Monday, June 30, 2008
Home loans and auto financing from public sector State Bank of India would be dearer as the lender has decided to hike interest rates by 50 basis points on all credit linked to Prime Lending Rates.
Speaking at a function here on Monday, State Bank Chairman-cum-Managing Director O P Bhatt said the bank has decided to raise the interest rate by 0.5 percent on all loans such as home loans and auto loans which are linked to PLR.
The revision in PLR came after SBI raised its PLR from 12.25 percent to 12.75 percent last week following Reserve Bank's increasing its key short-term lending rate to banks and the mandatory cash deposits that banks need to keep with the apex bank (CRR) by 0.5 percent each.
Referring to the impact on bank's profit margins, Bhatt he hoped to maintain the net interest margin at 3 percent this fiscal.
SBI had earlier announced to hike interest rate on fixed deposit rates by up to 75 basis points effective from June 30.
State Bank of India in which government has about 60 percent stake is targeting 40 percent growth in non-interest income in 2008-09, compared to 28 percent last fiscal.
The bank had lowered its PLR twice in February to 12.25 percent but decided to raise by 50 basis points last week.
"The net profit of the bank is likely to be affected next quarter though there is not much on first quarter profits ending today," he said.
He also indicated the bank is expected to set aside at least USD 10 billion to provide for depreciation in its treasury portfolio as interest rate rise.
Markets Remain At Par As Crude Oil Settles Above $ 140
Most Asian indices were stuck near break-even point, as investors remained cautious after a string of weak finishes recently and ahead of key economic data from the U.S. later in the week. Energy-related stocks ranked among gainers on high-crude-oil prices, but airline and refining shares extended losses. Concerns about slowing growth in corporate earnings also contributed to weak sentiment.
Japanese stocks continued their downbeat performance, with the benchmark Nikkei 225 Average ending lower for the eighth straight session a day ahead of the Bank of Japan's tankan business sentiment survey. The Nikkei closed down 0.5% to 13,481.38, while the broader Topix index ended little changed at 1,320.10. Looking at the oil prices, Japan's refiners and trading houses surged their May crude oil imports by 16.3% from a year earlier to 20.30 million kiloliters, 4.12 million barrels a day. On the good side, Japan's overall oil product output rose 6.0% on year to 16.99 million kiloliters in May.
On the housing front, Japan's housing starts fell 6.5% in May from a year earlier to 90,804 units. That was the 11th straight month of declines. Housing starts fell 8.7% in April and dropped 15.6% in March. Starts for individual homes in May fell 5.7% to 27,194 units, while those for rental housing slipped 8.6% to 37,733 units. Starts for multiunit dwellings, meanwhile, fell 3.1% to 25,157 units, including condominiums. Adding more concern total construction orders received by Japan's 50 leading domestic contractors fell 25.2% on year to 782.9 billion yen in May following a 8.4% drop in April and a 6.4% gain in March.
Orders from the public sector fell 12.7% to Y83.9 billion. Private-sector orders decreased 23.2% to Y606.4 billion. Overseas construction orders declined 58.9% to Y48.5 billion, the ministry said
China's Shanghai Composite fell 0.5% to 2,736.10, after rising as high as 2,766.80 earlier in the day. In Shenzhen, the All Share index lost 0.3% to 793.13.
The benchmark Hang Seng Index, which fell during six of the previous seven sessions in Hong Kong, registered a gain of 0.3% to 22,102.01, while the Hang Seng China Enterprises Index rose 0.8% to 11,909.75.
Australia's S&P/ASX 200 dropped down by 0.4% to 5,215.30, giving a large part of its gains after touching 5,305.90 earlier in the day. The backward movement in stocks gains importance as a private measure of Australian inflation jumped to new highs in June as households paid more for petrol and rents, keeping upward pressure on interest rates just a day before a central bank policy meeting.
The TD Securities-Melbourne Institute monthly inflation gauge rose 0.5% in June, after a 0.3% increase in May. Annual inflation accelerated to 4.8%, from 4.5 %, the highest in the five-year history of the series.
Elsewhere, South Korea's Kospi fell 0.6% to 1,674.92 and Singapore's Straits Times Index rose 0.1% to 2,959, while Taiwan's weighted index fell 0.3% to 7,523.54.
The August contract for crude-oil futures climbed as much as $1.34 to $141.55 a barrel in electronic trading, after adding 57 cents to $140.21 a barrel on the New York Mercantile Exchange on Friday. The front-month contract had touched a record high of $142.99 a barrel in electronic trading on Friday.
In currency trading, the 105.53 yen in Asia compared with 106.18 yen earlier in the day and 106.17 yen in New York late Friday. The Japanese yen strengthened against the U.S. dollar after Moody's Investors Service upgraded the rating on Japanese government bonds to Aa3 from A1 with a stable outlook. The upgrade was prompted by expectations of continued fiscal restraint and consolidation, coupled with an easing-out of the debilitating effects of deflation," Moody's Senior Vice President Thomas Byrne wrote in a statement.
On Wall Street, the Dow Jones Industrial Average fell 106 points to 11,346 and the Nasdaq Composite dipped 5.7 points to 2,315, while the S&P 500 index fell 4.8 points to 1,278.
Moving towards European markets which moved broadly lower in the final trading session of the quarter, with shares of Swedish telecoms operator TeliaSonera down sharply after France Telecom decided to walk away without making a formal offer.
Among the main European indexes, the French CAC fell 0.2% to 4,387.17 and the German DAX 30 dipped 0.8% at 6,370.62. Meanwhile the U.K. FTSE 100 gained 0.2% at 5,541.60.
