Grey Market Premiums

Avon Weighing 10 8 to 10

Sejal Architectural Glass Ltd. 115 19 to 21

First Winners Ind. Ltd. 125 3 to 3.50

Archid Ply Ind. 74 5 to 6

Lotus Eye Care Hospital 38 2.5 to 3

KSK Energy Venture 240 to 255 Discount

Somi Conveyor Belting 35 3 to 5

Birla Cotsyn (India) 15 to 18 1.50 to 2

Market Outlook - June 30 2008

Market Outlook - June 30 2008

Daily Call - June 30 2008

Prime Minister Singh may have finally had his way, if the Saturday endorsement by Mrs. Gandhi is anything to go by. The Nuclear Deal may finally be on and Dr. Singh may finally get to go to Japan for the G8+5 meeting. It remains to be seen whether the SP will want to support the UPA with TDP, AIDMK and JD staying out. While the cat may not be out of the bag before July 3, the nuclear power related stocks will be dusted off today as we open the trading this week.

On Friday, the indices had closed at their lowest levels of the day, which indicated continued weakness. The massive negative cost of carry further added to the gloomy scenario. However, because of the glimmer of hope of the nuclear deal, stocks could bounce early in the morning and short covering can happen. So for the moment, approach today’s trade with an open mind and short covering stance. A breaking of the 4090 level should make you go back to your bearish ways.

Morning Call - June 30 2008

Market Grape Wine :

In House :

Nifty at a support of 3980 with resistance at 4250 and 4400 levels.

Cash: sell KOTAK BANK AND ICICI BANK

Future: Sell WEL GUJ below 304 TGT 293 with S/L 310

Future: sell ESSAR OIL below 198 TGT 190 with S/L 201.

Out House:

Markets at a support of 13663 & 13551 resistance at 14041 & 14114 levels .

Maintain strict stop loss as markets to see selling at every rise .

Sell : JetAir & AirDeccan

Sell : DLF , HDIL

Buy : Tisco at dips

Buy : RIL at dips

Buy : RPL at dips

Buy : ITC & HLL at dips

Dark Horse : ITC , RIL , Tisco & RPL

Post Session Commentary - June 30 2008

The Indian Market is expected to have positive opening on the back of mixed global cues. On Friday, the Indian market closed in deep red after going through a blood bath due to rise in crude oil prices and inflation worries. Crude oil prices reached to a new high of $141.71 a barrel for the first time after the head of OPEC predicted that the price of crude could raise over $150. Market opened on extremely negative note on the back of weak global cues continued to trade weak. till the end of session. From the sectoral front, metal, capital goods, bank, oil & gas and realty stocks faced heavy selling across the counters. The BSE Sensex closed lower by 619.70 points at 13,802.22 and NSE Nifty ended down by 179.20 points at 4,136.65. We expect that market may remain volatile during the trading session.

US markets closed lower on Friday on the concern of sub-prime write down at banks may increase together with record oil and slowdown in global economic growth which in turn will hit corporate earnings.

The Dow Jones Industrial Average (DJIA) closed lower by 106.91 points at 11,346.51 along with NASDAQ down by 5.74 points to close at 2,315.63 and S&P 500 dropped by 4.77 points to close at 1,278.38.

Indian ADRs ended mixed. In technology sector, Satyam ended up by (2.50%) along with Wipro by (1.09%), Infosys by (0.99%) while Patni Computers dropped by (1.92%). In banking sector, ICICI bank and HDFC bank decreased by (4.29%) and (1.65%) respectively. In telecommunication sector, MTNL and Tata Communication reduced by (4.04%) and (0.06%). Sterlite industries declined (3.06%).

Today the major stock markets in Asia are trading mixed. Hang Seng index is trading higher by 55.99 points at 22,098.34 along with Japan’s Nikkei trading up by 45.04 points at 13,589.40 while Taiwan Weighted trading at 7,534.93 with a fall of 13.83 points.

The FIIs on Friday stood as net seller in equity and debt. The gross equity purchased was Rs4,235.50 Crore and the gross debt purchased was Rs207.70 Crore while the gross equity sold stood at Rs4,704.60 Crore and gross debt sold stood at Rs483.50 Crore. Therefore, the net investment of equity reported was (Rs49.00) Crore and net debt was 275.90 Crore.

Today, Nifty has support at 4,051 and resistance at 4,211 and BSE Sensex has support at 13,506 and resistance at 14,074.

Inflation may peak at 13%

Inflation is likely to peak at around 13 percent over the next two months before gradually moderating to around 8.5 to nine percent by end of this fiscal year, economists said.

