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Wednesday, January 24, 2007
Tuesday, January 23, 2007
Market Close: Custom Cut bring in Profit booking
Government nod for cut in custom duty brought in selling in Indian Indices and weakness in Global markets added fuel to the fall. FNO Expiry too kept Indian Indices to trade weak. Selling intensified in Cement, Banking stocks along with Engineering, Construction, Automobile, Energy, Pharma and Software. Heavyweights like Bharti and Hindalco were the gainers while selective Mid caps and Small caps saw buying interest on the back of good results. The Asian markets traded mixed for the day and also European Markets currently trading mixed.
Sensex clsoed down by 168 points at 14041.24. Weighing on the Sensex are losses in ACC (1037,-7 percent), Guj Ambuja (136.9,-7 percent), Dr Reddys (770,-5 percent), SBI (1173.95,-4 percent) and Grasim (2805.3501,-3 percent). Losses are restricted by gains in Bharti Tele (689.15,+2 percent), Hindalco (164.95,+0 percent).
Maruti results for the 3Q were not spectacular. Net profits at Rs 376 cr up 11%, The lower-than-expected profit was due to adjustment on account of the merger of wholly-owned subsidiary Maruti Suzuki Automobiles India (MSAIL) with effect from April 1, 2006. MSAIL's Rs 54.6-crore loss had the profits down. The sentiment however turned positive on its intention to launch the diesel Swift, in the next couple of days. The government stake sale is another trigger. MUL has been aggressive in discounting to get sales with risks coming in fom higher material costs, rising interest rates, increasing competitive intensity. However valuations at 16 times FY07 earnings seems to offer scope given the fact that this Diesel initiative could kick off well. Telco dominates the Diesel car segment which is growing rapidly.
SBI has declared its Q3 results for FY07. Its third quarter Net Profit stood at Rs 1,065 cr down by 4.5% vs Rs 1,115.1 cr yoy. The company's Net profit (excluding exceptional) was at Rs 1065 cr vs loss of Rs 620 cr. SBI had extraordinary income of Rs 2,048 cr in Q3 last year. Its Q3 NII has gone down by 6.4% at Rs 3951 cr against Rs 4219.8 cr yoy. The NII (Excluding Extraordinary Income) was up by 46% at Rs 3951 cr. SBI provisions and contingencies stood at Rs 1166 cr compared to Rs 470 cr. Banks CAR was at 11.86% vs 12.49%. The Banking sector results were not much encouraging as rising deposit rates had impacted their Net profits. The Bank stocks closed in red and SBI closed down by 4.5%.
Technically Speaking: Sensex traded weak as selling intensified till the closing. Sensex touched intraday high of 14212 and low of 14025. Market turnover stood decent at Rs 4040 cr. Overall breadth was in favor Declines where Declines stood at 1723 and advances stood at 913. The Resistance level was at 14156 -14277 while Support at 13969 -13904 levels.
FII: +Rs 319.80cr, MFs - Rs 54.23cr
FII Gross purchases Rs 2236.20 Cr Gross Sellers Rs 1916.40 Cr Net Buyers Rs 319.80 Cr.
MF Gross Purchases Rs 468.40 Cr Gross Sellers Rs 522.63 Cr Net Sellers Rs 54.23 Cr.
Our View:
Market continued to range ahead of F&O week.. One can say it is a consolidation process.. Moment ahead will be directed by liquidity inflow..
Market takes a hit
The market exhibited nervousness throughout the trading session. It witnessed a correction as weak Asian markets and flat US indices dampened the sentiment. After opening weak at 14212, the Sensex declined further under the selling pressure in heavyweights, banking, cement and pharma stocks. The decent earnings from several Sensex stocks failed to help the Sensex to recover from its losses. As trading progressed the Sensex lost its strength and slipped further towards the close to touch the intra-day low of 14026. The Sensex finally ended the session with losses of 168 points at 14041, while the Nifty shed 36 points and closed at 4066.