Meanwhile on the economic front the day was sounds good either as Euro-zone consumer prices surged in June, hitting a new record high Monday and probably increasing the European Central Bank's hawkish bias ahead of its rate-setting meeting.
The flash estimate of the annual rate of euro-zone inflation was 4.0% in June, up from May's 3.7%, and ahead of expectations of 3.9%.
The inflation rate's latest surge marks a new record high for the measure, which is at its highest level since Euro stat began collecting data in 1997.
Following the news markets tanked further. At 9.35 GMT the U.K's FTSE 100 was at 5,541.60 with a gain of 0.2%. However the French CAC fell further by 0.5% to 4,375.32 while the German DAX 30 tanked by 1.6% at 6,323.33.
Following the regional trend, the Italian producer price growth in May registered its fastest rise since the index began, driven by rising energy and food prices.
On the year, producer prices rose 7.5% in May, up from a 6.3% rise in April. On the month the index rose 1.5%, compared with a 0.4% rise in April. Both increases were the highest ever recorded since the index began in January 2003.
In U.K. mortgage approvals slumped in May, dropping more than a quarter to a fresh record low, while net mortgage lending fell to its weakest level in more than six years last month underlining the troubles in the U.K. housing market.
Mortgage approvals, which were already at a record low of 58,000 in April, fell to 42,000 in May, the lowest number since the series began in 1999. May's drop of 16,000 was the largest monthly decline in mortgage approvals on record.
Looking ahead the day is scheduled to release Canada’s GDP figure followed by Chicago’s PMI index for June. In the late night we will have Tankan survey for large manufacturing index and non-manufacturing index.
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
30-JUN-2008,ALKYLAMINE,Alkyl Amine Chem Ltd,SECURITIES ANALYSIS.I.PVT.LTD,BUY,100000,99.36,-
30-JUN-2008,CERA,Cera Sanitaryware Limited,ALPHA VANIJYA PVT. LTD.,BUY,35000,120.23,-
30-JUN-2008,CERA,Cera Sanitaryware Limited,SHEO KUMAR AGARWAL,BUY,32500,120.35,-
30-JUN-2008,FEDERALBNK,Federal Bank Ltd.,GOLDMAN SACHS INVESTMENT (MAURITIUS) 1 LIMITED A/C SHORT TER,BUY,1428167,185.55,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,BUY,186764,107.81,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,B K SHAH CO KETAN BHAILAL SHAH,BUY,146268,107.58,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,HOTEL LIBRARY CLUB P LTD,BUY,133970,106.52,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,LEGEND COMMODITY & DERIVATIVES PRIVATE LIMITED,BUY,80780,107.28,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,MANIPUT INVESTMENTS PVT LTD,BUY,126491,113.38,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,MANSUKH SECURITIES & FINANCE LTD,BUY,89835,105.20,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,MLB CAPITAL PVT LTD,BUY,68000,105.62,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,NAMAN SECURITIES & FINANCE PVT LTD,BUY,60511,108.72,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,NISSAR BROTHERS,BUY,136607,103.87,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,PRASHANT JAYANTILAL PATEL,BUY,131219,107.29,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,TRANSGLOBAL SECURITIES LTD.,BUY,73030,107.34,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,FIN BRAINS SECURITIES (INDIA) LTD.,BUY,240971,115.82,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,MANISH VRAJLAL SARVAIYA,BUY,174126,125.46,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,MBL & COMPANY LTD.,BUY,290931,119.95,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,MORGAN STANLEY MAURITIUS COMPANY LTD,BUY,170000,119.80,-
30-JUN-2008,MVL,MVL Limited,AMBIT SECURITIES BROKING PVT. LTD.,BUY,428264,88.23,-
30-JUN-2008,MVL,MVL Limited,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,BUY,1189304,90.38,-
30-JUN-2008,MVL,MVL Limited,AVANI AMITBHAI KORADIA,BUY,400000,91.79,-
30-JUN-2008,MVL,MVL Limited,B K SHAH CO KETAN BHAILAL SHAH,BUY,430035,89.85,-
30-JUN-2008,MVL,MVL Limited,DHIRAJ ANOPCHAND MEHTA PROPRIETORRINKI ENTERPRISE,BUY,774538,87.01,-
30-JUN-2008,MVL,MVL Limited,DINDAYAL BIYANI STOCK BROKERS LTD,BUY,311617,85.82,-
