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Thursday, July 19, 2007
Close: Sensex in a hurry !
Markets started off with a bang carrying the momentum of yesterday closing and then there was no stopping. It was Reliance which lead from the front. The ferocity of the upmove in the absense of any positive global cues surprised one and all. There were no results which could be called spectacular today and even more the numbers were more of a disappointment from Wipro and ACC. However Wipro closed steady and so did ACC. Reliance as a heavyweight led the markets and the gas find seemed to find the buyers today as analyst did their back of the envenlope calculations.
WiposIts results season. Larsen results came in strongly positive and the stock rallied. However some other income dampened the enthusiasm. ACC results were certainly a disappointment. The stock was hit but made a strong come back. There was some profit taking seen in the banking sector. The talk is that the RBI may have a CRR hike even ahead of the meeting now that the offers of UTI bank, HDFC bank are over with. Tough call but given the positive momentum, the markets closed up in a frenzy.
Sensex closed up by 249 points at 15550 helped up by gains in Tata Motors (778.05,+5 percent), Bajaj Auto (2381.75,+4 percent), RIL (1896.45,+4 percent), Grasim (2996.45,+3 percent) and Infosys (1996.85,+3 percent). Restricting the gains are Hero Honda (693.4,-3 percent), HLL (197.85,-1 percent), Rel Energy (685.9,0 percent), Cipla (205.45,0 percent) and Dr Reddys (665.05,0 percent).
Transport Corporation of India was one of the stocks in action. This company is set to be a large logistics company and will benefit from the growing oranisation in the unorganised Transportation market. We had a note just last month and the stock has delivered exceptional gains. Do read that note
Larsen & Toubro ended 2% higher post its quarterly results today. Net profit for the quarter came in at Rs.377 cr vs Rs.157 cr, up by 140%. Net sales stood at Rs.4505 cr vs Rs.3469 cr, up by 30%. Company had bagged orders worth Rs.3,400 cr in the month of July itself. The order book remains healthy. However a fly in the ointment was the large other income. Valuations at 28 X FY 8 certain price in superb execution. We would look for lower levels here to take position. The risk from slippage in execution remains high.
Prime Focus Ltd. (PFL) the largest independent company in the business of post production for Movies and Advertising films ended 3% higher. VTR has turned around and the company intends to make the UK business even more profitable with cost rationalisation. We had a research note on the company today where we believe that the growth may disappoint as we believe that the only scalable part of the business is the Visual Effects and thats still small part of revenues for the company. The company provides integrated production and visual effects services in India. Its services include visual effects, digital intermediate, film scanning and film recording, telecine, editing, motion control, etc. Do read the details for our view !
Eastern Silk Ind the major silk exports major from the country closed 2% higher. The top line of the company in the last quarter witnessed a growth of 10% YoY. The lower input costs coupled with improved product mix helped in improved margins. Lower input costs also helped in offsetting the impact of the appreciating Rupee. The recently started manufacturing unit near Banglore is expected to increase the installed capacity by 20%. Do read our note on the company to know the risk factors and the investment arguments in favor of the company.
echnically Speaking : Sensex traded in a broad range for the day between an intra day high of 15,993 and low of 15,357 levels. Volume to the tune of Rs.5,699 cr was churned out through out the day. Sensex has hit our expected target level of 15550. We could see some pullback from here on profit booking. The trend remains up. Support for sensex at 15400 and 15330. But its better to avoid predicting a top. Enjoy the ride.
Biocon, KPIT Cummins, Reliance Energy, Dish TV
SSKI on Biocon
Biocon’s Q1’08 profits are in line with expectations with 35.9% yoy growth in net profits at Rs530m. In a positive move, Biocon has also sold its relatively sluggish enzyme business to Novozyme for $115m, at an attractive valuation of ~4.8x sales which is clearly indicative of the intrinsic value of Biocon’s biotechnology based businesses. The proceeds will enable Biocon to pursue strategic acquisitions to further strengthen its innovation business. Key positives are strong growth momentum in biopharma business with 28% yoy growth and continued progress in biosimilars programme as exhibited through the new licensing deals for GCSF and Insulin. Biocon is clearly amongst the leaders in the Biosimilars space in India and the developments in US / EU to accelerate biosimilars entry bode well for the company. Contract research services business continues to grow strongly and discovery R&D projects are looking promising. The only concern is the sharp appreciation in rupee which is significantly impacting Biocon’s margins given that ~60% of its sales are denominated in dollars and pricing revisions are slow to come through. In reflection Q1FY08 margins at 28% are 120bps below our estimates despite a much higher component of licensing income (Rs160m against Rs20m expectation). To adjust for the enzyme business divestment and lower operating margins, we are reducing our FY08 and FY09 earning estimates by 8% and 10% respectively. Maintain Outperformer with a price target of Rs546 (23.8xFY08E and 19xFY09E earning estimates). Unlocking of discovery R&D assets and acceleration in licensing revenue growth will be upsides to our estimates.
SSKI on Reliance Energy
REL's 1QFY08 results were above our estimates at Rs3.04bn led by sharply higher than expected other income of Rs3.6bn (forex gain of Rs1.9bn). Revenues grew by 41% yoy to Rs16.2bn during the quarter led by sharp jump in EPC division (faster execution of projects) coupled with 42% yoy increase in power revenues (14% growth in volumes and 25% jump in realizations). However, margins of EPC fell by 110bps to 5.1% led by execution of lower margin components of the order backlog, while energy business EBIT margins fell by 100bps to 13.2% led higher purchased power cost. Despite, the poor operating performance during the quarter, we have upgraded our FY08 and FY09 earnings estimates by 10% and 8.5% respectively to reflect the higher other income. REL is currently trading at 13.3x FY09 earnings. Despite being bullish on REL’s business model of backward integrating the distribution business through own generation, we believe valuations adequately factor in the medium term upsides. Moreover, the gas pricing uncertainty for the Dadri power plant is delaying the big value trigger for the stock. We maintain our Neutral rating on the stock.
SSKI on Dish TV
Mapping our estimates, Dish TV has reported revenue growth of 35%qoq at Rs893m in Q1FY08 with subscriber reach of 2.1m (0.18m subscribers added during the quarter). High content cost (65%); subscriber acquisition costs and Set Top Box subsidies have led to operating loss of Rs488m and net loss of Rs898m.
Unlike cable, DTH is a more organized and less regulated business. With heavyweights like Reliance ADAG, Bharti, Tata Sky, Dish TV and Sun TV foraying into the space, we expect DTH to outpace digital cable in near term and become a 14m home market by FY10. However, intense competition would also mean increasing subscriber acquisition cost and subsidization (from 4-6 months of ARPU now to 8-10months of ARPU), given the fact that there is no content differentiation. We have already witnessed the early signs, with customer acquisition cost for Dish TV more than doubling since the entry of Tata Sky. As competition is more funded and aggressive, we believe that Dish TV’s share of incremental market would drop and its market share would reach 32% by FY10E from 75% now. Intensifying competition, increasing bleed period and impending dilution to fund Rs7-8bn of capex leaves limited value for the investors. Reiterate Neutral.
