Thursday, December 14, 2006
Sensex has formed Bullish pattern followed by continuation pattern which indicates strongness of pullback rally which signals another 200-300 or more points rally if maintain 13360 levels. As per weekly scenario, Sensex is forming a huge Bearish candle which indicates the possibilty of another 1500 points fall. To nullify this bearish scenario the current pullback rally must close above 13560 levels on last day of the session or must do sideway movement above today's gap for next 3-4 days. If it does then there could be chance of 14180 or more levels or else 11800 levels cold be witness as a trend reversal.
Support 1) 13400 2) 13320 3) 13280 4) 13230 imp.
Resistance 1) 13560 2) 13640 imp 3) 13790 imp 4) 13860.
Market had a firm start and buying was seen from the first hour of the trade itself and continued through out the day in momentum. Buying was seen in Banking, Cement, Automobiles and Energy stocks. The northward journey of the markets continued banking on index heavyweights. Mid caps too were buyers choice for the day. Selling pressure was at its minimum as only few stocks were in Red.
Sensex closed 306 points up at 13487. It was helped up by gains in ICICI Bk (869.25,+5 percent), Satyam (467.6,+4 percent), Cipla (247.7,+4 percent), NTPC (145.55,+4 percent) and HLL (227.4,+4 percent). Restricting the gains were Hero Honda (713.3,-1 percent), SBI (1222.95,0 percent).
HCL technologies Board has recommended a bonus issue of one share for every existing share. The bonus issue is subject to share holders approval and record date is yet to be decided by the company Board. Company has been following high dividend policy from last 3 Yrs and this a significant event as it will enhance enhance the Investor Base and enhance liquidity for the stock. Stock saw gains of 6%.
L&T has bagged two contracts from Chinese Petrochemical Company Sinopec. The value of the contract is 86 Million US $. The company will have to design, manufacture and supply three ethylene oxide reactors, each weighing in excess of 1,000 tonnes. Which are going to be a part of Methyl Ethyl Glycol (MEG) unit in a petrochemical plant. Buying was seen in engineering stocks and the stock closed 2% higher. L&T seems to be having a huge order book but its the valuations which make us cautious.
Technically Speaking: Positive sentiment was there in the market as the market constantly marched Northwards in the positive territory to finally end 306 points up. The rally was ranging between 13334-13144. The advances dominated declines as there were four advances against every decline.
FII Gross purchases Rs 2782.70 Cr Gross Sellers Rs 2879.60 Cr Net Sellers Rs Cr 96.90
MF Gross Purchases Rs 743.25 Cr Gross Sellers Rs 975.09 Cr Net sellers Rs 231.84 Cr.
Surprising to see negative numbers on a day when markets closed up 200 points. Its ironical but thats a fact. However provisional numbers seem to be in line Whats more important is the FNO figures and that we will know tomorrow with these figures one can head for a positive start tomorrow.
Cluster: Emerging Star
Price target: Rs320
Current market price: Rs232
Designed to grow
- Niche player with distinct competitive strengths: Tata Elxsi Ltd (TEL) has built the required scale of operations and established strong client relationships with leading global companies to effectively tap the huge opportunity emerging in the niche segment of product design and engineering space. In this space, the size of the opportunity for the domestic companies is estimated to more than double to $6.6 billion by 2010. TEL also has the advantage of having developed reusable components (intellectual property to provide faster and more valuable proposition to the customers) and is investing to boost its delivery capabilities in the high-end services like VLSI and chip design.
- Aggressive expansion plans: TEL has aggressive expansion plans in terms of the capital expenditure on physical infrastructure and employee addition. This clearly reflects the management's growing confidence in the revenue growth visibility over the next few years.
- Improving margins: The shift in the revenue mix in favour of the high-margin software development service business has significantly improved the company's operating margins in the past two years (up by 490 basis points to 19.8% in FY2006). The trend is expected to continue and further boost margins by 250 basis points during FY2006-08, in spite of the aggressive expansion plans and rising wage inflation.
- Attractive valuations and decent dividend yield: Revenues and earnings are estimated to grow at a robust rate of 26.8% and 34.5% respectively, during the period FY2006-08. Moreover, the company offers a decent dividend yield of 2.8% (based on the 65% dividend given in FY2006), which is likely to limit the downside risk. We recommend Buy call on TEL with a one-year target price of Rs320
Today was the decisive day for the market as to see weather the bears are tightening their grip or bull run is still there. After opening with a positive gap of 75 points the Sensex rallied past to close the session at 13487 with the gains of 306 points. Buoyancy among heavyweights, consumer durables, banking, IT and tech stocks kept the sensex moving upwards throughout the session. However, profit booking in some of the consumer goods and banking stocks in the closing session saw the Sensex to slip the days high of 13525. While the Nifty added 78 points to close at 3843.
