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Wednesday, February 07, 2007

A new high lead by select heavy weights !


Market surpassed the previous higher levels to close at an all time high yet again amid mixed Global cues. Starting apprehensively, buying was witnessed through out the trading session. Bajaj was the star of the day on rumours of stock split. Really a stock split is of no significance and value should not increase by 8% but thats a BULL market for you. The rally was supported by Banking, Pharma and FMCG stocks while Automobile, Power, and cement stocks traded mixed.

Driven by robust performance in manufacturing and financial services, the country's gross domestic product (GDP) growth is projected at 9.2% during FY07, against 9% in the previous year. This is along expected lines and kind of discounted. The issue now is that interest rates are rising and whether the GDP growth can continue with the momentum that it has been growing in the current environment.

Sensex closed up 165 points at 14643 helped by gains in Bajaj Auto (3080.3,+9 percent), Hindalco (181.9,+4 percent), Infosys (2358.75,+4 percent), Grasim (2874.6001,+3 percent) and ICICI Bk (982.35,+3 percent). Restricting the gains were Tata Motors (902.05,-2 percent), ONGC (891.65,-2 percent), Guj Ambuja (141.2,-1 percent), HLL (207.5,-1 percent) and RCVL (485.75,-1 percent)

FIIs were buyers of Rs.656 cr yesterday in cash. FII interest seems to have reignited. Yesterdays data would also include about Rs 150 cr of TCS shares sold by Tatas. FII positive numbers will keep the momentum going up with the India Conference of many FII brokers bringing in interest

Bajaj stole the show today. The market talked about stock split in Bajaj Auto. The stock gained substantially on back of this. We like the company but near term competitive pressures are expected. However we believe that the interest was more to do from the fact that Uttaranchal facilities may be near completion and that would add to the margins. The news was positive with Sri Lankan courts decision in favor of Bajaj and against their Sri Lankan importer Ranatunga Motors against the sale of Ranamoto Gulsar. Ranamoto Gulsar is an Chinese version of Bajaj's Pulsar model. Company has started registering its name, design and Brands in the countries where it intends to sell and also deputed a team to track such cases in other export markets to avoid such incidents in future in its other export markets. Bajaj Auto sells 5,000-6,000 bikes per month in Sri Lanka out of which 1,000 are Pulsar 180 model. Bajaj is still a strong contender as an investment option in the two wheeler segment with 34% market share in the two wheeler industry and a strong hold in the three wheeler segment with a market share of 78%. We are positive on this one.

InsdusInd Bank rallied on back of news that Hindujas intends to sell 20 per cent stake to a MNC bank..at Rs 80 per share. It was also said that this deal mandated by RBI. We believe that, the price cannot be mandated. and by the RBI, certainly not. This pricing is probably an expectation of the Hinduja group. IndusInd bank has strengths in credit disbursal but its tough to source funds and that is key for success. The stock closed up 6%.

Technically Speaking: There were 1320 advances against 1337 declines still market ended high as rally was led by selected stocks. Market traded in the range of 14,478 and 14,493. Resistance lies around 14680 levels while support is around 14520 levels. Volume was good at Rs 4,641 cr. 14,720 level will be the next level to be watched out. Key support is now at 14320.

HSBC - Bharti Airtel


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Sharekhan Investor's Eye - Feb 6 2007


ACC
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,250
Current market price: Rs1,100

Stupendous quarterly performance

Result highlights

  • ACC put up an excellent performance for the fourth quarter clocking a 250% year-on-year (y-o-y) growth in the profit after tax (PAT) at Rs329 crore, ahead of our estimates.
  • The top line grew by a healthy 51% year on year (yoy) to Rs1,619 crore on the back of a 42% y-o-y growth in the realisations and a 7% y-o-y growth in the volumes.
  • The operating expenditure grew by 25.8% yoy to Rs1,151 crore driven by a 12.7% y-o-y rise in the power & fuel costs and a 19.7% rise in the freight costs.
  • On account of the higher realisation growth, the operating profit witnessed a 197.5% y-o-y growth to Rs468 crore. The operating profit margin expanded by 1,420 basis points yoy and by 230 basis points quarter on quarter (qoq) to 28.9%.
  • Consequently, the earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne jumped three-fold to Rs975 per tonne on account of the company's high leverage to the cement prices.
  • The interest cost fell by 80.1% yoy to Rs4.1 crore whereas the depreciation provision stood higher at Rs77.1 crore.
  • The pre-exceptional profit stood at Rs329 crore translating into a y-o-y growth of 249.9%. Adjusting for the extraordinary items, the PAT was up 86.1% yoy at Rs358 crore.
  • The company has declared a dividend of Rs15 per share for the year ending December 2006 implying a dividend payout of 27%.
  • ACC is adding capacity of 0.9 million metric tonne (MMT) at Lakheri along with the setting up of a 25MW captive power plant (CPP). The company is also expanding the capacities at various other locations post which, its total capacity is expected to increase by 3.19MMT to 23.1MMT by December 2007. The company is also adding 1.18MMT capacity coupled with a 30MW CPP at its Bargah Cement unit (expected to be commissioned in the first quarter of CY2008) and is putting up a fresh 3MMT plant at Wadi, which is expected to be commissioned in the next 24-30 months.
  • At the current market price of Rs1,100, the stock is discounting its CY2007E earnings by 15.7x and EBITDA by 9.2x. On an enterprise value (EV) per tonne basis, the stock is trading at USD198 per tonne. We believe the stock is very attractive considering its leverage to the cement prices, better cost structure as well as its improving financials. We thus maintain out Buy recommendation on the stock with a price target of Rs1,250.

