Intra-day Stock Ideas

NIFTY (4164) RES 4150 SUP 4178

BUY AIRDECCAN (132.3)
SL 128 T 140, 142

BUY ORIENTBANK (229.55)
SL 224 T 238, 240

BUY STERLINBIO (178.50)
SL 174 T 186, 188

SELL IVRCLINFRA (367.80)
@ 370 SL 375 T 359, 356

SELL ZEETELE (260.5)
@ 263 SL 267 T 253, 251

STRATEGY INPUTS FOR THE DAY

HLL, Reliance to be in focus

My interest is in the future because I am going to spend the rest of my life there.

The market seems to be more interested in the immediate future. With the futures and options expiry almost here and a perk up in budget hype, the immediate future becomes even more uncertain. In short, the market may reflect the weather out there - dull and cloudy. Stay light and if you should buy, do it keeping in mind next year's budget, not the one coming up in a few days. The bulls would look to consolidate their hold on the market after last week's carnage. Global cues are limited as the US markets were closed yesterday on account of the Presidents Day. Many Asian markets are shut owing to the Chinese Lunar New Year. The Nikkei in Japan is down ahead of the announcement on interest rates tomorrow. The Bank of Japan begin its two-day meeting today and will declare its decision on Wednesday. Opinion is divided on what the Japanese central bank will do. But looks like the BOJ may choose to keep its benchmark rate steady till further signs emerge on the strength of the world's second-largest economy.

We expect a more stock specific action. HLL will be in action as it announces its fourth quarter and annual results. Reliance Industries is another stock to keep an eye on. Reports say Chevron is likely to pick up a stake in the company's energy exploration and production business. SBI may attract some buying after the banking giant hiked lending and deposit rates. Airlines might gain amid reports that FIIs will be allowed to buy shares from the secondary market outside the 49% sectoral cap on FDI. HPCL is also expected to be in the spotlight. A national daily says steel baron Lakshmi Mittal is to buy a 49% stake in the company's Bhatinda refinery.

HFCL is also likely to rise after a financial daily reported that it is putting its 74% stake in Hindustan Teleprinters on the block. Bombay Rayon Fashions will rally after the RBI approved a hike in investment limit for the FIIs up to 40% of the company's equity share capital. Garnet Construction may gain as the company will tomorrow announce a strategic global marketing alliance.

The poison may appear to be out of the system for the time being. But any new additions or deletions in the budget could change the current health and wealth of the indices for the near term. So, it pays to be safe than sorry.

FIIs were net sellers to the tune of Rs58.1mn (provisional) in the cash segment yesterday. In the F&O segment, they pumped in Rs6.61bn. Foreign funds poured in Rs6.17bn in the cash segment on Thursday, when the Sensex rallied by 345 points. Mutual Funds were net buyers of Rs1.05bn on the same day.

Asian stocks fell from a record this morning. Mitsubishi UFJ Financial Group led Japanese shares lower on concern that the Bank of Japan may keep interest rates unchanged after politicians urged it to support economic growth.

The Morgan Stanley Capital International Asia-Pacific Index lost 0.3% to 146.54 as of 11:28 a.m. in Tokyo. Japan's Nikkei 225 Stock Average lost 0.6% to 17,841.38, while the broader Topix index fell 0.6%.

Markets fell in New Zealand and Australia, and rose in South Korea and the Philippines. Financial markets were closed for the Lunar New Year holiday in China, Hong Kong, Malaysia, Singapore and Taiwan.

European shares reached multiyear highs on Monday. The pan-European Dow Jones Stoxx 600 index advanced 0.4% to 382.26. The French CAC-40 closed up 0.5% at 5,739.90, the German DAX Xetra 30 climbed 0.4% to 6,987.08 and the UK's FTSE 100 gained 0.4% to 6,444.40.

In the emerging markets, the Bovespa in Brazil was up 0.2% at 45,849 while the IPC index in Mexico advanced 0.35% to 28,590.17 and the RTS index in Russia gained 0.4% to 1904.84.

