem . “We are facing the risk that the number of hungry will increase by many more millions of people.”

Despite a favourable global production outlook, the expected price decline in many basic agricultural commodities during the new 2008/2009 season is likely to be limited, because of the need to replenish stocks and an increase in utilization. Due to rising utilization, more than one good season is required to replenish stocks and reduce price volatility.

Record output expected in 2008 world cereal production:

FAO’s latest forecast for world cereal production in 2008 points to a record output, now at nearly 2192 million tonnes, including milled rice, up 3.8 percent from 2007. Among major cereals, the tight wheat supply is likely to improve most, given the prospects for better harvests in 2008. Despite record production levels in several crops, tight markets will probably lead to continued price volatility during the season.

Heads of State and Government will address the problem of high food prices and the challenges of climate change, bioenergy and food security at the upcoming June summit in Rome (3-5 June 2008).

Other Commodity Highlights:

Oils and oilseeds

The rise in international prices of oilseeds and oilseed products has accelerated in 2007/08, with values climbing to new record levels in March 2008. World markets have tightened considerably as reduced supply growth for oils and a drop in meal supplies are coinciding with further expansion in demand. First forecasts for the 2008/09 season point towards a strong recovery in global oilseed production, and the resulting oil and meal output should be sufficient to meet global demand.

Sugar:

Generally favourable growing conditions led to a record world sugar production in 2007/08 and although world sugar consumption is foreseen to increase at a sustained rate, it will not be enough to absorb an expected second consecutive global supply surplus. International sugar prices are likely to remain under downward pressure.

Meat:

Global meat output is expected to grow in 2008 despite high feed prices. Strong economic growth is expected to sustain steadfast consumption in many developing countries.

Dairy:

Global milk production, which is responding to the past year’s high milk product prices, is forecast to grow strongly in 2008. However, there is uncertainty as to where dairy markets will head. Global trade in milk products is anticipated to fall again in 2008 mainly because of reduced exportable supplies. Import demand seems to have faltered because of high dairy product prices due to strong increases in milk output among several importing countries.

Fisheries:

Food Outlook forecasts that aquaculture production growth will continue this year with the historic milestone of reaching the same level as the expected capture fisheries in 2008. Prices for wild species from capture fisheries are moving upwards strongly but the price increase for farmed species are expected to be more moderate.

The potato:

Worldwide potato production could expand over the next decade between 2 and 3 percent annually – with developing countries, especially those situated in Sub Saharan Africa, being the main engine of growth. In China, the world's biggest potato producer, authorities are reviewing proposals for the potato to become one of the country’s major food crops, while India is considering plans to double potato output in the next five to ten years.

Govt under pressure to hike fuel prices

Here in India, public sector oil marketing companies unleashed a slew of measures to protect their turf given the Government's reluctance to help them limit the damage from the grim business scenario. According to reports, state-run OMCs suspended new LPG connections, curtailed fuel supplies to dealers and increased the sale of branded fuels to cut their losses. HPCL reportedly warned the Government of huge losses for the year while Numaligarh Refinery - a BPCL JV with the Assam Govt - said it will cut supply to dealers by the end of the month. The Government, however said the steps taken by OMCs did not have its stamp of approval. Petroleum Minister Murli Deora met the Prime Minister and sought his help in tiding over the crisis, while the Petroleum Secretary held a meeting with OMC's head honchos to discuss various options at their disposal.

The Cabinet did meet on Friday, but didn't take any decision on fuel price hike. The Petroleum Secretary said the Cabinet will take a call on fuel prices over the nest few days. The Petroleum Ministry is seeking a Rs10 per litre increase in petrol and Rs5 a litre hike in diesel prices along with cut in customs and excise duties to curb the impact of surging crude prices. Whether its demand is met or not only time will tell. Even a small hike in fuel prices is bound to generate a lot of hue and cry. The Government is in a major bind as any increase in fuel prices will lift inflation, which crossed 8% in the week ended March 15 (revised). On the other hand, a status quo will mean more blood letting for the oil companies. The most likely scenario is that the Centre will go for a small hike fuel prices, and may also tweak duties and ask upstream companies like ONGC to share more burden of the under-recoveries.

Crude oil shoots past US$135/bbl

Oil prices blazed past the US$135 per barrel mark after a US government report showed a surprising drop in fuel inventories, escalating worries over already fragile global supply scenario. A weak dollar also continued to attract heavy fund buying. To make matters worse, OPEC once again refused to increase supply. OPEC Secretary General Abdullah al-Badri said oil prices could keep rising if factors such as the weakening dollar continue to put pressure on prices. But, he added that OPEC would only act when market fundamentals showed a need to do so.

