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Tuesday, November 28, 2006
Market declines on weak global cues
Market traded in the red throughout the day’s trading session, tracking weak global markets. The volatility was high ahead of expiry of November contracts this Thursday (30 November), where open positions are quite large.
The 30-shares BSE Sensex lost 171.64 points (1.25%) to 13,601.95. It moved in a range of 13,577.38 and 13,691.12.
The S&P CNX Nifty lost 45.70 points (1.15%) to 3923.20.
The total turnover on BSE was Rs 4049 crore, which was lower as compared to Rs 4441 crore on Monday (27 November).
Market breadth was weak. 1072 shares advanced as compared to 1465 that declined on BSE. 83 remained unchanged. In early trade, the breadth was much weaker. The BSE Small-Cap index lost 45 points to 6,531.39 while the BSE Mid-Cap index declined 34.57 points to 5,651.21.
Among the Sensex pack, 25 declined while the rest advanced.
Frontline IT stocks were the worst hit on profit booking, with the BSE IT index declining the most among sectoral indices, by 2.43% or 125.69 points to 5044.49. Satyam Computers (down 2.91% to Rs 451), Wipro (down 2.27% to Rs 588) and Infosys (down 2.79% to Rs 2165) declined.
Majority of the Indian ADRs ended in the red on Monday in a weak US market. Infosys ADR lost nearly 3% to $51.98, Satyam Computer ADR shed 3.2% to $22.99 and Wipro ADR lost 1.9% to $15.25. Also the rising rupee against the US dollar added to investors’ concerns for IT companies which derive a lion’s share of their venue in dollar terms. The rupee hit a two-week high on Monday 27 November.
Other major losers from Sensex pack were NTPC (down 2.79% to Rs 149.65), Reliance Energy (down 3.12% to Rs 529) and Reliance Communications (down 3.25% to Rs 471).
Index heavyweight Reliance Industries (RIL) lost 0.28% to Rs 1248.25 on 10.30 lakh shares. It declined from its intra-day high of Rs 1279.95. There are reports that RIL will sell piped gas at discount to LPG.
Hero Honda was the top gainer, up 1.62% to Rs 745 on 6.64 lakh shares. The stock rose following reports that the government is considering cut in oil prices. An announcement regarding fuel prices will be made in parliament on Wednesday 29 November.
Grasim (up 0.65% to Rs 2711), SBI (up 1.37% to Rs 1294.10) and Gujarat Ambuja Cements (up 0.38% to Rs 143.70) were the other gainers.
The BSE Metal Index declined 1.7% to settle at 8,921.50 on selling pressure. Hindustan Zinc (down 4.73% to Rs 926.50), SAIL (down 3.05% to Rs 85.75), JSW Steel (down 2.65% to Rs 323.50), Sterlite Industries (down 1% to Rs 545), Hindalco (down 1.72% to Rs 176.65) and Tata Steel (down 1.42% to Rs 475.40) were among the losers.
Among the side counters Donear Industries jumped 6.28% to Rs 165 on high volume of 70.80 lakh shares while Amar Remedies surged 20% to Rs 63.15 on high volume of 29.82 lakh shares.
Godfrey Phillips surged 10% to Rs 1140.55, on reports that the company is planning to issue bonus shares to reward investors in the next few months and at a ratio of 4 shares for 1 held. However, at the fag end of the trading session, the company denied rumours of bonus issue and stock split.
Force Motors rose 0.80% to Rs 421 after the company’s board approved the transfer of assets and liabilities of the heavy commercial vehicles division to its subsidiary Man Force Trucks. The company also approved investment of Rs 100 crore as equity capital in this subsidiary.
IVRCL Infrastructures & Projects gained 0.41% to Rs 412.60 after the company bagged orders worth Rs 388 crore from the irrigation department of the Andhra Pradesh government. The orders will be executed along with its joint venture partners, the company said.
Sadbhav Engineering advanced 2.45% to Rs 494.20 and PBA Infrastructure gained 2.64% to Rs 142 after Sadbhav Engineering said its joint venture with PBA Infrastructure has secured a construction contract worth Rs 297 crore. Sadbhav has a 51% stake in the joint venture and PBA holds 49%.
Torrent Power (TPL) the umbrella company of the newly amalgamated generation, transmission and distribution businesses of the Torrent Group settled at Rs 70.70 on BSE on high volumes of 1.30 crore shares. The stock was listed at Rs 60 on BSE. The stock hit a low of Rs 55.50 and high of Rs 76.30. Three companies Torrent Power AEC (TPAL), Torrent Power SEC (TPSL) and Torrent Power Generation (TPGL) were merged in TPL as a part of a scheme of arrangement. TPL’s equity capital is Rs 472.44 crore with face value of Rs 10 each.