30-JUN-2008,MVL,MVL Limited,DINESH MUNJAL,BUY,591759,88.52,-
30-JUN-2008,MVL,MVL Limited,LATIN MANHARLAL SECURITIES PVT. LTD.,BUY,634133,88.11,-
30-JUN-2008,MVL,MVL Limited,MANIPUT INVESTMENTS PVT LTD,BUY,479148,89.07,-
30-JUN-2008,MVL,MVL Limited,R.M. SHARE TRADING PVT LTD,BUY,508129,91.65,-
30-JUN-2008,MVL,MVL Limited,SANJAY BHANWARLAL JAIN,BUY,354979,88.00,-
30-JUN-2008,MVL,MVL Limited,TRANSGLOBAL SECURITIES LTD.,BUY,755976,89.47,-
30-JUN-2008,ORBITCORP,Orbit Corporation Limited,SHREE DHOOT TRADING & AGENCIES LTD,BUY,380000,305.60,-
30-JUN-2008,PUNJABCHEM,Punj Chem & Crop Prot Ltd,FAIRDEAL TRADELINK,BUY,50000,215.00,-
30-JUN-2008,PUNJABCHEM,Punj Chem & Crop Prot Ltd,V AND U CAPLEASE PVT LTD,BUY,5201,211.91,-
30-JUN-2008,PVR,PVR Limited,THE WESTERN INDIA & EXECUTOR CO LTD (IND ADVANTAGE FUND SCHE,BUY,1175000,173.88,-
30-JUN-2008,TUBEINVEST,Tube Investments Ltd,PARRY AGRO INDUSTRIES LTD,BUY,8300000,41.65,-
30-JUN-2008,VISAKAIND,Visaka Industries Ltd.,G VIVEKANAND,BUY,106000,49.44,-
30-JUN-2008,ALKYLAMINE,Alkyl Amine Chem Ltd,SHAH SANJIV DHIRESHBHAI,SELL,68649,99.43,-
30-JUN-2008,CERA,Cera Sanitaryware Limited,MINIVET LIMITED,SELL,35000,120.40,-
30-JUN-2008,CERA,Cera Sanitaryware Limited,NAKUL ARUN JAGJIVAN,SELL,41561,120.04,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,SELL,186253,109.24,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,B K SHAH CO KETAN BHAILAL SHAH,SELL,146243,106.93,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,HOTEL LIBRARY CLUB P LTD,SELL,133970,107.21,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,LEGEND COMMODITY & DERIVATIVES PRIVATE LIMITED,SELL,80780,107.66,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,MANIPUT INVESTMENTS PVT LTD,SELL,126491,114.06,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,MANSUKH SECURITIES & FINANCE LTD,SELL,89835,106.06,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,MLB CAPITAL PVT LTD,SELL,68000,104.32,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,NAMAN SECURITIES & FINANCE PVT LTD,SELL,66082,109.03,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,NISSAR BROTHERS,SELL,136607,104.38,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,PRASHANT JAYANTILAL PATEL,SELL,131219,108.43,-
30-JUN-2008,GMRFER,GMR Ferro Alloys & Indust,TRANSGLOBAL SECURITIES LTD.,SELL,73030,107.36,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,FIN BRAINS SECURITIES (INDIA) LTD.,SELL,240971,115.97,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,MANISH VRAJLAL SARVAIYA,SELL,174126,124.93,-
30-JUN-2008,GWALCHEM,Gwalior Chemical Industri,MBL & COMPANY LTD.,SELL,290931,119.63,-
30-JUN-2008,MVL,MVL Limited,AMBIT SECURITIES BROKING PVT. LTD.,SELL,428264,88.96,-
30-JUN-2008,MVL,MVL Limited,ASTUTE COMMODITIES & DERIVATIVES Pvt Ltd,SELL,1189289,91.40,-
30-JUN-2008,MVL,MVL Limited,AVANI AMITBHAI KORADIA,SELL,400000,89.01,-
30-JUN-2008,MVL,MVL Limited,B K SHAH CO KETAN BHAILAL SHAH,SELL,430039,89.83,-
30-JUN-2008,MVL,MVL Limited,BEYOND SECURITIES PRIVATE LIMITED,SELL,358915,93.03,-
30-JUN-2008,MVL,MVL Limited,DHIRAJ ANOPCHAND MEHTA PROPRIETORRINKI ENTERPRISE,SELL,774538,91.25,-
30-JUN-2008,MVL,MVL Limited,DINDAYAL BIYANI STOCK BROKERS LTD,SELL,311617,87.80,-
30-JUN-2008,MVL,MVL Limited,DINESH MUNJAL,SELL,591759,88.95,-
30-JUN-2008,MVL,MVL Limited,LATIN MANHARLAL SECURITIES PVT. LTD.,SELL,623133,88.25,-
30-JUN-2008,MVL,MVL Limited,MANIPUT INVESTMENTS PVT LTD,SELL,479148,89.27,-
30-JUN-2008,MVL,MVL Limited,R.M. SHARE TRADING PVT LTD,SELL,508129,93.85,-
30-JUN-2008,MVL,MVL Limited,SANJAY BHANWARLAL JAIN,SELL,354979,88.02,-
30-JUN-2008,MVL,MVL Limited,TRANSGLOBAL SECURITIES LTD.,SELL,755963,90.39,-
30-JUN-2008,ORBITCORP,Orbit Corporation Limited,JAROLI VINCOM PVT LTD,SELL,200000,305.60,-
30-JUN-2008,PUNJABCHEM,Punj Chem & Crop Prot Ltd,V AND U CAPLEASE PVT LTD,SELL,50000,215.00,-
30-JUN-2008,PVR,PVR Limited,HSBC M F A/C HSBC ADVANTAGE INDIA FUND,SELL,150000,174.00,-
30-JUN-2008,PVR,PVR Limited,OPPENHEIMER INTERNATIONAL SMALL CO FUND,SELL,1000000,174.00,-
30-JUN-2008,TUBEINVEST,Tube Investments Ltd,CORBEL ESTATE AND INVESTMENTS PVT LTD,SELL,6560397,41.50,-
30-JUN-2008,TUBEINVEST,Tube Investments Ltd,MAHINDRA HOLDINGS LIMITED,SELL,1312103,41.50,-
30-JUN-2008,VISAKAIND,Visaka Industries Ltd.,BNP PARIBAS ARBITRAGE,SELL,100000,49.50,-
