May the good times last
March wind ranges; April changes; Birds sing in tune. To flowers of May, And sunny June
Contrary to fears earlier, the month of May has seen the indices blossom. With the economy on fire (barring agriculture) and business confidence soaring (reflected in strong quarterly results and increased M&As), can global investors afford to stay away from India? A simple answer would be no. That perhaps explains the resurgence in foreign capital inflows in the last couple of months. Nearly $2bn has flowed into the stock market from overseas investors in April and May following the crash in the previous two months. This, coupled with good earnings momentum, lower inflation and firm global markets has lifted the Nifty past the 4300 mark to an all-time high. The Sensex is also within the striking distance of its earlier lifetime high. And, given the current momentum it won't be long before the BSE benchmark also scales a new peak.
Coming to the F&O expiry, the rollover has been pretty good. Provisional figures show Nifty futures rollover at around 75%. However, the action has actually been in the non-index single stock futures, where the rollover has been even better. This goes to show that investors are increasingly veering towards small- and mid-cap stocks for gains as large caps appear to be running out of steam. Having said that one must be careful while picking up these shares as it becomes difficult to exit when the going gets tough in the market. On the whole, the outlook looks positive and the market should hold firm barring the odd weak day here and there.
Today, we expect the market to open higher on the back of encouraging signs emanating from global markets. The Asian markets in particular are doing quite well this morning. Inflation has cooled down further to 5.06% in the week ended May 19, says the Finance Minister. A big worry, however, is the continuous rise in the rupee and its impact on exporters. Also, in the last couple of days call money rates have dived below 1%, reflecting excess liquidity in the system. As a result, some money market observers feel the RBI may have to resort to further tightening measures like a CRR hike or fresh bond auctions under the market stabilisation scheme. The market may give up some ground if and when that happens. Till then the bulls should remain in control.
FIIs were net buyers of Rs1.69bn (provisional) in the cash segment yesterday while the local institutions put in Rs321.9mn. In the F&O segment, foreign funds pumped in Rs3.46bn. On Wednesday, FIIs offloaded stocks worth Rs3.77bn in the cash segment.
Two more indices - the Nifty Junior and the CNX 100 - are going to commence trading on the F&O segment from today.
Sintex Industries has decided to acquire 81% shareholding of Wausaukee Composites Inc. Himatsingka Seide volume has been rising. While the buzz is that the company may acquire an overseas brand. The spurt in volume in recent times may be mainly on account of some MF selling. Deccan Aviation and UB Holdings are likely to be in the limelight following the official announcement of its acquisition by Kingfisher Airlines. GMR Infrastructure is seeking expression of interest from potential Indian and international Real Estate investors to build various categories of hotels and related facilities at the Delhi Airport site.
US technology stocks rose on Thursday, pushing the Nasdaq Composite index to its highest close in more than six years. The S&P 500 index barely managed a fresh all-time high in a tough session for the blue chips. Citigroup led the Dow Jones Industrial Average's to its first decline in four days.
The S&P 500 finished flat at 1530.62, leaving it with a 3.3% advance this month. The Nasdaq rose 11.93 points, or 0.5%, to 2604.52, the highest since February 2001. The Dow slipped 5.44 points to 13,627.64.
The US stock market completed its best May since 2003. For the month, the Dow rose 4.4%, the S&P 500 gained 3.2%, the Nasdaq advanced 3.1% and the Russell 2000 rose nearly 4%.
Reports on manufacturing, construction and jobless claims showed improvement. But first-quarter economic growth came in weaker than first thought, at the slowest pace since 2002.
After the close of trade, Dell reported quarterly sales and earnings that topped Wall Street estimates and said that it will cut about 10% of its workforce over the next year. Shares jumped 6% in extended-hours trading.
US light crude oil for July delivery rose 52 cents to settle at $64.01 a barrel in New York. Prices were volatile following the weekly oil inventories report, which showed a surprise drop in crude oil supplies. The front-month contract was quoting 22 cents higher at $64.23 a barrel in extended trading.