The country's economic growth too would moderate below the earlier-forecasted eight percent to around the 7.5-7.8 percent level in financial year 09, they said.

"I expect inflation to peak at around 12.5-13 percent in the next two months before beginning to decline. But double-digit inflation will continue at least for the next four to five months," Yes Bank's chief economist, Shubhada Rao, said.

Global fuel prices present the most concern to policy-makers, the economists said. "Inflation will be contingent upon oil prices," Crisil's director and principal economist, D K Joshi, said.

"Prices of products such as aviation turbine fuel and naphtha have shot up 40 percent year-on-year," Enam Securities' chief economist, Sachidanand Shukla, said.

While inflation would peak at around 12.5-13 percent, Joshi expected the yearly average inflation rate to be around the 8.5 to nine percent mark.

This figure, again, is much higher than the 5.5 percent projected by some economists earlier.

Rao, however, pegged the average at a much higher nine to 9.5 percent.

Economic growth would be below the eight percent mark, "maybe even below the 7.5 percent mark", Bank of Baroda's chief economist, Dr Rupa Rege Nitsure, said.

But other economists such as Joshi and Enam's Shukla felt that it would be in the 7.8 percent range.

"Growth will definitely slow down given the rate hikes, but I don't expect it to fall sharply. It will be around the 7.8 percent mark," Shukla said.

Yes Bank's Rao said that even pessimists were forecasting a seven percent growth. "Amidst the present global turbulence and domestic headwinds, seven percent is still very healthy," she said.

Food prices are expected to ease in the next few months. Much would, however, depend upon the monsoon, the economists said, but with a good one forecast, they expect a healthy Kharif crop, which would help in pushing down food prices.

On whether the Reserve Bank would further hike the Repo rate and Cash Reserve Ratio (CRR), most economists expect a 0.25-0.50 percent hike in the Repo but were divided over its timing.

A CRR hike would, however, depend upon prevailing liquidity conditions, they said. While some expected the RBI to hike rates in July, others felt that the RBI might do so later.

However, all are agreed that inflation would continue to occupy Centre-stage throughout this fiscal.

Birla Cotsyn IPO Analysis

Birla Cotsyn (india) is a constituent of the Yash Birla group (YBG) and was originally incorporated in 1941 by R. D. Birla under the name and style of M/s Jamod Ginning Company Private Limited. On conversion to public limited company the name of the company has been modified to Birla Cotsyn (India) (BCIL) with effect from May 2006. On 9th December 2006 Yash Birla Group signed a joint venture agreement with P.B. Bhardwaj group (PBG) to combine their resources and expertise and carry on the business of manufacturing, marketing and distribution of the products in India as well as other places. As per the JV the total promoter’s equity of BCIL would be taken up in the ratio of 50:50 between the PBG and YBG.

The company has been engaged in cotton ginning, pressing and oil expelling and after the acquisition of assets of Khamgaon Syntex, a wholly owned subsidiary of Zenith, one of the group companies of YBG with a spindle capacity of 18,304 spindles with effect from August 2006, has entered into the manufacturing of synthetic yarn.

The company is coming with an IPO to part finance the expansion of an integrated textile project at Khamgaon and Malkapur at an estimated cost of Rs 289.19 crore, setting up a garment manufacturing plant at Rs 25.21 crore and establishing retail outlets at cost of Rs 5.80 crore.

The company plans to implement the integrated textile project in three phases. During Phase I the spindle capacity of 18,304 spindles of Khamgaon Syntex is envisaged to be enhanced to 19,040 spindles along with the modernization and upgradation of facilities with part replacement of existing machinery and setting up of a 36,000 cotton spindle yarn manufacturing unit at Malkapur. During Phase II the company plans to manufacture open end rotor based cotton yarn with an installed capacity of 1,728 rotors at Khamgaon and weaving of grey fabric with 114 looms at Malkapur. During phase III the company plans to set up a dyeing and processing unit for manufacturing of finished clothes with an installed capacity of 50,000 meters per day. The expansion plan under phase I is estimated a cost of Rs 131.34 crore and subsequent phase II and phase III together has been estimated at Rs 157.85 crore.

In addition the company plans to forward integrate and set up facilities for garment and apparel manufacturing and also to establish retail outlets all over the country for marketing of the products at an estimated cost of Rs 31.01 crore.

