Sensex to hit 22000

The stock market barometer Sensex is set to touch 22,000-mark by December from the present 16,400 levels, despite a decline in the overall business confidence, a JP Morgan Asset Management survey said.

Among the eight cities where the survey was carried out, the investors in the nation's financial capital are the most optimistic as they expect the bellwether Sensex to trade between 20,000 and 22,000 by the end of the year, the survey found.

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Fund Manager Poll - Sensex Predictions

Fund Manager Poll - Sensex Predictions

Sensex plunges more than 500 pts for the week

The Sensex plunged to 53%, falling to four digits for the first time in more than two years on concerns of a sharp global economic slowdown and sluggish corporate earning. Bearish sentiment in global markets and heavy selling by FIIs drove many blue chips to all- time lows.

In nine months after hitting its all-time peak of 21,206.77 on January 10, 2008, the index dipped below 10,000 in more than two years. It had taken 21 months for the Sensex to touch the 20,000 level from the 10,000 level.

A series of measures announced by the government and the Reserve Bank of India failed to check rising capital outflow by foreign funds. Even inflation numbers did not helped.

The wholesale price index (WPI) Inflation declined further to 11.44% for the week ended Oct. 4, 2008, as compared to 11.80% in the week before due to moderation in the prices of essential commodities and also on account of falling crude oil prices. Government`s fiscal and monetary measures have helped to moderate the rising prices.

In an effort to pump liquidity into the global crisis stricken market, the Reserve Bank of India (RBI) decided to slash Cash Reserve Ratio (CRR) further by 100 basis points to 6.5% from the current level of 7.5%. This cut in CRR was made to inject additional liquidity into the system of the order of Rs 400 billion.

The 30 share index, Sensex plunged 552.5 points, or 5.25%, to 9,975.35 in the week ended Oct. 17, 2008. On the other hand, the broad based NSE Nifty plunged 205.6 points, or 6.27%, to 3,074.35 in the same period.

Mid-cap stocks dropped 131.16 points, or 3.57%, to 3,544.84 in the week. While small-cap shares plunged 187.59 points, or 4.31%, to 4,167.86 during the week.

Major gainers over the week in the sectoral indices were Realty which gained 0.07%, FMCG rose (0.08%), HC climbed (0.13%), IT went up (1.82%), and TECk rose (2.08%).

Among major losers in the sectoral indices over the week, Metal dropped 11.32%, Oil & Gas fell 10.9%, Capital Goods lost 9.29%, Power declined 7.7%, and PSU went down 5.43%.

Results:

Satyam, global consulting and IT services company, registered a substantial gain in consolidated net profit in the quarter ended September 2008. During the quarter, the profit of the company climbed 41.98% to Rs 5,808.50 million from Rs 4,090.90 million in the same quarter previous year. Consolidated total income for the quarter rose 35.31% to Rs 28,988.70 million compared with Rs 21,422.60 million in the prior year period.

NIIT Technologies, provider of services in application development on consolidated basis reported a rise of 7% on year on year (Y-o-Y) basis for the quarter ended September 2008. The net profit for the quarter stood at Rs. 367 million as compared to Rs 344 million in the previous year`s same quarter. The revenues were Rs 2587 million as against Rs 2,299 million for quarter ended September 2007, a growth of 13% on Y-o-Y basis.

Biocon, integrated healthcare company delivering biopharmaceutical solutions, registered a sharp fall of 53.64% in the consolidated net profit in the quarter ended September 2008. During the quarter, the profit of the company climbed 32.25% to Rs 250.20 million from Rs 539.70 million in the same quarter previous year. Consolidated total income for the quarter jumped 63.17% to Rs 4,577.30 million compared with the prior year period.

Larsen & Toubro (L&T), India`s largest engineering and construction conglomerate, registered a substantial rise in its standalone net profit for the quarter ended September 2008 driven by strong sales growth. During the quarter, the profit of the company climbed 32.25% to Rs 4,602.60 million from Rs 3,480.20 million in the same quarter previous year. Total income for the quarter jumped 41.99% to Rs 78,422.60 million, when compared with the prior year period.

Sensex bounces back from 2 year lows

The key benchmark indices snapped last three days losses to post decent gains today, 30 September 2008. Sensex rose 264.58 points. The barometer index had lost 1,096.77 points or 8% in the past three trading sessions to 13,102.18 on Monday, 29 September 2008, from a recent high of 13,692.52 hit on 24 September 2008

Expectations that a revised rescue package for the US financial sector would be put forward quickly by the US administration, triggered a recovery on the domestic bourses today, 30 September 2008, after an initial sharp fall that pushed Sensex to 2-year low. The US House of Representatives on Monday, 29 September 2008, unexpectedly rejected a plan to buy toxic assets from struggling banks that had been designed to revitalise strained lending markets. US stock futures were trading higher. Nasdaq futures were up 32.25 points while Dow Jones futures gained 211 points.

Banking stocks climbed. Index pivotal ICICI Bank rose more than 8%, Tata Consultancy Services rose close to 7%. Bharat Heavy Electricals and Bharti Airtel rose more than 5% each.

Finance minister P Chidambaram today said Indian banks are well capitalised and regulated. He further added that foreign institutional investors are not selling all the time.

European markets were trading mixed. France’s CAC 40 and UK’s FTSE 100 were up by between 0.02% to 0.16%. Germany’s DAX was down 0.89%.

The Securities & Exchange Board of India (Sebi) chairman C B Bhave today, 30 September 2008, said he did not have concerns that institutional investors were short-selling stocks and added that no change in the rules governing short selling was expected. The market surveillance system is already in place, Bhave said.

