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Thursday, May 31, 2007

STRATEGY INPUTS FOR THE DAY


Volatile day...expiry, GDP numbers to keep indices shaky

The best way to live is by not knowing what will happen to you at the end of the day...

After a fairly volatile week so far, the bulls can hope for a better day in office, with positive global cues and strong inflows from FIIs. And though the Chinese market is once again down sharply today, it is unlikely to have a significant impact on local sentiment. What will have a bearing on today's trading will be the GDP numbers for Q4 and FY07 to be released at noon. The Government has forecast a 9.2% growth in GDP for the year ended March 2007. Any reading above that level will help boost the undertone, which is positive despite the recent spurt in volatility. Even a slightly disappointing data may be brushed aside.

In the F&O segment, marketwide rollover has been 63% so far while the same in the Nifty is at 59%. The open interest is at record levels and with the Sensex close to all-time high there is bound to be intra-day gyrations. We expect the stock centric activity to continue. On the whole, we expect a strong day for the bulls.

Air Deccan will be in action as a financial daily reports that the low-cost carrier is set to be taken over by Vijay Mallya's Kingfisher Airlines. For the time being though Air Deccan is denying the same. Idea Cellular will be another stock to keep an eye on as some media reports have suggested it could merge with Spice Telecom, though none of the companies have officially confirmed any such deal. Fortis Healthcare shares might fall anew after Dr. Naresh Trehan sold its 10% stake in Escorts Heart Institute and has joined rival Apollo Hospitals.

Retailers like Pantaloon and Shoppers' Stop will be in focus as the Left parties have demanded restrictions on their proposed rapid expansion. GMR Infrastructure could gain as it has set up a subsidiary for the development of the excess land at the Delhi airport. Besides, a few brokerages have come out with 'buy' reports on the stock. Watch out for some movement in Indus Fila. It could announce an acquisition today along with its results. Hindustan Oil Exploration could be in limelight on speculation that a large corporate may take stake. No confirmation on the same. BHEL could see some choppiness.

FIIs were net sellers of Rs5.98bn (provisional) in the cash segment yesterday while the local institutions pumped in Rs5.62bn. In the F&O segment, they were net sellers of Rs3.07bn yesterday. On Tuesday, foreign funds poured in Rs8.37bn in the cash segment, taking their net investment in the month to nearly a billion dollars. For the year, their net inflows have crossed the $4bn mark. Mutual Funds were net sellers of Rs42mn on Tuesday.

In the minutes of the last policy meeting released yesterday, the Federal Reserve said economic growth was slow, but added that it would pick up in the coming quarters. The central bank also maintained that inflation was their predominant concern. Yet, US stocks rallied. The Dow Jones and the S&P 500 ended at new all-time highs on Wednesday, while the Nasdaq finished at a new six-year high.

US stocks fell in the morning on the back of a slump in the Chinese stocks. But by midday, investors shrugged off such worries and sent stocks higher. S&P 500 surpassed its 2000 record, led by energy and financial shares. The S&P 500 rose 12.12, or 0.8%, to 1530.23, eclipsing its March 2000 record close of 1527.46. The Dow added 111.74, or 0.8%, to 13,633.08, its 25th high this year. The Nasdaq rose 20.53, or 0.8%, to 2592.59.

US light crude oil for July delivery rose 34 cents to $63.49 a barrel on the New York Mercantile Exchange. COMEX gold fell $4.10 to $659.30 an ounce. Treasury prices rose, lowering the yield on the 10-year note to 4.87 percent from 4.88 percent late Tuesday. In currency trading, the dollar gained modestly versus the euro and the yen.

European shares finished lower. The pan-European Dow Jones Stoxx 600 index fell 0.9% to 394.64. The UK's FTSE 100 dropped 0.9% to 6,545.50, the German DAX Xetra 30 lost 1% to 7,703.86 and the French CAC-40 declined 0.9% to 6,001.13.

