Weekend Industry Trends - Dec 24 2007
India Equity Analysis, Reports, Recommendations, Stock Tips and more!
Search Now
Recommendations
Thursday, December 20, 2007
Weekly Close: Holiday Mood !
The week started off on a major negative note. The culprit was the global credit crunch which finally impacted Indian Markets at least on sentiment. Selling was largely by foreign funds and the buyers were the domestic funds to an extent. Domestic fund were active and when the retail investors are active it is the mid caps and small caps which tend to do very well. Mid caps continued to gain confidence though they too saw intermediate levels of profit taking.
Investors shunned positions ahead of a long weekend so as to avoid event risk of the US markets over the weekend. Sensex tumbled 4.41% for the week to close at 19163. There stood two gainers Satyam by 4.11% and Infosys +3.23% while the numbers in losers were large; HDFC -11.14%, ACC - 8.68%, RCom -7.22%, NTPC -6.97%, TISCO -6.47%, Hindalco -6.44%, RIL and DLF both down by -5.89%, SBI -5.62%, Maruti -5.21%, ICICI Bank -4.71%, LNT -4.67% and Bharti -4.04%.
Global economy: India is quite integrated in the world economy and US being a big portion of that gets a big focus. Slowdown there certainly has implications which cannot be ignored. There was an event with the US Government intervening to save the borrower. That had big implications and could have further also. Rate cut is also trend across the developed nations.. Probably we may provide support. It is clear, that the US Administration will do as much as possible to ensure smooth landing of economy. How this plan can help cleanse out the system is not clear. Someone has to pay for the excesses and it so appears that the companies who have lent may bear the pain. Government intervention in a capitalist economy like US may shake investor confidence. We wont comment much here. We really wonder that Govt. intervention would help or it is just delaying the worst. Time will only tell. On Indian economy front story remains strong but on the markets front it could be different.
IT counter had bounced from there lows. Many papers reported that adverse over rupee is priced in and it may time to see something good here. The Result season is ahead and IT cos who are normally the first to declare numbers saw the trading interest. We agree that rupee impact is done .. US slowdown could weigh here. Banks are the major victim in US and big clients for Indian IT Cos. We don't expect any major turnaround here unless and until things get better in US. The stocks may see some upsides but there are headwinds of an appreciating rupee, the Tax sops going away and then the pressure of salaries.
Our research cover many stocks is our research and delivery from there was wow !
Gillette India continued to hit circuits. FMCG firms are considered as defensive play in weak markets. But Gillette itself has a growth story. It is a play on number of growing young population in India. Right now the grooming market is dominated by double edge blade system. Disposable income has increased and so also the purchasing power. Interesting to see that better lifestyle will see more numbers young men will move to the twin edge space. Gillette is well placed with its premium brand. The company has also reduced the price so as to cater the mass. The company would also leverage on on distribution network of P&G post merger. We are positive on this one with a long term prospective.
WWIL is one were our research will follow soon. The company is Multi System Operator (MSO) which provide Cable services through Local Cable Operator (LCO). Right now the prefer mode of cable viewing is Analogue and this system has led to under subscription for the industry. With digitalization major portion of under subscription would be disclosed to MSO. The industry very large but highly fragmented. MSO's are seeking consolidation in the industry. Thing would improve with digitialisation and consolidation. But this will take its own sweet time. Do await an interesting note here.
Garnet is one of the gems in our research. The company has huge land bank and it would used to develop bungalows. Now its time to cash here.
Indian Seamless Metal Tubes Limited (ISMT) produces specialized seamless tubes in India. ISMT caters to various industries like Auto, Bearings, Oil Explorations, Construction, Boilers, Engineering & Hydraulic applications. Considering the good future prospects of power segment, the company intends to focus on the power segment to sell more seamless tubes required in the Boilers and Heat Exchangers. ISMT is also into steel.. Pig iron and sponge iron route. The complete steel is procured in house and some of it is even sold. This gives an advantage to ISMT for using the right kind of alloy steel for specialized applications. More Details in our note and also our views
There was more research, including VIP Industries, Mold Teck and othres.