The government of Maharashtra has decided to offer the status of ‘Mega project’ to the proposed project. Accordingly the company shall receive benefits of electricity duty exemption for a period of seven years from the date of the commencement of the project, 100% exemption from payment of stamp duty, industrial promotion subsidy equivalent to 100% of the eligible investments made and 75% reimbursement of expenditure incurred on account of employer’s contribution towards ESI and EPF for a period of 5 years but limited to 25% of the fixed capital investment.

Strengths

1. The company is into complete forward integration, i.e. right from ginning and pressing upto manufacture of fabrics, readymade garments and also to opening of retail outlets of its own which is expected to give considerable savings on margins.
2. Khamgaon is the centre of cotton production and there are about 35 ginning units in and around this place. Hence good quality raw materials like cotton are easily available.

Weaknesses

1. The textile industry is highly competitive and fragmented. With abolition of quota system from January 1, 2005 many companies have ramped up their capacities increasing competition among players in the textile industry.
2. The company is having negative operating cash flows for the nine months ended December 2007.
3. Financial and stock market track record of Yash Birla group companies is not encouraging.

Valuations

At the price band of Rs 15 - Rs 18, the annualised EPS for the nine months ended December 2007 on post-issue equity works out to Rs 0.3- Rs 0.4 and PE works out to 49.1-50.3. TTM PE of Textiles-spinning/Cotton/Blending Yarn sector is 10.9. However once the company’s plans for forward integration in garment and apparel manufacturing and setting up of retail outlets are implemented successfully, it may get higher P/E than 10.

Another week of huge losses at Wall Street

Nine sectors end in the red led by financial sector

US Market once again ended the week on Friday, 27 June with huge losses. The Dow fell to its lowest level since September 2006. Record high crude prices, tumbling financial sector and not-so-good outlooks from tech companies took a toll on market sentiment.

The Dow Jones Industrial Average lost 496 points for the week to end at 11,346.69. Tech - heavy Nasdaq lost 91 points at 2,315. S&P 500 shed 40 points to end at 1,278. In percentage terms, Dow, S&P 500 and Nasdaq lost 4.2%, 3% and 3.8% respectively. Financials tumbled almost 6% for the week and is at its lowest level in five years.

Wall Street firms were in downgrade mode, prompting most of the selling during the week. Goldman Sachs sent financials tumbling on Monday, 23 June, after cutting the sector to Underperform from Neutral. Also, Wachovia Securites downgraded Goldman Sachs to Market Perform from Outperform. Credit Suisse cut its earnings estimates on Merrill Lynch and JPMorgan Chase, citing incremental credit quality deterioration.

As the week progressed, financial sector failed to make any change in its destiny. Goldman added Citigroup to its Conviction Sell list on Thursday, 26 June and also forecast a $8.9 billion second quarter write-down. On the other hand, Lehman Brothers said Merrill Lynch will likely incur a $5.4 billion second quarter write-down, mainly from its exposure to bond insurers. Nine of the ten sectors posted a decline for the week.

During the middle of the week, on Wednesday, 25 June, the Federal Reserve sharpened its focus on inflation, saying that the upside risks to inflation have increased. Market reacted in a quite volatile manner throughout the day. At the end, it ended with little gains. Fed held its target for short-term interest rates steady at 2%.

In its FOMC directive, the Fed said overall economic activity continues to expand, partially due to "firming" in household spending. However, the fed expects economic growth will face the burdens of tight credit conditions, housing contraction and the rise in energy prices. The statement also said that uncertainty over the inflation outlook remains high, although it expects inflation to "moderate later this year and next year."

In terms of economic data, the Commerce Department reported that U.S. orders for durable goods were unchanged in May. Also, the Commerce Department estimated that sales of new U.S. single-family homes fell 2.5% in May to a seasonally adjusted annual rate of 512,000 as sales in the West fell to a 26-year low. The drop in May follows the upwardly revised 4.8% gain in April. The results in May are better than the expected drop of 2.7%.

Also, the final GDP reading for the first quarter indicated the economy grew at 1%, on par with expectations and up slightly from the previous reading. Personal consumption expenditures were revised upward to 1.1%, while the GDP price index came in at 2.7%.

The 104% year-over-year spike in crude prices took a toll on petroleum intensive companies. UPS lowered its second quarter earnings guidance, citing the increase in fuel costs and the sluggish U.S. economy.

In terms of earnings news, Research In Motion reported an earnings miss and tepid outlook. Oracle’s outlook also disappointed investors.

Today's Pick - GAIL

We recommend a sell in GAIL India from a short-term perspective. From the charts of GAIL India we note that it has been on a long-term downtrend since its January 2008 peak of Rs 555. During early May, the stock declined crossing below the 50 and 200-day moving averages.