From the Research Desk

Hexaware Technologies Ltd. Result Update for Q4 CY06

Hexaware delivered decent performance in the quarter with revenues growing 6.8% qoq and earnings de-growing 2.7% qoq marred by the impact of sharp rupee appreciation. The Dollar revenue growth of 10.7% qoq was impressive in the quarter. For the full year CY06, revenue and profit growth stood strong at 39.9% and 99% respectively excluding PeopleSoft ISC. Company has entered CY07 with a strong order book of ~US$170mn (for the year) and confidence of doubling its operations over the next 8-10 quarters. FocusFrame integration is running ahead of schedule and is expected to complete by end CY07. Management has issued a guidance of a robust topline growth and subdued bottomline growth in Q1 CY07.

Outlook

Based on the company’s broad guidance for CY07, it is likely to post an EPS of about Rs12.4, which discounts CMP Rs174 at 14x. Being a reasonably large and old mid-cap IT company with good management, the current valuations appear attractive to us. Valuing Hexaware at the higher-end (due to CY ending unlike peers) of the one-year forward peer P/E band of 15-19x, we arrive at a 10-12 month target price of Rs224 representing 29% upside

Market Watch , Insider Info, Trades

Insider Trades:
Larsen & Toubro Limited: Mr. K. Venkataramanan, Whole-time Director has sold in open market 5000 equity shares of Larsen & Toubro Limited on 2nd and 5th February, 2007.

Market Volumes:
The turnover on NSE was down by 28% to Rs77.62. The BSE Bank index was the major gainer and gained 1.48%. BSE Oil & Gas index (up 0.42%), BSE Metal index (up 0.34%) and BSE PSU index (up 0.33%) were among the other major gainers. However, BSE Consumer Durable index lost 1.49%.

Volume Toppers:
Zee News, Redington India, IDBI, Cinemax India, IDFC, GBN, Bajaj Hindusthan, TTML, Hindalco, Aftek Ltd, Unitech, Reliance Communication, Ashok Leyland, Indian Hotels, TV Today, KPIT Cummins, ITC and India Cements.

Upper Circuit Filters:
SSI, Trigyn Tech, Suashish Diamond, Tele Data Informatics, KEW Industries, Swan Mills, Donear Industries, DS Kulkarni, Genus Overseas, KLG Systel, Sahara One, Steel Strips and Swaraj Mazda.

Brokers Recommendation:
Buy - Hexaware from Motilal Oswal with target of Rs220

Long Term Investment
Siemens

Major News Headlines

Aban Offshore ups stake in Sinvest to 97%

Biocon to invest Rs5bn in five years in Vishakhapatnam

Diamond Cables gets large turnkey order

L&T Infotech signs accord with Dassault Systems

Reliance Industries finds more gas in KG basin block

L&T wins $250mn order from Maersk Oil Qatar

Spanco Tele to raise up to Rs1.25bn for expansion

Nucleus Software wins order from United Bank of Africa

Teledata Informatics buys Majority stake in eSys Tech for $105mn

Core Projects to consider stock split on 22nd February

Shopper Stop plans JV with Swiss Nuance Group

Parsvnath wins bid to buy 290,000 Sq Mt of Land at Noida

Suprajit Engineering gets Rs400mn car cables order from Tata Motors

JSW Steel shuts 20% of hot metal capacity after fire

Tata Tea to sell stake in North India Plantation

HOW MARKET FARED

Market may turn choppy

In a lackluster trading session, the markets closed higher led by gains in Reliance Industries and ICICI Bank. Also uncertainty among the investors ahead of the F&O expiry and Budget brought the key indices lower from day’s high. After a impressive recovery on Thursday last week, the markets closed on a quiet note with benchmark Sensex settling at 14402, higher by 47 points and NSE Nifty adding 18 points to close at 4164.

Among the index heavy weights Hindalco, Reliance Energy, Satyam Computer, HDFC Bank witnessed selling pressure, dragging the benchmark index to a low of 14372.07 after posting a robust opening. However, Banking stocks were the star performers of the day, adding over 1.4%. SAIL, ICICI Bank, ABB and TCS were among the notable gainers among the 50 Nifty stocks.

Aban Offshore was in the limelight adding over 8.5% to Rs1950, the company now owns about 97% equity stake in Sinvest ASA after the mandatory open offer for the Norwegian company ended on Feb 16. The scrip touched an intra-day high of Rs1955 and a low of Rs1795 and recorded volumes of over 3,00,000 shares on NSE.

Reliance Industries gained 1% to Rs1420 following reports of gas discovery at KG basin. The scrip touched an intra-day high of Rs1430 and a low of Rs1410 and recorded volumes of over 15,00,000 shares on NSE.