The broader market remained weak. Of the 2,679 stocks traded on the BSE, 1,722 stocks declined, 899 stocks advanced and 58 stocks ended unchanged. All the sectoral indices ended in negative territory. The BSE Bankex index dropped 2.17% to 7315, the BSE HC index shed 1.66% to 3834 and the BSE CD index was down 1.53% to 3802.
Among the major losers, ACC slumped 7.06% to Rs1,037, Gujarat Ambuja dropped 6.88% to Rs137, Dr Reddy's Lab shed 4.93% to Rs770, SBI lost 4.10% at Rs1174, Grasim declined 2.93% at Rs2,810 and HDFC Bank slipped by 2.50% at Rs1,030. NTPC tumbled 2.31% at Rs135, Maruti Udyog declined 2.05% at Rs919, Tata Motors lost 1.49% at Rs950 and Reliance Communication slipped 1.42% at Rs441. However, Bharti Airtel gained 1.89% at Rs689 and Hindalco rose 0.30% at Rs165.
The banking stocks came under sharp selling pressure. UTI Bank tumbled by 6.60% at Rs509, Canara Bank slipped 5.22% at Rs249, Kotak Bank slumped 4.09% at Rs462, BOI fell 3.94% at Rs196, PNB declined 2.14% at Rs515, Union Bank shed 1.62% at Rs116, Indian Overseas Bank was down 1.41% at Rs112 and ICICI Bank slipped 1.24% at Rs965.
Over 32.95 Crompton Greaves shares changed hands on the BSE followed by Ispat Industries (32.46 lakh shares), Cairn India (29.38 lakh shares), Dena Bank (19.70 lakh shares) and Welspun Gujarat (18.81 lakh shares).
Value-wise SBI registered a turnover of Rs115 crore on the BSE followed by Reliance Communication (Rs75 crore), India Cement (Rs56 crore), Gujarat Ambuja Cement (Rs55 crore) and Bharat Forge (Rs53 crore).
Cement, banks, FMCG stocks fall headlong
The Sensex, which had opened weak, kept sliding as the day progressed. Squaring up of long positions and covering of short positions today itself, ahead of the expiry of January 2007 derivatives contracts on Thursday (25 January 2007), contributed to the fall. Shares of cement makers, banks and FMCG firms were the major losers.
The 30-shares BSE Sensex lost 168 points (1.18%), to end at 14,041.24. It had opened a bit higher, at 14,212.12 (also the day’s high), but started declining due to heavy selling. It also plunged to a low of 14,025.74, in the late-afternoon session of trade.
The S&P CNX Nifty was down 36.35 points (0.89%), to 4,066.10.
The market-breadth was weak, as a host of small-cap and mid-cap stocks came under pressure. For 1,723 shares that declined, only 913 advanced and 60 scrips remained unchanged on BSE.
The total turnover on BSE amounted to Rs 4040 crore, higher than Rs 3,719 crore on Monday.
Among the 30-Sensex pack, 28 declined and only 2 eked out gains.
Cement shares were drubbed by the lifting of customs duty on all varieties of the commodity. ACC (down 6.97% to Rs 1038) was the top loser. It had also slipped to a low of Rs 1031.
Gujarat Ambuja Cements tanked 6.78% to Rs 136.80. It had slipped to a low of Rs 135.10. The counter clocked 39.13 lakh shares on BSE.
Other cement shares to suffer were Grasim (down 2.93% to Rs 2810), Mangalam Cement (down 8.93% to Rs 224.35), Mysore Cement (down 6.97% to Rs 62), Birla Corporation (down 7.83% to Rs 338), Ultratech Cement (down 4.65% to Rs 1060), Shree Cement (down 4.54% to Rs 1425), JK Lakshmi Cement (down 4.42% to Rs 173.15), Anjani Portland (down 13.53% to Rs 36.10), India Cement (down 8.73% to Rs 220.65) and Madras Cement (down 4.86% to Rs 3455).
The customs duty on all varieties of cement, except white cement, has been cut to zero from 12.5%. Analysts reckon that cement prices in only a few regions, mainly restricted to Bangladesh, and to some extent Sri Lanka, could be impacted due to increase in imports following the lifting of the import duty. Cement being a bulky commodity, freight costs account for a large portion of its retail cost. Prices in the interior regions are unlikely to be affected as a result.