SSKI on KPIT Cummins
In Q1FY08, KPIT’s revenue grew 3.8% qoq to Rs1.35bn (+5.4% in $ terms) – higher than our expectations of Rs1.32bn. However the company books forex gains / (losses) on hedges in revenues as well as in G&A. The average exchange rate realization for the company was Rs43.64/$ compared to average exchange rate of Rs41.3/$ during the quarter. As per our estimates the revenues would have included forex gains of Rs73m. The management has not provided clarity on volume growth and pricing increase during the quarter. Despite wage hike (17% offshore and 6% onsite) the EBITDA margins improved by 10bp primarily on account of booking of forex gains in revenues and lower S&M (-10% qoq in absolute terms) on getting benefit of rupee appreciation on $ terms costs and absence of variable salary paid during Q4FY07. PAT declined 9.8% qoq to Rs127m (we expected Rs120m) despite 4.4% increase in EBITDA on higher depreciation and interest expenses. The company has entered into partnership with Cummins to provide F&A BPO work (potential size of $55m over 5 years) but KPIT will be paying $5m upfront of which $4.5m have been raised through equity dilution to Cargill (2% dilution) and additional $5m towards end of 5 years based on certain performance parameters. The company has cut rupee terms PAT guidance by 6.8-10% on account of rupee appreciation – though it has raised $ terms revenue guidance by 1.4-3%. We expect 19% earning CAGR over FY07-09E – at Rs135 the stock trades at 17x FY08E and 14x FY09E – maintain Neutral.
Beware of Scams - Finance Minister
Dabbling in stock markets could cost investors dearly unless they understand what risks await them, although the markets are less mysterious than they were before, Finance Minister P Chidambaram cautioned on Thursday.
"I think people understand markets and more and more people prefer markets. They did in 1990s but burnt their fingers. So they withdrew. They again came back in late 1990s and again burnt their fingers," he said at a function last night, while advising more awareness about financial markets and role of regulators.
Two scams, widely known as Harshad Mehta and Ketan Parekh scams, rocked Indian stock markets in early 1990s and 2001.
Market regulator SEBI again unearthed scams in IPOs, beginning from public offers of Maruti to Suzlon during 2003-05, pointing out irregularities in allocating retail portions of shares.
However, Indian markets were now one of the best regulated markets in the world, Chidambaram said at a function of CNBC-TV18 to launch an awareness booklet for first-time investors, called "Pehla Kadam" (first step).
Over the years, much of the mystery about markets has been removed "layer by layer", the Finance Minister said.
Highlighting the need for spreading financial awareness right from the school level, he said there are enough students at 10+2 level who can absorb lessons in financial literacy.
"We have to tell the people what is the meaning of risk and how it could be mitigated," he said.
Returns on the web
TAX: Filing income-tax returns online is easy and convenient, and you have help from all the web portals that have come up recently
When Arun Kumar went to London on a six months’ assignment, his biggest worry was how to file his income tax returns. But a friend told him about a web portal which offered e-filing and tax consultancy services, and he could file his returns easily.
It is this growing breed of e-tax filers like Kumar that is attracting entreprenuers, who are coming up with web-portals which offer customised online tax filing and computation services.
Leading the way is a group of three young executives from Delhi who quit cushy MNC jobs to set up Span Across. Ankur Sharma, Chirayu Patel, Sumit Grover and Rita Gupta, an executive programme student of the Indian Institute of Management Ahmedabad who’s helped them, claim their flagship product, TaxSpanner, can compute tax returns in just 15 minutes. Not only that, it provides a detailed interview session for deductions, finds deductions which might otherwise go unclaimed, and also analyses and computes capital gains from shares, mutual funds, bonds and so on. “With the income tax department rolling out new return forms and changing tax codes, the hassles surrounding returns became an everyday topic of discussion. That is how TaxSpanner started,” says Sharma.
To cater to different tax planning needs, the promoters will come out with two variants, TaxSpanner Quick and Tax Spanner Advanced, the first for individuals whose primary source of income is salary and interest, and the second for those who also have income from property and capital gains.
A group of alumni from the Indian School of Business Hyderabad have launched a similar online tax filing service, TaxYantra, which enables tax-payers to understand taxes and fill returns online. Alternatively, printouts of the forms can be picked up by company representatives and filed manually with the tax department.
The government of India too has a website, incometaxindiafiling.gov.in, as part of the income tax department’s e-governance action plan. Income tax practicioners say around 75 per cent of all returns filed this year will be online.
These start-ups also have value-added services. For example, instant ITR in TaxSpanner which displays the computed taxes instantly. TaxYantra is co-ordinating with the income tax department so it can send the forms directly in XML format.
The revenue models are user-driven. TaxSpanner does not ask for registrations; customers pay only if they are satisfied. TaxYantra too accepts payment only after the return is filed. Confidentiality of information is another issue taken up seriously. For instance, TaxSpanner stores user information in specialised secure servers.
But it is not as if tax-payers will no longer need the services of CAs and income tax experts. As Sunil Talati, president of the Institute of Chartered Accountants of India, says, “There is need for some acumen on tax-related issues for an individual to fill the form. This is where CAs and income tax practicitioners come in, since the online form is no different from the manual one.”
While large corporates may have responded well to online portals, tax consultants say individual tax-payers still have doubts about authenticity and security. Ketan D Raiyani, managing director of the recently launched Taxsmile.com, says, “It will take at least a year for people to adapt to online filing simply because of the fear of their data being misused.
Via Business Standard
Market welcomes earnings
The market continued to scale new heights and the Sensex closed firm above 15500 for the first time largely owing to institutional buying. Positive Asian indices helped the market open at 15358, up 56 points. The Sensex sailed in positive territory throughout the trading session on strong bullish sentiment and traded above the 15400 mark for the major portion of the day. Substantial buying in heavyweights, Reliance Industries and Bajaj Auto, followed by strong quarterly numbers from ACC, L&T and Ranbaxy helped the Sensex to record its new high of 15593 in the late trades. The Sensex recorded gains for the second consecutive session and added 249 points to close at 15550, while the Nifty moved up by 63 points at 4562.
The breadth of the market was positive. Of the 2,677 stocks traded on the BSE 1,503 stocks advanced, 1,104 stocks declined and 70 stocks ended unchanged. Of the 12 sectoral indices on the BSE, ten indices ended in positive territory. The BSE Oil & Gas ended firm with gains of 2.91% at 8,168,the BSE Auto index rose 1.89% at 5,148 and the BSE CG index added 1.59% at 12,876. However, the BSE Realty index, the BSE CD index ended weak.
Action in several index heavyweights lifted the market. Bajaj Auto led the pack and shot up by 4.89% at Rs2,394. Tata Motors soared 4.70% at Rs778, Reliance surged 4.20% at Rs1,896, Grasim flared up by 3.38% at Rs2,994, Infosys jumped by 2.51% at Rs1,996. M&M added 2.30% at Rs823, L&T advanced by 2.25% at Rs2,382, Reliance Communication moved up by 2.13% at Rs579 and ACC was up 1.52% at Rs1,150. However, HLL at Rs198, Reliance Energy at Rs686, Cipla at Rs205 and Tata Steel at Rs682 dropped marginally.
Oil stocks rallied sharply today. Reliance Petro shot up by 3.98% at Rs118, Gail India soared 1.98% at Rs338, Cairn India flared up by 1.04% at Rs160. IOC, ONGC and BPCL gained moderately.
