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Monday, March 31, 2008

Mkts tumble 4.44%, tank 11% in the month

The BSE Sensex tumbled 726.85 points, or 4.44%, at 16,371.29, losing about 11% this month; while the broad-based NSE Nifty slumped 207.5 points, or 4.20% to close at 4734.50.

Global Cues

Asian stocks closed negative on Monday (Mar. 31, 2008) as concerns regarding the U.S. consumer spending that will erode exports of cars, clothing and electronics escalated.

Market statistics

Market breadth was mixed. Out of the total 2,699 stocks traded at the BSE, 1,365 advanced, 1,291 declined while 43 remained unchanged.

Among the sectoral indices at BSE Realty slumped 5.39%, BSE IT fell 5.60%, BSE Bankex slumped 5.89%, BSE Metal and BSE Oil & Gas each fell 4.31%.

Movers and Shakers

There were only four companies which made to the gainers list. Cipla closed up 1.01% at Rs 219.75, M&M settled up 0.66% at Rs 695.65. Bharti Airtel and ITC just managed to close in the green.

Losers at the BSE Sensex include HDFC which tanked 8.79% to settle at Rs 2,383.75, ICICI Bank fell 7.79%, DLF tumbled 7.07%, TCS, ONGC, Wipro, Infosys, Reliance Energy and Hindalco each slumped over 6%.

Top Volumes & Values

Ispat Industries topped the volume chart with 23.38 million shares, RNRL witnessed volumes of 13.26 million shares, Orchid Chemicals 11.77 million and IFCI 11.37 million shares.

Turnover wise Reliance Capital topped the chart with a turnover of Rs 3.24 billion, followed by GSS America (Rs 2.89 billion), RIL (Rs 2.57 billion) and Orchid Chemicals (Rs 1.87 billion).

NSE Bulk Deal Watch - March 31 2008

Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
31-MAR-2008,AMTEKAUTO,AmtekAuto-Roll Sett,QUALITY PUBLICITY PVT LTD,BUY,826000,244.00,-
31-MAR-2008,AMTEKAUTO,AmtekAuto-Roll Sett,SPT INFOTECH PVT LTD,BUY,2215000,244.00,-
31-MAR-2008,DECOLIGHT,Decolight Ceramics Limite,MITTAL SECURITIES FINANCE LTD,BUY,100000,20.48,-
31-MAR-2008,FIEMIND,Fiem Industries Limited,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,BUY,60800,67.53,-
31-MAR-2008,FIEMIND,Fiem Industries Limited,SHREE RANI SATI INVESTMENT & FINANCE LIMITED,BUY,130000,66.68,-
31-MAR-2008,GLORY,Glory Polyfilms Limited,SRI SALASAR SUPPLIERS PVT LTD,BUY,100000,66.00,-
31-MAR-2008,GMRINDS,GMR Industries Limited,LIMITED GMR HOLDINGS PRIVATE,BUY,664590,74.00,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,BUY,101661,737.18,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,B K SHAH CO KETAN BHAILAL SHAH,BUY,74494,728.84,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,GOPAL TRADERS,BUY,66500,680.91,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,HARBUX SINGH SIDHU,BUY,76206,753.77,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,PRASHANT JAYANTILAL PATEL,BUY,88752,728.99,-
31-MAR-2008,GTL,GTL Limited,GLOBAL ASSET HLDG CORIN P.LTD,BUY,602341,260.64,-
31-MAR-2008,ISPATIND,Ispat Industries Limited,CLEAN FINANCE & INVESTMENT LTD,BUY,6509756,32.22,-
31-MAR-2008,NORTHGATE,Northgate Technologies Li,MARSHAL ASIA CAPITAL LTD,BUY,180000,449.48,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,AVP TRADES PVT. LTD.,BUY,500000,155.89,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,JAYPEE CAPITAL SERVICES LTD.,BUY,353278,155.75,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,MANSUKH SECURITIES & FINANCE LTD,BUY,337019,159.50,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,MERRILL LYNCH CAPITAL MARKETS ESPANA S.A S.V.,BUY,355804,154.33,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,PRASHANT JAYANTILAL PATEL,BUY,522099,161.27,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,SOLREX PHARMACETICALS COMPANY,BUY,1064895,160.77,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,TRANSGLOBAL SECURITIES LTD.,BUY,679827,159.53,-
31-MAR-2008,PIONEEREMB,Pioneer Embroideries Limi,RAJKUMAR SEKHANI,BUY,220000,105.58,-
31-MAR-2008,TUBEINVEST,Tube Investments Ltd,PARRY AGRO INDUSTRIES LTD,BUY,5750000,57.50,-
31-MAR-2008,TULSI,Tulsi Extrusions Limited,INDIA MAX INVESTMENT FUND LTD,BUY,150000,77.99,-
31-MAR-2008,VESUVIUS,Vesuvius India Ltd,HDFC ASSET MANAGEMENT COMPANT LTD,BUY,154500,210.00,-
31-MAR-2008,AMTEKAUTO,AmtekAuto-Roll Sett,EXCEL HOSIERY PVT LTD,SELL,2215000,244.00,-
31-MAR-2008,AMTEKAUTO,AmtekAuto-Roll Sett,W.LD. INVESTMENT PRIVATE LTD,SELL,826000,244.00,-
31-MAR-2008,FIEMIND,Fiem Industries Limited,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,SELL,60800,67.00,-
31-MAR-2008,GLORY,Glory Polyfilms Limited,GIRDHAR VANIJYA PVT LTD,SELL,100000,66.00,-
31-MAR-2008,GMRINDS,GMR Industries Limited,MEDVIN FINANCE PRIVATE LTD,SELL,664590,74.00,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,SELL,102357,737.40,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,B K SHAH CO KETAN BHAILAL SHAH,SELL,74563,729.20,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,GOPAL TRADERS,SELL,66500,720.23,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,HARBUX SINGH SIDHU,SELL,76206,752.56,-
31-MAR-2008,GSSAMERICA,GSS America Infotech Limi,PRASHANT JAYANTILAL PATEL,SELL,88752,729.17,-
31-MAR-2008,IOLN,IOL Netcom Limited,BROADBAND INDIA LIMITED,SELL,467570,92.65,-
31-MAR-2008,ISPATIND,Ispat Industries Limited,CLEAN FINANCE & INVESTMENT LTD,SELL,6509756,32.23,-
31-MAR-2008,ISPATIND,Ispat Industries Limited,ICICI BANK LTD,SELL,8000000,32.41,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,JAYPEE CAPITAL SERVICES LTD.,SELL,353278,155.09,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,MANSUKH SECURITIES & FINANCE LTD,SELL,337018,159.42,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,PRASHANT JAYANTILAL PATEL,SELL,522099,161.21,-
31-MAR-2008,ORCHIDCHEM,Orchid Chemicals Ltd.,TRANSGLOBAL SECURITIES LTD.,SELL,710269,159.24,-
31-MAR-2008,PIONEEREMB,Pioneer Embroideries Limi,RACHNA VINIMAY PVT LTD,SELL,177981,105.59,-
31-MAR-2008,PPAP,Precision Pipes And Profi,INDUSTRIAL DEVELOPMENT BANK OF INDIA,SELL,134793,68.69,-
31-MAR-2008,TUBEINVEST,Tube Investments Ltd,TII SHARE HOLDING TRUST ,SELL,5750000,57.50,-

BSE Bulk Deals to Watch - March 31 2008

Deal Date Scrip Code Scrip Name Client Name Deal Type * Quantity Price **
31/3/2008 530721 ANG AUTO EMERGING INDIA TIGER FUND S 123056 95.00
31/3/2008 532475 APTECH LTD INDEA CAPITAL PTE LIMITED B 470000 218.96
31/3/2008 532475 APTECH LTD INDEA CAPITAL PTE LIMITED S 450000 218.75
31/3/2008 505506 AXON INFOTEC ASHARAM RAMAWATAR B 4000 41.75
31/3/2008 532363 COMP-U-LEARN NARASIMHA MURTHY BOLLA S 100000 9.96
31/3/2008 517973 DMC INTER HITECH COMPUTECH PRIVATE LTD S 60000 12.63
31/3/2008 531367 DOLLEX INDUT NADEEM KHAN B 45448 33.67
31/3/2008 526717 GOPALA POLYP PRASAD DESHPANDE S 193354 3.57
31/3/2008 508918 GREYCELLS EN PRIME SECURITIES LTD B 20000 216.50
31/3/2008 532951 GSS AMERICA B K SHAH CO B 82625 726.04
31/3/2008 532951 GSS AMERICA B K SHAH CO S 82623 730.67
31/3/2008 532334 HB ESTA DEVL B K KHULLAR AND CO B 290865 35.50
31/3/2008 532334 HB ESTA DEVL DELHI IRON AND STEEL P LTD S 290950 35.50
31/3/2008 509627 HINDUS DOR O M M MURARKA SHARE AND SEC PVT LTD S 187000 97.70
31/3/2008 516078 JUMBO BAG LT CHETAN VALCHAND MEHTA B 34730 42.15
31/3/2008 512399 KAPASHI COMM MONA SNEHAL KOTHARI B 15000 40.55
31/3/2008 512399 KAPASHI COMM ROOPESH CHAITANYA PATEL B 25000 40.55
31/3/2008 512399 KAPASHI COMM NIMISH INDUBHAI KAPASHI S 40000 40.55
31/3/2008 532407 MOSCHIP SEMI MAKHAN LAL PHUMBHRA B 300000 17.90
31/3/2008 532504 NAVIN FLUORI LAXMI INVESTMENTS B 125000 222.00
31/3/2008 532504 NAVIN FLUORI DARASHAW AND COMPANY PVT LTD S 125000 222.00
31/3/2008 524372 ORCHID CHEM ASSET ALLIANCE SEC PVT LTD B 481679 158.38
31/3/2008 524372 ORCHID CHEM LATIN MANHARLAL SEC PVT LTD B 342110 161.12
31/3/2008 524372 ORCHID CHEM AVP TRADES PVT LTD B 500000 157.22
31/3/2008 524372 ORCHID CHEM ASSET ALLIANCE SEC PVT LTD S 571599 157.04
31/3/2008 524372 ORCHID CHEM LATIN MANHARLAL SEC PVT LTD S 346610 161.00
31/3/2008 531219 POONAM PHARM SWARN GANGA TRADING PVT. LTD. B 38500 3.40
31/3/2008 532934 PRECISION IDBI LTD S 76210 67.65
31/3/2008 523363 STER HOL RES KOTAK PMS S 349339 28.72

Post Market Commentary - March 31 2008

The market closed in a deep red territory backed by the weak cues from the global markets. The market opened on a sad note and kept on hovering in the negative territory throughout the trading session. The Asian market which opened befor the Indian market were trading in red that led the domestic market to open with heavy gap down. Also the report by the Institute of Chartered Accountants of India (ICAI), that cited that the companies have to disclose losses on a mark-to-market basis incurred due to derivatives trades from the current financial year onwards (year ending March 2008) and this was as a precursor to making a new accounting standard mandatory from April 2011. This led to the negative sentiments among the investors in the market. From, the sectoral front, all the sectoral indices closed in red.

