ACC

ACC may be a good stock to accumulate on declines for investors looking at long-term returns. The stock’s PE multiple of seven, at a Price of Rs 501, factors in only moderate growth expectations. The company’s enterprise value per tonne is Rs 4,076 down from Rs 8,459 in December 2007.

Accelerated growth in despatches in the Northern region in recent months, easing cost pressures and a tighter supply situation as major capacity additions are rescheduled, suggest that ACC’s revenues and profits could see improvement from the December quarter of 2008.
Demand is strengthening

The stimulus measures announced by the government and a post-monsoon improvement in demand appear to have contributed to a pick-up in cement despatches in the Northern region in recent times. The region saw a 20 and 23 per cent growth in despatches in November and December respectively on a year-on-year basis, albeit on a lower base.

The other key region to see strong growth was the East, where despatches rose by 22 per cent in November and 10.3 per cent in December. ACC accounts for a lion’s share in these markets. Of the total 22.4 million tonne capacity, the company’s plants in North and East make up 14.36 million tonnes. In addition to these, ACC also has plants in New Wadi and Madukkarai in South and Chanda in West.

This lets the company draw benefits of strong prices in South as also strong demand in the North. The Gujarat government’s “Vibrant Gujarat” initiative that has drawn a reported Rs 12 lakh crore investment to the State could also see the demand for cement increasing in the region.

ACC is already working on its plan of adding a 3 mtpa capacity to its existing plant in Chanda (Maharashtra) by 2010. On commissioning, it will feed the infrastructure and other projects in the Western region.

ACC may be a good stock to accumulate on declines for investors looking at long-term returns. The stock’s PE multiple of seven, at a Price of Rs 501, factors in only moderate growth expectations. The company’s enterprise value per tonne is Rs 4,076 down from Rs 8,459 in December 2007.

Accelerated growth in despatches in the Northern region in recent months, easing cost pressures and a tighter supply situation as major capacity additions are rescheduled, suggest that ACC’s revenues and profits could see improvement from the December quarter of 2008.
Demand is strengthening

The stimulus measures announced by the government and a post-monsoon improvement in demand appear to have contributed to a pick-up in cement despatches in the Northern region in recent times. The region saw a 20 and 23 per cent growth in despatches in November and December respectively on a year-on-year basis, albeit on a lower base.

The other key region to see strong growth was the East, where despatches rose by 22 per cent in November and 10.3 per cent in December. ACC accounts for a lion’s share in these markets. Of the total 22.4 million tonne capacity, the company’s plants in North and East make up 14.36 million tonnes. In addition to these, ACC also has plants in New Wadi and Madukkarai in South and Chanda in West.

This lets the company draw benefits of strong prices in South as also strong demand in the North. The Gujarat government’s “Vibrant Gujarat” initiative that has drawn a reported Rs 12 lakh crore investment to the State could also see the demand for cement increasing in the region.

ACC is already working on its plan of adding a 3 mtpa capacity to its existing plant in Chanda (Maharashtra) by 2010. On commissioning, it will feed the infrastructure and other projects in the Western region.

Simplex Infrastructures

We reiterate a buy on the stock of Simplex Infrastructures (Simplex) for investors with a two-three year perspective. The company’s strong business and financial fundamentals — arising from its diversified business, presence in the relatively low risk business of contracting and superior return on equity — support its prospects in the construction space.

Simplex is unlikely to grow at the scorching pace (62 per cent compounded annual growth in earnings over the last five years) seen in the past; in other words, it may no longer witness the ‘mid-cap rate of growth’ witnessed from early 2000.

However, the company’s order-book and strong execution skills are likely to offer a more sustainable earnings model. Further, there remains substantial potential for higher spending in infrastructure and housing in the Indian context.

Contractors such as Simplex, with superior execution skills are likely to benefit from the long-term spending in these sectors.
Why the correction?

At the current market price of Rs 137, the stock trades at six times its trailing 12-month earnings. For the half year ended September alone, the company’s adjusted net profit grew by 82 per cent.

We believe that the steep correction witnessed by the stock over the past few months, is the result of an en masse de-rating of the infrastructure space.

While some among the infrastructure-developer players do face concerns in terms of slower order flows and shrinking IRRs, a steep hike in raw material costs and stretched working capital were the predominant risks seen in the contracting space.

However, with the liquidity situation easing, fears on the second score may be overdone.

Further, while September numbers did show some contracting companies give in to cost pressures, Simplex’s financials suggest that it handled these pressures better than the rest.

With the recent trend of declining cost of borrowing, improving liquidity and sharp reversal in commodity prices, the risks to earnings faced by the contracting companies may also partially abate.
Diversification helps

Simplex’s order-book, at Rs 10,700 crore, witnessed a growth of 50 per cent in the first half of FY09; impressive, at a time when orders especially from the private sector have been on the decline. Interestingly, building and housing accounts for as much as 28 per cent of the order book.

However, a good part of this comes from overseas projects, especially in West Asia, where the building activity was hectic until recently.

With the global economic recession beginning to be felt in West Asia as well, a slowdown in the construction activity in this region appears imminent.

The company appears to have anticipated this as it has diversified its presence into other segments as well. Urban infrastructure, power and other transport projects together account for a chunk of the order book.

The company has also shifted focus back to its core business in these tough times. Piling and ground engineering works, the key strength for Simplex, has once again gained ground, with the segment contributing 16 per cent to H1FY09 sales as against 10 per cent in FY08.

Overall, infrastructure projects would be the biggest revenue driver followed by industrial and building segments.

To this extent, the company’s exposure to sectors that have slowed down appears limited. In the long-term however, we expect Simplex to benefit from a gradual revival in the domestic housing construction.

Simplex has protected close to 90 per cent of its future revenues through price escalation clauses.

Nevertheless, the steep commodity price hikes, together with booking of mobilisation expenses for projects for which revenues are yet to be booked, led to about 120 basis points dip in operating profit margins to 8.7 per cent in the September quarter.

We expect OPMs to improve over the next few quarters for the following reasons: One, the benefit of a decline in commodity prices may be reflected in the financials with a lag of a quarter or two.

Two, the effect of a higher share of overseas orders (26 per cent of total order book) is likely to provide superior margins, once these translate into revenues.