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
30/6/2008 506767 ALKYL AMIN C SECURITIES ANALYSIS.I.PVT.LTD B 96000 99.22
30/6/2008 532989 BAFNA PHARMA N D NISSAR B 333493 36.87
30/6/2008 532989 BAFNA PHARMA RAMESH VINAYAK VAZE B 221000 38.76
30/6/2008 532989 BAFNA PHARMA KEDAR RAMESH VAZE B 116499 34.94
30/6/2008 532989 BAFNA PHARMA N D NISSAR S 333493 36.98
30/6/2008 532989 BAFNA PHARMA RAMESH VINAYAK VAZE S 221000 38.03
30/6/2008 532989 BAFNA PHARMA KEDAR RAMESH VAZE S 91503 35.23
30/6/2008 590061 BRUSHMAN IND SECUREX CAPITAL MKT LTD B 75000 121.50
30/6/2008 590061 BRUSHMAN IND BEDI JASDEEP S 130173 121.24
30/6/2008 500469 FEDERAL BANK VINAMARA UNIVERSAL TRADERS PVT LTD B 747222 186.00
30/6/2008 532980 GOKUL REFOIL PACIFIC CORPORATE SERVICES LTD B 168000 204.20
30/6/2008 531025 INCA FINLEAS VHM IMPEX PRIVATE LTD B 87500 118.06
30/6/2008 531025 INCA FINLEAS VISAGAR POLYTEX LIMITED S 87300 118.08
30/6/2008 530885 JAISAL SECUR SRIPATHEE INVESTMENTS PRIVATE LIMITED B 25000 37.24
30/6/2008 523704 MASTEK* MASTEK LIMITED B 502000 390.00
30/6/2008 523704 MASTEK* RELIANCE LONG TERM EQUITY FUND S 500000 390.00
30/6/2008 532991 MVL LIMITED WLD INVESTMENT PVT LTD B 445024 106.11
30/6/2008 532991 MVL LIMITED SPJSTOCK B 1021107 87.50
30/6/2008 532991 MVL LIMITED R M SHARES TRADING PVT LTD B 410345 92.08
30/6/2008 532991 MVL LIMITED SAM GLOBAL SECURITIES LTD B 288701 87.00
30/6/2008 532991 MVL LIMITED DINDAYAL BIYANI STOCK BROKERS LTD. B 292715 88.51
30/6/2008 532991 MVL LIMITED SPJSTOCK S 1021107 88.91
30/6/2008 532991 MVL LIMITED R M SHARES TRADING PVT LTD S 410345 89.72
30/6/2008 532991 MVL LIMITED BEYOND SECURITIES PRIVATE LIMITED S 827599 98.90
30/6/2008 532991 MVL LIMITED SAM GLOBAL SECURITIES LTD S 288701 86.47
30/6/2008 532991 MVL LIMITED DINDAYAL BIYANI STOCK BROKERS LTD S 292715 86.40
30/6/2008 532986 NIRAJ CEMENT NAYANBHAI RAMESHCHANDRA SHAH B 61981 205.22
30/6/2008 532986 NIRAJ CEMENT AYODHYAPATI INVESTMENT PVT LTD B 1184991 207.30
30/6/2008 532986 NIRAJ CEMENT HEMANT MADHUSUDAN SHETH B 52835 223.45
30/6/2008 532986 NIRAJ CEMENT BHANDARI RAKHI K B 57000 203.01
30/6/2008 532986 NIRAJ CEMENT ASTUTE COMMODITIES AND DERIVATIVES PVT LTD B 79260 205.00
30/6/2008 532986 NIRAJ CEMENT AYODHYAPATI INVESTMENT PVT LTD S 1184991 205.80
30/6/2008 532986 NIRAJ CEMENT BHANDARI RAKHI K S 57000 210.70
30/6/2008 532986 NIRAJ CEMENT ASTUTE COMMODITIES AND DERIVATIVES PVT LTD S 93365 207.40
30/6/2008 532606 PAREKH ALUM MANISH JASWANT MARU B 500000 112.00
30/6/2008 532606 PAREKH ALUM MEENAKSHI JATIA S 152359 112.00
30/6/2008 532606 PAREKH ALUM LOTUS GLOBAL INVESTMENTS LIMITED S 60000 112.00
30/6/2008 532791 PYRAMID SAIM SPJSTOCK B 241736 240.29
30/6/2008 532791 PYRAMID SAIM SPJSTOCK S 252736 234.99
30/6/2008 502587 RAMA PUL PAP JYOTIKABEN MAHESHBHAI HADVANI B 39000 27.51
30/6/2008 526049 SHRILAKSHMI VIPUL HIRALAL SHAH B 117000 101.56
30/6/2008 532863 SPICE TELE SUKSHAM FINLEASE AND INVESTMENT PVT LTD S 5204272 72.55
30/6/2008 530585 SWASTIK INV JIGNESHBHAI HIRALAL SHAH S 90000 24.19
30/6/2008 526586 WIM PLAST LT M M S HOLDINGS PVT LTD S 41020 51.05
The market was badly hit for the second consecutive day by posting heavy losses across the counters on account of heavy selling pressure backed by rise in crude oil price and political uncertainty. The BSE Sensex slipped below 13,500 mark and NSE Nifty below 4,100. The BSE Midcap and Smallcap indices closed with deep cut of more than 3%. New York crude oil reached an all time high to $142.99 a barrel on Friday. In the domestic political scenario, left parties has again threatened to pull out support from the UPA if government went to IAEA and there are signs that Congress may go ahead with the deal even if it leads to the collapse of the UPA coalition and early elections. Market opened on flat note on the back of mixed global cues and turned volatile during early trade. Further it slipped sharply and continued the losing trend through out of trading session to close in deep red. From the sectoral front, Oil & Gas, Capital Goods, Reality, Bank and Consumer Durables stocks were under pressure, while IT and Pharma stocks witnessed some buying interest. The market breadth was weak as 2107 stocks closed in red while 542 stocks closed in green.