The rejection of the US bailout plan has heightened concerns that more banks will fail and global credit-losses will widen, leading to a global slowdown. The Dow Jones industrial average on Monday, 29 September 2008, posted its largest point decline ever on Monday, and its biggest daily percentage slide since the 1987 stock market crash.

Adding to the woes were troubles in Europe, where authorities were scrambling to prop up a slew of banks. On Tuesday, 30 September 2008, the Belgian-French financial services group Dexia got a 6.4 billion euro ($9.18 billion) capital boost from public shareholders to help it fight the global credit crisis. Ireland also offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets.

Meanwhile, global central banks on Tuesday, 30 September 2008, more than doubled the amount of dollar funding to $620 billion, but the move showed no signs of thawing the freeze in money markets where banks are hoarding cash and bracing for more trouble ahead in the deepening year-long credit crisis.

The BSE 30-share Sensex jumped 264.58 points or 2.1% to 12,860.43. The index shed 442.2 points at the day's low of 12,153.55, hit in early trade, its lowest level in two years. The Sensex rose 399.45 points at day’s high of 15,995.20 hit in mid-afternoon trade.

The S&P CNX Nifty was up 71.15 points or 1.85% to 3,921.20. Nifty hit a low of 3,715.05 in early trade, its lowest level in 17 months.

The BSE Sensex is down 7,426.56 points or 36.6% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 8,346.34 points or 39.35% below its all-time high of 21,206.77 struck on 10 January 2008.

The BSE clocked a turnover of Rs 5,164 crore today, 30 September 2008 as compared to a turnover of Rs 4,594.16 on 29 September 2008.

Nifty October 2008 futures were at 3923.15, at a premium of 1.95 points as compared to spot closing of 3921.20. NSE's futures & options (F&O) segment turnover was Rs 56,549.63 crore, which was higher than Rs 55,905.71 crore on Monday, 29 September 2008.

The BSE Mid-Cap index was up 1.46% at 4,798.29 and the BSE Small-Cap index was up 0.44% at 5,577.47.

BSE Bankex (up 4.92% to 6,478.85), BSE Capital Goods index (up 3.02% to 10,581.13), BSE Realty index (up 2.96% to 3,508.77), BSE Teck index (up 2.24% to 2,545.91) outperformed Sensex.

BSE Metal index (down 1.66% to 8,992.06), BSE FMCG index (down 0.86% to 2,160.76), BSE HealthCare index (up 0.58% to 3,672.18), BSE IT index (up 1.22% to 3,095.08), BSE Oil & Gas index (up 1.28% to 9,039.28), BSE Auto index (up 1.4% to 3,674.98), BSE Power index (up 1.58% to 2,260.27), BSE PSU index (up 1.62% to 6,246.03) and BSE Consumer Durables index (up 1.98% to 2,929.18) underperformed Sensex.

The market breadth was weak on BSE with 1,277 shares advancing as compared to 1,316 that declined. 79 shares remained unchanged.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries rose 0.8% to Rs 1,946.35. The stock recovered from the session’s low of Rs 1,862.60.

Tata Consultancy Services (up 6.96% to Rs 662.75), Bharat Heavy Electricals (up 5.07% to Rs 1,586), Bharti Airtel (up 5.14% to Rs 785.05), Maruti Suzuki India (up 3.73% to Rs 687.15), Larsen & Toubro (up 4.16% to Rs 2442.90), HDFC (up 5.33% to Rs 2,141.15), Jaiprakash Associates (up 4.12% to Rs 111.10), edged higher from the Sensex pack.

Ranbaxy Laboratories (down 3.17% to Rs 247.75), Tata Motors (down 3.27% to Rs 344.20), Tata Steel (down 4.43% to Rs 425.60), Grasim Industries (down 2.58% to Rs 1,687.60), Sterlite Industries (down 1.02% to Rs 428.45), edged lower from the Sensex pack.

India’s largest private sector bank in terms of net profit ICICI Bank rose 8.42% to Rs 534.85. The stock recovered from the session’s low of Rs 458. ICICI Bank today said rumours about its financial strength were baseless and malicious. The bank said it has a very strong capital position. In a statement, chief executive K.V. Kamath said ICICI's banking and non-banking units were well capitalised and the impact of the current market conditions on its investment portfolio would not pose any challenge to its capital position.

The stock had slumped 12.11% to Rs 493.30 yesterday despite the bank clarifying that 98% of ICICI Bank UK PLC's non-India investment book is rated investment grade and above. ICICI Bank UK PLC has zero exposure to US subprime-credit, it had said.

India’s largest commercial bank State Bank of India rose 4.32% to Rs 1,465.65. It recovered from the session’s low of Rs 1,353. India’s second largest private sector bank by net profit, HDFC Bank, rose 2.46% to Rs 1,229. The stock recovered from session’s low of Rs 1,125.

Reliance Natural Resources clocked the highest volume of 2.33 crore shares on BSE. IFCI (1.27 crore shares), Suzlon Energy (89.37 lakh shares), Chambal Fertilisers and Chemicals (80.36 lakh shares) and Ispat Industries (72.22 lakh shares) were the other volume toppers in that order.

Reliance Capital clocked the highest turnover of Rs 405.22 crore on BSE. Reliance Industries (Rs 356.18 crore), ICICI Bank (Rs 336.95 crore), Larsen & Toubro (Rs 206.55 crore) and Axis Bank (Rs 203.49 crore) were the other turnover toppers in that order.