Auto stocks, too, witnessed strong appreciation. Cummins India vaulted by 7.19% at Rs379, Apollo Tyre jumped by 3.02% at Rs380 and Exide Industries added 1.29% at Rs47.
Over 11.71 crore Spice Tele shares changed hands on the BSE followed by Tata Teleservices (1.13 crore shares), IKF Technologiesl (98.45 lakh shares), Zee Entertainment (80.79 lakh shares), and Nagarjuna Fertilizers (72.89 lakh shares).
Value-wise, Spice Tele registered a turnover of Rs696 crore on the BSE followed by DLF (Rs371 crore), Zee Entertainment (Rs272 crore), Reliance Industries (Rs208 crore) and Reliance Communication (Rs151 crore).
Sensex, Nifty at record closing highs
The market kept on cruising ahead as the day progressed with the rally getting intense in the last one hour of trade. Index pivotals were in strong demand, with Reliance Industries, Bajaj Auto, Tata Motors and Grasim at the forefront. Both the key indices on BSE and NSE struck all-time highs.
Today’s rally was broad based with stocks from various sectors and market capitalisation participating in the rally. Auto, capital goods, IT, oil & gas stocks logged smart gains. However, real-estate stocks cooled off on profit booking. Positive cues from the global markets boosted the sentiment further.
The BSE 30-share Sensex surged 248.96 points, or 1.63%, to 15,550.13, an all-time closing high. It opened higher at 15,357.38 and kept on hitting new highs at regular intervals, with the last being 15,593.31 at 15:27 IST. The barometer index’s previous lifetime high was 15,440.20, struck just about two days ago: Tuesday, 17 July 2007.
The S&P CNX Nifty also touched an all-time high of 4,573, surpassing its previous lifetime high of 4,550.25 on 17 July 2007. It settled with a 62.55-point, or 1.39%, spurt at 4,562.10, an all-time closing high. The Nifty July futures settled at 4,553.65, a discount of 8.45 points compared to spot closing
The total turnover on BSE amounted to Rs 5,699 crore as against Rs 5,750 crore on Wednesday 19 July 2007
The NSE F&O turnover was Rs 45,874.91 crore as compared to Rs 45,052.64 crore on Wednesday 19 July 2007
The market breadth was strong on BSE with 1,536 shares advancing as compared to 1,157 that declined, while 70 remained unchanged
The BSE Mid-Cap Index settled at 6,827.74, up 52 points, or 0.8%, while the BSE Small-Cap Index rose up 74 points, or 0.9%, to 8,258.52
Besides good corporate earnings in a fast growing economy, the rise in the value of the Indian rupee against the dollar has attracted foreign funds. FII inflow in the first half of July 2007 reached Rs 19,334.30 crore (till 17 July 2007). The large inflows this month are also due to FII subscription to IPOs of DLF and ICICI Bank.
Receding fears of rising interest rates have aided the surge on the domestic bourses over the past few days. Inflation is at a little above 4%.
In today's trade, among the Sensex pack, 26 advanced while only four of them declined.
Shares from the auto pack dominated the list of gainers, on easing worries of interest-rate hike. The BSE Auto Index settled at 5,147.58 up 1.89%, from its previous close.
Auto companies derive 50%-75% of their sales from borrowed funds. Tata Motors, India's top auto maker by sales, jumped 6.31% to Rs 790 on reports it is evaluating a bid to buy luxury British car brands Jaguar and Land Rover from struggling US car maker Ford. A successful bid for Jaguar and Land Rover, which have been underperforming ever since Ford acquired them seven years ago, may cost over Rs 6,000 crore. It was the top gainer from the Sensex pack, with 3.64 lakh shares changing hands on the counter.
Tractor major Mahindra & Mahindra advanced 2.30% to Rs 823.20 on reports that it is also interested in Land Rover.
India's second largest two-wheeler maker Bajaj Auto surged 5.06% to Rs 2,398 after a domestic brokerage initiated as 'outperformer' rating with target price of Rs 2,725.
India's largest private sector company Reliance Industries (RIL) extended gains to strike a fresh an all- time of Rs 1,925. The index heavyweight galloped 4.34% to Rs 1,899, on 11.04 lakh shares. The Bombay High Court on Wednesday, 18 July 2007, refused to stay an interim order barring RIL from selling gas from its KG basin field to any other firm except Anil Ambani's Reliance Natural Resources (RNRL) and state-run NTPC. A division bench of Justices J N Patel and Ahmed Sayed also adjourned by eight weeks the hearing on RIL's appeal against the previous interim order.
The court, however, said the government can go ahead with the process of fixing of gas price as per the contract for the field, without any prejudice to either party.
Led by RIL, the BSE Oil and Gas Index jumped 2.91% to 8,168.35. It also struck an all-time high of 8,219.56. Reliance Petroleum (up 4.20% to Rs 117.75), GAIL India (up 1.81% to Rs 337.10) and ONGC (up 0.39% to Rs 895) advanced from the oil & gas sector.
Cement stocks, riding on the infrastructure boom, advanced. Grasim, the AV Birla group diversified major deriving major revenue from cement, surged 3.94% to Rs 3,010 after striking an all-time high of Rs 3,024.80 in early trade.
Other cement stocks JK Lakshmi Cement (up 4.30% to Rs 143.10) and UltraTech Cement Company (up 1.35% to Rs 969.90) also edged higher.
ACC, the second largest cement company according to market captialisation, saw high volatility today on the eve of its results. The stock slipped sharply to a low of Rs 1,119, after the company said its net profit fell 13.5% to Rs 351 crore in Q1 June 2007 over Q1 June 2006. However, it rallied sharply from the low to strike a high of Rs 1,160 in late trade. The stock settled with a 2.29% gain at Rs 1,159.
South-east Asia's largest engineering and construction firm Larsen & Toubro rose 2.25% to Rs 2,382 after it posted a 139.83% spurt in net profit to Rs 376.85 crore in Q1 June 2007 over Q1 June 2006. Sales moved up 29.57% to Rs 4,505.21 crore.
State-run engineering major Bhel rose 0.71% to Rs 1643.10. Led by L&T and Bhel, the BSE Capital Goods Index advanced 1.6% at 12,876.18.
Telecom pivotals advanced on renewed buying. India's second-largest mobile services firm Reliance Communications (RCom) advanced 3.14% to Rs 585, after striking an all-time high of Rs 586.90. The company has sold a 5% stake in its telecom tower business, valued at Rs 27000 crore, Chairman Anil Ambani said on Thursday, 19 July 2007. It has placed the 5% stake with a handful of leading investors in the United States, Europe and Asia, for Rs 1400 crore.
RCom is also evaluating a possible initial public offering or strategic equity placements for the tower business, Ambani said.
Top cellular services provider Bharti Airtel gained 1.97% to Rs 900.50, after striking an all-time high of Rs 902. Bharti Enterprises, the parent of Bharti Airtel said on Wednesday, 18 July 2007, one of its group companies had bought a 4.99% in the telecom firm from Vodafone. The purchase took Bharti's voting interest in Bharti Airtel to more than 50%.
IT stocks advanced on momentum buying in anticipation of global merger & acquisition (M&A) activity. Led by Infosys, the BSE IT Index gained 1.5% to 4,956.31.
