EXCLUSIVE - Equibrain Report - August 3 2007
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Friday, August 03, 2007
IT sector will achieve $50 bn revenue in 2007-08: NASSCOM
Despite rupee’s appreciation against dollar affecting the Indian IT sector, National Association of Software & Services Companies (NASSCOM) said on 2 August that it is confident the IT industry of the country would achieve the revenue of $50 billion (Rs2,01,100 crore) in 2007-08.
“We are quite confident that the IT software and services will achieve the target of $ 50 billion by the end of this fiscal even as the dollar depreciation has some negative impact on the industry,” NASSCOM, chairman, Lakshmi Narayanan said at IT conclave.
Last year, the industry clocked a revenue of about $40 billion with a growth rate of 30%. “In this year, the growth is expected to stay between 26-27%,” he said.
Observing that the IT industry continue to achieve handsome growth in the last quarter and that the same should continue in the next quarter, he said adding that the revenue per employee might shrink in view of the rupee appreciation against dollar.
“The IT companies are growing and they are hiring more and more people but the margin per employee may dip due to the weakening of dollar,” he said.
KPR Mills
KPR Mills, formerly KPR Cotton Mills, was originally incorporated on 19 March 2003. To further rationalise operations and better leverage capacities, KPR Cotton Mills purchased on 1 April 2005 KPR Knits as a going concern. Subsequently KPR Mills and K P R Spinning Mill were consolidated into KPR Cotton Mills through merger approved by the Madras High Court. On 5 October 2006, KPR Cotton Mills was renamed KPR Mills.
KPR Mills is now a vertically integrated apparel company. Operations span various aspects of apparel production chain: from producing carded and combed cotton yarn and knitted fabric to managing the design, delivery and quality assurance processes involved in producing readymade knitted apparel. The company exported 99.86% of its readymade knitted apparel directly to international clients in the year ended March 2007 (FY 2007). It has 1,000 regular domestic clients for yarn and fabric. Production facilities are located in Coimbatore, Sathyamangalam and Tirupur in the southern state of Tamil Nadu in India.
Current capacity
KPR Mills produced 10.16 million and 11.55 million pieces of readymade knitted apparel in FY 2006 and FY 2007, respectively. The company has a cumulative capacity of 128,064 spindles in four mills and manufactured approximately 26,232 and 28,346 tonnes of yarn in FY 2006 and FY 2007, respectively. This represented capacity utilisation of approximately 98% and 98.2% in these periods. Fabric produced was 6,147 and 6,734 tonnes in FY 2006 and FY 2007, respectively, representing capacity utilisation of about 90% and 80% in these years.
Expansion plans
To further expand its production capabilities, KPR Mills will spend Rs 472 crore. Of this, Rs 349 crore will be raised through term loans and Rs 52.5 crore through private equity. To fund the remaining expansion cost, the company has come out with an issue of 5912100 shares of Rs 10 each at a price band of Rs 225 - Rs 265 per share. The issue proceeds will be Rs 133 crore at the lower band and Rs 156 crore at the upper band.
The expansion plans of KPR are as follows:
* Expansion of existing garment facility at Arasur, near Coimbatore: Rs 10.59 crore.
* Setting up a design studio at Arasur: Rs .56 crore.
* Construction of an additional hostel facility: Rs 7.13 crore.
* Expansion of the processing facility at SIPCOT, Perundurai: Rs 39.70 crore.
* Investment in knitting facility at Arasur: Rs 25.96 crore.
* Addition of balancing equipments for existing facility at Sathyamangalam: Rs 13.81 crore.
In addition, KPR Mills has installed printing and embroidery machines at the Arasur facility. This became fully operational in March 2007. It will enable the company to meet most of its printing and embroidery requirements in-house.
Has advantage of lower power cost
To become self-sufficient, and reduce dependence on the state electrical grid, windmill facilities were installed at the Tirunelveli, Thenkasi and Coimbatore facilities. Through these facilities, KPR Mills has the capacity to produce 39.07 mega watts (MW) of power, required to met the company’s entire energy needs end April 2007. Going forward, it is expected to support approximately 75% of the energy needs once the Arasur mill is fully operational. As a result, the power cost per unit was Rs.0.53 in FY 2007, which was approximately 84.9% lower than the per unit cost charged by the Tamil Nadu Electricity Board.
Strengths
*KPR Mills is a vertically integrated player and well placed to realise efficiencies of scale and quality control at each stage of the manufacturing process.