The BSE Sensex closed lower by 340.62 points at 13,461.60 and NSE Nifty ended down by 96.10 points at 4,040.55. The BSE Mid Caps and Small Cap closed negative with fall of 172.23 points and 236.11 points 5,386.48 and 6,701.96 respectively. The BSE Sensex touched intraday high 13,872.06 and intraday low of 13,405.54.
Lossers from the BSE are Reliance Infra (11.47%), ACC Ltd (9.80%), Ambuja Cement (6.83%), DLF Ltd (6.60%), Reliance Com Ltd (6.58%), Grasim Industries (5.05%), M&M Ltd (5.00), HDFC (4.40%) and MAruti Suzuki (4.22%).
The Oil & Gas index closed down by 378.47 points at 9,009.16. As Essar Oil Ltd (11.11%), Reliance Natural Resources (10.71%), BPCL (6.30%), HPCL (5.52%), Reliance (4.06%) and Aban Offshore (3.89%) closed in negative territory.
The Capital Goods index dropped by 361.45 points to close at 10,080.69. Major lossers are Jyoti Struct (9.57%), Elecon Eng C (7.82%), BEML Ltd (7.02%), ABB Ltd (6.33), Suzlon Energy (6.29%) and Alstom Proje (5.71%).
The Reality Index closed higher by 331.78 points at 4,543.47. Lossers are Housing Dev (10.27%) along with Indiabull Real (8.56%), Penland Ltd (7.78%), Parsvnath (7.52%), Ansal Infra (7.18%) and Unitech Ltd (6.65%).
The Banking index closed down by 209.97 points at 5,915.98. Lossers are Yes Bank (8.38%), PNB (6.45%), Kotak Bank (5.61%), Indian Overseas Bank (5.51%), SBI (4.04%), Axis Bank (4.02%), Andhra Bank (3.51%) and ICICI Bank Ltd (3.51%).
The IT index closed higher by 15.07 points at 4,019.82. Gainers are NIIT Ltd (8.12%), Financ Tech (2.02%), Infosys Tech (1.59%), Tech Mahindra (0.79%) and I-Flex (0.76%).
The Pharma index closed up by 14.28 points at 4,164.33. As Matrix Lab (4.46%), Sun Pharma (4.42%), Dr Reddy’s Lab (2.66%), Glenmark Pharma (1.97%) and Cipla Ltd (0.29%) closed in positive territory.
The market witnessed the second crash today after witnessing a fall of 620 points on Friday. Following a steep fall in global stock markets led by fears of a hike in crude oil prices, the Sensex resumed on a bearish note at 13,791, 11 points below its last close of 13,802. By mid-morning trades, the Sensex shed around 400 points on across-the-board selling pressure. The market started to deteriorate further towards the close, as fresh bout of selling saw the Sensex plummet over 350 points and touch the day's low of 13,406. The Sensex dropped 2.47% and was down 341 points for the day at 13,462. The Nifty shed 96 points at 4,041.
The market breadth was heavily tilted in favour of the losers as 2,103 stocks declined, while only 546 stocks advanced and 42 stocks remained unchanged on the BSE. All the sectoral indices were battered on the BSE except information technology (IT), fast moving consumer goods (FMCG) and health care (HC) stocks. The BSE Realty index lost heavily and dropped 6.81% followed by the BSE consumer durables (CD) index (down 4.71%), the BSE Oil & Gas index (down 4.03%), the BSE Power index (down 3.55%), the BSE capital goods (CG) index (down 3.46%) and the BSE Bankex index (down 3.43%). The second-rung benchmark indices the BSE mid-cap index and the BSE small-cap index tanked over 3% each.
Only 8 stocks from 30 Sensex stocks managed to end in the green. Among the major losers Reliance Infrastructure tanked by 11.47% at Rs751.05. ACC slumped by 9.80% at Rs512, Ambuja Cement shed 6.83% at Rs73.50, Grasim Industries crumbled by 6.66% at Rs1,815. DLF dropped 6.60% at Rs389, Reliance Communications slipped by 6.58% at Rs433.10, Tata Motors plunged 5.03% at Rs416 and Mahindra & Mahindra fell by 5% at Rs477. Other front-line stocks also declined by over the range of 0.50-4% each.
Realty stocks took a heavy pounding. Housing Development & Infrastructure plunged by 10.27% at Rs387, Indiabulls Real Estate tumbled by 8.56% at Rs271.20, Peninsula Land lost 7.78% at Rs51, Ansal Infrastructure by 7.18% at Rs69.15 and Unitech declined by 6.65% at Rs170.65. DLF, Sobha Developers, Omaxe, Phoenix Mill, Mahindra Life, Akruti City and Anant Raj crashed around 4-5% each. CD stocks, too, were hammered on the bourses. Rajesh Export slumped by 10.36% at Rs58.40, Videocon Industries dropped 6.12% at Rs275.40 and Blue Star fell by 3.89% at Rs374.55.
Over 2.37 crore MVL shares changed hands on the BSE followed by Reliance Petroleum (1.51 crore shares), Reliance Natural Resources (1.44 crore shares), Chambal Fertilisers (84.61 lakh shares) and IFCI (81.62 lakh shares).
Valuewise, Reliance Industries registered a turnover of Rs379 crore on the BSE followed by Reliance Capital (Rs262 crore), MVL (Rs210 crore), Niraj Cement (Rs148 crore) and Reliance Communications (Rs141 crore).
The market extended losses for the second successive day today, with Sensex shaving off nearly 1000 points in last two tradng sessions as high inflation, rising interest rates, record high oil prices and political concerns continued to haunt the markets. Over the past few days, the market has witnessed a sharp fall with bears totally dominating the proceedings on the street.