Mexican and Brazilian stocks jumped to record highs. Mexico's benchmark IPC stock index climbed 715 points, or 2.3%, to 31,380. Brazil's Bovespa soared 814 points, or 1.6%, at 52,527.65. Also, Chile's IPSA ended up 0.5% at 3,261 and Argentina's Merval index rose 0.9% to 2,222.22.

China's stocks fell further today, set for the biggest two-day drop on record, after the government tripled the tax on securities transactions. The benchmark CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, dropped 170.82, or 4.4 percent, to 3715.64 as of 10:06 a.m. local time. The measure tumbled 6.8 percent yesterday and is headed for the worst two- day performance since it was introduced in April 2005.

Meanwhile, other Asian markets have bounced back this morning. The Nikkei in Tokyo is up 193 points to 17,781 while the Hang Seng in Hong Kong is up 230 points at 20,524 and the Kospi in Seoul has gained 27 points to 1690. The Straits Times in Singapore has shed 16 points to 3511.

Emerging market funds witnessed robust inflows in the fourth week of May, according to the Emerging Portfolio Funds Research (EPFR). Latin America and Global Emerging Markets (GEM) equity funds had their best week in over a year, EMEA (Europe Middle East Africa) equity funds posted inflows for the first time in six weeks. China and Japan country funds remained out of favour, although the pace of outflows slowed.

Four day rally came to an end ahead of F&O expiry as bulls ran out of steam led by weak Asian markets upfront. Further weak opening by the European markets dampened the sentiments of the investors on Dalal Street. The frontline stocks like HDFC, Bajaj Auto and SBI were the major gainers. However, Reliance Energy, BHEL and Satyam Computer were the major laggards.

Even the Mid-Cap and the small cap index witnessed sell off as Mid-Cap index fell over 1% and small cap index lost half percent. Nirma after surging for couple of trading session cooled off a bit, however, L&T, Punj Lloyd held firm. Finally, the 30-share Sensex ended lower by 96 points to close at 14411. NSE-50 Nifty lost 43 points to close at 4249.

Shares of MIC Electronics Ltd. and McDowell Holdings Ltd. climbed on their stock market debut on Wednesday while that of Insecticides India Ltd. fell below the issue price.

MIC Electronics, the maker of True Colour LED video displays, listed at Rs210.25 on the BSE, up 125% over its issue price of Rs150 per share.

McDowell Holdings opened at Rs195.60 on the BSE as against the base price of around Rs157. the scrip was locked in the 20% upper circuit. McDowell Holdings (formerly McDowell India Sprits Ltd.) got listed following a restructuring scheme.

L&T surged by over 7.5% to Rs1994 after the company yesterday announced its full year profit at Rs14.03bn (up 38%), full year net sales at Rs175.79bn (up 19.1%) and to pay Rs2 as final dividend. The scrip touched intra-day high of Rs2010 and a low of Rs1847 and recorded volumes of over 33,00,000 shares on NSE.

Ranbaxy edged lower by 0.5% to Rs389 after the company won a legal battle against Pfizer in Norway. The scrip touched intra-day high of Rs401 and a low of Rs386 and recorded volumes of over 10,00,000 shares on NSE.

Orbit Corp declined by over 2.5% to Rs248 amid reports of some accounting mismanagement. The scrip touched intra-day high of Rs263 and a low of Rs203 and recorded volumes of over 73,00,000 shares on NSE.

Simplex Infrastructure surged by over 4% to Rs340 after the company declared that they have secured order worth Rs10.55bn. The scrip touched intra-day high of Rs359 and a low of Rs326 and recorded volumes of over 95,000 shares on NSE.

Crompton Greaves dropped by over 6% to Rs235. The company announced its Full year result with net profit at Rs1.92bn (up 17.7%) and sales at Rs36.6bn (up 33%). The scrip touched intra-day high of Rs254 and a low of Rs234 and recorded volumes of over 6,00,000 shares on NSE.

