Sharekhan Riveting Metals dated May 09, 2007
Wednesday, May 09, 2007
Weak trend continued as we witnessed yesterday. Start for Indices was in green but weakness in global weighted on the market as the Bourses slipped in red. Asian markets traded mixed but recovered to close in positive territory while Europe trading mixed. Sensex had a volatile session with no clear direction as investors played cautiously ahead the final results of the UP elections and the Fed meeting in the evening. Profit booking was on the cards for most of the sessions but the market saw some patchy attempts by the bulls to push the indices into the positive.
Sensex remained in the red for the most of the day. Sudden Momentum sprung up in the final hour of trade as it witness strong buying at lower levels in the index heavyweights to close marginally up in the positive territory. The rally was started in the Bank sector as there was news in the market that RBI might cut CRR which saw SBI to zoom. Other banking stocks also gained after witness a profit bookedin the day to close in green during final hours of trading. Selective stocks in the Software, FMCG and Energy sectors bared the brunt of profit booking. Selling pressure continued for small cap and mid cap stocks.
Sensex ended up by 16 points at 13781.51. It was helped up by gains in SBI (1122.9,+4 percent), Hero Honda (701.3,+3 percent), Rel Energy (519.4,+3 percent), TISCO (562.2,+2 percent) and Bajaj Auto (2564.45,+1 percent). Restricting the gains were TCS (1236.65,-2 percent), HLL (191.05,-2 percent), Cipla (207.85,-2 percent), ONGC (909.35,-1 percent) and ACC (875.7,-1 percent).
Fortis Healthcare which listed today settled at Rs 100 a discount over IPO price of Rs 108 per share. The stock debuted at Rs 105 and surged to a high of Rs 109 and made low for the day at Rs 98. Almost 1.38 crore shares changed hands in BSE. Fortis Healthcare had priced its 4.59 crore equity shares for the IPO in the price band of Rs 92 to Rs 110 per share. The issue was subscribed 2.78 times. The qualified institutional buyers (QIB) portion was subscribed 2.72 times, non-institutional portion 1.74 times and the retail portion 3.26 times. This is a Ranbaxy promoted group company. Bulk of the IPO proceeds would be used to part-fund a hospital to be built in New Delhi and to pay a loan made for an acquisition.
Some of the financial bids for the government?s residual 10.27% shareholding in the country?s largest car maker, Maruti Udyog came in today while the others would follow later on. The floor price had been fixed at Rs 760 a share. As many as 296,79,709 shares of Rs 5 each would be sold through the competitive bidding route to domestic public sector financial institutions, public sector banks and mutual funds. The highest bid for Maruti came in at Rs.850 per share from the Corporation Bank while bid from LIC stood at Rs. 800 per share for the same. The bids have just opened and this news has the stock running. However it?s better to avoid long positions as the Government informs that 36 banks, institutions have bid for Maruti stake, highest bid coming in at Rs.850 per share. It does not benefit the small investor. In fact its overall negative for markets as that much of money which could have otherwise come into the market is likely to be sucked out. The stock ended marginally up after a good rally in the early sessions.
With news becoming hotter and hotter that Canara Bank might acquire Dena Bank, Canara Bank has reportedly appointed Ernst & Young to explore the possibility of acquiring Dena Bank. The chairmen of the two banks are reportedly to meet shortly after which the matter would be taken up by the respective boards. Canara Bank is strong in the south with a network of 2,542 branches, while Mumbai based Dena Bank has a large presence in Maharashtra, Gujarat and Chhattisgarh with almost 1,050 branches. The government holds a 73% stake in Canara Bank and 52% in Dena Bank. Dena bank ended the day up by 6.5% while Canara Bank ended 2% higher.
Technically Speaking: Markets traded in a volatile manner but a good bounce back in the last session saw it end in the positive territory. Sensex touched an intraday high of 13806 levels and low of 13612 levels. Volumes were good as the market churned almost Rs. 4081cr. Overall breadth was in favor of Declines, where the Declines were 1396 against Advances of 1161.
The market witnessed a correction in the opening trades, as weak Asian markets, and flat US and European indices dampened the sentiment. Although the Sensex resumed on a positive note at 13772, yet the market soon lost ground and slipped to touch the early low of 13638. The market managed to recover some lost ground but as the trading progressed the Sensex slipped significantly in the afternoon with selling in heavyweight, IT, oil and banking stocks dragging the index to the day's low of 13612. However, recovery in auto, banking and capital goods stocks towards the close lifted the Sensex to the positive territory to touch the intra-day high of 13806. The Sensex finally ended the session with gains of 16 points at 13782, while the Nifty added nine points and closed at 4086.
Among the sectoral indices, the Bankex led the upsurge with gains of 1.46% at 6851 followed by the BSE Auto index (up 0.54% at 5007) and the BSE CG index (up 0.46% at 9945). However, the BSE IT index, The BSE Oil & Gas index, the BSE FMCG index and the BSE Teck index closed in negative territory. Interestingly, the market breadth was negative. Of the 2,633 scrips traded on the BSE 1,407 stocks declined, 1,122 stocks advanced and 104 stocks ended unchanged.
Out of the 30 Sensex stocks, 17 managed to end in the green while 13 stocks ended with losses. Banking major SBI was the lead gainer and soared 3.83% at Rs1,123. Hero Honda advanced 3.20% at Rs701, Reliance Energy moved up by 2.72% at Rs519, Tata Steel jumped 1.64% at Rs562, Bajaj Auto shot up by 1.24% at Rs2,564, Ranbaxy added 1.14% at Rs393 and Bharti Airtel rose 1.13% at Rs825. ICICI Bank, L&T and Gujarat Ambuja Cement gained marginally. Among the laggards, TCS dropped 2.46% at Rs1,237, HLL shed 1.77% at Rs191, Cipla declined by 1.75% at Rs208 and ONGC lost 1.39% at Rs909.