The barometer index BSE Sensex today hit its lowest level in more than 14 months. Realty, consumer durables, oil & gas and capital goods stocks fell. The market breadth was weak.
Political uncertainty weighted on market sentiments. The media continues to speculate whether the ruling Congress led United Progressive Alliance government will be able to push through a much-debated Indo-US nuclear deal and still retain its power, in the face of heavy opposition from its key communist allies. The Left parties on Sunday, 29 June 2008, renewed their threat to withdraw support from the ruling coalition if Prime Minister Manmohan Singh forged ahead with the nuclear deal.
The uncertainty pertains to whether there will be stability at the centre if mid-term polls are held i.e. whether the new government will complete five years and whether the new government restarts economic reforms process which has virtually come to a halt in the last two years or so.
A sustained selling of Indian stocks by foreign institutional investors (FIIs) has also dented market sentiment. As per provisional data, foreign funds sold shares worth a net Rs 703.11 crore on Friday, 27 June 2008. FII outflow in June 2008 totaled Rs 9349 crore (till 26 June 2008). FII outflow in calendar year 2008 totaled Rs 24,719.10 crore (till 26 June 2008).
The 30-share BSE Sensex plunged 340.62 points or 2.47% at 13,461.60. Sensex lost 396.68 points at day’s low of 13,405.54, its lowest level in more than 14 months. Sensex gained 69.84 points at its high of 13,872.06 hit in mid-morning trade.
The broader based S&P CNX Nifty was down 96.1 points or 2.32% at 4,040.55.
Sensex had slumped 619.60 points or 4.30% to 13,802.22 on Friday, 27 June 2008. A setback to stocks in Asia and US, sharp spurt in crude oil prices and political uncertainty due to Indo-US nuclear deal rattled the bourses on that day. From a record high of 21,206.77 hit on 10 January 2008, Sensex has lost 7,745.17 points or 36.52% to current 13,461.60. It has declined 6,825.39 points or 33.64% in calendar year 2008 so far.
BSE clocked a turnover of Rs 4,439 crore today as compared to Rs 6,015.06 crore on Friday, 27 June 2008.
Nifty July 2008 futures were at 3960, at a steep discount of 80.55 points as compared to spot closing of 4040.55. NSE's futures & options (F&O) segment turnover was Rs 40,590.90 crore, which was lower than Rs 45,408.54 crore on Friday, 27 June 2008.
The market breadth was weak on BSE with 542 shares advancing as compared to 2,107 that declined. 43 remained unchanged. 21 stocks ended in red from Sensex pack.
As per the provisional figures on NSE, foreign institutional investors sold shares worth Rs 208.66 crore today, 30 June 2008 while domestic funds bought shares worth Rs 724.18 crore.
The BSE Mid-Cap index declined 3.1% to 5,386.48 and BSE Small-Cap index fell 3.4% to 6,701.96. Both these indices underperformed Sensex.
BSE Realty index (down 6.81% at 4,543.47), BSE Consumer Durables index (down 4.71% to 3,477.60), The BSE Oil & Gas index (down 4.03% to 9,009.16), The BSE Power (down 3.55% to 2,252.39), BSE Capital Goods index (down 3.46% at 10,080.69), BSE Bankex (down 3.43% at 5,915.98), BSE Auto (down 2.83% at 3,585.62), BSE PSU index (down 2.67% to 5,666.42), underperformed the Sensex.
BSE IT index (up 0.38% to 4,019.82), BSE FMCG index (up 0.35% to 2,080.33), BSE Health Care index (up 0.34% at 4,164.33), BSE Metal index (down 0.64% to 13,207.30), BSE TecK index (down 1.6% to 3,043.99), outperformed the Sensex.
Realty stocks tumbled. Unitech (down 6.65% to Rs 170.65), Indiabulls Real Estate (down 8.56% to Rs 271.20) and DLF (down 6.6% to Rs 396.20) edged lower.
Consumer durables stocks declined. Rajesh Exports (down 10.36% to Rs 58.40), Videocon Industries (down 6.12% to Rs 258.55), Blue Star (down 3.89% to Rs 374.55), and Titan Industries (down 3.63% to Rs 991.55) edged lower.
Oil & Gas stocks declined. HPCL (down 5.52% to Rs 175.35), Gail (India) (down 2.4% to Rs 332.95), BPCL (down 6.3% to Rs 236), Indian Oil Corporation (down 2.74% to Rs 332.25) edged lower.
State run oil refiner ONGC declined 1.86% to Rs 814.70. It came off from session's high of Rs 853.50. It has reportedly discovered a new oil field in the Farsi oil bloc of the Persian Gulf. ONGC will undertake the development of the newly discovered field upon determining that its development is economically feasible.
Oil prices rose to a record near $143 a barrel on Friday, 27 June 2008, as a drop in global equities markets lured more investors into commodities. Crude oil rose one dollar in electronic trading to $141.21 a barrel on Monday, 30 June 2008.
Capital Goods stocks fell. India’s largest engineering and construction firm by sales Larsen & Toubro was down 3.7% to Rs 2,183.20. It came off from session's high of Rs 2,308. The company today said it had received an order wroth Rs 1,557 crore from Andhra Pradesh Power Development Company for the supply of steam turbine generators.
India's biggest power equipment maker in terms of revenue, Bharat Heavy Electricals was flat at Rs 1,380.60. The company today said it has bagged an order exceeding Rs 2080 crore for a 400-megawatt thermal power project in Syria. Wind turbine maker Suzlon Energy declined 6.29% to Rs 215.90.