Natco Pharma rose 1.60% to Rs 118.05 after it launched Pemnat (pemetrexed) for treatment of lung cancer.
TVS Motor was down 1.25% to Rs 98.90. As per reports, the company plans to invest $100 million over the next 3 year to set up a production base in Indonesia.
Eicher jumped 5% to Rs 131.80, the maximum permissible level of the day, after the company said it is considering delisting from BSE and NSE. Eicher has put up a board meeting on 28 November to consider proposal received from Eicher Goodearth, the promoters to initiate a voluntary delisting of the shares of the company from BSE and NSE in accordance with the provisions of the SEBI (Delisting of Securities) Guidelines, 2003.
Ashok Leyland rose 0.92% to Rs 44.05 on reports that it has tied up with French Company for supply of armoured vehicle in India.
Mirc Electronics lost 0.92% to Rs 21.45 after its Q2 September 2006 net profit slipped to Rs 10.5 crore as compared to Rs 11.5 crore in Q2 September 2005. Net sales rose to Rs 399.5 crore (Rs 316.5 crore).
DMC Vaults jumped 10% to Rs 20 after the company said has agreed to acquire FSI for 4,50,000 square feet at Rs 100 per square feet for development and construction of residential flats at Alwar, Rajasthan.
Rasandik Engineering Industries jumped 12% to Rs 146.35 after Reliance Mutual Fund acquired 1.4 lakh shares on Monday in a block deal on BSE at Rs 120. The stock had risen 13.7% on Monday to Rs 130.65 boosted by the block deal. Foreign fund Melchior Indian Opportunities was the seller.
Oil prices rose in Asian trading hours on geopolitical worries and hopes that OPEC will make further cuts in production. The New York Mercantile Exchange's main contract, light sweet crude for January delivery, rose $0.17 to $60.49 a barrel. Brent North Sea crude for January delivery gained $0.16 at $60.60.
All the European and Asia/Pacific markets were trading with losses except New Zealand’s NZX 50 which was up marginally by 0.02%.
The Nikkei average edged lower by 0.19% on Tuesday as losses in Honda Motor Co. and other blue-chip stocks were mostly offset by gains in Softbank Corp. and recently battered stocks such as banks. The Nikkei closed down 30.12 points at 15,855.26
Hang Seng index declined sharply by 2.94% or 564.48 points to 18639.53
US stock indexes sank on Monday, registering their worst day in months, amid concern about Google Inc.'s valuation and doubts about holiday spending after a disappointing sales estimate from Wal-Mart Stores Inc. In addition, downward pressure on the dollar for a fourth straight day hurt demand for US investments, while a rise in crude oil prices above $60 a barrel added to concerns about consumer spending. The Dow Jones industrial average fell 158.46 points, or 1.29%, to end at 12,121.71. The Standard & Poor's 500 Index lost 19.05 points, or 1.36%, to finish at 1,381.90. The Nasdaq Composite Index slid 54.34 points, or 2.21%, to close at 2,405.92.
Mutual funds were net sellers for the second day in a row on Friday 24 November. Mutual funds sold shares worth a net Rs 212.73 crore on 24 November compared to their outflow of Rs 276.24 crore on 23 November.
Sensex plummets 172 points
Sensex Open:13691 High:13691 Low:13577
The market received a pounding and erased most the gains accrued last week. The Sensex resumed 83 points below its previous close at 13691 and moved down to touch an intra-day low of 13577. The market languished in negative territory through the rest of the session and the Sensex closed with losses of 172 points at 13602. The Nifty also ended in the red at 3922, down 47 points.
The market breadth was weak. Of the 2,636 stocks traded on the BSE, 1,463 stocks declined, 1,091 stocks advanced and 82 stocks ended unchanged. Barring the BSE IT index, all the sectoral indices ended at lower levels. The BSE Teck index fell 2.02%, the BSE Bankex dipped 1.45%, the BSE Metal index shed 1.63% and the BSE PSU index was down 1.11%.
Among the draggers, Reliance Communication dropped 3.11% at Rs418, Satyam Computers shed 3.08% at Rs450, Reliance Energy tumbled 2.84% at Rs531, Infosys declined 2.71% at Rs2,167 and NTPC was down 2.66% at Rs150. Wipro at Rs586, ICICI Bank at Rs862, Cipla at Rs255 and Tata Motors at Rs811 were down around 2% each.
Select index heavyweights managed to register decent gains. SBI rose 1.32% at Rs1,293, Hero Honda gained 1.22% at Rs742, Grasim was up 0.81 at Rs2,715, Maruti Udyog added 0.33% at Rs913 and Gujarat Ambuja was marginally up at Rs143.