Billionaire investor T. Boone Pickens said he expects oil to hit US$150 a barrel this year. His comments came after at least five banks raised price forecasts in the past week on expectations that supply constraints will persist. Two weeks back, Goldman Sachs said crude oil could touch US$200 by 2010. The International Energy Agency (IEA) said it may cut long-term supply forecasts as fields deplete faster than expected. However, oil prices fell on the last day of the week as traders sold to benefit from a 20% increase in prices since May 1.

Crude oil for July delivery rose as much as US$1.57, or 1.2%, to US$132.38 a barrel in New York. It was at US$132.08 a barrel at 10:41 a.m. in London, on Friday. Yesterday, oil fell US$2.36, or 1.8%, to settle at US$130.81 after reaching US$135.09 a barrel, the highest on record. Oil prices are up 4.3% so far this week and have doubled in the last one year. Crude prices are likely to carry on rising, futures prices showed. The December 2016 contract is up 7.9% this week

NSE Bulk Deals to Watch - May 23 2008

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
23-MAY-2008,ISPATIND,Ispat Industries Limited,JAYPEE CAPITAL SERVICES LTD.,BUY,7445046,35.25,-
23-MAY-2008,KIRIDYES,Kiri Dyes and Chemicals L,ELARA INDIA OPPORTUNITIES FUND LIMITED,BUY,381140,165.44,-
23-MAY-2008,SELMCL,SEL Manufacturing Company,DKG SECURITIES PVT LTD.,BUY,179799,474.95,-
23-MAY-2008,SELMCL,SEL Manufacturing Company,DKG SECURITIES PVT. LTD.,BUY,95274,476.18,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,AMBIT SECURITIES BROKING PVT. LTD.,BUY,260304,49.59,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,DIPAK RAMANBHAI RATHOD,BUY,163009,47.56,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,GOPAL TRADERS,BUY,115500,47.63,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,TRANSGLOBAL SECURITIES LTD.,BUY,157921,49.26,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,UDDHAO RASHMI SANDEEP,BUY,120510,49.52,-
23-MAY-2008,ISPATIND,Ispat Industries Limited,JAYPEE CAPITAL SERVICES LTD.,SELL,7623861,35.36,-
23-MAY-2008,JYOTHYLAB,Jyothy Laboratories Limit,TEMPLETON MUTUAL FUND A/C FLEXI CAP FUND,SELL,135678,535.00,-
23-MAY-2008,SELMCL,SEL Manufacturing Company,DKG SECURITIES PVT LTD.,SELL,134677,480.38,-
23-MAY-2008,SELMCL,SEL Manufacturing Company,DKG SECURITIES PVT. LTD.,SELL,95274,481.80,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,AMBIT SECURITIES BROKING PVT. LTD.,SELL,260298,49.54,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,DIPAK RAMANBHAI RATHOD,SELL,163009,50.27,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,GOPAL TRADERS,SELL,11880,47.15,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,TRANSGLOBAL SECURITIES LTD.,SELL,157951,49.34,-
23-MAY-2008,SITASHREE,Sita Shree Food Products,UDDHAO RASHMI SANDEEP,SELL,120510,49.59,-