*On account of the 38-MW installed capacity of its windmills, power cost is one of the lowest in the industry at Rs 0.53 per unit. This is 85% cheaper compared with the cost of power from the state grid. Power cost as a percentage to sales stands at 3% against the industry average of 7.8%.
*Labour cost is one of the lowest at 2.75% (as a percentage of sales) as against the industry average of 7.9%.
*Operating profit margin was quite healthy at 25% in FY 2007, and has been increasing in the past two years.
*Subsequent to the expansions in capacities, there are plans to gradually increase apparel operations, where margin is higher.
*Net interest rate of existing term loans after considering the benefits available on loans covered under the Textile Upgradation Fund (TUF) scheme is around 3.5%.
*Has a diversified customer base. The largest customer contributes only 4% to the revenue, indicating that the dependence on a single customer is minimal.
Weakness
*Does not own intellectual property rights on the KPR trademark, logo and slogan. Has to share the use of the KPR name with other promoter group entities.
*The principal activities of certain entities that are part of the promoter group include, among others, manufacturing cotton yarn, dyeing fabrics and generation of power. As a result, there may be conflicts of interest between KPR Mills and the members of the promoter group in addressing business opportunities and strategies.
*Exports of the Indian apparel industry are currently facing pricing pressures on account of removal of restrictions on the quantity of textile and apparel imports in accordance with the Agreement on Textiles and Clothing (ATC) signed by certain member countries of the World Trade Organisation. Moreover, restrictions on imports from China imposed by the US and the European Union in various apparel categories may be revoked after December 2008. This may result in a further decline in prices in the apparel industry. Besides this, India is not presently part of any free trade agreement. Those that are part of such agreements with major importing countries enjoy lower import tariff. Therefore, KPR Mills may have to lower its prices at regular intervals to sustain in such challenging business scenario. If such price reductions are not supported by corresponding fall in cost of production, profitability may be adversely affected.
*Apparel sales are highly dependent on customers located in Europe and other countries outside India. Moreover, the post-expansion target is the US market. As a result, economic slowdown or factors that affect the economic health of these countries could adversely affect business.
*Rupee appreciation is a negative for the industry as well as the company.
Valuation
KPR Mills reported a 14% rise in net sales to Rs 481.62 crore but a 7% fall in (restated) net profit to Rs 58.42 crore in FY 2007. Fall in other income by 27% to Rs 17.21 crore and absence of extraordinary (EO) income, which was Rs 12.41 crore in FY 2007, impacted net profit. The fall in other income was primarily due to the scrapping of the export incentive under target plus scheme (Rs 8 crore) from 1 April 2007.
EPS was 15.5 in FY 2007 (on post-issue equity). This is discounted 14.5 times by the lower price band of Rs 225 and 17.1 times by the upper price band of Rs 265. The sector is out of market fancy for a long time and there are no signs of the market taking a second look at it positively in the foreseeable future. Hence, many well-established and reasonably good performing companies are trading around or even less than P/E of 10 times.
Market Close: to buy or not to buy !
US markets bounced back on last minute buying whereas Asia was volatile like a Seeesaw ride. Markets opened on a sombre note after the strong selloff seen yesterday. Buying interest in select heavyweights helped Sensex move into the positive territory in the early sessions and then there was some strength noticed on positive global cues. However the optimism soon gave way and markets softened yet again. Banks, consumer durables and realty stocks were able to hold on to some of their gains while capital goods, oil and metal stocks declined sharply and some of them even slipped into the red. Auto and IT stocks were very weak. Midcaps and smallcap segments too drifted to lower levels on profit taking but managed to gain some interest at the end. The sessions so far have been really volatile and that keeps investors away. Its seems that things will continue to be same for while. Extremely volatile and pressuring towards the negative.
Sensex ended up 50 points at 14985.7 helped up by gains in SBI (1592.75,+3 percent), TISCO (638.9,+3 percent), RCVL (542,+2 percent), BHEL (1698.7,+2 percent) and Grasim (2908.75,+2 percent). Restricting the gains were Hero Honda (649.5,-3 percent), Wipro (462.25,-3 percent), Tata Motors (652.2,-2 percent), TCS (1095.35,-2 percent) and Infosys (1899.6,-2 percent).