Ashok Leyland
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs56
Current market price: Rs49.8

Spillover boosts January numbers

Key points

  • Ashok Leyland has reported a magnificent growth in its January numbers. The higher than expected growth was a result of the spillover of sales  from the previous month due to the implementation of the value-added tax in Tamil Nadu w.e.f January 1, 2007.
  • The company reported an overall growth of 67% year on year (yoy) as its vehicle sales jumped to 9,650 units in the month. Its domestic sales grew by 62% while its exports rose by a whopping 228%.
  • The medium-duty vehicle (MDV) goods segment (which accounts for the bulk of the company's sales) turned a brilliant performance, reporting a growth of 69.6% yoy with sales of 7,870 vehicles. The MDV passenger segment, where the company has been losing market share, is beginning to show signs of improvement grew by 56% in January.
  • In January the sales of its light commercial vehicles stood at 28 units, marking a growth of 16.7% yoy.
  • Looking at the year-till-date numbers, the company has reported an overall growth of 41.7% with the MDV goods segment growing by 61% yoy and the MDV passenger segment marking a decline of 4.7%.
    w At the current market price of Rs49.8, the stock quotes at FY2008E PER of 12.4x and at an EV/ EBIDTA of 6.9x. We maintain our Buy recommendation on the stock with a price target of Rs56.

Sundaram Clayton
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,550
Current market price: Rs1,202

Higher efficiencies improve margins

Result highlights

  • Sundaram Clayton Ltd's (SCL) Q3FY2007 results are in line with our expectations. The net sales for the quarter marked a growth of 29.5% to Rs204.7 crore, in line with our expectations. Both the air brakes and die-casting divisions performed well during the quarter registering revenue growth of 17% and 52% respectively.
  • The operating margins have improved by 90 basis points year on year (yoy) to 15.6% because of increasing operating efficiencies. Consequently, the operating profit rose by 37.4% to Rs31.9 crore for the quarter.
  • The other income was higher due to the accounting of the dividend income; while the interest cost has also risen due to the higher capital expenditure incurred by the company. Consequently, the profit after tax (PAT) for the quarter was up 17.3% at Rs24 crore.
  • Due to a lower dividend income, and higher interest costs in the year-till-date period, we are lowering our FY2007 PAT estimates by 6%. However, we are very positive on the long-term prospectsof the company considering the continuing buoyancy in the commercial vehicle (CV) industry, strong outsourcing potential and a huge opportunity in anti-lock braking system (ABS).
  • The value of SCL's total investment in the group companies works out to Rs660 per share. While computing SCL's value, we have assumed a 75% discount to the company's total investment. After adjusting for the same, the SCL stock is currently trading at 14.1x its stand-alone FY2008E earnings and at 11.5x its stand-alone FY2008E earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a price target of Rs1,550.
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C&C Constructions IPO


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IDBI Capital - Shasun Chemicals


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Market in Bradmanesque form


After a shallow correction of 38 points on Tuesday (6 February 2007), the market shot back up today. The two key indices, the Sensex and the Nifty, set their third records in the last four trading sessions. The government today estimated GDP growth of 9.2% in the financial year ending March 2007, above RBI’s forecast between 8.5 - 9%, spreading more cheer in the market.

In the first official growth estimate for 2006/07, the Central Statistics Office said manufacturing output growth was estimated at 11.3%, compared with 9.1% a year ago. India had last week revised upwards growth for the fiscal year 2005/06 to 9% from a previous reading of 8.4%.

The 30-share BSE Sensex jumped 164.94 points (1.1%), to a lifetime closing high of 14,643.13. A bout of volatility afflicted the Sensex after it had struck an all-time high above 14,600 in afternoon trade. After cooling from this record high, the market firmed up once again in late-trading, striking a lifetime high of 14,663.26 at 15:21 IST, and surpassing an earlier all-time high of 14,564.80 of Tuesday (6 February 2007).

The S&P CNX Nifty rose 28.35 points (0.68%), to an all-time closing high of 4,224.25, a gain of 27.80 points (0.66%). The relatively muted gains in the Nifty compared to those in the Sensex were due to a fall in oil exploration major, ONGC, which is a heavyweight in the Nifty.

The market-breadth turned negative in the latter part of trading. The breadth held strong till the afternoon. Against 1,337 shares declining on BSE, 1,320 rose. Just 51 shares were unchanged.

The BSE Mid-Cap Index rose just 4.51 points (0.07%), to 6,186.86. The BSE Small Cap Index gained 35.06 points (0.46%), to 7,697.81.

All sectoral indices of BSE, other than the Oil & Gas Index and the FMCG Index, ended in the green. The BSE IT Index jumped 118.53 points (2.1%), to 5,524.22. It was the top gainer among sectoral indices in percentage terms. The BSE Metal Index gained 142.56 points (1.5%), to settle at 9,426.33.