On the bottomline, however, net profit margin may remain muted for sometime as higher depreciation (as a result of new assets) and interest costs may act as a drag.

On the latter, while the cost of borrowing could well decline, the quantum of borrowing, especially for working capital purposes, may remain high for sometime.

This premise is based on the likelihood of private sector clients (who account for about 60 per cent of expected revenues) needing longer periods to pay their dues or, in other words, higher debtor days as a result of the less robust industrial growth.

Weekly Stock Picks - Jan 18 2009

Buy Reliance Capital

Buy Tata Power

Buy Reliance Infra

Buy NTPC

Buy Bharti Airtel

Investing in 2009

I know someone who is constantly on the line with his broker, forget global recession and FII exits. Many of his calls on the market hit home and he books small profits in these trades. The beauty of it is that this (besides the endless gazing at the charts) is all that he does for a living, and continues to do it rather well, if you consider that he has accumulated a big chunk of wealth. This is his trade, his occupation and his calling.

It's not mine, for sure. While I agonise over numbers, management quality and macro-environment, my friend wants to buy what his rumour network tells him. And he sells this stuff the minute he's got news that his punter friends are exiting the counter.

I don't like this style of batting. It sounds like he's a pinch hitter, who plays across the line every time, and wants a boundary for that. No, investing is not a 20-20 fixture or a 50-over ODI. It's a Test match. If I want a better average (as opposed to doing well only today), I'd rather accumulate ones and twos. And wait for the loose ball.

Sometimes my friend buys really screwed-up stocks. He thinks there's serious money to be made by being a kabaadiwaala in the stock market. And, indeed, there is. Just look at what IFCI, RNRL, IOL Broadband, Oswal Chem and other such items did for their shareholders in the recent bull run. To this I say: when we buy a share, we allocate capital to it. We must allocate this capital to a business that has the potential to become more valuable over time and not just get traded at a higher price.

Often, short-term price movements do not favour the rational investor. Mr Market seems to have a mind of his own and is willing to bet against you. Patience, backed by conviction, is the best way out. My friend usually exits his 'bad timing' trades at a 10% loss if the promised action goes against him. That's because he doesn't know why he entered the stock in the first place! Sometimes you do know why and still end up with an egg on your face. An analyst in my team recommended a sell last week on NTPC based on what I thought was impeccable reasoning. It was up 5.3% by the afternoon!

Imagine the agony of the early stage investors in Bharti Airtel, which did not budge for several months before it galloped from the mid-forties to four digits across five stupendous years. Their conviction was based on an understanding of how the telecom business could evolve and Bharti's ability to garner market share and deliver profits. My friend would have sold this 20-bagger at a mere 20% gain!

Investing is not just about winning and losing at the sweepstakes, but also about how you win and lose. Because that, and that alone, is what determines your average score, not the great trade you did last April.

Dipen Sheth

Satyam saga continues...

The Government appointed six members on the new board of tainted IT major, Satyam Computer Services. The new directors on the Satyam board are, HDFC group chairman Deepak Parekh, former NASSCOM chief Kiran Karnik, ex-SEBI board member C. Achuthan, CII mentor Tarun Das, former ICAI president TN Manoharan, and LIC's Suryakant Balakrishna Mainak. The new board then hit the ground running in a bid to bring the company's operations back on track. It appointed KPMG and Deloitte to restate Satyam's forged accounts. However, ICAI later claimed that the two firms are not registered with it and are not allowed to do audit work in the country. The government appointed board also simultaneously started looking for a suitable CEO and a CFO to run the company.

A Hyderabad court posted to January 19 hearing on a petition by market regulator SEBI seeking permission to question former Satyam chairman B. Ramalinga Raju and two others. The petition was filed before a magistrate court seeking permission for interrogating Raju, MD Rama Raju and former CFO Vadlamani Srinivas. P.K Reddy, lawyer of market watchdog SEBI said the judicial custody of disgraced Satyam promoter was delaying it's probe into the case. Meanwhile, a team of the Serious Fraud Investigation Office (SFIO) examined the records available with the Crime Investigation Department (CID) of Andhra Pradesh Police as part of its ongoing probe into the multi-crore fraud in Satyam. SFIO has been given three months to unravel the Satyam mystery.

In his confession recorded by the Andhra Pradesh police, the disgraced Satyam chief said, "For about seven years, we wanted to show more income in the accounts to avoid others from getting involved in company affairs and any possible hostile acquisition." Raju also said he had manipulated the balance sheet to attract more business. But, Vadlamani said that the software firm's fixed deposits were unreal and fictitious and managed with an understanding between the audit section and the top management.

Price Waterhouse, the statutory auditor of Satyam, said that its audit report is inaccurate. The audit arm of PricewaterhouseCoopers said that since the Satyam chairman admitted that the financial statements were inaccurate, it may have a material effect on the veracity of the company's financial statements presented to us during the audit period. "Consequently, our opinions on the financial statements may be rendered inaccurate and unreliable," PwC said.

Satyam denied reports that executives Ram Mynampati, Virender Aggarwal and Keshab Panda had left the country to avoid investigation. The company said they were currently meeting customers in their regions to assure them of the company's commitment. Reports said that the top executives, including these three, sold Satyam shares in the six-month period before the fraud broke out. Initial investigations by the Registrar of Companies (RoC) into the scam also revealed large-scale selling of shares by institutional investors just days ahead of Ramalinga Raju's startling confession. Global investment banking major Lazard sold a major chunk of its stake in Satyam and was likely to sell further in the coming days if it is not given a board seat.

The Government, which was believed to be considering financial assistance for Satyam, dropped the idea amid growing suspense over the extent of financial irregularities in the company's accounts. Later, Deepak Parekh revealed that the company had Rs17bn in receivables and had also paid salaries to its staff in the US. He also said that KPMG and Deloitte will take 8-12 weeks to restate Satyam's accounts.

Jain Irrigation Systems

Jain Irrigation Systems

AllCargo Logistics

Shareholders with a long-term perspective can retain their exposures to the stock of Allcargo Global Logistics. While there is no denying that the company would also have to face the effects of the global economic slowdown, its unique business model plus presence across major ports in India places it in a better position to tide over the challenge.