The breadth of the market was positive. Of the 2,596 stocks traded on the BSE, 2,063 stocks advanced, 478 stocks declined and 55 stocks ended unchanged. Among the sectoral indices the BSE CD index jumped 3.97% at 3,337 followed by the BSE Teck index (up 2.71% at 3,553), the BSE IT index (up 2.69% at 5128) and the BSE Bankex index (up 2.58% at 6899).
Barring a few select counters, most of the heavyweights ended at higher levels. Among the blue chips ICICI Bank shot up by 4.69% at Rs869, Satyam Computers soared 4.46% at Rs468, CIPLA surged 4.05% at Rs248, NTPC advanced by 4% at Rs146, HLL added 3.65% at Rs227, Reliance Energy moved up 3.28% at Rs532, Gujrat Ambuja scaled up 3.28% at Rs139 and Reliance Communication was up 3.28% at Rs447. Among the laggards Hero Honda dropped 0.75% at Rs713 and SBI shed 0.42% at Rs1223.
Consumer durables stocks were in the limelight and closed with strong gains. Titan Industries vaulted 6.17% at Rs753, Lloyd electric soared 5.72% at Rs148, Gitanjali Gems surged 5.08% at Rs199 and Rajesh Exports advanced by 5% at Rs330. Videocon Industries, Goldiam International, and Blue star gained 1-3% each. Among the IT stocks HCL Tech, Mphasis BFL, Satyam computers, Hexaware and wipro gained 2-6% each.
Tata steel clocked a turnover of Rs117 crore on the BSE followed by Reliance Industries (Rs117 crore), Parshwanath (Rs110 crore), Century Textile (Rs109 crore) and Unitech (Rs107 crore).
The market continued to recover for the second straight day due to heavy buying in index pivotals. The 30-shares BSE Sensex surged 305.82 points (2.32%), to end at 13,487.16. It had opened firm, at 13,256.81, as buying continued following a 186-point rally on Wednesday. The Sensex had surged to a fresh intra-day high of 13,524.77, its low for the day being 13,239.79. Its all-time high is more than half a thousand points away.
The S&P CNX Nifty advanced 87.30 points (2.32%), to settle at 3,852.50.
The BSE clocked a turnover of Rs 4,355 crore.
The market-breadth was rock solid as a host of small-cap and mid-cap counters rallied on high volumes. For 2,048 shares rising on BSE, just 487 declined. As many as 60 shares were unchanged. Gainers outpaced losers by a ratio of 4:1. The BSE Small-Cap index closed at 6,594.52, up 201 points (3.14%), while the BSE Mid-Cap index jumped 139.61 points (2.6%), to settle at 5,616.97.
Among the 30-Sensex pack, 28 advanced while Hero Honda (down 0.65% to Rs 714) and Tata Steel (down 0.09% to Rs 435.25) were the only losers.
ICICI Bank was the top gainer, up 5.62% to Rs 877, after it announced an increase of 0.5% in its Benchmark Advance Rate (I-BAR) and its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from 18 December 2006. The revised I-BAR will be 13.75% p.a. payable monthly as against 13.25% at present. The revised FRR will be 10.75% p.a. against 10.25% at present. The bank has also announced an increase in interest rates on deposits of value less than Rs 1 crore in the 0.25%-0.75% range across various tenors with effect from 18 December 2006. The hike in lending rates will help protect margins at a time, when deposit rates/cost of funds are also rising. On Wednesday, the ICICI Bank ADR surged 3.6% to $38.34, boosted by the news.
HLL (up 3.92% to Rs 228), NTPC (up 4.11% to Rs 145.65), Cipla (up 4.20% to Rs 248) and Satyam Computers (up 4.32% to Rs 467) were the other gainers.
Reliance Communications rose 3.69% to Rs 449.15, on reports that it is interested in Hutchison's India operations. As many as 9.9 lakh shares changed hands in the counter on BSE as market is abuzz with talk that the ADAG group telco is negotiating with three PE firms, who are together discussing this with the Hong Kong-based telecom major.
ONGC rose 2.14% to Rs 806, on reports that its joint venture with Mittal group, is close to signing an agreement for an oil block in Turkmenistan. Another report that ONGC’s overseas investment arm proposes to undertake joint exploration and production activities in Iraq with Reliance Industries (RIL), too, aided the recovery after a steep decline in the past four days. ONGC Mittal Energy (OMEL), the joint venture between ONGC and Mittal group, is eyeing opportunities in Kazakhstan, Azerbaijan and Indonesia, reports add.
Maruti Udyog gained 2.31% to Rs 906.24, amid reports that it will usher in the New Year by hiking prices of cars. It will raise prices from January 2007 by as much as Rs 12,000, to help offset higher freight and component costs, newspapers said on Thursday. The company has sent letters to dealers informing them of the increase effective January, papers quoted sources.