The BSE Sensex closed lower by 726.85 points at 15,644.44 and NSE Nifty fell by 207.5 points at 4,734.50. The BSE Mid Caps and Small Caps also closed lower by 94.97 points and 60.36 points at 6,427.82 and 7,841.62 respectively

The market breadth was little strong as 1,365 stocks closed in green as against 1,291 stocks that closed in red.

The BSE Realty index closed lower by 430.12 points at 7,554.80 as HDIL (8.68%), DLF (7.07%), Phoenix mill (6.04%), Unitech (5.31%), Ansal Infra (5.29%), Omaxe (3.88%), Indbull Real (3.56%) and Akruti City (2.70%) closed in red.

The Metal index declined by 631.63 points to close at 14,022.56. Major losers are Bhushan Steel (8.23%), Gujrat NRE (8.20%), SAIL (6.46%), Hindalco Inds (6.10%), Sterlite Inds (5.61%) and Tata Steel (3.29%).

The Bankex index fell by 482.63 points to close at 7,717.61 as ICICI bank (7.79%), Yes bank (7.61%), BOI (7.11%), Kotak bank (6.35%), HDFC bank (5.79%), BOB (5.77%), Oriental bank (4.87%) and SBI (4.81%) closed lower.

The Capital Goods index dropped by 446.42 points to close at 14,009.02. Losers are Siemens (6.77%), Punj Lloyd (6.48%), Jyoti Structures (5.92%), Crompton Greaves (4.35%), L&T (3.89%), BEML (3.88%), AIA Engineering (1.96%) and ABB (1.84%).

The Oil and Gas index slipped by 450.79 points to close at 10,016.82 as Essar Oil (7.94%), ONGC (6.68%), RNRL (5.41%), BPCL (5.19%), Reliance Inds (3.54%), RPL (3.37%), HPCL (2.81%).

The IT index decreased by 210.42 points to close at 3,547.61. Scrips that fell are HCL Tech (6.93%), TCS (6.80%), Wipro (6.32%), Infosys (6.30%), Aptech (6.03%), Satyam (3.40%).

From the Power index, Reliance Energy 6.19%, GMR Infra (4.73%), Reliance Power (4.90%), NTPC (3.55%), Tata Power (3.24%) and GVK Power (2.08%).

Market Close: negative global cues weigh in

The last day of financial year FY08 was bad for Indian markets as it ended with huge losses. Following weak global cues, Indian markets also started in red with worries of high inflation haunting the banking sector. Reports from ICAI (Institute of Chartered Accountants Association) which has urged companies to reveal their mark to market (MTM) losses of all outstanding derivative contracts in their balance sheets this quarter put more pressure on selling. Sensex slipped below the 16k mark as it closed down over by 700. Indices witnessed tremendous selling pressure across all sectors with Banking, IT, Realty, Metals and Oil&Gas been hit the worst. Mid and small caps felt the brunt of the selling pressure at they both ended in the negative zone.

Sensex closed down by 727 points at 15644.44. Weighing on the Sensex are losses in HDFC (2383.75,-9 percent), ICICI Bk (770.1,-8 percent), TCS (810.9,-7 percent), ONGC (981.35,-7 percent) and Wipro (425.3,-6 percent). Losses are restricted by gains in Cipla (219.75,+1 percent), Bajaj Auto (691.45,+1 percent), Bharti Tele (826.1,+0 percent), Dr Reddys (590.95,+0 percent) and ITC (206.35,+0 percent).

Cement companies are likely to hike prices by Rs 3-5/bag beginning April. The government last week withdrew the DEPB incentives on a number of products, including cement. This means that some of the companies will not be able to claim the drawback of import duties paid on any raw material used for manufacturing of items which are exported. In Gujarat, prices are expected to rise by Rs 5-7 per bag due to increase in value added tax (VAT). VAT rate is scheduled to increase in the state from 12.5% to 15% from April 1, 2008. Prices are also set to increase in the South, where government intervention in Tamil Nadu and a softening of prices in some parts of Andhra Pradesh, had ensured there was no price hike in March. Dealers see a hike of Rs 3-5 per bag across the four states from April 1. Cement has seen cost pressures from coal prices and also fuel and transportation costs. The demand supply gap is favorable and so the companies can now at least pass on these cost pressures to the consumers. However for now Cement may be the flavor till as much time the demand supply is in their favor.

IOC is studying various options for becoming an ethanol producer from being just a buyer. The company would be looking at both organic and inorganic prospects for expanding its business in the bio-fuel category. Ethanol is slowly gaining importance. This can be noticed from the fact that, Oil majors are trying to establish sugar, ethanol units. Also, Reliance Industries and Hindustan Petroleum Corporation Ltd (HPCL) were among the companies which were awarded financial contracts for the revival of State-run sugar mills in Bihar. This is in from the view of Oct 2008, where Ethanol blending is extended from 5% to 10%. On back of this, sugar companies, mainly into Ethanol will see interest in time to come, specially, Renuka sugar.

Technically Speaking: Sensex traded in the negative zone for the entire day. It made an intraday high of 16,227 and low of 15,563. The overall breadth of Advances and Declines remained at 1:1. Turnover was pretty good at Rs 6000 cr. Sensex has closed at the 13 Day moving average and that is a support in a sense. There is a gap support and that if held out will lead us to be more comfortable on the upside move which started around 18th of March. 14730 is an important level and markets could see negative if that level is broken.

Market sinks on bear hammering

The market went into a complete tailspin as the much-awaited correction shaved nearly 800 points off the Sensex during intra-day trades. Global positive cues like further cooling off of the oil prices failed to lift the sentiment, as investors tracked the falling Asian indices since early trades instead. The Sensex resumed 144 points lower at 16,227 and lost more ground as the trading progressed. The market witnessed a steep fall in early noon trades as selling in heavyweights, Bankex, realty and information technology (IT) dragged the index below the 16,000 mark to the day's low of 15,563. After lingering in negative territory thereafter, the Sensex wrapped up the session at 15,644, down 727 points, while the Nifty shed 208 points to close at 4,735.

However, the market breadth was marginally positive with the gainers outpacing the losers by 1:0.4. Of the 2,699 stocks traded on the BSE, 1,356 stocks advanced, 1,300 stocks declined and 43 stocks ended unchanged. All the sectoral indices took sharp beating. The BSE Bankex index bore the major brunt and crashed 5.89% at 7,718, while the BSE IT index, the BSE Realty index, the BSE Metal index, the BSE Oil& Gas index and the BSE Teck index dropped over 3-5% each.

Of the 30 stocks in the Sensex pack, 26 ended in red. Among the major losers, HDFC tumbled 8.79% at Rs2,383.75, ICICI Bank slumped 7.79% at Rs770.10, DLF crumbled 7.07% at Rs646.50 and TCS plunged 6.80% at Rs810.90. Infosys dropped 6.30% at Rs1,430, Wipro declined 6.32% at Rs425.30, Reliance Energy fell 6.19% at Rs1,251 and Hindalco moved down 6.10% at Rs164.75. Other frontline stocks also dropped over 1-5% each.

In the Bankex pack, Yes Bank tanked 7.61% at Rs168.75, Bank of India plummeted 7.11% at Rs252.90, Kotak Bank slumped 6.35% at Rs628.55 and HDFC Bank lost 5.79% at Rs1,319. Bank of Baroda, Centurion Bank of Punjab, Oriental Bank of India, SBI, Allahabad Bank, Punjab National Bank, UBI and Andhra Bank crashed over 3.5% each.

Over 2.33 crore Ispat Industries shares changed hands on the BSE followed by RNRL (1.32 crore shares), Orchid Chemicals (1.17 crore shares), IFCI (1.13 crore shares) and RPL (1.02 crore shares).

Valuewise, Reliance Capital clocked a turnover of Rs324 crore followed by GSS America (Rs289 crore), Reliance Industries (Rs257 crore), Orchid Chemicals (Rs187 crore) and RPL (Rs162 crore).

Sensex up nearly 20% in financial year ended March 2008

Sustained selling pressure in blue chips ever since the opening bell spooked the bourses today. Negative cues from global markets dampened sentiment. The sentiment was also hit by reports that the Institute of Chartered Accountants of India (ICAI) has asked companies to disclose losses on a mark-to-market basis incurred due to derivatives trades from the current financial year onwards (year ending March 2008), as a precursor to making a new accounting standard -- the AS-30 -- mandatory from 1 April 2011. This may hit Q4 March 2008 and FY 2008 (year ending March 2008) bottom line of Indian firms.

European markets, which opened after Indian markets, were weak in early trade. Asian markets, which opened before Indian market, were in red. US stocks dropped on Friday, 28 March 2008, as a profit warning from US department store chain J.C. Penney raised concerns about slowing consumer spending while persistent worries about credit-related problems throttled financial stocks. A prominent analyst warned that earnings will not support current dividend payouts in 2008 at Citigroup, Wachovia Corp and other US banks.

The BSE Sensex dipped below 16,000 mark. 28 stocks from the 30-member Sensex pack declined. Despite the sharp fall, the market breadth was positive.

The 30-share BSE Sensex plunged 726.85 points or 4.44% at 15,644.44. Sensex had opened with a downward gap of 144.63 points at 16,226.66 and slipped 808.14 points to touch day’s low of 15,563.15 in late trade.