Moreover, the stock conclusively penetrated the significant support level at Rs 380 by tumbling 5 per cent (accompanied with high volume) on June 24. The daily and weekly relative strength indices are featuring in the bearish zone. The weekly moving average convergence and divergence (MACD) has entered the negative territory, indicating bearishness.

The long-term down trendline of the stock is intact. We are bearish on the stock in the short-term and expect it to decline further until it hits our price target of Rs 305 in the approaching trading sessions.

Traders with short-term perspective can sell the stock while maintaining stop-loss at Rs 359.

Weekly Technicals - June 30 2008

Weekly Technicals - June 30 2008

Bullion metals continue to rise

Gold and silver prices rise once again as dollar continues to weaken

Bullion metals ended considerably higher on Friday, 27 June, 2008. Prices declined as the dollar weakened against its rivals. Prices also soared as the energy costs also increased considerably. The increase in energy costs increase demand for the precious metal as a hedge against inflation. Silver prices also rose.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies.

Comex Gold for August delivery rose $16.2 (1.9%) to close at $931.3 ounce on the New York Mercantile Exchange. One day back, prices surged by more than 3.5%. That was the biggest percentage gain for a most-active contract since June, 2006. For the week gold prices ended higher by $27.6 (3.1%). Last month, in May, it ended with a gain of higher by $22.5 (2.5%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped since then.

This year, gold prices have gained 11.5 till date against a 7.8% drop for the dollar against the euro. Before May, for April, prices closed lower by 6.3%. For first quarter prices gained 10.7%. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices succumbed and fell by 5.5%.

On Friday, Comex silver futures for July delivery rose 49 cents (2.8%) to $17.71 an ounce. Silver has gained 18.3% in 2008 till date.

Silver prices ended the month of May 2008 with a gain of 2.7%. For April, it closed lower by 5.5%. Silver had gained 16% in Q1. In January this year itself, prices climbed 14%. In February, it gained another 15%. For March, it ended lower by 13%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.

At the currency markets on Friday, the dollar was flat to modestly lower against major currencies with increasingly risk-averse traders unwilling to buy the greenback as oil futures marched to new highs and equities lost ground. The dollar index which tracks the performance of the U.S. currency against other major counterparts, was at 72.294 compared with 72.48 a day prior.

Earlier in the week, Federal Reserve yesterday sharpened its focus on inflation, saying that the upside risks to inflation have increased. Fed held its target for short-term interest rates steady at 2%.

Since last September, Fed has axed interest rates seven times and brought it down to 2%. On the other hand, the ECB has kept rates unchanged at 4% since June, 2007. Gold gained 39% from 17 Sept as the Fed slashed rates from 5.25%.

In the crude market on Friday, crude-oil futures for light sweet crude for August delivery today closed at $140.21/barrel (higher by $0.57/barrel or 0.4%) on the New York Mercantile Exchange. This was another all time new closing price for crude. During intra day trading prices touched a high of $143. For the week, crude prices closed higher by 3.6%.

Gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. In 2006, silver had jumped 46% while gold gained 23%.

Crude touches a new high

Prices end marginally higher after touching the $143 level

Crude futures rose by more than $3.5 at one shot on Friday, 27 June, 2008. Couple of factors continued to contribute to this rise. A day before, prices had shot up by $5 at one go. First and foremost, the dollar continued to weaken. Then, Libya threatened to cut output on Thursday, 26 June and also OPEC's president reinforced once again that prices may reach $170 by the summer.

Crude-oil futures for light sweet crude for August delivery today closed at $140.21/barrel (higher by $0.57/barrel or 0.4%) on the New York Mercantile Exchange. This was another all time new closing price for crude. During intra day trading prices touched a high of $143. For the week, crude prices closed higher by 3.6%. Prices are 99% higher than a year ago. For the year, crude is up by 43% till date.

It was reported on Thursday, 26 June that Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil was also reported to have said that oil may surge as high as $170 in near months on a European interest rate rise.

Tensions in Nigeria, the Middle East, talk that OPEC members actually want to lower production, weather concerns, a weaker dollar, the Fed's inability to raise rates to contain inflation all culminated together to this rising crude prices.

Earlier during the week, the EIA reported that U.S. crude supplies climbed by 800,000 barrels to 301.8 million for the week ended 20 June. It was the first reported rise since early May. Supplies had fallen a total of nearly 25 million in five weeks. EIA also reported that motor gasoline supplies fell 100,000 barrels to 208.8 million barrels. Distillate stocks were up 2.8 million barrels at 119.4 million barrels.