Index heavyweight Reliance Industries (RIL) advanced 2.10% to Rs 1,264, on a volume of 9.24 lakh shares. It had surged to an intra-day high of Rs 1,272.80.
Larsen & Toubro (L&T) rose 2.41% to Rs 1,455, after announcing that the company won two major contracts of an aggregate value of $ 86 million from a leading Chinese petrochemical company, Sinopec. The company has been contracted to design, manufacture and supply three ethylene oxide reactors, each weighing in excess of 1,000 tonnes. The reactors will form part of the Methyl Ethyl Glycol (MEG) unit in a petrochemical plant.
BF Utilities, a Kalyani group company into wind power generation, was surprisingly the top-traded counter on BSE and accounted for Rs 620.89 crore of the total turnover. The counter was locked at the 5% upper circuit filter at Rs 3,253.65, on a total volume of 19.10 lakh shares. A little over 5.05% of the company’s equity changed hands in the counter today. The counter saw an astronomical spurt in volume today on the multiple block deals. Its average yearly traded volume on BSE is just 36,030 shares, on a daily basis.
Tata Steel (Rs 117.68 crore) and Reliance Industries (Rs 116.04 crore) were the other counters traded in a big way.
Cement scrips dominated the indices on strong purchases anticipating firm cement prices. Analysts expect cement prices to remain firm over the medium term, as no big capacity addition is expected till FY 2008. Strong growth from housing and infrastructure has been driving up demand for cement.
Gujarat Ambuja Cement (up 3.62% to Rs 139), UltraTech Cement (up 7.20% to Rs 990), and ACC (up 2.64% to Rs 1,034) advanced.
Four Soft advanced 20% to Rs 69.70, after scheduling a board meet for 20 December 2006, to consider the allotment of equity shares / warrants preferentially. They will also consider raising capital by issuing ADRs/GDRs/ bonds/ debentures along with a proposed acquisition in Europe.
HCL Technologies surged 6.71% to Rs 626.65, after the software services firm announced a liberal 1-for-1 bonus issue. The stock had surged to a high of Rs 650.
Britannia Industries jumped 4.22% to Rs 1,141, after the company signed an agreement for buying stake in a bakery business owned by a West Asian group. The move to acquire stake in the West Asian bakeries, is in line with Britannia’s strategy of expanding overseas. The acquisition of shares is subject to the execution of definitive agreements.
Punj Lloyd (PLL) jumped 9.10% to Rs 1,018.55, after it set up a new company for carrying out back office engineering activities. Simon Carves India, the new company, is a wholly-owned subsidiary of PLL, catering to the the group's engineering requirements in the initial phase. Simon Carves India will integrate the engineering expertise of Punj Lloyd with its two recent acquisitions - Sembawang Engineers & Constructors and Simon Carves, UK.
Alok Industries rose 7% to Rs 71.20, after the company said foreign fund Caledonia Investment acquired 2.10% stake in the company through open market route on 12 December 2006. Post-acquisition, the shareholding of Caledonia Investment has risen to 14.33%.
All the Asia/Pacific and European indices were trading with gains except Mexico’s IPC and Stockholm General of Sweden index.
The Nikkei average rose 0.82% to its highest close in more than seven months on Thursday, as exporters, including Sony Corp, climbed on a weaker yen and strong US retail sales data.
The Nikkei rose 136.27 points, to 16,829.20, rising for the fourth straight session to hit the highest close since 11 May 2006. Hang Seng index was up 1.07%.
International rating agency Standard & Poor's (S&P) said on Thursday, India's credit rating can be upgraded to investment grade if it continued to improve public finances.
The outlook on the sovereign credit rating on India was revised to positive from stable in 2006, highlighting that if current credit improvements continue, especially on the fiscal front, India could achieve investment grade ratings," S&P said in its Asia Pacific Market Outlook for 2007.
The central bank is probably expected to refrain from raising interest rates at its policy board meeting to be held 18-19 December. Most of the nine voting policy board members want to examine more personal consumption and price data as well as US economic growth before raising borrowing costs, reports say.
Meanwhile, Federal Reserve kept interest rates unchanged on Tuesday for the fourth straight time, as worries about inflation continued to trump concerns about the slowing economy. At its final meeting of 2006, Fed left its target for the federal funds rate at 5.25%. The funds rate, the interest that banks charge each other, has been at that level since June, when the Fed raised rates for the 17th consecutive time in a two-year effort to combat rising inflation.
Although the Sensex is sharply off its record high of 14,000, equity valuations still remain steep. The Sensex’s current PE multiple is 21.72 based on trailing 12-month September 2006 earnings. The Indian market is most expensive compared to its regional and emerging market peers.
The Sensex staged a recovery on Wednesday (13 December) gaining 186 points. A lower-than-expected industrial output growth for October 2006 caused a 404-point fall in the Sensex on Tuesday (12 December), after the barometer index lost 400 points on Monday (11 December) following a surprise hike in the cash reserve ratio (CRR) by the RBI, which raised fears of a rise in interest rates. It had slipped 173 points on Friday (8 December) ahead of the surprising CRR hike.