L&T edged lower by 0.2% to Rs1693. The company won order from Maersk Oil Qatar for largest export project worth a quarter of billion dollars for its Block 5 development in Qatar. The scrip touched an intra-day high of Rs1728 and a low of Rs1662 and recorded volumes of over 5,00,000 shares on NSE.

Banking stocks surged smartly led by gains in ICICI Bank on hopes that hike in lending rates would help maintain its profit margins, the scrip surged 3.2% to Rs980 and SBI was up by 0.9% to Rs1132. Among the Mid-Cap stocks Corp Bank, OBC and Canara Bank were among the major gainers.

Capital Good stocks also recorded smart gains. ABB surged over 3% to Rs3919, Jyoti structures spurred by over 4% to Rs178 and Siemens advanced by 3.2% to Rs1198. However, BHEL slipped 0.4% to Rs2376 and BEL was down 2.4% to Rs1685.

Consumer Durable stocks were the major losers as profit booking dragged them down. Titan slipped 2.3% to Rs980, Gitanjali Gems lost 2.5% to Rs238, Videocon Industries was down by 0.5% to Rs449 and Rajesh Exports slipped 3.2% to Rs435.

Sugar stocks were a mixed bag today. Bajaj Hindusthan surged 2.3% to Rs164, Dhampur Sugar was up 0.3% to Rs77 and Sakhti Sugar edged higher 0.3% to Rs75. However, Balrampur Chini lost 3.5% to Rs61 and Renuka Sugar declined nearly by 5% to Rs305

Firm trend may continue

The upturn in the market may continue on strong fund inflows in the last few sessions. However, mixed Asian indices in morning trades may put pressure on the domestic indices. Among the Asian indices, Nikkei has slipped around 0.55% while Kospi and Jakarta are trading with steady gains. Caution should be maintained on account of the prevalence of a intra-day volatility and global crude oil prices trading above $59 a barrel. The Nifty could test higher levels between 4185 and 4200 and may dip around 4150, while the Sensex has a likely support at 14300 and may face resistance at 14480.

Brokers bullish on Tata motors, Birla Corp, India cement

Sharekhan has kept buy rating on Tata motors; with a target of Rs 1075.

SSKI has maintained outperformer rating on Jain irrigation.

Motilal oswal has maintained buy rating on Birla Corp; with a target of Rs 495.

Motilal oswal has maintained buy rating on India cement; with a target of Rs 280.

Karvy upgraded Jubilant Organosys to outperformer rating; with a target of Rs 296.

Anandrathi has kept buy rating on Technocraft Ind; with a target of Rs 150.

Networth has maintained buy rating on Grasim Ind; with a target of Rs 2922.

Anagram - Daily Call

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Emkay - Morning Notes, Chettinad Cement

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IDBI Capital - Global Vectra

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Power Finance Corporation (PFC) Allotment

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Unexpected events - Chetan Parikh

In a great book, "The art of Contrary Thinking", the author, Humphrey B. Neil, recounts events where contrary thinking helped.

“I’m sometimes asked about unexpected (and unsuspected) events of the past, when contrary ruminating might have been useful in mental preparedness and when contrary planning might have saved losses to nations as well as to peoples. Here are a few; many more might be added.