BSE Bulk Deals to Watch - May 23 2008

Deal Date Scrip Code Scrip Name Client Name Deal Type * Quantity Price **
23/5/2008 532975 AISHWARYA TE MATRIX EQUITRADE PVT LTD B 65612 101.04
23/5/2008 532975 AISHWARYA TE SANJAY KUMAR YADAV B 64475 101.07
23/5/2008 532975 AISHWARYA TE S. M. NISSAR B 307357 101.82
23/5/2008 532975 AISHWARYA TE PREM MOHANLAL PARIKH B 100000 101.00
23/5/2008 532975 AISHWARYA TE N D NISSAR B 90374 101.50
23/5/2008 532975 AISHWARYA TE SMITA VILAS MARATHE B 331275 100.91
23/5/2008 532975 AISHWARYA TE MANISH V SARVAIYA B 116864 101.80
23/5/2008 532975 AISHWARYA TE MATRIX EQUITRADE PVT LTD S 65612 100.97
23/5/2008 532975 AISHWARYA TE SANJAY KUMAR YADAV S 64475 101.64
23/5/2008 532975 AISHWARYA TE S. M. NISSAR S 307357 102.01
23/5/2008 532975 AISHWARYA TE N D NISSAR S 90374 101.64
23/5/2008 532975 AISHWARYA TE SMITA VILAS MARATHE S 331275 101.35
23/5/2008 532975 AISHWARYA TE MANISH V SARVAIYA S 116864 101.74
23/5/2008 531223 ANJANI SYNTH NILESH RASIKLAL PANDYA B 128017 46.87
23/5/2008 523489 CMM HOSPITAL. SHILPA S MORAKHIA S 41864 20.98
23/5/2008 507833 COMPUTER POI ANOOP NOPANY S 66000 5.10
23/5/2008 531067 CONTIL I LTD SAURBH MOHAN B 21890 11.09
23/5/2008 532271 CYBERMAT INF S V ENTERPRISES B 1852143 6.49
23/5/2008 532271 CYBERMAT INF S V ENTERPRISES S 2770109 6.44
23/5/2008 517973 DMC INTER HITECH COMPUTECH PRIVATE LTD B 21100 13.00
23/5/2008 517973 DMC INTER J A FINANCIAL AND MANAGEMENT CONSULTANTS PVT LTD B 25000 13.05
23/5/2008 517973 DMC INTER HITECH COMPUTECH PRIVATE LTD S 35000 13.05
23/5/2008 531863 GEEKAY FINAN CRESTA FUND LTD B 150000 69.45
23/5/2008 531863 GEEKAY FINAN SUYASH SINGHAL S 30000 69.08
23/5/2008 531137 GEMSTONE INV MALA H SHETH B 20000 22.55
23/5/2008 531137 GEMSTONE INV BHAVESH PRAKASH PABARI S 25000 22.56
23/5/2008 511116 HFCL INFOTEL MANOHAR MANAK ALLOYS PVT.LTD B 260562 19.81
23/5/2008 511116 HFCL INFOTEL NIRMALA ASHOK SETH S 260562 19.81
23/5/2008 531602 KOFF BR PICT LAXMI CAP BROKING PVT LTD B 64884 24.19
23/5/2008 531602 KOFF BR PICT LAXMI CAP BROKING PVT LTD S 50895 23.67
23/5/2008 524404 MARKSANS SHRADHA TRADELINKS PVT LTD B 1800000 21.15
23/5/2008 532692 RADHA MADHAV INDIASTAR MAURITIUS LIMITED S 143861 59.62
23/5/2008 532961 SITA SHREE N D NISSAR B 204093 49.89
23/5/2008 532961 SITA SHREE N D NISSAR S 204093 49.80
23/5/2008 513530 STELCO STRIP SPJSTOCK B 55258 46.23
23/5/2008 513530 STELCO STRIP SPJSTOCK S 55258 46.53
23/5/2008 506687 TRANSPEK IND RUCHIT B PATEL B 43000 82.00
23/5/2008 531703 TRIBHVAN HSG CRESTA FUND LTD B 52000 80.92
23/5/2008 531703 TRIBHVAN HSG UNIVERSAL CREDIT S 40000 80.90
23/5/2008 531088 TULIP STAR H MANISH MEHTA B 42865 230.54
23/5/2008 531249 WELL PACK PA DEVENDRA SURESH GUPTA B 60000 67.89
23/5/2008 531249 WELL PACK PA N C JAIN B 90516 67.61
23/5/2008 531249 WELL PACK PA N C JAIN S 90516 66.81

Market takes a beating

The market witnessed a full-fledged correction, as weak Asian markets and flat US and European indices in yesterday's close dampened the sentiment. After easing sharply in the last few sessions of the week, profit taking was round the corner, as the Sensex had rallied sharply last week. Although the Sensex resumed on a positive note at 16,959, the market soon lost ground and slipped below 16,800 in early trades. The market steadily kept losing momentum as trading progressed and lost significantly in afternoon trades as selling in heavyweights, realty, FMCG, oil & gas and metal stocks dragged the index to the day's low of 1,626. The Sensex finally ended the session with losses of 257 points at 16,650, while the Nifty shed 77 points to close at 4,949.

The market breadth was extremely weak. Of the 2,790 stocks traded on the BSE 1,901 stocks declined, 816 stocks advanced and 73 stocks ended unchanged. All the sectoral indices ended in red except BSE HC index. BSE Realty index was the major loser and shed 2.38% at 7,510 followed by BSE FMCG index (down 2.15% at 2,387), BSE Oil & Gas index (down 2.15% at 10,975) and BSE Metal index (down 2.08% at 16,796).