US stocks slumped on Monday, 29 September 2008 as the House of Representatives rejected the $700 billion bailout plan to rescue the financial system. The S&P 500 index tumbled the most since the 1987 crash and the Dow Jones saw it's biggest single day point fall ever. The Dow Jones Industrial Average plunged 777.68 points, or 6.98%, to 10,365.45. The S&P 500 index fell 106.62 points, or nearly 9%, to 1,106.39. The Nasdaq Composite index declined 199.61 points, more than 9%, to 1,983.73.

Most Asian markets pared initial sharp fall triggered by overnight setback in US stocks. Hong Kong's Hang Seng rose 0.76%. Japan's Nikkei, Singapore's Straits Times, South Korea's Seoul Composite and Taiwan's Taiwan Weighted fell between 0.57% to 4.12%.

US light crude for November 2008 delivery fell 59 cents to $95.78 a barrel today, 30 September 2008 plunging $10.52 its second biggest fall since 23 April 2003, on the previous day.

New Lows for Sensex

New Lows for Sensex

Sensex extends loss

India`s benchmark index, Sensex extended its losses for the week, due to heavy selling by overseas investors and discouraging global markets. The 30-share index fell on concern the soaring inflation may force the central bank to tighten monetary policy, while the soaring oil prices weighing down auto makers. Jaiprakash Associates, Tata Motors, and ICICI Bank led the fall.

The 30-share index lost 234.07 points, or 1.40%, to 16,415.57 in the week ended May 30, whereas the broad based NSE Nifty declined 76.45 points, or 1.54%, to 4,870.10 in the same period.

However, Sensex has shown some signs of recovery on Friday by gaining 99.31 points, or 0.61% to settle at 16,415.57, while the broad-based Nifty 34.80 points, or 0.72% to end at 4,870.10.

Broad-based rally in the market was led by metal, consumer durable, and IT shares.

BSE mid-caps and small-caps declined 2.54% and 4.51% respectively over the week.

The whole price index, inflation climbed to 8.1% for the week ended May 17, as compared with 7.82% in the previous week, fuelled by high prices of all essential commodities.

Tata Motors fell 9.56% over the week after the India`s largest automobile company announced it will raise Rs 72 billion via Rights issues to fund the acquisition of Jaguar.

Leading utility vehicles maker, Mahindra & Mahindra slipped 9.11% during the week after the company posted lower than forecasted fourth quarter earnings which missed analysts estimate.

However, Larsen & Toubro rallied 4.80% after the engineering and construction giant pleased investors by announcing bonus issue of shares, dividend and excellent financial performance, which beaten analysts forecast.

Indian Oil Corporation, the nation`s biggest oil marketing company, posted net loss of Rs 4.14 billion due to soaring crude oil prices and its inability to pass on the same to the end users.

The government is likely to announce the fuel price hike in next couple of days to rescue oil marketing companies.

CLSA - India not overvalued

CLSA, the Asia-brokerage arm of French lender Credit Agricole, said Indian stocks were not overvalued due to strong economic fundamentals and relatively low political risk, especially compared with its neighbours. But slow-paced infrastructure development and possible unstable coalition politics were risks ahead for India, Rob Morrison, chairman and chief executive officer of CLSA, told media in an interview on Thursday.

"India does not look over-valued. It looks very attractive as against the Chinese companies ... When we look at Indian stocks, the prices are much more attractive," he said.

Helped by foreign inflows India's main 30-share BSE index has risen 43.5 per cent this year to Thursday's close, sparking fears stocks were now overvalued.

Foreigners have so far poured in $16.8 billion in 2007, already higher than a record $10.7 billion in 2005. India has a stock price ratio of around 19 times earnings, compared with a ratio of 50-60 times earnings in China.

Morrison said Indian earnings growth in the second quarter was still high at 25-27 percent, and returns on assets were at 25 percent. He said CLSA saw investment opportunities in many sectors in India, including property, power companies and consumer banking.

In October, India's stock market regulator tightened investment rules for unregistered foreigners, clamping down on issuance of indirect investment notes - so-called participatory notes (P-notes) - to stem inflows of anonymous money.

Morrison said he expected the curbs to lower liquidity levels in the short term, but he saw the move as positive in the medium term by making investment in stocks more transparent. CLSA expected to increase private equity investment in Asia to $3 billion in 2008 from $1.8 billion this year.

India currently accounts from some $100 million in CLSA's private equity investments but the company wants that to rise. CLSA plans to renew a two-year contract with the merchant banking arm of leading lender State Bank of India, he said.

Morrison said he feared an asset bubble in Asia and a knock-on effect from a likely US economic downturn, but added India was better placed than many Asian nations to survive these problems because it relied more on domestic demand than exports.

POLITICAL WORRIES?

Indian stocks were briefly hit this year by political uncertainty over a nuclear deal with the United States that was opposed by the government's communist party allies.

The crisis threatened snap elections. Violent protests by poor farmers over industrial development plans, the closure of large retail stores in north India after demonstrations and go slow on the nuclear deal did not mean there was a wider backlash against reforms, he said.

But unstable coalition politics were a risk, especially as India needs infrastructure and education reforms if bottlenecks are not to shackle the booming economy. "I think it (coalition politics) does slow reforms," he said.

But he said India was still stable relative to its neighbours like Thailand and Pakistan. "When a government is elected in India it stays," he said. N Krishnan, head of research for CLSA India said that political uncertainity this year had weakened the government's ability to implement reforms.