Technicaly speaking: Sensex has a clearly defined Resistance above 20000 on weekly basis. We see the short term trend as negative and 18500 seems to be more likely in coming days.Traders should reduce their longs on pullbacks upto 19500--19700.
Next week is the expiry of the December Futures and there is also the holiday for 25th for Christmas. Action will be limited but a Santa Claus rally can be expected as stocks get helped for the bonuses of the Fund Managers. Fundamentally, though there is little reason to be positive. News flow will be limited and with China having hiked interest rates, the emerging markets may react a bit cautiously.
Tata to unveil People's Car on Jan 10 2008
Tata Motors will display a range of new passenger vehicles, while Fiat will display passenger cars from its international range. From its commercial vehicles business, Tata Motors’ displays will include buses from the joint venture with Marcopolo of Brazil, newly developed multi-axle heavy trucks, pickup vehicles, applications of panel vans, and new mini-trucks.
In keeping with the company’s tradition of unveiling its new cars at the Auto Expo, the company will present its People’s Car, which will be unveiled at a special ceremony on January 10. Although the People’s Car will be unveiled at the Expo, the commercial launch will take place later in 2008.
The New Delhi Auto Expo, which is a biennial event, has been the glittering showcase of the Indian automobile and auto-component industry for the last 18 years. A complete automotive show, it is a platform for the world to display state-of-the-art and latest developments in the automotive industry.
Ford may pick Tata Motors for JLR: reports
Ford Motor is likely to name Tata Motors as the preferred bidder for its Jaguar and Land Rover brands (JLR) on Dec. 21, according to international media reports. Tata Motors is expected to quote about £1bn (US$2bn) for the marquee luxury brands, the reports said. However, Ford may keep some interest in JLR under pressure from the British unions. Ford, which is spinning off the British luxury brands to focus on restructuring its loss-making North American operations, said last week it aimed to complete the sale in early 2008. Tata Motors is competing with Mahindra & Mahindra (M&M) and private equity firm One Equity Partners.
UK trade unions have already expressed their desire to back the Tatas. Officials from the British factories making the iconic brands believe that the family-owned Indian auto manufacturer would offer more long-term security than private equity firm One Equity. JLR together employ 15,000 people in the UK. The headcount of the two brands increases to 40,000 if employment throughout the supply and support chains is taken into account. However, union leaders have voiced some concern about Tata Motors' market positioning as a manufacturer of mass market brands. They fear that JLR brands will not fit well with Tata Motors' image. Unions also feel that Tata Motors may source components or manufacturing from India, leading to loss of British jobs.
Software companies struggle with user compliance: KPMG
Illegal and unlicensed software installations continue to be a significant problem and source of revenue loss for software companies worldwide, according to a recent survey of software company executives conducted by KPMG LLP, the U.S. audit, tax and advisory firm. In fact, 55 % of the executives estimated their firm’s revenue loss at greater than 10 % of total revenue.
Overall, in the KPMG study, 87 % of the executives claimed revenue loss due to unlicensed users. What’s more, 77 % of those surveyed agree with IDC (International Data Corp.) estimates that 35 % of software installed is unlicensed, leading to an estimated $34bn in lost revenue to the industry.
The KPMG study found that 64 % of software publishing executives indicated that their companies have a program designed to ensure customer compliance with software license agreements. And 36 % said that they do not have compliance programs.
“Executives of software companies are struggling to find answers to combat unlicensed software use,” said Arpinder Singh, Executive Director KPMG in India. “Some firms are either not executing their compliance programs or need them analyzed or overhauled. Effective compliance programs do help firms recoup revenue and maintain strong customer relationships.”
In fact, 20 % of the KPMG survey takers say that their compliance programs deliver over five % of their ongoing software revenue streams, and 30 % say they derive between five and 10 % of annual revenue. Seven % of respondents indicate that these programs actually contribute 10 % or more to the top line.
When asked if compliance activities resulted in negative outcomes with customers, 94 % of survey takers indicated that customer loss is very rare or never occurs. And, 50 % of those surveyed said customer satisfaction is a key measure used to gauge compliance-program success.
“In India also the picture is quite grim as almost 50 % software is pirated. One of the major problems in India is the weak law enforcement and awareness. Though a number of companies have started software compliance programme but we still need to go a long way. Several leading practices were revealed through our survey that can be applied by software publishers to help recover lost revenues, strengthen software license controls, and improve business relationships with major institutional customers.” concludes Arpinder Singh.