IT stocks came under sharp hammering. Megasoft slumped 6.47% at Rs105, Mascom Global lost 4.46% at Rs8, Kernex Micro declined 4.04% at Rs181, GTL tumbled 3.65% at Rs123, Cranes Software was down 3.81% at Rs105 and HCL Technologies closed weaker by 3.26% at Rs620. Prithvi Info, Geometric Software, Hexaware, Subex Azure and Visual Software dipped 2-3% each.
NTPC clocked huge volumes of over 47.25 lakh shares followed by Lanco Infra (26.84 lakh shares), Adani Enterprises (24.68 lakh shares), India Cements (17.07 lakh shares) and Sterlite Optical (16.70 lakh shares).
Reliance Industries clocked a turnover of 129.49 crore on the BSE followed by Jaiprakash (Rs85.46 crore), Punj Lloyd (Rs77.20 crore), NTPC (Rs71.92 crore) and Reliance Capital (Rs64.81 crore).
How brokers turn small investors into traders
Cut-throat competition among broking houses has resulted in brokerage rates falling to ridiculously low levels over the past few months. This is partly-good news for the small investors. But what is not so good for these investors is that brokerages are trying their best to make them trade as frequently as possible in order to make up for the low-broking charges. It may be in the form of a persuasive customer service representative, or a burst of SMS and e-mail messages.
Broking business is getting competitive by the day, with one broker claiming to charge less than the competitor. But, in the end all charge more or less the same, often billing small retail investors through other charges. A few small retail investors ET spoke to mentioned that their trading frequency had certainly increased.
Mumbai-based Rasik Shah, a 42-yearold small retail investor, who has been investing in equities from the past 10 years said, “Every time I call my broker (one among the top three retail brokerages), the customer service representative would not allow me to hang up the call unless I bought or sold something. And they are so convincing that one actually bites the bait.”
Bharat Dave, 37-year-old executive said, “We receive an overload of information from our broker on our mobiles, emails. And often we are lured to buy into their recommendations for a short timeframe .” Over the past one year, brokerage charges have almost halved to around 15-20 paise for Rs 100 worth of delivery trades and 3-5 paise for Rs 100 worth of intra-day trades. Also, retail investors are a fickle lot. They come rushing in hordes during a booming market, and then vanish for months when the market corrects. So, brokerages have no option but to extract the maximum possible brokerage out of them when the going is good.
Almost all brokerage houses go a step further by offering small retail investors margin trading facility. Margin trading is the use of borrowed money to buy securities with the expectation of magnifying profits. It can lead to greater returns, but is also very risky. Brokerage houses, often, are more than happy to offer you margin. Sometimes these margins go up to fivetimes your portfolio size and are offered at interest rates as high as 18% per annum.
ET tried to speak to brokers. They denied the charges that they are converting small retail investors into traders. In fact, brokers mentioned that since they have the expertise through dedicated high quality research, they are offering a better chance for small retail investors to make money free of cost.
According to Gaurav Mashruwala, a certified financial planner, “The greed of quick returns is luring many small retail investors into trading. Investment in equities should be for the very long term, where returns are high and risks are lower. When one does day-trading , the probability of returns are very low, but the risks are very high. So, ideally, small retail investors must avoid getting into this trap of churning stocks very often.”
Sensex plunges 172 points
Market traded in the red throughout the day’s trading session, tracking weak global markets. The volatility was high ahead of expiry of November contracts this Thursday (30 November), where open positions are quite large.
The 30-shares BSE Sensex was down 171.64 points (1.25%) to 13601.95. It moved in a range of 13577.38 and 13691.12.
The S&P CNX Nifty lost 45.70 points (1.15%) to 3923.20
The total turnover on BSE was Rs 4049 crore
Market breadth stayed negative on BSE with 1072 shares advancing as compared to 1465 that declined. 83 remained unchanged. In early trade, the breadth was much weaker.
Among the Sensex pack, 25 declined while the rest advanced.
Frontline IT stocks were the worst hit on profit booking. Satyam Computers (down 2.91% to Rs 451), Wipro (down 2.27% to Rs 588) and Infosys (down 2.79% to Rs 2165) declined. IT pivotals witnessed an across the board fall following decline in their ADRs on Monday. Also the rising rupee against the US dollar caused concern for IT companies, which derive a lion’s share of their venue in dollar. The rupee hit a two-week high on Monday 27 November.
Other major losers from Sensex pack were NTPC (down 2.79% to Rs 149.65), Reliance Energy (down 3.12% to Rs 529) and Reliance Communications (down 3.25% to Rs 471).
Index heavyweight Reliance Industries (RIL) lost 0.28% to Rs 1248.25 on 10.30 lakh shares. It declined from its intra-day high of Rs 1279.95. There are reports that RIL will sell piped gas at discount to LPG.
