Thursday, August 23, 2007
Political uncertainty took its toll with the Sensex swinging over 400pts in a volatile session today.
The Sensex opened with a significant positive gap of 209 points at 14,458, and soon soared to a high of 14,555 - up 306 points from its previous close.
The index turned volatile in the noon session, and slipped into negative zone on reports that the central committee of CPM has endorsed the politburo call for cancelling the nuclear deal.
The index dropped to a low of 14,129 - down 426 points from the day's high. The Sensex finally ended with a loss of 85 points at 14,164.
The BSE Bankex dropped over 2% to 7225. The Oil & Gas index shed 1.7% to 7385, and the Healthcare index slipped over 1% to 3387. The FMCG index, however, moved up over 1% to 1862.
The market breadth was fairly negative - out of 2,665 stocks traded, 1,702 declined, 905 advanced and 58 were unchanged today.
ACC surged 2% to Rs 972. Ambuja Cements gained 1.7% at Rs 133.
ITC rallied nearly 1.5% to Rs 161. Maruti and Satyam advanced 1.3% each to Rs 777 and Rs 423, respectively.
Infosys and Hindustan Unilever were up 1% each at Rs 1,808 and Rs 198, respectively.
...AND THE SHAKERS
Cipla slumped over 4% to Rs 168.
ONGC and SBI plunged 3% each to Rs 784 and Rs 1,415, respectively.
Reliance Energy and ICICI Bank dropped around 2.5% each to Rs 706 and Rs 826, respectively.
HDFC Bank shed 1.7% to Rs 1,100. TCS, Reliance Communications, Tata Steel, Ranbaxy and Reliance slipped around 1.5% each to Rs 1,008, Rs 487, Rs 560, Rs 349 and Rs 1,743, respectively.
Wipro was down over 1% at Rs 448.
MOST ACTIVE COUNTERS
SEL Manufacturing topped the value chart with a turnover of Rs 197.50 crore followed by Reliance (Rs 176 crore), Reliance Capital (Rs 145 crore), debutant Asian Granito (Rs 133.50 crore) and SBI (Rs 122.50 crore).
Nagarjuna Fertilisers led the volume chart with trades of around 2.12 crore shares followed by Asian Granito (1.42 crore), Tata Teleservices (1.40 crore), IFCI (1.19 crore) and SEL Manufacturing (1.11 crore).
Major Indices across the globe ended strong with Asian counter parts like Hang Seng which rallied to end up by 620 points and Nikkei by 415 points. Indian Indices were hit after the strong start due to political nervousness. Session started strong looking at its global peers with some buying in the heavyweights. Ranged session in green till the middle but saw a complete trend reversal as the political uncertainty on Indo US nuke deal jitters across the market. Investors were nervous and didn't knew whether to enter or exit the market. Sensex lost near to 400 points from the days high. Except for some Cement, FMCG and IT stocks all the sectors ended in red. Banking, Oil & Gas, PSU were the worst hit. News of Switzerland's Holcim open offer to acquire 20% more stakes in Ambuja Cement at Rs 154 per share saw some value buying in the cement sector. Mid and Small caps too succumbed to selling pressure.
Sensex closed down by 85 points at 14163.98. Weighing on the Sensex were losses in Cipla (167.8,-4 percent), ONGC (783.95,-3 percent), SBI (1415.05,-3 percent), Rel Energy (705.75,-3 percent) and ICICI Bk (825.8,-2 percent). Losses were restricted by gains in ACC (972.4,+2 percent), Guj Ambuja (132.75,+2 percent), ITC (160.7,+1 percent), Maruti (777.1,+1 percent) and Satyam (422.7,+1 percent).
Videsh Sanchar Nigam (VSNL) is one of the leading provider of international telecommunication services in the country. The company lost the Income-Tax Appellate Tribunal case and now has to pay a possible tax of Rs 1,000 cr to the Government as the order was passed by ITAT. The bench of ITAT informed that the company is liable to pay tax on an income of Rs 2,090 cr earned between 1995 and 2006. The tax effect of this order could be above Rs 1,000 cr. Though the order is only for the assessment year 1996-97, the bench?s conclusion will be binding for the subsequent years also, unless the Bombay High Court reverses the order. Therefore, the tax effect for the period between 1996-97 to 2005-06 including interest payable is estimated to be Rs 1,000 cr or higher. Due this the stock traded weak for the day and ended marginally down.
India's pharmaceutical industry seems to be in a race against time. According to McKinsey & Company's latest report, the country's pharma market is all set to provide the third largest growth opportunity globally. It is expected to triple in size and touch $20 bn by 2015, becoming one of the world's top 10 markets and is expected to grow at 12% annually. Several factors such as large private sector investments in health infrastructure, increase in the number of hospital beds, rise in the number of physicians, greater penetration of health insurance, rising prevalence of chronic diseases and aggressive market penetration by smaller companies will play a key role in the growth of the Indian pharmaceutical market. However, the pharmaceutical industry's concerns on drug pricing policies and product patent regulations could be the dampeners to ensure the 12% growth in the domestic growth. Mc Kinsey?s suggests that while the present generics industry will continue to dominate the pharmaceutical market, patented products will constitute close to 10% of the market in the next ten years. The pharma stocks ended in mixed for the day.
Technically Sepaking: Indices swung in between 400 Points. Declines outnumbered Advances in the ratio 1.8:1. Turnover of Rs 4779 Crs was good. Sensex has a Key Support at 14000-14050 and 13850-13870. Resistance seen at 14425-14440 and 14530-14570.
The market rose more than 2% on expectations that the global credit problem and local political worries may get resolved very soon. The Sensex resumed with a gap of 209 points at 14,458 tracking positive global cues and rallied sharply to touch the day's high of 14,555. Cement stocks led the rally with banking and metal stocks. However, the market received a major hit in the afternoon as the central committee of CPI (M) announced the party politburo's opposition to the Indo-US nuclear deal and authorised it to do whatever it can to block the deal. Quickly the Sensex entered in to the negative territory but recovered soon. The market remained choppy thereafter and zigzagged between positive and negative territory. The Sensex finally closed the session at 14,164, down 84 points, while the Nifty ended the session at 4,115, down 38 points.
The breadth of the market was weak. Of the 2,665 stocks traded on the BSE, 1,702 stocks declined, 905 stocks advanced and 58 stocks ended unchanged. Almost all of the sectoral indices ended weak while, the BSE FMCG index bucked the trend and closed in the green. The BSE Bankex index lost 2.21%, the BSE Oil & Gas index declined by 1.68% and the BSE PSU shed 1.47%.
Several heavyweights took a sharp tumble on selling pressure. Cipla shed 4.41% at Rs168, ONGC tumbled by 3.07% at Rs784, SBI dropped 2.94% at Rs1,415 and Reliance Energy declined by 2.59% at Rs706. Among the other major losers ICICI Bank slumped by 2.47% at Rs826, HDFC Bank lost 1.74% at Rs1,100, TCS slipped by 1.64% at Rs1,008, Reliance communication dipped 1.64% at Rs487 and Tata Steel shed 1.60% at Rs560. Select counters, however, ended in the green. ACC advanced by 2.02% at Rs972, Ambuja Cement added 1.72% at Rs133, ITC gained 1.45% at Rs161, Maruti Udyog moved up 1.36% at Rs777 and Satyam Computer gained 1.25% at Rs423.
Banking stocks declined on sharp selling pressure. Kotak Bank tumbled by 3.48% at Rs626, Centurion Bank of Punjab dropped 2.76% at Rs37, Fedral Bank shed 2.67% at Rs304 and Punjab National Bank lost 2.58% at Rs452.