Dr Reddy’s Lab (DRL) plunged 5.28% to Rs 767.10, after results missed street expectations. The drugmaker reported a surge in net profit in December 2006 quarter after trading hours on Monday. However, the stock managed to recover from a low of Rs 772.
The Hyderabad-based drugmaker, which acquired Germany's Betapharm last year, said quarterly net profit rose to Rs 188 crore from Rs 62.80 crore in December 2005 quarter. Total revenue jumped to Rs 1540 crore from Rs 590 crore.
DRL's foreign acquisitions and better sales of generics in the United States drove growth, while overseas sales are seen rising as drugs with annual sales of $30 billion are likely to go off patent in the next two years. Dr Reddy's Labs generics revenue rose to Rs 768 crore from Rs 83.10 crore.
PSU bank SBI declined 4.53% to Rs 1168.75. Its third quarter net profit stood at Rs 1,065 crore, down 4.5% from Rs 1,115.1 crore in the corresponding quarter of the previous year. The bank’s net profit (excluding exceptional items) was at Rs 1065 crore versus loss of Rs 620 crore. SBI had extraordinary income of Rs 2,048 crore in Q3 last year. Its Q3 NII declined 6.4% to Rs 3951 crore (Rs 4219.8 crore). The NII (Excluding Extraordinary Income) was up 46%, to Rs 3,951 crore.
SBI's provisions and contingencies stood at Rs 1166 crore, compared to Rs 470 crore in the corresponding period of the previous fiscal. SBI's CAR was 11.86% versus 12.49%.
Index heavyweight Reliance Industries (RIL) was down 1.05% to Rs 1359, on a volume of 3.65 lakh shares. It had also struck a high of Rs 1381.
Bharti Airtel was the top gainer, up 1.60% to Rs 687.15, on a volume of 3.93 lakh shares. The company posted a net profit of Rs 1043.69 crore for the quarter ended December 2006, compared to Rs 538.68 crore for the quarter ended December 2005. Total revenue increased to Rs 4723.68 crore (Rs 2936.03 crore).
A solid surge in user base in the world's fastest growing mobile market, sent Bharti Airtel's shares to a life high of Rs 700.80. The company’s consolidated net profit, as per Indian GAAP, zoomed over 90% to Rs 1,033.34 crore for the third quarter ended December 2006, when compared with Rs 543.54 crore in the quarter ended December 2005.
Chairman Sunil Mittal said demand for telecom services continued to be strong. The company, India's top mobile services firm, added five million new subscribers in the three months to December, the highest-ever in a quarter.
The board of Bharti Airtel approved transferring the company's towers for mobile communications and related infrastructure, to a wholly-owned subsidiary, Bharti Infratel, for better operational efficiency.
The company also announced commencement of Direct-To-Home (DTH) services to address the fast-growing home entertainment segment through Bharti Telemedia, another wholly-owned subsidiary. It also approved acquisition of a submarine network cable system from Network i2i (jointly owned by Singtel and a Bharti group company) for an overall consideration of $ 110 million.
The BSE Bankex fell 162.09 points (2.17%), to 7,314.61. UTI Bank (down 7.25% to Rs 505.60), Canara Bank (down 5.03% to Rs 249.20), Bank of India (down 4.11% to Rs 196), Kotak Mahindra Bank (down 4.54% to Rs 460), and Bank of Maharashta (down 3.76% to Rs 44.75), ended with losses.
The FMCG index slipped 21.91 points ( 1.11%), to 1,954.15. Colgate (down 4.06% to Rs 359.15), ITC (down 1.67% to Rs 176.15), Marico (down 1.46% to Rs 556.10), HLL (down 0.78% to Rs 222.35), Dabur India (down 1.17% to Rs 160.10), Tata Tea (down 1.07% to Rs 722), and P&G (down 0.86% to Rs 892) declined.
