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Wednesday, January 24, 2007

STRATEGY INPUTS FOR THE DAY


Concrete gains likely

The most important thing is not to stop questioning.

Yesterday the cement counters cracked following the Government's decision to slash import duties on cement, capital goods and select raw materials. This was done to curtail inflation. Cement shares were hit amid fears that the move could lead to cheaper imports and hurt local players. After some questioning, investors will realize that the panic selling was overdone. Portland cement accounts for just over 30% of total output in the country, according to estimates. So, expect a bounce back this morning in cement stocks to begin with. Banking stocks were hammered following the disappointing results from leader SBI. However, other banks have reported good numbers. As a result, here too, we could see a rebound today.

Do not get trapped in the bounce back. Remember, the key indices are trading near their record levels. Signs from the F&O segment are not very encouraging. Open interest in Nifty January Futures is down with the premium between the Spot Nifty and the Futures narrowing. This indicates that long positions have been liquidated. The difference between the underlying index and the Nifty February Futures too has reduced with a sharp rise in open interest. This shows that some short positions have been created. Hence, one should remain on guard for any untoward development.

We expect a higher opening in line with the firm trend in Asian markets. US stocks too closed higher. The Nasdaq, however finished flat. There's one bad news though. Oil prices climbed past the $55 per barrel mark in New York yesterday. In extended trading in Asia, the front-month crude contract was quoting 17 cents higher at $54.87 a barrel. FII inflows are not too exciting at the moment. They were net buyers of Rs1.27bn (provisional) in the cash segment yesterday. In the F&O segment, they offloaded stocks worth Rs3.43bn. On Monday, foreign funds pumped in Rs3.19bn. Mutual Fund on the other hand pulled out Rs542.3mn.

Some of the key results today include: Allahabad Bank, Apollo Hospitals, BoB, Bombay Dyeing, Corporation Bank, HDFC, Petronet LNG, Prithvi Info, HCL Infosystems, IOB, M&M Financial, OBC, Rolta and Sasken.

On Wall Street, the Dow Jones and the S&P 500 rose, while the Nasdaq was little changed, as investors struggled to absorb a nearly 5% jump in oil prices and a spate of mixed earnings reports.

The Dow industrials added 56.64, or 0.5%, to 12,533.80, its first gain in five days. The S&P 500 rose 5.04, or 0.4%, to 1427.99. The Nasdaq ended static at 2431.41.

Among the Indian ADRs, Patni surged 7.8%, Infy rose 1.5%, Satyam gained 1.7%, Tata Motors lost over 1%, Dr. Reddy's dropped 4.7%, HDFC Bank advanced 1.7% and ICICI Bank tacked on 1.8%.

European shares closed in the red, hit by technology-sector weakness. The pan-European Dow Jones Stoxx 600 index lost 0.1% at 372.61. The German DAX Xetra 30 closed down 0.1% at 6,678.93 and the French CAC-40 slipped 0.1% to 5,575.07. The UK's FTSE 100, however, gained 0.2% to 6,227.60.

Asian markets are on firm footing this morning. The Nikkei was up 113 points at 17,552 while the Hang Seng in Hong Kong too climbed 128 points to 20,898.

The Morgan Stanley Capital International Asia-Pacific Index rose 0.4% to 142.17 at 12:11 p.m. in Tokyo, heading for the highest close since May 10. The gauge is within 1% of its record close on May 8.

Stock benchmarks in Australia, China, Hong Kong and Singapore were set to close at all-time highs. Indexes in markets open for trading gained, except in Indonesia.

In emerging markets, the Bovespa in Brazil gained 1.4% while the RTS index in Russia was up 0.8%.

Major Bulk Deals:
Morgan Stanley has picked up Lloyd Electric; Citigroup has sold Orient Hotels; Deutsche Securities has purchased Phoenix Mills; Tata MF has sold Punjab Chemicals; Morgan Stanley has sold REI Agro; Goldman Sachs has sold Shriram Transport; Goldman Sachs has bought Sical Logistics from Lloyd George Investment; Citigroup has sold Venus Remedies; HSBC has picked up Vyapar Industries.

Market Volumes:
The turnover on NSE was up by 5.9% to Rs80.26bn. BSE Bank index was the major loser and lost by 2.17%. BSE Pharma index (down 1.66%), BSE Consumer Durable index (down 1.53%), BSE PSU index (down 1.29%) and BSE FMCG index (down 1.11%) were among the other major losers.

Volume Toppers:
IFCI, Nagarjuna Fertilizers, SAIL, India Cement, TTML, Shree Ashtavinayak, IDBI, R Com, Satyam Computer, Aftek, Balrampur Chini, Hindalco, ITC, MTNL, IDFC, KPIT Cummins, Ispat Industries, Ashok Leyland and Voltas.

Upper Circuit Filters:
Flex Industries, Heritage Foods, Pyramid Saimira, Nesco, Crest Animation, Ganesh housing, Hindustan Dorr and Suven Life.

Delivery Delight:
Apollo Tyres, Bharat Forge, Cambridge Solutions, Educomp Solutions, Gammon India, GTC Industries, Indiabulls, Jammu and Kashmir Bank, Orchid Chemicals, Sun TV, Tata Power and Zee Entertainment.

Brokers Recommendations:
Great Offshore – Buy from Kotak with target of Rs878.

Long Term Investment:
Jyoti Structures.

Major News Headlines:
Bharti Airtel Q3 profit at Rs12.15bn (up 122%); revenues at Rs49.13bn (up 62%)
SBI Q3 net at Rs10.65bn (down 9.5%); total income at Rs115.47bn (up 1.2%)
Glenmark developing asthma drug with Forest Labs
Neyveli Lignite Q3 profit at Rs1.52bn (up 11.7%), revenues at Rs6.42bn (down 6.5%)
BEML Q3 profit at Rs529.7mn (down 5%); revenues at Rs5.59bn (up 5.6%)
Tata Motors Q3 profit at Rs5.13bn (up 11.5%), sales at Rs69.56bn (up 37%)
Cipla Q3 profit at Rs1.84bn (up 5.1%), sales at Rs8.81bn (up 12.5%)
Hindustan Zinc cuts prices by 2.3% to Rs188,000 per ton
Indian Hotels Q3 profit at Rs879.9mn (up 42.9%), revenues at Rs4.12bn (up 25%)
Grasim Q3 profit at Rs4.12bn (up 154%), sales at Rs22.79bn (up 37%)
LIC Housing Finance Q3 profit at Rs766.1mn (up 31%), total income at Rs4.05bn (up 27%)