Banking stocks were the star performers, Fwedral Bank 4.78% at Rs257, BOI surged 2.70% at Rs194, Bank of Baroda jumped 2.62% at Rs243, Oriental Bank scaled up 2.39% at Rs195, Canara Bank spurted 2.19% at Rs221, Punjab National Bank soared 2.14% at Rs508 and UTI Bank was up 1.87% at Rs517.
Over 1.77 crore of IFCI shares changed hands on the BSE followed by Fortis Healthcare (1.37 crore shares), Tata Teleservices (83.54 lakh shares), Nagarjuna Fertilizers (82.98 lakh shares) and GV Films (70.86 lakh shares).
Reliance Capital registered a turnover of Rs103 crore on the BSE followed by Reliance Industries (Rs101 crore), SBI (Rs93 crore), Infosys (Rs72 crore) and Tata Steel (Rs65 crore).
The market was able to snap its three days of losing streak and posting a marginal gain as buying resumed. In the last three days, it had slipped 312.75 points, from 14,078.21 on 3 May to 13,765.46 on 8 May 2007.
The sharp recovery today was triggered by value buying at lower levels and strong global markets.
Japan's Nikkei average gained 0.52% on Wednesday, 9 May 2007, to its highest close since the global equity sell-off in February 2007, as Kawasaki Kisen Kaisha jumped following an upbeat earnings report, prompting investors to buy shares in other shipping firms. The Nikkei rose 91.28 points to 17,748.12, its highest close since 27 February 2007.
Hong Kong’s Hang Seng index was up 0.62% or 128.72 points to 20,835.07
US stocks closed flat on Tuesday as investors locked in profit after five straight sessions of gains in blue chips, a day before Fed's meeting on interest-rate policy. The Dow Jones industrial average dipped 3.90 points, or 0.03%, to end at 13,309.07, after falling as much as 75 points.
The Standard & Poor's 500 Index slipped 1.76 points, or 0.12%, to finish at 1,507.72. But the Nasdaq Composite Index edged up 0.80 point, or 0.03%, to close at 2,571.75.
The improved sentiment forced traders to cover their short positions. Bears dominated the first half of the session, but sporadic buying since the afternoon session saw the bulls emerging victorious. Banking, auto and metal stocks led the recovery.
The 30-shares BSE Sensex settled 16.05 points higher at 13,781.51, after surging to 13,806.37. Earlier, the Sensex had opened weak at 13,709.95 as profit booking continued for the fourth straight session, pulling the benchmark index below the 13,700 mark to a low of 13,612.04.
The NSE Nifty gained 2.30 points to 4,079.30
The market breadth, which indicates the overall health of the market, recovered from the initial weakness arising from selling in small-cap and mid-cap stocks. On BSE, 1,396 shares declined as compared to 1161 that advanced. Prices of 102 stocks remained unchanged.
The BSE Mid-Cap Index ended at 5,792.15, gaining 12.33 points, or 0.21%, while the BSE Small-Cap Index lost 20.65 points, or 0.30%, to 6,918.60.
The total turnover on BSE amounted to Rs 4081.17 crore while the F&O turnover on NSE stood at Rs 31001.77 crore. Total market wide turnover amounted to Rs 43464.21crore, which is higher than Rs 40,927.59 crore on Tuesday.
The Sensex has been moving in a trading range of 13,700 and 14,300 points since the past few weeks and a breakout on closing basis, either way, is likely to provide future direction.
Traders are seen to be refraining from building fresh positions ahead of the crucial US Federal Reserve’s meeting today evening (IST). Fresh short positions in the futures and option (F&O) segment are said to have been built up on Tuesday, 8 May 2007, as the basis (the spread between futures and spot market) turned negative.
Among the 30-member Sensex pack, 21 advanced while the rest declined.
Meanwhile, the government has not taken any decision to allow foreign direct investment (FDI) in the retail sector, Finance Minister P Chidambaram told the Rajya Sabha today.
FDI was only permitted for cash-and-carry, wholesale and single brand retail.
FDI inflow of $13.5 billion in 2006-07 was the highest-ever.If retained earning and swap deals were to be included, FDI would be $19 billion.
India’s largest commercial bank State Bank of India (SBI) advanced 3.85% to Rs 1123 on 8.44 lakh shares, and was the top gainer. The stock surged after market rumors that CRR may be slashed shortly. ICICI Bank (up 1.25% to Rs 852) and HDFC Bank (up 0.71% to Rs 997) were the other gainers from the banking space.
Led by SBI, the BSE Bankex advanced 1.46% at 6,851.35, and was the top gainer among the sectoral indices on BSE. Federal Bank (up 5.31%), Bank of Baroda (up 2.93%), Canara Bank (up 1.98%), and PNB (up 1.81%), advanced.
Bike maker Hero Honda followed with a gain of 3.46% to Rs 703. The BSE Auto Index closed at 5,007.06 up 0.54%.
REL (up 2.81% to Rs 520), Tata Steel (up 2.11% to Rs 564.80), and Bajaj Auto (up 1.65% to Rs 2575), were the other gainers.
Ranbaxy Laboratories gained 1.35% to Rs 393.95. The pharma major is planning to invest around Rs 60 crore to upgrade the recently acquired Be-Tabs Pharma units in South Africa. With the revamp of the Be-Tabs facilities, the company expects to lead the way for generics manufacturing in South Africa, says a company statement. The acquisition substantially strengthens the basket of products that Ranbaxy brings to the market, specially in the acute and over the counter product streams.