August natural gas fell by 5 cents to close at $13.198 per million British thermal units, retreating from a high of $13.40. But it ended the week almost 0.7% higher.

Against this backdrop, prices for petroleum products closed on a mixed note on Friday, but ended the week higher. July reformulated gasoline fell by 1 cent to close at $3.5012 a gallon on the Nymex, up 1.8% for the week. July heating oil closed at $3.9066 a gallon, up 2.3 cents for the session and 3.6% higher for the week.

Trading Calls - June 30 2008

Nifty (4137) S 4050 R 4210

Sell Puravankara (170) SL 174
Target 164, 161

Sell Essar Oil (199) SL 204
Target 191, 188

Sell Divi's Labs (1340) SL 1360
Target 1300, 1290

Buy Voltamp (910) SL 895
Target 940, 950

Buy Voltas (128) SL 124
Target 134, 137

A royal pull back indeed!

There is no royal road to anything. That which grows fast, withers as rapidly. That which grows slowly, endures.

Guess what! Even Queen Elizabeth and the British Royal family has not been spared by inflation. The queen's household costs for the 12 months through March, paid for by the British taxpayer, rose by 6.1%. The rise per tax payer per annum may be equivalent to just what you would pay for an ipod download. But the fact remains that nobody is spared. Reports suggest India Inc going slow on capex. And by the way, the royal household is also paying close attention to obtaining the best value for money in all areas of expenditure.

Markets around the world are fighting the twin menace of fire (inflation) and ice (growth slowdown). Some say it may only be the beginning of the bear market, while others are a bit more optimistic. On the whole, the market remains jittery, vulnerable to daily dose of bad news. Traders and investors are hoping that the market will bottom out soon.

Whether that happens remains to be seen. Today, we see another tumultuous day for the bulls, which should begin with a cautious opening. The intra-day choppiness will continue and one may see some buying at lower levels, though the rebound may prove to be short-lived.

The next big trigger will come from the first-quarter results, which will be declared over the next few days. As always, IT sector will lead the way, with Infosys announcing its results on July 11. Though the advance tax numbers were quite encouraging, it will be interesting to see how India Inc is coping with slowing growth momentum and rising costs. Operating margin is an area that everybody will be keen to watch.

Among stock specific news, Blue Green Constructions and Investments could be in action as the board will met to sell majority stake to discount retailer Subhiksha.

There is no dearth of bad news and complete lack of positive news. Crude oil continues to hover around $140/bbl. The US financial sector is not in a pink of health either. Though technically, the US might have avoided a recession, it still remains in a pretty bad shape. The dollar remains weak (except against the rupee), which will continue to fuel the rally across various commodities.

This week, the ECB (European Central Bank) will take a call on interest rates. If it decides to jack up rates to fight inflation, there will be more trouble for the dollar. On the domestic front, the political situation has once again turned precarious with the Congress determined to go ahead with the nuke deal, and the Left reiterating its threat of pulling down the Government.

Asian markets are mixed this morning. The Nikkei in Tokyo was up 45 points at 13,589 while the Hang Seng in Hong Kong was flat at 22,043. The Kospi in Seoul was also nearly unchanged at 1685 while the Straits Times in Singapore rose 14 points at 2969. The Shanghai Composite in China added 6 points at 2754 while the Taiex in Taiwan was down 14 points at 7534.

FIIs were net sellers of Rs7.03bn (provisional) in the cash segment on Friday while the local institutions poured in Rs3.06bn. In the F&O segment, foreign funds were net sellers of Rs632.8mn. On Thursday, FIIs were net sellers of Rs4.69bn in the cash segment. With this, they have pulled out more than $6.1bn from the Indian market this year.

Results Today: Ansal Infra, Asian Hotels, BEML, Bombay Dyeing, BPL, Deccan Chronicle, Gammon India, India Cement, Indo Rama Synthetics, Ispat, MMTC, Madras Cement, Matrix Labs, Pfizer, REI Agro, Sun TV, Trent, TVS Motor and Wyeth.

ANG Auto will consider buy back of shares.

US stocks slipped on Friday, as record-high oil prices, a weak dollar and more trouble for the financial sector continued to unnerve investors. The US market has now fallen nearly 20% from its 2007 high, marking an official entry into bear-market territory.

Crude oil hit a new intraday high of $142.99 a barrel, heightening worries about the impact of surging commodity prices on consumer spending. A survey by the University of Michigan revealed that consumer confidence slid further in June, nearly at a 50-year low.

