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Monday, April 21, 2008

Short selling...bulls hope not to CRRy


Don't cry over anyone who won't cry over you”
The bulls will hope not to cry soon. On Thursday, after markets closed, the RBI announced a hike in CRR. The expectations were always there but the timing caught many by surprise. Starting today investors can start to sell short and borrow and lend securities. Institutional investors not permitted to do intra day trade with shorts. To begin with securities in the Futures & Options (F&O) segment would be eligible for short selling. This is set to bring in more depth in the long run. However, margining of institutional trades in the cash market from today is expected to result in a further dip in volumes. This will have a severe impact on institutional trades.
US markets did well over the weekend. Asian markets too are cheerful this morning. Given the positive global cues, the Indian markets should be able to overcome the CRR hike news. The banking counters may see some weakness initially. ICICI Bank has reportedly hiked rates for auto loans and other banks are expected to follow suit.
FIIs turned net buyers of Rs12.81bn in Index Future and by Rs11.65bn in index options. In Single Stock Futures, they were net buyers of Rs4.43bn. In the cash segment (provisional) , FIIs were net buyer by Rs5.97bn and DIIs were net sellers of Rs598.7mn.
Titagarh Wagons Limited will list on the bourses. The issue price was fixed at Rs540 per equity share for its initial public offering of 23,83,768 equity shares of Rs10 for cash at a price determined through 100% book building process. The issue was subscribed to 6.75 times. The qualified institutional bidder portion was subscribed approximately by 10.37 times, non institutional bidder portion by 2.77 times and retail bidder portion by 0.98 times.
The big ticket results today include Reliance, Satyam, TCS, Axis Bank and United Breweries.
Among the prominent headlines in the media include:
- Israeli investment firm Koor Industries on look out for a 10% stake in Tata Teleservices for US$720mn.
- Marks and Spencer forms retail JV with Reliance Retail
- Patni Computers is scouting for acquisitions in the consultancy space in Europe.
- Promoters of Dabur have sold Dabur Pharma to European firm Fresenius SE for Rs8.8bn.
- 3i Infotech raises Rs5bn debt to fund domestic buys.
- Infosys wins five-year contract from Conseco to provide development and maintenance services.
- Tata Power to enter in to a sourcing agreement with BHEL for all its future power projects.
- L&T may not sell it’s recently hived off ready-mix concrete division in 2008.
- Saffron Group picks up 30% stake in a realty project of Parsvnath Developers in Mumbai for Rs1.9bn.
- SCI likely to consider a bonus issue.
- Polaris to consider share buyback on April 23.
- ONGC has launched Rs63.4bn Mumbai High South redevelopment phase II.
- GMR Energy buys 5% equity stake in mining company Homeland South Africa for US$15mn.
- Abu Dhabi firm plans JV with Tata Group for developing a power plant in India.
- Punj Lloyd eyes Indian Army’s US$1bn contracts for artillery.
- Power Grid plans capital expenditure of Rs80bn in fiscal 2009.