Index heavyweight Reliance Industries (RIL) rose 0.27% to Rs 1598 on 6.38 lakh shares. It staged a smart recovery from a low of Rs 1577.25
IT major TCS was the top loser, down 2.04% to Rs 1242, on renewed selling. TCS, a leading global IT services, business solutions and outsourcing firm, announced its tie-up with Microsoft Corporation to deliver RFID (radio frequency identification) solutions to global companies. It launched an initiative to develop RFID solutions built on Microsoft BizTalk
Other shares from the IT pack were not spared either. Infosys (down 0.89% to Rs 1985) and Satyam Computers (down 1.12% to Rs 451.35) also declined. The BSE IT Index declined 0.92% at 4,887.62, and was the top maximum loser among the sectoral indices on BSE.
Cipla (down 1.77% to Rs 207.80), HLL (down 1.34% to Rs 191.90), and ONGC (down 1.21% to Rs 911), declined
Fears of backlash from the US pulled ONGC down by 1.31% to Rs 911, despite subsidiary ONGC Videsh, leading a consortium of Indian companies, striking large oil and gas reserves in a block in Iran.
Fortis Healthcare, which listed today, settled at Rs 100, a discount over the IPO price of Rs 108 per share. The stock debuted at Rs 105, and surged to a high of Rs 109.10. Its low for the day was Rs 97.90. On BSE, 1.38 crore shares changed hands in the counter.
Fortis Healthcare had priced its 4.59-crore equity shares at Rs 108. The price band for the IPO was Rs 92 to Rs 110 per share. The issue, which had opened for subscription on 16 April 2007 and closed on 20 April 2007, was subscribed 2.78 times. The qualified institutional buyers (QIB) portion was subscribed 2.72 times, non-institutional portion 1.74 times and the retail portion 3.26 times
TRF jumped 10% to Rs 684.85 after it reported a 147% growth in net profit in Q4 March 2007 to Rs 10.03 crore in Q4 March 2007. Sales rose 78.49% to Rs 141.61 crore. Net profit jumped 185.29% to Rs 20.17 crore in the year ended March 2007. Sales surged 60.33% to Rs 347.20 crore.
Biscuits maker Britannia Industries surged 5.1% to Rs 1450.50, extending its recent rally. The government has exempted from excise biscuits whose retail price does not exceed Rs 100 per kilo gram from the earlier proposal of excise exemption for retail price up to Rs 50 per kg. These changes were announced on 3 May 2007, when the Finance Bill 2007-08 was passed in Lok Sabha.
SKF India rose 4.94% to Rs 383.45. The stock rose ahead of its analyst meet scheduled later in the day. Last month, SKF India reported a 63% growth in net profit to Rs 36.66 crore in Q4 March 2007. Net sales rose 22% to Rs 359.82 crore.
Gas transmission firm GAIL (India) dropped 4.37% to Rs 280.40 even as it reported a 66.33% growth in net profit to Rs 680.73 crore in Q4 March 2007 as against Rs 409.26 crore in Q4 March 2006. Sales rose 6.11% to Rs 3883.41 crore, from Rs 3659.81 crore. Net profit rose 3.32% to Rs 2386.67 crore in the year ended March 2007 as against Rs 2310.07 crore during the previous year ended March 2006. Sales declined 1.86% to Rs 16047.18 crore, from Rs 16351.29 crore.
Dena Bank surged 6.65% to Rs 36.90 on reports that Canara Bank is contemplating a takeover and has reportedly appointed Ernst & Young to explore the possibility of acquiring Dena Bank. The chairmen of the two banks are said to be meeting shortly after which the matter would be taken up by the respective boards. The government holds a 73% stake in Canara Bank and 52% in Dena Bank.
State-run Syndicate Bank gained 4.80% to Rs 79.75 after it reported a 911.6% surge in net profit to Rs 104.30 crore in Q4 MArch 2007, from Rs 10.31 crore in Q4 March 2006. Total income edged up to Rs 1930.40 crore, from Rs 1255.06 crore. Advances grew 42%, whereas deposits were up only 4.4%. The bank's net profit jumped 33.47% to Rs 716 crore in the year ending March 2007. Total income increased to Rs 6659 crore, up 44.36% from FY 2006. Its capital adequacy ratio (CAR) stood at 11.74%. The gross non-performing assets (NPA) declined to 2.95%, from 4% in FY 2006. The net NPA was also down to 0.76%, from 0.86%.
Mid-Day Multimedia declined 5.70% to Rs 44.65,extending its fall triggered by the loss in Q4 March 2007. A couple of days ago, the company had reported net loss of Rs 2.89 crore in Q4 March 2007 compared to a net loss of Rs 0.36 crore in Q4 March 2006. Net sales rose 12.80% to Rs 27.85 crore (Rs 24.69 crore). Net profit fell 86.40% to Rs 1.10 crore in FY 2007 (year ended March 2007) compared to a net profit of Rs 8.09 crore in the previous financial year. Net sales rose 1.10% to Rs 105.94 crore (Rs 104.34 crore).
Tamil Nadu Newsprint & Papers gained 0.41% to Rs 85.45 after disclosing plans to set up a 400-tonne a day cement plant and an information technology park on surplus land. Kalindee Rail Nirman Engineers was up 1.10% to Rs 175 after it net profit surged to Rs 3.67 crore in Q4 March 2007 as compared to Rs 95 lakh in Q4 March 2006. Net sales rose to Rs 82.5 crore (Rs 40 crore).
Kirloskar Brothers edged up 2.81% to Rs 350 following its joint ventures with various firms bagging Rs 1338.90-crore contracts.
A crucial US Federal Reserve’s meeting today is scheduled in the evening (IST) today. It looks certain that Fed will hold interest rates steady when it meets and will likely restate worries on inflation, even while nodding to weak growth and an easing of price pressures.
The US central bank has held the benchmark overnight borrowing costs steady at 5.25% for six consecutive meetings stretching back to August 2006.