Over 2.11 crore Nagarjuna Fertilisers shares changed hands on the BSE followed by Asian Granito (1.42 crore shares), Tata Teleservices (1.39 crore shares), IFCI (1.19 crore shares) and SEL Manufacturing (1.11 crore shares).
Value wise, SEL Manufacturing registered a turnover of Rs197 crore on the BSE followed by Reliance Industries (Rs175 crore), Reliance Capital (Rs144 crore), Asian Granito (Rs133 crore) and SBI (Rs122 crore).
The market saw a complete trend reversal in late afternoon trading today, 23 August 2007. Boosted by strong Asian and European markets, the market was firm till early afternoon trade. It, however, faltered in afternoon trade on a sudden sell-off due to political uncertainties.
Volatility was intense throughout the day, with the market swinging between positive and negative zone
The BSE 30-share Sensex lost 84.68 points or 0.59% at 14,163.98. It had opened higher at 14,458.33 and advanced further to hit 14,544.93 as buying continued. From here, the benchmark index declined sharply to touch a low of 14,128.72.
At the day’s high, the Sensex had gained 306.27 points. At the day’s low, it had lost 119.94 points. The Sensex oscillated 426.21 points in the day.
From an all time high of 15,868.85 24 July 2007, the BSE Sensex is down 1704.87 points.
The S&P CNX Nifty slipped 38.20 points or 0.92% at 4,114.95. The Nifty August 2007 futures settled at 4113.80, a discount of 1.15 points as compared to spot closing.
The Central Committee of the CPI (M) today, 23 August 2007, endorsed the party Politburo's opposition to the Indo-US nuclear deal and authorised it to do whatever it can to block the deal. The Politburo had warned the government of serious consequences if it went ahead with negotiations with the International Atomic Energy Agency and Nuclear Suppliers Group.
If the communist allies of the ruling coalition decide to pull their support, the government will be reduced to a minority and that could trigger fresh elections.
The market breadth, indicating the overall health of the market, was strong on BSE till early afternoon session. But it turned weak later as small- and mid-caps succumbed to selling pressure. On BSE 1,749 shares declined as compared to 943 that rose, while 67 remained unchanged.
In the opening session, the market breadth was strong on BSE, with 1,129 shares advancing as compared to 271 that declined
The BSE Mid-Cap Index was down 0.88% to 6,105.11, while the BSE Small-Cap Index declined 1.25% to 7,424.39. Both these indices were sharply off from their day’s high of 6,285.19 and 7,679.04, respectively
Most sectoral indices on BSE settled lower. The BSE Metal index (down 0.88% to 9,992.40), BSE Realty index (down 0.80% to 6,752.71), BSE PSU index (down 1.47% to 6,477.17), BSE Oil & Gas index (down 1.68% to 7,385.15), BSE Bankex (down 2.21% to 7,224.29), BSE Health Care index (down 1.15% to 3,386.60) and BSE Auto index (down 0.23% to 4,463.46), underperformed the Sensex.
BSE Consumer Durables (down 0.18% to 3,961.50), BSE TECk index (down 0.17% to 3,416.10), BSE FMCG Index (up 1.11% to 1,862.39), BSE IT index (up 0.18% to 4,356.28), BSE Capital Goods index (down 0.49% to 12,336.67) outperformed the Sensex.
The total turnover on BSE amounted to Rs 4779 crore as compared Rs 4404 crore on Wednesday, 22 August 2007. The NSE F&O turnover was Rs 56,000.15 crore as compared to Rs 51,749.7 crore on Wednesday, 22 August 2007.
Among the 30-member Sensex pack, 15 advanced while the other 15 slipped.
India’s third largest pharma company in terms of sales Cipla slumped 4% to Rs 168.50 on 6.48 lakh shares, slipping sharply from the day’s high of Rs 179.95. It was the top loser from the Sensex pack.
Banking and financial shares came under selling pressure. State Bank of India (down 3.10% to Rs 1412.80, off the session’s high of Rs 1500), ICICI Bank (down 2.45% to Rs 826, off the session’s high of Rs 869), HDFC Bank (down 1.27% to Rs 1105, off day’s high of Rs 1159.70) ended in red.
Reliance Energy (down 2.60% to Rs 706) and ONGC (down 2.20% to Rs 791 were the other losers from the Sensex pack.
India’s top car maker Maruti Udyog advanced 2.39% to Rs 785 on 2.05 lakh shares. It was the top gainer from the Sensex pack. Earlier this week a foreign brokerage recommended buy rating on the stock with a target of Rs 1050.
Cement stocks rose following Swiss cement major Holcim’s open offer to acquire an additional 20% stake in Ambuja Cement, India’s second largest cement producer by sales.
ACC (up 2% to Rs 972), UltraTech Cement (up 0.25% to Rs 855), Birla Corporation (up 6.83% to Rs 263.30), India Cements (up 3.90% to Rs 218.40), Ambuja Cement (up 1.15% to Rs 132), and Grasim Industries (up 0.85% to Rs 2749.95) ended higher.
Switzerland's Holcim today said it had acquired a 3.9% additional stake in Ambuja Cements from the founding families at Rs 154 share, in a deal worth $220 million.
FMCG stocks, considered as defensive in a volatile market held firm. ITC, the country’s biggest cigarette manufacturer, advanced 2.27% to Rs 162 on its plans to set up small-format stores in rural areas, on the lines of its existing hypermarket chain Choupal Sagar, by early next year. It also plans to raise the number of its fruit and vegetable outlets to about 200 in three years. ITC also plans to operate 50 of the Choupal Fresh stores by March 2008 in Hyderabad, Pune and Chandigarh.
Other FMCG stocks Tata Tea (up 2.80% to Rs 690) and Hindustan Unilever (up 1.43% to Rs 199) rose. On Wednesday, 22 August 2007, the BSE FMCG index had gained 2.38% to 1841.90
Bharti Airtel, the country’s largest listed mobile service provider, gained 1.22% to Rs 858 on reports it is looking to sell the management control of its passive infrastructure business, Bharti Infratel. As per reports, a clutch of private equity funds and Reliance Communications are in the race. Bharti Infratel is the largest tower infrastructure company in the country with over 40,000 towers.
India's largest engineering and construction firm by sales Larsen & Toubro was up 0.89% to Rs 2405.50 after company won a repeat order for construction of two ships from Netherlands's RollDock BV (erstwhile Zadeko Shipmanagement CV) of The Netherlands valued at over $70 million.
India’s leading power equipment maker Bharat Heavy Electricals slipped off its day’s high of Rs 1725, to settle 0.12% lower at Rs 1664.90. It had bagged contracts worth Rs 6500 crore for setting up power project units on Wednesday, 22 August 2007. The orders have been placed by Damodar Valley Corporation (DVC). The stock had lost 9.18% to Rs 1666.95 on 22 August 2007 from Rs 1765.45 on 23 July 2007.
Dr Reddy's Laboratories rose 1% to Rs 633. It had got an approval from the US Food and Drug Administration for cholesterol-lowering simvastatin tablets on Wednesday 22 August 2007. The stock lost 6.87% in the past month to Rs 626.75 on 22 August 2007.
IT stocks were mixed. Wipro (down 1.44% to Rs 447) and TCS (down 1.41% to Rs 1010), slipped. While Infosys (up 1.14% to Rs 1810), and Satyam Computers (up 0.84% to Rs 421), rose.