The second-largest IT services provider Infosys Technologies surged 2.46% to Rs 1,995 on market talks that it is close to acquiring the finance and accounting BPO arm of Philips Global. The BPO arm is said to have assured revenues of $200 million spread over five year. Infosys had gained in recent times on market rumors that it has bid for Capgemini, a European IT services provider.
Shares of third-ranked software services provider Wipro recovered from a low of Rs 494, and was up 0.19% to Rs 505.40. The company posted before market hours today, 19 July 2007, a lower-than-expected 16% rise in net profit to Rs 710 crore in Q1 June 2007 over Q1 June 2006.
Wipro added 39 clients in the June 2007 quarter. It has forecast its IT services revenue would rise 32% to $777 million in Q2 September 2007, up from $589 million in Q2 September 2006.
Wipro’s net profit declined 18% and net sales dipped 2.86% over the March 2007 quarter.
India's largest IT service provider TCS rose 0.56% to Rs 1,174, while Satyam Computers, the fourth largest, was up 1.2% to Rs 487.40
The Indian rupee slipped on Thursday, 19 July 2007 as rising oil prices spurred oil companies to buy dollars, though dealers expected capital flows into the fast-growing economy to bolster the local unit. In early trade, the rupee was at 40.43/44 per dollar, easing from Wednesday's 40.4150/4250, and drifting further from a nine-year peak of 40.28 hit in late May.
Top drug maker by sales Ranbaxy Laboratories rose 1% to Rs 350.50 after it today reported a 117% surge in net profit in Q2 June 2007 to Rs 263 crore over Q2 June 2006.
Leading aluminuim and copper maker Hindalco Industries rose 0.76% to Rs 185.70 after it announced an agreement with Canada-based Alcan to acquire its participating interest in the Utkal Alumina project in Orissa. The conclusion of the transaction will mark the complete exit of Alcan from the Utkal project
Reliance Energy lost 0.69% to Rs 684 and was the top loser from the Sensex pack. About 9.84 lakh shares changed hands on the counter on BSE.
Cipla (down 0.56% to Rs 205.15), Hindustan Unilever (down 0.33% to Rs 198.30) and Tata Steel (down 0.09% to Rs 682.10) were the other losers from Sensex pack.
Spice Communications, a telecom services provider, settled at Rs 60.65, a premium of 45% over the IPO price of Rs 46. The scrip debuted at Rs 55.75. It touched a high of Rs 67.05 and a low of Rs 48.50 during the day. On BSE, the counter saw huge volume of 11.71 crore shares.
Zee Entertainment Enterprises, the second largest media company by market capitalisation, rose 2.57% to Rs 335 on huge volumes of 80.79 lakh shares after three block deals of 23.34 lakh shares each were strcuk in the counter at an average price of Rs 328 per share on BSE in opening trade.
Bank stocks advanced on renewed buying, taking the banking sectror index BSE Bankex to an all-time high of 8,487.57. The Bankex settled with gain of 0.98% at 8,453.97. Banking shares gained as fears of interest rate hike in near future receded. Kotak Mahindra Bank (up 4.18% to Rs 737), Punjab National Bank (up 3.77% to Rs 582), State Bank of India (up 1.34% to Rs 1596), and ICICI Bank (up 0.96% to Rs 991.85) edged higher from the banking pack.
DLF, the country’s largest real-estate developer, was up 0.02% to Rs 645.50. It today posted a net profit of Rs 579.27 crore on revenue of Rs 1,207.11 crore in Q1 June 2007. Figures for the corresponding period were not available.
The BSE Real Estate index was down 0.29% to 8,054.54 and was the worst performer among the sectoral indices on BSE. The stocks declined on profit booking after the recent rally, which led the BSE Real Estate index gain 3.71% to 8077.67, on 18 July 2007, since its launch on 10 July 2007. Indiabulls Real Estate (down 1.42% to Rs 573.20), Unitech (down 1.12% to Rs 543), and Sobha Developers (down 1.07% to Rs 914.10) declined.
Neyveli Lignite surged 17.09% to Rs 78.45 ahead of its Q1 June 2007 results, which are due tomorrow, 20 July 2007.
Infotech Enterprises plunged 9.74% to Rs 337 after its net profit dipped 60.95% in Q1 June 2007 on a sequential basis to Rs 8.16 crore over Q4 March 2007. Sales fell 0.35% to Rs 96.24 crore.
Research focused pharma firm Glenmark Pharma rose 2.4% to Rs 719 after the company said it bought two new biological entities of Canada's Chromos Molecular Systems Inc. The financial details of the transaction were not announced. Last month, the company announced a stock-split to from Rs 2 per share to Re 1 per share. The stock has witnessed a steady uptrend over the past few days. From Rs 650.70 on 28 June 2007, it has risen 10.5%
IDBI lost 3.42% to Rs 111.65 and IFCI shed 1.33% to Rs 55.85 after the National Stock Exchange barred building fresh positions in their derivatives.
Telecom software provider Tanla Solutions was locked at the 5% upper limit of Rs 496.05. After trading hours on Wednesday, 18 July 2007, Tanla Solutions reported a 2.3% fall to Rs 33.25 crore in consolidated net profit in Q1 June 2007 over Q4 March 2007. Consolidated revenue rose 14.6% to Rs 89.44 crore.
VST Tillers, the Bangalore-based farm equipment manufacturer of power tillers and low horse power tractors, jumped 13.63% to Rs 210.50. The stock has surged in the past one month. From Rs 135 on 13 June 2007, it has risen 55.9%.
Number two credit rating agency ICRA gained 7.51% to Rs 1,148.50. The stock had surged 5.1% to record closing high of Rs 1,068.30 on Wednesday, 18 July 2007, after it signed an initial agreement with state-run Indian Bank to assign ratings to small-scale industries and small and medium enterprises that are borrowers of the bank.
Software firm Cambridge Technology Enterprises jumped 20% to Rs 55.50 after the company’s board approved the acquisition of US-based Reilly & Associates Inc. subject to conditions.
Engineering firm Texmaco rose 8% to Rs 1220 after it reported a 153.8% surge in net profit to Rs 11.37 crore in Q1 June 2007 over Q1 June 2006.
Construction firm Hindustan Dorr-Oliver rose 2.74% to Rs 129.50 after it bagged an order worth Rs 30 crore from Vedanta Alumina.
Easun Reyrolle (ERL), offering power system protection, rose 5% to Rs 1,136.45 ahead of the results of the postal ballot of shareholders for 5-for-1 stock split.
West Coast Paper Mills rose 10.55% to Rs 440 after the company said its board would meet on 26 July 2007 to consider a stock-split.
Diesel engine maker Kirloskar Oil Engines surged 7.41% to Rs 357.25 after the company’s board approved a liberal 1:1 bonus.
Jindal Steel and Power (JSPL) rose 5.11% to Rs 4,025 on reports that it is to sign a contract to exploit the vast El Mutun iron ore deposits in Bolivia. As per the reports, JSPL will sign a contract to exploit the vast El Mutun iron ore deposits in Bolivia.The deal sets out an investment of $2.1 billion to mine iron ore used to make steel at the site in eastern Bolivia.