1914	Little general apprehension of war. Newspapers carried scarcely any mention of strained relations prior to mid-July, 1914.	Yet—black headlines soon appeared: Aug. 1—Germany Declares War on Russia Aug. 2—Germany Invades France Aug. 4—Germany Invades Belgium Aug. 5—England Declares War on Germany
A stunned world looked on believing
1916	Sensational rise in stocks of “war babies” and general stockmarket boom expected to continue.	Year-long bear market set in in November, 1916. By December, 1917, market average almost returned full cycle.
1919	Immediate postwar depression generally expected and predicted.	Inflation boom occurred, to be nicknamed the “silk shirt era.”
1926	Fears of another bear market and depression.	“New Era” commenced, with greatest market rise in history.
1929	Permanent plateau of prosperity.	New Era delusions shattered.
1930’s	Economics: We reached the age of “maturity.” World Politics: Why worry about the little paperhanger and his Nazis?	Economic maturity laughable, but Hitler no laughing matter! War in 1939 expected but “it can’t last long.” Hitler “has no money and no powerful armies.”
1940	Hitler could never breach famed French Maginot line; Holland’s dikes would be opened to flood out any invader. The stock market was expected to rise when the invasion occurred on May 10 to 14, 1940.	The “blitzkrieg” overran Belgium, Holland, and into France as fast as the reports carried the news. The western world awoke to the realization that “everybody’s” opinion about Hitler and the Nazi armies was woefully wrong! The market collapsed on the fall of France.
1945-1946	Immediate postwar slump expected, with eight to twelve million to be unemployed.	As in1919, a postwar “replacement” boom made all predictions look silly.
1949	Great Britain would not again devalue the pound, Sir Stafford Cripps so asserting some thirteen times.	September 18, pound devalued to $2.80; currencies of 29 other nations following suit—and as many more since.
1947-1954	Persistent predictions of a slump were common.	Booming conditions largely prevailed; there were only brief interruptions.
1955-1957	The years when fears of slumps vanished and the idea of perpetual prosperity became the fad.	Stock market collapsed in mid-’57 just when the future looked brightest.
1961	Mania for growth. Stocks fomented a great speculative era; hundreds of companies “went public”; and a greedy public grabbed for the shares at fast-rising prices.	As in manias of the past, the cruel awakening came in the summer of ’62, as stock prices plunged. Again, it paid to be contrary!

And so we come to the end of our narratives and essays on THE ART OF CONTRARY THINKING.

The writer’s hope is that you, the reader, will follow through with persistent thinking on the Theory of Contrary Opinion to the end that it may develop into clearer thinking on the world’s intense and complex subjects.”

Sharekhan Eagle Eye (equities) & Derivatives Info Kit for February 20, 2007

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Sharekhan Investor's Eye dated February 19, 2007

Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs392

Ranbaxy's US offices face surprise
On February 14, 2007, US federal office of criminal investigation, USFDA conducted a surprise search of Ranbaxy Laboratories' US corporate offices and a manufacturing facility in New Jersey. The manufacturing facility belongs to Ohm Laboratories (a 100% subsidiary of the pharma major). Paper and electronic documents were seized in the raids.

Andhra Bank
Cluster: Cannonball
Recommendation: Buy
Price target: Rs109
Current market price: Rs81

Operating performance shows improvement

Result highlights

• For Q3FY2007 Andhra Bank (ANDB) reported a 5.8% year-on-year (y-o-y) growth in its net profit to Rs136.3 crore. The same is in line with our profit after tax (PAT) expectations of Rs138.5 crore.
• During the quarter the bank's net interest income (NII) grew by 22.8% year on year (yoy) and by 9.9% quarter on quarter (qoq) to Rs363.5 crore. ANDB has been one of the few banks which have shown an improvement in their net interest margin (NIM) yoy and maintained the NIM stable on a sequential basis.
• The non-interest income of the bank increased by 11.8% yoy to Rs132.9 crore despite a 21.6% y-o-y decline in the treasury income. The non-interest income excluding the treasury income was up 18.7% yoy and 5.1% qoq.
• The operating profit was up 28.5% yoy and 16.9% qoq while the core-operating profit (excluding the treasury income) increased by 33.8% yoy and 19% qoq.
• Provisions and contingencies showed a significant jump to Rs64.5 crore mainly on account of higher investment depreciation and provisions related to non-performing assets (NPAs).
• The net NPAs increased from 0.1% to 0.44% on a sequential basis while the gross NPAs declined by four basis points to 1.72% qoq. However, in absolute terms, both the net NPAs and the gross NPAs showed an increase. Despite the rise in the NPAs the asset quality of the bank continues to be one of the best in the industry.
• The bank has reported numbers in line with our expectations and also improved on its operating performance. The capital adequacy levels are comfortable at 12.8% with the Tier-I capital at 11.4%. Also, despite some increase during the quarter the asset quality of the bank continues to be among the best in the industry.
• At the current market price of Rs81, the stock is quoting at 6.1x its FY2008E earnings per share (EPS), 3.7x pre-provision profits (PPP) and 1.1x book value (BV). The bank is available at attractive valuations, given its low price to book multiple with an average return on equity (RoE) of 18.5% compared with its peers. We maintain our Buy call on the stock with a price target of Rs109.

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Thanks Sulagna