Among the major losers ITC shed 4.24% at Rs213.60, Tata Motors declined 3.57% at Rs638, Jaiprakash Associates fell by 3.43% at Rs237.65, Larsen & Toubro slipped by 2.47% at Rs2,844.75, Reliance Energy dipped 2.42% at Rs1,291, ONGC lost 2.41% at Rs902.05 and Tata Consultancy Services slumped 2.40% at Rs933.70. While Hindalco, Reliance Communications, SBI, Ambuja Cement, ICICI Bank, ACC, Infosys, DLF, Maruti, Wipro, Satyam Computer and Tata Steel lost above 1-2% each. Bharti Airtel, however, gained 2.35% at Rs836.80 while HDFC, HUL, HDFC Bank and Cipla ended with steady gains.

Over 3.56 crore Ispat Industries shares changed hands on the BSE followed by IFCI (1.67 crore shares), Aishwarya Telecom (1.11 crore shares), Idea Cellular (0.92 crore shares) and Reliance Natural Resources (0.81 crore shares).

Global cues, futures & options expiry to dictate trend

The market is likely to dance to global tunes in absence of any near term major domestic trigger with Q4 March 2008 results almost over. Expiry of May 2008 futures & options series on Thursday, 29 May 2008 will keep the market volatile. As per reports, rollover of Nifty positions from May 2008 series to June 2008 series stood at 27.50%, as on 23 May 2008.

Aggregate results of 1886 companies showed 18.70% rise in net profit on 22.60% rise in net sales in Q4 March 2008 over Q4 March 2007, so far. There was 28.10% rise in net profit on 22% rise in net sales in the year ended March 2008 over year ended March 2007.

Forthcoming inflation data will be closely watched as it remains as a major worry and hindrance for the domestic growth. High inflation may compel the government to take more fiscal measures to rein in prices in addition to slew of measures taken recently.

Inflation based on the whole price index rose 7.82% in the year through 10 May 2008, marginally lower than 7.83% rise in the previous week, government data released on 23 May 2008, showed. Meanwhile, inflation for the year through 15 March 2008 was revised upwards to 8.02% compared to provisional figure of 6.68%.

Foreign institutional investors (FII) sold shares worth Rs 673.40 crore in this month, till 21 May 2008. They sold shares worth Rs 11,031.40 crore in calendar year 2008, till 21 May 2008. Domestic funds sold shares worth Rs 639.80 this month, till 14 May 2008. Mutual funds were net sellers of shares worth Rs 578.30 crore in this month, till 20 May 2008.

Earnings downgrade amid rising input and interest costs, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market.

With parliamentary elections scheduled next year (May 2009), the government may leave no stone unturned in its attempt to tame inflation. This is bad news for commodity shares from cement and steel sector.

Meanwhile, as per a recent study by CLSA, large amount of foreign currency convertible bonds (FCCBs) issued by Indian companies are coming up for redemption in the next 18-24 months. After recent stock market volatility many FCCBs are at risk of not converting i.e. if the stock market remains subdued, it will stop the bond holders from opting for an equity conversion as it will be easier for them to buy the stock from the open market instead of paying the agreed premium.

When the FCCBs come for redemption, some of these companies may have to take on more debt to redeem the FCCB, thereby raising interest outgo. In the event FCCBs don't get converted, companies have the option to lower the conversion price in line with the market, leading to higher equity dilution. If companies decide to issue fresh FCCBs to finance redemption of FCCBs, it will be at lower premium than earlier.

With the rupee tumbling against the dollar in the last few days, the government may ease restrictions on overseas corporate borrowing when it, together with the RBI, reviews the external commercial borrowing (ECB) policy later this month, reports suggest. Last year, the government had imposed restrictions on ECBs in a bid to check in surge in rupee against the dollar. There are many Indian corporates who will eagerly seek cheap overseas funds if the RBI re-opens the ECB tap, analysts reckon.

The structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. A CLSA report says India’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises. Rating agency Crisil in its outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.

Given the continued inflow to unit linked insurance plans (Ulips) and equity linked savings schemes (ELSS) of mutual funds, stock-specific buying will continue depending on fundamentals of individual stocks. Insurance firms are now a major player in the Indian stock market given the huge mop up in Ulips in recent years. It was buying support from domestic funds which had aided the recent recovery on the bourses.

Meanwhile, as per recent reports, ELSS which offer tax benefit are catching the fancy of small savers. ELSS funds saw their collective assets jump more than nine times to about Rs 16000 crore in three years ending March 2008. In 2005 the investment limit eligible for income tax breaks was raised ten times to Rs 1,00,000 rupees for ELSS funds. Systematic investment plan (SIP) are said to be driving inflows into ELSS funds.

The key benchmark indices suffered losses in the week ended Friday, 3 May 2008 following concerns that soaring global crude oil prices which struck record high of over $135 barrel and spiraling inflation will impact growth.