COMEX gold rose $7.40 to $666.70 an ounce. Treasury prices slipped, raising the yield on the 10-year note to 4.9% from 4.87% late on Wednesday. In currency trading, the dollar fell versus the euro and rose against the yen.
European shares rebounded. The Dow Jones Stoxx 600 index advanced 0.7% to 396.49. In Frankfurt, the DAX Xetra 30 closed up 1.5% at 7,883.04, after hitting a high of 7,895.71 - a level not seen since March 2000 - earlier in the session. The French CAC-40 advanced 1% to 6,104.00, while the UK's FTSE 100 rose 0.3% to 6,621.40.
In the emerging markets, the Ibovespa in Brazil was down 0.5% at 52,268 while the IPC index in Mexico was more or less flat at 31,398 and the RTS index in Russia surged by 3.2% to 1780.
Most Asian markets are trading up this morning, led by commodity producers as prices of metals and crude oil rallied. The Morgan Stanley Capital International Asia-Pacific Index is on course for its biggest weekly gain in more than two months.
The MSCI index added 0.9% to 151.53 as of 10:55 a.m. in Tokyo after rising 1.3% yesterday to a record. The benchmark is poised for a 2.6% advance this week, the most since a similar period ended March 23.
Japan's Nikkei 225 Stock Average added 0.6%. Benchmarks in markets open for trading advanced, except in New Zealand. South Korea's Kospi index surged 1.8% to a new high, the biggest advance among regional measures.
A measure of six metals traded on the London Metal Exchange (LME), including copper and zinc, rose 1.4% yesterday. Copper climbed 2.4%, zinc added 2.9% and lead gained 1.8%.
Markets had a strong session after losing ground in the previous trading session; bulls made a solid come back on the bourses shrugging off the bears. Firm regional markets, better than expected GDP figures for FY07 which was at 9.4% against 9.2% and short covering towards the fag end of the session all participated in the celebration, lifting the NSE Nifty to hit a new pinnacle
BSE Consumer Durable index led from the front as the index gained by 4.47%. Others like Auto, Bank, Technology and FMCG index followed suit. Zee Telefilms, Hero Honda and Tata Tea were the major gainers among the 50-scrip’s of NSE Nifty.
Finally, the 30-share Sensex surged higher by 133 points to close at 14544. NSE-50 Nifty gained 46 points to close at 4295.
Air Deccan surged to higher altitude; the scrip surged by over 11% to Rs146 as reports stated that the low-cost carrier is set to be taken over by Vijay Mallya's Kingfisher Airlines. The scrip touched intra-day high of Rs149 and a low of Rs130 and has recorded volumes of over 10,00,000 shares on NSE.
Hindustan Oil Exploration spurred by over 3.5% to Rs115 on speculation that a large corporate may take stake. The scrip touched intra-day high of Rs120 and a low of Rs113 and recorded volumes of over 23,00,000 shares on NSE.
Hind Rectifiers rallied by over 3% to Rs857 after the company announced that they would consider stocks split. The scrip touched intra-day high of Rs900 and a low of Rs820 and recorded volumes of over 8,000 shares on NSE.
Tantia Construction lost by 1.5% to Rs115 after the company secured order worth Rs1.78bn. The scrip touched intra-day high of Rs118 and a low of Rs114 and recorded volumes of over 1,00,000 shares on NSE.
FMCG stocks were also in the limelight led by gains in the index heavy weight HLL which gained by over 2.5% to Rs203, McDowell gained by over 5.5% to Rs1264, Colgate advanced by 2.3% to Rs362 and Dabur added 1.7% to Rs99.
Consumer Durable stocks were the top gainer of the day as the index surged by 4.47%. Videocon Industries rallied by over 7% to Rs492, Rajesh Exports surged by over 4.5% to Rs502, Titan Industries rose over 3% to Rs1124 and Lloyd ELE added 4.7% to Rs170.
Banking stocks recorded smart gains. Index heavy weight HDFC Bank surged by 4% to Rs1147, SBI was up by 2% to Rs1353 and ICICI Bank gained by 0.6% to Rs919. PNB, Bank of Baroda and Bank of India were the major gainers among the Mid-Cap stocks.