Capital Good stocks held firm as the index gained by 1.68% in a falling market. L&T led from the front the scrip surged by over 7.5% to Rs1994, Punj Lloyd rallied by over 6% to Rs208 and Gammon India advanced by 1.2% to Rs385. However, BHEL pared its intra-day gains and slipped by 3% to Rs2767,

Metal stocks lost its shine on back of selling pressure. SAIL dropped by over 3% to Rs139, Hindalco was down by 3% to Rs140, Sterlite Industries slipped by 1.3% to Rs531 and Hindustan Zinc declined by 1.5% to Rs647.

FMCG stocks also were on the receiving end on back of profit booking. HLL slipped by 1% to Rs198, ITC was down by 1.6% to Rs162, Colgate dropped by over 4% to Rs354 and Tata Tea declined 3.7% to Rs876.

Insider Trades:
UFLEX Limited: Anshika Consultants Private Limited (part of the promoters' group) has purchased from open market 58757 equity shares of UFLEX Limited on 28th and 29th May, 2007.

Volume Toppers:
RNRL, IFCI, JP Hydro, RPL, Nagarjuna Fertilizer, ITC, Orbit Corp, TTML, Dish TV, R Com, Redington, Dabur Pharma, Punj Lloyd, Unitech, Dena Bank, L&T and Bank of Rajasthan.

Upper Circuit:
Shree Ashtavinyak, Redington, McDowell Holding, ACE, UTV Software, Eicher Motors, Shree Precoated and Ruby Mills.

Delivery Delight:
Alfa-Laval, Apollo Tyres, Bharat Electronics, GAIL, GlaxoSmithKline Pharma, GNFC, Gujarat State Fertilizers, HCL Technologies, Hero Honda, HDFC, IPCL, Oriental Bank of Commerce, Sterling Biotech and Union Bank of India.

Abnormal Delivery:
Nirma, BEML, Grasim Industries, Rolta, SCI, Bombay Dyeing, BPCL, Bharat Forge, Geometric Software Solutions Company Ltd, TVS Motor, Colgate, Indian Oil Corporation Ltd and McDowell & Co Ltd.

Results Today:
Cummins India, Indus Fila, Punj Lloyd, RPG Cables, Timex, Swaraj Mazda, .

Results Corner:
NTPC Q4 profit at Rs17.35bn (up 11%), revenues at Rs95.37bn (up 14%)

Crompton Greaves Full year sales at Rs36.6bn (up 33%) and Full year profit at Rs1.92bn (up 17.7%)

Birla Corp Q4 profit at Rs1.01bn (up 50.7%) and revenue at Rs4.56bn (up 14.8%).

Brokers Recommendations:
M&M – Buy from Citigroup with target of Rs1032

Unity Infra – Buy from Kotak with target of Rs636

Long Term investment:
Infosys

Major News Headlines:
Ranbaxy wins legal battle for Lipitor against Pfizer in Norway

Patel Engineering bags order from NHAI worth Rs5.18bn

ICRA enters MoU with UCO Bank for rating for SSI, SME borrowers

Pricol to set up Joint Venture company in Iran

Simplex Infra gets orders worth Rs10.55bn

Sobha Developers enters retail business

HPCL (Q4 FY07) Result Update

Hold

CMP Rs283

Hindustan Petroleum Corporation Ltd (HPCL), reported robust numbers for Q4 FY07 and for the fiscal year ended March 2007 on back of higher bond income and strong volume growth. Higher share of upstream companies in sharing of under recoveries further provided a boost to bottomline growth. Improved GRMs provided additional strength to operational performance. Going ahead, the GRMs are likely to remain at current high levels on account of stringent fuel specifications and lower capacity additions compared to increase in demand for petroleum products. With expectations of the sharing pattern of under recoveries in FY07 to continue in FY08, HPCL stands to gain. However, uncertainty with respect to the above issue and also related to the pricing of auto fuels increase risk element in valuations. Hence we recommend only high risk appetite investors to hold on to the stock.