The Bank of England is seen lifting rates to 5.5% on Thursday, a move that would put British interest rates above those in the US for the first time since January 2006. The European Central bank (ECB) is expected to hold its rates steady at 3.75% on Thursday,10 May 2007, but signal a hike in June 2007.
FIIs remained in buying mode on the bourses on Monday, 7 May 2007. FIIs were net buyers of Rs 96.70 crore of equities on Monday, 7 May 2007. Domestic institutional investors were net sellers of Rs 124.54-crore equities on Tuesday, 8 May 2007.
Oil prices rebounded to above $65 a barrel on Wednesday, 9 May, as new attacks on Nigeria's oil industry deepened supply losses, interrupting a six-session losing streak that had driven prices to their lowest level since 26 March. London Brent crude was up 6 cents to $65.60 a barrel
The NIFTY futures saw a rise in OI to the tune 1.02% with prices coming down and closing below 4100 levels near day's low indicating short positions were built up in the market as market not sustaining at higher levels .The discount in nifty futures widened and nifty futures closed at 21 points discount to spot nifty indicating aggressive short positions built up and profit booking emerging in the market at the current levels. The FII sold index futures to the tune of 77crs and sellers in index options to the tune of 15crs. The PCR has come down from 1.19 to 1.17 indicates some weakness may be seen in the market. The IV is around 25.40 levels indicating some volatile trading sessions ahead.
Among the Big guns, ONGC saw 1.50% rise in OI with prices coming down 1.23% indicating shorts built up their positions and long positions liquidated in the counter indicating weakness in the counter. Whereas RELIANCE saw 2.23% rise in OI with prices coming down from high indicating selling pressure emerging at higher levels and drop in prices was mainly driven by short selling coming in the counter and which may be expected to remain continue for few days.
In the TECH front, INOFSYSTCH& TCS, WIPRO & SATYAMCOMP saw rise in OI with prices coming down sharply indicating fresh short positions being built up in overall IT pack indicating some weakness may be seen in IT pack. TCS saw some buying emerging at lower levels indicating that the counter may outperform the overall IT pack in the short term.
In the BANKING counters, SBIN saw rise OI to the tune of 5.37% with prices coming down sharply and closing near day's low indicating fresh short positions being built up in the counter indicating weakness in the counter. ICICIBANK saw rise in OI with fall in prices indicating short positions being built up in this counter indicating weakness in the counter. HDFCBANK saw rise in OI with drop in prices indicating liquidation of long positions and built up of fresh short positions in the counter.
In the metal pack TATASTEEL saw drop in OI to the tune of 8.89% with price down to the tune of 0.30% indicating liquidation of long positions in the counter suggesting weakness may be seen in this counter. SAIL saw drop in OI with prices almost flat indicating liquidation of positions. HINDALCO saw rise in OI with fall in prices indicating weakness in the counter. STER saw liquidation of positions with prices positive indicating buying emerging at lower levels indicating some strength in the counter.
We feel that the volume and built up in OI suggests that market may show some short positions being built up and long positions liquidation as uncertainty prevail in the market .Market may show weakness if it closes below 4050 levels where we may see fresh short positions built up in the market and long liquidation in the market .One should trade with strict stop losses to be adhered too.
Anand Rathi - Daily Strategist Note - May 9 2007
Sell Praj Industries with stop loss of Rs 490 for a target of Rs 420.
Sell Century Texttiles with stop loss of Rs 600 for a target of Rs 490.
Rajat K Bose
Sell IVRCL with stoploss above Rs 303 for a target of Rs 277. This is a day-trading recommendation.
Sell M&M with stoploss above Rs 767 for a target of Rs 749-743. This is a day-trading recommendation.
Buy Network 18 below Rs 560 with stop loss of Rs 550. This is a day-trading recommendation.
Short Sell Bajaj Hindustan above Rs 157 with stop loss of Rs 161.50. This is a day-trading recommendation.
If India continues on its current high growth path, incomes will almost triple over the next two decades, and the country will climb from its position as the twelfth-largest consumer market today to become the world's fifth-largest consumer market by 2025.
The 'Bird of Gold': The Rise of India's Consumer Market-McKinsey & Company
Essar Oil is in the final stages of negotiations to raise $100 million (about Rs 407 crore) through external commercial borrowings (ECB) for expansion and upgradation of its crude refinery in Khambalia, Gujarat.
Financial bids for the government's residual 10.27 per cent shareholding in Maruti Udyog, will be opened on 10th May 2007.
Tata Tea signed a joint venture agreement with Zhejiang Tea Import and Export (ZTIE) company of People's Republic of China The agreement involves setting up a joint venture company at the Economic Development Zone of Anji County, Zhejiang, for the manufacture and marketing of green tea polyphenols, other green tea extracts.
The Foreign Investment Promotion Board (FIPB) issued the letter of approval to Vodafone International Holdings BV for going ahead with its proposal to acquire an effective shareholding of 51.96 per cent in Hutch Essar Ltd from HongKong- based Hutchison Telecom International Ltd.
The Indian shareholders of Lintas India have agreed to sell their 51 per cent stake in the advertising agency to the Interpublic Group (IPG), which holds the balance 49 per cent.
GAIL India's FY07 net profit was up at Rs 2,545 crore versus Rs 2,439 crore . Its Q4 net profit was up at Rs 681 crore from Rs 409 crore.
Kotak Mahindra Bank registered profit after tax of Rs 170 crore in fourth quarter of FY07 versus Rs 156 crore in Q4 of FY06. Net interest income stood at Rs 329 crore as against Rs 201 crore FY07 NIM stood at 5.2%.
Syndicate Bank has reported net profit of Rs 716 crore in FY07 as against Rs 536 crore in FY06. It has posted net profit of Rs 104 crore in fourth quarter of FY07 compared to Rs 10 crore in Q4 of FY06 and net interest income of Rs 604 crore versus Rs 394 crore.