Hero Honda was the top gainer, up 1.62% to Rs 745 on 6.64 lakh shares. The stock rose following reports that the government is considering cut in oil prices.
Grasim (up 0.65% to Rs 2711), SBI (up 1.37% to Rs 1294.10) and Gujarat Ambuja Cements (up 0.38% to Rs 143.70) were the other gainers.
Among the side counters Donear Industries jumped 6.28% to Rs 165 on high volumes of 70.80 lakh shares while Amar Remedies surged 20% to Rs 63.15 on high volumes of 29.82 lakh shares.
Oil prices rose in Asian trading hours on geopolitical worries and hopes that OPEC will make further cuts in production. The New York Mercantile Exchange's main contract, light sweet crude for January delivery, rose $0.17 to $60.49 a barrel. Brent North Sea crude for January delivery gained $0.16 at $60.60.
All the European and Asia/Pacific markets were trading with losses except New Zealand’s NZX 50 which was up marginally by 0.02%.
The Nikkei average edged lower by 0.19% on Tuesday as losses in Honda Motor Co. and other blue-chip stocks were mostly offset by gains in Softbank Corp. and recently battered stocks such as banks. The Nikkei closed down 30.12 points at 15,855.26
Hang Seng index declined sharply by 2.94% or 564.48 points to 18639.53
US stock indexes sank on Monday, registering their worst day in months, amid concern about Google Inc.'s valuation and doubts about holiday spending after a disappointing sales estimate from Wal-Mart Stores Inc. In addition, downward pressure on the dollar for a fourth straight day hurt demand for US investments, while a rise in crude oil prices above $60 a barrel added to concerns about consumer spending. The Dow Jones industrial average fell 158.46 points, or 1.29%, to end at 12,121.71. The Standard & Poor's 500 Index lost 19.05 points, or 1.36%, to finish at 1,381.90. The Nasdaq Composite Index slid 54.34 points, or 2.21%, to close at 2,405.92.
Mutual funds were net sellers for the second day in a row on Friday 24 November. Mutual funds sold shares worth a net Rs 212.73 crore on 24 November compared to their outflow of Rs 276.24 crore on 23 November.
Indo Tech Transformers: Sharekhan Stock Idea dated November 28, 2006
Indo Tech Transformers
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs280
Current market price: Rs199
Powered by power reforms
Key points
- The fortunes of Indo Tech Transformers are all set get transformed, thanks to India’s mission to achieve power for all by 2012. As part of this programme the government plans to almost double the country’s installed power generation capacity from 115,000MW to 200,000MW by the end of the 11th Five-Year Plan.
- This initiative is expected result in an additional demand of around 570,000MVA of transformer capacity over FY2005-12 or of 80,000MVA per year. Another 15,000MVA of demand is expected from the replacement market every year, leading to a total annual demand of 95,000MVA. That is a huge opportunity for the transformer industry whose annual capacity stands at a mere 75,000MVA.
- Indo Tech already stands to gain from this opportunity, as it has built a strong relationship with the SEBs in the south over the years. Now to make the most of this demand explosion, it is tripling its capacity from 2,450MVA to 7,450MVA.
- Indo Tech has signed an MoU with DuPont (USA) to set up a 100MVA plant to manufacture dry-type transformers for industrial and corporate customers. These transformers are higher in realisation and installed in the basement of hotels, IT parks, malls etc. We believe this will further boost the top line of the company.
- As a result of these initiatives we expect its revenues and net profit to grow at CAGR of 52% and 49% respectively over FY2006-08E.
- At the current market price of Rs199, the stock is quoting at 8.6x its FY2008E EPS and 4.8x its FY2008E EV/EBIDTA. Considering the future growth potential of the company and the stock’s attractive valuations, we recommend a Buy on the stock with a price target of Rs280.
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Market battered
The market continues to dip as relentless selling pressure across sectors and heavyweights have wiped out over 150 points from the Sensex. The weakness in IT, banking and tech stocks has dragged the index to an intra-day low of 13589. Currently, the Sensex is down 176 points at 13598 and the Nifty has declined 48 points at 3921.
Among the techs Megasoft has dropped 5.36% at Rs103, Infotech Enterprises has shed 3.76% at Rs297, GTL has lost 3.49% at Rs123, Mascon Global has slipped 3.31% at Rs8, Geometric Software has lost 3.20% at Rs115 and Hexaware Tech is weaker by 3.07% at Rs180.
On the other hand I-gate Global has notched up gains of 5.43%, GMDC has surged 4.86% and Ramco System has advanced 3.91%. HCL Infosys, Syngenta, Punj Lloyd and Sun Pharmaceuticals are also trading in positive territory.
Of the 2,551 shares traded on the BSE, 1,505 shares have declined, while 974 shares have advanced.
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