There was a downgrade of Everest Kanto by a leading Research house. Everest Kanto is the largest player in industrial cylinder in India. Govt. ruling on use of CNG as fuel in auto has boosted demand for CNG cylinders. The demand remains still high but now supply seems to be coming as more capacity is expected to come in Iran and that could change the scenario as Iran and Pakistan were expected to be the big markets. The stock had rallied in big way beyond fair value one coudl say. We believe more downsides is on cards.
ABG shipyard Ltd performed well and ended up by 2% after it has reported good results for Q1. It has received major order for construction of 12 vessels of approximately 32,000 dwt for Rs 1460 cr from Thailand's Precious Shipping Public Co. Ltd. The outstanding order book is now at Rs 5560 cr. Valuations appear to be rich. We are positive on business. However its the valuations are somewhat discomforting. Do read our detailed note on the site to get clearer picture on the stock.
We had a research note on Greenply as well. This company has been a winner for our research for quite some time. However the important thing is that we believe that the business is beginning to catch momentum and really its something to watch out for.
Technically Speaking: It was a fairly a volatile day for the market. Sensex made a high of 15135 and low of 14896 with the Advances out numbering decliners. The Advances stood at 1390 against the Declines of 1275. Volumes were low at Rs 4419 Cr. Sensex has moved into a short term downtrend with supports at 14800 and 14450. Having left unfilled gap on the higher side, there is chance of some bounce back up to 15200...15400 levels.
Trading Calls
Sell Alstom Projects with stop loss of Rs 780 for target of Rs 605.
Sell Parsvnath Developers with stop loss of Rs 360 for target of Rs 235.
Thursday, August 02, 2007
Market pulls back after yesterday's crash
The Sensex slipped into the red immediately after a positive start, but rebounded as buying began at the lower levels. The market gained amid choppy trading as bargain hunting for blue-chips began, overlooking the weak Asian indices and yesterday's drop of over 600 points. The Sensex got a boost in the afternoon trades after some Asian markets, especially Japan and Taiwan, managed to recover. The sustained buying in capital goods, banking and realty stocks saw the index touch the day's high of 15,135. However, profit bookings in late trades saw the Sensex shed most of its gains and the index to touch yesterday's close. However, hectic buying at the lower levels helped the Sensex to recover and end the session on a firm note by gaining 50 points at 14,986. The Nifty closed the session at 4,356, up 11 points.
The breadth of the market was positive, with the gainers outpacing the losers in the ratio of 1.09:1. Of the 2,636 stocks traded on the BSE, 1,338 stocks advanced, 1,225 stocks declined and 73 stocks ended unchanged. Most of the sectoral indices closed with significant gains. The BSE CD index was the major gainer and soared 2.06% followed by the BSE Realty index (up 1.71%) and the BSE Bankex index (up 1.51%).
Most of the heavyweights gained on the BSE. Among the blue chips, SBI shot up by 2.87% at Rs1,593, Tata Steel soared 2.65% at Rs639,Reliance Communication surged 2.15% at Rs542, BHEL advanced by 2.13% at Rs1,699, Reliance Energy added 2.01% at Rs752, Maruti Udyog moved up 1.86% at Rs836, ACC scaled up 1.78% at Rs983 and Dr Reddy's Lab was up 1.37% at Rs631. Among the laggards, Wipro dropped 2.83% at Rs462, M&M slipped 2.59% at Rs676 and Tata Motors shed 2.23% at Rs652 while TCS, Infosys and ONGC fell over 1% each.
Consumer durables stocks were in the limelight and closed with strong gains. Gitanjali Gems jumped 6.13% at Rs270, Blue Star soared 5.03% at Rs291, Titan Industries surged 2.61% at Rs1132 and Videocon Industries added 1.47% at Rs373.
Over 2.60 crore IFCI shares changed hands on the BSE followed by Faccor Alloys (82.84 lakh shares), Reliance Natural Resources (74.10 lakh shares), Spice Telesystems (52.33 lakh shares) and IKF Technologies (38.28 lakh shares).
SBI clocked a turnover of Rs179 crore on the BSE followed by Everonn Systems (Rs154 crore), Reliance industries (Rs150 crore), IFCI (Rs146 crore) and Housing Development & Infrastructure (Rs143 crore).
Sensex settles just below 15,000
The market saw intense volatility throughout the day, on alternate bouts of buying and selling. It was going strong till mid-afternoon trade when profit booking emerged, dragging it lower. Most of the Asian markets stabilised after initial volatility while a majority of European indices were trading higher. Shares from real estate, cement and banking were in demand while those of IT and auto were offloaded.