Asian markets gained today, 19 July 2007, with Japanese shares rebounding on automakers such as Toyota Motor Corp. and Suzuki Motor Corp. despite reports they will temporarily halt production because of a disruption in key parts supplies. Japan's Nikkei rose 0.56% to 18,115.95.
Hong Kong's Hang Seng (up 0.76% at 23,016.20) and Singapore's Straits Times (up 0.58% at 3,604.62) gained. Shanghai Composite lost 0.44% to 3,916.06
All the European markets were trading with gains.
US stocks fell on Wednesday on deepening concerns that a crisis in lending could spread and a warning from the Federal Reserve chairman Ben Benanke that weakness in housing could hurt economic growth for some time. The Dow Jones Industrial Average lost 53.33 points to 13,918.22. The tech-laden Nasdaq Composite Index shed 12.80 points to 2,699.49.
Oil prices jumped more than a dollar on Wednesday, 19 July 2007, after a steep drop in US gasoline stocks fanned concerns the world's top consumer could face a shortfall during the peak summer driving season. Global benchmark London Brent crude settled up $1.23 at $76.76 a barrel on Wednesday.
Trading Call - Reliance Industries
Buy Reliance cmp 1848 stoploss 1729 target 2100. The stock is heading for 2100 levels after going past key retracement levels at 1850 levels.
Nifty levels : sup : 4512 - 4498 - 4480 res : 4540 - 4565 - 4570
Top line jitters for early birds
Net profit of 154 firms goes up 37%, sales growth slumps to 17%.
India Inc’s first quarter scorecard has been mixed so far. While net profit growth has shot up, the 154 companies that have declared their results have faltered on the turnover growth rate.
Net profit has grown 36 per cent in the first quarter ended June 2007 compared with 29.44 per cent a year ago.
But the sales growth rate has slumped to around 17 per cent from 31 per cent in the same period last year.
Profit margins, however, have posted a robust growth. Operating profit margins have gone up from 20.14 per cent to 22.82 per cent in the same period and gross profit margins have increased by 239 basis points to 19.99 per cent.
Net profit margins have improved 205 basis points to 13.77 per cent.
Buoyed by a 101 per cent rise in other income, a few companies such as Jubilant Organosys, Petronet LNG, Zee Entertainment, Bayer Corp Science and Finolex Industries have doubled their net profit growth.
Analysts said it was too early to predict the overall picture as the 154 early birds belong to only four sectors – software, two-wheelers, construction and fertilisers.
Initial estimates, however, suggest that telecommunications and capital goods will shine once again, with aggregate profits rising by over 85 per cent and 44 per cent, respectively.
Engineering firms are also expected to do well on the back of robust order-books. The fast moving consumer goods companies may also record a double-digit growth in revenues on account of the rise in product prices during the quarter.
The impact of rising interest rates will hit the profits of automobile companies, while the rupee appreciation is set to spoil the party for metals and software companies.
Cement companies, analysts said, were bound to feel the heat of their inability to raise prices.
Trading Calls
Buy Akruti Nirman with a stop loss of Rs 480 for target of Rs 680.
Buy Abhishek Industries with stop loss of Rs 15.25 for short-term (3 months) target of Rs 26.
Buy PTC India with stop loss of Rs 70 for target of Rs 120.
Market may extend gains on robust FII inflow
The market is likely to extend gains on firm Asian stocks and robust FII inflow. As per provisional data, FIIs were net buyers to the tune of Rs 198 crore in equities on Wednesday, 18 July 2007. The market staged a solid intra-day rebound on Wednesday, 18 July 2007, to gain 11 points to 15,301.17.
Besides good corporate earnings in a fast growing economy, a rise in the value of the Indian rupee against the dollar has attracted foreign funds. FII inflow by the first half of July 2007 reached Rs 19334.30 crore (till 17 July 2007). The large inflows this month are also due to FII subscription to IPOs of DLF and ICICI Bank.
Receding fears of rising interest rate has aided the surge on the domestic bourses which is hovering near a record high. Inflation is hovering at a little above 4%.
As per provisional data, domestic institutions were net sellers to the tune of Rs 57 crore on Wednesday, 18 July 2007.
Key benchmark indices in Asia were up by between 0.1% to 0.4% on Thursday, 19 July 2007.
US stocks fell on Wednesday on deepening concerns that a crisis in lending could spread and a warning from the Federal Reserve chairman that weakness in housing could hurt economic growth for some time. Dow Jones Industrial Average lost 53.33 points to 13,918.22. The tech laden Nasdaq Composite Index shed 12.80 points to 2,699.49.
Oil jumped more than a dollar on Wednesday after a steep drop in US gasoline stocks fanned concerns the world's top consumer could face a shortfall during the peak summer driving season. Global benchmark London Brent crude settled up $1.23 at $76.76 a barrel on Wednesday.
US Market closes lower on subprime and earning worries
Earnings report in Technology sector spurs sell-off though Dow recovers from a 148 points fall
US Market closed lower today, Wednesday, 18 July, 2007 snapping a five day winning streak for the market. Bear Stearns reportedly telling investors that its two troubled hedge funds are nearly worthless ushered in the first wave of consolidation throughout the heavily weighted Financial sector. Disappointing results in the tech sector last night kicked things off on a sour note since the morning.
Dow was down by as much as 148 point at one point of time. But it recouped back most of its loss in the final half hour of trading. Fed Chairman, Ben Bernanke’s comments did play some role in cooling investor sentiments.
The Dow Jones Industrials closed lower by 53 points at 13918. Tech heavy Nasdaq lost 12.6 points to close at 2699. S&P 500 closed lower by 3.2 points at 1546.
Twenty-one out of the thirty Dow stocks closed in red today. Intel and JP Morgan, were the top most Dow losers today.
Earlier in the day today, the Fed Chairman did say growth will pickup up next year and that inflation is likely to recede. However, Bernanke also said that conditions in the subprime mortgage sector have "deteriorated significantly," and that delinquencies and foreclosures are likely to get worse before they get better
The yield on the 10-year note slipped below the psychologically important 5.00% level was a positive factor.
Intel and Yahoo – both slip by 4.8% and act as an overhang for Technology
When market opened in the morning, stocks opened lower across the board as everything from renewed subprime woes to mixed earnings reports armed the bears with the means to take some money off the table.
Stocks retraced session lows as Bernanke's prepared remarks did nothing to calm investors' nerves in the face of an already dismal day of news items.
Financials and Technology collectively accounted for the maximum sell-offs. Sell-offs in both sectors eliminated much of the leadership that had recently helped the Dow and S&P 500 hit historic highs.
Last night, Intel came out with its second-quarter earnings and disappointed investors. Wall Street wasn't too happy with Yahoo earnings report either. Both the stocks together accounted for a good plunge for Nasdaq. Both the stocks fell by 4.8%.
The indices were at their best levels of the afternoon but continued to languish in negative territory as market breadth remained decidedly bearish.
IBM shares strike 5 year high today
After the close, IBM said it earned $1.55 a share in the second quarter, including a tax gain worth 5 cents a share, better than the Wall Street estimate of $1.47 a share. IBM shares touched a 5 year high today after the share jumped 2.8% to $111 today before announcing its result.