Anil Dhirubhai Ambani group stocks tumbled. Reliance stocks slumped. Reliance Infrastructure lost 11.47% to Rs 784.80 and Reliance Communications shed 6.58% to Rs 442.40.
Hindalco Industries (up 1.97% to Rs 142.10), ITC (up 1.66% to Rs 187), Jaiprakash Associates (up 0.84% to Rs 143.85), Cipla (up 0.29% to Rs 211.10), NTPC (up 0.4% to Rs 151.65), Tata Steel (up 0.22% to Rs 728.35) edged higher from the Sensex pack.
ACC (down 9.8% to Rs 522.50), Ambuja Cements (down 6.83% to Rs 75.70), Grasim Industries (down 6.66% to Rs 1,815), DLF (down 6.6% to Rs 396.20), Tata Motors (down 5.03% to Rs 426.50), Mahindra & Mahindra (down 5% to Rs 485.05), HDFC (down 4.4% to Rs 1,962.40), edged lower from the Sensex pack.
Reliance Petroleum clocked the highest volume of 1.51 crore shares on BSE. Reliance Natural Resources (1.44 crore shares), Chambal Fertilisers and Chemicals (84.61 lakh shares), IFCI (81.62 lakh shares) and Ispat Industries (79.15 lakh shares) were the other volume toppers in that order.
Reliance Industries clocked the highest turnover of Rs 379.85 crore on BSE. Reliance Petroleum (Rs 262.7 crore), Reliance Capital (Rs 243.63 crore), Niraj Cement Structurals (Rs 148.04 crore) and Reliance Communications (Rs 141.88 crore) were the other turnover toppers in that order.
European markets which opened after Indian markets were mixed. Key benchmark indices in France and UK were up by between 0.04% to 0.81%. Germany’s DAX fell 0.91%.
Asian markets were trading mixed today. The key benchmark indices in Singapore, China, Japan and Taiwan were down by between 0.33% to 1%. Key benchmark indices in HangSeng and South Korea were up by 0.01% to 0.27%.
US markets finished lower for the second consecutive day on Friday, 27 June 2008, hit by surging crude oil prices and a fresh round of banking troubles. The Dow Jones Industrial Average fell 106.91, or 0.93 %, to 11,346.51. The Nasdaq composite index fell 5.74, or 0.25% to 2,315.63 and S&P 500 index fell 4.77, or 0.37% to 1,278.38.
The market may open on a weak note as Asian indices are exhibiting a mixed trend in the morning trades followed by Friday's loss in the US markets. It may keep the market volatile. Pressure on the liquidity front because foreign institutional investors (FIIs) are net sellers of equity could make the investors jittery. On the upside, the Nifty could test the recent high around the 4190 level and may witness support around the 4090 level. The Sensex has a likely support at 13730 and may test higher levels of 13945.
US indices fell sharply on Friday with the Dow Jones tumbling 107 points to close at 11346. The Nasdaq dropped 6 points at 2316.
Indian floats largely had a mixed outing on the US bourses. Tata Motors was the major loser and declined by above 6% followed by ICICI Bank and MTNL, which lost 4.29% and 4.04% respectively. HDFC Bank, Rediff, Patni Computer and VSNL ended with steady losses. Among the gainers, Satyam, Infosys, Dr Reddy's and Wipro ended with steady gains.
Crude oil prices in the US market gained and jumped to an all-time high of $142.60 on Friday as a sell-off on Wall Street sent the Dow Jones into bear market. At the end the Nymex Light Crude oil for August 2008 delivery gained 57 cents to close at $140.21 a barrel. However, in the commodity space, the Comex gold for August 2008 series gained $16.20 to settle at $931.30.
The market may extend a sharp fall witnessed over the past few days. Concerns about slowdown in corporate earnings, political uncertainty and sustained FII inflow will continue to keep market sentiments edgy. The barometer index BSE Sensex tumbled to its lowest level in 13 months on Friday, 27 June 2008.
Companies in sectors ranging from capital goods to automobiles are feeling the heat on their margins from rising input costs and slackening growth over the past two quarters. Nevertheless, advance tax payment by the Indian corporate sector this year so far has been decent to strong. Government’s direct tax collection from the corporate sector rose 39.81% to Rs 30655 crore until 21 June 2008 compared to the corresponding period last year.
Oil prices rose to a record near $143 a barrel on Friday, 27 June 2008, as a drop in global equities markets lured more investors into commodities. Crude oil rose one dollar in electronic trading to $141.21 a barrel on Monday, 30 June 2008.
Political uncertainty continues to haunt the bourses. The media continues to speculate whether the ruling Congress led United Progressive Alliance government will be able to push through a much-debated Indo-US nuclear deal and still retain its power, in the face of heavy opposition from its key communist allies. The Left parties on Sunday, 29 June 2008, renewed their threat to withdraw support from the ruling coalition if Prime Minister Manmohan Singh forged ahead with the nuclear deal.
A sustained selling of Indian stocks by foreign institutional investors (FIIs) has also dented market sentiment. As per provisional data, foreign funds sold shares worth a net Rs 703.11 crore on Friday, 27 June 2008. FII outflow in June 2008 totaled Rs 9349 crore (till 26 June 2008). FII outflow in calendar year 2008 totaled Rs 24,719.10 crore (till 26 June 2008).