The BSE 30-share Sensex rose 49.93 points or 0.33% at 14,985.70. It opened slightly higher at 15,022.87 and slipped to a low of 14,896.47 as selling began. However, the broad market index again started heading north to touch a high of 15,134.53 at 13:50 IST. The market came off higher level later.
Sensex oscillated in a range of 238 points for the day.
The S&P CNX Nifty rose 10.50 points or 0.24% at 4,356.35. The Nifty August 2007 futures settled at 4317, a discount of 39.35 points as compared to spot closing.
The market breadth, indicating the overall health of the market, eased as the day progressed. On BSE 1,390 shares advanced as compared to 1,275 that declined, while 57 remained unchanged. The breadth was much stronger in afternoon trade when the advance-decline ratio was 2:1.
The BSE Mid-Cap Index rose up 53.96 points or 0.84% to 6,515.42 while the BSE Small-Cap index gained 30 points or 0.4% to 7,805.46
Meanwhile, India's trade deficit in June 2007 widened to $7.33 billion, data released yesterday, 1 August 2007, showed. Imports surged 36.7% to $19.2 billion in June 2007, while exports rose 14% to $11.87 billion, over June 2006.
The turnover on BSE declined to Rs 4,419 crore from Rs 6656 crore on Wednesday, 1 August 2007.
The NSE F&O turnover was Rs 38783.38 crore as compared to Rs 55904.92 crore on Wednesday, 1 August 2007.
Among the Sensex pack, 16 advanced while the rest declined.
Auto stocks remained under selling pressure throughout the day, as the sentiment was dampened by poor monthly sales figures. The BSE Auto Index lost 0.51% to 4,747.08
India's top bus and truck maker Tata Motors slipped 2.26% to Rs 652. Its vehicle sales fell 6.6% in July 2007 to 42,098 units over July 2006. Sales of commercial vehicles dropped 3.8% to 20,705 units in July 2007 over July 2006. Exports fell 17% to 4,382 units.
India's top motorcycle maker Hero Honda Motors shed 1.36% to Rs 660 after it said on Wednesday, 1 August 2007, it sold 2,01,191 units in July 2007, down 14.5 % from 2,35,314 sold in June 2006. The announcement was made after trading hours.
Bajaj Auto slipped 0.17% to Rs 2284, after India's second-biggest motorcycle maker’s vehicle sales in July 2007 fell 7% to 185,890 units over July 2006.
Top utility vehicle maker Mahindra & Mahindra (M&M) declined 2.98% to Rs 673 on 3.30 lakh shares, despite its sales rising 46% in July 2007 to 19,163 units over July 2006. It was the top loser from the Sensex pack.
However Maruti Udyog rose 1.7% to Rs 835 on the back of 24.8% rise in total vehicles sales to 57,909 vehicles in July 2007 over July 2006. The company sold 52,839 vehicles in the domestic market in July 2007, a rise of 18.33% over the same period last year.
IT stocks were subdued today. The BSE IT index declined 1.32% to 4,649.11, and was the top loser among the sectoral indices on BSE. Infosys (down 1.33 % to Rs 1904), TCS (down 1.33% to Rs 1101), Satyam Computers (down 1.50% to Rs 462.65), and Wipro (down 2.70% to Rs 462.85) were trading lower. The Indian rupee eased on Thursday, 2 August 2007 as investors awaited cues from the stockmarket as to whether foreign funds would continue cutting holdings on worries of a global credit crunch and declining risk appetite. The partially convertible rupee was at 40.44/45 per dollar in early deals.
India’s largest commercial bank State Bank of India jumped 2.95% to Rs 1594, on 11.23 lakh shares. It was the top gainer from the Sensex pack. It is holding talks with potential partners for its non-life insurance venture. It is also keeping options open for going alone in the general insurance business. SBI also plans to set up a holding company to transfer its share holding in its insurance and asset management subsidiaries. The new holding company, valued between $5 billion to $7 billion, would eventually be listed.
The BSE Bankex was up 1.5% at 7,946.80. It has gained 3.44% in the last one month from 7682.64 on 1 June 2007. Other banking stocks also posted gains on bargain hunting. Dena Bank (up 1.77% to Rs 51.65), Oriental Bank of Commerce (up 3.35% to Rs 228), Punjab National Bank (up 1.66% to Rs 495.50), Bank of India (up 1.67% to Rs 243), Bank of Baroda (up 1.67% to Rs 292), AXIS Bank (up 0.36% to Rs 620) and ICICI Bank (up 0.86% to Rs 899) gained.
