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Monday, June 25, 2007

India Banks - small but yet big

ICICI Bank Ltd’s CEO and managing director K.V. Kamath is the happiest man in the Indian financial sector today. The bank’s just concluded twin Rs20,125 crore (about $5 billion) follow-on equity offer has mopped up around Rs1.5 trillion (about $37 billion). In some ways, this is reminiscent of the initial public offer (IPO) of the Industrial and Commercial Bank of China (ICBC), China’s largest lender. In October 2006, ICBC went for a dual-listing in Hong Kong and Shanghai to raise $21 billion, making it the world’s biggest IPO, beating the record of Japan’s NTT Mobile Communications Network Inc. that had raised $18.4 billion in 1998.
The euphoria over ICICI Bank’s public issue is indeed comparable with what Chinese banks have created among the global investing community. But, the comparison ends here. ICBC’s market capitalization is over $212 billion, 10 times bigger than that of ICICI Bank. India’s second largest lender has a market cap of Rs85,774 crore or above $21 billion at last Friday’s closing price. ICICI Bank has priced its domestic issue at Rs940, marginally lower than its closing price on Friday. If it manages to hold on to this price till the new shares are listed, its market cap will probably cross $25 billion.

ICBC’s market cap is more than double the market cap of all listed Indian banks which is just above $90 billion (Rs3.7 trillion). State Bank of India, the country’s largest commercial bank and double the size of ICICI Bank in terms of assets, has a market cap of close to $19 billion (Rs76,619 crore). It is followed by HDFC Bank with a market cap of $8.65 billion (Rs35,188 crore). Only three other Indian banks have over $4 billion market cap, namely Kotak Mahindra Bank ($4.93 billion) and UTI Bank ($4.27 billion) in the private sector and Punjab National Bank ($4 billion) in the public sector.

Indian banks are indeed pygmies both in terms of market cap as well as their asset base. ICBC has an asset base of over $750 billion—three-fourths the size of the Indian economy and much higher than the asset base of the entire Indian banking industry. State Bank of India’s total asset base is around $137 billion, ICICI Bank’s is roughly half of this size.

Based on 2006 balance sheet numbers, State Bank is about one-tenth the size of the world’s biggest bank, Citigroup, on the basis of Tier I capital (net worth and free reserves). On the basis of Tier I capital, State Bank’s global position was 72 last year. It is not even at the forefront of Asian banks where the first three slots were occupied by the Chinese banks. Six Chinese banks featured among the top 25 Asian banks last year, India had only two—State Bank and ICICI Bank.

Three banks each from the US and Japan, two from the UK and one each from France and Spain completed the global top 10 list. In the pack of Asian banks (excluding Japan), China accounted for five of the top 10 slots, Australia four and South Korea one.

Indian banks are nowhere near the global giants in terms of scale. But if one goes beyond the scale in terms of assets and market capitalization and focuses on other parameters such as price-to-book-value (P/BV) and price earnings (P-E) multiple, one would see immense value in these banks. This explains the mad rush for ICICI Bank’s equity issue.

Based on 2006-07 balance sheets, at least four Indian private sector banks have P/BV over five times. Kotak Mahindra Bank tops the list with 12.28 times P/BV, followed by Yes Bank (5.61 times), HDFC Bank ( 5.47 times) and UTI Bank (5.12 times). Development Credit Bank and Centurion Bank of Punjab have over 4 times P/BV while ICICI Bank’s P/BV before its equity dilution is 3.53 times. State Bank of India’s P/BV is 2.47 times and that of Punjab National Bank (PNB) 1.61 times.

The average price to book value of public sector banks at around 1.6 times is less than that of their private sector counterparts but overall the Indian banking industry is in sync with its global peers. ICBC’s price to book value is about 2.5 times. Most US banks trade in the range of 1.2-3.5 times and the range for the European banks is 2-3 times P/BV.

In terms of price earnings multiple, the Chinese banks are in the range of 16-24 times. The average P-E of listed Indian banks is around 15 times with Kotak Mahindra topping the list. HDFC Bank is trading at a P-E of 31.88 times and ICICI Bank, before the listing of new shares, at 29.87 times. In the public sector, both SBI as well as Industrial Development Bank of India are trading at a P-E of over 17 times while PNB and Bank of India are trading at a P-E of over 10 times.

Once, Kamath had said that he would like to see ICICI Bank’s market cap topping $100 billion. It may sound a wild dream today but is very much in the realm of possibility. Chinese banks are not known for transparency. Last year audit firm Ernst & Young estimated that China’s bad loans were over $911 billion and the big four Chinese banks accounted for one-third of that. But, despite the huge non-performing assets and weak disclosures, the international community sees huge potential in China’s banking sector. Indian banks, with much lower distressed assets and better disclosure norms, can ride India’s economic growth equally well. But their real value will be unlocked only when they build scale.

ONGC Q4 net falls 13 pct

State-run Oil and Natural Gas Corp. Ltd. (ONGC) said its fourth-quarter net profit fell 13 percent, lagging forecasts, due to higher mandatory discounts to refiners and one-off staff costs.

ONGC, India's second most valuable listed company with a market cap of $48 billion, also said it was in talks with oil majors Chevron, Total and Royal Dutch Shell to swap stakes in oil blocks and planned to spend $10.3 billion in acquiring and developing overseas assets by 2012.

ONGC exploration director D.K. Pande said the Indian explorer had 190 blocks and was offering stakes in four or five of them.

"We offer them stakes provided they compensate by reciprocating," Pande told reporters. "We will tie up with anybody that can add value to our properties."

ONGC said quarterly net profit fell to 26.82 billion rupees ($657 million) from 30.86 billion rupees a year ago. Eleven analysts had forecast a 35 percent rise to 41.6 billion rupees. Full-year net profit rose 8.4 percent to 156.43 billion rupees, lower than forecasts for more than 190 billion rupees.

"It (net profit) would have been better than last year but this year we have factored in 11 billion rupees as extraordinary expenses towards retirement and medical benefits for our employees," ONGC chairman, R.S. Sharma, told reporters.

ONGC shares ended 0.9 percent up at 916.60 rupees in a firm Mumbai market, with analysts saying that although it had missed forecasts, after the extraordinary expenses the quarterly profit was roughly in line with expectations.

The stock rose nearly 1 percent in the January-March period, lagging a 4 percent gain in the oil sector index.


The company, which is second only to Reliance Industries in market capitalisation, produces nearly 80 percent of India's crude.

It is required by the government to sell oil and gas from its domestic output to state-run refiners at heavy discounts in order to keep retail fuel prices low.

ONGC said its subsidy to state-run refiners rose by 42.4 percent to 170.24 billion rupees for 2006/07. The company sold its crude at a discount of $22.11 per barrel to refiners in the full year to March 2007, up from $17 a barrel the previous year. It said it had earned an average $44.22 per barrel in 2006/07.

"It is becoming very difficult to judge ONGC because of the uncertainties surrounding its subsidy burden which has risen significantly over last few years," said Rohit Nagraj, analyst with Angel Stock Broking Ltd.

"We continue to remain neutral on the stock," he said.

For the year to end-March 2008, analysts expect net profit of about 205 billion rupees.

ONGC had been considering setting up a refinery in Rajasthan to process crude from a block belonging to Cairn India, the Indian arm of British explorer Cairn Energy Plc., but Sharma said it now had no plans to do so.

Cairn India needs a pipeline to transport its crude from its Rajasthan fields and Sharma said a decision on the pipeline would be taken by the government on Wednesday.

"It will be decided whether a pipeline will be laid by ONGC and Cairn, or a special purpose vehicle or a third party," he said.

ONGC Videsh, the company's overseas arm, plans to step up investment in acquisition and development of overseas assets to 420 billion rupees by 2012 from 255 billion in the previous five years.

"Our 11th five-year plan outlay is 420 billion rupees which we will spend on acquisitions and development of existing properties," ONGC Videsh Managing Director R.S. Butola said.

ONGC is eyeing a 51 percent stake in a producing oil field in Azerbaijan. Butola said the company was hopeful it would get some assets there and was talking to Azerbaijan's state-run oil company Socar.

To secure more oil assets, the company is pursuing opportunities in Africa, the Middle East, Russia, Latin America and Kazakhstan.

Via Reuters

India Telecom Sector - June 25 2007

India Telecom Sector - June 25 2007

ONGC, Mphasis

ONGC, Mphasis

India IT Sector

India IT Sector

ICICI Bank - FIPB move could impact growth

ICICI Bank today said in a release that the rejection by the Foreign Investment Promotion Board (FIPB) of its proposed divestment of stake in ICICI Financial Services could adversely impact its ability to capitalise insurance subsidiaries and their growth, the bank's future capital adequacy and financial performance, and the price of its equity and American depository shares.