Dabur India has declared its Q4 and FY07 consolidated results. Its net profit stood at Rs 76 crore versus Rs 63 crore in corresponding quarter previous year. Net sales increased to Rs 577 crore from Rs 480 crore YoY.
Market may remain uncertain owing to lack of clarity and may witness sideways movement on the back of sharp intra-day volatility. Mixed fund inflows and global trend will be monitored for further direction. Among the local indices, the Nifty could test the 4085-4100 range on the upside while on the down side it could find support at 4040 and 4029. The Sensex is likey to get support at 13700 and may face resistance at 14300.
US indices ended mixed on Tuesday after finishing with record closes for five sessions in a row. While the Dow Jones declined by four points to close at 13309, the Nasdaq also ended a point up at 2572.
Barring few select floats, most of the Indian ADRs posted losses on the US bourses. MTNL lost over 2%, while VSNL, HDFC Bank, MTNL and Infosys fell over 1% each. Among the select gainers Rediff, Tata Motors and ICICI Bank ended with the marginal gains.
Crude oil prices moved up, with the Nymex light crude oil for June series rising by 79 cents at $62.26 a barrel. In the commodity space, the Comex gold slipped by $3 to settle at $687.40 a troy ounce.
Market Grape Wine :
In House :
Markets to be range bound with negetive Bias .
Nifty to be range bound between 4050 and 4100 levels .
Sell : GMRInfra below 318 target of 306 s/l of 325
Buy : IndianBank above 118 target of 125 s/l of 116
Out House :
Markets at a support of 13696 & 13595 levels with resistance at 13868 & 13949 levels .
Maintain strict stop loss as markets to be very choppy and volatile .
Buy : RIL at dips
Buy : KotakBank
Buy : IDBI & IFCI
Buy : LUPIN & GlenMark
Buy : DIVIS
Buy : JSW & Sail
Buy : Ibulls & Ibullsreal
Dark Horse : Lupin , IBUlls , IbullReal , Unitech , Divis & I-Flex
NIFTY (4077) RES 4101SUP 4054
BUY HTMEDIA (197.6)
SL 193 T 205,207
BUY ASIANELEC (578.35)
SL 573 T 588, 591
SELL POLARIS (162.45)
@ 165 SL 169 T 155, 153
SELL CORPBANK (311.45)
@ 315 SL 319 T 304, 301
SELL MANGLMCEM (144.60)
@ 147 SL 151 T 138, 140
Dull start, bulls hope to slowly return
Success isn't permanent, and failure isn't fatal.
After an excellent April, the month of May is turning out to be pretty dull as far as bulls are concerned. The benchmark BSE Sensex has barely budged in the first four trading days of the month. It is down 0.8% so far. The key indices have fallen in three out of the last four trading sessions. FII inflows, which touched $1.26bn last month, have slowed down considerably. Most key results, barring a few prominent ones, are already out. In any case, the impact of corporate earnings is already in the price. The RBI, has kept interest rates steady and is confident of reigning in inflation between 4-4.5% in the medium term and 5% for FY08.
The one big worry is the sharp appreciation in the rupee versus the dollar. IT stocks have taken a big hit in the past few weeks and unless the central bank stems the relentless rise in the Indian currency they may continue to bleed. Having said that, a story in a leading financial daily says that the rupee has not advanced against a basket of 36 currencies. The RBI uses a more narrow 6-currency basket to measure the real effective exchange rate (REER) for the rupee. Sooner or later, the central bank is expected to step in and check the runaway rise in the rupee. But that may happen when inflation cools further.
After three days of reversals, the bulls will be hoping to have a better day today. But global indicators are quite mixed again. US stocks closed flat to slightly higher, while Asian markets are also mostly flat. Oil in New York is trading just above the $62 per barrel mark. We expect another lackluster opening followed up by the usual intra-day choppiness and stock-centric movement. Among the prominent companies announcing their results today include Lupin, Blue Star, AztecSoft and Page Industries. Fortis Healthcare will make its stock market debut today.
Lupin may gain as the company has received an approval from the US Food and Drug Administrative (USFDA) for Cefdinir for Oral Suspension, 250 mg/5mL. The company's Cefdinir capsules and suspensions are the generic version of Abbott Labs' Omnicef, which had US sales of about $787mn in the 12-month period ended December 2006. ONGC and IOC might gain amid reports that they have struck upon a big oil & gas discovery in the Persian Gulf.
Also keep an eye on Granules India. IFC, the World Bank's investment arm, has agreed to pick up a 11.5% stake in the company via a preferential allotment. Patel Engineering may attract some more attention as it has decided to set up a real estate arm for unlocking value from a land bank of over 500 acres in Mumbai, Bangalore, Hyderabad and Chennai.
FIIs were net sellers to the tune of Rs2.05bn (provisional) in the cash segment yesterday while domestic institutions sold stocks worth Rs1.25bn. In the F&O segment, foreign funds were net sellers at Rs1.59bn. FIIs were net buyers of Rs967mn on Monday. Mutual Funds pumped in Rs571mn on the same day.
US stocks posted their first decline in a week on Tuesday due to weaker-than-forecast earnings from power utilities. The fall ended Wall Street's best initial performance in May since 1990 and reflected concerns that the Federal Reserve policy makers will continue to be cautious on inflation. The Fed is widely expected to leave its benchmark lending rate unchanged at 5.25% at a meeting later today.
The S&P 500 Index ended nearly flat at 1507.72, snapping a five-day advance. The Dow Jones Industrial Average slipped 3.90 points to 13,309.07. The Nasdaq Composite Index finished barely changed at 2571.75.