As per provisional data, foreign funds sold shares worth a net Rs 865.79 crore today. Domestic funds bought shares worth a net Rs 566.03 crore.

The BSE Sensex lost 4642.55 points or 22.88% in the quarter ended March 2008. The Sensex gained 2572.34 points or 19.67% in the financial year 2008, from its close of 13072.10 on 30 March 2007.

The broader based S&P CNX Nifty plunged 207.50 points or 4.20% at 4,734.50. Nifty lost 1404.10 points or 22.87% from 6,138.60 on 31 December 2007 in the quarter ended March 2008. Nifty rose 912.95 points or 23.88% in the financial year 2008, from its close of 3821.55 on 30 March 2007.

Nifty April 2008 futures were at 4715, a discount of 19.50 points as compared to spot closing.

The ICAI norm requires companies to provide for all losses, including those that may occur due to trading in derivatives. Indian companies are sitting on huge losses on account of the forex derivative transactions they undertook during the year. A steep decline in the value of the US dollar against the Japanese Yen and the Swiss Franc has hit Indian corporates which have used these two currencies (Yen and Franc) extensively to swap their rupee denominated debt.

There are many companies, which are not disclosing these losses, as it is not mandatory to show these numbers in the balance sheets. But with the new accounting norms they now have some compulsions. Companies, which thought that they could escape declaring the losses, will now have to come forward and show their numbers, which could hit their balance sheet, which, in turn, may impact their market capitalisation.

Earlier, robust corporate advance tax payments in Q4 March 2008 indicated that corporate profit growth will be strong in the quarter. Advance tax figures showed banks, hospitality and software firms were doing better than sectors like automobiles and cement.

Despite the market crash, the market breadth was positive: On BSE 1,356 shares advanced as compared to 1,302 that declined. 45 shares remained unchanged.

The BSE Mid-Cap index was down 1.46% to 6,427.82 while the BSE Small-Cap index slipped 0.76% to 7,841.62. Both these indices outperformed the Sensex

The total turnover amounted to Rs 5912 crore on BSE as compared to Rs 6,463.99 crore on Friday, 28 March 2008.

Total turnover in NSE’s futures & options segment amounted to Rs 47200.87 crore as compared to Rs 49087.03 crore on Friday, 28 March 2008.

All sectoral indices on BSE posted losses. The BSE IT index (down 5.60% to 3,547.61), the BSE Bankex (down 5.89% at 7,717.61), the BSE Realty index (down 5.39% at 7,554.80), underperformed the Sensex

The BSE Auto (down 4.31% at 10,016.82), the BSE Consumer Durables index (down 3.52% to 3,883.29), the BSE FMCG index (down 1.23% at 2,290.07), the BSE Health Care index (down 0.18% at 3,848.11), the BSE TecK index (down 3.93% to 3,024.13), the BSE Power (down 3.40% to 3,189.81), the BSE Capital Goods index (down 3.09% at 14,009.02), the BSE Metal index (down 4.31% to 14,022.56), the BSE Oil & Gas index (down 4.31% to 10,016.82), and the BSE PSU index (down 3.67% to 7,426.83), outperformed the Sensex

India’s largest dedicated housing finance provider in terms of net profit Housing Development Finance Corporation slumped 9.10% to Rs 2376.20 on 2.74 lakh shares. It was the top loser from Sensex pack.

Banking shares slumped. HDFC Bank (down 6.87% to Rs 1304.85), ICICI Bank (down 8.03% to Rs 768.10), and State Bank of India (down 4.26% to Rs 1608.15), also slipped.

India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries lost 4.11% to Rs 2251 on 11.24 lakh shares. The stock moved in a range of Rs 2251 and Rs 2340 during the day.

IT pivotals were hit on worries a recession in US may impact their revenues. Infosys Technologies (down 6.31% to Rs 1429), Satyam Computers (down 3.42% to Rs 394.50), Wipro (down 8.59% to Rs 415), and TCS (down 7.94% to Rs 801), declined. IT firms derive majority of their revenue from exports to US markers.

Reliance Energy, the country’s largest private sector power utility company in terms of net profit slipped 6.12% to Rs 1252. The company has bought back 6.50 lakh equity shares since the start of the offer on Tuesday, 25 March 2008 aggregating Rs 83.15 crore

Hindalco Industries (down 6.13% to Rs 164.70), DLF (down 7.14% to Rs 646) and ONGC (down 6.61% to Rs 982), edged lower from the Sensex pack.

Cipla, the country’s third largest pharma company in terms of sales, gained 0.96% to Rs 219.60 on 4.83 lakh shares. It was the lone gainer from Sensex pack.

Reliance Capital was the top traded counter on BSE with turnover of Rs 323.48 crore followed by GSS America Systems (Rs 288.50 crore), Reliance Industries (Rs 257.43 crore), Orchid Chemicals & Pharmaceuticals (Rs 187.09 crore), and Reliance Petroleum (Rs 162.10 crore), in that order.

Ispat Industries led the volume charts clocking volumes of 2.34 crore shares followed by Reliance Natural Resources (1.33 crore shares), Orchid Chemicals & Pharmaceuticals (1.18 crore shares), IFCI (1.14 crore shares) and Reliance Petroleum (1.02 crore shares), in that order

Among the side counters, Axon Infotech (up 19.11% to Rs 41.45), Aro Granite (up 19.51% to Rs 102), Indowind Energy (up 20% to Rs 68.20), and Sulzer India (up 20% to Rs 687), surged

Action Construction Equipment (down 13.45% to Rs 75.75), ECE Industries (down 11.95% to Rs 330), India Infoline (down 11.30% to Rs 760), and Indiabulls Financial Services (down 13.12% to Rs 410), slipped.

Tyre stocks rose on reports that tyre manufacturers are gearing up to increase prices following a surge in input costs. CEAT (up 6.10% to Rs 108), Govind Rubber (up 3.91% to Rs 14.60), Premier Tyre (up 2.63% to Rs 29.25) edged higher.

Era Infra Engineering was down 0.25% to Rs 594.90 after the company secured a contract worth Rs 20 crore for supply of ready mix concrete in New Delhi.

Cairn India slipped 3.02% to Rs 223.15. The company posted net higher loss of Rs 78.82 crore in the year ended December 2007 as compared to net loss of Rs 29.22 crore in the year ended December 2006. Cairn India's total income rose 474.60% to Rs 33.96 crore in the year ended 31 December 2007 over the year ended 31 December 2006. The company announced the results before trading hours today, 31 March 2008.

Bhushan Steel slipped 8.76% to Rs 659 after the company said it is planning to set up a value added steel plant in Chennai with a production capacity of 0.5 million tonne per annum and total investment of about Rs 500 crore. The company made this announcement during trading hours today, 31 March 2008.

Suven Life Sciences declined 4.24% to Rs 31.65 after the company said it has secured patent rights in Mexico and Korea for two of its new chemical entities for the treatment of disorders associated with neurodegenerative diseases.

City Union Bank declined 2.76% to Rs 28.20 after bank said it would issue 80 million shares by way of qualified institutional placement. The bank made this announcement after market hours on Friday, 28 March 2008.

Spanco Telesystems & Solutions fell 2.14% to Rs 160.25. The stock surged to a high of Rs 180 after the company said on Monday, 31 March 2008, it won orders worth Rs 166 crore from various parties.

Amtek Auto declined 0.92% to Rs 258 after company said it may suffer losses up to $18 million in the next two years due to volatility in the global currency market. The company made this announcement after market hours on Friday, 28 March 2008.

Diamond Cables rose 1.13% to Rs 340 after the company received an engineering procurement and construction order for implementation of Rajiv Gandhi Gramin Vidyutikaran Yojna in Gujarat.

The key benchmark indices in United Kingdom (down 0.55% to 5,661.80), France (down 0.50% to 4,4672.40), and Germany (down 1.46% to 6,464.63), edged lower.

Asian markets settled lower today, 31 March 2008. Hang Seng (down 1.88% at 22,849.20), Japan's Nikkei (down 2.30% at 12,525.54), Taiwan's Taiwan Weighted (down 0.59% at 8,572.59), Singapore's Straits Times (down 0.81% at 3,007.26), Shanghai Composite (down 3% to 3,472.13), edged lower. However South Korea's Seoul Composite rose 0.13% to 1,703.99

US markets closed lower on Friday, 28 March 2008 after a profit warning from J.C. Penney renewed fears about slower consumer spending. The Dow Jones industrial average slipped 86.06 points, or 0.70%, to 12,216.40. The S&P 500 index was down 10.54 points, or 0.80%, to 1,315.22, and the Nasdaq Composite index declined 19.65 points, or 0.86%, to 2,261.18.

Morning Notes - March 31 2008

Morning Notes - March 31 2008

Ultratech Cement

Ultratech Cement

Stocks to pick - March 31 2008

IVRCL Infrastructures
CMP:Rs 406

Lehman Brothers initiates coverage of IVRCL Infrastructures & Projects with an ‘overweight’ rating and a March ’09 target price of Rs 593, implying 72% potential upside from current levels. Lehman’s March ’09 value for the base construction business is Rs 399, which is based on a P/E multiple of 17x FY09E earnings. IVRCL is likely to benefit from huge investments planned in the infrastructure sector. The total order inflows over FY08E-FY10E are expected to be around Rs 25,900 crore, compared with Rs 11,300 crore worth of orders received over the past three years. Lehman estimates a strong 40% earnings CAGR over FY07-FY10, on the back of expansion in core EBITDA margins from 10% in FY07 to 11.1% in FY10E. It expects that IVR Prime, which has around 85 million sq ft under development, will remain a key contributor to IVRCL’s value.

Reliance industries
CMP:Rs 2,347.55

CLSA is upgrading FY08 EPS estimates for Reliance Industries (RIL) by 6% to build in stronger-than-expected refining margins in the fourth quarter. But it is downgrading estimates for FY09-10CL by 5% each. The downgrade in FY09 is led by lower KG-oil output assumptions and KGgas commencing in October ’08 (July ’08 earlier). Similarly, the downgrade in FY10 is led by lower peak oil output at 40 kbpd (50 kbpd earlier), lower associated gas production and lower savings for its refinery from natural gas substitution ($1.2/bbl from $1.5/bbl earlier). The target price continues to build in Rs 653/share ($22.5 billion) in E&P upside, implying that RIL will need to discover 6.8 billion barrels of oil equivalent (boe) of additional recoverable resources in the near term. So, CLSA values RIL on 10.4 billion boe of recoverable resources — similar to 10 billion boe target envisaged by chairman Mukesh Ambani in the previous shareholders’ communication. This remains a stiff task; CLSA continues to view new discoveries as justifying, rather than adding to this valuation estimate.