Besides, its access to private equity money (Blackstone Group LP) to fund its expansion plans — an option that is no longer easy to come by — may also help it score over its competitors.

The company’s stock price, however, appears to have captured these factors. At the current market price of Rs 650, the stock discounts its CY-09 per share earnings by over 12 times, leaving little room for significant appreciation in the medium term.
Increased opportunities

The ongoing economic slowdown, which has forced most companies worldwide to tighten their belts could well translate into increased business opportunities for Allcargo given its leadership position in the domestic LCL (less-than-container load) segment.

Apart from reaping benefits from the shift of air cargo to ships, Allcargo may also see rekindling of interest in its LCL service offering. Aimed at large and small exporters and importers with cargo not enough to fill an entire container, this service may now find more takers.

Companies looking out for ways to manage costs are likely to switch to LCL freight forwarding as that will not only enable them to hold lesser inventory, but will also help them cut down on their logistics expenses.

Another factor in Allcargo’s favour is its relative insulation from the impact of a sudden plunge in freight rates vis-À-vis shipping companies whose margins suffered when freight rates plunged last year.

Allcargo’s margins are dependent only on its consolidation margins; the freight rates are merely passed through to clients.
CFS business to drive long-term growth

With an extensive presence in 23 cities in India and 120 offices in 65 countries, Allcargo can deliver and receive cargo to and from over 4,000 locations across the world.

The company also has a significant presence in the high-margin CFS segment — in JNPT, Chennai and Mundra ports. Including JNPT, which enjoys the highest volumes in the country, the company’s presence in Mundra also holds potential, what with Gujarat turning into an investment hot spot among Indian industrialists.

Having a presence in Chennai may help it rake in higher volumes once the manufacturing sector picks up. It has already expanded its Chennai CFS capacity from 50,000 TEUs to 84,000 TEUs.

The CFS business, which derives revenues from the rentals for containers stored on its premises, pending customs clearance, had benefited significantly from the increased dwell time last quarter.

From an average of 11 days, the dwell time had increased to 16 days in JNPT and 15 days in Chennai. Attributed mainly to the delayed payments and reluctance of banks to extend line of credit, the increased dwell time of containers had helped Allcargo (other CFS players too) rake in better realisations and margins. While sustaining this may no longer be practical, the company may still continue to enjoy decent margins.

Allcargo also has a presence in the equipment hiring business, by virtue of the merger of Transindia Freight Services with itself. This division undertakes the movement of containers principally from port to CFS and vice-versa and factory-stuffed containers from factories to the port. Presence in the equipment business has helped Allcargo not only broad base its service offerings but also expand its revenue base. The management has expended about Rs 100 crore towards building the equipment bank (cranes) for this division.
Capex funding in place

The company plans to spend Rs 140 crore, spread over the next year and a half, towards establishing CFS (container freight stations) and ICD (inland container depots) in Dadri, Hyderabad, Nagpur and Goa.

These will be funded through a mixture of debt and private equity money (Rs 242 crore) that the company had raised in February last year by selling 10.4 per cent stake to Blackstone Group LP.

While the next round of fund infusion from Blackstone is due only in September 2009, Allcargo may, till then, take the debt route to fill the funding gap. While this temporary preference for debt may not pose any immediate concern for the company (debt-to-equity ratio well below normal), it can become worrisome if the Blackstone PE deal is called off in the interim period; this poses a major risk for the company.
Financials

For the quarter ended September 2008, the company reported sales and earnings growth of over 56 per cent and 150 per cent respectively.

EBITDA margins for the same quarter expanded by a percentage point to 11.3 per cent. On a segmental basis, the company’s MTO business registered a sales growth of 60 per cent. There was, however, a sequential decline in volumes.

As this segment remains the main contributor to revenues (64 per cent in Sep ‘08), its performance in the coming quarters will need to be carefully monitored. The CFS segment, which made up for over 29 per cent of the total revenues, almost doubled its revenues, benefiting from the increased dwell time at ports.

The fledgling equipment division made up for the rest. Profit numbers of ECU Line, the company’s Belgium-based subsidiary, also witnessed a growth of over 160 per cent.

A slew of cost-cutting measures taken by the company last quarter have helped it keep a tab on cost overheads despite increase in revenues.

Satyam board were divided over Maytas

The unanimous approval of Satyam's erstwhile board to the Maytas deal was not unanimous in letter and spirit, the minutes of the infamous December 16 meeting revealed today.
While the board had 'unanimously' passed the resolution for the $1.6 billion acquisition of two Maytas firms, run by Satyam founder Ramalinga Raju's family, many of the five independent directors raised concerns over the deal.

The concerns related to the valuation, actual benefits to the shareholders being a related party transaction and assurance about board being used as a "rubber stamp" and the company moving away from core business of IT.

Even after the passage of the resolution, the board members asked the company to make sure that compliance was ensured to their comments and proper justification was provided in case the actual value of the acquisition target turned out to be below what was told to them.

The minutes of the board meeting, held on December 16 and chaired by M Rammohan Rao, says that "without prejudice to the unanimous approval by the board members of the above resolution (acquisition of Maytas Properties), board members further reiterated that compliance shall be ensured for the comments made by all the directors as deliberated and discussed during this meeting..."