"We don't see a dramatic reverse of economic reform but don't want an extended period of political uncertainty," he said. "With infrastructure, there isn't too much room for a delay."

Punting on future gains

Each bull market is based on its internal logic, one that seeks to explain the seemingly incomprehensible — a vertiginous rise of the markets. So the 1992 bull run had Harshad Mehta’s replacement cost theory. In 2000, Ketan Parekh spoke about the new economy and how it would cast aside the old order. This time, the bull phenomenon has a new logical framework, the esoteric-sounding ‘embedded value.’

This concept has been used to justify a rise in stock prices even as the fundamentals of the Indian corporate sector — operating margins, cash flow — are looking weaker than a year ago. So, is the market missing the woods of the fundamentals for the trees of “hazy” future gains?

Consider SBI, Reliance Industries and Larsen & Toubro. Over the past three months, these companies have seen their stock prices move up by around 50%. The reason for this sudden increase has been associated with the fact that these companies have wholly-owned subsidiaries that will contribute to the cash flows of the company in the near future and thus, need to be valued in the stock price.

A theory for the excesses?

Brokers have given a thumbs-up to the theory that they feel can explain current valuations of the Indian stock market. The theory has been gaining currency for the past two years, but it is only in the past six months that it has been quoted widely to explain the massive rise in certain stocks.

So much so that in August 2007, brokers and analysts believed the Sensex still had an upside of 20% on account of embedded value in certain stocks, which had not been reflected in the stock price. By the beginning of November, the market had moved up by 29% and had exhausted almost all of that value.

That, however, was not the end of the story. According to research reports, more than 20 stocks that are a part of the Sensex still have upsides that are not noticed by the market. Most reports are bullish on large cap stocks like ONGC, Tata Motors and SBI and believe there is still an upside for these stocks in a market that is hovering around 20,000.

Embedded or embattled?

Simply explained, embedded value is the market putting a valuation to earnings that are somewhat visible but may not be completely evaluated as they do not form the main aspect of the company’s business. Broking houses in India are seeing embedded value in many stocks.

Bharti Airtel for its towers, Bajaj Auto for insurance, ITC for hotels and paper — these are some of the companies that have assets or subsidiaries that are not valued in the mainline assets. The earnings are fairly visible to analysts or the markets and some amount of value can be attached to their businesses. The market, though, is now trying to attach embedded value to all companies — whether their earnings are visible or not.

Embedded value is calculated by doing a sum of the parts (SOTP) valuation — the stock price is divided into different businesses to arrive at valuations. While fund managers agree that the SOTP methodology itself is not a problem, the way it has been applied is. This happens when analysts try to value subsidiaries that will take a long time to show cash flows into present values of the stock price.

“The sum of the parts method should be used for understanding valuations as of today and not of the future. It has to do with today’s real numbers... If analysts are using embedded value to calculate values of businesses where earnings are not visible, then this becomes an exercise in fantasy. Embedded value is not about the future, but is about the present and those who are valuing the invisible future in stock prices have not understood this concept,” says Shankar Sharma of First Global.

The runaway value

Take, for example, Reliance. A research report based on August 1 prices stated that Reliance Industries had an upside of 25% when the stock price traded at 1,798. At that point in time, the valuation of the retail business worked out to Rs 80, which was constant for some time.

Much of the change in stock price was taking place due to the increasing value attached to the exploration and production side of the business. In the sum of the parts calculation of the Reliance stock price, the value of exploration and production had gone up by 135% in less than seven months and was at Rs 719 at the end of June 2007.

All broking firms that have brought out reports on embedded value use the SOTP method for companies whose subsidiaries will take a long time to show any business.

In October 2007, another broking house released a report on Reliance Industries where the E&P business was valued at Rs 745 and the retail business at Rs 182. Surprisingly, the retail business had a consensus value of Rs 80 in August 2007, which jumped to Rs 182 in a span of only three months, without any material change in business prospects.

According to the research report, the reason is associated with the fact that Reliance Industries has invested Rs 2,000 crore during the quarter into Reliance Retail and the “loyal customer base” has crossed the 1.5 million-mark. But the link between this and the cash-generation capabilities of the business is at the moment not very clear. After all, it’s cash the market values and not market share.

But Reliance Retail is not alone. State Bank of India is experiencing something similar. Analysts feel the AMC and insurance arm of SBI need to be reflected in the bank’s stock price. Insurance is a business where companies sell products for a long time before they actually start showing cash flows. But analysts feel the trick lies in grabbing the market share as this ensures future profits.

Based on this logic, both ICICI and SBI carry a part value of their insurance and AMC business in their stock price. The market feels the stock price should reflect the values of these businesses which are wholly owned subsidiaries. In August, the SOTP upside associated with SBI was around 44% when the price was at Rs 1,548. Today, the stock is up at Rs 2,237, capturing the SOTP valuations.

For most banks, their insurance subsidiaries are yet to have any impact in terms of profitability. Given the fact that some are gaining market share, it is important to see how relevant these market shares will be in terms of profitability. Tridib Pathak, CIO of Lotus Mutual fund considers embedded value only if the broader certainity of the business and cash flows are visible.

“People tend to go overboard. During the bull market phases, all aspects of the business get considered and during the bear market phase, even the main activity of the company is ignored by the market and stock prices lag behind. It is human behaviour,” he says.

A 'model' explanation

Optimistic research heads and analysts are running their spreadsheets again to rerate businesses. They believe many companies have changed strategies and there is an improvement in business — as a result, there should be a change in their embedded values as well. The trouble is, ‘embedded value’ is a broad concept. In many cases, even the simple revaluation of land gets carried forward in the stock price. Companies like Hindustan Unilever, which have undervalued real estates, are also getting rerated.