Banks may CRRy
Indian bourses ended with smart gains on Thursday reaching a near six-week high on back of positive cues coming in from the international equity markets and buying momentum in the Realty, Metal and IT stocks. It was the third straight session of gains for the markets. The Realty stocks in particular were in demand also the IT stocks continued to be in momentum led by Infosys.
Among the 30-stocks of Sensex, 7 stocks ended in red and with Hindustan Unilever, L&T, RIL and REL were among the major laggards.
Finally, the BSE benchmark Sensex ended 237 points higher to close at 16,481 and the Nifty index ended 71 points higher to 4,958.
Overall about 2,020 stocks advanced; 711 stocks declined while 47 stocks remained unchanged. Among the 50-Nifty 42 stocks ended in green and 8 stocks ended in red.
Power Grid surged by over 3.5% to Rs102 after the company announced its FY08 results with net profit at Rs14.2bn (up 15.4%) and revenue at Rs47bn (up 15.1%). The company also announced its plans that they would spend Rs550bn in 11th Plan. The scrip touched an intra-day high of Rs104 and a low of Rs99 and recorded volumes of over 38,00,000 shares on BSE.
Hindustan Zinc surged by over 7% Rs591. India's largest producer of the metal announced that it cut zinc prices by 2.1% or by 2,300 rupees to Rs1,04,800 per metric ton, The hike will be effective starting April 17, 2008. The price of lead was left unchanged. The scrip touched an intra-day high of Rs595 and a low of Rs554 and recorded volumes of over 51,000 shares on BSE.
Century Plyboards was marginally up by half a percent to Rs690. The company announced that May 02, 2008 has been fixed as the Record Date for the purpose of split of equity shares of the company from face value of Rs10/- per share to face value of Rs1/- per share. The scrip touched an intra-day high of Rs718 and a low of Rs690 and recorded volumes of over 1,000 shares on BSE.
Hanung Toys surged by over 6% to Rs238 after the company said that the it signed MoU with a Chinese Company to buy latter's soft toy business in China by acquiring 100% stake in the said Company. The scrip touched an intra-day high of Rs244 and a low of Rs224 and recorded volumes of over 54,000 shares on BSE.
Sugar stocks were in momentum after government, scrapped a facility allowing duty-free raw sugar imports against exports at a later date as local stockpiles increased because of higher production. The concession on imports of raw sugar against the so-called advance lice BSE will be withdrawn with immediate effect, reports stated.
Dhampur Sugar surged by over 4% to Rs56, Balrampur Chini advanced by 3.5% to Rs98, Sakhti Sugar gained by 2% to Rs68 and Renuka Sugar added over 5% to Rs113.
GMR Infrastructure gained by 1.5% to Rs152 after the company’s unit acquired 5% of Homeland Mining and also has an option to buy additional 45% in Homeland. The scrip touched an intra-day high of Rs154 and a low of Rs151 and recorded volumes of over 10,00,000 shares on BSE.
UltraTech Cement was up by 0.5% to Rs783. According to reports, the company would setup a greenfield project at Mahuva in Bhavnagar district of Gujarat at an investment of Rs30bn. The scrip touched an intra-day high of Rs794 and a low of Rs773 and recorded volumes of over 12,000 shares on BSE.
M&M raced by over 3% to Rs638 after the company said that it inked 50:50 joint venture with South African international supply chain company, Capespan, through its agri-business initiative. The scrip touched an intra-day high of Rs642 and a low of Rs621 and recorded volumes of over 47,00,000 shares on BSE.
Polaris rallied by over 12% to Rs103 after the Board of Directors of the company announced that it would consider buy back on April 23. The scrip touched an intra-day high of Rs104 and a low of Rs92 and recorded volumes of over 16,00,000 shares on BSE.
On Monday, banks would come under pressure as in a statement, the Reserve Bank of India said, "On a review of current liquidity situation, it is considered desirable to increase the cash reserve ratio (CRR) of the scheduled commercial banks, regional rural banks (RRBs), scheduled state co-operative banks and scheduled primary (urban) co-operative banks by 50 basis points to 8.0% in two stages, effective from specified fortnights: First 25bps to be raised effective from April 26 and second would be effective from May 10.

Corporate News
- L&T Mitsubishi JV may win Rs480bn order from the union power ministry.(ET)
- AV Birla group to set up Rs6bn carbon black unit in Mexico.(BS)
- Coal India invites EOI from global mining firms for development of underground coal mines in seven blocks.(BL)
- Ispat Industries to raise Rs5bn through issue of share warrants to promoters.(BS)
- Shishir Bajaj raises his ownership in Bajaj Hindustan by nearly 5% in FY08.(ET)
- Maruti Suzuki decides to hike prices from first week of the next month.(TOI)
- M&M is in advanced stage of negotiation to acquire Belgium gear-maker VCST for US$475mn.(ET)

- Spanco Tele is close to winning the Common Services Centers contract worth Rs2bn.(BS)
- SAIL has decided not to increase prices for the moment.(BL)
- ADAG promoted Rosa power project is slated to be completed by the beginning of 2010, nine months ahead of schedule. (ET)
- Amtek Auto in talks with Sumitomo Corporation of Japan for a 50:50 JV in precision forgings.(DNA)
- ArcelorMittal has marked US$25bn for India plans. (TOI)
- TVS Motors incurs production and sales loss of Rs1bn due to ongoing litigation with Bajaj Auto over its 125cc motorcycle Flame.(DNA)
- Mahindra Lifespace to invest Rs10bn in four residential projects in NCR and Maharashtra over next three years.(BS)
- Hanung Toys signs a deal to acquire soft toys business of a Chinese firm for an undisclosed amount.(DNA)
- Jet Airways enters into partnership with Global Hotel Alliance. (ET)
- ONGC will invest Rs200bn in its different oil and gas recovery improvement programmes in the current fiscal.(DNA)
- Leela Group to invest Rs20bn over next three years to develop six new properties.(ET)
- Reliance Industries and Ballard Power Systems are in talks for a partnership in India. (DNA)
- Suzlon Energy secures orders for wind farm project in China. (ET)
- American Tower not in contention for Tata Teleservices’ tower arm.(ET)
- Greaves Cotton signs an agreement with Germany based Bomag to manufacture 19MT vibratory soil compactors.(ET)
- Indiabulls Financial forms an alliance with Sogecap, insurance subsidiary of Societe General.(ET)