"...Particularly that proper justification be provided to the board members in the event the valuation of Maytas Properties is significantly higher than the aggregate of the actual value of completed projects, current market realisation value of the work-in-progress and the basic market value notified by the state government for registration of lands awaiting development

BSE Bulk Deals to Watch - Jan 16 2009

Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
16/1/2009 532134 BANK OF BARODA-PARI PASSU THE CHILDRENS INVEST FD MAGT UK LLP THE CHILDRENS INVET MASTER FD S 12216811 235.00
16/1/2009 532787 ESS DEE ALUM RELIANCE CAPITAL TRUSTEE CO LTD REKIANCE LONG TERM EQ FD B 285706 120.00
16/1/2009 532787 ESS DEE ALUM AKASH BHANSALI B 300000 120.00
16/1/2009 532787 ESS DEE ALUM MORGAN STANLEY MF AC MORGAN ST GROWTH FUND S 190513 120.16
16/1/2009 532787 ESS DEE ALUM MORGAN STANLEY INVT MGT INC AC MORGAN ST INIDA INVT FUND INC S 346000 120.00
16/1/2009 500720 FUTURA POLYS UPPALA KANTHARAO B 340313 4.41
16/1/2009 505576 GOLDCRES FIN PADMAKSHI FINANCIAL SERVICES LTD B 140000 15.78
16/1/2009 505576 GOLDCRES FIN BHARAT SHAH S 140000 15.78
16/1/2009 523160 MORGAN CRU MORGANITE CRUCIBLE LTD S 18290 45.54
16/1/2009 531952 RIBA TEXTILE MANISHRATILALSHAH S 43800 24.85
16/1/2009 531898 SANGUINE MD VISHU ENTERPRISE S 89005 7.02
16/1/2009 532765 USHER AGRO R U RAMCHANDANI S 269985 48.05
16/1/2009 531249 WELL PACK PA REKHA BHANDARI B 125000 41.15
16/1/2009 531249 WELL PACK PA GANDHI MANISHA NAVNEETLAL S 32000 41.15

NSE Bulk Deals to Watch - Jan 16 2009

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
16-JAN-2009,APOLLOSIND,Apollo Sindhoori Capital,SUBRAMANIYAN P B,BUY,10000,53.00,-
16-JAN-2009,HCIL,HIMADRI CHEMICALS AND IND,HIMADRI DYES & INTERMEDIATES LTD,BUY,350000,89.52,-
16-JAN-2009,SATYAMCOMP,Satyam Computers Ltd,GENUINE STOCK BROKERS PVT LTD,BUY,5248769,25.32,-
16-JAN-2009,SATYAMCOMP,Satyam Computers Ltd,TRANSGLOBAL SECURITIES LTD.,BUY,3608973,24.69,-
16-JAN-2009,APOLLOSIND,Apollo Sindhoori Capital,SUBRAMANIYAN P B,SELL,382382,53.71,-
16-JAN-2009,HCIL,HIMADRI CHEMICALS AND IND,VIJAY KUMAR CHOUDHARY,SELL,350000,89.52,-
16-JAN-2009,SATYAMCOMP,Satyam Computers Ltd,GENUINE STOCK BROKERS PVT LTD,SELL,5197307,25.29,-
16-JAN-2009,SATYAMCOMP,Satyam Computers Ltd,TRANSGLOBAL SECURITIES LTD.,SELL,3635950,24.69,-
16-JAN-2009,UNITECH,Unitech Ltd,IFCI LTD.,SELL,17500000,29.52,-

Post Session Commentary - Jan 16 2009

Positive cues from the global markets along with news that Bank of America will receive fresh aid from the US government, led the pleasant closure of the Indian markets. The largest U.S. bank by assets, Bank of America Corp., received a $138 billion emergency salvation from the government to support its acquisition of Merrill Lynch & Co. and prevent the global financial crisis from intensifying. The U.S. government agreed to invest $20 billion more in Bank of America and guarantee $118 billion of assets as part of its commitment to maintain financial-market stability. Confidence that the US government will act to prevent the yearlong recession from deepening as well as firm European markets also supported the rally.

The domestic market today made sharp turnaround from the yesterday’s losses and opened higher on the back of positive Asian Markets. Further, market continued to gain ground on the back of sustained buying interest seen across board contributed mainly by US government aid for Bank of America. Though, volatility ruled the bourses in mid-afternoon trade, market managed to make a rebound to trade on firm note. During the final trading hours market gained the most to close the day with gains on huge buying. From the sectoral front, most of the indices ended in green and most of the buying was seen in Reality Oil & Gas, Power, Metal, PSU, Bank and Teck stocks. However, Reality stocks remained out of favour today. Midcap and Smallcap stocks remained quiet during the trading but managed to close in green terrain.

Among the Sensex pack 25 stocks ended in green territory and 5 in red. The market breadth remained in favor of advancers as 1241 stocks closed in green while 1162 stocks closed in red and 94 stocks remained unchanged in BSE.

The BSE Sensex closed higher by 276.85 points at 9,323.59 and NSE Nifty ended up by 91.75 points at 2,828.45. The BSE Mid Caps and Small Caps ended with gains of 16.02 points and 2.29 points at 3,026.83 and 3,412.77 respectively. The BSE Sensex touched intraday high of 9,342.47 and intraday low of 9,125.65.

Gainers from the BSE Sensex pack are NTPC Ltd (7.69%), Reliance Infra (7.34%), Reliance (6.56%), Tata Power (4.89%), Hindalco (4.64%), RCom (4.79%), Bharti Airtel (4.77%), ONGC Ltd (3.72%), ICICI Bank (3.69%) and BHEL (3.24%).

Losers from the BSE Sensex pack are DLF Ltd (3.51%), TCS Ltd (1.38%), Grasim Indus (1.11%), ACC Ltd (0.27%) and Maruti Suzuki (0.22%).

The BSE Oil & Gas index outperformed among all the sectoral indices to close higher by (5.09%) or 287.66 points at 5,933.69. Major gainers are Reliance (6.56%), Reliance Natural Resources (4.05%), Cairn India (3.94%), Gail India (3.75%), ONGC Ltd (3.72%) and HPCL (2.59%).

The BSE Power index inclined (4.29%) or 72.74 points at 1,767.43. Gainers are Neyveli LIG (10.76%), NTPC Ltd (7.69%), Reliance Infra (7.34%), Suzlon Energy (5.42%), Tata Power (4.89%) and BHEL (3.24%).

The BSE Metal also contributed to the rally and ended up by (3.45%) or 166.41 points at 4,995.43. Main gainers are Steel Authority (7.70%), Sesa Goa Ltd (5.13%), Jindal Steel (4.17%), NMDC Ltd (3.86%), Hindalco (3.63%) and Welspan Gujarat SR (2.87%).

The BSE PSU index witnessed northward journey today to close higher by (3.36%) or 165.09 points to at 5,085.20 as Neyveli LIG (10.76%), Steel Authority (7.70%), NTPC Ltd (7.69%), NMDC Ltd (3.86%), Gail India (3.75%) and NMDC Ltd (3.86%), ended in green.