The BSE Sensex slumped 785.30 points or 4.50% to 16,649.64 in the week ended Friday, 23 May 2008. The S&P CNX Nifty declined 211.15 points or 4.09% to 4,946.55in the week.

S&P CNX Nifty settles below 5,000 mark

Relentless selling in realty, oil & gas and metal stocks spooked sell-off in late trade, erasing early gains. Weak Asian and European markets also played the spoilsport. The S&P CNX Nifty settled below the physcological 5,000 mark, after closing above that level for six consecutive sessions. The market breadth was weak on BSE.

The 30-share BSE Sensex settled 257.47 points or 1.52% lower at 16,649.64 after registering 147.23 point gain at day’s high of 17,054.34 and 281 point loss at day’s low of 16,626.11. The day's high and low were hit during early and late trade respectively.

The broader based S&P CNX Nifty was down 78.9 points or 1.57% at 4,946.55. Nifty May 2008 futures were at 4945.20, a marginal discount of 1.35 points as compared to spot closing. Nifty May 2008 futures are set for expiry on Thursday, 29 May 2008.

The NSE's futures & options (F&O) segment turnover slipped to Rs 41,317.97 crore, as compared to Rs 45076.17 crore on Thursday, 22 May 2008.

The BSE Mid-Cap index declined 1.59% to 6,937.11 and BSE Small-Cap index declined 1.69% to 8,517.43. Both these indices underperformed Sensex.

The BSE clocked a turnover of Rs 5,358 crore today as compared to Rs 6,106.27 crore on 22 May 2008.

Securities Exchange Board of India (Sebi)'s plan to keep in abeyance the imposition of upfront margins for institutional trades in the cash market. Securities & Exchange Board of India (Sebi) had earlier asked institutional investors to pay upfront margins from 16 June 2008. In the light of difficulties expressed by the market participants regarding implementation of upfront margining of institutional trades in the cash market, it has been decided to keep the same in abeyance, Sebi said in a circular issued to stock exchanges.

Inflation based on the whole price index rose 7.82% in the year through 10 May 2008, marginally lower than 7.83% rise in the previous week, government data released today, 23 May 2008, showed. Meanwhile, inflation for the year through 15 March 2008 was revised upwards to 8.02% compared to provisional figure of 6.68%.

The market breadth, which was strong during first half of the day, settled weak. On BSE, 795 shares advanced as compared to 1,924 that declined and 71 remained unchanged.

Among the 30-member Sensex pack, 25 declined while the rest advanced.

Among the sectoral indices, the BSE Realty index (down 2.38% at 7,510.14), BSE FMCG index (down 2.15% at 2,387.47), BSE Oil & Gas index (down 2.15% to 10,975.26), BSE Metal index (down 2.08% to 16,795.80), BSE IT index (down 1.75% to 4,340.98), BSE Bankex (down 1.72% at 8,232.16), BSE PSU index (down 1.69% to 7,524.44) underperformed Sensex.

While the BSE Auto index (down 1.39% at 4,619.90), BSE Capital Goods index (down 1.12% at 13,192.42), BSE Consumer Durables index (down 1.04% to 4,584.46), BSE TecK index (down 0.98% to 3,454.97), BSE Power (down 0.93% to 3,202.79), BSE Health Care index (up 0.02% at 4,229.03) outperformed Sensex.

Interest rate sensitive realty stocks declined, while banking shares were mixed. Indiabulls Real Estate (down 4.3% to Rs 490.45), DLF (down 1.76% to Rs 609.75) and Unitech (down 2.04% to Rs 268.25) edged lower from real estate pack.

Banking stocks fell after inflation data. India’s largest private sector bank by net profit ICICI Bank (down 1.89% to Rs 863.75) and State Bank of India (down 2.1% to Rs 1,573.25) edged lower. However HDFC Bank rose 0.25% to Rs 1,383.35.

Oil & Gas stocks declined on profit booking after steady rally in past few days. Cairn India (down 4.05% to Rs 306.45), ONGC (down 2.41% to Rs 902.05) and Reliance Industries (down 2.39% to Rs 2,554.80) edged lower.

Metal stocks were weak. Sterlite Industries (down 4.96% to Rs 903.20), Hindalco Industries (down 2.38% to Rs 192.95), Tata Steel (down 1.32% to Rs 896.50) and Steel Authority of India (down 1.57% to Rs 172.95) , National Aluminium Company (down 0.45% to Rs 528) edged lower.