The bank was planning to sell 5.9% stake in ICICI Financial Services to foreign institutional investors, which would increase the foreign holding in the insurance venture to over 26%, and, as a result, breach the cap of foreign holding in insurance ventures.

The bank, in consultation with its advisors, is evaluating further steps to obtain the requisite approvals in the regard.

"ICICI Bank has not received any official communication from FIPB in respect of its application. The bank has been given to understand that its application has not been approved by FIPB at its June 22 meeting,'' the statement said.

ICICI Financial Services, the proposed NBFC, would hold the bank's equity shareholding in ICICI Prudential Life Insurance Company, ICICI Lombard General Insurance Company, ICICI Prudential Asset Management Company and ICICI Prudential Trust. The bank proposes to transfer its aggregate investment in these companies of Rs 2,228 crore at year-end fiscal 2007.

The bank maintains that it has definitive offers from potential investors.

The subscription amount is Rs 2,650 crore towards fresh issue of shares by the proposed subsidiary, and the investors would acquire a collective stake of 5.9% in the proposed new subsidiary, valuing it at Rs 44,600 crore on a post-issue basis.

Affiliates of Goldman Sachs International, one of the underwriters for the bank's ADS offering, has presented definitive offers to subscribe for shares constituting 2.02% of the post-issue equity capital of the proposed subsidiary.

The stake sale plan would be terminated if the requisite approval is not received within a mutually agreed date.

Tourism Finance Corporation of India

Tourism Finance Corporation of India

Daring Derivatives, Eagle Eye Commodities

Daring Derivatives, Eagle Eye Commodities

Should IPO Reservations go?

The mega DLF Ltd and ICICI Bank Ltd public issues have both sailed through because of strong institutional demand. Retail investors have barely been able to cough up enough funds to subscribe to the portion allotted for them.

Nearly 35% of ICICI Bank’s Rs10,063 crore issue and 30% of DLF’s Rs9,188 crore issue were reserved for retail investors. In sum, retail investors have had to come up with Rs6,278 crore in a short span of time to subscribe to the allotted portion.

It’s no wonder the response was lukewarm, despite an enticing Rs50 discount (about 5.5% of the issue price) that ICICI Bank gave retail subscribers and part-payment options.

For the issuer, it doesn’t really matter if the retail portion goes undersubscribed as long as the institutional portion is oversubscribed. In fact, it’s critical that the institutional portion (typically 50-60% of an issue) is fully subscribed—otherwise, the issue devolves.

In case the retail portion doesn’t have enough bids, the spillover from the institutional portion can take care of the shortfall. But it does affect market sentiment if the retail portion of an initial public offering (IPO) doesn’t get enough bids.

With bankers heaving a sigh of relief now that the two mega issues are out of the way, the question is: Do we need to revisit the rules that require mandatory retail allotment?

This question isn’t a new one, but the experience with two large issues makes an emphatic case for a revisit, at least in the case of large issues and certainly in the case of follow-on ones, where retail investors can easily buy from the open market.

Without a specified retail quota, not only could institutional demand have been better met, but even the retail section of the market would not have come under pressure. From an issuer perspective, it could avoid discounts to retail subscribers, resulting in raising the best possible amount from the market. In any case, the retail portion, with most investors applying at the cut-off price, contributes nothing towards price discovery.

ICICI Bank pricing

ICICI Bank’s pricing of its follow-on public offer (FPO) has been a coup of sorts. The stock traded at Rs908.70 when the bank announced its price band of Rs885-950, moving up to Rs954.55 by the end of trading on Friday.

The strong demand from institutional investors for the bank’s FPO seems to have pushed up the stock in the secondary market.

In fact, the stock traded at an average of around Rs900 in the preceding six months and the price band for the issue went against the conventional wisdom that follow-on offers should be priced at a discount to the traded price. Why else would investors block funds for about three weeks? They’d rather buy from the open market.

But ICICI Bank faced no such problem—its IPO was oversubscribed by 11.5 times, with the vast majority of the bids coming from institutional investors. Also, it’s not just the ICICI Bank scrip that did well last week—National Stock Exchange’s Bank Nifty moved up by even more than ICICI Bank last week. Whether FPO benefited from the surge in bank stocks or whether some of the sheen of the issue rubbed off on other bank stocks is a moot question.

Essentially, ICICI Bank has taken advantage of strong institutional appetite for Indian banking stocks, which remains unsatisfied because of low foreign holding limits, especially for state-owned banks. (State-owned banks account for 50% of the total market value of all listed banks).

The strong demand was visible in massive oversubscription for the institutional part of the issue. Retail investors, of course, weren’t expected to share the fervour, which explains the upfront Rs50 discount.

Via Mint

Quarterly Surprise ?

Buoyancy returned to Indian markets as equities rallied across all major sectors, other than software, on fresh buying by funds and traders. There were liquidity concerns because of public issues by DLF Ltd and ICICI Bank Ltd. But fresh buying by funds in the secondary market eased such concerns. Also, heavy oversubscription of the ICICI Bank share sale was another comforting factor. Inflation, which has been haunting the markets for quite some time, has now fallen to an acceptable, and rather unexpected, level. On the domestic front, there are no big concerns on the horizon.
But the situation is just the reverse on the global front. The resurfacing of concern over subprime contagion is a new challenge that global stock markets may face in days to come. Friday’s sharp fall on Wall Street was on fears that trouble at two Bear Stearns hedge funds may signal bigger problems for credit markets. Inflation and rising interest rates were already worrying markets across the globe and rising US bond yields had triggered a fall on global bourses. If the subprime problem spreads to more hedge funds, it could rattle all major global markets. The US markets are already under pressure as the yield on the benchmark 10-year treasury note has been approaching the 5.25% level. This may put pressure on the interest rates in the US.
This week, the US Federal Reserve meeting is scheduled on Wednesday and Thursday. The Fed has held the target for overnight interest rates steady at 5.25% since last June. Although only minor changes are expected in the meeting, the Fed may decide to hike interest rates, creating problems for global stock markets as it would put pressure on all major economies to review their own interest rates. But going by recent US economic data, chances of upward revision of interest rates are remote.
Other important data that will be released in the US this week includes home sales data on Monday and new home sales data on Tuesday. The new home sales are likely to be lower, compared with May. This may not impact markets substantially, but any positive surprises will boost the US markets. On Wednesday, the US commerce department reports on durable goods orders for May. This data is also likely to show a fall of 1% after a 0.8% rise in April—this has already been factored in by the markets. On Thursday, the revised figures of the first quarter GDP will be made available. This number is likely to be revised upwards to 0.8% from 0.6%.

Indian scenario

This week is going to be important for the domestic bourses as the derivatives contracts for June will expire on Thursday. Since the global markets are likely to be volatile and at present there are no major positive triggers on domestic bourses, the market will be quite volatile ahead of this expiry. The rollover thus far has been smooth and because of this, high open interest rates should not pose any problem. However, the creation of fresh short positions in the wake of uncertainty on global bourses could see some selling pressure building up. Also, the market may now start pondering over the earnings of the first quarter, as these will start arriving from the second week of July. The market’s expectations of first quarter earnings are not very encouraging. But given the strong growth in direct tax collections, the results may
spring some positive surprises.

Technical signs

This week is also going to be driven by a lot of uncertainties. It will start on a negative note and equities may register a fall initially. But no big-ticket selling is likely as the technical indicators are still bullish. Unless selling becomes a global phenomenon, uncertainty-led selling will be temporary.
Purely on a technical basis, the charts show that the market will be back on track from Wednesday. Stocks such as HDFC Bank Ltd, Suzlon Energy Ltd and Unitech Ltd look good on charts. However, readers should note that since some initial weakness is expected this week, it would be better to consider these stocks only after the market consolidates. HDFC Bank, at its current market price of Rs1,101, has the potential to move up to Rs1,064, with a stop-loss of Rs1,064. Suzlon Energy is currently northbound, but is likely to see a lot of volatility; however, with a medium-term perspective, the stock is a good buy. The stock, which is currently trading at Rs1,378, has a short-term target of Rs1,424 and a medium-term target of Rs1,467 with a stop-loss of Rs1,337. Unitech, at the current rate of Rs524.50, has a potential to move up to Rs547 in the short-term, with a stop-loss of Rs492.
From our last week’s recommendation, Century Textiles & Industries Ltd, recommended at Rs604, touched a high of Rs672, gaining 11.26% during the week, well above its target. IVRCL Infrastructures & Projects Ltd, recommended at Rs335, touched a high of Rs379, gaining 13.13%. And Punjab National Bank Ltd, recommended at Rs488, hit a high of Rs532.40, gaining 9.1% during the week.