The BSE Bank index gained on hopes lower interest rates may boost lending growth and on expectations of strong Q3 December 2008 results and advanced (2.42%) or 118.96 points to close at 5,037.84 as Federal Bank (9.41%), Yes Bank (4.21%), ICICI Bank (3.69%), Bank of India (3.28%), Kotak Bank (3.10%) and Union Bank (3.09%) ended in positive territory.

The BSE Reality index underperformed the benchmark indices to close with losses of (2.39%) or 42.26 points at 1,723.76. Scrips that lost are Unitech Ltd (5.49%), Mahindra Life (4.27%), DLF Ltd (3.51%), Indiabull Real (3.34%) and Orbit Co (0.75%).

Third quarter results to dictate trend

The ongoing quarterly reporting season may dictate the market trend in the near term. Investors are bracing for poor quarterly earnings as high input costs, credit crunch, high interest rates, and the burden of piled-up inventories may hit bottom lines of companies. India's largest private sector firm by market capitalisation and oil refiner Reliance Industries will unveil its Q3 December 2008 results on 22 January 2009.

The quarterly earnings season was kicked off by Infosys Technologies on a positive note with stronger-than-expected results on 13 January 2009. So far, aggregate results of 83 companies showed 19.40% rise in net profit on a 36.60% increase in net sales in Q3 December 2008 over Q3 December 2007.

Industry representatives will meet government officials on 21 January 2009 to discuss further measures to stimulate country's economy, Trade Minister Kamal Nath had said on 12 January 2009.

On 2 January 2009, the Reserve Bank of India (RBI), cut the repo rate and the reverse repo rate by 100 basis points each, with immediate effect. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks. After the latest cuts, the repo rate is now at 5.5% and the reverse repo is now at 4%, the lowest ever.

The RBI also announced a cut in cash reserve ratio, the proportion of deposits banks must keep with the central bank, by 50 basis points to 5% with effect from 17 January 2009. Lower interest rates may revive the domestic economy, which has been slowing faster than expected due to high interest rates and the global financial crisis.

Meanwhile, global cues turned positive after Bank of America Corporation, the largest US bank by assets, received a $138 billion emergency lifeline from the US government late on Thursday, 15 January 2009, to support its acquisition of Merrill Lynch & Company and prevent the global financial crisis from deepening.

Bank of America Corp will receive $20 billion in fresh government cash and a federal backstop against $118 billion of bad assets to help the bank absorb Merrill Lynch & Co.

Closer home, Jaiprakash Associates, Dr. Reddy's Laboratories, Hero Honda Motors, KS Oils, LIC Housing Finance, Mangalore Refinery & Petrochemicals, Mahindra Lifespace Developers, Nagarjuna Fertilisers & Chemicals, Reliance Capital, Reliance Petroleum, Tata Coffee, United Breweries, Rolta India, Religare Enterprises, United Breweries (Holdings), Wockhardt, Bank of Rajasthan, Gujarat NRE Coke, Jaypee Hotels, Reliance Industrial Infrastructure, Allahabad Bank, Apollo Tyres, BASF India, Great Offshore, Madras Aluminium Company, MindTree, Punjab Tractors, REI Agro, State Bank Of Mysore, amd State Bank of Travancore, among others will declare their December 2008 ended quarter results next week.

Market drifts lower in volatile trade

Volatility ruled the roost as weak global markets and concerns about the US banking sector pulled the domestic bourses lower. Nevertheless, lower inflation and improved industrial production numbers ensured that the fall in share prices was not steep.

FII outflow in January 2009 totaled Rs 1174.20 crore (till 14 January 2009). FIIs had pulled out a massive Rs 52,998.70 crore in calendar year 2008, as against an inflow of a huge Rs 71,486.50 crore in calendar year 2007.

The BSE 30-share Sensex fell 82.88 points or 0.88% to 9,323.59 in the week ended 16 January 2009. The S&P CNX Nifty fell 44.55 points or 1.55% at 2828.45 in the week.

The BSE Mid-Cap index fell 93.96 points or 3.01% to 3,026.83 and the BSE Small-Cap index fell 142.83 points or 4.02% to 3,412.77 in the week.

The barometer index BSE Sensex is 11883.18 points or 56.03% below its all-time high of 21,206.77 struck on 10 January 2008.

Key benchmark indices, remained in negative zone throughout the day, extending losses for the third straight day on 12 January 2009 led by sustained selling in index pivotals. Concerns about corporate governance standards at Indian firms and weak global markets dampened investor sentiment offsetting an improved industrial production data. The BSE 30-share Sensex lost 296.42 points or 3.15% to 9,110.05. The S&P CNX Nifty lost 99.90 points or 3.48% at 2,773.10.

Key benchmark indices extended losses for the fourth day in a row 13 January 2009. Fall in index heavyweight Reliance Industries (RIL), telecom stocks and private sector banking pivotals offset rally in IT stocks on the back of stronger-than-expected Q3 December 2008 results by IT bellwether Infosys Technologies. The BSE 30-share Sensex slipped 38.69 points or 0.42% to 9,071.36. The S&P CNX Nifty fell 28.15 points or 1.02%, at 2744.95. Weak global markets weighed on the domestic bourses.

Key benchmark indices snapped four-day declining trend on 14 January 2009 led by frenzied buying in index heavyweight Reliance Industries (RIL) and IT pivotals. Strong buying momentum was seen in stocks of Anil Dhirubhai Ambani Group (ADAG) and Mukesh Ambani group in late trade on speculation the two warring Ambani brothers will reach out-of-court settlement over supply of gas from Reliance Industries (RIL)'s KG basin. However, RIL denied rumours of out-of-court settlement. The BSE 30-share Sensex surged 299.13 points or 3.30% at 9370.49. The S&P CNX Nifty gained 90.35 points or 3.29% at 2835.30.

Weak global equities and a deepening banking crisis in the United States pulled the domestic bourses lower in choppy trade on 15 January 2009. The BSE 30-share Sensex lost 323.75 points or 3.45% at 9,046.74. The S&P CNX Nifty lost 98.60 points or 3.48% at 2,736.70.