US light crude oil for June delivery gained 79 cents to settle at $62.26 a barrel on the New York Mercantile Exchange. The front-month contract was trading 5 cents down at $62.21 a barrel in extended trading in Asia.
COMEX gold for June delivery fell $3 to settle at $687.40 an ounce. Treasury prices were little changed, with the 10-year note yield at 4.63%. In currency trading, the dollar gained against the euro but fell versus the yen.
European stocks closed lower. European Central Bank on Thursday is likely to hint at a rate hike in June and the Bank of England is likely to make a quarter-point rate hike. The pan-European Dow Jones Stoxx 600 index lost 0.8% to 389.79. The UK's FTSE 100 shed 0.8% to 6,550.40 and the French CAC-40 declined 0.6% to 6,034.25. The German DAX Xetra 30 slipped 1.1% to 7,442.20.
In the emerging markets, the Ibovespa in Brazil ended flat at 50,277 while the IPC index in Mexico was down 0.7% at 29,572 and the RTS index in Russia dived 0.7% to 1913.
Asian stocks rose this morning. The Morgan Stanley Capital International Asia-Pacific Index advanced 0.2% to 149.37 at 11:20 a.m. in Tokyo, after earlier dropping as much as 0.2%. The index yesterday slid 0.2% after rising to a record on May 7.
In Japan, the Nikkei 225 Stock Average was down 11 points to 17,645 while the Hang Seng in Hong Kong dropped 15 points to 20,690. The Kospi in Seoul was down 2 points at 1580 and the Straits Times in Singapore shed 5 points to 3434.
During the week ended May 2, US Equity Funds lost much of the new money they had received during April, According to EPFR Global. Flows into emerging markets equity funds ground to a halt as the struggle surrounding the Turkish presidency reminded investors of the risks sometimes associated with this asset class, the Boston-based fund flow tracker says. Global Equity Funds and Latin America Equity Funds did extend their winning streaks. But flows were noticeably more subdued and, at the country level, favored the more defensive markets.
Will it be four in a row for bears?
Markets witnessed volatile trades as alternate bouts of buying and selling in scrip’s across the sectors pushed the key indices in positive and negative territory. SBI, Infosys, REL, Bharti Airtel and TCS were the major losers dragging the benchmark index Sensex down nearly 200 points from days high to hit a low of 13741.24. The Mid-Cap and the small cap stocks also witnessed profit booking. Finally, the 30-share benchmark Sensex dropped 113 points to close at 13765. NSE Nifty was down 34 points to close at 4077.
Ranbaxy slipped 0.7% to Rs388. The company announced that they would spend about $14.5mn to upgrade its plant in South Africa. The scrip touched an intra-day high of Rs396 and a low of Rs384 and recorded volumes of over 13,00,000 shares on NSE.
TCS shed by 0.5% to Rs1266. According to reports the company has announced that it is in talks to provide services to Macau casinos the Hong Kong- based, English-language newspaper. The scrip touched an intra-day high of Rs1280 and a low of Rs1257 and recorded volumes of over 20,00,000 shares on NSE.
Shrenuj surged by over 6% to Rs47 after the company purchased Simon Golub & Sons in US. The scrip touched an intra-day high of Rs49 and a low of Rs44 and recorded volumes of over 44,000 shares on NSE.
Moser Baer marginally gained by 0.2% to Rs363 after the company announced that IFC will fund US$22.5mn (Rs1bn) to Moser Baer Photo Voltaic Ltd (MBPV). The scrip touched an intra-day high of Rs371 and a low of Rs360 and recorded volumes of over 4,00,000 shares on NSE.
L&T edged higher 0.3% to Rs1699. The company secured Rs2.15bn order in UAE. The scrip touched an intra-day high of Rs1720 and a low of Rs1690 and recorded volumes of over 2,00,000 shares on NSE.
Tech Mahindra dropped by over 4% to Rs1558 after the company registered its Q4 result with net loss at Rs3.29bn after a one-time payment of Rs5.25bn to a customer reduced its earnings and revenues at Rs8.75 (up 107%). The scrip touched an intra-day high of Rs1627 and a low of Rs1544 and recorded volumes of over 15,00,000 shares on NSE.
Technology stocks were among the major losers. Index heavy weight Infosys slipped 2% to Rs2002, Satyam Computer was down by 1.2% to Rs454 and Wipro fell 1% to Rs547. Rolta, Mphasis BFL and i-Flex are the major losers among the Mid-Cap stocks.
Select Metal stocks lost their shine as profit booking dragged them lower. Tata Steel marginally lost by 0.2% to Rs551 and Hindalco also edged lower by 0.3% to Rs144. However, Nalco was up 1.8% to Rs256 and SAIL added 0.7% to Rs135.
Banking stocks also pared their early gains as selling pressure dragged them lower. SBI fell over 3.4% to Rs1081, HDFC Bank was down by 0.9% to Rs991 and ICICI Bank slipped 0.5% to Rs839. Bank of India, Union Bank and Corp Bank were the major losers among the Mid-Cp stocks.
Cement stocks gained momentum during the day. Heavy weight ACC advanced 2.7% to Rs886, Grasim was up by 0.5% to Rs2485 and Gujarat Ambuja added 0.5% to Rs120.
Prithvi Information Solutions Limited: Mr. V Satish Kumar, Managing Director has purchased from 40000 equity shares of Prithvi Information Solutions Limited on 7th May, 2007.
BSE IT index was the major loser and lost 1.32%. BSE Auto index (down 1.17%), BSE Consumer Durable index (down 1.08%), BSE Pharma index (down 1.05%) and Oil & Gas index (down 0.98) were among the other major losers.
TTML, SAIL, Indiabulls, Dish TV, R Comm, Idea, ICRA, Redington, Reliance Capital, IVRCL Infrastructure, MTNL, India Cement, ACC, Tata Steel, Cinemax and IDFC.
