Search Now


Saturday, April 07, 2007

IDBI Capital Reports






Power Generation

Globalisation's Offspring, Hungry Tiger, Dancing Elephant

Download here

Networth - Weekly Notes

Download here

The Circle of Manipulation

MoneyToday - What markets are saying

Download here

10 hours on a frenzied floor

March 12 11:30 am Woke up to a rather beautiful morning. Day started well as the news channels said the Nifty opened strong. The markets have been totally out of whack over the past week. Just a year ago, you could throw a dart at a wheel full of stock names, invest in whatever got hit and make a cool return of 40-50%. And now I encounter investors who are contemplating withdrawing money from the equity markets, with whatever little that is left. The travails of an equity investor!!

And damn globalisation!! Chinese markets crash and it hits us living in Dadar, thousands of miles away. One butterfly flutters in Wall Street and poor South-east Asians lose their life savings. A good idea would be to check out the mood on the trading floors.

1:30 pm The moment I step into a broking house at Colaba, I am welcomed by a sight of complacent traders turning wild. Nifty had started taking a U turn. In early trade it had touched a high of 3781, 64 points up from the previous close and was now sliding with every tick. Managed to grab a chair besides a trader and like all others he did not have the time to talk. “Not now, clients need to cut losses,” he barked. He was at two or three phones at the same time. Awesome.

Phones continuously rang around me and the buzz made me actually feel the panic of investors desperately trying to find ways to exit.

4.30 pm Nifty decided to take a break at 3713, a dip of 68 points from the top. During the last lap markets started its slow crawl up to close the day 17 points up from yesterday’s level. A sudden silence engulfed the room. Traders sat back in their chairs for a few minutes looking dazed at their closed terminals. Leaving the place I realised they were famished.

March 13 9.55 am Nifty had given up most of its gains yesterday to close almost flat. Though uncertainty prevails, the mood is not that bad. Global markets are slowly shrugging off the jitters (seamless world, salute!). Nifty should move up. Hopefully. Got ready and headed for the broking house.

As expected, the trading terminals were filled with green coloured price ticks against the respective stock names. Brijesh, a new-kid-on-the-block type trader gets a call to buy some ITC shares at Rs 148. Within a minute or so however the same screen starts transforming into red ticks.

The Nifty had opened with a marginal up tick of 15 points but soon drifted to yesterday’s closing of 3734. Words like mandi and “go short” filled the room. Incessant telephone rings...the traders get antsy. Whoa! Another day of volatility…

Brijesh receives another call and this time it is to place a stop loss of 147 on the ITC stock he bought earlier. By 11.20 am Nifty had bounced to higher levels of 3772 and ITC traded at 150.90. Brijesh swiftly moved into kill and squares off the ITC position. Happy with the profit of Rs 2 per share made for the investor, he says: “With this kind of volatility, a swift intraday trader can make good money in a span of minutes.” He looked relieved. A motley crew of brokers are furiously punching in buy and sell orders for their clients, most of them intraday like the ITC trade.

1.57 pm Nifty has nosedived to the lowest point of the day to stand at 3718, sending blood pressures up north. Everybody seems to be battered. Will this end? At times the daily Nifty graph looks like a V or an inverted V or at times both (see graphs below). Clearly the market is still struggling to find a direction.

I leave Brijesh’s desk and roam around to get a perspective on the market sentiment and bump into Pareshbhai, a seasoned hand. “During last May’s carnage many retail investors booked heavy losses in panic. They were scared…they didn’t put in money when the markets started picking up from June. Not many people have made money in this rally.”

Just before the Budget, Nifty had started correcting from its highs of around 4164. I’ll hazard a guess: investors are still reluctant to back equities. Otherwise how can you explain the low daily turnover of around Rs 38,000 crore (Note to myself: need to check out the highest daily turnover last year. Call KP tomorrow!).

2.30 pm Trading floor is slowly moving to a higher gear. Decibels are rising. And you know the reason: Nifty is again showing some signs of strength. Yes!! Yes!! Go Nifty, go. Phones keep buzzing as fresh rounds of buying orders come in. Within an hour it is bustling with orders and words like teji and maal lav. However the overall mood is still cautious as investors are placing intraday orders with strict stop-loss levels and any profit, however small, is being pocketed in an attempt to wipe out earlier losses.