According to KPMG’s survey, software companies could be doing a better job of helping their customers understand what they have purchased, and what types of usage their license agreements allow. Only 36 % make such information easily accessible by their customers, while 43 % say they share such information on a case-by-case basis. In addition, the information that is made available may not be as comprehensive as necessary. While 45 % say their entitlement information is comprehensive, 55 % say the data may provide only an average or limited level of understanding.
KPMG surveyed 50 executives from software publishing companies collectively represented almost 50 % of total industry revenue. Twenty-eight % of those who responded are with companies earning US$5bn or more in software revenues. In addition, 62 % are with companies earning more than $250 million. Additionally, KPMG interviewed executives at six prominent software companies to validate the survey findings, and identify software license compliance practices worthy of note.
The survey was conducted in cooperation with the International Business Software Manager’s Association (IBSMA), a trade group that represents enterprise-level software customers. The objectives were to detect the substantive issues underlying this enormous industry problem by surveying a valid cross-section of software publishers. The approach also focused on identifying better practices in license compliance, so the industry could learn from successful techniques being applied in the industry today.
FII short selling to be permitted soon
: The Securities and Exchange Board of India on Thursday decided to permit short selling by institutional investors. Hitherto, only retail investors were allowed to short sell.
The markets regulator said it will put in place a securities lending and borrowing scheme to provide a mechanism for borrowing of securities to enable settlement of securities sold short.
Stock exchanges and depositories have been advised to put necessary systems in place in this regard.
The date of implementation will be communicated subsequently.
Short selling means selling a stock which the seller does not own at the time of trade.
Broad framework for short selling:
1. "Short selling" shall be defined as selling a stock which the seller does not own at the time of trade.
2. All classes of investors--retail and institutional--shall be permitted to short sell.
3. Naked short selling shall not be permitted and all investors would be required to honour their obligation of delivering the securities at the time of settlement.
4. No institutional investor shall be allowed to day trade--square-off transactions intra-day. In other words, all transactions would be grossed for institutional investors at the custodian level and the institutions would be required to fulfill their obligations on a gross basis. The custodians, however, would continue to settle their deliveries on a net basis with the stock exchanges.
5. The stock exchanges shall frame necessary uniform deterrent provisions and take appropriate action against the brokers for failure to deliver securities at the time of settlement which shall act as a sufficient deterrent against failure to deliver.
6. A scheme for Securities Lending and Borrowing shall be put in place to provide the necessary impetus to short sell, and its introduction shall be simultaneous with that of short selling by institutional investors.
7. Securities traded in F&O segment shall be eligible for short selling. SEBI may review the list of stocks eligible for short selling transactions from time to time.
8. Institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale. However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.
9. The brokers shall be mandated to collect the details on scrip-wise short sell positions, collate the data and upload it to the stock exchanges before the commencement of trading on the following trading day. The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public on a weekly basis.
Via ET
Post Market Commentary
The market closed higher after facing a lot of volatility throughout the trading session. The cues from the global markets are not in favor that led the domestic market to struggle a lot to close with marginal gains. The market opened on a firm note but pared most of its gains at the end of the session. The IT and Metal stocks remained in the limelight as most buying is seen from these baskets. Both the BSE Mid cap and Small Cap closed lower by 54.85 points and 102.04 points at 9,025.54 and 11,813.32 respectively. The BSE Sensex closed up by 70.61 points at 19,162.57 and NSE Nifty closed higher by 15.35 points at 5,766.50. The BSE Sensex touched its intraday high of 19,291.14 and low of 19,097.70 during the trading session. Overall, the market breadth was week as 1,754 stocks are closed in red while 1166 stocks are closed in green.
BSE Metal index closed higher by 70.90 points at 18,273. Scrips that gained are SH. Precoated (7.16%), SAIL (2.30%), Jindal steel (1.33%), JSW steel (1.16%), Hindalco (0.40%).
BSE Realty index closed up by 10.82 points at 11,614.08. Scrips that grew are Phoenix mill (4.78%), Mahindra Life (2.02%), Omaxe (1.92%), HDIL (1.33%) and DLF (1.09%).