The BSE clocked a turnover of Rs 5340 crore, lower than Tuesday’s Rs 6103 crore.

With today’s rise, the Sensex has added 552.21 points (3.9%) in the past five trading sessions, from 14,090.92 on 31 January 2007. The barometer index is up 856.22 points (6.2%) in calendar 2007.

FIIs have stepped up buying of late. Their inflow was Rs 165.60 crore in three trading sessions, from 2 February to 6 February 2007.

Healthy corporate earnings' growth in a booming Indian economy, along with strong global liquidity, has been a key driver of the bull-run on the Indian bourses, which is now in its fourth year. The Q3 December 2006 corporate results were strong.

Although the RBI raised short-term interest rates by 25 basis points in its quarterly monetary policy review on 31 January 2007, it also raised its GDP growth forecast for the current fiscal year. A day before, ratings agency Standard & Poor's (S&P), on 30 January 2007, raised India's sovereign local currency credit ratings to investment grade BBB-/A-3, with a stable outlook, citing strong economic prospects and an improving fiscal situation.

A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities. The development will be instrumental in carrying the rally on the stock market forward.

The near-term trend on the bourses will be determined by expectations regarding the Union Budget 2007-08. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. According to a pre-budget report of Man Financial, though the 10% surcharge on corporate tax may be eliminated, the effective tax burden for corporates may go up if certain open-ended exemptions are removed.

In today’s trade, insurance firms hogged the limelight. Bajaj Auto jumped nearly 9% to Rs 3078, Aditya Birla Nuvo gained 9.6% to Rs 1392 and Max India gained 5% to Rs 1115. As per reports, the group of ministers (GoM) on insurance headed by Minister of External Affairs, Pranab Mukherjee, will meet on 13 February 2007 to decide the fate of amendments to the insurance bill.

The bill, which proposes to hike the foreign direct investment (FDI) cap for insurance companies to 49% from the present 26%, was referred to the GoM after the Cabinet deferred a decision on the contentious issue in December 2006. Once the GoM forms a view, the issue will be taken up by the Cabinet. The Union Government wants to introduce the bill in the forthcoming Budget Session of Parliament.

IT bellwether Infosys gained nearly 4% to Rs 2360. The BSE has raised Infosys’ free float factor for calculating its weightage in the Sensex from 0.8% to 0.85% with effect from 12 February 2007. Free float factor is used to calculate the weightage of a scrip in a free-float index like the Sensex. Index funds tracking the Sensex will have to make adjustments in their holdings following the changes in the free-float factor.

Oil exploration major ONGC lost 1.6% to Rs 893.70, after the government halted moves to confirm the appointment of R S Sharma as chairman.

Copper and aluminium major Hindalco 4% to Rs 181.45, following a recovery in global copper prices.

ICICI Bank gained 2.5% to Rs 982, after the largest private sector bank on Tuesday, said it had raised the reference rate by 1% for corporate loans and home loans, from 9 February 2007. HDFC Bank gained 1.7% to Rs 1107.

Engineering & construction major L&T gained nearly 3% to Rs 1749. The stock hit a lifetime high of Rs 1767. As per reports, L&T will sign a deal with European aerospace and defence group, EADS, on Thursday to sell components for the latter's defence systems.

Reliance Industries rose 0.2% to Rs 1392. The stock came down from a session’s high of Rs 1399. The BSE has reduced Reliance Industries (RIL)’s free float factor from 0.55% to 0.5%.

Cipla surged 3% to Rs 257.65. As many as 2.5 lakh shares changed hands in the counter on BSE.

IFCI rose 6.5% to Rs 32.15. The rally materialised on heavy volumes, of 3.9 crore shares, on BSE. With effect from 23 February 2007, NSE has slashed the lot size of IFCI in the derivatives segment to 7,875 from 31,500.

NSE also reduced the lot size of a number of contracts in the derivatives segment, including that of the briskly traded Nifty contract. The decision has been taken based on the prescribed minimum contract value of Rs 2 lakh as per a Securities & Exchange Board of India (Sebi) circular of 2004. The premier stock exchange has simultaneously raised the lot size of some stocks, in order to comply with the same criteria.

Auto parts maker Amtek India jumped 7% to Rs 167, on renewed buying.

Autoline Industries jumped 10% to Rs 430.35, extending what has been a solid surge in the past few days, in the newly-listed entity. The stock rose on high early volume of 21.9 lakh shares on BSE.

Punjab Tractors (PTL) jumped 9% to Rs 309.50, on news that Mahindra & Mahindra had submitted a non-binding bid to buy a stake in the company. Private equity firm Actis has put its 29% stake in PTL on the block.

Akruti Nirman settled at Rs 564. The stock declined sharply after a strong debut at Rs 701.35 on BSE compared to the IPO price of Rs 540.

Software firm, Silverline Technologies gained 2.5% to Rs 23.85, after it said its board will meet on 8 February 2007 to consider setting up a joint venture in Oman for animation, IT education and training services. The board estimates an investment of $10 million in this venture.

Valecha Engineering dropped 1.7% to Rs 271.35, after the company said on Wednesday it will own 60% of Singapore's Koon Holdings, in return for a 5% stake, 48% of its unit Valecha Infrastructure and transfer of international assets.