Crude oil futures increased today and crossed the $75 mark at close after an Energy Department report showed that U.S. gasoline inventories unexpectedly fell last week. Crude-oil futures for light sweet crude for August delivery closed at $75.05/barrel (higher by $1.05/barrel or 1.4%) on the New York Mercantile Exchange.
Despite the rise in refinery activity, motor gasoline supplies fell for the first time in three weeks, down 2.3 million barrels at 203.3 million to stand 4.5% below the year-ago level. Gasoline imports plunged 36% to an average 915,000 barrels a day.
Trading volumes showed 1.7 billion shares exchanging hands on the New York Stock Exchange and 2.2 billion on the Nasdaq. Declining issues topped gainers by 20 to 11 on the NYSE and by 9 to 5 on the Nasdaq.
For tomorrow, Initial Claims will be out at 8:30 ET. Leading Indicators will be out at 10:00 ET while the Philly Fed will offer an update on manufacturing conditions at 12:00 ET. The FOMC Minutes from the June 27-28 meeting will hit the wires at 14:00 ET. On the earnings front, Microsoft and AMD are the major names after close.
Morning Call - July 19 2007
Market Grape Wine :
In House :
Nifty at a supp of 4477 and 4445 with resis at 4515,4540 and 4575
Intra day calls: Buy HDFC Bank above 1220 with a TGT of 1255 and a SL of 1205
Buy Jindal steel above 3875 with a TGT of 3992 and a SL of 3825
F&O: Buy Ultracemco above 974 with a TGT of 992 and a SL of 965
Buy Birla jute above 310 with a TGT of 322 and a SL of 304
Outlook positive: Bharti
Out House :
Markets at a support of 15015 & 15151 levels with resistance at 15353 & 15445 levels .
Buy : Kotakbank & SBIN
Buy : RIL & Rel
Buy : Welspun & SkOil
Buy : Bhel & NTPC
Buy : PFC & Idea
Buy : Hindalco & Sterlite
Buy : Aban & SKumar
Buy : DLF & IBulls & IbullReal
Buy : Ankurdrugs & Aptech & Asian
Dark Horse : Kotak ,IBulls , IndiaInfo ,Aptech , REL , DenaBank & JpAsso & SesaGoa
Bullet for the Day : Murudeshwar , IbullRealty & Aban with strict stop loss
Trading Picks for the day
Stocks with +ve bias : ICICI Bank, Bajaj Auto, Idea, Bank Of India, GNFC
Stocks for short term delivery: Glenmark
Stocks for Investment : TCS, Genus Overaseas.
Fly above the clouds
When it rains, most birds fly for shelter. But the eagle alone avoids the rain by flying above the clouds.
The challenge now is to identify stocks which will survive the drizzle, heavy rain and of course the thunder of concerns. The main indices are yo-yoing a lot more given the concerns on lofty valuations, high open interest in the F&O segment and anxiety over quarterly earnings. Another bit of worry is the spike in crude oil prices though the Government has not made its intention clear on whether it will go for a price hike in fuel prices. Looks like the Centre is banking on the stronger rupee to help it tide over the crises. How long will the Government defer a decision on the contentious issue is tough to call.
The market is facing resistance with both the Sensex and the Nifty trading near their all-time peaks. Investors are not prepared to resort to aggressive buying at these levels. Though a major correction like the one seen in February-March this year or in May last year may not materialise, there is a debate underway on current valuations and the upside from here. (Let us remind you, the long term story remains intact.) The bulls appear to be in a stronger position at the moment due to strong FII inflows, but the bears are lurking to get back in action.
Today, we see a positive opening given yesterday's smart recovery and largely positive cues coming from Asian markets. US stocks slipped overnight and oil prices have inched higher. A slew of big companies are slated to announce their results today, which could have a bearing on the sentiment. We expect the intra-day volatility to continue as the market goes through a consolidation phase after the recent rally.
US stocks suffered its worst day in a week on the back of a few disappointing results and nagging worries over the slump in the housing sector. The decline pulled down the Dow Jones Industrial Average from its fourth consecutive record and marked the third straight drop for the S&P 500 index.
Intel sparked the biggest tumble in semiconductor shares in almost five months after saying competition forced it to cut prices. Citigroup and JPMorgan Chase led 86 of 92 financial firms in the S&P 500 Index lower following Bear Stearns said investors in two hedge funds were wiped out by bad bets on subprime mortgages.
The S&P 500 lost 3.2, or 0.2%, to 1546.17. The Dow dropped 53.33, or 0.4%, to 13,918.22. The Nasdaq Composite Index slid 12.8, or 0.5%, to 2699.49.
The dollar dropped against the yen and traded near a record low versus the euro after the Federal Reserve lowered its forecasts for US economic growth as home building is weaker than anticipated.
Investors also pushed the dollar close to a 26-year low against the pound after Fed Chairman Ben S. Bernanke said in testimony to Congress that inflation will edge lower and a slump in construction will continue to weigh on growth.
US light crude for August delivery jumped $1.02 to $75.02 a barrel on the New York Mercantile Exchange. COMEX gold for August gained $7.80 to $673.70.
European shares closed broadly lower. The pan-European Dow Jones Stoxx 600 index declined 0.9% to 394.05. The UK's FTSE 100 closed down 1.4% at 6,567.10, the German DAX declined 1.8% to 7,893.61, and the French CAC-40 slipped back below the 6,000 level, down 1.7% at 5,995.97.
Most Asian markets were up this morning, led by BHP Billiton and Zijin Mining Group after copper, gold and oil prices gained. JFE Holdings, Japan's second-biggest steelmaker, and Posco climbed after UBS said slowing global production is supportive of prices.
China, the world's biggest consumer of steel, today reported that its economy grew in the second quarter at the fastest pace in 12 years. Inflation accelerated the most in almost three years, adding pressure on the government to raise interest rates. The CSI 300 Index swung between gains and losses.
The Morgan Stanley Capital International Asia-Pacific Index rose 0.2% to 158.02 at 12.28 p.m. in Tokyo. Nine of its 10 industry groups advanced. Japan's Nikkei 225 Stock Average rose 0.2% to 18,042.50.
The Philippines and Thailand were the only markets to fall in the region. Technology-related shares including Canon advanced after IBM reported profits that beat analyst estimates. Korea Electric Power Corp. fell on concern higher oil prices will raise fuel costs.
Bulls made a strong come back from days low as benchmark Sensex managed to close above the 15300mark. After opening on a weak note markets gradually lost ground. However, buying momentum in the index heavy weights like Bharti Airtel, ICICI Bank, Hindalco and Infosys lifted the key indices in green. However, L&T, ONGC and ITC were among the top laggards.
BSE Capital Good and the FMCG index were top losers, even the Mid-Cap and the Small Cap indexes lost ground. Finally, BSE 30-share Sensex gained 11 points to close at 15301. NSE-50 Nifty closed flat at 4499.
DLF surged by over 5% to Rs643 after the company secured order worth Rs60bn from Delhi Development Authority. The scrip touched intra-day high of Rs649 and a low of Rs615 and recorded volumes of over 1,00,00,000 shares on NSE.
Nagarjuna Construction slipped by 0.6% to Rs194. The company announced that it has secured two orders worth Rs2.36bn. The scrip touched intra-day high of Rs201 and a low of Rs192 and recorded volumes of over 8,00,000 shares on NSE.