FMCG stocks fell. ITC declined 4.48% to Rs 213.05. The company posted 13.05% rise in net profit to Rs 735.64 crore on 17.95% rise in total income to Rs 4,098.07 crore in Q4 March 2008 over Q4 March 2007. Tata Tea (down 1.91% to Rs 899.95), Dabur India (down 1.61% to Rs 94.75) edged lower.

Bharti Airtel (up 2.35% to Rs 836.80), HDFC (up 1.96% to Rs 2,678.30), Cipla (up 0.2% to Rs 203.50), Hindustan Unilever (up 0.32% to Rs 235.75) edged higher from the Sensex pack.

Tata Motors (down 3.57% to Rs 637.85), Jaiprakash Associates (down 3.43% to Rs 237.65), Reliance Infrastructure (down 2.42% to Rs 1,291), Reliance Communicatios (down 2.11% to Rs 572.30), edged lower from Sensex pack.

India’s largest IT exporter by sales Tata Consultancy Services (TCS) declined 2.4% to Rs 933.70. It has reportedly won a contract, estimated to be worth more than Rs 1000 crore, for processing Indian passport applications.

India’s largest tractor maker by sales Mahindra & Mahindra was down 0.07% to Rs 651.90. Private equity ICICI Venture is reportedly partnering Mahindra & Mahindra in its bid to acquire Belgian gear maker VCST Industrial Products in a deal valued around 250 million euros.

Ispat Industries clocked the highest volume of 3.57 crore shares on BSE. IFCI (1.67 crore shares), Aishwarya Telecom (1.11 crore shares), Idea Cellular (92.15 lakh shares) and Reliance Natural Resources (81.43 lakh shares) were other volume toppers in that order.

Reliance Capital clocked the highest turnover of Rs 283.43 crore on BSE. Cairn India (Rs 175.73 crore), Reliance Industries (Rs 151.06 crore), Reliance Power (Rs 138.29 crore) and Ispat Industries (Rs 126.68 crore) were other turnover toppers in that order.

European markets were weak. Key benchmark indices from France, Germany and UK were down between 0.48% to 1.05%.

Most of the Asian markets were in red. Key benchmark indices in Japan, rose by 0.24%. Key benchmark indices in Singapore, Hongkong, Taiwan China and South Korea were down by between 0.36% to 1.92%.

US stocks rose modestly on Thursday, 22 May 2008, after two days of steep declines as energy prices pulled back from record highs and a proposed acquisition in the utilities sector buoyed optimism. The Dow rose 24.43 points, or 0.19% to close at 12,625.62. The Standard & Poor's 500 Index climbed 3.64 points, or 0.26%, to 1,394.35, while the Nasdaq Composite Index was up 16.31 points, or 0.67%, at 2,464.58.

Earnings downgrade amid rising input and interest costs, high inflation and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. In a bid to rein in inflation, the Reserve Bank of India, on Tuesday, 29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to 8.25%, to suck out excess liquidity in the banking system, in its annual monetary policy review.

With parliamentary elections scheduled next year (May 2009), the government may leave no stone unturned in its attempt to tame inflation. This is bad news for commodity scrips such as cement and steel. Cement maker ACC said earlier this months that its margins will be hurt by a decision to hold its prices for 2 to 3 months that was taken after the government asked cement firms to help contain price pressures. The government recently imposed export tax on basmati rice and some steel products, and cut import duties on key inputs like ferro alloys and metallurgical coke. The government had earlier banned export of cement and non-basmati rice. On 7 May 2008, the government ordered suspension in futures trading in channa, refined soyoil, potato and rubber for four months.

Meanwhile, as per a recent study by CLSA, large amount of foreign currency convertible bonds (FCCBs) issued by Indian companies are coming up for redemption in the next 18-24 months. After recent stock market volatility many FCCBs are at risk of not converting i.e. if the stock market remains subdued, it will stop the bond holders from opting for an equity conversion as it will be easier for them to buy the stock from the open market instead of paying the agreed premium.

When the FCCBs come for redemption, some of these companies may have to take on more debt to redeem the FCCB, thereby raising interest outgo. In the event FCCBs don't get converted, companies have the option to lower the conversion price in line with the market, leading to higher equity dilution. If companies decide to issue fresh FCCBs to finance redemption of FCCBs, it will be at lower premium than earlier.

With the rupee tumbling against the dollar in the last few days, the government may ease restrictions on overseas corporate borrowing when it, together with the RBI, reviews the external commercial borrowing (ECB) policy later this month, reports suggest. Last year, the government had imposed restrictions on ECBs in a bid to check in surge in rupee against the dollar. There are many Indian corporates who will eagerly seek cheap overseas funds if the RBI re-opens the ECB tap, analysts reckon.

The structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. A CLSA report says India’s infrastructure development is set to accelerate, backed by greater private sector participation and improved finances of government and public sector enterprises. Rating agency Crisil in its outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.

Given the continued inflow to unit linked insurance plans (Ulips) and equity linked savings schemes (ELSS) of mutual funds, stock-specific buying will continue depending on fundamentals of individual stocks. Insurance firms are now a major player in the Indian stock market given the huge mop up in Ulips in recent years. It was buying support from domestic funds which had aided the recent recovery on the bourses.

Meanwhile, as per recent reports, ELSS which offer tax benefit are catching the fancy of small savers. ELSS funds saw their collective assets jump more than nine times to about Rs 16000 crore in three years ending March 2008. In 2005 the investment limit eligible for income tax breaks was raised ten times to Rs 1,00,000 rupees for ELSS funds. Systematic investment plan (SIP) are said to be driving inflows into ELSS funds.

Soaring crude oil, high inflation pull market lower

The key benchmark indices suffered losses in the week ended Friday, 3 May 2008 following concerns that soaring global crude oil prices which struck record high of over $135 barrel and spiraling inflation will impact growth.

The BSE Sensex slumped 785.30 points or 4.50% to 16,649.64 in the week ended Friday, 23 May 2008. The S&P CNX Nifty declined 211.15 points or 4.09% to 4,946.55in the week.

The BSE Mid-Cap index fell 192.59 points or 2.77% at 6,937.11 in the week. The BSE Small-Cap index rose shed 102.83 points or 1.19% at 8,517.43. Both these indices outperformed the Sensex.

Foreign institutional investors (FII) sold shares worth Rs 673.40 crore in this month, till 21 May 2008. They sold shares worth Rs 11,031.40 crore in calendar year 2008, till 21 May 2008. Domestic funds sold shares worth Rs 639.80 this month, till 14 May 2008. Mutual funds were net sellers of shares worth Rs 578.30 crore in this month, till 20 May 2008.

The Indian stock market remained closed on Monday, 19 May 2008, on account of Buddha Pournima.

Concerns about monetary tightening by the Reserve Bank of India following high inflation rate pulled the market lower on Tuesday, 20 May 2008. The 30-share BSE Sensex lost 204.76 points or 1.17% at 17,230.18 and the broader based S&P CNX Nifty was down 52.75 points or 1.02% at 5,104.95, on that day.

However the 30-share BSE Sensex rose 12.98 points or 0.08% at 17,243.16 and the broader based S&P CNX Nifty gained 12.7 points or 0.25% at 5,117.65, on Wednesday, 21 May 2008, due to short covering at lower levels.

Sharp fall in US stocks overnight and record breaking crude oil prices above $135 a barrel triggered a broad based decline in blue chips on Thursday, 22 May 2008. The 30-share BSE Sensex lost 336.05 points or 1.95% at 16,907.11 and the broader based S&P CNX Nifty was down 92.2 points or 1.8% at 5,025.45 on that day.

On Friday, 23 May 2008, the 30-share BSE Sensex settled 257.47 points or 1.52% lower at 16,649.64 and the broader based S&P CNX Nifty declined 78.9 points or 1.57% at 4,946.55 as relentless selling in realty, oil & gas and metal stocks spooked sell-off in late trade, erasing early gains.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries declined 3.05% to Rs 2,554.80 in the week. It has reportedly formed a $1 billion joint venture with New York-based Vornado Realty Trust to set up a real estate fund.

India's largest commercial bank State Bank of India slumped 7.67% to Rs 1,573.20 in the week. It has reportedly decided to stop giving loans for the purchase of tractors and other farm equipment. Due to mounting non-performing assets in the farm equipment loan segment, the bank has decided to temporarily put on hold all future advances for farm equipment like tractors, power tillers and combined harvesters, the reports suggested.

India's largest tractor maker by sales Mahindra & Mahindra fell 1.56% to Rs 651.90 in the week. It is reportedly eyeing Italian motorcycle marque brands - Cagiva and MV Agusta. The Castiglioni family, which owns flagship MV Agusta and Cagiva motorcycle brands, has been facing financial troubles for some time and has been on the look out for a potential acquirer, the reports added.

India's largest state-run oil exploration firm in terms of revenue Oil and Natural Gas Corporation (ONGC) shed 5.14% to Rs 902.05 in the week. It is reportedly planning to sell 30% to 40% each in two blocks in Vietnam to share the risks and drilling costs. ONGC owns 100% in the two deepwater exploration blocks. The buyer has not yet been finalised, the reports added.