Aircraft maker Taneja Aerospace & Aviation jumped 5% to Rs 249.15 after the company said on Wednesday it planned to form a joint venture with Belgium's Sabena Technics for maintenance, repair and overhaul services.

The IPO of state-run Power Finance Corporation received bids for 77 times the shares offered. The 117.32-million-equity share offer aimed to raise Rs 997 crore at the top of the Rs 73 - Rs 85 price-band. Qualified Institutional Buyers (QIBs) have applied for 137.2 times the shares reserved for the segment, while retail investors have tendered requests for 8.5 times the shares in their category. The IPO closed on Tuesday (6 February 2007).

European markets were slightly firmer in early trade. Key benchmark indices in London, Germany and France were up between 0.05 - 0.27%. Asian markets were mixed. Japan’s Nikkei 225 average shed 0.6%. Hong Kong’s Hang Seng was up 0.12%. It had moved between positive and negative zone during the session.

Nymex crude was up 60 cents at $59.48 a barrel.

Market looks strong


When the Nifty was trading below 4,100, investors had hedged their long positions in individual stocks by selling Nifty future contracts. Once this level was crossed, Nifty futures were bought by investors who squared off their previous shorts, thus giving an upward push to the Nifty futures and in turn, the cash market as well.

Further indications from the derivatives segment are positive as well. The cost of carry is at a comfortable level; the put-call ratio as per Tuesday’s data stood at 0.8:1. Along with a fresh build-up of long positions on the futures side, we are also observing a contrary short position build-up, thus giving certain stability to the system. When the next correction comes, these shorts will give support, as we will see a portion of them getting squared up.

If the derivatives segment cues are considered, then an upmove seems likely.

- Amit Hiremat, Derivatives Analyst, IDBI Capital Markets Services

Business Today - Money Column


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Emkay - NRB Bearings


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Karvy - Balrampur Chini


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Sensex ends buoyant above 14600


The market was back on track after slipping yesterday. Lack of buying support in early trades pushed the index into a range-bound mode. The market gained momentum in the afternoon and rallied sharply touching a new high. Ignoring the weakness in the Asian markets, the Sensex began the trading session 16 points higher at 14494 and advanced further after some range-bound moves. Hectic buying towards the close saw the index touch an all-time high of 14663 and close with gains of 165 points at 14643, while the Nifty closed with gains of 28 points at 4224.

The breadth of the market was neutral. Of the 2,725 stocks traded on the BSE 1,327 stocks advanced, 1,358 stocks declined and 40 stocks ended unchanged. Among the sectoral indices the BSE IT index notched up gains of 2.19% at 5524 followed by the BSE Metal index (up 1.54% at 9426), the BSE Auto index (up 1.48% at 5809), the BSE Teck index (up 1.45% at 3949) and the BSE Bankex (up 1.35% at 7527).

The heavyweights witnessed strong buying interest. In the auto space Bajaj Auto soared 9.02% at Rs3,080 and Punjab Tractors surged 8.71% at Rs308. Among the other gainers Hindalco surged 4.36% at Rs182, Infosys jumped 3.82% at Rs2,359, Grasim added 2.93% at Rs2,875, ICICI Bank gained 2.61% at Rs982, L&T advanced 2.54% at Rs1,744 and Cipla was up 2.50% at Rs256. On the other hand Tata Motors fell 2.03% at Rs902 and ONGC declined 1.83% at Rs891. Gujarat Ambuja, HLL, Reliance Communication, Dr Reddy's and Ranbaxy closed with marginal losses.

Over 39.14 lakh SAIL shares changed hands on the BSE followed by IndusInd Bank (33.42 lakh shares), Hindalco (22.46 lakh shares), IDBI (20.53 lakh shares) and IDFC (17.98 lakh shares).

Value-wise Bajaj Auto registered a turnover of Rs112 crore on the BSE followed by Infosys (Rs76 crore), Reliance Energy (Rs67 crore), Bharat Electronics (Rs64 crore) and Reliance Industries (Rs62 crore).

Morgan Stanley - India on the Move


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Bears on the mat


A solid surge in Bajaj Auto and gains in index heavyweights Infosys and ICICI Bank sent the BSE Sensex surging. The government today estimated GDP growth of 9.2% in the financial year ending March 2007, above RBI’s forecast between 8.5 - 9%, spreading more cheer in the market.

In the first official growth estimate for 2006/07, the Central Statistics Office said manufacturing output growth was estimated at 11.3%, compared with 9.1% a year ago. India had last week revised upwards growth for the fiscal year 2005/06 to 9% from a previous reading of 8.4%.

However, the same strength was not reflected by the broader market. The market-breadth turned negative in the latter part of trading. The breadth held strong till the afternoon.

The Sensex’s provisional closing was 14,650.46, a gain of 172.27 points (1.1%). A bout of volatility afflicted the Sensex after it had struck an all-time high above 14,600 in afternoon trade.

After cooling from this record high, the market firmed up once again in late-trading, striking a lifetime high of 14,663.26 at 15:21 IST, and surpassing an earlier all-time high of 14,564.80 struck of Tuesday (6 February 2007).