HPCL edged higher by 0.7% to Rs260 after the company announced its plans that they would shut refineries in 1st Quarter 2008. The scrip touched intra-day high of Rs261 and a low of Rs257 and recorded volumes of over 2,00,000 shares on NSE.
IDBI declined by over 3% to Rs115. The company announced its Q1 result with net profit little changed at Rs1.53bn, interest and non-interest income rose to 21.93bn (up 31%). The scrip touched intra-day high of Rs122 and a low of Rs114 and has recorded volumes of over 1,00,00,000 shares on NSE.
Uttam Sugar surged by over 3% to Rs102 after the company announced that it would consider raising funds. The scrip touched intra-day high of Rs106 and a low of Rs99 and recorded volumes of over 3,00,000 shares on NSE.
Auto stocks were in reverse gear as US light crude for August delivery traded at $74.05 per barrel on the New York Mercantile Exchange. Tata Motors was down by 1% to Rs743, Maruti slipped by 0.7% to Rs743 and TVS Motors slipped 1.1% to Rs62. However, Bajaj Auto surged by 2.5% to Rs2281, M&M added 1% to Rs806.
Realty stocks recorded smart gains on hopes that RBI would not tinker with interest rates. Akruti surged by over 4% to Rs539, Sobha Developers gained by 2.7% to Rs929 and Parsvnath added 0.8%t o Rs367.
Profit booking dragged the Capital Good stocks lower. L&T declined by over 2.5% to Rs2330, Siemens was down 1.5% to Rs1325, ABB declined 1.5% to Rs1071 and Punj Lloyd dropped 2% to Rs267.
Select metal stocks also were on the receiving end on back of selling pressure. Hindustan Zinc fell 1.5% to Rs770; JSW Steel was down by 1.1% to Rs691, Jindal Steel dropped 1%t o Rs3826. However, Sterlite industries gained 2% to Rs645 and Tata Steel added 0.3% to Rs682.
Results Today:
Aban Offshore, ACC, Ashok Leyland, DLF, Essel Propac, Great Offshore, ICI India, L&T, Lupin, Mastek, Novartis India, Orchid Chemical, Ranbaxy, Shree Cement, SKF India, Tech Mahindra, Trent, Unichem Labs, Vakranjee, Welspun Gujarat and Wipro.
Fund Activity:
FIIs were net buyers of Rs1.98bn (provisional) in the cash segment on Wednesday. On the other hand, local institutions were net sellers at Rs574.9mn. From the F&O segment, FIIs pulled out Rs10.66bn.
On Tuesday, FIIs poured in Rs9.46bn in the cash segment. Mutual Funds were net sellers of Rs1.06bn.
Major bulk Deals:
HSBC has bought Balasore Alloys; Goldman Sachs has picked up EID Parry; Macquarie Bank has purchased Euro Ceramics; Sundaram BNP Paribas MF has bought GEI Industries; Morgan Stanley has picked up Gitanjali Gems; HSBC has bought JRG Securities and HDFC MF has picked up Zee News.
Insider Trades:
Ranbaxy Laboratories Ltd: Life Insurance Corporation of India has purchased from open market 8094753 equity shares of the company on 9th July, 2007.
Mastek Ltd: Acquirer: HSBC Global Investment Funds - A/C HSBC Global Investment Funds (Mauritius) Limited; PAC: HSBC Investments (Singapore) Limited has sold in open market 156250 equity shares of the company on 16th July, 2007.
Lower Circuit:
Bilcare and DGP Securities.
Upper Circuit:
Zee News, Agro Tech, Goldstone Tech, Ganesh Forgings, Hindustan Dorr, IID Forgings, Kalindi Rail, BF Utilities and Jaybharat Textiles.
Delivery Delight (Rising Price & Rising Delivery):
ACC, BASF India, Crompton Greaves, Hero Honda, Lupin and VSNL.
Abnormal Delivery:
Avaya Global, BEML, Dena Bank, Dr Reddys Lab, GDL, HDFC, India Cements, ONGC, Thermax and UTI Bank.
Major News & Announcements:
Unitech to invest $720mn building 28 hotels in India
HEG to hive off Steel operations for Rs885mn
Renuka Sugar to consider selling securities abroad
Biocon Q1 Group profit at Rs528.3mn (up 35.7%) and sales at Rs2.71 (up 27.8%)
Alembic Q1 profit at Rs174 (up 22.7%) and revenue at Rs1.78 (up 17.1%)
Polaris Q1 profit at Rs130.7mn (down 25%), net sales at Rs2.32bn (up 22%)
REL Q1 profit at Rs2.2bn (up 25%), net sales at Rs16.24bn (up 40%)
IDBI Q1 profit flat at Rs1.53bn, interest and non-interest income rose to 21.93bn (up 31%)
HPCL plans to shut refineries in 1st Quarter 2008
Accentia Tech Board approves GDR issue of $4.5 per share
DLF gets Rs60bn order
Nagarjuna Construction secures two order worth Rs2.36bn
Lupin secures approval from DCGI to conduct combined Phase IIB/III Psoriasis Trail.
Intraday Stock Ideas
Nifty (4499) Supp 4470 Res 4525
Buy VSNL (490) SL 458 Tgt 498, 501
Buy STER (646) SL 641 Tgt 656, 659
Buy Bharti Airtel (883) SL 877 Tgt 894, 898
Sell RPL (113) SL 117 Tgt 106, 104
Sell IOC (429) SL 434 Tgt 420, 418
Bias may remain positive
After witnessing the surge on Wednesday the market is expected to make further headways on firm Asian markets. The market may see some short-term profit bookings in frontline stocks creating a volatility in the afternoon trades.
Major US indices slipped on Wednesday, amid subprime fears, disappointing corporate earnings and comments from Federal Reserve chief Ben Bernanke. The Dow Jones industrial average tumbled by as much as 145 points before finishing 53 points, or about 0.4 percent lower, the Nasdaq moved down by 13 points to close at 2699.
The Indian ADRs also witnessed sharp fall on the US bourses. HDFC Bank tumbled 3.87% followed by Dr Reddy's Lab shedding 3.62%, while Infosys, Satyam, Wipro, Tata Motors and Patni Computer were down around 0.5 -1% each. However, Rediff gained 1.91% and VSNL added 0.25%.
Crude oil prices rose on Wednesday, with the Nymex light crude oil for August delivery gaining $1.03 to close at $74.02 a barrel. In the commodity space, the Comex gold for August delivery gained $7.80 to settle at $665.90 an ounce.
Gartner - India Telecom to contribute $25.61 billion by 2011
India will continue to be the fastest growing country in the Asia-Pacific region next to China, with cellular services expected to contribute $25.61 billion by 2011, according to study by global research and analysis firm Gartner.
The telecom industry is likely to register 18.4 per cent growth per annum during the 2007-2011 period. The industry recorded a revenue of $8.95 billion from cellular services in 2006.
The entry of Vodafone would further boost growth, lower tariffs and handset costs in the country. Data services would outpace voice revenue growth and contribute 22 per cent by 2011, up from 9.6 per cent in 2006, the study said.
The research firm also projects cellular market penetration to increase 38.6 per cent by 2011 from 12.7 per cent in 2006. The overall penetration would be driven mainly by an increased focus on rural market, huge promotions by the players and handset bundling schemes.