Among side-counters, Geodesic Information Systems rose 0.55% to Rs 245.35, after its board approved merger of the Bangalore-based wholly-owned subsidiary, Picopeta Simputers, with the company. The board also approved purchasing 100% stake in Chandamama India. Geodesic reported Q3 net profit of Rs 24.3 crore for the quarter ended December 2006, compared to Rs 21.7 crore for the quarter ended September 2006 (QoQ). Net sales increased to Rs 45.3 crore (Rs 39.1 crore).
Torrent Cables surged 5.89% to Rs 167.20. It had posted 65.6% growth in net profit for Dec-2006 quarter to Rs 7.02 crore (Rs 4.24 crore). Net sales jumped 55.1% to Rs 50.73 crore (Rs 32.70 crore).
Branded apparel major Kewal Kiran Clothing plunged 8.58% to Rs 242, after a mere 7.7% growth in net profit for Dec-2006 quarter. Kewal Kiran Clothing (KKCL)’s net profit rose 7.7% in December 2006, to Rs 3.62 crore (Rs 3.36 crore). Net sales rose 20.6% to Rs 31.56 crore (Rs 26.16 crore).
The company, however, said the results were not strictly comparable. After restructuring, the apparel manufacturing and marketing business is vested in the company. The results for FY-2006 (year ended 31 March 2006) includes the effect of the above for part of the year, and hence the previous year figures are not strictly comparable, the company warned.
National Aluminium Company gained 4.14% to Rs 221.50, on reporting 46% growth in net profit for Dec-2006 quarter to Rs 572.60 crore (Rs 393.03 crore). Net sales rose 9.3% to Rs 1448.57 crore (Rs 1324.91 crore). Nalco posted results after trading hours on Monday (22 January 2007).
Zee Entertainment Enterprises surged 4.6% to Rs 316.10. On Monday, Zee had reported 175% surge in net profit in December 2006 quarter, to Rs 87.53 crore (Rs 31.86 crore). The scrip rose 2.3% to Rs 301.95 on Monday (22 January) following announcement of results during trading hours.
Asahi India Glass rose 4% to Rs 142.35, after the company reported a surge in net profit in December 2006 quarter, to Rs 13.92 crore (Rs 2.88 crore).
Orchid Chemicals rose 4% to Rs 225.40, after its betalactam unit in Maharashtra received regulatory approval from the UK. The approval for this plant, from UK's Medicines and Healthcare products Regulatory Agency, will help Orchid market its betalactam product, Piperacillin-Tazobactam, across Europe.
TRF jumped 9% to Rs 468, after the company posted 154.4% surge in net profit for Dec-2006 quarter to Rs 4.96 crore (Rs 1.95 crore). Net sales rose 100.1% to Rs 80.37 crore (Rs 40.16 crore).
Suven Life Sciences jumped 5% to Rs 167.25, after its board decided to consider sub-division of equity shares along with a bonus issue on 29 Jan 2007.
The Central Government on Monday cut customs duty on key inputs with immediate effect. The customs duty on ferro-alloys stainless steel and other alloy steel was cut to 5% from 7.5%; calcined alumina to 5% from 7.5%; pipes and tubes of aluminium, copper and zinc to 7.5% from 12.5%.
Other cuts include project imports to 7.5% from 12.5%; specified capital goods and their parts to 7.5% from 12.5%. The reduced customs duty of 7.5% on project import has now been extended to airport development and metro rail projects. A government statement read the step will reduce the cost of manufacturing and infrastructure development.
The Nikkei average closed little changed on Tuesday, as Nippon Steel Corp jumped after a rival hiked product price, offsetting losses in tech shares including Advantest Corp.
The tech-sensitive Nikkei ended down 15.61 points (0.09%), at 17,408.57, after rising as high as 17,442.00 late in the afternoon. The broader TOPIX index added 0.02% to 1,730.76.
FIIs were net buyers to the tune of Rs 77 crore on Friday (19 January), the day when the Sensex lost 35 points. FIIs have resumed buying after heavy inflows earlier during the month, which triggered a sharp market fall. FIIs were net buyers in 6 out of 7 trading sessions, from 11 January to 19 January. As per provisional data, FIIs were net buyers to the tune of Rs 218 crore on Monday (22 January), the day when the Sensex rose 27 points.