Reliance Industries (RIL), the country’s top private sector entity by market capitalisation and oil refiner, slipped 1.73% to Rs 1737.80 on 9.92 lakh shares. It had moved in a range of Rs 1732.10– Rs 1809.95. As per reports, RIL will foray into solar power generation through pilot projects that will supply electricity to a few villages in Maharashtra. In the next 8-12 months, pilots will be launched in 38 villages in Maharashtra.
Among the side counters, Rasoi (up 20% to Rs 295.20), Emkay Shares (up 9.68% to Rs 110), Sanghi Industries (up 9.66% to Rs 73.80), International Combustion (up 8.24% to Rs 375) and Sahara Housing (up 9.97% to Rs 75) surged.
RT Exports (down 11.19% to Rs 26.20), Ginni Silk Mills (down 13.92% to Rs 25), Jai Corp (down 5% to Rs 5935.25), Era Construction (down 5% to Rs 492.65), and Saregama (down 9.98% to Rs 221.45) declined.
Real-estate stocks advanced on fresh buying after the recent sharp fall. Ansal API (up 2.20% to Rs 252.70), Indiabulls Real Estate (up 0.13% to Rs 460.50), Omaxe (up 9.81% to Rs 301), and Sobha Developers (up 1.83% to Rs 748.80) were up. The BSE Realty index had lost 16.56% to 6,806.90 on 22 August 2007 from 8,379.28 on 23 July 2007.
Three block deals of 23.07 lakh shares each were struck on the Bank of Maharashtra counter on BSE at average price of Rs 48.18 per share in opening trade. The stock slipped 0.10% to Rs 48.10 on high volume of 70.19 lakh shares.
Asian Granito India settled at Rs 94.75 on BSE, a discount of 2.3% over the IPO price of Rs 97. The stock debuted at Rs 100.15, hit a low of Rs 82.10 and high of Rs 103.35. On BSE, 1.42 crore shares changed hands in the counter. Asian Granito India's IPO had ended on 31 July 2007 with 4.51 times subscription.
Easun Reyrolle rose 1.25% to Rs 209.85 after the company's board approved raising long term funds. The funds will be raised in Indian and or international markets by issue of equity shares/GDRs/ADRs/FCCBs/convertible bonds.
BPO firm Firstsource Solutions was up 0.10% to Rs 70.55 on reports of it emerging as the front-runner to acquire US-based MedAssist Inc. which provides a range of healthcare and related services.
Birla Kennametal rose 4.55% to Rs 255 after its board of directors at its meeting held on 22 August 2007 approved the sub-division of each of 1 (one) existing share of Rs 10 each into 5 (five) shares of Rs 2 each. The company made this announcement after market hours on Wednesday, 22 August 2007.
Godfrey Phillips India was up 0.64% to Rs 1250. It turned Rs 25 per share ex-dividend from today. It has a face value of Rs 10 per share.
Grindwell Norton had declined 4% to Rs 142.75 after it decided to sell its stake in Lincoln Hellos India to its joint venture partner, Lincoln GmbH for Rs 100 crore.
ITD Cementation India surged 14.69% to Rs 462.95 its joint venture with its promoter, Italian-Thai Development Public Company, Thailand, was awarded a Rs 893-crore contract by the Delhi Metro Rail Corporation.
All the Asian markets, which opened before the Indian markets, settled higher. At its meeting today, the Bank of Japan left interest rates unchanged at 0.50%, the lowest among major economies. The BOJ had last raised interest rates in February 2007.
Hang Seng (up 2.77% at 22,966.67), Japan's Nikkei (up 2.61% at 16,316.32), Taiwan Weighted (up 2.82% at 8,732.84), Singapore's Straits Times (up 1.49% at 3,370.91), and South Korea's Seoul Composite (up 2.29% at 1,799.72) edged higher.
China's benchmark Shanghai Composite Index surpassed the 5,000-level for the first time today, 23 August 2007 as bullish investors snapped up blue chips on a strong outlook for corporate earnings. The Shanghai Composite Index settled 1.05% or 52.41 points higher to 5,032.49. It also hit an all-time high of 5,050.38 in intra-day trade. The Shanghai Composite Index has gained 88% since the beginning of the year.
All the European markets, opened after the Indian markets, were trading higher today. Key European indices in Germany, France and UK were up between 0.70% and 0.90%.
US stocks rose on Wednesday, 22 August 2007, as takeover activity resurfaced and credit markets stabilised, luring investors back into riskier assets such as equities.
The Dow Jones Industrial Average jumped 145.27 points, or 1.11%, to 13,236.13. Broader stock indicators jumped as well. The Standard & Poor's 500 index rose 16.95 points, or 1.17%, to 1,464.07, while the Nasdaq Composite index gained 31.50 points, or 1.25%, to 2,552.80.
Crude oil prices rebounded from lower levels on Thursday, 23 August 2007, as world stock markets rallied on hopes that the worst of the credit squeeze may be past and traders braced for supply delays in the wake of Hurricane Dean. US crude rose 29 cents to $69.55 a barrel, while Brent crude gained 16 cents to $68.86 a barrel.
Buy Bhel with a stop loss of Rs 1540 for a target of Rs 1900.
Buy Bharti Airtel with a stop loss of Rs 800 for a target of Rs 962.
Buy Sujana Metals with a stop loss of Rs 27 for a short term target of Rs 42 and a medium term target of Rs 70.
Motilal Oswal 725 to 825 120 to 125
Indowind Energy 55 to 65 3 to 5
Magnum Venture 27 to 30 2 to 3
Puravankara Projects 400 Discount
Take Solutions 730 130 to 140
KPR Mills 225 Discount
Asian Granito 97 +3 / -3
The market is expected to head higher, on positive global cues. The BSE 30-share Sensex advanced 259.55 points or 1.86% to settle at 14,248.66, on Wednesday, 22 August 2007, tracking firm Asian and European markets. The S&P CNX Nifty advanced 78.25 points or 1.92% at 4153.15, on Wednesday, 22 August 2007.
The benchmark index, BSE Sensex, is now down 1620.19 points from its all time high of 15,868.85, struck on 24 July 2007.
All the Asian indices were trading higher today, 23 August 2007. The Bank of Japan (BOJ) at its meeting today, 23 August 2007, left interest rates unchanged at 0.50%, the lowest among major economies. The BOJ had last raised interest rates in February 2007.
Hang Seng (up 2.55% at 22,917.07), Japan's Nikkei (up 2.47% at 16,293.60), Taiwan Weighted (up 2.55% at 8,710.15), Singapore's Straits Times (up 2.56% at 3,406.64), Shanghai Composite (up 0.44% to 5,001.94) and South Korea's Seoul Composite (up 2.59% at 1,805), all edged higher
US stocks rose on Wednesday, 22 August 2007, as takeover activity resurfaced and credit markets stabilized, luring investors back into riskier assets such as equities. The Dow Jones Industrial Average rose 145.27 points, or 1.11%, to 13,236.13. Broader stock indicators jumped as well. The Standard & Poor's 500 index rose 16.95 points, or 1.17%, to 1,464.07, while the Nasdaq Composite index gained 31.50 points, or 1.25%, to 2,552.80.
Crude oil prices rebounded from lower levels on Thursday, 23 August 2007 as world stock markets rallied on hopes that the worst of the credit squeeze may be past and traders braced for supply delays in the wake of Hurricane Dean. US crude rose 29 cents to $69.55 a barrel while Brent crude gained 16 cents to $68.86 a barrel.
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 636.19 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 547.29 crore on Wednesday, 22 August 2007.
FIIs have been on a selling drive recently. FIIs sold shares worth Rs 8,558.10 crore in the month of August, till 21 August 2007. FII inflow in the month of July 2007, totaled Rs 23,872.40 crore.