Banks are seen cutting deposit rates after the Reserve Bank of India (RBI) on Tuesday, 31 July 2007, raised the cash reserve ratio (CRR) by 50 basis points. The hike in CRR means effective increase in cost of deposits for banks. The deceleration in credit offtake implies that banks have to roll back high deposit rates being offered on tenures of one year and above. Banks now have to maintain 7% of their deposits with the RBI. On these CRR deposits, banks will receive interest only on 3% of the deposits at `bank rate’, which is 6%. No interest is paid on the balance 4%. As RBI does not pay any interest on the 4% deposits, banks’ margin is impacted to that extent.
Telecom pivotals - Reliance Communications (up 2.34% to Rs 543), Bharti Airtel (up 1.95% to Rs 879.75), gained on bargain hunting.
Dr Reddy’s Lab, India's only drug maker listed on the New York exchange, gained 1.30% to Rs 630.50 after the company said it had reached an important milestone in testing an anti-diabetic molecule which could become the first patented drug from India.
Cement stocks showed strength on fresh buying. India’s second largest cement producer ACC advanced 2% to Rs 985. ACC's cement dispatches jumped 14.68% to 16.4 lakh tonnes in July 2007 over July 2006.
Ambuja Cements gained 1.55% to Rs 131 after its cement dispatches rose 20% to 13.9 lakh tonnes in July 2007 over July 2006.
Grasim gained 1.28% to Rs 2885 while UltraTech Cement slipped 0.91% to Rs 895.65. The Aditya Birla Group said on Wednesday its cement shipments rose 13.1% to 24 lakh tonnes in July 2007 over July 2006. Grasim and UltraTech Cement belong to the Aditya Birla Group
Reliance Energy (REL), India's second largest power generation and distribution company in terms of sales, rose 2.27% to Rs 754 on reports that it has emerged as the sole bidder for a Damodar Valley Corporation (DVC) power project in the Purulia district of West Bengal.
India’s largest private sector company Reliance Industries (RIL) which had surged to a high of Rs 1839, pared gains and managed to end just 0.18% higher at Rs 1801.25, on 8.27 lakh shares. As per reports, the government is likely to clear the price quoted by RIL for its gas from the Krishna-Godavari basin without seeking to control the price.
Battered real-estate stocks which were worst hit in Wednesday’s meltdown, made a comeback today on bargain hunting. The BSE Realty index gained the most among the sectoral indices on BSE. It rose 1.71% to 7,457.79. Unitech (up 3.82% to Rs 534), DLF (up 0.61% to Rs 588.15), Orbit Corporation (up 4.45% to Rs 334.40) and Indiabulls Real Estate (up 2.24% to Rs 511.85), edged higher.
Some of the top gainers from small-cap and mid-cap space were Hitachi Home (up 13.97% to Rs 143.95), Shree Precoated Steels (up 10% to Rs 368.05), Sulzer India (up 10% to Rs 513), JK Lakshmi Cements (up 8.53% to Rs 154), and Selan Exploration (up 8.10% to Rs 108.30).
Basnat Agro (down 8% to Rs 44), Simplex Castings (down 5.58% to Rs 58.40), Zensar Technologies (down 5.26% to Rs 246.50), and Praj Industries (down 5.21% to Rs 195.50), were the top losers from small-cap and mid-cap space.
Power Finance Corporation gained 1.52% to Rs 176.90 on reports it has raised $180 million via private placement in US.
Punj Lloyd rose 0.74% to Rs 267 after its subsidiary bagged a Rs 666-crore contract in Singapore for sub-structural works at the Sentosa Integrated Resort Development.
Northgate Technologies rose 1.85% to Rs 1379 on fixing 3 September 2007 as the record date for the purpose of issue of bonus shares in the ratio of 1:1.
Dhanalakshmi Bank jumped 2.16% to Rs 73.40. Its promoter offloaded 4.68% stake to a German Bank -MM Warburg Bank (Schweiz), through secondary market operations recently.
India’s largest zinc maker Hindustan Zinc gained 0.55% to Rs 714 after it had cut zinc prices by 3.8% to Rs 1,63,500 a tonne with immediate effect. It has also cut lead prices by 6.9% to Rs 1,37,200 per tonne.