India's largest car maker by sales Maruti Suzuki India was down 3.52% to Rs 790.15 in the week. It has reportedly increased prices of cars by up to Rs 18,000 because of higher raw material costs.

India's largest engineering and construction firm by sales Larsen & Toubro declined 5.06% to Rs 2,844.75 in the week. The company received electrical project orders worth Rs 640 crore in the Gulf region.

HDFC Bank, India's second largest private sector bank in terms of net profit, declined 7.92% to Rs 1,383.35 in the week. The Reserve Bank of India has approved the scheme of amalgamation of Centurion Bank of Punjab with HDFC Bank. The scheme of amalgamation will come into effect from 23 May 2008.

India's largest telecom services provider by market share Bharti Airtel lost 1.71% to Rs 836.80 in the week. As per reports Bharti Airtel has forged an exclusive alliance with Indian Oil Corporation (IOC) that will enable the telco to access 18,000 retail outlets and 5,500 Indane cooking gas distributors of the oil giant.

India's largest IT exporter by sales Tata Consultancy Services (TCS) shed 4.35% to Rs 933.70 in the week. It has reportedly won a contract, estimated to be worth more than Rs 1000 crore, for processing Indian passport applications.

Inflation based on the whole price index rose 7.82% in the year through 10 May 2008, marginally lower than 7.83% rise in the previous week, government data released on 23 May 2008, showed. Meanwhile, inflation for the year through 15 March 2008 was revised upwards to 8.02% compared to provisional figure of 6.68%.

Meanwhile the Securities Exchange Board of India (Sebi) plans to keep in abeyance the imposition of upfront margins for institutional trades in the cash market. Securities & Exchange Board of India (Sebi) had earlier asked institutional investors to pay upfront margins from 16 June 2008. In the light of difficulties expressed by the market participants regarding implementation of upfront margining of institutional trades in the cash market, it has been decided to keep the same in abeyance, Sebi said in a circular issued to stock exchanges.

On Wednesday, 21 May 2008, the US Federal Reserve cut its 2008 US economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely, driving the three major US indexes down over 1.5%. Oil prices surged to a record high above $135 per barrel on Thursday, 22 May 2008, stoking fears of global inflation.

Range-bound moves likely

The market showed resilience in yesterday's trades and is likely to move in a range with select bouts of buying and selling activities today. On the downside, the Nifty has a likely support at the 4980-4930 range and could test higher levels of 5066 and 5118 while the Sensex has a support at 16736 and resistance at 17136.

US indices came off their early highs and ended with slim gains on Thursday. While the Dow Jones added 24 points to 12626, the Nasdaq was up 16 points at 2465.

Indian ADR gainers outnumbered losers on the US bourses. Dr Reddy's flared up 3.59% and HDFC Bank moved up 2.15% while Satyam, Wipro, Infosys, VSNL, Rediff and Patni Computer ended with steady gains. Among losers, MTNL tanked 1.21% while Tata Motors and ICICI Bank also ended at lower levels.

Crude oil prices in the international market declined on Thursday, with the Nymex US light crude oil for June delivery dipping $2.36 to close at $130.81 a barrel. In the commodity space, the Comex gold lost $10.30 to settle at $918.30 an ounce.

Daily trend of FII/MF investment in equities
On May 21, 2008 FIIs were net sellers of stocks to the tune of Rs611.40 crore (purchases worth Rs2,830.30 crore and sales of Rs3,441.70 crore) while domestic mutual funds were net buyers of stocks to the tune of Rs13.10 crore (purchases worth Rs622.60 crore and sales of Rs609.50 crore).

Daily Call - May 23 2008

Daily Call - May 23 2008

Market Outlook - May 23 2008

Market Outlook - May 23 2008

Today's Pick - Bharat Forge

We recommend a sell in Bharat Forge from a short-term perspective. The stock had been on a medium-term uptrend between mid March and early May, from the trough at Rs 245. However, the stock encountered resistance at Rs 310 during early May and reversed direction.

On May 13, the stock tumbled penetrating the medium-term up trendline. Following a pullback rally till the up trendline, the stock once again began to decline resuming the downtrend.

The stock fell more than 3 per cent on May 22. The relative strength index is featuring at around 40 levels and is on the verge of entering the bearish zone. We notice a crossover in the daily moving average convergence and divergence and it is declining in line with the stock price, indicating bearishness.

We are bearish on the stock in the short-term. We expect the stock’s down move to continue until it hits our price target of Rs 260 in the upcoming trading sessions. Traders with short-term perspective can sell the stock while keeping the stop-loss at Rs 294.

via BL