CMP:Rs 442

ABN Amro retains its ‘hold’ rating on Gail with a target price of Rs 400. Thejump in valuation is due to a 50-63% upgrade in ABN Amro’s earningsforecast, following a revision in crude oil prices. Gail plans to raise itspipeline capacity from 150 mmscmd to 278 mmscmd by ’09 (capexRs 8,500 crore), and to 326 mmscmd by ’11 (additional capex Rs 10,300crore), which can lead to a jump in pipeline revenues.

But there is no visibilityon additional gas supplies to justify this expansion. In line with therecent experience of the Dahej-Uran and Dabhol-Panvel pipelines, ABNAmro has assumed the new pipelines will come in phases and the actualcapex over FY08-12 will be well below Gail’s current estimates. Absenceof significant earnings growth over FY08-10F and lack of visibility ongrowth thereafter from new pipelines may cap valuations. ABN Amrovalues Gail’s core business at 6x FY09F EV/EBITDA (Rs 306/share) andthe balance (Rs 94/share) will come from cash and investments.

CMP:Rs 398

Morgan Stanley retains ‘overweight’ rating on Gammon India and reducesits target price to Rs 461, implying 20% upside.

The target price isbased on sum of the parts and factors in the core construction business (Rs246/share) based on residual income model, Gammon InfrastructureProjects’ (GIPL’s) share value (Rs 202/share) based on IPO price, andGammon’s investment in Sadbhav Engineering (Rs 14/share). MorganStanley has reduced its PAT estimates for FY08E and FY09E by 27-30% asit takes into account the higher marginal tax rate of 34%, instead of the reducedtax rate that was used by Gammon.

While the GIPL issue closed atRs 167/share, the listing price of the stock may be an important driver.GIPL has a portfolio of 15 assets (six roads, six power plants and threeports), excluding one port in Gujarat where a GIPL-led consortium is thehighest bidder. With the majority of roads in its order book, Gammon willcontinue to lag its peers in terms of margins and net income growth,though it may continue to deliver 25% earnings CAGR over FY08-10E.But the impending listing of GIPL creates a value-unlocking opportunity.

RESEARCH:Indiabulls Financials
CMP:Rs 263

Given the recent correction in HPCL’s share price, Indiabulls upgrades its rating on the stock to ‘buy’. For the quarter ended December ’07, HPCL’s net sales rose 22.4% y-o-y to Rs 27,120 crore led by sales volume of 6.43 mmt. The government’s issuance of oil bonds worth Rs 1,900 crore aided the increase in HPCL’s net sales. In February ’08, the government hiked prices of petrol and diesel by Rs 2 and Re 1 per litre, respectively.

Talks are on to raise the proportion of oil bonds issued to oil marketing companies from 42.7% of retail losses to 57%. If the new formula is approved, oil companies’ burden will reduce to only 10%, while 57% will be borne by the government, and 33% by upstream companies. HPCL’s outlook seems promising, but soaring global crude oil prices remain a risk. At the current price, the stock trades at a forward P/E of 6x for FY08E and 5.1x for FY09E. Historically, the company has traded at an average P/E of 6.5.

RESEARCH:Standard chartered - STCI
CMP:Rs 175

Standard chartered - STCI recommends a ‘buy’ on Hindalco Industries with a target price of Rs 192 and 24% upside to its current level. Hindalco’s primary aluminium business is likely to be a cash-generator as the company expects to report a revenue CAGR of 13% over the next two years till FY10E on the back of higher London Metal Exchange (LME) prices. Transformation of China into a net importer of metal in ’10 will help to maintain high aluminium prices. Hindalco has lined up a capex of Rs 30,000 crore to be incurred over the next five years, which will triple its primary aluminium capacity to 1.5 million tonnes (mt), alumina capacity to 6 mt and power plant capacity to 3,437.2 mw.

This will help realign its upstream and downstream operations in the Asian market, as it will meet 30% of Novelis’ current production of 3.1 mt. Hindalco (standalone) currently trades at a P/E of 6.6x and 5.5x its FY09E EPS of Rs 23.4 per share and FY10E EPS of Rs 28.1 per share, respectively.

Pre Market Outlook - March 31 2008

The BSE Sensex ended the day with a huge gain of 355.73 points, or 2.22%, at 16,371.29; while the broad-based NSE Nifty closed at 4942.00, up 111.75, or 2.31% (Friday).

Broker`s Outlook
Alex Mathew Head of Research, Geojit Financial Services said, `` Nifty closed above 4741 consecutively for the last 4 days. Short covering above 4909 has given a trigger to the bulls to pull up the Nifty towards 5091 in the short run.

He also added, ``Higher PC ratio and falling volatility are supportive elements to bulls. Fresh buying is also visible ahead of quarterly numbers. We had seen massive buying in Infosys along with Wipro and TCS. Infosys is coming out with the quarterly numbers on Apr. 15, 2008. Market enthusiasm may remain for another couple of days.``

Asian markets started the week on a negative note. The market declined in the early session of trade on Monday (Mar. 31, 2008) on speculation that U.S. consumer spending is declining and after a newspaper reported that UBS AG will need more capital, raising concern that credit market losses will widen.

Japanese benchmark index Nikkei declined 192.64 points, or 1.50%, to trade at 12,627.83. Hong Kong`s index Hang Seng lost 313.03 points, or 1.34%, to trade at 22,972.92. South Korea`s KOSPI declined 3.62 points, or 0.21%, to trade at 1,698.21.

US Stocks declined on Friday following a report that showed personal spending at its weakest growth in 17 months and a profit warning from J.C. Penney Co.

The Dow Jones industrial average fell by 0.70%, to 12216. NASDAQ composite index fell by 0.87%, to 2261.

Oil prices dropped on Friday (March 28) as fears of a major disruption of Iraqi crude exports vanished after the restart of a crude pipeline system in Iraq. Light sweet crude for May delivery fell USD 1.96 to settle at USD 105.62 a barrel Friday on the New York Mercantile Exchange (NYMEX).

April gasoline futures rose 0.07 cent to settle at USD 2.717 a gallon. The retail gas prices rose 0.8 cent overnight, to USD 3.275 a gallon. April heating oil futures fell 4.33 cents to settle at USD 3.105 a gallon at the NYMEX.


Market may move up on local funds boost

The market may open higher today, 31 March 2008 extending its rally on Friday, 28 March 2008. Also year-end net asset value (NAV) boosting exercise from local mutual funds may boost the market. Asian markets were trading mixed today, 31 March 2008 while US markets closed lower on Friday, 28 March 2008.

Marketmen are keenly awaiting Q4 and full year March 2008 results from Indian corporates. Robust corporate advance tax payments in Q4 March 2008 indicate that corporate profit growth will be strong in the quarter. Advance tax figures showed banks, hospitality and software firms are doing better than sectors like automobiles and cement.

However, the sharp rise in inflation has been a cause of concern, which has now risen above the Reserve Bank of India’s caution limit of 5%. India's wholesale price index surged to 13-month to 6.68% in the 12 months to 15 March 2008, surging from the previous week's rise of 5.92%, government data showed on Friday, 28 March 2008.

Asian markets were trading mixed today, 31 March 2008. Hang Seng (down 1.12% at 23,025.72), Japan's Nikkei (down 1.50% at 12,627.83), Taiwan's Taiwan Weighted (down 1.19% at 8,520.84) declined. However, Singapore's Straits Times (up 0.15% at 3,036.47) and South Korea's Seoul Composite (up 0.03% to 1,700.85) rose.

US markets closed lower on Friday, 28 March 2008 after a profit warning from J.C. Penney renewed fears about slower consumer spending. The Dow Jones industrial average slipped 86.06 points, or 0.70%, to 12,216.40. The S&P 500 index was down 10.54 points, or 0.80%, to 1,315.22, and the Nasdaq Composite index declined 19.65 points, or 0.86%, to 2,261.18.

Back home, the 30-share BSE Sensex advanced 355.73 points or 2.22% at 16,371.29 on Friday, 28 March 2008. The broader CNX S&P Nifty was up 111.75 points or 2.31% at 4942 on that day.

The Sensex has now gained 1561.8 points or 10.54% from a recent low of 14809.49 on 17 March 2008.

The Sensex surged 1,376.46 points or 9.18% to 16,371.29 in the week ended Friday, 28 March 2008 on buying by foreign institutional investors and local funds. The S&P CNX Nifty rose 368.05 points or 8.04% to 4,942 in the week.

As per provisional data, foreign institutional investors (FIIs) purchased sold worth Rs 401.95 crore on Friday, 28 March 2008. Domestic institutional investors (DIIs) were net buyers of shares worth Rs 729.50 crore on that day.

FIIs were net sellers of Rs 132.21 crore in the futures & options segment on Friday, 28 March 2008. They were net sellers of index futures to the tune of Rs 366.53 crore and bought index options worth Rs 406.38 crore. They were net sellers of stock futures to the tune of Rs 184.53 crore and bought stock options worth Rs 12.47 crore.

Daily Call - March 31 2008

Daily Call - March 31 2008

Morning Call - March 31 2008

Market Grape Wine :

In House :

Nifty at a supp of 4870 and 4800 with resistance at 4990 and 5070 levels.

Cash : Buy Cen Tex above 747 TGT 760 with S /L 740.

Buy Corp Bank above 291 TGT 300 with S/L 283.

Future : Buy Punjlloyd above 337 TGT 350 with S/L 331.

Buy Neyvelilig above 126 TGT 135 S/L 121.

Out House :

Markets at a support of 15786 & 16016 and resistance at 16456 & 16678 levels .