India’s fourth largest term lending institution in terms of revenue IFCI jumped 8.71% to Rs 56.70 on media reports that Citigroup, Lehman Brothers, BNP Paribas, Deutsche Bank and Barclays are interested in buying 26% in it
Nitco Tiles was down 0.84% to Rs 219 coming off sharply from an initial 6% surge. RBI said on Wednesday, 1 August 2007, FIIs could buy up to 49% in the company after the firm's board passed a resolution to this effect.
Civil engineering firm Hindustan Dorr-Oliver was locked at the 5% upper limit of Rs 113.75 after the company said it has got an order worth Rs 70 crore from Bharat Oman Refineries.
Royal Orchid Hotels slipped 3.51% to Rs 181.40 after it went Rs 6 per share (60% on face value of Rs 10 per share) ex-dividend from today.
NIIT slipped sharply from its high of Rs 1048 to end marginally lower at Rs 980 after it fixed 31 August 2007 as the record date for the purpose of sub-division of 1 equity share of Rs 10 each into 5 equity shares of Rs 2 each. The company made this announcement after market hours on 1 August 2007.
Asian markets were trading mixed amid high volatility. Shanghai Composite (up 2.49% to 4,407.73), Nikkei 225 (up 0.67% to 16,984.11) and Taiwan Weighted (up 0.66% to 8,950.57) gained. Hang Seng (down 0.05% to 22,443.56), and Seoul Composite (down 0.18% to 1,853.07) slipped.
Wall Street shot higher in a last-minute buying yesterday, 1 August 2007, after careening through a session made turbulent by ongoing concerns about US home loans and the credit market. The Dow gained 150.38 points, or 1.14%, to 13,362.37. Broader stock indicators also advanced. The Standard & Poor's 500 index rose 10.54 points, or 0.72%, to 1,465.81, and the Nasdaq Composite index was up 7.60 points, or 0.30%, to 2,553.87.
US crude prices surged to a record high of $78.77 a barrel on Wednesday, 2 August 2007 after the US Department of Energy reported that US crude stocks sank by 6.5 million barrels in the week ended 27 July.
The Bank of England today, 2 August 2007 left interest rates on hold at 5.75% as expected. The European Central Bank (ECB) also meets today, 2 August 2007, to set interest rates amid growing concern that an expanding subprime credit crunch in the US may have knock-on effects in Europe. ECB is expected to keep its refinancing rate unchanged at 4%, but may signal an increase to 4.25% in September 2007.
Morning Call
Market Grape Wine :
In House :
Nifty at a supp of 4305 and 4257 with Resis at 4398 and 4447
Intra day calls: Buy Tisco with a TGT of 634
Buy LT with a TGT of 2550 and a SL of 2465
F&O: Buy Century text above 702 with a TGT of 724 and a SL of 692
Buy Petronet above 58 with a TGT of 64 and a SL of 55.50
Out House :
Markets at a support of 14898 & 14786 levels with resistance at 15151 & 15243 levels .
Buy : SBIN at dips
Buy : RIL & Rcomm at dips
Buy : Gacl & LNT
Buy : REL & ABB at dips
Buy : EKC & Educomp
Buy : Aban & IOLBroad
Buy : DishTV , TvToday & ENIL
Buy : JP & Century
Buy : HDIL & IBulls
Dark Horse : RIL , SKumar , SBIN , RComm , DishTV , REL , Century & IBulls
India Daily Results Update
Strategy: KS-Ownership Navigator, June 2007 quarter changes (qoq)
Results
National Thermal Power Corp.: 1QFY08: Prior period revenue and forex gains explain the higher profit
MICO: 2QCY07 recurring profits grow 4% yoy
VSNL: Performance of subsidiaries improve significantly. Maintain OP
Nestle India: 1QCY07: Strong topline growth, increase estimates on higher growth; retain IL
AIA Engineering: Rupee punishment for aiming global; maintain rating and target
Rico Auto Industries: 1QFY08 net profit declines 61% despite increase in margins
Updates
Shriram Transport Finance: Used-vehicle finance drives profit growth, retain OP
Automobiles: Jul 07 sales: New launches drive passenger car volumes as 2-wheelers continue to bleed
India Daily Results Update
Market may open weak
The market is likely to remain volatile on the back of weak Asian indices in current trades and a positive close in US markets. Traders may book profits on every rise after yesterday's bloodbath, which may create high volatility in the later part of the day. However, bias remains positive, investors should trade with caution as profit bookings may drag the index further down. Among the local indices, the Nifty could test 4390 on the upside and on breaching this it is likely to touch 4450 and it may slip to 4320 on the downside. The Sensex has a likely support at 14900 and may face resistance at 15135.