Asian markets opened positive on Thursday (August 23) as worries regarding the credit crises took a pause. However, Japanese government bond futures fell in the early sessions of trade ahead of the Bank of Japan`s policy decision, which is to come later in the day.
Mitsubishi UFJ Financial Group and Macquarie Bank rose on easing credit concerns. BHP Billiton, the world`s largest miner, rose after it reported record profit.
Shares of Countrywide Financial jumped 20% after the company announced that Bank of America bought USD 2 billion of convertible preferred stock.
The Japanese benchmark index Nikkei, gained 392.26 points, or 2.47%, to trade at 16,293.60.
Hong Kong`s index Hang Seng gained 545.18 points, or 2.44%, to trade at 22,892.06.
China`s Shanghai Composite gained 17.84 points, or 0.36%, to trade at 4,997.91.
Taiwan`s index Taiex gained 229.51 points, or 2.70%, to trade at 8,722.97.
South Korea`s KOSPI gained 55.12 points, or 3.13%, to trade at 1,814.62.
Singapore`s Straits Times gained 77.36 points, or 2.33%, to trade at 3,398.86. (8.10 a.m, IST)
Market Grape Wine :
In House :
Nifty at a supp of 4110 and 4049 levels with resistance at 4198 and 4265 levels .
Buy : Gujambcem and Central bank intraday
Out House :
Markets at a support of 14040 & 14114 levels with resistance at 14543 & 14453 levels .
Markets to remain choppy and volatile keep strict stop loss for your trades . .
Buy : IciciBnak & KotakBank
Buy : RIL & REL
Buy : Bhel & Titan bullet
Buy : HanunToys & Siemens bullet
Buy : JPAsso & CenturyTex
Buy : JpHydro , NTPC , Ngarfert & Gujambcem
Dark Horse : Kotak ,IciciBank , JP , Centextile , Titan , Bhel , Siemns , RIL & REL
Bullet for th Day : Indiainfo , LT & Sterlite with strict stop loss
After displaying a solid pull-back in yesterday's trades the market is likely to show firm trend in early trades and may advance further on cooling US credit markets woes and falling oil prices. The market is also likely to get support from firm Asian markets which are up over 2% in current trades. However, the market may exhibit caution owing to lack of clarity and higher volatility. Among the indices, the Nifty could test higher levels at 4208 and 4240, and has a supports at 4060. The Sensex has a likely support at 14100 and may face resistance at 14500.
US markets shot up on Wednesday on speculation that the breakdown in credit markets won't hurt the economy. While the Dow Jones flared up by 145 points at 13,236, the Nasdaq moved up by 32 points at 2,553.
All the Indian floats had a field day on the US bourses. Rediff jumped 4.49%, HDFC Bank surged 4.26% and Satyam Computer moved up by 4.13% while Tata Motors, Wipro, Infosys, Patni Computer, VSNL, MTNL and Dr Reddy's Lab gained around 1-3% each.
Crude oil fell on Wednesday after a government report showed U.S. crude inventories rose unexpectedly last week, easing supply concerns. The US light crude oil for October delivery moved down by 31 cents at $69.26 a barrel. In the commodity segment, the Comex gold for December delivery gained by $2.50 to settle at $668.70 an ounce.
Dow ends day with triple digit gain with twenty-eight components supporting it
Mergers and buyout news took the centre stage today, Wednesday, 22 August, 2007 pushing the recent credit crunch related news to the backside. Market also heaved a sigh of relief thinking that the situation in credit market is not so bad when they heard that top for banks have borrowed money from Fed’s discount window after the rate cut. All three indices closed in the green.
The Dow Jones Industrial Average closed higher by 145.27 points at 13,236.13. Tech-heavy Nasdaq gained 31.5 points to close at 2,552.8. S&P 500 gained 16.95 points to close at 1,464.07.
Twenty-eight out of thirty Dow stocks closed in the green today. Alcoa, Caterpillar, Boeing and Du Pont were the main Dow winners today. JP Morgan and CoCo Cola were the only two Dow laggards.
Reports that Rio Tinto has raised a record-breaking $40 bln to fund its proposed takeover of Alcan and Dubai World reportedly investing $5 bln to buy a 9.5% stake in MGM Mirage were the main deal news that boosted investor confidence that all is not so bad in the US market.
All Indian ADRs end in green
Indices rallied in the green for the entire day today. Among other deal news, TD Ameritrade and E*Trade Financial reported that they might merge. Nymex Holdings confirmed it is in takeover talks. Nymex shares rose more than 6%.
Four big banks - Citigroup, JPMorgan Chase, Wachovia and Bank of America said today that they had borrowed $500 million each from the Federal Reserve's discount window. The discount window is how Wall Street describes the process of borrowing money from the Fed at its discount rate.
Among the Indian ADRs, all Indian ADRs ended in green today. Satyam, Rediff, Infy, ICICI Bank and HDFC Bank were the top winners today. Satyam and Rediff, both gained almost 4.5% today. The other three rose up by 2.5% -3.5%.
Crude stays below $70 as inventories rise
Crude oil futures fell to lowest level in two months an eight-week low after Energy Department’s weekly report showed an unexpected increase in inventories. Prices were also lower because Hurricane Dean weakened and is expected to dissipate by tomorrow morning.
Crude-oil futures for light sweet crude for October delivery closed at $69.32/barrel (lower by $0.16/barrel or 0.23%) on the New York Mercantile Exchange. On a yearly basis, prices are 4.6% lower. Futures fell as low as $68.63 during intraday trading.
Volume at the New York Stock Exchange neared 1.5 billion shares, with advancers beating decliners 4 to 1. At the Nasdaq, more than 1.8 billion shares were exchanged, and advancing stocks outpaced decliners by a more than 2-to-1 ratio.
For tomorrow, only a handful of notable companies are expected to report their results. On the economic front, Initial Claims will hit the wires at 8:30 ET.
NIFTY (4153) Supp 4112 Res 4195
Buy BHEL (1667) SL 1651
Target 1705, 1715
Buy GSFC (217) SL 213
Target 224, 226
Buy L&T (2384) SL 2370
Target 2420, 2430
Buy Cent Text (716) SL 710 Target 728, 732
Sell Nicolas Piramal (242) SL 246 Target 235, 232
Keep your face to the sunshine and you will never see the shadow.
The local bulls are set to bask in the sunshine with global cues appearing fine for the moment. Investors abroad are betting that the Federal Reserve will effect a rate cut. Bank of Japan has kept its key rate steady at 0.5%.
But, the euphoria over the Fed rate cut may prove to be short lived. The American central bank will hold its next scheduled meeting on Sept. 18. That's too long a time period for the stock markets. In the interim, there could be more blood letting in the US subprime mortgage market or in other parts of the globe. Keep abreast of the developments in the global markets to gauge the impact on the local sentiment.
Investment guru Warren Buffett was quoted as saying “worsening credit and housing markets may provide some real investment opportunities.” READ the article below
Today, thankfully things are looking up for the bulls, with markets across the world rising sharply. We expect a gap-up opening and a fine day for the bulls. Make hay but remain cautious as it will take time for things to stabilize completely.
Remember, locally we have an over-heated political situation to take care of as well. There has been no change in the stance taken by either the Prime Minister or the Left parties on the Indo-US nuclear deal. The communists are bent on having the deal scrapped/renegotiated while the PM is not willing to back down either.
Cement shares might come under some pressure amid reports that two Pakistani firms have received BIS certification to export cement to India. A third Pakistani cement manufacturer is likely to get the clearance shortly. Pharma companies could be in action as a McKinsey report says the Indian pharma industry could hit the $20bn mark by 2015.