The Dow fell 106 points, or 0.9%, to 11,346. With the last week's 4.2% loss, the Dow has now down nearly 20% since its Oct. 9, 2007, record high of 14,165. The blue-chip index is also on track for its worst month of June since 1930.

The S&P 500 index dropped 4.8 points, or 0.4%, to 1,278, while the Nasdaq Composite Index dipped 5.7 points to 2,315. The S&P 500, which most Wall Street experts use as a benchmark to gauge market's direction, is now off 18.1% from its high of 1,562 points hit on Oct. 10, 2007.

US stocks posted bigger losses in mid-afternoon trade, but managed to close off the lows. All three major gauges fell for the week.

US financial firms and credit markets continue to be in pain. Ratings agency Moody's said it may downgrade Morgan Stanley, citing big trading losses recently that have undermined confidence in the investment bank's risk management.

Personal income jumped 1.9% in May, and 0.4% excluding the stimulus payments. The 0.4% rise was in line with estimates. Income rose 0.4% in April. Personal income rose 0.8%, topping the forecast for a rise of 0.7%. The report's closely watched inflation component rose a smaller-than-expected 0.1%.

US light crude for August delivery reached a record high of $142.99 a barrel on the New York Mercantile Exchange before pulling back to settle at $140.21 a barrel, up 57 cents.

The national average price for a gallon of regular unleaded gas fell to $4.066 from $4.067 the previous day, according to AAA.

In currency trading, the dollar fell versus the euro and the yen. In the bond market, Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.96% from 4.03% late on Thursday.

COMEX gold for August delivery rose $16.20 to settle at $931.30 an ounce.

Palm lost more than 8.3% as the handset maker reported a worse-than-forecast 26% sales fall and didn't offer an outlook. Sony Ericsson warned of slowing demand for mid- to high-level phones. Ericsson shares fell 5.4%.

Merrill Lynch could post a $5.4bn second-quarter writedown, Lehman Brothers said, due to its exposure to bond insurers. That's more than currently expected. Merrill shares fell 1%.

In addition, AIG likely will take $5bn in quarterly losses from its insurance units, which have been hit by $13 billion in writedowns, according to published reports. AIG shares slipped more than 2%.

Micron Technology posted a wider-than-expected quarterly loss late on Thursday, despite higher revenue, due to pricing pressures. Its shares fell 12.7%.

Next week on Wall Street will be a curtailed one on account of the Fourth of July holiday. Markets will close early on Thursday ahead of the long weekend. Plenty of economic news is on tap, however, including reports on manufacturing, construction, factory orders and the labor market.

European stocks drifted to a new multi-year low on Friday. The pan-European Dow Jones Stoxx 600 extended Thursday's big fall with a drop of 0.4% to 287.34, with losses led by the technology sector after a warning by Sony Ericsson.

The UK's FTSE 100 ended 0.2% higher at 5,529.90. But most regional markets dropped. The French CAC 40 lost 0.7% to 4,397.32 and Germany's DAX 30 fell 0.6% to 6,421.91.

In the emerging markets, the Bovespa in Brazil gained 0.6% at 64,321 while the IPC index in Mexico rose 0.3% at 29,295. The RTS index in Russia was up 0.4% at 2318 and the ISE National-30 index in Turkey slid 2.28% to 43,343.

After a disappointing June series, bears greeted the July series with benchmark index tanking over 4.5% (provisional). Bears were in the ring right from the first minute. Weak global cues coupled with crude oil prices hitting an all time high triggered a sell off on the Indian bourses. Crude oil prices hit an intraday record of US$141.71 per barrel.

Further, rising inflation also added fuel to the sell off. India’s Inflation rate was at 11.42% for the week ended June 14. Market had expected inflation to be 11.22%. The wholesale price index rose 0.4% to 236.1 from 235.2.

The interest rate sensitive stocks like Banking, Auto and realty again were under immense selling pressure. Even, the Mid-Cap and the Small-Cap indices ended losing 2.5% each.

Finally, the BSE benchmark Sensex lost 619 points to close at 13,802 and the Nifty index lost 179 points to close at 4,137.

HT Media surged by over 4 percent to Rs101 as the company reportedly acquired 0.65% stake in real estate major Sunil Mantri Realty for Rs200mn. HT bought equity shares of Re1 at a price of Rs125. The company plans to use the funds for new projects. The scrip touched an intra-day high of Rs102 and a low of Rs92 and recorded volumes of over 5,00,000 shares on BSE.

Sun Pharma edged lower by 0.8% to Rs1333 after reports stated that the company has launched a hostile bid for Taro Pharma. The scrip touched an intra-day high of Rs1382 and a low of Rs1305 and recorded volumes of over 92,000 shares on BSE.