After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so, given that strong earnings growth has been a key driver of the bull-run on the bourses.
US stocks closed little changed on Wednesday, as surprisingly strong retail sales data raised hopes for the holiday season, offsetting a rise in oil prices which hurt industrial shares. The Dow Jones industrial average advanced 1.92 points, or 0.02%, to end at 12,317.50. The Standard & Poor's 500 Index rose 1.65 points, or 0.12%, to finish at 1,413.21. The Nasdaq Composite Index eked out a gain of just 0.81 of a point, or 0.03%, to close at 2,432.41.
Oil prices edged up on Thursday after a larger-than-expected drop in U.S. crude stocks and as traders waited to see if OPEC ministers meeting in Nigeria would hold off from making further cuts to output. US light crude for January rose 29 cents to $61.66 a barrel. London Brent crude for January traded 23 cents higher at $61.56, ahead of its expiry on Thursday.
As per provisional figures, FIIs were net buyers to the tune of Rs 24.52 crore on 13 December, the day when the Sensex had risen 186 points. Their inflow was Rs 95 crore on 12 December, the day when the Sensex had plunged 404 points.
The last few days witnessed substantial FII sales in index-based futures. FIIs were net sellers to the tune of Rs 284 crore in index-based futures on 13 December. Their net sales in index-based futures in four trading sessions, between 8 December and 13 December, aggregate Rs 3,036 crore. The last two days also witnessed substantial FII purchases in individual stock futures, worth Rs 780 crore (between 12 December and 13 December).
Pyramid Saimira Theatre (PSTL), promoted by V Natarajan, P S Saminathan and N Narayanan, has produced 10 films since inception. It has since taken a strategic decision to concentrate on film distribution and exhibition. The company set up its first theatre in September 2005 and thereafter embarked on the mega-digital-theatre-chain project in November 2005. Till filing the prospectus, PSTL had tied up with 148 screens with 90,906 seats in existing theatres in Tamil Nadu, Andhra Pradesh and Karnataka. The company’s project is the first of its kind in the world.
The objective of PSTL is to have presence in all categories of theatres including malls, multiplexes, cineplexes and standalones across the country in Tier I, II and III locations through long-term leases, improvement in their infrastructure and conversion into digital theatres. The company is establishing an integrated network-operating center to convert films into digital formats. Digital theatres will also function as the delivery medium for other entertainment content and educational centres.
PSTL has tied up with Spirit Global Constructions Pvt. Ltd. for managing the operations of 60 malls in Punjab and Himachal Pradesh. It has a walk-in agreement with Swatantra Land and Finance to manage the operations of 22 malls in Haryana and 20 malls in Rajasthan. The malls will be fully complete with all facilities such as multi screens, food courts, entertainment zones, retail space, and parking space.
- PSTL’s strategy of digital distribution of films in a large number of theaters simultaneously as well as improving the film viewing experience will help it to get maximum revenues from the first week of release of new film. Shelf life of films has reduced significantly and showing new films every week/fortnight is the key to success in distribution and exhibition.
- The business model is an asset-light model. PSTL has signed a pay-per-view contract with Value Media Pvt. Ltd. for 1,000 theatres for equipment and services for the digital cinema system thereby avoiding a capital expenditure of Rs 160 crore. Also, all the standalone theatres, malls, multiplexes and cineplexes are on long-term lease or revenue sharing model, further lightening the capex burden.
- PSTL has the first-mover advantage in digitisation of theatres and digitisation of films. The company will exhibit films and other content in digital mode without physical prints. This will the company Rs 60,000 – Rs 70,000 per movie per theatre and approximately Rs 20 lakh per theatre per annum.
- Since June 2006, promoters have bought and sold substantial number of shares at various prices. Pre-issue, investment advisor Nirmal Kotecha’s equity stake at 41.92% is higher than promoters’ stake of 27.34% (which will go down to 22% post-IPO). This is quite low.
- PSTL is exhibiting films only for about a year. The company plans to scale up in a very big way in a short span of time. It has plans to cover 1,550 locations and manage 2,000 theatres by 2010. Negotiating, handling and managing a large number of small theater owners spread all over India will be a highly demanding job.
- PSTL is a new player in the exhibition/distribution industry and competes with other established players, some of whom have been operating for a very long time and also have deeper pockets as compared with PSTL. Its capability in Hindi film distribution is unproven. In digital distribution, the company may have to contend with the Anil Dhirubhai Ambani group, which is planning to enter the field using Reliance Communications’ optic fiber network. Also, increase in the price of content on account of competition may restrict profit.