VSNL could face fury of investors, as the Income-Tax Appellate Tribunal (ITAT) has ruled that the company is liable to pay tax on an income of Rs20.9bn earned between 1995 and 2006. ORG Informatics is likely to gain amid reports that it has bought the TV and telecom teleport assets of Belgium's national telecom operator, Belgacom.
US stocks rallied on Wednesday on the back of a string of M&A news. Investors were also betting that the Fed will cut its more widely tracked fed funds rate next month in a bid to quell the current turbulence in the credit markets.
The Standard & Poor's 500 Index rose 16.95 points, or 1.2%, to 1,464.07. The Dow Jones Industrial Average jumped 145.27 points, or 1.1%, to 13,236.13. The Nasdaq Composite Index advanced 31.50 points, or 1.3%, to 2,552.80.
Tuesday's meeting between Fed Chairman Ben Bernanke, Senator Dodd and Treasury Secretary Henry Paulson has raised hopes that the Fed will cut the fed funds rate next month. Although economists believe that the central bank is unlikely to make a cut ahead of the next policy meeting, according to a recent survey.
Treasury prices fell, raising the benchmark 10-year note yield to 4.63% from 4.59% late on Tuesday. In currency trading, the dollar slipped versus the euro and rose versus the yen. COMEX gold for December delivery rose $2.50 to settle at $668.70 an ounce. US light crude oil for October delivery fell 31 cents to settle at $69.26 a barrel on the New York Mercantile Exchange, erasing early gains after the government reported a surprise increase in crude oil supplies.
Dubai World, the investing arm of the Dubai government, will buy a 9.5% stake in MGM Mirage in a deal worth more than $5bn. NYMEX Holdings confirmed it has discussed selling itself with potential suitors, Reuters reported. NYMEX is the parent company of the New York Mercantile Exchange. And reports surfaced that brokerages TD Ameritrade and E*Trade are in merger talks.
Lehman Brothers said it is shuttering its subprime mortgage lending unit, which will result in 1,200 layoffs and a $25mn charge. HSBC said it is closing its Indiana mortgage unit, which will result in it cutting 600 jobs. Accredited Home Lenders said it won't take any more loan applications and that it will cut 1,600 jobs, due to the problems in the subprime mortgage lending market. Toll Brothers reported slumping earnings and warned about its outlook. However, the luxury homebuilder's earnings were nonetheless stronger than expected.
European shares advanced for a fourth straight session. The pan-European Dow Jones Stoxx 600 index rose 1.7% to 368.62, with miners leading the rally following BHP Billiton's robust annual results. The German DAX 30 rose 1% to 7,500.48, the French CAC-40 advanced 1.8% to 5,518.17 and the UK's FTSE 100 gained 1.8% at 6,196.00.
Latin American markets closed higher. Brazil's Bovespa jumped 3.9% to 51,744.56 for a fourth day of advances. The benchmark IPC in Mexico City ended 2.5% higher at 29,269.34. Argentina's Merval closed up 2.3% at 2.008.50 and Chile's IPSA added 2.4% to 3,210.71.
In other emerging markets, the RTS index in Russia was up 1.8% at 1853 while the ISE National 30 index in Turkey surged 3.9% to 58,632.
Asian markets were up sharply this morning. The Nikkei in Tokyo rallied 392 points to 16,293 while the Hang Seng in Hong Kong was up 563 points at 22,910. The Kospi in Seoul gained 47 points at 1807 and the Straits Times in Singapore rose 83 points to 3405.
The Morgan Stanley Capital International Asia Pacific Index added 2.3% to 148.20 as of 10:33 a.m. in Tokyo, extending a three-day, 5.7% rally. All 10 of the benchmark's industry groups advanced. An index of raw-material producers that includes BHP posted the biggest gains.
Honda Motor paced gains among Japanese exporters after the yen weakened against the dollar. Australia's S&P/ASX 200 Index rose 2.6%, recouping all of this month's losses. Benchmarks advanced in all markets open for trading.
Benchmark Sensex once again ended above the 14200 mark as value buying coupled with strong cues from the Asian and the European markets lifted the key indices higher. However, the broader market was not all that lucky, with the BSE Small-Cap index losing 0.3% and BSE Mid-Cap index rising just 0.4%.
Fertilizer stocks had an impressive session led by Chambal Fertilizer and Nagarjuna Fertilizer. On the other hand Sugar stocks had a bitter session as scrip’s like Bajaj Hindustan and Balrampur Chini lost nearly 3% each. Realty stocks also were on the receiving end however, managed to close off their days low. Finally, the Sensex closed at 14,280, up 291 points. The NSE Nifty gained 78 points to finish at 4153.
ICICI Bank advanced by 2% to Rs846 after the Government approved a plan by the nation's most valuable lender to sell shares in an insurance and funds unit. The bank plans to sell a 24 percent stake in the unit for Rs2.14bn. The scrip touched an intra-day high of Rs852 and a low of Rs811 and recorded volumes of over 30,00,000 shares on NSE.
Siemens rallied by over 9% to Rs1229 as its German parent has announced its plans to double the size of Indian operations in the next three years. The scrip touched an intra-day high of Rs1238 and a low of Rs1127 and recorded volumes of over 2,00,000 shares on NSE.
Infosys advanced by 1.5% to Rs1788 after India's second-largest computer-services provider expanded into Latin America, setting up a software-development and sales unit in Monterrey, Mexico. The scrip touched an intra-day high of Rs1808 and a low of Rs1750 and recorded volumes of over 11,00,000 shares on NSE.
Reliance Industries advanced by 1.1% to Rs1766 after, Chairman Mukesh Ambani said the nation's most valuable company expects higher profit from processing crude oil into fuels. The scrip touched an intra-day high of Rs1793 and a low of Rs1715 and recorded volumes of over 43,00,000 shares on NSE.
Sterlite Optical gained by 1.5% to Rs209 after the company announced that they have started production of power transmission at new unit. The scrip touched an intra-day high of Rs211 and a low of Rs203 and recorded volumes of over 1,00,000 shares on NSE.
Diamond cable edged higher by 0.3% to Rs286 after the company announced that they have received Rs520mn transformer order. The scrip touched an intra-day high of Rs295 and a low of Rs285 and recorded volumes of over 14,000 shares on NSE.
Pharma stocks were in poor health. Cipla slipped by 1.1% to Rs175, Glaxo was down by 1.7% to Rs1118, Cadila declined by 2.3% to Rs302. However, Ranbaxy gained by 0.6% to Rs353.
Realty shares ended in the red, with the BSE Realty index down 0.55%. Parsvnath declined by 1.5% to Rs276, Sobha slipped by 0.2% to Rs740. However, Akruti Nirman was up 1% at Rs481.
Airline stocks were back in action after being on the sidelines. Air Deccan surged by over 6% to Rs141, operator of
Beaten out Metal stocks also were back with Sterlite Industries leading the pull back, the scrip was up by over 4% to Rs566, Tata Steel rose over 4% to Rs569, National Aluminum gained 1.5% to Rs252 and Hindustan Zinc added 3% to Rs694.
FIIs were net sellers of Rs6.36bn (provisional) in the cash segment on Wednesday while the local institutions pumped in Rs5.47bn. In the F&O segment, FIIs were net buyers at Rs11.48bn. On Tuesday, foreign funds pulled out Rs98mn from the cash segment. Mutual Funds were net sellers at Rs165mn on the same day.
Major Bulk Deals:
Principal India MF has bought Bosch Chassis while Sundaram MF has sold it; Deutsche Securities has picked up Geodesic Info; Merrill Lynch has purchased Prakash Industries.