Shriram Iyer, head of research at Edelweiss Capital, which has worked on a report on embedded value, says as far as their report was concerned, the stocks achieved the target price mentioned therein. He feels that in a dynamic market, he will have to revisit the report to see if anything has changed for companies to revise their valuations in terms of their sum of total parts of businesses. But he agrees that barring a few exceptions, there may be no point in looking at embedded values or SOTP when the market is hovering at the 20,000-mark.

All this is reminiscent of the way markets had given internet companies large valuations in 2000. Back then, the revenues never materialised and stock prices collapsed. But then, these aren’t like internet companies. “The big problem today is that many companies who are ‘embedded value’ stars have real revenues in other businesses and hence, it is that much harder to disagree with valuation of loss-making subsidiaries,” says the India head of a multi-strategy fund.

Only visible earnings matter

Even if we agree that the business of wholly-owned subsidiaries should be valued into the stock price of the company, the fact remains that in many cases, the cash flows from these subsidiaries are not clear.

For the value of subsidiaries to be reflected in the stock price, the company should have made plans or announced the strategic sale of these assets; or there is an IPO or even demerger of these assets, and the subsidiary has a certainity of business and cash flows. When such things are not in the news, the value of these subsidiaries becomes at most speculative.

“Analyst reports clearly state that the main line businesses are expected to grow at 17-18% this financial year. That is fine. But the valuation of the subsidiaries into the stock prices and their growth rate is humongous.

Sometimes the growth rates for the subsidiaries are more than 150%. We understand the main businesses, and have no argument against the valuation of subsidiaries; thus, we accept whatever analysts tell us,” says a fund manager who does not agree with the sum of total part of stock prices or the embedded values in stock prices.

He believes these are concepts used in insurance, and there are people working overtime to apply the theory to stock prices. But Mr Iyer feels this approach to valuing companies is credible as significant value exists in balance sheets which is not near-term earnings accretive. “Some assets need to be valued separately to arrive at a fair price of the stock. It is a valuation tool and needs to be revisited all the time,” he says.

Via Economic Times

Sensex ends up 250 pts

A fag-end buying interest in heavy weight stocks, especially banking sector, helped the BSE benchmark Sensex wipe off early losses and close over 251 points higher on Friday.

The Sensex, which commenced the day lower by 446 points down, bounced back to close with a gain of 251.88 points at 19,976.23 after shying away from the intra-day peak of over 20,000 points. It touched the day's high of 20,025.63 points and a low of 19,2 55.77, showing a gap of nearly 770 points.

Similarly, the wide-based NSE index Nifty surged 59.95 points at 5,926.40, after touching the day's high of 5,944.75 and a low of 5,714.25 points.

The market remained weak in early trade in line with a weakening global trend but recovered on emergence of buying by funds following reports of a decline in inflation rate.

The late buying was more confined to sectors such as banking, capital goods, metal and public sector undertaking. Banking index gained 389.84 points at 11,241.53 followed by capital goods index by 245.22 points at 20,386.41. PSU index rose by 227.97 poin ts at 9,930.27 and metal index by 111.12 points at 17,693.66

Market opens Circuit Down

Nifty hits 10% down circuit

Sensex hits circuit down

EXPECTED! Don't PaNIC :)

17000 ....

Sensex crosses 17000 from 16000 in 6 days !

Biggest-ever rally, Sensex ends above 16K

The Sensex opened with a bang at a new all-time high of 15,941 - up 272 points from its previous close - on the back of positive global cues.

The US Fed, on Tuesday, cut its benchmark rate by 50 basis points, for the first time in four years, to 4.75%. A move that resulted in a strong rally across the globe.

The buying momentum was so strong that the Sensex soon crossed a new landmark of 16,000, and went on to extend gains as the day progressed. The index hit an all-time, intra-day high at 16,335 - up 666 points from the previous close.

The Sensex finally ended with its biggest-ever single-day gain of 654 points at 16,323.

The index took only 52 trading sessions to move from 15,000 to 16,000.

While the BSE Mid-cap index advanced nearly 2% to 7117, the Small-cap index added 1% to 8871.

The BSE Realty index surged 5.8% to 8465. The Bankex and Oil & Gas indices rallied nearly 5% each to 8691 and 8924, respectively.

The market breadth was positive - out of 2,850 stocks traded, 1,541 advanced, 1,233 declined and 76 were unchanged.

BIG MOVERS...

All the Sensex stocks ended with gains today.

HDFC and HDFC Bank zoomed nearly 8% each to Rs 2,354 and Rs 1,326, respectively.

Bharti Airtel soared 6.5% to Rs 886. ONGC surged 6% to Rs 902, and Maruti was up 5.8% at Rs 926.

Reliance rallied 5.5% to Rs 2,173. Reliance Communications and ICICI Bank gained 5% each at Rs 564 and Rs 970, respectively.

Tata Steel and Bajaj Auto moved up 4.7% each to Rs 745 and Rs 2,512, respectively.

While Mahindra & Mahindra and SBI advanced 4.5% each to Rs 741 and Rs 1,770, respectively, Tata Motors and ITC added 3.7% each to Rs 722 and Rs 187, respectively.

Hindalco and Infosys were up 3% each at Rs 159 and Rs 1,853, respectively. ACC surged 2.7% to Rs 1,153.