Via Mint

Anagram - Eveninger - June 25 2007

Anagram - Eveninger - June 25 2007

Tilaknagar Industries, Gammon India

Tilaknagar Industries, Gammon India

Market Close: Expiry nearing.. Looking for Direction..

Subdued session in the market as indices looked for direction. Asian cues were negative and even Europe traded in red. Selling pressure was seen from the start which pushed the market into red zone. This week is the FNO expiry which added to the sluggish session. Selective buying was seen in sector like Telecom, Cement, Oil and Capital good while IT stocks declined on lack of fresh buying. Midcap index opened firm but slipped later to end flat inline with the benchmark indices. Smallcap index closed in green outperforming the frontline indices. Midcaps like GreenPly, Esab India rallied with good.

Sensex ended up by 20 points at 14487.72. It is helped up by gains in L & T (2166.05,+3 percent), RCVL (522.5,+2 percent), HDFC (1904.25,+1 percent), Bharti Tele (833.25,+1 percent) and ONGC (916.6,+1 percent). Restricting the gains are Cipla (206,-2 percent), Bajaj Auto (2137.8999,-2 percent), Satyam (454.75,-2 percent), HLL (188.8,-1 percent) and Grasim (2460.6499,-1 percent).

Greenply continued to perform well after the fantastic results reported. Top line grew by 76% to Rs.111 cr. Margins at operating level improved by 260 bps compared to same period last year. EBITDA enhanced by 126% to Rs.13 cr for the quarter. On sequential basis margins was down as company incurred revenue expenditure of Rs.80 lac on implemented SAP and also incurred higher advertising spend. Profits grew by 78% to Rs.6.7crs. Uttaranchal plant went on line during 2006-07. It is expected to go on full steam in FY2008. It enjoys excise and tax holiday and benefits have started flowing to the bottom line. For the full year Revenue was Rs.403 cr. EBITDA @ Rs.46 cr. EBITDA margin was11.5 %. PAT stood at 22.6crs up over 60%. The consolidated numbers contain the numbers of the 100 % subsidiary based out of Europe which is for marketing. Valuations are attractive and we remain positive on this story. We have a detailed research note on this which will give clear picture on the story.

State-run Oil and Natural Gas Corporation reported it financial results which was in line with the industry expectation. Its net profit for fiscal 2006-07 jumped 8% to Rs 15643 crore despite a subsidy payout of Rs17024 crore during the year. The company had posted a net profit of Rs14431 crore in the 2005-06 fiscal. Turnover in FY?07 increased by 18% to Rs 56904 crore and the company declared a dividend of 310% to its shareholders. ONGC?s gross realization in crude sales was $66 a barrel but company had to shell out a discount of $22 to refiners toward subsidized fuel sales. The net realisation for ONGC in 2006-07 was $44 dollar a barrel. The management has said the that the group will invest Rs 121,318 crore in 11th Plan period (2007-012) compared to Rs75,380 crore in the previous plan period. Crude pricers at over 65$ could create some level of margin pressure. Stock managed to close up marginally.

Technically Speaking: It was a volatile session as the indices oscillated to either side of the region ended flat. Sensex touched intraday high of 14521 levels and low of 14424 levels. As we are approaching the expiry, the market is getting more and more ranged. On the lower side Nifty futures has a support at 4215 which was not broken for last 3 days and on the higher side it is facing resistance at 4265,4270 levels and Sensex resistance is seen at 14531levels while the support is seen at 14434, 14381 levels. The market is looking for a bigger move and it might come with the expiry, as it is we believe the trend is up and hence the bigger move is likely to come as an uptrend. Market turnover was low at Rs 4283 Cr. Overall breadth was in favor of Advances, where the Advances were 1487 against the Declines of 1116.

Spice Communications IPO Analysis

Spice Communications IPO Analysis

Indian Hotels, Hotel Leela

*Indian Hotels *consolidated profits grew by 49% in FY07, in line with our estimates. Future growth will be driven by the group's plans to add c.6,500 rooms over the next three years to its existing inventory of 9,900 rooms. We believe that pricing power will remain with the industry for the next 12months and have upgraded our earnings estimates for FY08 and FY09 by 3% and 6% respectively. Given the company's diversified portfolio across the country and increasingly internationally, Indian Hotels is our top pick in the sector.

*Hotel Leela's *revenues grew by a disappointing 16.5% during FY07. Ebitda margin declined by 70bps as inspite of increase in tariffs, as other expenses increased with increase in advertisement and marketing budgets. However, net profit grew by 72.5% on the back of higher other income from sale of Business Park in Mumbai and non cash interest income on the deposits with Hudco. With no major additions to room inventory before FY10, we expect Leela's growth to lag its peer group. Further with Bangalore accounting for an estimated 45% of its room revenues, the impact of any correction in tariffs in Bangalore is the highest for Leela.

*Saregama *is India 's leading music company with a repertoire of over 300,000 tracks. The company's revenue mix is fast changing led by publishing income from mobile, radio and internet mediums. Saregama's FY07 publishing income was up 132% driving the 70% jump in Ebitda. For physical sales Saregama is now focussing on large format retail stores and corporate clients. While its distribution muscle in the international markets, esp. in US/UK is growing it is expanding its TV content and films production also. We see Saregama's 46% Cagr in publishing income leading the 50% Cagr in Ebitda over FY07-09CL. The stock trading at 15x FY09CL earnings is an
attractive music play.

*Entertainment Network* , a subsidiary of Times Group, is India 's leading FM radio broadcaster. ENIL's radio business turned around with the shift from licence fees to revenue share. Today the brand Radio *Mirchi *operates in 12 cities, including four metros and is targeting to rollout 20 new stations in FY08. ENIL's out of home media order-book is rising and includes Rs5bn contract of three years for Mumbai/Delhi Airports. It is also ramping up the event management business to be a "city-centric solution" media company. Led by the business ramp-up we estimate ENIL profits to rise 65%Cagr over FY07-09CL however valuations at 28x FY09CL earnings are rich.

Sangam India

Sangam India

Short-term Trading Calls

Buy Bank of India with stop loss of Rs 185 for a target of Rs 310.

Buy GBN with stop loss of Rs 875 for a target of Rs 1200

Buy Sun Pharma with stop loss of Rs 1020 for a short-term target of Rs 1196.

Buy PBA Infrastructure with stop loss of Rs 72 for a target of Rs 95.

Rolta India

Rolta India

Cipla, Orchid Chemicals, Media Sector

Cipla, Orchid Chemicals, Media Sector

Weekly Technical Update

Weekly Technical Update

Everonn IPO - Educational Solutions Company

Chennai-based education and learning solutions company Everonn Systems India is tapping the capital markets with a public issue of Rs 50 crore. The price band has been fixed between Rs 125 and Rs 140 per share of Rs 10 each.

With a current authorised capital of 16 million shares and paid-up capital of 10.28 million shares, the company will increase its issued shares by 35.71 lakh at the lower end of the IPO band and 40 lakh shares at the upper end. The company plans listings on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The issue will open on July 5, 2007, and close on July 11, 2007.

Everonn Systems has budgeted an outlay of Rs 30 crore for IT infrastructure services. Out of the IPO proceeds, the company will allocate Rs 17.25 crore towards capital expenditure for virtual and tech-enabled learning solutions, and Rs 8 crore has been earmarked for mergers and acquisitions during 2007-08, Rs 5 crore for working capital, while brand building and investments in the company’s proposed subsidiary will be taken up with the rest of the funds. The company also announced that it has received Gujarat Government's contract to set up IT labs worth Rs 30 crore.

Everonn is also looking at expanding its operations in the overseas market, especially in the Middle East and Far East--Singapore and Malaysia.

Kishore Padmanabhan, managing director, Everonn Systems said: "Almost 95% of the e-learning market is untapped. India alone has 10 lakh schools that can be provided such services."

Everonn Systems has seen revenue grow at a compound annual growth rate (CAGR) of 22% and profit after tax at a CAGR of 64%. For the year ended March 31, 2007, the company recorded a turnover of Rs 43 crore.

Interview - Rana Kapoor - YES Bank

India's Yes Bank plans to double its staff and quadruple its branches as it prepares a $110 million share sale which it hopes to price about 44 percent above market price, the bank's founder and CEO said on Monday.

Rana Kapoor, founder and chief executive, also said that Yes Bank will look for a big foreign strategic partner, as Dutch Rabobank -- which holds 19.3 percent of Yes -- is planning to eventually set up its own business in India.

Yes Bank shares reversed an earlier loss to jump more than 9 percent on Kapoor's comments.

"Around 2010 we will look for a strategic financial partner to help with global product distribution. It is unlikely that that will be Rabobank," Kapoor told Reuters at the World Economic Forum in Singapore.

"Rabo has the desire to have its own independent banking operation in India. We do not see them as a medium to long-term partner in the bank," he said, adding that he expects Rabo's stake will gradually be diluted.