Buy : RelCap & RPL at dips

Buy : RIL

Buy : HDIL & Coreproject

Buy : Kotak & IciciBank


Buy : Ibullreal & Ibull

Buy : SBIN

Dark Horse : Aban , HDFC , Ibullreal , RPL ,Yesbank , RIL , LT , HDIL & Coreproject

US Markets end mixed

Financial sector once again dictates momentum in the market and turns out to be the worst performing sector

US Market ended mixed for the week that ended on Friday, 28 March, 2008. Barring Monday, 24 March, 2008, the major indices closed lower on all the other days of the week. Nasdaq was the only major index that managed to eke out a marginal gain for the week. Or else, Dow and S&P 500 – both posted losses. Financial sector ruled the major part of the momentum of the week’s trading. Ultimately, it turned out to be the worst performing sector of this busy week.

The Dow Jones Industrial Average lost 145 points for the week. Tech - heavy Nasdaq gained 3 points. S&P 500 lost 14.3 points.

On Monday, 24 March, Bear Sterns once again brought back a smile on US Market’s face after JP Morgan Chase lifted its offer to buy Bear Sterns at $10/share from its previous $2/share. This Helped Bear Sterns stock soar by more than 85% today and also gave the financial sector an overall good boost.

Also helping to set things on a positive mode on that day was the existing home sales report for February, which showed a surprising 2.9% increase from January levels - the first monthly increase in a year. After being up by almost 214 points at open, the Dow Jones industrial Average ended the day with a gain of 184 points.

Though up and down since the opening bell, the major stock indices closed a little higher on Tuesday, 25 March after the Conference Board reported U.S. consumers' confidence falling in March. Monsanto came up with strong forecast and that also led to some positive market sentiments. Nasdaq finished higher by 14.3 points and S&P 500 finished higher by 3.1 points.

But on the negative side, the S&P/Case-Shiller Home Price Index, which measures prices in 20 U.S. metropolitan areas, declined 10.7% on a y-o-y basis, the largest drop on record since the measurement began in 2001.

For the rest of the week, host of familiar issues regarding the financial sector, rising commodity prices, weak economic data and speculation that a large private equity deal involving Clear Channel Communications and general earnings concerns took indices lower.

The financial sector was badly hammered after Oppenheimer cut earnings estimates for Bank of America, Citigroup, JP Morgan Chase and Wachovia. Also, Oppenheimer cut earnings estimates for UBS and Merrill Lynch. On the other hand, Lehman Brothers cut its estimates on several banks like Citigroup, Bank of America and Wells Fargo.

Among major economic reports, new home sales fell to a 13 year low in February and there was a 1.7% drop in durable good order in USA for February. Initial jobless claims for last week fell to 366,000 from 375,000, which was slightly better than the expected. Separately, final fourth quarter GDP was left unchanged at 0.6%.

Oracle reported a slower-than-forecast 21% revenue rise for the third quarter, with profit increasing 30%. The company said on its call that customers got a little more cautious at the end of its quarter.

Ultimately on Friday, 28 March, 2008, indices once again ended in the red after retailer JC penny reduced its first quarter guidance which ends in April.

With trading on Monday, 31 March, the first quarter will come to an end and the US stock market is set for its largest quarterly decline since 2002.

Grey Market Premiums - Titagarh, Kiri, Gammon

Gammon Infrastructure 167 8 to 10

Sita Shree Food Products 30 5 to 7

Titagarh Wagons Ltd. 540 to 610 25 to 30

Kiri Dyes & Chemicals 125 to 150 10 to 12

Pre Market Watch - March 31 2008

The Indian Market is likely to have a negative opening today as the cues from the global markets are not in favor. On Friday, The Indian market made a smart turnaround after the mid session to close with handsome gains on the back of heavy buying across all the sectors. Tracking the favoring cues from the Asian market, the domestic market opened on a firm note but lost the grip towards the mid session on the back of weak inflation data that grew to its 13 month high of 6.68% in the week ended March 15 from the previous week rise of 5.92%. But the market gathered the momentum after the mid session to recover from the fall and kept on marching forward till the final closing of the session. From, the sectoral front, all the sectoral indices closed in green while the metal, capital goods and realty index saw more buying by the investors. The BSE Sensex closed higher by 355.73 points at 16,371.29 and NSE Nifty closed up by 111.75 points at 4,942. We expect that the market lose some grounds during the trading session.

On Friday, the US market closed in negative. The Dow Jones Industrial Average (DJIA) closed lower by 86.06 points at 12,216.40 along with S&P 500 (SPX) index fell by 10.54 points to close at 1,315.22 and NASDAQ Composite (RIXF) dropped by 19.65 points to close at 2,261.18.

The Indian ADRS closed mixed. In technology sector, Patni Computers grew by 0.81% along with Wipro by 0.80% and Satyam by 0.35%. In banking sector, ICICI bank advanced by (0.28%) while HDFC bank dropped by (1.03%). In telecommunication sector, Tata Communication increased by 1.18% while MTNL slipped by (0.20%). Tata Motors grew by (1.02%).

Today the major stock markets in Asia are trading mixed. Hang Seng is trading lower by 260.23 points at 23,025.72 along with Japan’s Nikkei trading down by 192.64 points at 12,627.83 and Taiwan Weighted trading at 8,520.84 down by 102.64 points.

The FIIs on Friday stood as net buyer in equity while the net seller in debt. The gross equity purchased was Rs4,861.10 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs4,430.40 Crore and gross debt sold stood at Rs76.10 Crore. Therefore, the net investment of equity reported was Rs430.70 Crore and net debt was (Rs76.10 Crore).

Today, Nifty has support at 4,821 and resistance at 4,997 and BSE Sensex has support at 15,923 and resistance at 16,618.

Global markets to dictate trend

The market is likely witness volatility during intra-day trades and may succumb to selling pressure amid overnight weakness in the US indices and the bearish looking Asian indices in the ongoing trades. Among the key domestic indices, the Nifty could get support at 4860 and a slip below this level may see it dip further to 4800, while on the upside, the index has a key resistance at 5050. The Sensex has a likely support at 16150 and could test higher levels of 16480.

Among the indices the US indices posted loss on Friday and the Asian indices were weak in early session. While the Dow Jones declined 86 points to 12216, the Nasdaq moved down 20 points to close at 2261.

Except HDFC Bank, Infosys and MTNL, rest of the Indian floats had a strong outing on the US bourses. Rediff was the leading gainer and rose over 4% while Dr Reddy, Tata Motors, VSNL, Satyam, Patni Computers, Wipro and ICICI Bank gained over 0.30-2% each. However, HDFC Bank, Infosys and MTNL were marginally down.

Crude oil prices moved down, with the Nymex light crude oil for May 08 delivery tumbled by $1.96 to close at $105.65 a barrel. In the commodity space, the Comex gold for June series lost $17.50 to settle at $936.50 respectively.

Kotak Mahindra, Vishal Retail, Koutons Retail, GE Shipping, Varun

Kotak Mahindra, Vishal Retail, Koutons Retail, GE Shipping, Varun

Weekend Industry Trends - March 31 2008

Weekend Industry Trends - March 31 2008

Weekly Technicals - March 31 2008

Weekly Technicals - March 31 2008

Market Outlook - March 31 2008

Market Outlook - March 31 2008

Weekly Report - March 31 2008

Weekly Report - March 31 2008

Readers Soundoff - What was your biggest gain in FY08 ?

What was your biggest gain in FY08 ?

Did you actually book profits or were greedy and lost that gain ?

Leave a comment and let us know !

Trading Calls - March 31 2008

Nifty (4942) Sup 4850 Res 5000

Buy Voltas (174) SL 170
Target 182, 185

Buy Suzlon (270) SL 265
Target 280, 283

Buy ITC (207) SL 203
Target 213, 216

Sell Hero Honda (701) SL 707 Target 688, 686

Sell Ranbaxy (439) SL 444
Target 430, 427

Enduring bulls hope to stay afloat!

Endure the present, and watch for better things.

It has been an enduring task to stay afloat in the markets, especially for the last two months. Better things remain a hope. In fact, on Friday, bulls may have powered ahead. That does not hide the fact that inflation is reaching alarming levels. The Government has already announced measures to contain price pressures. More steps are likely to be announced over the next few days. The moot point is whether these measures will be enough to check inflation amid a global rally across various commodities.

The RBI too may take steps to rein in inflationary expectations. Most experts see the central bank keeping rates unchanged and resorting to a CRR hike. It may also allow the rupee to appreciate further to make imports cheaper. One has to see whether the RBI waits till next month's annual policy meeting or makes the anticipated announcements well ahead of it. A tighter monetary policy at a time when the economy is slowing down spells bad news for India Inc. and therefore the stock market. Not long ago, many were betting on a rate cut.

Aside from inflation, the market will also have to brace for the change in the STT regime from Tuesday. The withdrawal of STT benefit will hit traders, jobbers and arbitrageurs hard. This may have an adverse effect on traded volume and push up transaction costs, though past experience shows that the market has adjusted well to such events over time. Then there are the lingering concerns over the state of the US economy and global credit markets. There is no dearth of bad news on this front. This will remain a stumbling block for the bulls.

Today, we expect the market to open on a cautious note after Friday's surprising rally and on mixed global cues. Though indicators from the technical and derivative side are encouraging, weak fundamentals (both locally as well as globally) and erratic behaviour of the FIIs will keep the market on tenterhooks. The upcoming quarterly results will be keenly followed for ascertaining the impact on future earnings growth. Given the year end considerations, mutual funds may do their best to prevent a slide in their counters today.

Asian markets are trading mixed this morning. The Nikkei in Tokyo was down 192 points or 1.5% at 12,627 while the Hang Seng in Hong Kong dropped 290 points or 1.25% at 22,995. The Kospi in Seoul was flat at 1702 and the Straits Times in Singapore added 6 points or 0.2% at 3037.

The Shanghai Composite in China slid 82 points or 2.3% to 3497 and the Taiex in Taiwan shed 95 points or 1.1% to 8528.

US stocks closed lower for a third successive day on Friday, with two of the three major indexes recording weekly losses. A grim outlook from retail major JC Penny and disappointing economic data weighed on the sentiment.

Stocks rose through the early afternoon as investors welcomed a report showing a rise in personal income and tame inflation - as well as falling oil and gold prices. But the advance was short-lived as most of the gains evaporated by the close of trade.

The Dow Jones Industrial Average declined 86.06 points to 12,216.40, off 1.2% from the previous week's close.