MOST ACTIVE COUNTERS

DLF topped the value chart with a turnover of Rs 255.70 crore followed by Reliance (Rs 227 crore), ICICI Bank (Rs 148.70 crore), Reliance Capital (Rs 137.65 crore) and Renuka Sugar (Rs 127.80 crore).

IKF Technologies led the volume chart with trades of around 1.85 crore followed by Ispat Industries (1.82 crore), Balrampur Chini (1.08 crore), IFCI (89.70 lakh) and Himachal Futuristic (87 lakh).

SENSEX ZOOMS PAST 16,000….
Landmark	Strike Date	No of Days	Close	Gain/Loss
16,000	19-Sep-07	52	16,323	654
15,000	06-Jul-07	144	14,964	102
14,000	05-Dec-06	26	13,938	63
13,000	30-Oct-06	135	13,024	117
12,000	20-Apr-06	19	12,040	144
11,000	21-Mar-06	29	10,905	-36
10,000	06-Feb-06	48	9980	237
(Gain/Loss is the net change over previous day)

Sensex - 16000 :-)

Cheers - Party Party Party!

Sensex could face selling pressure

The markets could start the week on a positive note, with the Sensex expected to climb to around 15,380-15,400 and the Nifty to around 4,480-4,500. However, we expect selling pressure to set in at higher levels, and this could push down the major indices to levels of around 14,900/4,300. These levels could act as strong support as they did during the major sell off last week.

Technical Parameters: In the weekly charts of the week before last (week ended July 27) there was a downward bar reversal. This pattern at the top is a bearish sign and means that the ongoing rally can be halted and some correction is likely to occur in the subsequent period. This was also accompanied by weakness displayed by the oscillators (RSI).

The RSI (relative strength index) also displayed negative divergence, which means that prices continue to make higher tops, but the corresponding oscillator levels make lower tops. This occurring in the overbought zone indicates that selling pressure is likely in the coming days. Last week, there was heavy selling, which had pulled down the indices from their highs of 15,569/4,534.

However, they have taken strong support at the levels of 14,900/4,300. Further weakness is likely to continue only when these levels are broken and then the next support is at around 14,680-14,700/4,280-4,300 levels. A close look at the sectoral indices suggests that most of them, despite showing a weak trend, are near their support levels and are likely to bounce back from the current levels.

This is the reason why we see the markets bouncing upwards for the initial part of the week. The weakest among the indices are BSE Auto/BSE IT and BSE Healthcare and the ones displaying strength are BSE FMCG and BSE Bankex.

Conclusion: To conclude, the market in the coming week or two may witness a move in the range of 14,680-15,450/4,300-4,530. For long-term investors any correction around 14,700 to 14,800 will be an excellent opportunity to accumulate good stocks as our long-term (12-to-15 months) target for the indices is around 16,500-16,750/4,700-4,780. However, short-term investors may use any rally to book profits and wait for an opportunity to buy back at lower levels. Directional traders can sell short around 15,400-15,450 levels with a strict stop-loss of 15,600 for a target of around 14,700.

FIIs exiting Sensex Stocks

Are foreign institutional investors beginning to lose interest in frontline companies? Though it may be early to draw an inference , latest shareholding data in 8 out of the 30 Sensex companies show a decline in FII holdings.

These companies include Gujarat Ambuja Cements (GACL), HDFC Bank, Hindalco, HDFC, Infosys Technologies, Larsen & Toubro, Maruti Udyog and Reliance Communications. “Foreign funds have been actively churning their portfolios in the past couple of quarters as outlook on many sectors has changed suddenly,” said an official at a foreign brokerage house. “Also, fund managers are restricting their bets to companies where they see a reasonably good chance of making money, as only few frontline companies have been participating in the rally,” he added.

In most of these companies, foreign fund houses have been trimming their holdings in the past two quarters. The fall in FII holdings in companies like Ambuja Cements, Hindalco, Maruti Udyog and HDFC Bank is significant, while that in Infosys Technologies, Reliance Communications , L&T and Housing Development Finance Corporation is less.

Market observers are not surprised that overseas fund managers have pared their exposure to stocks like Ambuja, Hindalco and Maruti. The proposal in the Union Budget to levy a dual excise duty on cement in a bid to tame prices, soured sentiment towards the sector. And while cement shares have been rising of late, they are still off highs seen in January this year. Hindalco’s expensive acquisition of Novalis did not go down well with the market, resulting in many investors exiting the stock. Growth in automobile sales has been slipping over the past few months, prompting a sour outlook for stocks in that sector.

A fall in FII holdings in L&T during the April-June quarter is a bit surprising . The stock has been the secondlargest contributor to the 1330-point rally in the Sensex since the beginning of 2007. Also, the stock enjoys favourable ratings by leading brokerage houses, given the bullish view on the capital goods sector. This is evident from the 65% rise in the stock price since the beginning of the year. This surge, without much support from foreign funds, shows that when a new set of overseas players bought into the stock, another set of existing FII shareholders have moved out.

A similar trend was witnessed in the case of HDFC. The stock has been among the best performers in the Sensex pack so far in 2007, despite many foreign funds pulling out.

Indian shares close above 15,000 for first time

India's benchmark share index hit a sixth straight record high on Monday and closed above 15,000 for the first time, buoyed by gains in software services and telecoms stocks on expectations of good quarterly results.

Export-driven software services firms such as Infosys Technologies and Tata Consultancy Services extended gains even as some analysts expected them to report their earnings were hit by the rupee's rise of almost 7 percent against the dollar in the June quarter.

"There is a feeling that the overall business visibility is still high," said Sandeep Neema, a fund manager with JM Financial Mutual Fund.