Kapoor and his founding partner Ashok Kapur together own 38 percent of Yes Bank, which was set up in August 2004 and went public in July 2005. With a market capitalisation of $1.01 billion based on Friday's close, Yes Bank is India's 15th largest bank by market value, Reuters data show.

About 43 percent of the bank's shares are in free float. Other large shareholders include Hong Kong-based private equity fund AIF Capital with 5.36 percent, Malaysian state holding company Khazanah with 4.99 percent, funds group Fidelity with 4.00 percent and reinsurer Swiss Re with 3.57 percent, Kapoor said.

Kapoor said that existing shareholders' stakes will be diluted by 6.7 percent following the issue -- in about three months -- of 20 million new shares in a $110 million private placement for one or two foreign investors.

The target price for the placement is 225 rupees ($5.50) per share, nearly 44 percent above the 156 rupees the share was trading at before Kapoor's comments.

"The issue price will be higher than the current market price. We believe that our stock is somewhat undervalued and does not fully represent the growth we are going to see," he said.

Yes Bank stock was down one percent at 156 rupees ahead of his comments and rose nearly 10 percent to 172.50 rupees in busy trading following his comments.

The equity issue is part of a $210 million capital raising in which Yes Bank will also raise tier 2 capital by issuing $100 million worth of long-term subordinated debt to German state development banks KfW and DEG.

10,000 BY 2010

Kapoor also announced a large-scale expansion of the bank's branch network as Yes Bank, now focused on corporate business and SMEs, expands into retail banking and wealth management.

He said the bank's total number of branches is set to jump from 22 in March to 60 by August and 100 by March 2008.

"We aim for 150 branches by 2010 and we have a board-approved plan to be at 400 branches by 2012."

Kapoor was equally bullish on staff numbers.

The bank has about 3,000 staff, up from 2,220 in March 2007 and 627 in March 2006.

"We expect to have 4,800 staff by March 2008. In 2010 we should be at 10,000."

Kapoor also said he expects to maintain a net profit growth rate of 60 to 75 percent in the next three years.

Analysts polled by Reuters expect profit to grow by 59 percent and 66 percent respectively over the next two years

Kotak - HT Media, Murudeshwar, PSL, ICICI Bank

Kotak - HT Media, Murudeshwar, PSL, ICICI Bank

Capital goods stocks rally in volatile market

The market recovered most of the day’s losses towards the close of today’s session, after shedding 97 points in early trades from the day's high of 14522. Tracking weak global indices the Sensex opened marginally above its previous close, but the mood remained bearish and the market slipped on profit booking in index pivotals, banking and information technology (IT) stocks. The market once again witnessed selling pressure and the Sensex touched the day's low of 14425 by the afternoon amid a choppy session. However, the Sensex recovered, shrugging off the weakness in the early trades on substantial buying towards the close and ended the session at 14488, up 20 points. The Nifty gained by seven points to close at 4259.

The breadth of the market was positive, with the gainers outpacing the losers in a ratio of 1.40:1 on the BSE. Of the 2,645 stocks traded on the BSE, 1,501 stocks advanced, 1,072 stocks declined and 72 stocks ended unchanged. Barring a few most of the sectoral indices gave up their early gains and ended weak. The BSE IT index declined by 0.94% followed by the BSE Auto index (down 0.81%) and the BSE HC index (down 0.79%). While the BSE CG index rallied sharply and gained 1.13%.

Select counters logged steady gains. L&T rose 2.77% at Rs2,166, Reliance Communication added 1.83% at Rs523, HDFC gained 1.31% at Rs1,904 and Bharti Airtel moved up by 1.25% at Rs833. However, several index heavyweights slipped into the red and ended with losses. Cipla declined by 1.76% at Rs206, Bajaj Auto dropped 1.69% at Rs2,138, Satyam Computer slumped 1.53% at Rs455, HLL shed 1.46% at Rs189, Grasim lost 1.36% at Rs2,461, TCS declined by 1.27% at Rs1,126, Maruti Udyog slipped by 1.14% at Rs753 and Tata Motors was down 1.07% at Rs677.

Tech stocks came under sustained selling pressure. Patni Computer tumbled by 3.41% at Rs494, Infotech Enterprises dropped 2.84% at Rs377, Logix Microsystems slumped 2.75% at Rs260 and Allsec Technologies shed 2.73% at Rs237.

However the majority of the capital goods stocks logged significant gains. Voltamap Transformers flared up 11.88% at Rs841, Esab India advanced by 8.79% at Rs460, Honda Siel Power added 6.22% at Rs191, Indo Tech Transformers gained 6.05% at Rs417 and Indo Asian Fusegear was up 6% at Rs141.

Over 1.39 crore IKF Technology shares changed hands on the BSE followed by Bampsl Securities (89.78 lakh shares), Reliance Petro (70.90 lakh shares), Hindalco (70.30 lakh shares) and Reliance Natural Resources (50.96 lakh shares).

Value-wise, Indiabulls Real Estate clocked a turnover of Rs137 crore on the BSE followed by Hindalco (Rs119 crore), Reliance Industries (Rs94 crore), Educomp (Rs89 crore) and ICRA (Rs76 crore).

BSE Capital Goods index shines in range bound market

The benchmark index, BSE Sensex oscillated about 105 points in the day’s trading session, without much movement on either side. It started firm, but later pared gains, since early afternoon session, tracking weak global markets. All the European indices opened lower, while a majority of Asian markets were trading weak. IT and auto stocks were under selling pressure. Shares from capital goods sector saw buying with the BSE capital goods index striking an all time high.

The 30-share BSE Sensex gained 20.36 points or 0.14% at 14,487.72. It opened slightly lower at 14,454.49 but advanced to strike a high of 14,521.62 at 11:35 IST, as buying resumed. It later pared gains. It slipped to a low of 14,424.71 at 14:14 IST. It later recovered from that low.

The S&P CNX Nifty rose 7.35 points or 0.17% at 4,259.40. It had struck an all time high of 4,362.95, on 4 June 2007. Nifty June 2007 futures settled at 4242.40, a discount of 17 points compared to spot closing.

The market had surged last week. Sensex rose 304.65 points, or 2.15%, to 14,467.36, while the S&P CNX Nifty gained 80.6 points, or 1.93%, to 4,252.05 in the week ended 22 June 2007.

The turnover on BSE rose to Rs 4283 crore compared to Rs 5343.74 crore, on Friday, 22 June 2007. The turnover was over Rs 5,000 crore in the previous three trading sessions (20-22 June 2007). The NSE Futures & Options (F&O) segment turnover was Rs 40264.20 crore as compared to Rs 37941.31 crore on Friday, 22 June 2007.

The market breadth, which indicates overall health of the market held firm, as buying continued in small and mid-cap stocks. 1487 shares advanced on BSE as compared to 1116 that declined, while 82 remained unchanged.

The BSE Mid-Cap index rose 0.16% to at 6384.19 while the BSE Small-Cap index gained 0.68% to 7,564.21

Among the Sensex pack, 15 declined while the other 15 advanced.

Engineering & construction major Larsen & Toubro (L&T) surged 2.58% to Rs 2162 on 2.74 lakh share and was the top gainer from the Sensex pack. The scrip hit an all time high of Rs 2,189.40 during the day. The stock rose after the company said today, 25 June 2007, its board would meet on 3 July 2007 to consider a special dividend. The stock gained 23.87% in the past one month to Friday, 22 June 2007.

State run engineering major Bharat Heavy Electricals (BHEL) gained 0.55% to Rs 1448, after it won an order worth Rs 106 crore from Rashtriya Ispat Nigam (RINL). The contract will be executed in 28 months.

Led by L&T and Bhel, the BSE capital goods index surged to an all time high of 11,870.62. The index rose 1.13% to 11,830.08.

Telecom stocks gained on fresh buying. Bharti Airtel rose 1.30% to Rs 833.50, and was the top gainer from the Sensex pack. As per reports, the Bharti group is forging ahead with its ambitions to be in the digital media space. It is likely to launch DTH services by December this year.

Reliance Communications vaulted 2.15% to Rs 524.15 on 8.79 lakh shares.

State run oil exploration major Oil & Natural Gas Corporation (ONGC) gained 1.05% to Rs 918.20 even as it posted 13% fall in net profit to Rs 2681.64 crore in Q4 March 2007 compared to a net profit of 3085.89 crore in Q4 March 2006. Total income rose 16.35% to Rs 14575.92 crore in Q4 March 2007 (Rs 12528.23 crore). The results hit the market during trading hours today, 25 June 2007.