Of the blue chip's 30 components, 22 posted losses, with financials including JP Morgan Chase erasing the bulk of earlier gains to close down nearly 0.4%. Other financials on the Dow also fell, with Citigroup easing 4.4% and American Express down 3.8%.

The S&P 500 shed 10.54 points to 1,315.22, down 1.2% from the previous week ago, while the technology-laden Nasdaq Composite index dropped 19.65 points to 2,261.18, rising by just 0.1% from the previous week.

The Dow is down just under 8% in the January-March quarter, the S&P 500 down 10.4% and the Nasdaq down 14.7%. Next week brings a heavy spate of economic news, including readings on manufacturing and construction spending, factory orders and employment.

Personal income in the US rose 0.5% in February, beating economists' forecasts. But spending rose just 0.1%, the smallest rise since September 2006.

On the upside, core PCE, the spending report's inflation component, rose 0.1%, in line with expectations. That left PCE at 2% over the last 12 months, within the 1-2% range at which the Fed is said to be comfortable.

Separately, the Fed announced that it would make an additional $100bn available to cash-deficient banks during the month of April, as part of its ongoing plan to help unfreeze the credit markets.

Another report showed that consumer sentiment fell to 69.5 in March from a previous reading of 70.5 and down from 70.8 in February.

Meanwhile, retailer JC Penney issued a profit warning. The department store operator said first-quarter earnings won't meet forecasts, due to sagging consumer demand amid the economic slowdown. Its shares slumped 7.5%.

Citi Investment Research upgraded Lehman Brothers to "buy" from "hold", saying that the company is attractively valued after the recent selloff and is in good shape in a tough environment. Lehman shares fell around 2.2%.

US light, crude oil for May delivery fell $1.96 to settle at $105.62 a barrel in New York. Oil prices hit a record $111.80 in electronic trading last week.

COMEX gold for April delivery fell $18.20 to settle at $930.60 an ounce. Gold hit an all-time trading high of $1,033.90 an ounce one week ago. The dollar fell versus the euro and the yen.

Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.44% from 3.53% late on Thursday.

In Europe, the pan-European Dow Jones Stoxx 600 index fell 0.6% to 306.68 on Friday but was still more than 3% higher on the week. The UK's FTSE 100 closed down 0.4% at 5,692.90, while the German DAX 30 slipped 0.3% to 6,559.90 and the French CAC-40 dipped 0.5% to 4,695.92.

In the emerging markets, the Bovespa in Brazil gained 0.5% at 60,452 while the IPC index in Mexico gained 0.3% at 30,089. The RTS index in Russia was up by nearly 1% at 2049 and the ISE National 30 index in Turkey was down almost 3% at 49,191.

Bulls may extend gains

Markets posted a smart start to the April series with benchmark Sensex shutting shop gaining over 350 points and Nifty index adding over 100 points. Markets snapped two day losing streak on back of positive cues from the Asian and the European markets

Despite accelerating inflation figures markets surged pass the 16,400 mark in intra-day. Finally, the BSE benchmark Sensex surged 386 points to 16,401 and the Nifty index ended at 4,942 adding over 111 points.

Overall about 2,328 stocks advanced; 374 stocks declined while 38 stocks remained unchanged. Among the 50 Nifty 40 stocks ended in positive territory. On the other hand, 10 stock ended in red.

Era Infra gained by 1% to Rs596 as the company’s venture with KMB Ukrain secured order worth Rs1.48bn. The scrip touched an intra-day high of Rs614 and a low of Rs591 and recorded volumes of over 68,000 shares on BSE.

Ranbaxy Labs was up by half a percent to Rs435. The company said that it would pay final dividend of Rs6 per share. The scrip touched an intra-day high of Rs446 and a low of Rs434 and recorded volumes of over 3,00,000 shares on BSE.

Tata Power gained 3.5% to Rs1211 after media reports stated that it would increase capacity to 12,861MW against 2,474MW by 2013. The scrip touched an intra-day high of Rs1225 and a low of Rs1153 and recorded volumes of over 93,000 shares on BSE.

Aegis Logistics surged by over 7% to Rs204 after the company said that it plans to set up subsidiary in Singapore. The scrip touched an intra-day high of Rs225 and a low of Rs196 and recorded volumes of over 21,000 shares on BSE.

Varun Shipping rallied over 7% to Rs72 after the company acquired India’s largest AHTS vessel. Fitch also rated the company’s bank loan facilities at A+/F1. The scrip touched an intra-day high of Rs77 and a low of Rs69 and recorded volumes of over 1,00,000 shares on BSE.

Jupiter Bioscience surged by over 9% to Rs148 after the company announced that it is acquiring a Manufacturing facility of Merck Life Sciences, Switzerland. Also the Company has concluded a long term business contract with Merck Life Sciences. The scrip touched an intra-day high of Rs150 and a low of Rs138 and recorded volumes of over 1,00,000 shares on BSE.

Reliance Power gained by 1.7% to Rs333 after reports stated that the company would place Rs100bn equipment order for its power plants. The scrip touched an intra-day high of Rs337 and a low of Rs327 and recorded volumes of over 16,00,000 shares on BSE.

MIC Electronic advanced by 4% to Rs700 after the company said that it secured orders from Delhi Metro Rail. The scrip touched an intra-day high of Rs744 and a low of Rs651 and recorded volumes of over 3,000 shares on BSE.

Suryachakra Power was locked at 5% upper circuit to Rs21.75 after the company announced that Lahari Power & Steels Ltd being the wholly owned subsidiary Company of Suryachakra Power, having its 9.8 MW Biomass Power Plant located at Madwa Village, Champa-Janjgir District, Chattisgarh State, started its operations from March 28. The scrip touched an intra-day high of Rs21.75 and a low of Rs21.75 and recorded volumes of over 34,000 shares on BSE.

J.B Chemicals, after being locked at 20% upper circuit in the previous trading session, the scrip further rallied by over 13% to Rs50 after the company announced its plan to buy back shares. The company would consider buyback plan on April 8. The scrip touched an intra-day high of Rs52 and a low of Rs47 and recorded volumes of over 6,00,000 shares on BSE.

Corporate Front Page

Reliance Energy has bagged two contracts worth about Rs12bn for execution of transmission system in the Western region.(Mint)
Tata Power plans to sell stakes in holding companies and assets to help fund its US$6bn capacity expansion plans.(Mint)
Tata Power is evaluating opportunities to make another overseas acquisition of a coal mine.(BS)
Bharat Oman Refineries' IPO is likely to hit the market in the second quarter of the coming fiscal.(BL)
BPCL says it can no longer absorb the losses it suffers on account of having to sell petroleum products at a government-mandated price.(Mint)
IDBI has deferred its earlier decision to cut benchmark PLR by 50 basis points.(BS)
Nagarjuna Fertilisers has completely exited from the inter-state mega power project under construction in Udupi, Karnataka, selling its 26% stake to the Lanco group.(BL)
Marks & Spencer is likely to hold majority stake in Reliance
Retail joint venture. (ET)
Power Grid Corp has signed agreements with World Bank and Asian Development Bank for two loans of US$600mn each for funding projects.(ET)
Ispat Industries to increase its steel capacity to 10 mtpa by 2014.(BS)
Shareholders of Ispat Industries approved the issue of convertible warrants to the tune of Rs5.1bn to the promoters of the company.(BL)
The Netherlands-based Pearle Europe is entering into a 50:50 JV partnership with Reliance Retail to sell optical products.(ET)
The Supreme Court has asked Posco to approach the Orissa government for allotting demarcated mining area for its proposed Rs510bn steel plant.(FE)
Tata Motors’ credit rating has been downgraded following its acquisition of Jaguar and Land Rover by Crisil.(ET)
The DoT has approved the Tata Teleservices–Virgin alliance.(ET)
GSPC has sought about one-tenth of the gas produced from Panna/Mukta and Tapti fields (PMT) for sale to customers in Gujarat.(BS)
Oil marketing companies (IOC, HPCL and BPCL) debt may swell to
Rs700bn in the current fiscal. (ET)
HDFC Bank to move its BPO activity to the semi-urban area by hiring about 2,000 people in next two months.(FE)
Gujarat NRE Coke is planning to invest US$425mn in the next three years to develop its mines.(DNA)
DLF Assets plans to raise more than US$2bn in a private stock sale to buy office properties.(DNA)
DLF will spend US$5bn in the next seven years to build about 125 hotels in the world’s fastest-growing tourist destination.(FE)
Four Soft and Take Solutions, providers of IT products and solutions in the supply chain management (SCM) space to merge.(BS)
Diamond Cables has raised Rs1bn as debt to meet its working capital requirement.(DNA)
Welspun Gujarat secured an order for supply of spiral pipes worth Rs10.8bn in Northern Africa.(BS)
IndianOil is mulling transportation of crude through pipeline from the upcoming SPM at Paradip in Orissa.(BL)
Bata India recorded a PAT of Rs0.5bn, up from the Rs0.4bn last year, on a turnover of Rs8.9bn for the year ended December,2007.(BL)
GSPC defers IPO due to market uncertainties, to come out with the IPO of Rs40-60bn before Diwali.(BL)
Electrotherm to raise Rs3bn via QIP route.(BL)
Morgan Stanley has increased its stake in S Kumars to over 7% for Rs1bn.(DNA)
KMB-ERA JV, of which Era Infra Engineering Ltd is a partner, has secured a contract from Delhi Metro valued at Rs1.5bn.(BL)
Lok Capital LLC has raised US$22mn from institutional investors to fund micro-finance institutions in India.(Mint)
Finance Ministry examining Essar Power’s $2 billion FDI proposal.(Mint)
Hinduja Group in talks with Europe’s third-largest auto component manufacturer Valeo SA to buy a controlling stake in the companyat around US$1.5bn.(BS)
Bhushan Steel to give free land to land-losers as a part of its rehabilitation and resettlement (R&R) package.(BS)
Havells will invest Rs4bn for increasing its capacities in India. (TOI)
HUL has shelved plans to sell its 28acre land in Brookefields,
Bangalore. (ET)
JetLite will soon start air services between Delhi and Islamabad. (ET)
Ispat Industries is all set to acquire in a cluster of coal and iron ore mines in Colombia, Mozambique and
Dena Bank will write-off Rs2bn under the loan waiver packaged announced in the Union budget. (TOI)

Today's Pick - Aptech

We recommend a buy in Aptech from a short-term perspective. The charts of Aptech show that it was on a medium-term downtrend from its December 2007 high of Rs 448 till its March 2008 low of Rs 155. However, recently, the stock took support at Rs 155 that also coincides with the long-term moving average line and bounced from there, penetrating the medium-term down trendline. Later on, the stock moved up crossing over the 21- and 50-day moving averages.