Moving on to another section, I decide to speak to some analysts. Rajesh, a fundamental analyst tells me: “This time more macro and global factors are at play and we are unsure how they will pan out. The lack of risk appetite leading to outflow of liquidity is a big problem. The threats of US slowing down and unwinding of yen carry trade looms large. Besides, the domestic interest rates are also rising.” Ha. This is pure expertspeak. But does it explain the losses?

Sandeep is more optimistic: “With the recent fall, much of the risk seems to be priced in. But for the lack of triggers right now markets don’t have a definite direction. Probably strong March results and the hope that inflation will soon moderate will push the upturn. So you can expect value-buying in select stocks for the long term. We see long-term value in cement, steel and banking stocks.”

On the other side of the room there were some chartists with their screens displaying graphs of daily stock prices plotted against dates. They belong to the esoteric camp of technical analysis. Ask them a simple question and you will be stumped: they speak in symbols not words. Sample: “The market is in an intermediate downtrend and the Nifty pulling back is actually a dead cat bounce”!! Anyway, these gentlemen are closely watching the 12300 mark on the Sensex and say that 11900 is a strong support. If these levels are broken then these may be the signs of the bull run reversing.

4.37 pm I decide to call it a day. Turning around to check the big TV screen I find the Nifty has climbed back to above 3770? Can I hear the bulls snorting?

Moving Pictures

If UTV has its way, you won't need to wait for the next film festival in town to catch films made by maverick directors Akira Kurosawa and Francois Truffaut. The Mumbai-headquartered media and entertainment major has set up UTV Palador, a 360 degree initiative in world cinema under the brand name of 'Olive Collections' with three verticals: A television channel, a DVD label and theatrical releases. "We are investing $15 million (Rs 70 crore) over the next three years to acquire 1,000 titles across 20 countries that have won over 3,000 (cumulative) awards. Initially, we will invest $3-3.5 million (Rs 13-15 crore)," says Ronnie Screwvala, Chairman, UTV.

Screwvala estimates the non-Indian language movie segment to be worth Rs 1,500 crore by 2009, and UTV Palador could grab 20 per cent of that pie with its focus on world cinema via its three prongs. "The main revenue source for us will be dvds and the channel. We plan to launch the TV channel in 6-8 months. The theatrical release will be mainly a marketing tool," adds Screwvala. Come April, 20 theatres across the country will release the Olive Collection films with two shows daily that will account for nearly 15,000 shows per annum. The Olive DVD Collection will be released in a phased manner. UTV will be releasing 15-20 titles each month and they will be priced at Rs 799. The TV Channel will take six-eight months to launch.

Meantime, UTV has cemented a relationship with Rakeysh Omprakash Mehra (who directed the UTV-produced Rang De Basanti), by tying with his production house titled Rakeysh Omprakash Mehra Productions (romp) to co-produce four films with a total outlay of Rs 280 crore.

Business Today - Inflation

Download here

Motilal Oswal - Derivatives, Daily Margin, Corporate News, Market Diary - Apr 9

Download here

Business Today - Money Column

Download here

Sharekhan Daring Derivatives for April 09, 2007

Download here

Emkay - Weekly Technicals & Derivatives

Download here

Server Busy

Technology sector has always lured funds of all hues across sectors.

And they have reasons for the liking. Technology stocks have always been on the forefront, growing organically and inorganically at a rapid speed. No wonder then that the technology funds have been beating the benchmark BSE IT index consistently from 2002 onwards. However, 2004 was the only year when technology funds generated less (23 per cent) returns compared with benchmark's 26 per cent return.

The quarterly numbers of the top technology companies show that they are driving up strong growth in volumes. For example TCS posted a net profit of Rs 1,104.7 crore in the third quarter of 2006-07, a rise of over 11 per cent over previous quarter. The company's bottom line surged 8.4 per cent to Rs 4,860 crore in the third quarter.

Another technology giant, Infosys Technologies, reported a net profit of Rs 983 crore in third quarter, a 5.8 per cent rise over previous quarter. The company posted higher revenues at Rs 3,655 crore during the same period. Similarly Satyam Computers also posted robust numbers (Rs 337 crore profit on a turnover of Rs 1,670 crore in third quarter). This is not to say that the robustness is confided to large companies only. Several mid caps and small caps in this space like NIIT Technologies, Sasken Communications, KPIT Cummins, Hexaware etc are also reaping profits. The net additions of 38,300 employees by the top four players of the Indian technology sector in the first half of the current financial year viz. TCS, Infosys, Wipro and Satyam reiterates its robustness.