Jet Airways dropped by 5.2% to Rs490 after reports stated that the company may post Rs20bn loss in two years. The scrip touched an intra-day high of Rs509 and a low of Rs488 and recorded volumes of over 14,000 shares on BSE.

Cairn India advanced by 1.4% to Rs275 after crude oil prices hits all time high of US$141.71/bbl. The scrip touched an intra-day high of Rs282 and a low of Rs267 and recorded volumes of over 23,00,000 shares on BSE.

Allcargo Global rose 2.5% to Rs825. The board of directors of the company said that it deferred the decision on sub-division (split) of nominal value of equity shares of Rs10 each. They have also recommended final dividend of 30% (Rs3 per share). The scrip touched an intra-day high of Rs825 and a low of Rs751 and recorded volumes of over 43,000 shares on BSE.

Bafna Pharmaceuticals started trading at Rs43.7 against the issue price of Rs40. The scrip finally closed at Rs38.50 translating slipping below its issue price of Rs40 per share. It hit an intra-day high of Rs47 and a low of Rs37.3 and recorded volumes of over 2,00,00,000 shares on BSE.

The company offered 64,00,000 equity shares of Rs10 each for cash at premium of Rs30 per share. The issue to the public constituted 40.05% of the post issue paid-up capital.

The Chennai-based Bafna Pharmaceuticals is engaged in the manufacturing of betalactum and non-betalactum pharmaceutical formulations in tablets, capsules and liquid forms. The company manufactures 126 formulations under various therapeutic segments such as anti-infective, cholesterol lowering agents, analgesic and antipyretic, antihelmintics, appetite stimulants, cough & cold preparations, antiulcerants anti diabetic and vitamins .

The proceeds of the issue would be utilized towards brand building exercise in domestic market. It intends to register the company, products and create brand in international markets. Bafna would also strengthen up R&D facility at its grantlayon plant besides getting MHRA certification. It is also proposing to retire high-cost debts through the IPO proceeds.

Anant Raj Industries advanced by 5% to Rs142 after the company announced that that M/s. Acacia Real Estate Ltd, a Bahrain based development fund has entered into a joint venture agreement with the company to acquire minority stake in one of its wholly owned subsidiary, Anant Raj Projects Pvt Ltd for Rs2.16bn.

The scrip touched an intra-day high of Rs153 and a low of Rs126 and recorded volumes of over 59,000 shares on BSE.

Renuka Sugars has slipped by 1.5% to Rs107. The company announced that it commenced production at its Haldia Sugar Refinery, having a refining capacity of 2000 metric tons sugar per day and Power cogeneration plant of 15 MW.

The scrip has touched an intra-day high of Rs107 and a low of Rs105 and has recorded volumes of over 3,00,000 shares on BSE.

Unitech plans to dilute 26% stake in its telecom arm to a foreign company. (TOI)

Reliance Industries may tie up with BP or Shell for bidding for new oil blocks under NELP VII round.(ET)

Daiichi Sankyo may sell debt to raise half the cost of its US$4.6bn acquisition of Ranbaxy Laboratories.(BS)

India’s crude oil production rose by 3.2% in May on back of better performance by ONGC.(FE)

Jupiter Biosciences acquires a facility of Merck in Switzerland and signs a five year agreement for its peptide products with the latter’s biosciences company.(BL)

Apollo Tyres launches capacity expansion at its Africa plants.(BL)

ONGC to start commercial production from Jaria-Parbatpur block by early 2009.(BL)

SAIL plans to run its own fleet of vessels in partnership with public as well as private players to ship imported cooking coal.(ET)

Unitech plans to invest Rs40bn in hospitality business in the next five years.(DNA)

China-based Dongfang Electric Corp. may tie up with BHEL or L&T for its proposed manufacturing unit in India.(ET)

Kingfisher Airlines receives an in-principle approval from ICICI Bank for a Rs10bn loan facility.(ET)

ONGC Videsh decides to surrender its Qatar block as reserves are low and not commercially viable.(BL)

M&M arm FirstChoice Wheels plans to invest Rs2bn in the next five years for its expansion.(TOI)

GMR Group plans to create holding firms for its three primary businesses and list them overseas.(Mint)

Food and grocery retail chain Subhiksha to invest Rs12bn by 2010.(BS)

Holcim divides the operations of its two companies, ACC and Ambuja Cements India, into three regions.(ET)

Essar group plans port terminal for LNG and a container cargo facility and depots.(Mint)