The S&P CNX Nifty’s provisional closing was 4,223.70, a gain of 27.80 points (0.66%). The relatively muted gains in Nifty compared to those in the Sensex were due to a fall in oil exploration major, ONGC, which is a heavyweight in the Nifty.

The BSE clocked a turnover of Rs 4641 crore.

Bajaj Auto, which is one of the leading players in the life insurance sector, spurted nearly 9% to Rs 3078. As per reports, the group of ministers (GoM) on insurance headed by external affairs minister Pranab Mukherjee is scheduled to meet on 13 February 2007 to decide the fate of amendments to the insurance bill.

The bill, which proposes to hike the foreign direct investment (FDI) cap for insurance companies to 49% from the present 26%, was referred to the GoM after the Cabinet deferred a decision on the contentious issue in December 2006. Once the GoM forms a view on it, the issue will be taken up by the Cabinet. The government wants to introduce the bill in the forthcoming Budget Session of Parliament.

IT bellwether Infosys gained nearly 4% to Rs 2360. BSE has raised Infosys’ free float factor for the purpose of calculating its weightage to 0.85% from 0.8% with effect from 12 February 2007. Free float factor is used for calculating weightage of a scrip in a free-float index like the Sensex. Index funds tracking the Sensex will have to make adjustments in their holdings following the changes in the free-float factor.

Oil exploration major ONGC lost 1.6% to Rs 893.70, after the government halted moves to confirm the appointment of R S Sharma as chairman.

Copper and aluminium major Hindalco 4% to Rs 181.45, following a recovery in global copper prices.

ICICI Bank gained 2.5% to Rs 982, after the largest private sector bank on Tuesday, said it had raised the reference rate by 1% for corporate loans and home loans, from 9 February 2007.

Engineering & construction major L&T gained nearly 3% to Rs 1749. The stock hit a lifetime high of Rs 1767. As per reports, L&T will sign a deal with European aerospace and defence group, EADS, on Thursday to sell components for the latter's defence systems.

Reliance Industries rose 0.2% to Rs 1392. The stock came off a session’s high of Rs 1399. The BSE has reduced Reliance Industries (RIL)’s free float factor to 0.5% from 0.55%.

The government’s robust GDP growth forecast for the current fiscal year triggered buying in select cement pivotals. Grasim gained 3% to Rs 2877 and ACC rose 1.5% to Rs 1060.90. The demand for cement is closely linked to economic growth. Cement scrips had plunged in late-January 2007, after the government got rid of import duty on cement in a bid to rein in inflation.

European markets were slightly firmer in early trade. Key benchmark indices in London, Germany and France were up between 0.05 - 0.27%. Asian markets were mixed. Japan’s Nikkei 225 average shed 0.6%. Hong Kong’s Hang Seng was up 0.12%. It had moved between positive and negative zone during the session.

Nymex crude was up 60 cents at $59.48 a barrel.

Kotak - TCS


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Thanks Dunbaka

Corus-like auction likely for Hutch Essar


Hong Kong's Hutchison Telecom may sell its stake in India's Hutchison Essar Ltd. through an open auction with a minimum reserve price of about $14 billion, the Hindustan Times newspaper said on Wednesday.

Officials of Hutchison Telecommunications International Ltd. could not immediately be reached for comment but the newspaper, quoting "highly placed" sources close to the deal, said the auction method would be similar to that used for the recent sale of Anglo-Dutch steelmaker Corus.

Europe's most valuable telecoms company, Vodafone Group Plc, India's Reliance Communications Ltd., Hutchison's local partner Essar and India's Hinduja group are pitted against each other to buy a 67 percent stake in Hutchison Essar. The Essar group controls the remaining 33 percent.

Analysts said selling India's fourth-largest mobile phone carrier in an auction was unlikely to result in significantly higher bids in a deal already estimated at $18-$20 billion.

"The valuations are steep any which way and if Hutchison opts for the auction route there won't be much action," said Sumit Modi, telecoms analyst with Emkay Share and Stock Brokers Ltd.

"The interested parties are already stretched too much. I think $18 billion would make sense and anything beyond this would not be justifiable," he said.

ELIMINATION GAME

The paper said Hutchison Telecom, controlled by Hong Kong's Hutchison Whampoa Ltd., would fix the minimum reserve price to eliminate bidders who were not serious, and said the enterprise value would be around $18-$20 billion including debt of $1 billion.

It said Hutchison Telecom, a unit of Hutchison Whampoa Ltd., was expected to hold an extraordinary general meeting (EGM) in the third week of February.

"After the EGM, the bids will be submitted and HTIL in consultation with the bidders will decide the rules of the game for its planned open auction," the paper said.

Last week, Corus went under the hammer in a nine-round auction that saw India's Tata Steel Ltd. beating Brazil's CSN with a $12.2 billion offer.

Bidding began by email with the rival teams in separate locations and went on half the night.

Reliance Communications and Britain's Vodafone are regarded as front-runners for Hutchison Telecom's stake in Hutchison Essar.

Vodafone has vowed not to pay "over the top" for the Indian carrier. Vodafone Chief Executive Arun Sarin said last week that final bids for Hutchison Essar were still weeks away.

India's mobile phone market is growing at about 6 million users a month although tariffs can be as low as 1 or 2 U.S. cents a minute.