We note that there is an increase in volume for the past four trading sessions. The daily momentum indicator is on the verge of entering the bullish zone and the weekly momentum indicator has entered the neutral region from the bearish zone. We also see that the daily moving average convergence divergence is steadily rising towards the positive region. We are bullish on the stock for the short-term. We expect the stock’s up move to continue to our target level of Rs 270 in the short-term. Investors with a short-term perspective can buy the stock with stop-loss at Rs 206.

Precious metals end lower

Gold and silver prices end lower on the last day of the week though gains on a weekly basis

Bullion metals ended lower on Friday, 28 March, 2008 as other commodities too declined across the board. Dollar rebounded on Friday and thus precious metals ended lower. A lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies and vice versa. Silver prices fell for the day.

Comex Gold for June delivery fell $17.20 (1.8%) to close at $936.8 ounce on the New York Mercantile Exchange. On Monday, 17 March, prices skyrocketed to a high of $1,034/ounce. For the week, gold prices gained 1.1%.

This year, gold prices have gained 14.1% till date. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices have succumbed and fell by 3%.

Comex Silver futures for May delivery fell 60 cents (3.2%) to $17.955 an ounce. Silver has gained 28% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%. In February, it gained another 15%. For March, it ended lower by 1%. For the week, silver gained 6%.

In the energy market on Friday, oil fell for the first time in three sessions, touching $105.22 a barrel after supply concerns continued after a pipeline explosion in southern Iraq cut supplies to the country's main export terminal earlier in the week.

At the MCX, gold prices for April delivery closed lower by Rs 347 (2.8%) at Rs 11,987 per 10 grams. Prices rose to a high of Rs 12,340 per 10 grams and fell to a low of Rs 11,907 per 10 grams during the day’s trading.

At the MCX, silver prices for May delivery closed Rs 1,009 (4.2%) lower at Rs 22,939/Kg. Prices opened at Rs 23,841/kg and fell to a low of Rs 22,680/Kg during the day’s trading.

Crude falls below $106

Prices close below $106 as consumer spending remains flat in February and dollar rebounds

Crude prices fell substantially lower on Friday, 28 March, 2008 as fresh concerns about the health of the US economy cropped up. Ongoing supply tensions from Iraq and rebounding dollar also weighed on the crude prices for the day. In the previous three sessions prior to Friday, crude had gained more than $7.

Crude-oil futures for light sweet crude for May delivery closed at $105.62/barrel (lower by $1.96/barrel or 1.8%) on the New York Mercantile Exchange. Crude prices are 65% higher on a yearly basis.

The crude ended the week lower by more 3%. Also helping to push oil higher this week was the weak dollar. The dollar index, which tracks the value of the greenback against a basket of other currencies, has dropped 1.4% this week.

The Commerce Department reported on Friday that U.S. consumer spending was flat in February after adjusting for inflation, the third consecutive month of weak consumer demand.

Earlier in the week, it was reported that a pipeline explosion took place in southern Iraq cutting supplies to the country's main export terminal. Also, clashes between Iraqi forces and militants were raging.

Natural gas advanced as speculators who had sold contracts in bad bets on falling prices bought the positions back to protect gains or limit losses. Natural gas for May delivery rose 11.3 cents (1.2%) to settle at $9.80 per million British thermal units.

Against this backdrop, May reformulated gasoline fell slightly to $2.7135 a gallon, while May heating oil dropped 4.99 cents to $2.9876 a gallon.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.

At the MCX, crude oil for May delivery closed at Rs 4,171/barrel, lower by Rs 133 (3.1%) against previous day’s close. Natural gas for April delivery closed at Rs 387.4/mmtbu, lower by Rs 1.9/mmtbu (0.5%)

Sunday, March 30, 2008

Moving towards 200 day DMA

The markets staged a relief rally as expected and now look on course to test the 200-DMA (Daily Moving Average).

The Nifty surged by 8 per cent or 368 points to 4,942. It touched a low of 4,540 and a high of 4,971 during the week.

The Nifty closed above its short-term 20-DMA, which was 4,845. The 50-DMA and 200-DMA are 5,090 and 5,099 respectively.

If the index closes above the 200-DMA for three consecutive sessions, one may a see further upmove.

The Nifty may face resistance around 5,105-5,155-5,210 this week, while it has a support around 4,775-4,725-4,675.

The Sensex moved in a range of 1,396 points. From a low of 15,056, the index rallied to a high of 16,452 and finally ended with gains of 9.2 per cent or 1,376 points at 16,371.

The index is now close to the upside target zone of 16,650-17,200 mentioned last week. It may face resistance around 16,900-17,070-17,235 and support around 15,835-15,675-15,505 this week.

A move beyond 17,200 would be crucial for the Sensex to sustain the upmove.

Via Business Standard

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Pyramid Saimira ties up with Spize TV

Pyramid Saimira Entertainment, a subsidiary of Pyramid Saimira Theatre, has tied up with the UK-based Spize TV, a direct-to-home (DTH) platform to offer the complete suite of the ARY Network channels (ARY Digital, ARY One World, QTV, and The Musik) and also the two B4U Network channels (B4U Movies & B4U Music) in the UK.

Pyramid Saimira Entertainment will provide content on Spize TV, a pan-European direct-to-home (DTH) TV platform offering Asian and niche content to viewers in Europe.

While Spize TV’s North bouquet has have channels in Urdu, Hindi, Punjabi, Bangla and Gujarati. The South bouquet has channels in Tamil, Telugu, Malayalam, Kannada, and Sinhalese. Since the soft launch of the bouquet, the channels are available, and the formal commercial launch for viewers will be in April 2008.

SpizeTV is a pan-European direct-to-home TV platform offering Asian and niche content to viewers in Europe. Spize TV is available on the EuroBird-9 (EB9) satellite, which allows viewers to benefit from the 500+ free-to-air channels on the HotBird satellite. Ajoy Khandheria, CEO of SpizeTV (Managing Director, ORG Informatics Ltd.) says “SpizeTV is a very exciting project for our Group to offer niche content on a pan-European basis and are proud to work with Eutelsat to create the EB-9 as a new hot location for the region, and with Pyramid Saimira to capitalize on their extensive content expertise.”

Salman Iqbal, MD of ARY Group says “we are proud to be the anchor tenant on the SpizeTV platform to progress the European distribution of ARY.”

Via ET

Coromandel Fertilisers

The strong uptrend in farm product prices, mounting pressure to expand farm output and yield and expanding government outlays on agriculture, are all likely to stoke demand for agri-inputs such as fertilisers and crop protection products over the next few years.

The policy environment for domestic fertiliser makers is also likely to turn more conducive in this backdrop. However, the stock may deliver only over a 2-3 year time frame, as the company’s cost and sourcing advantages may pay off only over the medium term. Near-term financials, especially for the March quarter, may be muted as one of the units had temporarily suspended production during this period.

Coromandel Fertilisers, one of India’s leading makers of phosphatic and complex fertilisers, has the scale and distribution reach to capitalise on this trend. The company has managed an annualised growth of 15 per cent in its sales and 32 per cent in net profit over the past five years helped by capex and acquisitions, despite limited pricing power and an unfriendly policy environment. The stock, trading at about eight times its estimated earnings for the current year, at its market price of Rs 117, appears to be a value ‘buy’ in this context.

Starting out as a South-based producer of phosphatic and complex fertilisers and pesticides, Coromandel Fertilisers has acquired significant scale and a pan-India presence through a series of acquisitions. The company’s acquisition of EID Parry’s farm inputs division, phosphate producer — Godavari Fertilisers — and pesticide maker — Ficom Organics — have added manufacturing facilities that are well spread-out to reduce logistics costs and an extensive distribution network for agri-inputs. These have been leveraged to market a wide range of farm inputs spanning fertilisers, crop protection products and micro-nutrients across India.
Scale and diversity

In the fertiliser business, the company is India’s second largest phosphate producers, controlling capacities of close to 2.5 million tonnes; this is proposed to be enhanced to 3.3 million tonnes by 2009. Economies of scale allow considerable flexibility and diversity in CFL’s product mix between DAP and various grades of NPK complex fertilisers (12:32:16, 20:20, 10:26:26 and 28:28). CFL’s earnings growth in fertilisers is determined mainly by volumes and product mix changes. Current selling prices are well below production costs, with producers reimbursed for the shortfall through a “concession” (subsidy) determined on the basis of “normative” conversion costs and prices of imported inputs.
Strategic sourcing

Though this subsidy regime allows eventual pass-through of major input costs (significant when international prices of sulphur and phosphoric acid have risen 9 and 3 times respectively in a year), late recoveries and under recoveries do tend to exert pressure on the liquidity of domestic manufacturers. CFL, on its part, has made several strategic moves over the past five years to optimise its cost structure. It has secured sourcing of key raw materials such as rock phosphate by acquiring stakes in large global suppliers such as Foskor.

A JV to produce Phosphoric acid has also been flagged off with Groupe Chimique Tunisien. CFL has also acquired, turned around and expanded capacities at Godavari Fertilisers to attain considerable scale; it has also worked with a flexible product mix to take best advantage of the subsidy regime. The company’s cost structure is now among the lowest in the phosphatic/complexes space, which makes it well-placed to compete with imported fertilisers.
Favourable twist to policy

Domestic demand for complex fertilisers has been strong over the past three years, on the back of stable prices (fixed by the government) and expanding irrigated area, with the Southern market registering the strongest demand growth. Supplies in the domestic market have been extremely tight as investments in new capacity have not kept pace with demand. Bridging the deficit through imports has become an expensive proposition with global fertiliser prices soaring more than two-fold in the past year.