At the price band of Rs 88 - Rs 100, the annualised EPS for the half-year ended September 2006 on post-issue equity works out to Rs 3.3 - Rs 3.5 and PE works out to 26.4 – 28.6. TTM PE of Entertainment/Electronic Media Software is 39.7. Companies in similar business such as Adlabs Films has a PE of 36.4, and Inox Leisure 44.9. However, the business model of PSTL is different from its competitors. The company’s project is exciting and can produce fast growth at a lower capital cost (which is what stock market fancies), provided it gets executed as planned. The job will be highly demanding.
Crude oil: Price curve to skew upwards
Oil was back in action following a slew of market moving news including the release of the IEA monthly oil report and DOE's inventory numbers. IEA maintains global oil product demand at 84.5 million barrels/day in 2006 (+1.1% versus 2005) and 85.9 million barrels/day in 2007 (+1.7%). However the report is cautious about the 2007 forecast as it faces downside risks, due to the uncertainties regarding the US economy. The IEA has reduced China's 2006 demand growth rate to 5.6% from 6.2% given the weak demand over the past three months, paving the way for choppy sessions ahead
The recovery of the Sensex coupled with increase in FII fund inflows and a positive opening in the Asian market may way on the local indices in early trades and thereafter could exhibit some volatility during the intra-day trades. However, mood of the market remains cautious. Among the local indices Nifty could rise to 3810 or 3850 level on the upside while it has a crucial support at 3730 on the downside. The Sensex has resistance at 13220 and support at 13030.
US indices registered gains, while the Dow Jones closed above the level at 12317, up two points, while the Nasdaq moved up by one points to close at 2432.
Most of the Indian ADRs ended positive out of 11 floats trading on the US bourses. ICICI Bank advanced 3.62% and Infosys, Satyam, HDFC Bank, Dr Reddy's, MTNL and Tata Motors gained over 0.5-3% each. Among the major loser Rediff declined 4.46% and VSNL shed 2.1% while ,Patni Computers was marginally down.
In the commodity segment, the Comex gold for the February advanced at $632.40 an ounce. The Nymex light crude oil for January delivery declined to close at $61.37 a barrel.
BUY Gayatri Projects (283.95)
SL 270 Target 310, 315
BUY JB Chem (90.05)
SL 82 Target 104, 107
BUY Godrej Industries (173.60)
SL 159 Target 200, 205
BUY VSNL (383.90)
SL 366 Target 419, 423
BUY Titan Inds (709.65)
SL 692 Target 739, 745
Tango if you have cash
Life shrinks or expands in proportion to one's courage.
Don’t be courageous if you don’t have the cash to back you. Wednesday was one of the most volatile days in recent memory, with bulls and bears slugging it out really hard. That slugfest is likely to continue, as both the camps will try to outdo each other. The sudden and sharp fall this week is also likely to make it difficult for all category of players to take a call on the immediate direction of the market.
Global cues are mixed. The US market closed flat but in Asia, key markets are in positive territory. Oil is trading above $61 per barrel. OPEC is holding a meeting today. The opinion is split between another cut in production and a status quo. Brace for another cautious opening and a choppy day. It is humanly impossible, especially in the light of this week's sharp fall, to predict the closing on the main indices. So, don't bother about that and happy trading.
For retail investors it makes perfect sense to wait for some more time before taking a fresh plunge, unless of course you have the cash and are willing to ride through any short term setbacks. Having said that the more grittier ones could look at long-term investment opportunities in quality scrips. On the whole the sentiment is still weak owing to the near-term uncertainty.
FII inflows are expected may slow down further due to the year-end factor. But markets could swing wildly with lower volumes are local operators may tend to get more active with lesser volumes. The upcoming quarterly results and the build-up to the Budget 2007 will also keep investors on tenterhooks. So, we see the market being rangebound after it recovers from the latest mayhem.
FIIs were net buyers of Rs245.2mn (provisional) in the cash segment yesterday. They pumped in Rs252.1mn in the F&O segment. On Tuesday, foreign funds were net buyers of Rs952mn in the cash segment. On the other hand, Mutual Funds were net sellers to the tune of Rs5.18bn.
The IPOs of Shree Ashtavinayaka Cine Vision and Lumax Auto Technologies open today.
Shares of Sutlej Textiles and Industries Ltd. will get listed on the bourses today.
Eicher Motors is a stock to watch out for, amid renewed media reports that DaimlerChrysler is looking at a majority stake in the commercial vehicles maker. Maruti will be in action amid reports that it will hike prices in January. However, reports of rising royalty burden could limit the gains.
Airlines such as Air Deccan, SpiceJet, GoAir and Kingfisher might advance as a financial daily reports that the Government is considering relaxing the criterion for flying overseas, from five years of domestic operations to three years. ICICI Bank and other banks will continue to be in the spotlight as the largest private bank in the country has hiked lending and deposit rates following the increase in the CRR.
GV Films' Board will meet on December 23, to consider a proposal to acquire theatres abroad, and sign agreement for a joint venture with an overseas company for the web casting division.