Index heavyweight Reliance Industries (RIL) was unchanged at Rs 1,704, on 5.41 lakh shares. The scrip had lost ground on Friday, 22 June 2007, after the Bombay High Court said after market hours on 21 June 2007 that Reliance Industries cannot sell the gas to be produced from one of its prime blocks in the Krishna-Godavari basin to any third party other than Anil Ambani’s Reliance Natural Resources (RNRL) and NTPC. In an interim order on a petition filed by RNRL, the high court has said that the 81.6 million cubic metres of gas per day (mmscmd) is to be earmarked for RNRL, NTPC or for RIL’s captive use for the next eight years.

The BSE Oil and Gas Index rose 0.3% to 7,613.58

Shares from the auto pack, slipped on profit booking. Bajaj Auto lost 2.05% to Rs 2130, on 67,220 shares. It was the top loser from the Sensex pack. Tata Motors (down 1.53% to Rs 674), and Maruti Udyog (down 1.28% to Rs 752) edged lower. Analysts reckon that tight financing and weakening of demand are the major reasons for the decline in auto shares. The BSE Auto Index lost 0.80% to 4,766.06.

IT stocks declined on renewed selling. The BSE IT Index declined 0.94% to 4,812.24, and was the top loser among the sectoral indices on BSE. Satyam Computers (down 1.47% to Rs 455), TCS (down 1.32% to Rs 1125), Infosys Technologies (down 0.89% to Rs 1933.40), and Wipro (down 0.42% to Rs 515.05) were not spared either. A stronger rupee impacts the profit margins of IT firms which derive a lion's share of their revenue from exports.

IT stocks were hit in recent months from rupee's surge against the US dollar. But the rupee slipped against the US currency and was quoted at 40.81/82 in late morning deals today, 25 June 2007, on dollar purchases by importers. The local currency opened slightly lower at 40.76/78 a dollar, from Friday’s close (22 June 2007) of 40.75/76 per dollar.

ICICI Bank was down 0.07% to Rs 953.10. The bank’s plan to sell a 5.9% stake in a subsidiary had failed to get government nod. Meanwhile, the bank priced its follow-on public issue (FPO) of equity shares at Rs 940 per equity share, before markets hours on 25 June 2007. ICICI Bank had set an indicative price band of Rs 885 to Rs 950 per share for its public offering. The issue was open from 19 June 2007 to 22 June 2007. The issue was subscribed close to 11.5 times. ICICI Bank sold American Depositary Shares (ADSs) at $49.25 each.

Aluminium and copper major Hindalco Industries advanced 0.47% to Rs 170.80 on high volumes of 70.24 lakh shares. The stock saw high volume on the back of multiple block deals in the counter. There is market speculation that promoters are hiking their stake from open market. It was the third highest traded counter on BSE with turnover of Rs 119.82 crore. From a recent low of Rs 161.30 on 15 June 2007, the stock has gained 5.88%

Reliance Energy was down 0.36% to Rs 588.10, after striking high of Rs 604.70, in early trade. The company was one of the five qualified bidders who had submitted bids for the 4,000-mega watt Sasan ultra mega power project.

NTPC advanced 0.36% to Rs 153.25, after a block deal of 5.28 lakh shares was struck in the counter on BSE at Rs 153.90 per share at the onset of the trading session. As per reports, the company is slated to acquire 44.6% stake in Transformers and Electricals Kerala (TELK), a Kerala government company, which manufactures and repairs transformers. The state government and its undertakings currently hold 95.6% equity of TELK.

Sterling Holiday Resorts (up 16.15% to Rs 53.25), Force Motors (up 14.24% to Rs 345), Zodiac Clothing Company (up 10.98% to Rs 291), Esab India (up 8.72% to Rs 460), Yes Bank (up 8.44% to Rs 170.90), Greenply Industries (up 7.42% to Rs 166.50), KLG Systel (up 8.03% to Rs 451.30), and GMR Infrastructures (up 7.39% to Rs 661.50) advanced from the small-cap and mid-cap space.

Hindustan Machine Tools declined 3% to Rs 68 on reporting a net loss of Rs 16.35 crore in Q4 March 2007 as against net profit of Rs 23.66 crore in Q4 March 2006. Sales declined 16.84% to Rs 77.19 crore (Rs 92.82 crore). Net profit rose 309.19% to Rs 54.30 crore in the year ended March 2007 as against Rs 13.27 crore in the previous year ended March 2006. Sales fell 8.47% to Rs 227.29 crore in FY 2007as against Rs 248.33 crore in FY 2006. The company had announced the results on Saturday, 23 June 2007.

Kalyani Steels jumped 4.85% to Rs 430 after agreeing to sell a 45% stake to Brazil's Gerdau SA in recent Indian acquisition. The company made the announcement after market hours on Friday, 22 June 2007. As per the agreement, both the companies will have equity partnership of 45% each in SJK Steel Plant, which was recently acquired by Kalyani Steels. The remaining 10% will be held by other investors. SJK Steel is an integrated alloy steel plant with an installed capacity of 2.75 lakh tonnes per annum and is located at Tadipatri in Andhra Pradesh.

Marathon Nextgen Reality & Textiles was locked at 2% upper limit of Rs 1773.45 after it announced a board meet on 29 June 2007 to consider a bonus issue.

Hexaware Technologies slipped 1% to Rs 157 after forming a joint venture with Pemtrad International for risk management technology. The new joint venture will focus exclusively on offering a comprehensive suite of technology-intensive solutions in the domain of enterprise risk and compliance management, primarily for financial institutions worldwide.

Amara Raja Batteries jumped 5% to Rs 454.80 after recommending subdivision of equity shares of Rs 10 each to Rs 2 each after market hours on Friday, 22 June 2007.

Bharat Earth Movers (BEML) slumped 4.23% to Rs 1,140.05 after it fixed a price band of Rs 1,020 - Rs 1,090 per share for its follow-on public offer of 49 lakh equity shares of Rs 10 each. The issue will open for subscription on 27 June 2007 and close on 3 July 2007. The issue would constitute 11.77% of the fully diluted post issue paid-up capital of BEML.

Television Eighteen India gained 2.86% to Rs 885 after it scheduled a board meeting on 5 July 2007 to consider bonus issue. The company had made the announcement on Saturday, 23 June 2007.

K S Oils rose 0.61% to Rs 415 on getting shareholders' approval for stock-split from Rs 10 to Re 1 per equity share, in a meeting held on Saturday, 23 June 2007. The company’s current equity is of Rs 22.09 crore comprising 2.209 crore outstanding shares of a face value of Rs 10 each.

Gujarat Apollo Industries spurted 3.47% to Rs 161.10 on entering into a technical knowhow agreement with a German company. This development will also help the company to address mining and re-cycling industry in the coming years.

Aurobindo Pharma rose 0.87% to Rs 792 after the company received tentative approval for quinapril hydrochloride and hydrochlorothiazide tablets from the US Food and Drug Administration.

Volatility is likely to be high on the bourses in the short term ahead of expiry of June 2007 derivatives contracts on Thursday, 28 June 2007. As is the case at the time of expiry of near-month contracts, the extent of rollover to July 2007 contracts from June 2007 contracts will dictate the trend in the near term. A higher rollover indicates that the market players expect bourses to remain firm in the month ahead and vice versa.

Most of the Asian markets were trading lower today, 25 June 2007, tracking overnight sharp fall in US stocks on Friday, 22 May 2007. Hong Kong’s Hang Seng (down 0.81% at 21,822.35), South Korea’s Seoul Composite (down 0.75% at 1,757.73), and Straits Times (down 0.97% at 3,580.33) edged lower.

Japan’s Nikkei 225 average was down 0.56% to 18,087.48. On Friday 22 June 2007, MSCI's measure of Asia Pacific stocks excluding Japan had struck an intraday record high.

China's main stock index plunged 3.68% to 3,941.08, on Monday, hit by worries about government policies to cool the economy and the market, and by big losses in oil refining giant Sinopec. On Friday, 22 June 2007, the index had tumbled 3.29%. Central bank governor Zhou Xiaochuan, speaking in Switzerland at the weekend, said another interest rate hike could not be ruled out because inflation might rise further.

US stocks tumbled on Friday, 22 June 2007, wrapping up their worst week since a global sell-off in February amid fears that trouble at two Bear Stearns hedge funds may signal worse problems lie ahead for credit markets. The Dow Jones industrial average was down 183.31 points, or 1.35%, to 13,362.53. The Standard & Poor's 500 Index was down 19.50 points, or 1.28%, to 1,502.69. The Nasdaq Composite Index was down 28, or 1.07%, to 2,588.96.

The Q1 June 2007 Indian corporate earnings season will kickstart from less than a month from now and, over the next few days, traders are likely to build positions based on Q1 results expectations. The Q4 corporate earnings were strong which had helped trigger a solid surge in domestic bourses since early April 2007.