BSE Capital goods index declined by 172.48 points to close at 18,725.69. Scrips that fell are AIA Engineer (3.28%), ABB (2.94%), Praj inds (2.38%) and BHEL (1.31%).
BSE Oil & Gas index fell by 34.76 points to close at 12,246.0 as Essar Oil (5.96%), RNRL (2.02%), Aban Offshore (1.39%), RPL (1.31%) and IOCL (0.56%) closed lower.
BSE Bankex index dropped by 25.37 points to close at 10,738.59 as CentBOP (4.34%), IOB (2.84%), BOB (1.72%), Andhra bank (1.17%) and Axis bank (1.07%) closed in negative.
BSE Health Care index dropped by 4.63 points to close at 4,242.53 as Glaxosmithkline (5.32%), Dishman pharma (3.78%), Fortis health (2.85%), Cadila health (2.36%) and Pfizer (1.43%).
IT stocks shine in lacklustre market
After yesterday's flat close, the market saw a gap up opening tracking positive Asian peers. But, indices came off their highs as investors booked profits in heavyweights, capital goods, and power stocks and the Sensex touched the day's low of 19,098. However, IT stocks moved up in anticipation of companies reporting good numbers and some value buying. The market recovered thereafter, but due to lack of buying interest in most of the counters the trading was range-bound with an upward bias. The market eventually gave up its early gains and wrapped up the session with a gain of 71 points at 19,163. The broad based Nifty closed the session at 5,767 up 15 points.
The market breadth was negative, with losers outpacing gainers in the ratio of 1.5:1. Of the 2,950 stocks traded on the Bombay Stock Exchange (BSE), 1,754 stocks declined, 1,166 stocks advanced and 30 stocks ended unchanged. Most of the sectoral indices ended in the red. BSE FMCG index dropped by 1.16% at 2,198 followed by BSE CG index (down 0.91% at 18,726) and BSE CD index (down 0.62% at 6,084). However, BSE IT index gained 3.34% at 4,321, BSE Tech index (up 1.50% at 3,777) and BSE Auto index (up 0.28% at 5,541).
Among the Sensex stocks, steel major Satyam Computer was the leading gainer and its stock price soared 5.85% at Rs428. Among other stocks Infosys advanced 3.68% at Rs1,698, Reliance Energy jumped 3.04% at Rs1,940, Tata Motors moved up by 2.86% at Rs711, TCS gained 2.34% at Rs1,045, Wipro added 1.77% at Rs492 and DLF surged 1.09% at Rs961. Among the laggards, ACC slipped 2.77% at Rs1,002, Cipla shed 2.04% at Rs211, ITC declined by 1.65% at Rs196, Ranbaxy fell by 1.65% at Rs196 and BHEL lost 1.31% at Rs2,368.
Over 6.11 crore IFCI shares changed hands on BSE followed by Ispat Industries (2.10 crore shares), IKF Technologies (1.78 crore shares), Harig Cranks (1.28 crore shares) and GV Films (1.27 crore shares).
IFCI registered a turnover of Rs473 crore on BSE followed by Reliance Energy (Rs291 crore), Reliance Industries (Rs251 crore), Ispat Industries (Rs175 crore) and Reliance Petroleum (Rs869 crore).
Derivatives expiry to keep market volatile
The market is expected to remain volatile in coming week as December 2007 derivatives contracts expire on Thursday, 27 December 2007. Trading for the week ahead will be truncated, as market will remain closed on Tuesday, 25 December 2007 on account of Christmas. Volumes may be low as foreign fund managers will be on annual vacation.
The 30-share BSE Sensex declined 868.26 points or 4.33% to 19,162.57 in the week ended Thursday, 20 December 2007. The S&P CNX Nifty slipped 281.20 points or 4.64% to 5,766.50 in the week. The market had posted gains during the preceding three weeks in a row.
Foreign Institutional Investors (FIIs) may resort to year-end profit taking. They follow calendar year as their accounting year. FIIs had been the key drivers of the recent rally. Their inflow in calendar year 2007 totaled Rs 67,329.50 crore (till 19 December 2007). They were net buyers to the tune of Rs 1,422 (till 19 December 2007).