Sharekhan Reports


Sharekhan Commodities Buzz dated February 07, 2007
Sharekhan Daring Derivatives for February 07, 2007
Sharekhan Highnoon dated February 07, 2007

Merrill Lynch - India Strategy


Merrill Lynch - India Strategy

PFC IPO Subscription Details


QIB - 137.168
NII/HNI - 48.8
Retail - 8.5
Employees - 1.14
Overall - 77 times

From Research Desk


Arihant Foundation & Housing Ltd. (Q1 F9/07 ). Result Update

Property demand in Chennai remained firm in the Oct-Dec quarter, helping AFHL book a 64% growth in revenues. The company currently has 5 on ongoing projects and has booked total sales of 0.19mn sqft during the quarter as against 0.16mn sq ft in the previous quarter. AFHL is currently carrying a Work-In-Progress inventory of Rs590mn, the sales for which should be converted over the next two quarters.

While the CBD, OMR and GST rd have seen stable to rising prices, other areas like Ambattur have not picked up as well as expected. As a result majority of the company’s projects are earning gross margin in the range of 35-40%. However, the commercial project at Ambatur (approximately 55% of revenues in Q1 F9/07) grossed around 22%, pulling down blended margin to 25.3%, a drop of 114bps over Q1 F9/07. However, we expect margin to look up from third quarter as high margin project contribution increases.

In line with the company’s guidance, it has started foraying outside Chennai. AFHL has added four new projects one each in Madurai (21 acres), Vijaywada (50 acres), Poonamali high rd (5 acres) and Mall + hotel (0.6mn sq ft) on the OMR rd. We have yet to factor in these new projects in our estimates, which are likely to contribute to revenues from F9/09.

We have delayed our project completion phase in some of AFHL’s projects (no guidance from the management). As a result we have revised our revenue growth downwards by 17% each for F9/07 and F9/08, while earnings have been revised downwards only 7% and 1% in the respective years. Lower revision in earnings is on account of lower tax rate.

How Market Fared


Market may remain volatile

The markets today cooled off, after surging for three consecutive days the markets today lost ground. Volatility and selling pressure ruled over the bourses, pushing the key indices in green and red. Except for BSE Mid-Cap, Auto and Bank index all the key indices ended in red. Sugar stocks also gained momentum as fresh buying lifted them higher. Select mid-cap stocks like Sesa Goa, Moser Baer and Mphasis BFL hogged the limelight, however heavy weights like Reliance Communication, ITC, Bharti Airtel and Tisco dragged the benchmark index to hit an intra-day low of 14452.78. Finally, the BSE benchmark Sensex was down 37 points to close at 14478. NSE Nifty fell by 19 points at 4195.

Reliance Communication lost over 5% to Rs489 on back of profit booking. The company has raised $1bn from a mega FCCB issue. The scrip touched an intra-day high of Rs518 and a low of Rs481 and recorded volumes of over 1,00,00,000 shares on NSE.

BHEL slipped 0.8% to Rs2499. According to reports the company received Rs39bn Power project order. The scrip touched an intra-day high of Rs2538 and a low of Rs2488 and recorded volumes of over 5,00,00 shares on NSE.

L&T edged higher by 0.5% to Rs1701 after the company announced that they would raise debt to finance projects. The scrip touched an intra-day high of Rs1713 and a low of Rs1681 and recorded volumes of over 5,00,000 shares on NSE.

Ansal Properties was frozen at 5% upper circuit to Rs839.75 after the company announced that they would develop Rs8bn project in India. The scrip touched an intra-day high of Rs839.75 and a low of Rs815 and has recorded volumes of over 4,00,000 shares on NSE.

Oil & gas stocks were on the receiving end. BPCL slipped 1% to Rs355, HPCL was down 2.4% to Rs295 and IOC dropped 1.5% to Rs481. However, Oil exploration major RIL gained 0.2% to Rs1389.

Telecom stocks ended lower on back of profit booking. Reliance Communication, Bharti Airtel, VSNL and MTNL were among the major losers.

FMCG stocks also lost ground as profit booking dragged them down. Frontline stock ITC fell 1.5% to Rs175, Colgate was down 1.4% to Rs369, Marico slipped 1% to Rs569 and McDowell lost 0.9% to Rs946.

Sugar stocks were in momentum as they witnessed fresh buying. Renuka India spurred by over 5% to Rs334, 4Bajaj Hindusthan advanced 1.7% to Rs159, Sakhti Sugar surged by over 2.5% to Rs77 and Balrampur Chini gained 1.2% to Rs67.

Pharma stocks recorded healthy gains. Ranbaxy gained 1.3% to Rs420 after the company signed new R&D agreement with GSK, Cipla was up by 0.75 to Rs250, Cadila edged higher by 0.2% to Rs334 and Glenmark Pharma added 0.3% to Rs606.

Profit-taking likely


Profit-taking may pull the market lower today with Asian markets mostly trading in the red. Rising interest rates may be another trigger for profit-taking. ICICI Bank on Tuesday said it will increase its reference rate for corporate loans and home loans by 1% from 9 February 2007. The BSE Sensex had slipped 38 points on Tuesday (6 February) to 14,478.19 on profit-taking after striking an all-time high of 14,564.80.