"Guidance in dollar terms could remain the same or could be upped in some cases, and people are not expecting any significant further appreciation in rupee for the time being at least."

The 30-share BSE index ended up 0.55 percent, or 81.61 points, at a record close of 15,045.73, after rising to a record high of 15,085.22 during trade. The index has risen 2.7

percent so far this month, hitting a record high each day.

More gains were expected. Citigroup expects the index to

reach 16,000 by year end, and 18,400 at the end of 2008.

Citigroup said it was "overweight" on banks, capital goods, information technology services, telecom and media stocks, and was "underweight" on energy, materials, pharmaceuticals and utilities.

Second-ranked software exporter Infosys, which kicks off the results season for the sector on Wednesday, rose 1.1 percent, and sector leader Tata Consultancy rose 1.5 percent. Both stocks posted their highest closes since June 15.

Infosys is forecast to report a rise of more than 21 percent rise in net profit for the June quarter, a Reuters poll showed.

Engineering and construction firm Larsen & Toubro Ltd., which reports its results on July 19, hit a record high during trade before closing up 2.2 percent. The stock has gained 21 percent since the end of May.

Shares in top mobile firm Bharti Airtel Ltd. gained 2 percent on expectations strong subscriber growth would help it post a better-than-expected rise in earnings, traders said.

Twenty-one of the benchmark index's component stocks rose. In the broader market, 1,626 gainers beat 1,036 losers on volume of 267.6 million shares.

The 50-share NSE index ended up 0.79 percent at a record close of 4,419.40, after hitting a lifetime high of 4,427.55 during the day.

Elsewhere in the region, Karachi's 100-share index added 0.25 percent to a record close of 14,020.90, after hitting a lifetime high of 14,079.26. But Colombo's All-Share index ended 0.52 percent lower at 2,510.92, its lowest close since May 30.

STOCKS THAT MOVED

* Shares in construction firm Roman Tarmat Ltd. closed at 319.85 rupees on their debut, after listing at 295 rupees, a 69 percent premium to their issue price of 175.

* Shares in Yash Birla group firms Zenith Brila, Birla Kennametal and Birla Power Solution surged after reports that the group planned a merger of the firms, as well acquisitions, investments and the sale of non-core units to steamline operations and focus on textiles, autoparts, lifestyle and power. Shares in Zenith Birla rose 20 percent, Birla Kennametal 5 percent and Birla Power 4.2 percent.

MAIN TOP THREE BY VOLUME

* IFCI Ltd. on 17.3 million shares

* Roman Tarmat Ltd. on 8.2 million shares

* Reliance Natural Resources Ltd on 4.2 million shares

Bulls have tough times ahead

The bull market does not end till the last bear has given up hope of a reversal in trend—that’s an old saying among market players. Going purely by this contrarian indicator, bulls can sit pretty for the time being.

Though bruised from repeated defeats over the past many months, bears have not given up hope yet and are looking for a suitable opportunity to strike back.

But if one were to look at some key indicators at hand, bulls are not going to find it easy defending Point 15K, which they had captured on Friday.

Firstly, valuations. At a one-year forward price to earning ratio of roughly 20, Indian equities do not rank among the cheapest in the emerging markets universe.

The high P/E can be justified to the extent that India offers a wide array of sectors to choose from, a liquid market, an effective regulatory framework and good corporate governance. But the tribe of analysts voicing concern about the Indian market beginning to look overvalued is growing.

The high base effect appears to be catching up with India Inc. Brokerages expect the cumulative earnings of Sensex companies for the April-June quarter to grow around 19%, compared with the same period last year. This is well below the growth estimates being flashed a year or two ago. For next year, analysts have toned down growth projections further.

Look carefully through the pile of research reports churned out by broking firms daily. The number of earnings and rating downgrades—something very rare till a year ago—is on the rise.

Already, players are eyeing the Infosys Technologies guidance on Wednesday uneasily. Tech stocks have been going through a rough phase because of the rising rupee, and Infy’s guidance may hold the key to the short-term trend in the sector.

Loan growth—a key indicator of demand in the economy—is also showing signs of cooling off, thanks to RBI’s efforts to rein in inflation by hiking interest rates. Loans to corporates and individuals dipped by Rs 30,532 crore between April and June 22. Even discounting the fact that corporates may be borrowing from sources other than banks, there is no denying that the average consumer is feeling the heat of rising rates.

So what is the saving grace for the market? Inflation is under control and this has raised hopes that banks may not hike interest rates anytime soon. Most players feel that a correction, if at all it comes, will be sparked by global factors rather than domestic ones. So what is the best strategy under these conditions? Majority of brokerages are advising their clients to follow a stock-specific approach.

Sensex to cross 50,000 mark by 2020

Sensex hitting 50,000 is right now only a serious prediction for Morgan Stanley and a laughable target for others but believe it or not Brazil's 50 share benchmark index 'Bovespa' went past 50,000 mark in May this year.

Sensex crossing 15,000 was also unimaginable two years back but today it is a reality and very close to what former Sebi whole time member Madhukar uttered, predicting that Sensex will cross 16,000 mark also.

After acheiving this record landmark analyst feel that Sensex will cross 25,000 mark by 2010, which big bull Rakesh Jhunjhunwala predicted in 2005 only.

Another brave statement from world's leading investment bank Morgan Stanley predicts Sensex to cross 50,000 mark 12 years from now in 2020. Morgan Stanley's prediction came in February only and they still hold on to what they predicted earlier.