Index heavyweight Reliance Industries (RIL) led a rally on the bourses on 16 January 2009, triggered by the US government rescue of the largest US bank by assets, Bank of America. Optimism that the US government will act to prevent the year-long recession from deepening also aided the surge on the domestic bourses. The BSE 30-share Sensex gained 276.85 points or 3.06% to 9,323.59. The S&P CNX Nifty advanced 91.75 points or 3.35% to settle at 2828.45.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) spurted 5.85% after the company during trading hours on Thursday (15 January 2009), said its unit Reliance Petroleum (RPL) will start fuel exports from its new refinery this month. RPL, last month, commissioned its 5,80,000-barrels-per-day only for exports refinery at Jamnagar in Gujarat. RPL fell 0.75%

India's second largest private sector bank by net profit HDFC Bank shed 7.48, after the bank's gross net performing assets (NPA) rose 120.47% to Rs 1911.41 crore as at 31 December 2008 from Rs 866.97 crore as on 31 December 2007.

TCS, India's largest software services exporter by sales, fell 6.10%. on posting a lower-than-expected rise in net profit in Q3 December 2008. Tata Consultancy Services (TCS)'s standalone net profit as per Indian GAAP rose 3.31% to Rs 1,211.89 crore on 3.07% rise in sales to Rs 5,875.48 crore in Q3 December 2008 over Q2 September 2007. The TCS management said currency volatility had hit the growth of its revenue in Q3 December 2008.

The company reported a foreign exchange loss of Rs 250 crore, of which Rs 45 crore was a mark-to-market loss and the rest were hedging losses. TCS said that it added 41 new clients in Q3 December 2008 and hired 11,773 new employees.

India's fourth largest software services exporter Satyam Computer Services rose 2.52% after a member of the newly-nominated board, Deepak Parekh, said after trading hours on Thursday that Satyam had Rs 1700 crore in receivables and might not need financial help if payments arrived on time. The stock had plunged about a third on Thursday after the government said it was not considering a bailout package.

Meanwhile UK-based investment bank Lazard Asset Management sold over 1.13 crore shares of Satyam in a bulk deal on the Bombay Stock Exchange at Rs 21.71 per share on Thursday, 15 January 2009. On the same day, Lazard sold 2.44 crore shares at Rs 21.74 a piece on the National Stock Exchange. Overall, the firm has sold 5.3% out of the 7.34% it holds in Satyam.

India's fifth largest software firm by sales HCL Technologies gained 7.24% ahead of its Q2 December 2008 results on 23 January 2009.

Software firm Rolta India slumped 23.28% amid rumours that creditors with whom promoters had pledged their stake have resorted to fire sales in the open market. Rolta's chairman K K Singhm however, denied rumours that creditor had sold shares pledged by the promoters.

India's second largest software services exporter by sales Infosys Technologies soared 6.12% after it posted a 14.59% rise in net profit to Rs 1641 crore in Q3 December 2008 over Q2 September 2008. The company announced the Q3 December 2008 results on 13 January 2009.

Car sales in India fell 7% to 82,105 units in December 2008 over December 2007, the fifth drop in six months as high borrowing costs, tight credit and a slowing economy weighed on demand. Sales of trucks and buses fell sharply by 58% to 17,920 units in December 2008 over December 2007.

India's infrastructure sector output grew 2.2% in November 2008 over November 2007, government data showed on Monday (12 January 2009). The figure was below 3.4% annual growth in October 2008 over October 2007. Output had risen an annual 5.1% in November 2007, and in the 2007/08 fiscal year it rose 5.6% from a year earlier. The infrastructure sector accounts for 26.68% of India's industrial output.

India's GSM telecom companies have added over 8.1 million mobile customers in December 2008 (excluding Reliance Telecom) maintaining the robust pace in the world's fastest-growing mobile market. According to the latest data released by Cellular Operators' Association of India (COAI), the total GSM subscriber base rose to 257.85 million, up from 249.35 million in November 2008, a sequential growth of about 3.25% in December 2008. Worldwide, GSM-led mobile technology is more popular than rival CDMA.

Sensex jumps 3% on US government aid for Bank of America

Index heavyweight Reliance Industries (RIL) led a rally on the bourses triggered by the US government rescue of the largest US bank by assets, Bank of America. Optimism that the US government will act to prevent the year-long recession from deepening also aided the surge on the domestic bourses. The BSE 30-share Sensex gained 276.85 points or 3.06%. RIL rose nearly 7%. The market was in green throughout the day.

However, foreign funds dumped stocks today, 16 January 2009, even as domestic funds bought. As per the provisional data released by the stock exchanges after trading hours, foreign funds sold shares worth a net Rs 585.41 crore. Domestic funds bought shares worth a net Rs 400.73 crore.

A bout of volatility was witnessed mid-afternoon trade when after a sudden fall the market immediately staged a rebound. A government official said the Reserve Bank of India (RBI) is unlikely to cut key policy interest at its monetary policy review later this month, causing the sudden slide.

Falling inflation has raised expectations that the central bank may further cut interest rates to soften the impact of the global financial crisis and economic recession in key world economies on the Indian economy. The Reserve Bank of India (RBI) has substantially eased monetary policy over the past few months.

European markets opened firm today, 16 January 2009, snapping a seven-session losing run, following a late rally in the United States on Thursday, 15 January 2009. Key benchmark indices in France, Germany and UK were up by between 1.86% and 2.73%.

Asian stocks surged on news of US government aid for Bank of America. In Japan, the Nikkei 225 average jumped 2.58%. Key benchmark indices in China, Singapore, Hang Seng, South Korea, and Taiwan were up by between 0.09% and 2.15%.

Trading in US index futures indicated the Dow could rise 118 points at the opening bell on Friday, 16 January 2009

US stocks ended slightly higher on Thursday, 15 January 2009, recovering from an early slump, amid optimism the government will act to prevent the year-long recession from deepening, offsetting news that Bank of America was seeking fresh government aid, which fueled worries about the health of the financial sector. The Dow Jones Industrial Average rose 12.67 points, or 0.15%, to 8,212.81. The S&P 500 Index gains 1.12 points, or 0.13%, to 843.74. The Nasdaq Composite Index rose 22.20 points, or 1.49%, to 1,511.84.