The near-term trend on the bourses will be determined by expectations regarding the Union Budget 2007-08. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. According to a pre-budget report of Man Financial, though the 10% surcharge on corporate tax may be eliminated, the effective tax burden for corporates may still go up if certain open-ended exemptions are removed.

FIIs have been in buying mode for the past few weeks. As per provisional data, FIIs were net buyers to the tune of Rs 894 crore on 6 February. They were net sellers to the tune of Rs 355 crore in index-based futures the same day. FIIs were net sellers to the tune of Rs 61 crore in individual stock futures also that day.

Asian markets were mixed on Wednesday. Key benchmark indices in Japan, South Korea and Taiwan were down between 0.2 - 0.9%. Key benchmark indices in Hong Kong and Singapore were up between 0.17 - 0.44%.

US stocks ended marginally higher on Tuesday, as oil prices backed down from a run toward $60 a barrel. The Dow Jones industrial average rose 4.57 points, or 0.04%, to end at 12,666.31, while the Standard & Poor's 500 Index added 1.01 points, or 0.07%, to reach 1,448.00. The Nasdaq Composite Index inched up just 0.89 of a point, or 0.04%, to 2,471.49.

On Tuesday, US crude oil futures ended just slightly higher at $58.88 a barrel after an early rally to $59.99 stalled. Oil prices jumped early in the day as a cold front swept across the northeastern United States.

STRATEGY INPUTS FOR THE DAY


Small is beautiful, but dangerous

It is true great things come in small packages...but so do dynamites

Are the bulls suffering from some sort of a fatigue after the recent run up? At least that seemed to be the case yesterday. We are aware of the over bullishness in the small and mid-cap stocks. The key indices finished almost flat though some action was seen in the small- and mid-cap space with a few scrips hitting upper circuits. The consolidation may continue even today though the pre-budget rally is surely in tact.

We are bound to see a lot of churning as the benchmark indexes are trading near all-time highs. Small- and Mid-cap shares, which underperformed the market last year may attract more attention this year. But, one has to be careful in dealing with these scrips as they tend to be highly volatile. For today, we expect a cautious to higher opening and a choppy day. The positive bias will continue though as will the stock-centric action.

Global markets are throwing up mixed cues. Oil prices are above $59 per barrel. US shares closed nearly unchanged. In Asia, the Nikkei in Japan has taken a beating while the Hang Seng is up marginally.

One positive factor is that FIIs were net buyers of Rs8.94bn (provisional) in the cash segment yesterday, when the key indices actually closed almost flat. In the F&O segment, they were net sellers of Rs3.51bn.

The appetite for emerging market equities among overseas investors remains strong even as they remove money from the US market. In the week ending Feb. 1 Global Equity Funds tracked by Emerging Portfolio Fund Research (EPFR) experienced their strongest weekly inflows since the first quarter of 2006 as investors continued to pump money into global equities at the expense of US equities. Year to date, investors have poured in about $12bn to global and emerging market equity funds while removing about $4.2bn from US equity funds.

Akruti Nirmal Ltd. and Cambridge Technology will get listed on the bourses today.

Patni Computer and Rain Calcining will declare their results today.

Aurionpro Solutions' Board will meet today to consider the proposal of raising finance through a preferential issue. The stock was up 4% yesterday. The Board of Emco will hold a meeting today to discuss strategic investment in an Electrical Industry Company.

The IPO of Power Finance Corp (PFC) has received an overwhelming response, with the overall subscription being 77 times the issue size. The IPO of Indian Bank has been subscribed two times. The IPO of Euro Ceramics opens today. It will close on Feb. 13. The price band for the issue is Rs150 to Rs180.

NIIT Technologies could gain as the software firm will announce new initiatives in insurance verticals today. ICICI Bank will be in focus after India's largest private bank hiked home loan rates by 1%. Other rates like on auto loans, loans against shares and corporate loans will also go up.

Lloyd Electric & Engineering is expected to shine as the RBI has hiked the FII investment limit in the stock up to 74%.

Keep an eye on Punjab Tractors as the buzz heats up on the stake sale by existing shareholders, private equity firm Actis and the Burman family.

Another scrip to watch out for is Morepen Labs. The stock hit the 5% upper circuit yesterday after a business channel reported that the company is likely to make a placement at Rs35-40 per share. The stock ended at Rs23.1.

Balaji Telefilms has been rising of late. Market grapevine has it that Star TV is likely to hike its stake in the television content producer, from the current 25.99%.

US stocks ended little changed on Tuesday after a choppy session. The S&P 500 added 1.01, or 0.1%, to 1448, its fifth advance in six days. The Dow Jones Industrial Average rose 4.57 to 12,666.31. The Nasdaq Composite Index closed unchanged at 2471.49.

After the close, Cisco Systems reported higher quarterly sales and earnings that topped forecasts. Shares inched higher in extended-hours trading.

Treasury prices rose, sending the yield on the benchmark 10-year note to 4.76% from 4.80% late on Monday. Crude oil for March delivery rose 14 cents to settle at $58.88 a barrel on the New York Mercantile Exchange. The front-month contract was quoting 48 cents higher at $59.36 a barrel in extended trading in Asia.