GVK Power & Infrastructure Limited: HSBC investment (Singapore) Limited has sold in open market 90235 equity shares of the company on 16th August, 2007.
Nagarjuna Construction Co. Ltd: SBI Mutual fund under its various schemes has purchased from open market 200000 equity shares of the company on 16th August, 2007.
LML, ETC Networks, Hindustan Oil Exploration, Jai Corp, Atlanta, Ganesh Forgings, IOL Broadband, Flawless Diamond, Era Construction, IID Forgings and Bag Films.
Sujana Tower, XL Telecom, Yashraj Securities and Prakash Industries.
Delivery Delight (Rising Price & Rising Delivery):
ABB, Deccan Chronicle, Geodesic Info, Indian Hotels and Marico.
Jet, Patni, Cranes Software, Bharat Electronics and Amtek Auto.
Major News & Announcements:
GAIL to invest Rs4.75bn equity in Dabhol Power project – Reports
Himatsingka Seide to sell 5.8mn shares to promoters
Indian oil to shut Barauni Refinery in October for maintenance
DLF wins order to develop township in West Bengal
Diamond Cables receives Rs520mn transformer order
Sterlite Optical starts production of power transmission in Uttarakhand.
While the world equity market was reeling under the subprime chaos, there was a small news item, which probably slipped attention of many. Investment guru Warren Buffett was quoted as saying “worsening credit and housing markets may provide some real investment opportunities.” Generally speaking, when there's a certain amount of chaos in certain sections, it is unpredictable where the fallout will be, but the fallout offers some real opportunity. It may surprise many but investing in the end seems all about conviction and lateral thinking.
Mr Buffett with his successful investment track record has created a cult of investment followers. In fact, some days back S&P's came with finding that Infosys , Wipro and Satyam would have fulfiled his investment criteria. His investing picking style is unique, in that he uses a blend of value and growth investment philosophies. He once said “ I am half Benjamin Graham and half Philip Fischer” . While the former is a thorough value based stock picker, the latter has dabbled with growth strategies . Worldwide equity investors seem to be divided into these two distinct styles of stock picking - Value and Growth. Both are quite popular stockpicking strategies so let's first understand who's who.
Value Investing - 'Offer till stocks last'
Don't we rush to pick things on sale thinking that its real worth is more than the offer price. This is what value investing simplistically put means. Investors that follow this style specifically target companies with strong fundamentals in terms of earnings, dividends, cash flow, etc but are trading below their actual worth (technically it's called intrinsic value). Investors believe that a value stock is created due to over reaction to particular news affecting the industry only in the short term. Benjamin Graham pioneered this method of investment. His investing style was invented from his bad experience in the 1929 stock market crash in US and therefore one could see that his investment principles are more defensive in nature.
He insists on 'margin of safety' , which is nothing but the discount to the intrinsic value that the stock price is currently quoting at. Wider the discount , more is the margin of safety. The parameters he uses to pick stocks are low price-to-earnings ratio, price-to-book ratio or price-to-sales ratio. Some of these stocks may no longer be the flavour of current investors but again, the fundamentals make a strong case that the stock will bounce back and 'show its true colour' . Value stocks are not sector-specific as an attractive bargain can almost be found anywhere, but the probability of locating them today is more in energy, financial service or healthcare sectors.
A word of caution here - a value stock available at a bargain does not mean that any stock that has taken a plunge will qualify as a candidate in this category. A company that has hit 12-month low may not necessarily be a value stock. A stock's sudden fall may be the market's reaction to some fundamental problem of the company and thus refuting the basic criteria for categorising a stock as a value stock.
Before qualifying a stock as value pick one must ensure that the debt of company does not exceed its equity and it has shown a healthy earnings growth over the past few years. One might also get into 'value trap' in which the low stock price never recovers in one's holding period and hence may not get expected returns.
Growth Investing - 'Mining Diamonds'
Unlike a value investor, a growth investor is concerned with the future potential of a company, and less interested in its current trading price - quite like mining diamonds knowing that it will give good returns once it is 'cut and polished' . Growth investing is based on figuring out companies that have the competitive edge to become the next Reliance, Infosys, ITC or Hero Honda. A typical growth company has expanding business model and reinvests its profit for extending operations.
They are represented by high price-to-earnings ratio and price-to-book ratio. As a thumb rule, they generally show considerably high return on net worth/ equity (RONW or ROE). This indicates that its shareholders are current enjoying its growth story in the form of higher ROE. A company that has shown robust growth in profits and is expected to do even better in future is a good candidate for classification as growth stock. Investors are ready to pay a premium for such stocks factoring in the future growth potential which leads to its high P/E ratio. They believe that increasing top line and bottom lines will automatically translate into higher stock price and hence will take care of the return. At current juncture, companies in the infrastructure and IT sector would be good examples of growth stocks.
The risk involved here is actual growth falling short of expectations, for which you have already paid a premium. This may be due to poor revenues and earnings and may lead to a slump in the stock price.
To pick or to mix
Now this is an on going debate. It is difficult to predict which strategy will outperform the other. If there are cases showing that value investors have outperformed growth over a period of time, the support on the growth investor side may be no less.
In fact, both these stock-picking strategies compliment each other well. So, instead of sticking to one strategy , an investor may strive for decent returns with low risk by combining growth and value investing - quite like diversifying one's portfolio across sectors to minimise risk and add up returns.
Common parameters used by fund managers:
P/E below 16 or P/B value below 1
Debt to equity ratio below 1
Dividend yield of 5% or more
Companies showing consistent growth in sales and profits
High return on equity (16% plus)
Firms with higher earnings margin
Nifty — The index opened on a flat note and dipped down towards 4040 in the morning trades after which it rallied. It ended the day with a gain of 88 points.
200 dma — The index is trading around 200dma at 4073, while intra-day dips are seeing support around the average. For the last four trading sessions, the index has seen a pullback from around the 200dma level. Lower support is around 3971 levels [62% retracement level from the low of 3555 (5 March 07) to the recent high of 4648 (24 July 07)].
5-Minute Chart — The index is consolidating in a band at 4164-4128.A breakout of the trading band would likely see intra-day directional move. Break above 4164 would likely see the index test higher levels around 4205, whereas break below 4128 could see intra-day weakness.
Conclusion — Trade a breakout from the 4164-4128 band intra-day.
One of the measures of investor's desire to take risk is something known as the "spread".
The "risk spread" is the difference between the estimated rate of return on 2 alternative investments, identical in tenure (the time horizon of an investment) but differing in risk.
"Liquidity" is essential to keep any economy moving along, just as it is essential to keep your house from functioning. Every day you need to pay bills to keep your home from functioning like a home with food and milk and daily houselhold needs.
Similarly, the US economy needs some level of liquidity to keep running on a daily basis. Companies have access to this liquidity via short term Commercial Paper. These 3-month instruments are issued to the banks and other investors (who have surplus cash) and are used by the companies to pay salaries, short-term expenditures like buying paper clips or spare parts - "working capital" in financial jargon. These 3-month loans are normally seen as very low risk and are issued by financially strong companies.
The chart below shows how the "spread" between what a US investor in a 3-month government security (the Treasury Bill which has zero risk) widened suddenly as investors decided to move away from any risk. These invstors were willing to park their money in these 3-month T Bills and were happy to take a lower interest rate (see the sharp decline in the yellow line).
It is important to note that the rate of interest paid by the borrowers increased - but only marginally. The widening of the spread (the difference between a risky asset and the less risky asset) was more due to the fact that investors shunned risk and had no desire to lend money to any company - irrespective of its financial strength.