In this backdrop, the policy on the subsidy and pricing of phosphatic and complex fertilisers is likely to turn more favourable in the years ahead. Implementation of the Abhijit Sen committee recommendations (which proposes pricing and subsidy based on landed cost of imported DAP ) could translate into better margins for low cost, integrated producers such as CFL; it will also make the policy regime more stable and transparent. CFL will also benefit from any transition to nutrient-based subsidies, as this will ensure better offtake of phosphatic fertilisers, relative to urea.

The recent spiral in global fertiliser prices has ensured that landed costs of imported products are well above production costs for efficient domestic producers such as CFL, allowing them a substantial margin of comfort. CFL’s other products offerings within agri-inputs — crop protection and micro nutrients — also offer growth potential. Low-cost manufacture makes CFL a supplier of choice for generic agrochemicals, while micro-nutrients offer significant scope for scaling up given the nascent Indian market.

Indo Tech Transformers

Indo Tech Transformers is one of the small-cap stocks that witnessed steep declines during the recent sell-off by foreign institutional investors. With strong fundamentals in place, the correction has provided an attractive entry point into the stock.

However, given the volatility seen in the broad markets, investors can consider buying in small lots and use price dips, if any, to accumulate the stock.

Invest with a perspective of two-three years. At the current market price of Rs 515, the stock trades at 9.7 times its expected per share earnings for FY-2009 and 12.5 times its present trailing 12 months earnings. Capacity additions that have gone on stream in February 2008 can be expected to reflect fully in revenues from FY-2009.

While the company has enjoyed price-earnings multiple of over 20 in the past, we believe such valuations were driven more by market momentum than fundamentals.

While the company’s business potential is likely to drive healthy growth, investors may have to temper their expectations on the returns front.
Steady demand

Indo Tech Transformers makes a range of power and distribution transformers. The company has fully utilised the proceeds of the IPO (March 2006) towards its plans and has rapidly added capacities. For companies such as Indo Tech, timely expansion moves may be key to capturing orders in a demand-driven market such as the present one. Indo Tech has been doing well on this front with the recent capacity augmentation from 3450 MVA to 7450 MVA.

While the company has not made any significant foray into overseas markets because of capacity constraints, recent capacity additions have opened up opportunities to diversify.

The company has already received orders from the African markets. As these are at present booked in the euro, the risks arising from currency fluctuations may not be as high as with dealing in dollars. Enhanced spending in transmission and distribution segment in these countries has led to higher demand. As a result, Indo Tech’s orders from these countries now carry relatively high profit margins.

While Indo Tech may not significantly ramp up contribution from the export market, the 15 per cent contribution that it hopes to achieve by FY-2009 may be sufficient to strengthen overall profit margins.
SEB dependent

Indo Tech’s order-book of Rs 180 crore is likely to convert into revenues in the next 6-7 months. While state electricity boards (SEBs) of Tamil Nadu and Andhra Pradesh account for about 70 per cent of this, Indo Tech has been expanding its list of corporate clients as a de-risking strategy. Interestingly, the company has managed to recover its receivables more quickly than even bigger players such as Emco, despite having SEBs as its biggest clients.

The company has also managed to enter into price escalation clauses with these SEBs. While it has had a smooth sail dealing with SEBs, the risk of delayed payments arising from the cash-strapped and loss-making SEBs does remains a risk factor.

However, on the positive side, the spending warranted by SEBs would ensure that Indo Tech (being a regular supplier) would secure new as well as replacement orders, thus providing a steady stream of projects.

While the order-book has remained healthy for Indo Tech, inflows in the current quarter (ended March) may see some slowdown associated with the delays in tendering process normally seen towards the financial year-end.
Superior margins

Indo Tech has always enjoyed higher operating profit margins compared to peers. The company’s raw material as a percentage of sales has been lower than peers, indicating better management of sourcing cost.

For the quarter ended December 2007, OPMs surged to 34 per cent from the 25-28 per cent range. While a better client mix could have contributed to this improvement, the company may also have enjoyed the benefits of lower prices of copper in that quarter.

However, even if copper prices remain sluggish (as suggested by forward contracts now, the company may not always be able to retain the cost benefits. Hence, sustainable OPMs of 28-30 per cent appear more realistic.

Tech Mahindra

The steep correction in the price of Tech Mahindra’s shares over the last several months can be traced more to adverse sentiment towards mid-sized IT companies, than to any material change in fundamentals. This offers an opportunity for investors to consider investments in the stock with a two-year perspective.

At Rs 723, the stock trades at 12 times its current earnings and 10 times its FY-09 earnings. This puts valuations on a par with Tier-2 IT players, though the company’s much larger revenue base and net profit margin (20 per cent) is comparable to Tier-1 IT players. Strong business prospects driven by an established relationship with British Telecom offer scope for capital appreciation.

Tech Mahindra broadly caters to three sets of clientele — telecom service providers, telecom equipment manufacturers and independent software vendors. The company is also working with clients on latest Internet technologies to cover newer delivery standards such as WiMAX.

These three segments, along with associated IT and BPO services, cover the entire gamut of IT/network operations for any telecom company. This makes Tech Mahindra a fully integrated player, a model not easily replicable even by Tier-1 software players, providing it with a significant competitive advantage. The other critical aspect is Tech Mahindra’s focus on the European markets, a critical geography for telecom spending. The client base of Tech Mahindra comprises, among others, AT&T, Motorola, Alcatel-Lucent, Convergys, Vodafone, and O2. Tech Mahindra derives 70 per cent of its revenues from European clientele.

Europe is also the biggest telecom market, home to top service providers and equipment makers (such as Ericsson, Alcatel, Nokia-Siemens) and the largest market for value-added services.

Tech Mahindra already works with some of these players. In the Business Support Systems and Operations Support Systems segment (areas where a lion’s share of telecom-software outsourcing happens), Tech Mahindra is among the top ten players in the world.
Business Drivers

Deal wins and strong pipeline: Tech Mahindra has recently won a $350-million, five-year deal with British Telecom Group (BT). This deal is largely for provision of application support and maintenance services and is structured for payment evenly spread over five years, giving sustained revenue visibility in an environment of global uncertainty over IT spends. This being a volume service deal, BT has indicated that a good part of the work is to be carried out offshore, suggesting scope for higher margins. This deal is over and above the $1-billion deal that the company had won from BT in December 2006.

The deal also envisages higher compensation to Tech Mahindra if it betters BT’s standards on certain project metrics. BT has also indicated that there may be more such “multi-hundred million” dollar deals in the offing, which may buoy Tech Mahindra’s prospects.

This apart, AT&T, Tech Mahindra’s second-largest client, has won a chunk of spectrum in the recent auction by the American telecom regulators. This will enable it to enhance its voice and data services delivery and tap new customers.

Other recent deal wins are from mobile virtual network operator (MVNOs), WiMAX providers and select media and entertainment companies. These are spread across West Asia and Europe. These services and geographies are high growth, portending more business for Tech Mahindra.
Operational Metrics

The geographic spread is now expanding with US also contributing 20 per cent of Tech Mahindra’s revenues. Revenue concentration (BT being the top client) has been reducing, with BT’s contribution down from 75 per cent levels earlier to 61 per cent now.

Utilisation levels as of December 2007 stood at 69 per cent, much lower than Tier-1 peers. Tech Mahindra may need to hike this level substantially to generate higher volume-driven growth, especially during turbulent quarters.

Attrition at 21 per cent, higher than Tier-1 players, is a key execution risk. Vendor rationalisation process of top clients may mean that large deals could be sliced into smaller ones, affecting deal size and revenues. In this light, Infosys and TCS, in particular, may offer stiff competition to the company.

Saturday, March 29, 2008

Long Term Recommendations - March 29 2008


Reliance Capital




Weekly Newsletter - March 29 2008

After posting one of the best weekly gains in recent months, the bulls will hope to retain their hold. Markets could see some spikes before the result season gets underway. Despite inflation rising, the markets staged a strong comeback on Friday. Some suspect the gains witnessed in the week, especially on Friday, was more to do with NAV propping by some mutual funds.

Like in recent weeks, pressure at higher levels will continue to keep the markets choppy. Besides the global cues, there are worries on the margin front for institutional investors too. No harm in booking profits if some recently bought stocks have had a good run. But then keep collecting some stocks for the long term too. w

Pay commission recommends liberal hike and Cabinet approves farmers relief

Sixth pay panel recommends liberal pay hikes

The Sixth Pay Commission submitted its report to Finance Minister P. Chidambaram and asked for a substantial hike in salaries for central government employees across the board. The new pay scale will come into effect from January 1, 2006. The report will now be presented to the Union Cabinet for its consideration. The pay panel is set up once a decade to assess civil servant salaries. The pay hike will cost the Government a net Rs79.75bn (US$2bn) in the financial year ending March 31, 2009. Apart from this, the Government will have to make an additional, one-time payment of Rs180.6bn for salary arrears. The commission recommended a salary increase of 77% for the lowest rung of central government workers. It suggested minimum wage of Rs6,660 a month and maximum salary of Rs80,000 a month for government employees. The previous pay commission was set up in April 1994 and submitted its report in January 1997. The subsequent pay increase cost the Government Rs170bn (US$4.2bn) annually. States were forced to match the pay hike, swelling the combined central and state deficit to nearly 10% of GDP. Some economists fear a similar slippage in the fiscal deficit this time around.

Cabinet okays farmers debt relief fund

The Cabinet gave its approval for creation of a Farmers’ Debt Relief Fund with an initial corpus of Rs100bn to be transferred from the Consolidated Fund of India to Public Accounts during the financial year 2007-08. The Cabinet gave its approval for augmentation of the fund required for reimbursing the lending institutions the amount of debt waiver /relief granted by them. Accordingly, the fund will subsequently be enhanced by Rs150bn in FY09, Rs150bn in FY10, Rs120bn in FY11 and Rs83.14bn in FY12. A scheme of debt waiver for farmers was announced in the Budget 2008-09. The scheme is aimed at mitigating the hardships being faced by the farmers in general and small and marginal farmers in particular. Upon being granted, debt waiver or signing an agreement for debt relief under the One Time Settlement (OTS), farmers would be entitled to fresh agricultural loans from banks in accordance with normal rules. The implementation of the debt waiver and debt relief scheme will be completed by June 30.

India Strategy - March 29 2008

India Strategy - March 29 2008

Steel Sector Update

Steel Sector Update