Over the next few months, the progress of the July-September monsoon will hold key. The weather office said in April 2007 that this year’s monsoon was likely to be 95% of the long-term average, with a 5% margin of error. The annual monsoon is vital for India’s economic health as it is the main source of water for agriculture, which generates more than a fifth of the gross domestic product

Crude oil fell from a nine-month high in New York after a strike in Nigeria ended, easing concern that supplies from Africa's biggest oil producer may be disrupted. Crude oil for August delivery fell as much as 62 cents, or 0.9%, to $68.52 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

Weekly Technical Analysis & Derivatives Daily

Weekly Technical Analysis & Derivatives Daily

Weekly Futures and Options Strategy

Weekly Futures and Options Strategy

Market may remain volatile

After registering the gains of 305 points in the last week, the market is likely to exhibit weak trends on the back of a strong intra-day volatile moves. The meltdown US markets and mixed Asian indices in morning trades also likely to put pressure on the domestic indices. However, the FIIs have turned net buyers of equities in the last session may help the investors' sentiment remain positive. On the upside, the Nifty could test around the 4325 level and may witness support around the 4200 level. The Sensex has a likely support at 14400 and may test higher levels of 14600.

US indices fell sharply on Friday, as subprime woes reemerged and investors remained nervous over rising interest rates, with the Dow Jones sliding over 186 points to close at 13360 while the Nasdaq slipping by 28 points at 2589 amid weak tech stocks.

Indian stocks trading on the US bourses fell roughly 1% each . HDFC Bank, Tata Motors, Infosys, Satyam, Wipro, MTNL, Rediff and Patni Computers were down over 1-1.50% each. However, DR Reddy's and ICICI Bank closed with the marginal gains.

Crude oil prices in the global market moved up on Friday. The Nymex light crude oil for August series gained by 49 cents at $69.14 per barrel. In the commodity segment, the Comex gold for August delivery moved up by $2.80 to settle at $657an ounce.

Emkay - Larsen and Tourbo

Emkay - Larsen and Tourbo

Weekly Technical Analysis - June 25 2007

Weekly Technical Analysis - June 25 2007

Market may turn volatile

Volatility is likely to be high on the bourses in the short term ahead of expiry of June 2007 derivatives contracts on Thursday, 28 June 2007. As is the case at the time of expiry of near month contracts, the extent of rollover to July 2007 contracts from June 2007 contracts will dictate the trend in the near term. A higher rollover indicates that the market players expect bourses to remain firm in the month ahead and vice versa.

The market surged last week despite liquidity concerns arising from the mega follow-up public offer of ICICI Bank. The BSE 30-shares Sensex rose 304.65 points or 2.15% to 14,467.36, while the S&P CNX Nifty gained 80.6 points or 1.93% to 4,252.05 in the week ended 22 June 2007.

As per provisional data, FIIs were net sellers to the tune of Rs 28.23 crore in equities on Friday, 22 May 2007. Domestic institutions bought shares worth a net Rs 512.30 crore on that day.

The only major Q4 result left which of ONGC will be out today, 25 June 2007. ONGC’s results for the quarter ended March 2007 are likely to be disappointing due to a surge in the subsidy burden.

Some Asian markets had recovered from lower level today, 25 June 2007, after initial fall that was caused by overnight sharp fall in US stocks on Friday, 22 May 2007. Hong Kong’s Hang Seng rose 61.37 points (0.28%) at 22,061.28, South Korea’s Seoul Composite was up 7.78 points (0.44%) at 1,778.76 and Taiwan Weighted was up 155.44 points (1.76%) at 8,968.35.

Japan’s Nikkei 225 average was down 92.49 points (0.51%) at 18,096.14 and Singapore’s Straits Times was down 12.58 points (0.35%) at 3,602.80. On Friday (22 June 2007, MSCI's measure of Asia Pacific stocks excluding Japan had struck an intraday record high.

US stocks tumbled on Friday, 22 June 2007, wrapping up their worst week since a global sell-off in February amid fears that trouble at two Bear Stearns hedge funds may signal worse problems lie ahead for credit markets. The Dow Jones industrial average was down 183.31 points, or 1.35 percent, at 13,362.53. The Standard & Poor's 500 Index was down 19.50 points, or 1.28 percent, at 1,502.69. The Nasdaq Composite Index was down 28.00 points, or 1.07 percent, at 2,588.96.

The Q1 June 2007 Indian corporate earnings season will kickstart from less than a month from now and, over the next few days, traders are likely to build positions based on Q1 results expectations. The Q4 corporate earnings were strong which had helped trigger a solid surge in domestic bourses since early April 2007.

Over the next few months, the progress of the July-September monsoon will hold key. The weather office said in April 2007 that this year’s monsoon was likely to be 95% of the long-term average, with a 5% margin of error. The annual monsoon is vital for India’s economic health as it is the main source of water for agriculture, which generates more than a fifth of the gross domestic product

Indiainfoline - Intraday Stock Ideas

NIFTY (4252) RES 4284 SUP 4220

SL 470 T 485, 487

BUY VSNL (480.4)
SL 475 T 490, 493

SL 102 T 113, 115

SELL RENUKA (603.75)
@ 607 SL 611 T 594, 591

@ 157 SL 160 T 148, 146

Well-Fed bulls...but will the party continue

Man is the only animal whose desires increase as they are Fed; the only animal that is never satisfied.

After a rewarding week, the bulls may find it difficult to sustain the positive momentum this week. The two big events - F&O expiry and the Fed meeting - are both taking place on Thursday. June has been pretty volatile after strong gains of the past couple of months. This is because FII inflows have been indifferent. Global markets too have been volatile due to concerns about inflation and interest rates. Oil prices have inched higher towards the $70 per barrel mark. Despite last week's rally, we urge caution as the underlying sentiment lacks strength and conviction.

Fresh buying should be avoided at this stage as the near-term direction looks uncertain. Stay in cash for better days ahead. Lots of stock centric action is expected to continue. We see a lower opening today. Friday's cooling off coupled with weakness on Wall Street and Asian markets will help the bears make an appearance at least. Having said that there is a chance of a rebound later in the day.

US stocks ended down on Friday, with the Dow Jones Industrial Average sliding 1.4%, on the back of renewed concerns over sub-prime mortgages and nervousness over interest rates.

The Dow was down 185.58 points to 13,360.26. The broader S&P 500 (down fell 19.63 to 1,502.56, while the tech-laden Nasdaq dropped 28 points to 2,588.96.

For the week, the Dow and S&P both lost about 2%, while the Nasdaq shed 1.4%.

European shares ended lower on Friday. The pan-European Dow Jones Stoxx 600 index slipped 0.3% to 392.43. The German DAX 30 earlier this week broke through 8,000 and closed at its highest level since March 2000. On Friday, the DAX lost 0.2% at 7,949.63, the UK's FTSE 100 slipped 0.4% to 6,567.40 and the French CAC-40 inched down 0.1% at 6,023.25.

In the emerging markets, the Ibovespa in Brazil gave up 0.7% at 54,267 while the IPC index in Mexico was down 0.6% to 31,642 and the RTS index in Russia rose 0.15% to 1896.

Asian markets were trading mixed. While the Nikkei in Tokyo, the Hang Seng in Hong Kong and the Straits Times in Singapore were in the red, stock indices in Shanghai, Taiwan and South Korea advanced.

FIIs were net sellers to the tune of Rs282.3mn (provisional) in the cash segment on Friday while domestic institutions pumped in Rs5.12bn. In the F&O segment, foreign funds were net buyers of Rs753.9mn. On Thursday, FIIs were net buyers of Rs16.42bn in the cash segment. However, this includes proceeds from the DLF issue. Mutual Funds poured in Rs1.49bn on the same day.

Markets lost ground after surging for three consecutive trading sessions as selling pressure in the index heavy weights like BHEL, Reliance Industries, Tata Steel and Satyam Computer dragged the key indices to close in red. Bulls looked to be tiring out as it struggled to further gain ground.

The Oil & Gas and the Metal index were the major losers both the indices lost nearly by 1%. Finally, the 30-share Sensex slipped 31 points to close at 14467. NSE-50 Nifty was down 15 points to close at 4252

Educomp rallied by nearly by 7% to Rs2295 after the company announced that it has raised $80mn via FCCB at conversion price of Rs2949.83 per share. The scrip touched intra-day high of Rs2359 and a low of Rs2071 and recorded volumes of over 13,00,000 shares on NSE.

Ranbaxy marginally slipped by 0.4% to Rs355. The company secured approval from US FDA for Tamsulosin. The scrip touched intra-day high of Rs359 and a low of Rs353 and recorded volumes of over 2,00,000 shares on NSE.