The 0.5% cut in the US Federal Reserve's discount rate (from 6.25% to 5.75%) was intended to allow banks to start taking money from the Fed and use these extra funds to go out and supply liquidity to the companies in the real economy.
This graph is important because it highlights what can happen to international capital flows into India. Since nearly 50% of the FII flows into India is reportedly via P-Notes and consists of short-term capital, India is unfortunately, linked to changes in short-term interest rates and, more importantly, changes in short-term assessment of risks.
If these short-term investors decide they wish to be in less risky assets, they can - very quickly - retain their extra funds in assets which give low returns and sacrifice the returns they could get from assets like the Indian stock market.
So, a 3.0% annualised return on 3-month loans to the US government is more attractive than a possible 15% annualised return from buying Indian stocks.
Its not that India has become less attractive - its just that international investors with short-term investment time horizons want less risk.
However, if the recent stalemate between the coaltion partners over the Indo-US nuclear deal continues, then these short-term investors will consider India a more risky investment proposition.
These investors will then demand more return for staying on - or entering - India's more risky stock markets.
That is why, while most stock markets around the world recovered in a "relief" rally on Tuesday, August 21st, the Indian stock markets saw a -3% slump.
How long will this last?
We don't know - but what we do believe is that as long as India encourages short-term capital flows via P-Notes, our stock markets will be linked to these global cues. On the upside and the downside.
This is great for the brokers and the TV channels that need to see some activity every second - but not good for your heart.
After pumping in about Rs 24,000 crore or $5.8 billion during July, foreign institutional investors turned bearish in August as they were net sellers to the tune of Rs 8,558 crore, according to data available on SEBI Web site. If one considers the provisional figure of FII data on the exchange, then their net selling stands at Rs 13,243 crore. FII data is on the basis of trades executed by them on the BSE and the NSE.
On the other hand, domestic institutions remained net buyers to the tune of Rs 7,473 crore and retail investors at Rs 1,808 crore, according to the data provided by the Bombay Stock Exchange.
Among the FIIs, Morgan Stanley, Merrill Lynch and Deutsche Bank did major selling in August, as per bulk/block deals data available on the BSE site.
Despite heavy selling, select FIIs also indulged in cherry picking. Merrill Lynch bought Nagarjuna Fertilizer while Morgan Stanley purchased Apollo Hospitals and House of Pearl Fashion. Citigroup Global Markets bought Punj Lloyd.
On the other hand, Merrill Lynch sold stocks such as Shah Alloys and Alembic Ltd; Merrill Lynch and Macquarie Bank sold shares of Dredging Corporation while Macquarie Bank sold UTV Software as well. Bear Stearns & Co sold 0.03 per cent of their holding in Bharati Shipyard.
“The short-term concerns are the global US sub-prime problem, there was some element of buying and selling across sectors but in the long term the growth story looks intact”, said Mr Alok Vajpeyi, Vice-Chairman & Managing Director, DawnayDay.
“The most important short-term concern is that these sellers were the highest buyers in July and in August they turned net sellers and this is worrisome; secondly, when the global markets are in a mess, FIIs attention gets diverted and they have to sell here so that they can salvage their position in the global markets,” said Mr Arun Kejriwal, Director of Kejriwal Research & Information Services.
Less hedging in F&O
In the F&O sector, the FIIs were net buyers to the tune fo Rs 3,197.61 crore. However, their open interest holding in index futures dipped to 7,42,007 contracts as against the August 1 figure of 8,37,715 contracts; on the other hand, in stock futures their open interest improved to 9,88,763 contracts as against 8,83,983 contracts on August 1. Even when their open positions improved on stock futures, their holding dipped on amount-wise as they hold Rs 26,768.42 crore against August 1 figure of Rs 26,992 crore.
“There was high volatility and the FIIs sold in cash market so there was less need to hedge and the drop in open interest holding in index futures reflects that,” said Mr V.K Sharma, Head of Research, Anagram Stockbroking.
Business Process Outsourcing (BPO) players including WNS and iGATE Global Solutions — hit by the meltdown in the US sub-prime mortgage market — have begun redeploying affected employees in other internal projects, while ruling out any immediate layoffs.
“About 500 of our employees were engaged in the First Magnus Financial Corporation contract. We are working on creating internal opportunities for these employees and there will be no layoffs,” the WNS Chief Executive, Mr Neeraj Bhargava, told Business Line.
Mr Bhargava said that the WNS team had started matching skill set of such employees with the internal requirements.
“There is enough growth in the market to take care of the flow of people from the contract, and efforts are on to absorb bulk of them internally within the practices such as financial services, travel and knowledge services. In the rare case of employees with skill sets unique to the client, we will assist them in getting jobs externally,” he said.
First Magnus contract
Last week, the company in a filing to NYSE, said First Magnus Financial Corporation, one of its top clients in the mortgage business, had decided to stop all work with WNS in light of the current volatility in the mortgage market.
WNS also said that its revenue less repair payments were expected to be between $286 million and $291million for the year ended March 31, 2008, about $16 million lower than originally estimated.
The sub-prime woes have prompted iGATE Global Solutions to redeploy close to 150 employees into other services, said the Chief Financial Officer, Mr N. Ramachandran.
Some of the employees have been redeployed into other practices such as insurance, finance and accounting, infrastructure management services and in pH (Process Health) Matrix consulting team.
iGATE also saw some 20-25 people leaving the company voluntarily during the past few months. “We have not filled up the vacancies arising due to voluntary attrition during this period,” Mr Ramachandran said.
At present, iGATE has some 500 employees in its BPO operations. Revenue from mortgage processing, which accounted for about 10 per cent of iGATE’s total revenues two quarters ago, has now come down to around six per cent.
“At present, we have three clients in the mortgage segment and all of them have been affected by the sub-prime crisis. Unlike other companies which have collapsed recently, our clients are big enough to withstand the crisis,” Mr Ramachandran said.
However, the Nassscom President, Mr Kiran Karnik, said that it was early to press the panic button. “While at individual company-level it could hit operations, from the Indian BPO industry standpoint it may not have large implication primarily because the industry’s exposure to mortgage market is quite small and the services are specialised.”
Foreign institutional investors (FIIs) sold shares worth $21.8 billion in six emerging markets over the last one month, wiping out $581 billion in terms of market capitalisation.
The sale by FIIs in 17 trading days (since July 24 – the day on which the subprime mortgage defaults started taking their toll) accounts for 90.5 per cent of the net inflows of $24.146 billion from the start of 2007.
Of the $581 billion market cap wiped off from the six emerging markets, South Korea accounted for 220.54 billion, Taiwan $136.8 billion and India $115.27 billion. The Indonesian markets lost 41.95 billion, while the Philippines shed $22.18 billion in market cap.
Among the six emerging markets, the FIIs sold $9.09 billion shares in South Korea and $8.885 billion in Taiwan. These two markets account for 82.24 per cent or $17.981 billion of the total shares sold by FIIs in six emerging markets.
India, Indonesia and the Philippines have not seen large amounts of net foreign selling compared with South Korea and Taiwan. The FIIs sold $2.48 billion in India, $1.41 billion in Thailand and $4 million in the Philippines. Indonesia, however, witnessed a marginal inflow of $14 million.
The FIIs have been aggressive sellers in the South Korean markets since 2005, with outflows aggregating $12.140 billion in 2006 and $4.137 in 2005.
In the current calendar year, the FIIs sold shares worth $11.85 billion, of which $9.1 billion was sold since July 24.
The equities meltdown in emerging markets, led by the subprime crisis in the US markets, was followed by sell offs in the commodity markets too.