Diageo, the global liquor giant, has received the FIPB approval for entering into a 50:50 Joint Venture with Radico Khaitan. Teledata Informatics has signed a MOU with eSys Technologies Pte Ltd., Singapore towards subscribing to the share capital of the company.
FCI OEN Connectors Ltd. has agreed to sell its Automotive Connector business to FCI Technology Services Ltd., a 100%-subsidiary of FCI Asia Pte Ltd, Singapore.
On Wall Street, the S&P 500 Index approached a six-year high as retailers rallied on the first increase in sales since July and energy producers benefited from higher oil prices. Wal-Mart led the rally after the government said retail sales rose 1% last month, more than the forecast.
The S&P 500 closed flat at 1413.21, leaving it within two points of its highest since November 2000. The Dow Jones too finished nearly unchanged at 12,317.50. Chip stocks dropped, weighing on the Nasdaq, after analysts downgraded Applied Materials and Micron Technology. The tech-rich index ended at 2432.41.
European indexes got a lift from the retail sector. The pan-European Dow Jones Stoxx 600 index rose 0.6% at 361.86. The German DAX Xetra 30 closed up 0.7% at 6,520.77, the French CAC-40 rose 0.9% to 5,475.85 and the UK's FTSE 100 added 0.6% at 6,192.50.
Asian stocks rose for a third day on Thursday after a US retail sales report fueled speculation that demand in the world's largest economy will remain healthy. Toyota and Hynix Semiconductor paced the advance.
The Morgan Stanley Capital International Asia-Pacific Index gained 0.4 percent to 137.15 at 11:11 a.m. in Tokyo. Eight of the measure's 10 industry groups advanced. All regional benchmarks rose, except in the Philippines.
Japan's Nikkei 225 Stock Average climbed 66 points to 16,759 while the Hang Seng advanced 102 points to 18,820. The Kospi in Seoul added 4 points to 1387 while the Straits Times in Singapore gained 9 points to 2893.
Japanese shares rose after the Nihon Keizai newspaper reported that the Bank of Japan will probably leave interest rates unchanged at its next meeting.
Australia's key stock index was set for a record close. QBE Insurance gained after buying companies to boost overseas earnings. Qantas Airways jumped after agreeing to a buyout offer from Macquarie Bank and Texas Pacific.
In the emerging markets, the Bovespa in Brazil rose 0.6% to 43,284 while the IPC index in Mexico lost 0.5% to 25,690 and the RTS index in Russia fell 0.7% to 1829.
Major Bulk Deals:
Standard Chartered has bought ABG Shipyard; Bear Stearns has sold Adhunik Metaliks; HSBC Financial has picked up Alok Industries; Citigroup Global has purchased Gayatri Projects; Birla Sunlife MF has bought Greaves Cotton; Templeton MF has picked up India Cements; Merrill Lynch has sold Infotech Enterprises but has bought K Sera Sera; Bear Stearns has sold K Sera Sera; Goldman Sachs has purchased Lloyd Electric; HSBC has bought Mazda; ABN AMRO Bank has picked up shree Ram Mills.
IFCI, R Com, Ashok Leyland, India Cements, Parsvnath, IVRCL Infrastructure, NTPC, Reliance Industries, Gujarat Ambuja, Zee Telefilms, Hindalco, Indiabulls, Century Textile and Satyam Computer.
The turnover on NSE was down by 12.4% to Rs96.36bn. BSE Bank index was the major gainer and gained 2.97%. BSE Pharma index (up 1.87%), BSE Technology index (up 1.62%), BSE Auto index (up 1.34%) and BSE Oil & Gas index (up 1.31%) were among the other major gainers.
Upper Circuit Filters:
LMW, GTC Industries, Mcnally Bharat and Surana Industries.
Andhra Bank, Bank of Baroda, Era Constructions, Glenmark, IOC, Polaris, Reliance Communications, Sterling Biotech, Suzlon Energy and Syndicate Bank.
L&T – Buy from Citigroup
Shree Cement – Buy from ASK Raymond James
Long Term Investment:
Major News Headlines:
Bharti Airtel, to form Mutual Fund JV with Axa
Raymond unit signs JV pact with AJ Rose
Britannia in pact to buy stake in 2 bakeries in Middle East
Tantia Constructions to consider plan to sell securities
McNally Bharat gets order worth Rs399mn
L&T Infotech acquires US electronic design services firm
Glenmark to start trials of pain medicine in Europe
Sical Logistics plans to sell $50mn shares to large investors
Zee sets Dec 18 as date for split into 3 companies
Teledata Informatics signs MoU with eSys Technologies, Singapore
Prajay Engineers Syndicate Ltd.