Though concerns have been raised over a possible 'slowdown' in the US economy, Indian IT companies are not expecting any cuts in IT spending by their foreign clients. They rather say that as a measure of cost-cutting, more work will be outsourced to Indian companies. However, it will be a matter of time which will determine billing rates for Indian companies. Another positive for the growth in the technology sector is growth in business from European countries. Margins from these countries are higher and this growth will help the sector to offset the pressure on margins due to the appreciation of rupee.

Image Makeover
Since the dotcom burst of 2000, technology companies have come of age and scripted a fabulous turn around. In fact, they are now regarded as long-term wealth creators rather than speculative. No wonder then that companies like Infosys, Tata Consultancy Services, Wipro and Satyam etc are regarded as stocks-for-all-seasons. However, there have been quite a few new technology companies that have emerged on the scene and funds have taken a liking to them. Companies like Infotech Enterprises, HOV Services, Tech Mahindra, Mastek, Tanla Solutions, Sasken, Info Edge, Nucleus Software Exports, Educomp are the companies which have started gaining prominence in the portfolios.

Maintains Figure
The technology category's five-year annualised 31 per cent return (till March 9, 2007) was more than that of the benchmark BSE IT index (22.57 per cent). Now consider short-term figures. The Sensex fell 11.38 per cent during the one month period ending March 9, 2007. Compared to this, the BSE IT index restricted its loss to 9.22 per cent. During the same period, the technology category of mutual funds lost 9.12 per cent, less than its benchmark and the Sensex. If we calculate the year-till-date returns (till March 9, 2007) of the technology funds category, then they lost just 1.31 per cent compared with benchmark's 5.66 per cent and Sensex's 6.54 per cent. In fact, the category of technology funds lost the least during this period.

Fund/ Index

Ret (%)

6 mths
1 year
2 year
3 year
5 year
Birla Sun Life New Millennium
Franklin Infotech
Kotak Tech
Magnum IT
Prudential ICICI Technology
UTI Software
Returns as on February 28, 2007
Returns up to 1 year are absolute and those above 1 year are annualised

Budget Effect
The Budget has proposed to impose 11.2 per cent minimum alternate tax on companies which were enjoying exemptions under Section 10A and 10B. Though the move hit the technology stocks, some large companies have said they would create a deferred tax asset against which they could set off against future taxes, thus creating minimal impact on reported earnings. Another negative for the IT sector could be the fringe benefit tax (FBT) on ESOPs. FBT would be charged on the difference between the issue price and the exercise price. This would discourage companies, particularly the smaller ones, from offering ESOPs, further making it difficult for them to attract and retain talent.

Favourite Across Funds
If you've been a stock market investor in these last few years, it would have been extremely difficult to give technology stocks a miss. And the same is true for mutual funds as well. Out of the 158 diversified equity funds (whose February 2007 portfolios were available), just seven did not have exposure to technology stocks. Of the remaining 151 funds, a majority 81 have technology as their top holding at the sector level while as many as 106 funds have it among their top three sectors. Things are pretty much the same where tax-planning funds are concerned. Out of the 26 equity linked savings schemes (ELSS), 16 have technology as their top holding.

While this speaks loads about the prospects of Indian IT companies and the kind of conviction fund managers are putting in this sector, it also points towards the fact that you might not need to invest separately in a technology fund. This is because you are likely to have sufficient part of your money already invested in technology stocks, had you been investing in diversified equity and tax-planning funds.

Therefore, it is important for you to take a holistic view of your portfolio before committing to a technology fund. And if you feel that you understand the sector well and are ready to take concentrated exposure to technology stocks, then there are quite a few good funds available to you.

Read on about the ones that we like.

Anand Rathi - Weekly Strategist

Download here

Religare - Weekly Tech Note - Apr 9

Download here

Anand Rathi - Weekly Technical Note

Download here

PPFAS - Investment Ideas for 2007

Download here

PPFAS - Weekly Report

Research Call - ADF Foods