Tele Data, Tripex Overseas, Garnet Construction, Maxwell Industries, Anant Raj Industries, Nirlon and Ramco System.
Blue Star and Lupin.
ABB, Apollo Tyres, Associated Cement Co, Crompton Greaves, National Aluminium Company, Nicholas Piramal, Reliance Capital, Siemens, SAIL and Tata Chemicals.
TVS Motor, State Bank of India, Hero Honda, Rolta India, Federal Bank, SRF, CEAT, Satyam, Colgate, Kotak Mahindra Bank and Tata Elxsi.
Stock Futures with Largest Increases in OI:
Infosys, Bata India, J&K Bank, SBI, Corp Bank, Century Textile, Bombay Dyeing, SCI and Bajaj Hindusthan.
Stock Futures with Largest Decreases in OI:
GDL, Crompton Greaves, Indian Bank, Nagarjuna Fertilizers, Colgate, Karnataka Bank, Mphasis BFL and Nicholas Piramal.
Kotak Bank Q4 profit at Rs1.7bn (30%), total income at Rs14.26bn
Syndicate Bank Q4 profit at Rs1.04bn (up 1%), revenues at Rs19.3bn (up 53.7).
Ashok Leyland – Outperformer from Man Financial with target of Rs46.
Long Term investment:
Major News Headlines:
Holcim buys additional 3.2% stake in ACC for Rs5.4bn
Syndicate Bank to pay final dividend of Rs1.3 per share
GHCL unit gets US$100mn order from Starwood Hotels
TCS signs contract with Microsoft for RFID Solution
Kavveri Telecom inks pact with Ericsson India
Shrenuj & Co buys Simon Golub & Sons in US
L&T secures Rs2.15bn Order in UAE.
Colgate-Palmolive (India) Ltd.
FY07 Result Update
Net sales grew 15% yoy to Rs13bn in FY07, driven by strong volume growth of 9% in toothpaste and 22% in toothbrush segment.
Margins expand 70bps to 16.1% aided by lower adspend and raw material cost. Higher outsourcing restricted further margin expansion.
Net profit rose 59% yoy to Rs2.2bn. Adjusted profit post VRS cost of Rs580mn increased 16% yoy to Rs1.6bn.
The company proposes reduction in share capital by Rs1.2bn to Rs135.9mn, Rs9 per share to be paid as a tax-free ‘deemed dividend’.
Colgate’s core oral care business has been growing at a healthy 10% pa in volume terms. The price hikes undertaken during the year, successful new launches and re-launches, coupled with the fiscal benefits from the Baddi plant have ensured a double-digit topline growth and improvement in profitability. The company has gained market share at the cost of regional players. The strong volume growth in toothbrush category indicates increasing shift towards toothpaste segment. Colgate being the market leader is expected to be the biggest beneficiary.
Colgate plans to increase the capacity at its Baddi plant to 40,000tons by Q1 2008 and to invest the fiscal gains from Baddi unit for brand building and further capex. At the current market price of Rs397, the stock is trading at 22.5x FY08E EPS of Rs17.6 per share. We recommend a ‘Buy’ rating on the stock.
The market may remain range bound tracking flat global markets. Investors are unlikely to build major positions ahead of major local and global events scheduled later in the week. Another reason why market participants have turned cautious is because the Indian market had remained weak in the month of May over the past few years. It may be recalled that the market had witnessed a sharp fall last year during the period May-June 2006.
The key event to watch out for is the outcome of assembly polls in Uttar Pradesh (UP). Polling for the seventh and final phase of polls in Uttar Pradesh got over on Tuesday (May 8) and counting of votes is due on 11 May 2007, with results expected the same day. The UP vote is seen as a barometer of national political trends.
Asian shares were flat on Wednesday, halting a recent strong run. Caution ahead of the outcome of the Fed meeting and a rebound in oil prices kept a lid on Asian markets.
US stocks closed flat on Tuesday as investors locked in profits after five straight sessions of gains in blue chips, a day before the Federal Reserve's meeting on interest rate policy. The Dow Jones industrial average dipped 3.90 points, or 0.03 percent, to end at 13,309.07, after earlier falling as much as 75 points. The Standard & Poor's 500 Index slipped 1.76 points, or 0.12 percent, to finish at 1,507.72. But the Nasdaq Composite Index edged up 0.80 point, or 0.03 percent, to close at 2,571.75.
While no one expects a rate move by the US Federal Reserve, when it meets on Wednesday, investors are keenly awaiting the central bank's latest assessment of the world's biggest economy. The Bank of England is seen lifting rates to 5.5% on Thursday, a move that would put British interest rates above those in the United States for the first time since January 2006. The European Central bank (ECB) is expected to hold its rates steady at 3.75% on Thursday, but signal a hike in June.
A spate of merger and acquisition activity, as well as increasingly eye-popping takeover bids have helped propel many global indices to record highs in recent days, supporting the view that the bull market has to run further.
FIIs remained in buying mode on the bourses on Monday 7 May 2007. FIIs were net buyers to the tune of Rs 96.70 crore on Monday. But the inflow was lower than their inflow of Rs 212 crore on Friday (4 May). As per provisional data, FIIs were net sellers to the tune of Rs 205 crore on Tuesday 8 May 2007, the day when Sensex had lost 114 points. Domestic institutional investors were net sellers to the tune of Rs 124.54 crore on Tuesday.
Corporate results announced so far have been strong. The major Q4 result today is that of drug maker Lupin.
Oil prices rebounded to above $65 a barrel on Wednesday as new attacks on Nigeria's oil industry deepened supply losses, interrupting a six-session losing streak that had driven prices to their lowest level since March 26. London Brent crude was up 6 cents at $65.60 a barrel.