Cairn India and ONGC have nearly finalized the plan for joint development of Ambe and North Tapti offshore marginal gas fields on the Gujarat coast.(BL)

AT&T is likely to buy 74% stake held by Maxis Communication in Aircel.(ET)

Subhiksha Trading Services, which runs country’s largest food & grocery discount retail chain, acquires majority stake in Chennai based Blue Green Constructions and Investments.(BL)

Future Group plans to split Big Bazaar into two entities.(ET)

Duncan Tea has tied up with Essel Group’s portal itzcash.com for online retailing of tea.(ET)

Reliance Retail is planning to open a chain of specialty stores of retail mobile phone handsets across the country.(ET)

Economic News

Higher crude oil prices could cause fuel subsidy bill to reach Rs3tn this year.(BS)

DoT scraps plan to auction 3G spectrum for CDMA players.(BL)

Railways to increase freight rates to offset diesel price hike.(BS)

PSU oil companies to raise ATF prices by Rs3,000/KL from July 1, 2008.(ET)

Hotel tariffs in five and four star segments may be soon revise downwards as economy heads for a slowdown.(BS)

TRAI to study long term spectrum availability to see whether there is space for new players.(FE)

It would not be possible for India to maintain 9% growth in current fiscal due to rising inflation, says Planning Commission Deputy Chairman.(BS)

Railways to increase discounts on empty-flow direction freight from 30 to 50%.(ET)

Accounting regulator ICAI says firms would have to provide for FCCB redemption premium in their books over life of instrument.(FE)

Government may temporarily ban export of cotton.(ET)

Tyre makers mull 7% price increase due to rising input costs.(BS)

Implementation of commodities transaction tax is likely to be delayed to end of year or next year due to rising inflation.(BS)

Ministry of renewable energy announces a generation-based incentive of 50 paise per unit of electricity for investors who do not have access to the benefits of accelerated depreciation.(ET)

Birla Cotsyn India

The initial public offer of Birla Cotsyn India may not be suitable for conservative investors. The execution of the project could result in a significant ramp up in revenues and earnings.

While integrated textile mills are the way forward, the lack of a relevant earnings track record and uncertainty regarding the likely offtake for the newly installed capacities, peg up risks.

The scale of the project would impose a significant strain on the balance-sheet in the near term, with the equity base alone expanding seven-fold following the issue.

Investors can wait for further clarity on the execution front and the demand situation before considering investment.

At the upper end of the price band of Rs 15-18, the stock trades at 7 times its annualised FY-08 earnings, not factoring in the expansion in equity base. With textile stocks out of favour, stocks of several larger integrated players are now available at lower valuations in the market.
Offer background

Birla Cotysn is raising Rs 144 crore through this IPO to partly fund an ambitious expansion project to set up an integrated textile facility from spinning to apparel.

Initially engaged in cotton ginning, the company took over a synthetic spinning facility from a group company in 2006.

This helped revenues and profits jump manifold. As of December 31, 2007, the company had a revenue base of Rs 60 crore and profits of about Rs 2.5 crore. Given the change in business, the financial track record upto August 2006 is largely irrelevant.

This project, conferred “mega project” status by the Maharashtra Government, will be executed in three phases.

The first phase involves setting up of a 36,000-spindle cotton yarn facility and modernisation of the existing synthetic yarn facility. Full capacities will go on stream by December 2008. The second phase involves setting up an open-end spinning facility and will be fully operational shortly.

The third phase involves setting up of a fabric processing facility capable of processing 50,000 metres of fabric a day. This is expected to go on stream by July 2009. Besides this, the company also plans to foray into apparel manufacturing and retail.
Starting from scratch

The expansion is on an ambitious scale and could well change the nature of the business, if it successfully makes the transition from a cotton ginner to a fully integrated textile player.

The company’s existing facilities operate on a significantly smaller scale and the company is being built virtually from scratch at this point.

Fully integrated facilities with capabilities to market a wide variety of yarn — from polyester and blended yarn to pure cotton yarn — could stand the company in good stead over the long term. Successful execution of the project can result in a manifold jump in revenues and profits.

However, in a fragmented industry with low differentiation and uncertain demand conditions in the export market, significant offtake is not guaranteed.

The project could also pose considerable strain on the company’s financials. High interest and depreciation costs in the near term could curtail the company’s ability to service a substantially higher equity base.

A sustained rise in cotton prices (prices have risen nearly 40 per cent in the last four months) will not augur well for margins in the yarn segment either.

The offer opens on June 30 and closes on July 4. The lead manager is Allbank Finance.