"You just need to factor in India's GDP growth of 8 per cent along with an inflation of 5-6 per cent and the cost of manufacturing and assuming Sensex stocks will grow by 17-18 per cent till 2020, then it will work out to more than what Morgan Stanley has predicted," Angel Broking's CMD, Dinesh Thakkar said.

Also, the Sensex crossing 50,000 mark is in the realm of possibility with Brazil's Sao Paulo Stock Exchange's benchmark index Bovespa hitting 50,000 mark first time ever on May 3 and closing around 55,000 mark last week.

The landmark on the Indian bourses that will now be keenly awaited is NSE Nifty's 5,000 mark which is just 614 points from yesterday's close at 4,384 points.
Sensex with yesterday's close at 14,964 is yet to record its first ever close above 15,000 mark, and when it does it will join an exclusive club of world bourses that currently trade above 15,000.

Besides Bovespa, on Friday Japanese index Nikkei closed at 18,140 and Hong Kong's index Hang Seng closed at 22,000 level.

There are 50 companies listed in the blue-chip Bovespa stock index as compared to 30 companies on the Sensex.

Brazil is a mirror image of India in terms of natural resources and also it has largest number of people living in poverty in all of Latin America.

Still, Brazil's arrival as a global economic power is linked to its vast natural resources like iron ore, offshore oil fields and the country's extensive use of ethanol.

Brazil has also become self-sufficient in energy, ending decades of foreign oil imports.
Like India, Brazil's economy is linked to agriculture, and it's the world's largest exporter of coffee, sugar, cattle, orange juice, and has surpassed the US as the biggest exporter of soybeans in January 2006.

"Sensex is in exuberance right now and it will continue for next few months," Thakkar says.
Meanwhile analysts believe that Bovespa may hit 60,000 mark by end of 2007.

Mutual Funds outperform Sensex

Marketmen may be jubilant about the Sensex touching the 15,000-point milestone, but mutual fund investors are laughing all the way to the bank, thanks to many funds outperforming the key index in the last 12 months.

While the 30-share Sensex has grown about 40% since July 2006, when it was quoting around 10,600 points, 106 funds have given higher returns than the bellwether.
Among the best performing equity funds are Standard Chartered Equity with 79% returns over a year, JM Basic (76%), ICICI Prudential Services (75%), ICICI Infrastructure (63%) and DBS Chola (61%), according to data complied by ValueResearchOnline.

The assets under management of the 32 fund houses in the country have grown 25% to over Rs4 trillion in the first 6 months of the year, the latest data of Association of Mutual Funds in India (Amfi) shows.

“The new levels of the benchmark index show more demand for equities and is a sign of recognition for the strength and potential of Indian economy,” Amfi head A.P. Kurien said.

While a bullish market does not affect the mutual fund industry directly, Kurien said the funds “are pleased that it implies a strong growth potential for the markets.” The Sensex on Friday crossed the historic 15,000 mark to touch an intra-day high of 15,007.22. It, however, ended the day at 14,964.12—which is still a new closing high.

“Investors are happy with the milestone... Some of the funds have performed better than the Sensex of late as growth in the mid-cap has led the rise in blue chips,” ValueResearch CEO Dhirendra Kumar said. Dismissing concerns of a correction after every milestone, Kumar said a slight correction should not bother MF investors as long as the funds remain in the black.

Sensex stocks aren’t more expensive

Current PE multiple of Sensex at 21.5 times (it was over 22 times in May 2006).

Lower PE means investors are not paying more than they did then.

Despite 15000 level, earnings growth has mostly outpaced stock price gains.

Cement, pharma stocks see sharp decline in PE; select IT, banking stocks see expansion.

With the BSE Sensex at the 15000-mark, should you be wary of entering the stock markets at this juncture? No more than you were last May. Two-thirds of the Sensex stocks are today available at price-earnings multiples (PE multiples) that are cheaper than their May 2006 levels.

The current price-earnings multiple of the BSE Sensex is at 21.5 times, lower than the multiple of over 22 times in May 2006 (both based on trailing earnings). Though the Sensex has zoomed by 18 per cent from 12600 to 15000 levels, earnings growth has mostly outpaced stock price gains.

The lower PE multiple indicates that investors buying Sensex stocks today are, in effect, not paying more (in relation to the company’s earnings) than they did in May last year.

Sharp declines

Stocks in the cement, pharmaceutical and FMCG sectors are key ones that have seen a sharp decline in their PE multiples between last May and now. Cement companies such as ACC, Grasim and Ambuja Cements suffered a sharp decline in their PEs, despite a scorching pace of earnings growth in 2006-07.

Expectations of an erosion in the pricing power of cement companies following policy intervention contributed to this trend. Pharma stocks Ranbaxy Labs and Dr Reddy’s Laboratories have also seen a decline in their multiples as stock prices have not kept pace with their strong earnings growth.

The same can be said for stocks such as Hindustan Unilever (HUL) and ITC. HUL now trades at 28 times its FY 07 earnings, down from a multiple of 43 times, a year ago. Market players feel that the already rich valuations for these stocks contributed to their recent underperformance.

Auto stocks

Concerns about a possible slowdown in automobile sales after the series of interest rate hikes seem to have impacted automobile stocks, with stocks such as Tata Motors or Bajaj Auto now trading at lower PE multiples.

While stocks from the cement, FMCG and pharma sectors have turned less expensive, select stocks from the IT and banking space have seen an expansion in their PE multiples over this period.

Wipro, ICICI Bank and Satyam Computer are some of the stocks that are trading at higher valuations than last year.