The sharp appreciation of the yen and the depreciation of the currencies of the emerging markets suggested some sell offs by hedge funds in the emerging markets.
According to Angel Broking research, the cycle of sell offs in equities, commodities and then currencies seems likely to be over. The markets may settle in the current zone, before taking off in emerging markets such as India.
U.S. stocks rose on Wednesday as takeover activity resurfaced and credit markets stabilized, luring investors back into riskier assets such as equities.
After the close, S&P 500 index futures jumped, indicating a sharply higher open on Thursday, after the Wall Street Journal reported Bank of America Corp. plans to invest $2 billion in preferred stock issued by mortgage lender Countrywide Financial Corp.
During the regular session, hopes for a Federal Reserve interest-rate cut persisted as they have since last Friday, highlighting renewed confidence that policy makers would not let financial markets go into a tailspin.
TD Ameritrade Holding Corp shares jumped 4.9 percent to $17.15 on news it was discussing a combination with other online brokers. The Wall Street Journal reported that E*Trade Financial was in talks with TD Ameritrade.
The Dow Jones industrial average climbed 145.27 points, or 1.11 percent, to end at 13,236.13. The Standard & Poor's 500 Index was up 16.95 points, or 1.17 percent, at 1,464.07. The Nasdaq Composite Index was up 31.50 points, or 1.25 percent, at 2,552.80.
In extended trading, Countrywide's shares surged 19 percent to $26, while Bank of America's stock rose 1 percent to $52.50.
"It's the continuation of money moving, and that is a positive for the market, and investor confidence. It shows that Countrywide at this price is a viable company," said Richard Sichel, chief investment officer of Philadelphia Trust Co.
In Wednesday's session, shares of industrial and material companies surged, with aluminum company Alcoa Inc. rising 4.7 percent to $36.22 after BHP Billiton Ltd, the world's largest miner, posted a 19 percent jump in second-half earnings
Stocks also rose as the flood of cash into the safety of short-term Treasury debt slowed. At the same time, issuers returned to the corporate bond market and prices rose in the mortgage-backed securities market.
"The market senses that the Fed will make sure there's liquidity," said Mark Bronzo, managing director at Gartmore Separate Accounts LLC in Irvington, New York. "People are sensing the fears are fairly high in terms of the credit markets and, as a result. maybe the worst of that is priced in, and you're seeing some signs of stability there."
The Nasdaq's gain was its fourth in a row and the index is now up 5.7 percent for the year, led this week by gains in shares of Apple Inc.
Apple advanced 3.9 percent to $132.51 after reports that the company had reached revenue-sharing deals with several European mobile network operators as it prepares to launch the iPhone in Europe later this year.
Around midday, several big U.S. banks, including Citigroup Inc, said they had borrowed money directly from the Federal Reserve.
Analysts said the move could be encouraging for the market after the Fed said that using its discount window would be considered a sign of strength. Banks have traditionally been hesitant to use the discount window since it is a direct loan from the Fed, one of the primary federal bank regulators.
The S&P index of financial shares ended with a gain of 0.8 percent after falling earlier on the news.
Citigroup's stock also advanced 0.8 percent to close at $48.43 on the New York Stock Exchange.
In other deal news, Dubai agreed to pay up to $5.1 billion for a 9.5 percent stake in MGM Mirage Inc and half the casino company's CitiCenter hotels and apartments project in Las Vegas. MGM shares gained 8.9 percent to $80.94
E*Trade shares fell 2.1 percent to $15.25 on the Nasdaq.
NYMEX Holdings Inc's shares rose 6.1 percent to $126.06 on the Big Board after the parent of the New York Mercantile Exchange said late Tuesday it has held preliminary discussions about a potential merger.
Besides Alcoa, the Dow's top positive influences included big manufacturers like Caterpillar Inc., up 1.4 percent at $75.30, and DuPont, up 2.5 percent at $48.92.
Speculation that the U.S. central bank will cut benchmark rates sooner rather than later increased after it surprised markets on Friday by cutting the discount rate, which it charges banks to borrow from it.
Problems in the risky U.S. subprime mortgage sector have spurred sharp declines in world stocks over the past month.
Trading was below average on the New York Stock Exchange, with about 1.45 billion shares changing hands, down from last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.84 billion shares traded, also down from last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about 4 to 1 on the NYSE and by 2 to 1 on Nasdaq.
Bharat Heavy Electricals
Cluster: Apple Green
Price target: Rs1,954
Current market price: Rs1,665
Price target revised to Rs1,954
- In Q1FY2008 the net sales of Bharat Heavy Electricals Ltd (BHEL) grew by 21.7% to Rs3,233.9 crore and were slightly below our expectations.
- In the first quarter of FY2008, the company incurred a foreign exchange (forex) loss of Rs54 crore on its receivables as against a forex gain of Rs18 crore in Q1FY2007. We have treated both as extraordinary items; subsequently the operating profit margin (OPM) remained flat year on year (yoy) at 11.3%. The net profit before extraordinary items grew by 56.8% to Rs342.9 crore.
- The net profit after extraordinary items grew by 22.1% to Rs288.9 crore.
- The power business reported a 25.4% growth yoy in the revenues and expansion of 70 basis points in the profit before interest and tax (PBIT) margin whereas the industry business recorded a growth of 19.4% in its revenues and a dip of 100 basis points to 3.7% in the PBIT margin.
- BHEL recorded the most impressive order inflow in Q1FY2008 with inflows increasing by 138% yoy to Rs10,970 crore. The order backlog at the end of the quarter stood at a historic level of Rs62,400 crore.
- BHEL is likely to take minority stakes in state utilities to upgrade to super critical power plants. This strategy in turn would make BHEL the prime recipient of the equipment orders.
- To meet the surge in the demand the company plans to raise its boiler and turbine capacity from the existing 6,000 megawatt (MW) each to 15,000MW each over next three years. Out of the total additional capacity proposed, work on 4,000MW of capacity is on schedule and the capacity would be commissioned by December 2007.
Cluster: Apple Green
Price target: Rs200
Current market price: Rs158
ITC acquires Technico Pty Ltd
- ITC has acquired Technico Pty Ltd, Australia, through its wholly owned subsidiary, Russell Credit.
- Technico Pty Ltd was a subsidiary of Chambal Fertilisers and Chemicals (of the Zuari group) through the latter's subsidiary, Chambal Biotech Pvt Ltd, Singapore, which owned 77.65% of its equity. The financial details of the takeover have not been disclosed. We believe that the transaction is small and is unlikely to affect the financials of ITC.
- Technico Pty Ltd provides supply chain solutions to global customers by using proprietary technology (TECHNITUBER) to deliver early generation seed potato products and technology platforms to implement affordable early field generation seed potato programmes and rapidly introduce new varieties. It has seed manufacturing facilities in China, Canada, India and the Middle East. ITC already has farm linkages for buying potatoes through its e-Choupals. This acquisition will further strengthen its agri-input business and secure supplies for the salted snacks business sold under the brand Bingo (launched in March 2007).
- The company had earlier mentioned that its strategic intent is to secure long-term growth by exploiting emerging opportunities in the fast moving consumer goods (FMCG) sector. ITC's branded food business continues to expand rapidly with the sales growing by 51% over last year. We believe this is one small step toward its ultimate goal of gaining strong foothold in the fast growing Rs1,900-crore organised salty snacks market.
- We have always liked the way ITC has channelised the strong cash flows generated from its cigarette business into the other businesses of FMCG products, hotels, paperboards and now e-Choupals. At the current market price of Rs158.4, the stock is attractively quoting at 19.9x its FY2008E earnings per share and 12.6x FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on ITC with a price target of Rs200.