By 2011, around 58 per cent of the rural population and 95 per cent of the urban population would get mobile connections.
According to Gartner's senior research analyst Madhusudan Gupta, "With more marginal users forming the bulk of the addressable market, low service costs and inexpensive handsets will help to unlock inertia and facilitate the adoption of mobile services."
"Call rates have reduced significantly to about 2.6 cents a minute. However, this remains high compared with fixed line rates at 0.9 cents a minute," he said.
Gartner expects prices to drop, which would further help in lowering the entry barrier. This trend, coupled with the emerging market handset initiative by vendors and operators, would boost adoption of mobile services in the country's semi-urban and rural sectors.
The mobile penetration in the rural market is low at 2 per cent, but this represents an immense opportunity for the cellular service providers. Handset manufacturers were therefore concentrating on launching sub-$25 mobile handsets, the study said.
Businesses were expanding into India's smaller towns and cities, where fixed-line connectivity is limited or non-existent, the study added.
The mobile growth in the Indian market is on an upward trajectory, and the robust growth is expected to continue until 2011. The market is forecast to grow at 23 per cent per annum during the five-year forecast period, growing to more than 462 million connections.
The Indian market is driven by prepaid connections, which accounted for over 84 per cent in 2006. It is expected to reach 93 per cent by 2011.
Gartner expects prices to drop and this will help in further lowering the entry barrier. This trend, coupled with the emerging-market handset initiative by vendors and operators, will boost adoption of mobile services in the country's semi-urban and rural sectors.
The mobile penetration in the rural market is low at 2 per cent, but this represents an immense opportunity for the cellular service providers. Handset manufacturers are therefore concentrating on launching sub-$25 mobile handsets, the study said.
Businesses are expanding into India's smaller towns and cities where fixed-line connectivity is limited or non-existent. Enterprises would use mobile services for intra- and inter-company communications, while mobile players might offer services to corporates at charges that might not be related to distances.
The mobile growth in the Indian market is on an upward trajectory, and robust growth will continue until 2011. The market is forecast to grow 23 per cent per annum during the five-year forecast period, growing to more than 462 million connections.
The Indian market is driven by prepaid connections, which accounted for over 84 per cent in 2006, and expected to grow up to 93 per cent of the connection base by 2011
Indian IT Companies battle wage costs innovatively
Their profits eroded by rising wages and the appreciating rupee, India’s information technology firms are finding innovative ways of hiring talent at lower costs. That includes hiring more science graduates who could earn 30% less than engineers, looking at development centres outside India, and increasing the utilization of the existing workforce. IT salaries are rising by around 15% a year and the rupee has appreciated almost 7% against the dollar, the currency in which most software firms bill a majority of their revenue, in the three months ended 30 June.
Tata Consultancy Services Ltd (TCS), India’s largest software company by revenues, plans to hire anywhere between 3,000 and 4,000 science graduates this year, as opposed to 500 last year, according to S. Padmanabhan, the company’s executive
vice-president in charge of global human resources development.
That strategy could increase the training costs, said Anand Pillai, vice-president and global head, talent transformation, at HCL Technologies Ltd, “but not so much that the cost saving on salaries would be counter balanced.”
Wipro Technologies, the software services arm of Bangalore-headquartered Wipro Ltd, isn’t hiring science graduates yet, but it is focusing on undergraduate computer science students who get to work for a stipend at Wipro and enrol in a distance learning course run by Birla Institute of Technology and Science, Pilani.
The Rs9,000 a month these workers get is “half what we pay engineering graduates,” said Achutan Nair, who is the vice-president of strategic sourcing for Wipro Technologies. Nair said the company plans to increase the number of employee-students in this programme to 3,000 this year from 1,500 last year.
Looking outside India
Other companies, especially multinationals, are looking to move business to countries such as the Philippines. Salaries in India, for at least lower- end jobs in IT services such as call service agents, are rising faster than in the Philippines. According to Vardhman Jain, head of the business process outsourcing division of Perot Systems, growth in salaries in the Philippines is 10-12% a year, compared to 15-17% in India.
“Temporarily at least, we do see the Philippines as a lower cost centre than India,” Jain added. He said the company’s Philippines centre was 10% more efficient than similar centres in India.
Subroto Bagchi, co-founder and chief operating officer of MindTree Consulting Ltd said that there is a growing impression in the West that Indian IT companies are going to pay themselves out of the market. He added that customers in such countries were encouraging Indian companies to hire employees in other countries. Brazil, China and Eastern Europe are the strong contenders for development centres being set up by Indian companies, according to Padmanabhan of TCS.
HCL Technologies is also looking at these regions, and Pillai said that the ratio of employees will stabilize in the future at 50% in India, 20% each in China and Eastern Europe, and 10% in Brazil.
Currently, the salaries in each of these countries and regions are growing at between 6% and 8%, said Padmanabhan.
Smarter methods
All large software services firms have a bench of workers whom they can press into a project at short-notice. Consequently, their worker utilization levels are usually around 75% to 85%. Over the past 18 months, HCL Technologies has implemented a ‘talent transformation’ programme that has helped it increase utilization by 3-4% and reduce attrition by 3%. “Instead of playing the wage game alone, HCL has been experimenting with giving its employees additional training resources to make them more employable over a period of time,” said Pillai.
Mass recruitment and large-scale training programmes are not an option for smaller firms such as Aricent (formerly Flextronics Software Systems), a company that develops telecommunications software. The top five software firms in India can hire generic engineers and convert them into programmers, said Aadesh Goyal, vice-president, HR, Aricent. “In a company of our type, however, that is into product development, we need to hire people with domain expertise—so if we make campus offers, it will have to be in the computer-science-and-equivalent-degrees space, because we need system engineers, not programmers,” he added. Goyal said that because of this, wage inflation for Aricent could be as high as 20%, almost 5 percentage points higher on average than what it is for the top five software firms.
Scaling up business
Experts said that Indian companies were facing problems related to wage inflation because their business model revolves around adding more people for every dollar of additional business they get. At a recent HR summit in Chennai, Kiran Karnik, chairman of Nasscom, India’s software lobby said that if the revenues of Indian IT companies doubled from their present levels by 2010, they would perhaps end up increasing their workforce by 85%. At the same summit, Lakshmi Narayanan, the president of Nasscom, added that the lobby would look to encourage IT firms to move up the value chain, offer services such as IT consulting and earn more from each employee.
Aadesh Goyal said that is clearly the way forward for Aricent. “The only way of dealing with the situation is to get more into the product space, to innovate in the technology side,” he added. The company would have anyway done this, he said, but the pressure on profits would make it do so faster. “Necessity is the mother of invention after all,” he added.
India Facts
Call it India’s impending credit boom.Three times as many people who have credit cards now want to acquire them over the next 12 months. And people who earn less than Rs1 lakh a year account for almost three-quarters of the demand for new cards. This is one of the findings of the Invest India Incomes and Savings Survey 2007, produced by IIMS Dataworks. The survey provides the first 360-degree view of the financial behaviour and future investment intentions of the Indian workforce. According to the survey, there are 321 million paid workers in India. While 17 million people say they want to get a new credit card in the next year (this includes both people who already have at least one card and those who do not), only 1.47% or 4.31 million people currently have at least one card
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