Domestic market will also be influenced by the global trend. Investors remain nervous on concerns that credit market crisis may intensify further. Any major sell-off in global markets may cast its shadow here as well.
Meanwhile, traders are likely to start building positions towards the end of the month based on expectations of Q3 December 2007 results due next month.
Sensex sheds 868 points
The market snapped three weeks winning streak to post losses in the week ended Thursday, 20 December 2007 on profit booking in index pivotals. It saw high volatility throughout the week. The market posted gains in 2 out of 4 trading sessions in the week. Global markets were subdued during the week.
The 30-share BSE Sensex declined 868.26 points or 4.33% to 19,162.57 in the week ended Thursday, 20 December 2007. The S&P CNX Nifty slipped 281.20 points or 4.64% to 5,766.50 in the week.
Trading for the week started on weak note with the market undergoing major correction on Monday, 17 December 2007. The 30-share BSE Sensex plunged 769.48 points or 3.84% to 19,261.35 tracking weak global markets.
Sensex slipped 181.71 points or 0.94% to 19,079.64 on Tuesday, 18 December 2007 in volatile trading session. FMCG, healthcare and consumer durable stocks gained. Banking, metal and capital goods stocks edged lower.
On Wednesday, 19 December 2007, Sensex rose 12.32 points or 0.06% to 19,091.96, amid mixed trend in index pivotals.
The Sensex rose 70.61 points or 0.37% to 19,162.57 on Thursday, 20 December 2007, as profit booking erased some of early gains, in volatile trade. Global cues were mixed.
The market remains closed on Friday, 21 December 2007 on account of Bakri Id.
India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 4.17% to Rs 2714.70 in the week. As per reports, Reliance Industries (RIL) has paid advance tax of Rs 1045 crore in the third quarter ended 15 December 2007 compared to Rs 440 crore in the corresponding quarter of the previous year.
State Bank of India declined 5.39% to Rs 2265.20 in the week. It shelled out Rs 1090 crore as advance tax for the third installment, up 26.7% over the tax it paid in the corresponding period in the previous year.
India's biggest power generation firm by revenue NTPC slipped 6.77% to Rs 229.40 75 in the week. The company is reportedly in active talks with more than one foreign power generation company for acquiring assets in excess of $1 billion (Rs 3,960 crore).
India's biggest commercial vehicle maker in terms of market share, Tata Motors edged lower by 6.44% to Rs 710.90 75 in the week. The company considered a front-runner to buy Ford Motor Co's luxury Jaguar and Land Rover brands, will unveil the world's cheapest car at an auto show in India next month. Tata Motors will showcase its $2,500 car at the Auto Expo in New Delhi on 10 January 2008, with a commercial launch planned for later in 2008.
Reliance Communications slumped 7.30% to Rs 706.50 75 in the week. It completed the acquisition of US-based Yipes Holdings that would give the company access to a Rs 4,00,000 crore global enterprise data market.
Reliance Energy (REL) rose 1.48% to Rs 1939.85 75 in the week. The company is reportedly planning to foray into Africa. It is believed to be in talks with the governments of Botswana, Tanzania and Zambia for setting up generation capacities of over 1,000 megawatt (MW). The company’s African Safari will be followed by a bid for a 1,200 MW greenfield project at Yanbu in Saudi Arabia, the reports added.
Thomas Cook (India) surged 58.75% to Rs 120.65 75 in the week. The stock surged on reports that it is going in for a private placement of over Rs 100 crore. However the company denied it after market hours on 19 December 2007.
IFCI tumbled 31.72% to Rs 76.75 in the week after the company, on Wednesday, 19 December 2007, called off the exercise to rope in a strategic partner through the private placement of 26% equity stake.
Annual inflation, based on the wholesale price index (WPI), rose 3.65% in the week ended 8 December 2007, lower than previous week's 3.75% rise.
The country's gross domestic product (GDP) growth can be scaled up to 10% by 2012 with the right set of policies, but the subprime crisis in the US might impact exports and capital flows, prime minister Manmohan Singh said on Wednesday, 19 December 2007, at a meeting of state chiefs and other top policymakers.
Subscribe to:
Posts (Atom)