Bulls may put things in order
Watch out for the fellow who talks about putting things in order! Putting things in order always means getting other people under your control.
A late bounce enabled the bulls to break a three-day losing streak yesterday. Banking stocks led the rebound. Market grapevine has it that the RBI may relax the Statutory Liquidity Ratio (SLR) sooner rather than later. Whether the rumour is true or not only time will tell. One should not get swayed by such market talk as it is fraught with risk.
Among the banking stocks, trades between FIIs saw SBI quoting at a premium of 221% on BSE at Rs1,370 as against the spot price of Rs1,122.90. PNB traded at a premium of 17.49% on the BSE as against the spot price.
Reliance Industries is reported to be on a huge fund-raising drive. The company is planning to mop up around Rs100bn through a combination of convertible bonds and treasury stock. Reports say the company is likely to issue foreign currency convertible bonds/ warrants/convertible debentures to be converted within 12-18 months at Rs 1,900- 2,100 a share.
The market remains in a 'no man's land' situation. In the immediate future we are unlikely to see any major crash nor will there be a non-stop rally to lift the main indices past the previous all-time highs. We expect the market to remain rangebound and volatile in the near term.
Inflation will be a major factor to keep an eye on, as will be movement in the currency markets and inflows from FIIs. Globally, one needs to focus on the key economies like the US, Japan and China.
Talking of global markets, the Federal Reserve offered no surprises yesterday. The FOMC left its key overnight lending rate unchanged at 5.25% for a seventh consecutive meeting. The Fed noted the steep slowdown in economic growth but indicated that it was still worried about inflation, saying "the predominant policy concern remains the risk that inflation will fail to moderate as expected."
Today we expect a flat to slightly higher opening given the mixed show by Asian markets. One big worry is that inflows from FIIs have tapered off this month after last month's deluge. The market needs this trend to reverse for making any significant progress.
US Treasuries maturing in two years declined the most in more than a month after the Fed move. The yield on the benchmark 10-year security increased 3 basis points to 4.67%. Two-year yields exceed those of 10-year notes by 6 basis points, the widest inversion to the yield curve since March 12 when the difference was 8 basis points.
US stocks rallied on improved profit forecasts and continued takeover speculation that pushed the Standard & Poor's 500 Index within 1% of its 2000 record. The Dow Jones Industrial Average rose to its sixth record in seven days.
The S&P 500 rose 4.86, or 0.3%, to 1512.58. The benchmark closed at an all-time high of 1527.46 in March 2000. The Dow climbed 53.80, or 0.4%, to 13,362.87. The Nasdaq Composite Index increased 4.59, or 0.2%, to 2576.34.
US stocks briefly erased their gains after the Fed released its statement. But stocks turned higher in the last 90 minutes of the session as investors breathed a sign of relief that the Fed meeting and statement brought few surprises.
US light crude oil for June delivery fell 79 cents to settle at $61.47 a barrel on the New York Mercantile Exchange after a government report said that gasoline supplies rose last week, diminishing worries about any supply shortage ahead of the start of the summer driving season. The front-month contract was quoting 11 cents higher at $61.66 a barrel in extended trading in Asia.
In currency trading, the dollar gained against the euro and yen following the decision. COMEX gold for June delivery fell $4.90 to settle at $682.50 an ounce.
European indexes advanced overnight. The pan-European Dow Jones Stoxx 600 index rose 0.2% to 390.60. The UK's FTSE 100 closed flat at 6,549.60. The French CAC-40 gained 0.3% to 6,051.63 and the DAX Xetra 30 added 0.5% to 7,475.99. Both the Bank of England and the European Central Bank will make interest-rate decisions on Thursday.
Asian stocks fell from a record on Thursday. The Nikkei in Tokyo was flat at 17,748 while the Hang Seng in Hong Kong slid 104 points to 20,740. The Straits Times in Singapore rose 7 points to 3460 and the Kospi in Seoul climbed 12 points to 1606.
In the emerging markets, the Ibovespa in Brazil surged 2% to 51,300 while the IPC index in Mexico advanced 1.4% to 29,992 and the RTS index in Russia fell 0.7% to 1913.
Weak markets ended flat with a positive bias. Bulls were back on the bourses after being in the sidelines in last three trading session. Weak global cues dragged the key indices to register negative opening. Prolonged selling pressure in the Technology stocks dragged the benchmark Sensex to hit a low of 136121.04. All the key sectoral indices except for the BSE Technology and BSE Oil & Gas index recovered its early losses.
However, index heavy weights like Bharti Airtel, Reliance Industries, ICICI Bank and L&T attracted buying interest towards the end lifting the markets to close in green snapping its three-day losing streak. Finally, the 30-share benchmark Sensex gained 16 points to close at 13781. NSE Nifty was up 3 points to close at 4079.
Fortis Healthcare Ltd made a subdued debut on the bourses with the stock slipping below the Rs100 mark. The stock opened at Rs104 on BSE as against the issue price of Rs108 per share. Ther scrip finally closed at Rs100 touching an intra-day high of Rs110 and a low of Rs98.05 recording volumes of over 2,00,00,000 shares of NSE.
Lupin slipped by 1.7% to Rs710. The company received an approval from the US Food and Drug Administrative (USFDA) for Cefdinir for Oral Suspension, 250 mg/5mLThe scrip touched intra-day high of Rs734 and a low of Rs702 and recorded volumes of over 40,000 shares on NSE.