IT offshoring and the resultant boom in hospitality business and premium residential segment has given a fillip to the Hyderabad real estate market. The expected new international airport at Shamshabad should give further increase to the commercial potential of the city. PESL being one of the leaders in the Hyderabad market is well placed to capture this high growth phase. We expect the company to report revenue and profit CAGR of 139% and 128% respectively over FY06-09. We value the stock at Rs307per share implying an upside potential of 49% from the current levels.
The ongoing IT outsourcing boom in the Hyderabad market, has led to a sharp rise in real estate demand for hotels and premium residential. This is corroborated in the sharp growth of more than 50% in property prices over the past 12 months. PESL with planned 15.8mn sq ft development offers a strong play on the growing Hyderabad real estate market.
PESL has a good mix of residential and hotel development over the next few years capturing both the booming segments. The company has altered its mass housing strategy to include luxury residential, citing increased demand from the IT/ITES sector. PESL also plans to develop two 5-star (one in Goa), two 3-star and expand its existing three star hotel.
PESL currently has 8 on hand projects and expects to take the tally to 31 over the next 4 years with a planned space addition of 15.8mn sq ft. we expect these
projects to turn a revenue CAGR of 139% and a profit CAGR of 128% over the next 3 years. Hospitality business would start contributing meaningfully from FY10.
PESL’s ambitious plans can run into rough weather, if there is a sharp drop in property prices in the Hyderabad market. Also with many projects expected to start in a short span, delay in execution or launch could push back cash flows impacting valuations.
Bulls find their feet
The 13th December has turned out to be lucky for the bulls. After three days of heavy selling; the markets bounced back sharply today with vengeance putting up a strong fight. After witnessing volatility in the early trades, the key indices firmed up in the later half as Blue Chip like RIL, ACC, SBI, Satyam Computer and L&T rose on back of fresh buying. Banking, Pharma, Capital Good, Telecom and Sugar stocks were also in demand. Finally, the BSE benchmark Sensex added 186 points to close at 13181 and NSE Nifty gained 48 points to close at 3765.
Zee Telefilms put on a great show, the scrip was the top gainer among the 50-scrips of NSE Nifty adding over 6.4% to Rs335 after the Company declared Dec 18 as date for its split into 3 Companies. The scrip touched an intra-day high of Rs338 and a low of Rs310 and has recorded volumes of over 44,00,000 shares on NSE.
Satyam Computer gained 2.5% to Rs449 after the company signed MoU with Government of Egypt to set up development Center. The scrip touched an intra-day high of Rs454 and a low of Rs430 and recorded volumes of over 30,00,000 shares on NSE.
Glenmark spurred over 7.2% to Rs548 after the company announced that they would start Trials of Pain medicine in Europe. The scrip touched an intra-day high of Rs555 and a low of Rs491 and recorded volumes of over 5,00,000 shares on NSE.
After taking a plunge on back of CRR hike, the Bank index today bounced back as Federal Reserve left its benchmark rate unchanged, the index regained 2.97%. Index heavy weight SBI surged 3.7% to Rs1225, ICICI Bank advanced 3.4% to Rs830, HDFC Bank was up 1% to Rs1039. While, among the Mid-Cap stocks, Syndicate Bank, Union Bank and Bank of Baroda were among the major gainers.
Capital Good stocks ended with smart gains. Siemens surged over 6.2% to Rs1110, L&T advanced 1.9% to Rs1419, ABB surged 3% to Rs3577 and Punj Lloyd was up 2% to Rs933.
Auto stocks gained momentum towards the end. Tata motors rose 2.5% to Rs841, Bajaj Auto advanced 1% to Rs2554 and TVS motors surged over 4.6% to Rs85.
Pharma stocks witnessed fresh buying. Glaxo Pharma surged 2.9% to Rs1129, Ranbaxy gained 2.2% to Rs367, Lupin added 4.5% to Rs555 and Sun Pharma added 0.2% to Rs935.
Sugar stocks were in demand as according to reports the government may lift a ban on sugar exports. Bajaj Hindusthan jumped 5.3% to Rs228, Sakhti Sugar surged 2.7% to Rs103, Balrampur Chini advanced 2.4% to Rs81 and Rana Sugar added 1.3% to Rs23.
The market is likely to open higher taking cue from steady to firm Asian markets. But according to a dealer with a domestic brokerage, the market may lose steam after a firm opening. He expects correction to continue on the bourses. A dealer with another brokerage expects mid-cap stocks to extend gains. A host of battered small-cap and mid-cap stocks had surged on Wednesday (13 December).
Though Sensex is sharply off its record high of above 14,000, equity valuations still remain steep. Sensex’s current PE multiple is 21.72 based on trailing 12-month September 2006 earnings. Indian market is most expensive compared to its regional and emerging market peers.