In response to indications that the recession is deepening, Democratic leaders in the US House of Representatives on Thursday unveiled an $825 billion tax cut and spending bill. After the closing bell, the US Senate rejected an attempt to block the release of the remaining $350 billion from the financial bailout fund.

As part of the emergency plan announced by the Treasury Department, the US Federal Reserve and Federal Deposit Insurance Corp, Treasury will provide Bank of America, the largest US bank by assets, with $20 billion in fresh capital from a government bailout fund in exchange for preferred stock. The government also agreed to share in losses on the troubled assets, which Bank of America took on when it paid an estimated $19.4 billion for Merrill on 1 January 2009

The European Central Bank (ECB) cut its benchmark interest rate by 50 basis points to 2% on Thursday, 15 January 2009, matching its lowest ever rate. The ECB President Jean-Claude Trichet said inflation risks continued to diminish as the economy weakened.

The BSE 30-share Sensex gained 276.85 points or 3.06% to 9,323.59. Sensex opened 78.91 points higher at 9125.65, also its day's low. The Sensex gained 295.73 points at day's high of 9,342.47 in late trade.

The S&P CNX Nifty advanced 91.75 points or 3.35% to settle at 2828.45. Nifty January 2009 futures were at 2821.50, a discount of 6.95 points compared over the spot closing.

The BSE Sensex has lost 323.72 points or 3.35% so far in 2009 from its close of 9647.31 on 31 December 2008. The barometer index had lost 10639.68 points or 52.44% in the calendar year 2008

The market breadth, indicating the overall health of the market, was positive on BSE with 1247 shares advancing as compared with 1175 that declined. 91 shares remained unchanged.

The BSE Mid-Cap index rose 0.53% at 3,026.83 and the BSE Small-Cap index gained 0.07% at 3,412.77. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 2930 crore as compared to Rs 2,904.93 crore on Thursday, 15 January 2009. Turnover in NSE's futures & options segment slipped to Rs 32716.71 crore as compared to Rs 40218.44 crore on Thursday, 15 January 2009.

The BSE Capital Goods index (up 1.83%), BSE Consumer Durables index (up 0.88%), the BSE FMCG index (up 1.27%), the BSE Auto index (up 1%), BSE HealthCare index (up 0.86%), the BSE Teck index (up 2.18%), BSE IT index (up 1.03%), the BSE Bankex (up 2.42%), BSE Realty index (down 2.39%), underperformed the Sensex.

The BSE Metal index (up 3.45%), BSE Oil & Gas index (up 5.09%), the BSE PSU index (up 3.36%), the BSE Power index (up 4.29%), outperformed the Sensex.

Among the 30-member Sensex pack, 26 advanced while only 4 of them declined. Tata Power (up 5.11%), Reliance Infrastructure (up 7.30%), and ITC (up 2.20%), edged higher from the Sensex pack.

Maruti Suzuki India (down 1.31%), and Grasim (down 0.34%), edged lower from the Sensex pack.

India's largest power generation company in terms of sales NTPC jumped 7.54% to Rs 176.90 on 18.76 lakh shares. It was the top gainer from the Sensex pack. The company's board of directors at its meet held on 13 January 2009 approved investment of Rs 6,037 crore in super thermal power projects in Madhya Pradesh, Uttar Pradesh and Chattisgarh.

India's second largest private sector power generation firm by sales Tata Power Company rose 5.11% to Rs 775 after a block deal of one lakh shares was executed on NSE at Rs 758 per share. The block deal constituted 0.05% of the company's equity.

India's largest private sector company by market capitalization and oil refiner Reliance Industries (RIL) spurted 6.76% to Rs 1220.65 on 22.21 lakh shares. The stock surged after the company during trading hours on Thursday said its unit Reliance Petroleum (RPL) will start fuel exports from its new refinery this month. RPL, last month, commissioned its 5,80,000-barrels-per-day only for exports refinery at Jamnagar in Gujarat. RPL gained 2.19%

India's largest oil exploration firm by market capitalisation Oil and Natural Gas Corporation (ONGC) vaulted 3.73% to Rs 648.20 on reports the company will invest $5.3 billion in developing gas finds in two of its eastern offshore KrishnaGodavari basin blocks to produce 25 million standard cubic meters per day of gas by 2013.

State run oil marketing firms rose as crude oil prices fell. HPCL (up 2.76%), BPCL (up 1.85%), and IOC (up 2.08%), gained.

Crude prices fell on Thursday, 15 January 2009, on unemployment benefit claims in US, the world`s largest oil consumer rose and organisation of petroleum exporting countries (Opec's) expectation that oil demand will fall in 2009. Light, sweet crude for February delivery fell $1.88, to $35.40 a barrel on the New York Mercantile Exchange (NYMEX). Lower oil prices will reduce losses at the state-run oil firms on domestic sale of cooking gas and kerosene at a controlled price.

Telecom pivotals surged on bargain hunting after a recent slide. India's largest cellular services provider by sales Bharti Airtel gained 4.63% to Rs 632 after declining 6.94% in one week to 15 January 2009. India's second largest cellular services provider by sales Reliance Communications rallied 4.19% to Rs 181.55 after sliding 15.62% in a week to 15 January 2009

IT pivotals underperformed the Sensex after TCS Chief executive S. Ramadorai said market conditions are tough and on firm rupee. Shares of TCS, India's largest software services exporter by sales, fell 1.47% to Rs 502.50. Ramadorai said almost all sectors are facing stress and almost all geographies are facing problems. TCS does not give guidance and hence management comments are watched closely.

After market hours on Thursday, 15 January 2009, TCS reported 3.31%% rise in standalone net profit as per Indian GAAP to Rs 1,211.89 crore on 3.07% rise in sales to Rs 5,875.48 crore in Q3 Decmeber 2008 over Q2 September 2007. The TCS management said currency volatility had hit the growth of its revenue in Q3 December 2008.

India's third largest software services exporter, Wipro, rose 1.55% to Rs 238.95, off day's low of Rs 229. Wipro's ADR fell 1.24% on Thursday, 15 January 2009. Wipro unveils its Q3 December 2008 results on 21 January 2009.