ONGC was down by 1% to Rs909. Accordion to reports The company struck upon a big oil & gas discovery in the Persian Gulf. The scrip touched intra-day high of Rs939 and a low of Rs897 and recorded volumes of over 16,00,000 shares on NSE.
Patel Engineering edged higher 0.3% to Rs374 as it decided to set up a real estate arm for unlocking value from a land bank of over 500 acres in Mumbai, Bangalore, Hyderabad and Chennai. The scrip touched intra-day high of Rs387 and a low of Rs370 and recorded volumes of over 2,00,000 shares on NSE.
Gail dropped by over 4% to Rs281. The company announced its Q4 results with net profit of Rs6.8bn (up 66%) and total Income at Rs39.96bn (up 6.7%). The scrip touched intra-day high of Rs293 and a low of Rs280 and recorded volumes of over 15,00,000 shares on NSE.
Banking stocks gained momentum on back of fresh buying. Index heavy weight SBI surged by nearly 4% to Rs1122, PNB gained by 2.3% to Rs509, Bank of India advanced by 2.9% to Rs194 and Bank of Baroda added 2.6% to Rs243.
Select FMCG stock ended firm in a weak market. Britannia surged by over 7% to Rs1484, Tata Tea advanced 1.7% to Rs774, Marico was up 2% to Rs56, McDowell was up 0.6% to Rs873 and ITC added 0.5% to Rs160.
Technology stocks continued its downtrend. Frontline stock Infosys was down by 1% to Rs1980, Sataym Computer edged lower by 0.5% to Rs452, Moser Baer dropped by 3.2% to Rs351 and HCL Tech lost 1.5% to Rs326.
Consumer Durable stocks also ended on the receiving end. Gitanjali Gems dropped 0.6% to Rs194, Rajesh Exports was down 1.5% to Rs375 and Videocon declined 0.3% to Rs439.
Insider Trades:
Rolta India Ltd: M K Govind, Executive Director has sold in open market 3000 equity shares of Rolta India Ltd on 07th May, 2007.
Gujarat Ambuja Cement Ltd: Shri P B Kulkarni, Director has sold in open market 10000 equity shares of Gujarat Ambuja Cement Ltd on 3rd May, 2007.
Volume Toppers:
IFCI, TTML, Fortis, SAIL, RNRL, Indiabulls, Idea, Ashok Leyland, IVRCL Infrastructure, R Com, IDFC, ITC, ICRA, India Cement, Satyam Computer, Reliance Capital and Unitech.
Upper Circuit:
Shree Ashtavinayak, Dalmia Cement, Mefcom Agro, Educomp Solutions, Deccan Aviation, TRF Ltd, Infomedia and BF Utilities
Delivery Delight:
Bharat Petroleum Corporation Ltd, Bombay Dyeing, Hindustan Petroleum Corporation Ltd, ICICI Bank, Indian Oil Corporation, Shipping Corporation of India Ltd and National Aluminium Company Ltd.
Abnormal Delivery:
Tata Power, Bombay Dyeing, Ashok Leyland, Siemens, Tata Elxsi and Gujarat Ambuja Cements.
Stock Futures with Largest Increases in OI:
Indian Bank, SCI, J&K Bank, Syndicate Bank, GAIL, SAIL, Crompton Greaves and IFCI.
Stock Futures with Largest Decreases in OI:
GDL, Renuka Sugar, IOC, Bajaj Hindusthan, HPCL, BPCL, Nagarjuna Construction and UTI Bank.
Results Corner:
Lupin Q4 profit at Rs1.37bn (up 174%), revenue at Rs6.46bn (up 39.5%)
Gail Q4 profit at Rs6.8bn (up 66%), total Income at Rs39.96bn (up 6.7%).
Results Today:
Asian Paints, Bharat Bijlee and Finolex Cables.
Brokers Recommendation:
Voltamp Transformers – Buy from Kotak with target of Rs818.
Long Term investment:
Patel Engineering.
Major News Headlines:
Monsoon may set over the east coast a week early
Panel of Ministers to decide on Maruti sale today
NALCO shuts alumina plant on workers protests
Matrix signs pact with Clinton Foundation for ARV drugs
Lupin to set up new unit to make APIs
Strides Arcolab plans to sell convertible bonds at Rs400 apiece to Eleemar Almeida
Kirloskar Brothers gets Rs815.5mn order
HCL Tech signs agreement with SIDBI
Sterlite Optical gets order worth $62mn for Power Transmission Conductors.
RESEARCH
RPG Transmission Ltd. (Q4 FY07) - Investment Update.
During Q4FY07 and FY07, RPG Transmission Ltd. (RPGTL) registered a bottomline growth of 165.6% and 185.3% at Rs100mn and Rs257mn
respectively. The strong momentum in the sector coupled with improving efficiency of the company, enabled it to register 56.8% and 185.3% topline and bottomline growth
respectively for FY07. Post successful CDR (during FY06) and continuance of healthy order book of Rs4.8bn, we expect RPGTL’s revenues and net income to
register a 32.3% and 57.3% CAGR respectively over FY06-09E.
At Rs203, RPGTL trades at a P/E of 10.6x and 8.2x its FY08E and FY09E earnings of Rs19.4 and Rs19.4 respectively. During H1FY07 there was a slow down in orders from PGCIL, which led to a de-rating of the sector, however now with
issues being resolved we expect orders to keep flowing. However, we believe with orders expected to flow primarily from PGCIL, the order book size of RPGTL is only set to head northwards. We recommend a BUY rating on the stock with a
target price of Rs275 over the next 12 months.