Major US indices rallied in the late session on Wednesday, as the Dow jumped 150 points at 13362, while the Nasdaq moved up by 8 points to close at 2554.
Except few all the Indian ADRs traded weak on the US bourses. Patni Computer received a heavy blow and tumbled 5.56% while MTNL and VSNL slipped over 2% each. Among the other laggards Infosys, Wipro, Tata Motors, HDFC Bank and Rediff were down around 1% each. However, Dr Reddy's and ICICI Bank bucked the trend and gained around 1% each.
Crude oil prices slipped further, with the Nymex light crude oil for September delivery was down by $1.68 to close at $76.53 a barrel. In the commodity space, the Comex gold for December delivery slipped by $3.40 to settle at $675.90 an ounce.
Bargain hunting back in Wall Street
Financial stocks help indices finish in green in an extremely volatile day
A volatile US market witnessed an extremely choppy session today, Wednesday, 1 August, 2007. Fresh news about Bear Sterns kicked off things in a very sour note. But a late turnaround in financial sector helped the indices register good gains at the day’s close. Big swings in crude prices were also a major reason for today’s choppiness.
The only positive news during the day that cheered investors was National Association of Realtors reporting contract signings on existing homes climbing 5% in June, the largest advance in three years.
The Dow swung within a two hundred and sixty point range before finishing considerably up. The Dow Jones Industrials Average today rose by 150 points at the end to close at 13362. Tech-heavy Nasdaq gained 7.6 points to close at 2553. S&P 500 added 10.5 points to close at 1465.
Twenty-eight out of the thirty Dow stocks closed in green. Merck, Walt Disney and AT&T were the main Dow winners. Honeywell and Alcoa were the only Dow losers.
After market closed, Walt Disney declared its result. It handily beat Wall Street’s expectations. But shares slipped in after hours trading. The growth of the company was fueled by higher advertising rates at the ABC television network and sales of merchandise from its films.
Good economic data get ignored in a volatile market
When market opened in the morning, all the three indices were trading lower. Of the six sectors trading lower, materials paced the way closely followed by financials. Reports that another Bear Stearns hedge fund has halted redemptions kicked things off on a sour note.
The Institute of Supply Management (ISM index) fell to a lower than expected 53.8% in July; but since any reading above 50 signals growth and the prices paid component fell to 65% from 68%, sellers did not react much to the data.
But soon, market turned direction and Dow was trading up by 80 points at one time. But volatility was today’s mantra for the entire day. Within a couple of hours, indices again turned negative and Dow was down by almost 100 points at one time. This continued for the rest of the day. But in the final hours of trading, a rebound in financial stocks pushed up the indices and all three ended in the green. .
Merck shares rose almost 3% today after reports that vaccines made by the company are being promoted by U.S. health officials to increase potentially life-saving immunization for preteens.
Crude slips by more than 2% even after reaching a new intra-day high
Crude oil futures today hit a new intra day high but eventually slipped and closed almost 2% lower. Before the retreat, it rose as high as $78.77 surpassing the previous all-time electronic high for a benchmark contract of $78.40 in mid-July of last year.
Increase in refinery utilization for the week ended 27 July 2007 contributed to a 600,000-barrel climb in motor gasoline supplies to 204.7 million barrels. This pushed down gasoline prices which in turn had a negative impact on the rising crude price and it closed lower for the day.
At the New York Stock Exchange today, volume hit 2.4 billion shares, with declining stocks topping advancers 19 to 14. At the Nasdaq, 2.9 billion shares were exchanged, and decliners beat advancing stocks 3 to 2.
Apart from a host of companies eg, Bausch & Lomb, Southern Copper etc. reporting their earnings tomorrow, on the economic front, Initial Claims will be released at 8:30 ET, while June Factory Orders will hit the wires are 10:00 ET.
Intraday Calls
Nifty (4346) Supp 4282 Res 4410
Buy ICICI Bank (891) SL 885 Target 903, 907
Buy Ranbaxy (368) SL 363 Target 376, 378
Buy Uni Phos (320) SL 315 Target 328, 330
Sell IVRCL Infra (376) SL 381 Target 369, 366
Sell GAIL (325) SL 329
Target 317, 315
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