RNRL surged by over 3.5% to Rs35 as the Bombay High Court has ruled that Reliance Industries cannot sell gas from its KG basin fields to a third party other than NTPC and RNRL. The scrip touched intra-day high of Rs36 and a low of Rs34 and recorded volumes of over 27,00,000 shares on NSE.

IID Forging gained by 1% to Rs737 after the company announced that they would consider stock split on June 30. The scrip touched intra-day high of Rs744 and a low of Rs715 and has recorded volumes of over 7,000 shares on NSE

Metal stocks lost ground, Hindustan Zinc slipped by 3.8% to Rs722, SAIL was down by 1.4% to Rs134, Tata Steel slipped by 1.3% to Rs601, Sterlite Industries lost 2.3% to Rs584 and Jindal Steel declined 1% to Rs3509.

Technology stocks also were on the receiving end led by heavy weight Wipro as the scrip was down by 1.5% to Rs517, Infosys slipped 0.6% top Rs1948 and Satyam Computer declined by 1% to Rs463.

Select Banking stocks also . SBI has surged by 2% to Rs1474, HDFC Bank is up by 1% to Rs1111 and ICICI Bank has added 1% to Rs957. Union Bank of India, Corp bank and Bank of Baroda are the major gainers among the Mid-Cap stocks.

Oil & Gas also lost ground on back of selling pressure. HPCL was down 0.6% to Rs272, ONGC slipped 0.6% to Rs909, IOC dropped 2% to Rs438.

Results Today:

Andhra Petro, Ansal Infra, BEML, Celebrity Fashions, CESC, Lumax Auto, Munjal Auto, Nirlon, ONGC, SAL Steel and Sical Logistics.

Major Bulk Deals:

Morgan Stanley has bought JM Financial from Fidelity; Merrill Lynch has picked up Man Industries; Citigroup has purchased Prime Securities; Macquarie Bank has bought Raipur Alloys; Reliance Capital has picked up Rico Auto while Morgan Stanley has sold the stock; Deutsche Securities has purchased Sun Pharma and SBI Life Insurance has picked up Sundaram Finance.

Insider Trades:

Swaraj Engines Ltd: Reliance Tax Saver (ELSS) Fund - Schemes of Reliance Mutual Fund has purchased from open market 5490 equity shares of Swaraj Engines Ltd on 20th June 2007.

Praj Industries Ltd: Pramod Chaudhari, Chairman has sold in open market 72550 equity shares of Praj Industries Ltd on 19th and 20th June, 2007.

UFLEX Limited: A.R. Leasing Private Limited (part of the promoters' group) has purchased from open market 1300 equity shares of UFLEX Limited on 18th June, 2007.

Lower Circuit:

Saregama, Tripex Overseas, Rama Pulp and Tanla.

Upper Circuit:

Swan Mills, TCI Finance, Rasoi, Yashraj Securities, Flawless Diamond, Vyapar Industries, Malu Paper, Amara Raja, Ashapura Minechem, Goldstone Tech, Crisil, Heritage Foods, Global Broadcast and PBA Infrastructure.

Delivery Delight (Rising Price & Rising Delivery):

APIL, Ashok Leyland, Bank of India, Dr Reddys Laboratories, GAIL, Hindalco, HLL, Indian Hotels, Moser Baer, Nicholas Piramal, SBI and Sun Pharmaceuticals.

Abnormal Delivery:

Hindustan Motors, Balaji Telefilms, HCL Technologies, EIH, Tata Steel, Wipro, Nagarjuna Fertilizers, Eicher Motors, Siemens, IDBI, Gujarat Alkalies, ITC, Indian Petrochemicals Corporation Ltd and Federal Bank.

Major News & Announcement:

Inflation for week ended June 9 was at 4.28% vs expectations of 4.45%

Govt to buy RBI’s stake in SBI for Rs355.3bn

Educomp raises $80mn via FCCB at Rs2949.83 per share

Chidambaram says too early to reach conclusion on inflation

Punjab Chem to borrow funds for overseas acquisition

IID Forging to consider stock split on June 30

Ranbaxy gets approval from USFDA for Tamsulosin

Trinity Capital to buy 1.7% stake in Phoenix Mills

Bank of India to buy 76% stake in Indonesia PT Bank

Gayatri Project gets two orders worth Rs8.8bn

Reliance Industries, TCS, Grasim Industries, ICICI Bank

Reliance Industries, TCS, Grasim Industries, ICICI Bank

Anagram - Daily Call - June 25 2007

Anagram - Daily Call - June 25 2007

India Strategy - June 22 2007

India Strategy - June 22 2007

Oil slides 0.8 percent as Nigerian strike ends

Oil prices fell by more than half a dollar to below $71 a barrel on Monday as Nigerian unions ended a strike that had threatened to disrupt oil exports.

Benchmark London Brent crude for August fell 59 cents or 0.83 percent to $70.59 a barrel by 0143 GMT. The contract touched a 10-month high of $72.25 a barrel early last week as dealers fretted over the potential impact of the general strike.

U.S. light, sweet crude fell 45 cents to $68.69 a barrel, unwinding half of last week's gains that were also fuelled by concerns that U.S. refiners are struggling to meet fuel demand in the world's top consumer.

At the weekend, unions in Africa's top oil producer called off their strike after the government agreed to freeze fuel prices for a year.

The general strike had halted most economic activity but did not affect oil exports, despite earlier threats from the union that they would remove key oil sector personnel. Western companies replaced key staff with management to keep oil flowing.

However, concerns about the ongoing militant violence that has already shut a quarter of Nigeria's output are likely to persist, supporting prices, analysts said. Four foreign hostages were released unharmed on Saturday.

"There's still a fair bit of production offline. There are some good signs they might sort out these issues, but that's not near term, we're talking months," said Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia.

The state of U.S. fuel supplies in the midst of the peak demand summer driving season should also keep prices supported.

Inventories of gasoline and heating fuel are sharply below seasonal norms, and refiners have thus far been unable to crank up output to refill them, U.S. data showed last week.

"(We) believe that the continued stress on the U.S. refining system from the adjustment to more stringent product specifications could lead to further refinery outages, posing a downward risk to U.S. refinery runs," said Goldman Sachs in a research report.

Since late Friday, Texas refineries operated by Lyondell Chemical Co., Exxon Mobil and Valero all reported upsets, according to regulatory filings.

Speculators took a more bullish view of prices in the week to June 19, lifting their net length in gasoline markets to the highest in three-and-a-half years, while heating oil length rose to its highest since October 2003, regulatory data showed on Friday.

NYMEX crude oil speculators also boosted their net length, CFTC data showed.

Via Reuters

Market Outlook, Tech Tracker, Technicals

Market Outlook, Tech Tracker, Technicals

Market more volatile

The F&O settlement considerations will lead to high volatility.
The market edged up past one strong resistance only to run into another. Aided by a burst of FII buying on Thursday and steady buying from the mutuals in the first two sessions, the Nifty and Sensex rose by 1.93 per cent and 2.15 per cent respectively to close on Friday at 4252 points and 14467 points. The Defty was 2.5 as the rupee zoomed.
Breadth was good – there seems to be some retail participation and the BSE 500 (up 2.5 per cent ), the Nifty Junior ( up 4.15 per cent) showed that the buying was weighted towards second-run blueships and entrants on the F&O list. Volumes were excellent except on Monday.
Outlook: The market is likely to oscillate between 4200-4300 for a while. Intra-day swings during this settlement week could be quite large but I don't see a breakout as likely. A new breakout could come on Thursday given a huge OI that may translate into a big carryover.
Rationale: There is massive resistance and congestion above 4250. There is very strong support between 4175-4200.
There is large open interest in the settlement week. That means a lot of intra-day volatility as the F&O settlement considerations exerts an influence on spot prices. But supply and demand will probably be evenly matched inside this zone.
Counter-view: The F&O signals do suggest some signs of overheating. Also the intermediate trend seemed to have gone negative in the first week of June – intermediate trends generally take more than 3 weeks to play out. It has not definitively reversed. A reversal back to a bullish intermediate trend would only be confirmed by new all time highs beating 4362.
Bulls & Bears: Banks had an excellent performance in a scenario where sentiment was driven by the ICICI FPO. The BankNifty gained 5.9 per cent. The CNXIT predictably lost ground, dipping 2.3 per cent.
Among individual stocks, SBI and BoI led the charge in the banking sector. Housing finance majors HDFC and LIC Housing did well.
Pharma stocks such as Dr Reddys, Aurobindo and Aventis shot up. Apart from this, there was strongly bullish action in . Bhel, HLL, Hindalco L&T, M&M, Reliance Energy, Tata Power, JP Associates, Educomp and Unitech
Hindustan Lever
Current Price: 192.35
Target Price: 210
The stock has seen short-covering followed by opportunistic long-trading, which has generated huge volumes. There is resistance at 196. If that is crossed, a target of 210 is likely. Keep a stop at 189and go long. Book profits above 205.
Current Price: 2310
Target Price: 2475
The stock has seen a big breakout followed by a consolidation and some profit-taking. It's testing resistance around 2320-2360. It will either settle into range-trading between 2150-2350 or it will breakout again. If it closes above 2325, it will target 2475. Keep a pivot at 2290 and go long. If the intra-day price hits 2290, go short and book profits around 2200.
Current Price: 1455
Target Price: 1550
The stock has made a breakout past resistance at 1450. It can be projected to a target about 1550 or even 1575. There has been a volume expansion along with the breakout and completion of a saucer formation. Keep a stop at 1440 and go long.
Larsen & Toubro
Current Price: 2107
Target Price: 2250
The stock is consolidating after a big breakout. It has a target of 2250. Keep a stop at 2075 and go long. Book partial profits above 2150. There is a chance of another session with a high-low range of 150 or more so the stop must be very disciplined.
Current Price: 524.75
Target Price: 550
The stock has shown a narrowing triangle pattern. This is generally assumed to be a continuation pattern. At the same time, it is consolidating on strong support at 510. Expect a rise till 550 followed by range-trading between 520-550. Keep a stop at 510 and go long.