In currency trading, the dollar slipped against the yen after briefly spiking higher on Treasury Secretary Henry Paulson's comments about the Japanese currency. He said there was nothing fundamentally wrong with the yen's weakness and that Japanese officials haven't been interfering to keep the yen near 20-year lows. The dollar also slid versus the euro. COMEX gold for March delivery rose $2.60 to settle at $658.70 an ounce.

Among the Indian ADRs, VSNL was down 3.6%, Satyam added 1.3%, ICICI Bank rose 1.3% and MTNL shed 1%.

European share indexes hit multi-year highs on Tuesday. The pan-European Dow Jones Stoxx 600 index rose 0.4% to 380.58. The UK's FTSE 100 closed up 0.5 % at 6,346.30. The Dutch AEX index touched its highest level in just under five-years at 509.35. It closed up 0.2% at 507.40. The German DAX Xetra 30 closed virtually flat at 6,875.70, holding just short of highs. The French CAC-40 slipped 0.1% at 5676.78, after touching its highest level since May 2001 earlier in the day at 5699.27.

In emerging markets, The Bovespa in Brazil added 0.1% to 45,351 while the IPC index in Mexico advanced 0.5% to 28,067 and the RTS index in Russia rose by nearly 1% to 1923.

Asian markets are mixed this morning. The Nikkei in Tokyo fell 139 points to 17,266 while the Hang Seng in Hong Kong rose 6 points to 20,661.

Major Bulk Deals:
BNP Paribas has sold Bombay Rayon; HSBC MF has bought Ceat; Templeton MF has picked up Federal Mogul while Bear Stearns has sold it; Jpmsl Ac Copthall has sold GVK Power; HDFC MF has purchased Manugraph while Citigroup has sold the scrip; Kotak Mahindra UK has bought Mirza International; Govt of Singapore has picked up Orchid Chemicals.

Insider Trades:
Rolta India Ltd: (i) Morgan Stanley & Co. International Limited a/c Morgan Stanley Dean Witter Mauritius Co. Ltd. (ii) Morgan Stanley & Co. International Limited A/C Morgan Stanley Investment Mauritius Ltd has purchased from open market 446284 equity shares of Rolta India Ltd on 1st February, 2007.

Geodesic Information Systems Limited: Kiran Kulkarni, Managing Director has sold in open market 20000 equity shares of Geodesic Information Systems Limited from 31st January to 2nd February.

Market Volumes:
The BSE Consumer Durable in was the major lower and lost 2.09%. BSE Metal index (down 0.66%), BSE Technology index (down 0.56%) and BSE FMCG index (down 0.35%) were among he major losers. However, BSE Mid-Cap index gained 0.44%.

Upper Circuit Filters:
Ansal Infrastructure, Prism Cement, Heritage Foods, Goldstone Technology, Dhanlak Bank, 3i Infotech, Anant Raj Industries, Dolphine Off shore, Ganesh Housing, Gemini Communication and HOV Services.

Brokers Recommendation:
Thermax - Hold from Emkay with target of Rs450.

Long Term Investment:
Madhav Marbles.

Major News Headlines:
ONGC, Petronas may jointly bid for oil blocks in India
Gammon India appeals SEBI ban
Marsons in talks to acquire Siros Electrical Engineering
ICSA India gets order worth Rs175.7mn
BHEL wins Rs39bn orders
L&T to raise debt to finance projects
Ranbaxy signs new R&D agreement with GSK
Ansal Properties to invest about Rs110bn in Punjab
VSNL gets $406mn claim from Flag
Radha Madhav to raise up to Rs1bn for funding expansion
Pyramid Saimira to set up a chain of multiplexes in Malaysia

Intra-day Stock Ideas


NIFTY (4195) SUP 4174 RES 4207

BUY HTMEDIA (189.05)
SL 184 T 197, 199

BUY DABUR (105.30)
SL 101 T 113, 115

BUY RANBAXY (420.05)
SL 415 T 429, 433

SELL HCL-INSYS (165.05)
@ 168 SL 172 T 159, 157

SELL SRF (200.55)
@ 203 SL 207 T 192 , 190

Market may remain volatile


Lack of clarity in the market, weak Asian indices and sharp intra-day volatility may hold the investors from taking any fresh position. However, overnight gains in the US markets and growth in the fund inflows in the past few sessions may add to the market advantage and help the sentiment turn positive. In the domestic market, the Nifty could face resistance around 4250, while on the downside it has a support at 4170. The Sensex has a likely support at 14372 and may face resistance at 14600.

US indices closed with the marginal gains on Tuesday. While the Dow Jones moved up 5 points at 12666, the Nasdaq declined by 0.89 points to close at 2471.

Indian ADRs, barring few moved up on US bourses. ICICI Bank, Satyam, Wipro, HDFC Bank, Tata Motors and Rediff jumped over 1% each. Among the laggards VSNL shed over 3% while Dr Reddy's, Infosys, MTNL and Patni Computers were down around 1% each.

Crude oil prices gained marginally in the international market. The US light crude oil for March delivery moved up 14 cents to settle at $58.88 per barrel. In the commodity segment, the Comex gold flared up by $2.60 to close at $658.70 a troy ounce.