India's second largest software services exporter Infosys Technologies rose 1.27% to Rs 1268, recovering from low of Rs 1238.60. Infosys' ADR advanced 2.72% on Thursday, 15 January 2009.

India's fourth largest software services exporter Satyam Computer Services galloped 21.92% to Rs 24.75, on high volumes of 6.14 crore shares after the member of the newly-nominated board, Deepak Parekh, said after trading hours on Thursday that Satyam had Rs 1700 crore in receivables and might not need financial help if payments arrived on time. The stock had plunged about a third on Thursday after the government said it was not considering a bailout package.

Meanwhile UK-based investment bank Lazard Asset Management sold over 1.13 crore shares of Satyam in a bulk deal on the Bombay Stock Exchange at Rs 21.71 per share on Thursday, 15 January 2009. On the same day, Lazard sold 2.44 crore shares at Rs 21.74 a piece on the National Stock Exchange. Overall, the firm has sold 5.3% out of the 7.34% it holds in Satyam.

India's fifth largest software firm by sales HCL Technologies gained 8.24% to Rs 118.25 ahead of its Q2 December 2008 results on 23 January 2009.

The Indian rupee rose today as domestic shares crept up tracking other regional markets and raised hopes for fresh capital inflows. The partially convertible rupee was at 48.77/78 per dollar, stronger than its Thursday's close of 49.03/04. A firm rupee negatively impacts operating margins of IT firms as the sector derives a lion's share from exports

Banking shares gained on hopes lower interest rates may boost lending growth and on expectations of strong Q3 December 2008 results. ICICI Bank (up 2.82%), HDFC Bank (up 1.68%), and State Bank of India (up 1.59%), rose.

Federal Bank surged 9.27% to Rs 155.65 on posting 98.1% rise in net profit to Rs 203.89 crore in Q3 December 2008 over Q3 December 2007. The results were announced during market hours today, 16 January 2009.

India's largest engineering and construction company by sales Larsen & Toubro advanced 1.46% to Rs 715.10 after it the company entered into a deal with Westinghouse Electric for 1,000 megawatt nuclear reactors in India. Westinghouse Electric is a unit of Japan's Toshiba Corp

India's top power equipment maker by sales Bharat Heavy Electricals (Bhel) rose 3.05% to Rs 1395. On 14 January 2009, the company signed a deal with Karnataka Power Corporation for constructing a 660 megawatt thermal power plant at Edlapur in Raichur district of Karnataka and two thermal units of 800 megawatt capacity each in Raichur.

Metal shares gained as copper prices rose on the commodities market. Tata Steel (up 2.50% to Rs 202.75), Hindalco (up 4.15% to Rs 50.25), and Sterlite Industries (up 2.31% to Rs 259.55), gained.

Auto shares rose on hopes lower interest rates and fall in fuel prices would spur demand for vehicles which is mainly driven by finance.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) rose 0.45% to Rs 320.50. M&M, which bought a controlling stake in the Pune-based two-wheeler manufacturer, Kinetic Motors, in August 2008, plans to re-launch the Kinetic range of scooters by the end of this month.

India's largest truck maker by sales Tata Motors rose 0.50% to Rs 151.90 after its Amercian depository receipt jumped 4.40% on Thursday, 15 January 2009.

Bajaj Auto jumped 7.69% to Rs 472 on improvement in a key profit margin parameter in Q3 December 2008 over Q2 September 2008, despite adverse market conditions. The company's EBITDA (earnings before interest, tax, depreciation and amortization) margin stood at 14.5% in Q3 December 2008, higher than 13.6% in Q2 September 2008, Bajaj Auto said at the time of announcing Q3 December 2008 results during trading hours today, 16 January 2009.

India's fourth largest pharma company by market capitalisation Ranbaxy Laboratories rose marginally by 0.07% to Rs 216.15 after striking day's high of Rs 224. The company is reportedly planning to exit its Japanese joint venture - Nihon Pharmaceuticals Industry (NPI) by selling 50% stake after the Indian drug maker was acquired by Japanese drug major Daiichi Sankyo. Ranbaxy will sell the stake back to its Japanese partner Nippon Chemiphar. Ranbaxy's stake in the six-year-old joint venture is estimated at Rs 30.50 crore.

Nippon Chemiphar, a Tokyo stock exchange-listed mid-sized drug company, competes with Ranbaxy's owner Daiichi Sankyo in several therapeutic categories in the Japanese market.

The Satyam mega accounting scandal weighed on realty shares on market perception that a number of realty firms do not strictly follow good corporate governance practices. Mahindra Lifestyle (down 4.27%), Indiabulls Real Estate (down 3.34%), and Unitech (down 5.59%), edged lower.

Akruti City rose 2.52% to Rs 636.20. The National Stock Exchange after market hours yesterday, 15 January 2009 informed the open interest in the underlying security reached 90% of the specified market wide position limit in the futures & options segment.

Puravankara Projects slumped 6.03% to Rs 36.65. The stock recovered after sliding to a low of Rs 25.60 on a clarification by the company that it is not pulling out of a major project in Andhra Pradesh.

India's largest real estate firm by market capitalisation DLF slumped 3.44% to Rs 195.35 on high volumes of 42.93 lakh shares. As per recent reports the company is planning to turn down its special economic zone (SEZ) plans, battered by low demand for real estate. The company is planning to start five of its SEZs after 2010 when demand revives.

Hindustan Construction Company tumbled 11.10% to Rs 43.25 on reporting a 7.38% fall in net profit to Rs 23.20 crore in Q3 December 2008 over Q3 December 2007. The company announced the results during trading hours today, 16 January 2009.

Reliance Industries was the turnover topper on BSE with turnover of Rs 266.50 crore followed by Satyam Computer Services (Rs 152.85 crore), Reliance Capital (Rs 120.85 crore), Reliance Infrastructure (Rs 115.45 crore) and Educomp Solutions (Rs 103.75 crore).

Satyam Computer Services led the volume chart on BSE clocking volumes of 6.15 crore shares followed by Unitech (2.60 crore), Reliance Natural Resources (1.65 crore), Bank of Baroda (1.24 crore) and Suzlon Energy (69.30 crore).

Technical Trends - Jan 16 2009

Technical Trends - Jan 16 2009