Stocks you can pick up this week

Research: ASK Securities (June 18, ’07)
Rating: Hold
CMP: Rs 1,440.2 (Face Value Rs 10)

Bhel had a strong outstanding order book of Rs 55,000 crore by the end of FY07, resulting in strong earnings visibility until FY09E. ASK Securities expects the order inflow and backlog to grow further on orders worth 31,000 mw, which are yet to be placed in FY08-09 for the 11th Plan period.

This is likely to help Bhel bag more orders worth Rs 50,000 crore in the power sector alone (Rs 29,000 crore in FY08E and Rs 21,000 crore in FY09E). Further, Bhel will continue to enjoy the legacy of 10% purchase preference up to March ’08. Bhel’s equipment are technologically superior to those supplied by its Chinese counterparts in the 100/110/125 mw segment. This keeps Bhel ahead of competition.

Also, capacity constraints have been alleviated due to swing capacities/enhancement from 6,000 mw/year to 10,000 mw/year in FY08E and 15,000 mw/year by FY10E. This positions Bhel to exploit impending growth opportunities. The stock trades at 22.9x FY08E EPS and 17.4x FY09E EPS. ASK Securities has advised investors to accumulate the stock below Rs 1,300.

Research: Kotak Securities (June 18, ’07)
Rating: Buy
CMP: Rs 908.7 (Face Value Rs 10)

ONGC has made several oil and gas discoveries in the domestic market, as well as abroad, over FY07. It added proven reserves of 65.6 million tonnes oil equivalents (MTOE) in contrast to production of 48.28 MTOE during FY07, resulting in a reserve replenishment ratio of 1.36:1.

The new discoveries of 18 MTOE at 5x EV/BOE (enterprise value/barrel oil equivalent) add $0.6 billion to the EV. The company’s gas in-place reserves of 5-10 trillion cubic feet (tcf) in the Mahanadi basin will add $1.2 billion to the EV, once it’s approved by the Director General of Hydrocarbons (DGH). With new discoveries in FY07, ONGC’s proven reserves are expected to be close to 1,000 MTOE.

For FY08, ONGC is expected to clock higher production and realisation for oil and gas. However, ONGC’s discount compared to its global peers has risen, due to increased subsidy burden in FY07 to 33% from 28% in FY06. At 30% gross under-recoveries, FY08 subsidy losses are expected to be $11.9/bl compared to $17.2/bl in FY07.

Hindustan Construction
Research: Motilal Oswal (June 11, ’07)
Rating: Buy
CMP: Rs 114.6 (Face Value Rs 1)

HCC’s FY07 performance was impacted by lower-than-expected revenues (Rs 2,360 crore versus expectations of Rs 2,500 crore), loss of Rs 71 crore on the Bandra-Worli Sealink, mismatch in terms of revenues and costs, and projects not crossing the margin recognition threshold.

As several hydro-power projects were awarded during FY06, they required quick mobilisation in terms of equipment and manpower, which in turn, increased operational, depreciation and interest costs. HCC’s order book as in March ’07 stood at Rs 9,310 crore, v/s Rs 9,670 crore during March ’06.

It has submitted tenders for nine bids, valued at Rs 4,510 crore and plans to bid for 24 new projects worth Rs 17,900 crore in the near future. It has submitted pre-qualification bids for nine projects worth Rs 3,800 crore. Motilal Oswal expects HCC to report a net profit of Rs 100 crore for FY08 (up 77.3% YoY) and Rs 180 crore for FY09 (up 74.8% YoY).
Inox Leisure
Research: Edelweiss (June 18, ’07)
Rating: Accumulate
CMP: Rs 131.7 (Face Value Rs 10)

Inox posted a 29.3% YoY growth in net revenues to Rs 33.2 crore in Q407. The growth was driven by an increase in the number of seats under operations. EBITDA margins declined on account of higher entertainment tax and lease rentals.

But, the decline in PAT margins was lower due to higher other income and lower interest expense. For FY07, net revenues grew 38.2% to Rs 140 crore, while PAT grew 41.3% to Rs 24.8 crore. During the quarter, Inox opened one multiplex each in Chennai and Jaipur. At the end of FY07, Inox had a total of 58 screens, including seven screens from the CCPL acquisition.

However, like other players in the multiplex and retail space, Inox is also facing considerable delays in setting up new multiplexes due to delay in handover of properties by developers. Against the expectation of 103 screens by the end of March ’08, Inox is likely to set up 92 screens.

This figure is expected to rise to 127 screens by March ’09. To factor in this delay, Edelweiss has revised the FY08 PAT estimates downwards to Rs 31.3 crore. It estimates that Inox will have EPS of Rs 5.1 and Rs 6.7 in FY08 and FY09, respectively. The stock trades at a P/E of 19.1x FY09E.

Ambuja Cement
Research: Enam Securities (June 19, ’07)
Rating: Outperformer
CMP: Rs 113.4 (Face Value Rs 2)

Enam Securities has covered Ambuja Cements with an outperformer rating, stating Holcim’s consolidation as a trigger for a further upswing in the share price. A 20% reduction in minority holdings of Ambuja boosts Holcim’s earnings by 3%. Enam expects Ambuja to become a key element in the overall business growth of Holcim.

Ambuja Cements is cash-rich. This will support volume growth in future through brownfield expansion. It is also highly profitable on account of cost competitiveness and retail market focus. Enam expects Ambuja’s cement volumes to rise from 16 million tonnes in FY06 to 20 million tonnes in FY08. Realisations are expected to increase from Rs 2,878 per tonne to Rs 3,021 per tonne.

Reliance Communications
Research: Citigroup (June 20, ’07)
Rating: Buy
CMP: Rs 513.1 (Face Value Rs 5)

Reliance Communications is an integrated player and the second-largest player in the mobile segment. The company has an 80,000-km-long India-wide optic fibre network and owns the FLAG submarine cable network. It plans to launch IPTV and retail broadband in FY08. Citigroup recommends the scrip as it believes the company will be able to capture its due market share and profitability, which will be a recurring theme.

Despite lower revenue yields, the wireless business has maintained its returns. Most regulatory approvals are also in place and the company is yet to realise the benefit of full utilisation of its network infrastructure.

Reliance Communications’ accelerated tower roll-out target (20,000 in FY08) — despite lack of clarity on GSM spectrum — could be due to growing realisation of the ‘first mover’ advantage in a nascent industry likely to be dominated by 1-2 mega tower companies. Hence, Citigroup has undertaken tower company valuation for Reliance Communications, estimated at $6 billion (Rs 60/share). The scrip trades at a P/E of 21.8x and 17x its FY08 and FY09 earnings, respectively.

Jet Airways
Research: ICICI Securities (June 19, ’07)
Rating: Buy
CMP: Rs 810 (Face Value Rs 5)

ICICI Securities has revised Jet Airways’ earnings upwards on the back of emerging clarity on the cost structure for US routes and alignment of aviation turbine fuel (ATF) price assumption with current price (corresponding to crude price of $68-70/bbl).

Also, the improving load factor trend is likely to boost international earnings on the back of increasing product acceptance. Jet will be the only private domestic operator to fly the Gulf route beginning CY08, when routes are opened to private airlines.

Further, with the culmination of two mega consolidations in the domestic circuit, ICICI Securities believes the sector will witness the return of pricing power. On EV/sales multiple and greater chances of an early turnaround, it finds that Jet’s acquisition of Air Sahara (now JetLite) is relatively cheaper compared to Kingfisher’s valuation of Air Deccan.