FIIs were net buyers to the tune of Rs 288 crore in index-based futures on 22 January. They were net sellers to the tune of Rs 85 crore in individual stock futures that day.
US stocks slid on Monday as investors sold shares of technology firms on worries about their earnings outlook, while a brokerage downgrade hurt shares of aircraft maker Boeing Company, pushing the blue-chip Dow average down to record its steepest one-day drop in two months.
The Dow Jones fell 88.37 points, or 0.70%, to end at 12,477.16. The Standard & Poor's 500 Index declined 7.55 points, or 0.53%, to finish at 1,422.95. The Nasdaq Composite Index lost 20.24 points, or 0.83%, to close at 2,431.07.
Oil prices slipped slightly in Asian trading hours due to a build-up in US stockpiles, easing concerns about heating fuel demand during the winter in the northern hemisphere.
The New York Mercantile Exchange's main contract, light sweet crude for delivery in March, was down $0.04 at $52.54 a barrel, from its level of $52.58 in late trading in the US overnight. The February contract expired at $51.13. Brent North Sea crude for March was at $54.64, down $0.06.
PowerYourTrade Trading Calls
Ashwani Gujral
Buy Glenmark Pharma with stop loss of Rs 600 for target of Rs 750
Buy Eicher Motors with a stop loss of Rs 340 for target of Rs 500
Deepak Mohoni
Short sell Glaxo Pharma above Rs 1130 with stop loss of Rs 1155. Its an intra-day recommendation.
Buy Rolta below Rs 321 with stop loss of Rs 313; Its an intra-day recommendation.
Rajat K Bose
Buy JB Chemicals around the last close with a stop loss below Rs 99.80 for target of Rs 113
Buy Centurion Bank around the last close with a stop loss below Rs 33.90 for target of Rs 40.
Intra-day Stock Ideas
NIFTY (4102) SUP 4092 RES 4124
BUY ITC (179)
SL 176 T 188, 190
BUY USHAMART (198.75)
SL 194 T 206, 208
BUY BRFL (218.75)
SL 213 T 227, 229
SELL SCI (176.25)
@ 178 SL 182 T 168, 165
SELL MONNETISPA (208.85)
@ 211 SL 215 T 200, 198
Indiainfoline - Research Desk
Shree Cements (SCL) – Q3 FY07
CMP: Rs1,489.90
Target: Rs1,726
Rating: BUY
Cement dispatches increased sharply in Q3FY07 by 79.5% yoy to 1.29mn ton. On qoq basis the same increased by 16.7%. Capacity utilization of the enhanced capacity touched 116% for the quarter. SCL increased its clinker to cement conversion ratio from 1.36 in Q2FY07 to 1.41 in Q3FY07. We expect cement volumes to clock 6.23mn ton in FY08 as 1.5mn ton integrated cement plant is expected to go on line from FY07 end at Unit 4and Unit 5 with 1.2mn ton clinker capacity with split grinding capacity of 2 mn ton is expected to come on line from Dec 2007.
SCL’s realization per ton increased yoy by 40.7% in line with the industry to Rs2817, in Q3FY07. On qoq basis it fell from Rs2849, as SCL tested new markets during the quarter. On yoy basis operating margin improved by 1400 bps to 43.9% in Q3FY07, but eased from 45.2% recorded in Q2FY07. Fall in realization coupled with increased freight cost to venture new pockets has brought down the operating margin. We expect operating margins to improve in the coming quarter as realization improves in the peak construction period and freight expenses coming back to normal levels.
SCL’s CMP of Rs1482 discounts our estimated EPS of Rs109.8 and Rs143.8 for FY07P and FY08P by 13.5x and 10.3x respectively. We expect SCL to command better valuations going forward with multifold increase in capacities and increase in blending ratio. We rate the stock as BUY with a target of Rs1726. Our target price discounts FY08 estimated earnings by 12x and EV/EBIDTA by 7.7x.
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