Sensex staged a recovery on Wednesday (13 December) gaining 186 points. A lower-than-expected industrial output growth for October 2006 caused a 404-point fall in the Sensex on Tuesday (12 December), after the barometer index lost 400 points on Monday (11 December) following a surprise hike in the cash reserve ratio (CRR) by the RBI, which raised fears of a rise in interest rates. Interest rates in the economy have already started firming up. On Wednesday, ICICI Bank raised lending rates by 50 basis points across the board.
After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so, given that strong earnings growth has been a key driver of the bull-run on the bourses.
Market men will also be watching FII allocations for India for calendar year 2007.
As per provisional figures, FIIs were net buyers to the tune of Rs 24.52 crore on 13 December, the day when the Sensex had risen 186 points. Their inflow was Rs 95 crore on 12 December, the day when Sensex had plunged 404 points.
Last few days witnessed substantial FII sales in index-based futures. FIIs were net sellers to the tune of Rs 284 crore in index-based futures on 13 December. Their net sales in index-based futures in four trading sessions between 8 December to 13 December totaled Rs 3036 crore. Last two days also witnessed substantial FII purchases in individual stock futures, worth Rs 780 crore (between 12 December to 13 December).
Asian markets were in the green on Thursday. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.4% to 0.7%.
US stocks closed little changed on Wednesday as surprisingly strong retail sales data raised hopes for the holiday season, offsetting a rise in oil prices that hurt industrial shares. The Dow Jones industrial average advanced 1.92 points, or 0.02 percent, to end at 12,317.50. The Standard & Poor's 500 Index rose 1.65 points, or 0.12 percent, to finish at 1,413.21. The Nasdaq Composite Index eked out a gain of just 0.81 of a point, or 0.03 percent, to close at 2,432.41.
US crude oil futures for January delivery rose 35 cents to settle at $61.37 a barrel on the New York Mercantile Exchange on Wednesday, after government data showed crude inventories fell more than expected in the latest week. NYMEX January crude futures hit a session high at $61.85.
It was choppy session as Sensex opened up and slipped towards days low at 12830 levels but managed to close in positive at the end on 4th day of fall.
Sensex has formed a continuation pattern which indicates that weakness in the trend will continue ( minimum 12580 levels ) but, after a pullback rally of 300-400 points. On weekly basis Sensex is forming a huge bearish candle which leads another 1500 points fall. To nullify this bearish scenario this pullback rally must close above 13560 for next 2 days. If it close above 13560 then there could be chance of 14180 or more levels or else 11800 levels could be witness as a trend reversal.
Support 1) 13090 2) 13010 3) 12900 4) 12780.
Resistance 1) 13490 2) 13602 imp 3) 13790 4) 13860.
Infrastructure Index up 9% for October 2006
Fem Care Pharma
Cluster: Ugly Duckling
Price target: Rs500
Current market price: Rs358
A name FEM(mes) trust
- Leadership position in a niche category: Fem Care Pharma Ltd (FCPL) has a dominant market share (around 65%) in the niche segment of bleach cream. It is also among the leading players in the liquid soap and hair-removing categories. To boost its overall growth, the company has introduced several product variants at various price points to effectively tap the expected growth in the FMCG industry, especially the fast growing beauty treatment and skin care segments.
- Incremental growth from exports: In FY2006, FCPL acquired a US-registered premium bleaching cream brand, Jaquline, which has an established presence in the UAE and Middle-East markets. The company plans to utilise it as an umbrella brand to introduce skin care and beauty products, and boost the overall growth of its export business.
- Margins to firm up: The introduction of high-margin premium products has positively affected its operating margins. The company has also commissioned a new manufacturing facility in the tax-blessed region of Baddi, Himachal Pradesh. The fiscal incentives in the form of income tax and excise duty exemptions are further boosting its overall profitability.
- Consolidation of its marketing arm: The distribution of FCPL's products is done exclusively by its 60% subsidiary, Mirasu Marketing. FCPL is expected to acquire the remaining 40% stake (held directly by the promoters) in Mirasu Marketing over the next one year. The consolidation is likely to result in marginal dilution in its equity base (about 1-1.5% on the higher side) but would be earnings accretive.
- Attractive valuation: The consolidated revenues and earnings are estimated to grow at a CAGR of 17.5% and 48.3% respectively during FY2006-08. Currently the stock trades at 9.9x FY2007E and 8x FY2008E earnings. We recommend a Buy on FCPL with a price target of Rs500.
Record breaking month
Riding on the cellular boom and the aggressive strategy by the operators to add new users, the Indian telecom operators are breaking new records. Both the GSM and CDMA industries witnessed a robust growth in subscriber add-ons taking the mobile subscriber base to 140.0 million at the end of November. However the key highlight for the month was witnessed in the GSM space. With an additional 5.0 million GSM subscribers bagged during the month, the total GSM mobile subscriber base stands at 100.7 million at the end of November, marking its entry into the elite 100 million GSM subscriber club. India now has the third largest number of GSM mobile subscribers next only to China (401.7 million) and Russia (152.2 million).