Nifty and Sensex have exhibited a bearish candlestick.
Technically, one may use the level of 4000 (Nifty) and 13600 (Sensex) as the stop loss level.
Nifty faces resistance at 4185 and Sensex at 14225.
BSE Smallcap and BSE Midcap also exhibited bearish candlesticks.
CNX IT has lost ground.
In the Punter's zone we have a Sell in IDBI , ABB & RELIANCE INDUSTRIES.
In the Technical call section, we have a Sell in IDFC , RPL & TATA STEEL.
Anand Rathi - Daily Technical Note - May 9 2007
JP Morgan - Tata Motors
JP Morgan- United Spirits
JP Morgan - Wockhardt
Price target: Rs101
Current market price: Rs82.4
- For Q4FY2007 Andhra Bank reported a stable year-on-year (y-o-y) growth in its net profit to Rs138.8 crore. The same is better than our profit after tax (PAT) expectation of Rs123 crore. The PAT growth was driven by a lower than expected operating expenditure.
- During the quarter, the bank’s net interest income (NII) grew by 18.4% year on year (yoy) to Rs362.2 crore. However there was some sequential pressure on the net interest margin (NIM) as the bank’s cost of funds increased at a much faster pace than its asset yields. Also, its low cost deposit base declined sequentially.
- The non-interest income increased by 9% yoy to Rs138.4 crore despite a 40.4% y-o-y decline in the treasury income. The non-interest income excluding treasury was up 20.3% yoy.
- A 15.7% growth in the net income coupled with a 7.3% y-o-y decline in the operating expenses helped the bank to report a 46.7% y-o-y growth in the operating profit to Rs270 crore. The core operating profit (operating profit excluding treasury) reported further improvement of 59.6% yoy to Rs256 crore.
- Provisions and contingencies showed a decline of 23% yoy to Rs81 crore but increased 25.7% quarter on quarter (qoq) mainly due to higher non-performing assets (NPA) and standard asset provisions charged during the quarter.
- The PAT growth was marginal although the profit before tax (PBT) grew by 158.7% yoy. This was mainly due to a Rs76 crore of tax charge in Q4FY2007 compared to a tax write-back in Q4FY2006.
- Its full year tax provision has gone up significantly by 208% to Rs247 crore compared to Rs80 crore. The higher tax incidence is due to a 32.5% jump in the operating profit coupled with the absence of the investment provision amount (which reduces a bank’s tax liability) in FY2007.
- We had witnessed a jump in the net NPAs during Q3FY2007. The bank made higher NPA provisions during the fourth quarter and the asset quality, already at healthy levels, showed further improvement during the quarter. The net NPAs improved to 0.17% from 0.44% on a sequential basis.
- The bank has shown an improvement in its operating performance, its capital adequacy ratio (CAR) is comfortable at 11.3% with the Tier-I CAR at 9.98% and its asset quality continues to remain among the best in the industry. At the current market price of Rs82.4, the stock is quoting at 6.5x its FY2008E earnings per share (EPS), 3.6x pre-provision profit (PPP) and 1.1x book value. The bank is available at attractive valuations, given its low price to book multiple compared with its peers, and an average return on equity of 18.1%. We maintain our Buy call on the stock with a price target of Rs101.
Cluster: Apple Green
Price target: Rs280
Current market price: Rs195
Good sales growth but disappointing margins
- The Q1CY2007 net profit of Hindustan Lever Ltd (HLL) grew by 13.6% year on year (yoy) to Rs333.9 crore, which is slightly below our expectations.
- The net revenues grew by 13.8% yoy on the back of an 8.73% year-on-year (y-o-y) growth in the home and personal care (HPC) segment, which comprises the soap and detergent, and personal care businesses. The lower growth in the personal product range is disappointing but is expected to pick up in the coming quarters.
- The profit before interest and tax (PBIT) margin showed a contraction of 70 basis points to 13.6%. The contraction in the PBIT margin is attributable to the lower growth in the personal care segment.
- The soap and detergent business has shown a growth of 9.6% whereas the personal care product business has reported a lower growth of 7.4%. Adjusting for the disposal of the Nihar brand, personal products grew by 10.5%.
- The beverage business has shown a growth of 16.6% yoy whereas the processed food business has grown by 26% yoy.
- The operating profit margin (OPM) of HLL contracted by 44 basis points to 11.37% on a y-o-y basis due to a higher raw material cost. The selling and administrative expenses as a percentage of sales increased by 35 basis points which led to further erosion in the margin.
- The soap and detergent segment was able to maintain its earnings before interest and tax (EBIT) margin at 12.1% yoy whereas the EBIT margin in the personal care product range recorded an improvement of 30 basis points to 24.7%.
- At the current market price of Rs195, the stock is quoting at 22.8x its CY2007E earnings per share (EPS) of Rs8.5 and 20x its CY2008E EPS of Rs9.6. We maintain our Buy recommendation on the stock with a price target of Rs280.
TV Today Network
Missing growth drivers
While Aaj Tak has been the leader in the Hindi news genre and has sustained its market share at about 22% (source: TAM Media Research), the other channels of the group haven't been able to garner significant share in their respective genres (Headlines Today—10.7%, Tez—4.6%). Though we believe that these channels had a low investment and incremental operating expenditure (as they leveraged the existing infrastructure of Aaj Tak) and the management claims them to be incrementally profitable, these small initiatives, in our view, do not lay down a foundation for strong growth. Also, competition to its channels has been heating up with the launch of newer channels and the decreasing differentiation of content that has led to pressure on the market share of the existing channels.
The company had about Rs100 crore cash on books at the end of FY2006, which should increase to around Rs150 crore by the end of FY2007. But it hasn't been able to find ways of deploying this cash in any new initiatives (several other players in the industry have actually raised funds for expansion).