Auto stocks were in top gear on expectations of impressive monthly sales numbers. Hero Honda led from front as the scrip surged by 5% to Rs732, Tata Motors was up by 1.8% to Rs755, Maruti gained 1.5% to Rs817 and Bajaj Auto advanced 1.1% to Rs2224.
Sectoral Movement:
The BSE Consumer Durable index was the major gainer and gained 4.47%. The BSE Bank index (up 1.36%), BSE Auto index (up 1.30%), BSE FMCG index (up 1.39%) and BSE Technology index (up 1.12%) were among the other major gainers.
Volume Toppers:
RNRL, RPL, IFCI, TTML, JP Hydro, Deccan Aviation, ITC, SAIL, Sterling Biotech, Punj Lloyd, Idea, Unitech, Arvind Mills, R Com, Ashok Leyland, Dena Bank and HLL.
Upper Circuit:
Karutri Network, Marg Construction, Shasun Chemicals, United Breweries, SREI Infrastructure, GTC Industries, MIC Holding, TVS Electronics, Tanla, Accel Frontline and Infomedia.
Delivery Delight:
Aditya Birla Nuvo, Alfa-Laval, Andhra Bank, Apollo Tyres, Arvind Mills, Bajaj Auto, Bank of Baroda, CEAT, Crompton Greaves, Divis Laboratories, Gammon India, HDFC Bank, ICICI Bank, IVRCL Infrastructures, Mercator Lines, Nagarjuna Construction, ONGC, PNB, RPL, SBI, STER and UTI Bank.
Abnormal Delivery:
ABB, Tata Chemicals, BEL, Ashok Leyland, CEAT, Aurobindo Pharma, Dr Reddys Labs, Ucal Fuel, ICICI Bank, Neyveli Lignite Corporation Ltd and Wockhardt.
Results Today:
Neyveli Lignite, Shreyas Shipping, Tata Tea, TV Today and VSNL.
Results Corner:
Cummins Q4 profit at Rs656mn (up 21.4%) and revenue at Rs5.29bn (up 29.9%)
Brokers Recommendation:
ABB – Buy from Citigroup with target of Rs5516
Long Term investment:
Cummins India
Major News Headlines:
Chidambaram says RBI monitoring rupee movement
India's economy grew 9.1% in Q4 and 9.4% in FY07
FM clears 23 FDI proposals worth Rs4.18bn
Tata Tea to buy majority stake in Mt. Everest Mineral Water: Reports
Mitsubishi Heavy to License pump Technology to BHEL
NDTV unit raises $120mn by selling securities
Tantia Construction gets order worth Rs1.78bn
TCS raises hedge on currency to $1.5bn from $1.2bn
Lupin gets US FDA approval for Cefadroxil Capsules
Madras Cements Ltd. (MCL) – Q4 FY07
CMP: Rs2754
Rating: HOLD
Target: Rs2921
Q4FY07 Financial Highlights
Net Sales increases yoy by 45.1% to Rs4.4bn
Operating profit increases by 100.4% to Rs1.3bn
Operating margin increases by 840 bps to 30.6%
Realization per ton increases by 32% to Rs2923
Cost per ton increases by 17.7% to Rs2028
PAT stood at Rs710mn for Q4FY07 compared to Rs326mn for Q4FY06
Valuation
The series of negative measures for cement industry has reduced the upside possibilities in cement pricing. We expect demand supply situation to be favourable for players in Southern market in FY08 and surplus situation is expected from second of FY09. MCL is expanding its capacity from 6mn tpa to 8mn tpa in FY08 and to 10mn tpa in FY09 which is expected to take care of price moderation in FY09. MCL is putting up 36MW captive power plant in two phases at Jayanthipuram which is expected to bring down power expenditure. We have revised down our estimates for FY08 and FY09 as MCL is unable to pass on the cost increases. MCL is trading at 9.7x and 9.4x of its estimated FY08 and FY09 earnings of Rs283.5 and Rs292.1 respectively. Recommend HOLD with target price of Rs2921. Our target price discounts estimated FY09 earnings by 10.0x.