Avon Weighing 10 8 to 10
Sejal Architectural Glass Ltd. 115 19 to 21
First Winners Ind. Ltd. 125 3 to 3.50
Archid Ply Ind. 74 5 to 6
Lotus Eye Care Hospital 38 2.5 to 3
KSK Energy Venture 240 to 255 Discount
Somi Conveyor Belting 35 3 to 5
Birla Cotsyn (India) 15 to 18 1.50 to 2
Prime Minister Singh may have finally had his way, if the Saturday endorsement by Mrs. Gandhi is anything to go by. The Nuclear Deal may finally be on and Dr. Singh may finally get to go to Japan for the G8+5 meeting. It remains to be seen whether the SP will want to support the UPA with TDP, AIDMK and JD staying out. While the cat may not be out of the bag before July 3, the nuclear power related stocks will be dusted off today as we open the trading this week.
On Friday, the indices had closed at their lowest levels of the day, which indicated continued weakness. The massive negative cost of carry further added to the gloomy scenario. However, because of the glimmer of hope of the nuclear deal, stocks could bounce early in the morning and short covering can happen. So for the moment, approach today’s trade with an open mind and short covering stance. A breaking of the 4090 level should make you go back to your bearish ways.
Market Grape Wine :
In House :
Nifty at a support of 3980 with resistance at 4250 and 4400 levels.
Cash: sell KOTAK BANK AND ICICI BANK
Future: Sell WEL GUJ below 304 TGT 293 with S/L 310
Future: sell ESSAR OIL below 198 TGT 190 with S/L 201.
Markets at a support of 13663 & 13551 resistance at 14041 & 14114 levels .
Maintain strict stop loss as markets to see selling at every rise .
Sell : JetAir & AirDeccan
Sell : DLF , HDIL
Buy : Tisco at dips
Buy : RIL at dips
Buy : RPL at dips
Buy : ITC & HLL at dips
Dark Horse : ITC , RIL , Tisco & RPL
The Indian Market is expected to have positive opening on the back of mixed global cues. On Friday, the Indian market closed in deep red after going through a blood bath due to rise in crude oil prices and inflation worries. Crude oil prices reached to a new high of $141.71 a barrel for the first time after the head of OPEC predicted that the price of crude could raise over $150. Market opened on extremely negative note on the back of weak global cues continued to trade weak. till the end of session. From the sectoral front, metal, capital goods, bank, oil & gas and realty stocks faced heavy selling across the counters. The BSE Sensex closed lower by 619.70 points at 13,802.22 and NSE Nifty ended down by 179.20 points at 4,136.65. We expect that market may remain volatile during the trading session.
US markets closed lower on Friday on the concern of sub-prime write down at banks may increase together with record oil and slowdown in global economic growth which in turn will hit corporate earnings.
The Dow Jones Industrial Average (DJIA) closed lower by 106.91 points at 11,346.51 along with NASDAQ down by 5.74 points to close at 2,315.63 and S&P 500 dropped by 4.77 points to close at 1,278.38.
Indian ADRs ended mixed. In technology sector, Satyam ended up by (2.50%) along with Wipro by (1.09%), Infosys by (0.99%) while Patni Computers dropped by (1.92%). In banking sector, ICICI bank and HDFC bank decreased by (4.29%) and (1.65%) respectively. In telecommunication sector, MTNL and Tata Communication reduced by (4.04%) and (0.06%). Sterlite industries declined (3.06%).
Today the major stock markets in Asia are trading mixed. Hang Seng index is trading higher by 55.99 points at 22,098.34 along with Japan’s Nikkei trading up by 45.04 points at 13,589.40 while Taiwan Weighted trading at 7,534.93 with a fall of 13.83 points.
The FIIs on Friday stood as net seller in equity and debt. The gross equity purchased was Rs4,235.50 Crore and the gross debt purchased was Rs207.70 Crore while the gross equity sold stood at Rs4,704.60 Crore and gross debt sold stood at Rs483.50 Crore. Therefore, the net investment of equity reported was (Rs49.00) Crore and net debt was 275.90 Crore.
Today, Nifty has support at 4,051 and resistance at 4,211 and BSE Sensex has support at 13,506 and resistance at 14,074.
Inflation is likely to peak at around 13 percent over the next two months before gradually moderating to around 8.5 to nine percent by end of this fiscal year, economists said.
The country's economic growth too would moderate below the earlier-forecasted eight percent to around the 7.5-7.8 percent level in financial year 09, they said.
"I expect inflation to peak at around 12.5-13 percent in the next two months before beginning to decline. But double-digit inflation will continue at least for the next four to five months," Yes Bank's chief economist, Shubhada Rao, said.
Global fuel prices present the most concern to policy-makers, the economists said. "Inflation will be contingent upon oil prices," Crisil's director and principal economist, D K Joshi, said.
"Prices of products such as aviation turbine fuel and naphtha have shot up 40 percent year-on-year," Enam Securities' chief economist, Sachidanand Shukla, said.
While inflation would peak at around 12.5-13 percent, Joshi expected the yearly average inflation rate to be around the 8.5 to nine percent mark.
This figure, again, is much higher than the 5.5 percent projected by some economists earlier.
Rao, however, pegged the average at a much higher nine to 9.5 percent.
Economic growth would be below the eight percent mark, "maybe even below the 7.5 percent mark", Bank of Baroda's chief economist, Dr Rupa Rege Nitsure, said.
But other economists such as Joshi and Enam's Shukla felt that it would be in the 7.8 percent range.
"Growth will definitely slow down given the rate hikes, but I don't expect it to fall sharply. It will be around the 7.8 percent mark," Shukla said.
Yes Bank's Rao said that even pessimists were forecasting a seven percent growth. "Amidst the present global turbulence and domestic headwinds, seven percent is still very healthy," she said.
Food prices are expected to ease in the next few months. Much would, however, depend upon the monsoon, the economists said, but with a good one forecast, they expect a healthy Kharif crop, which would help in pushing down food prices.
On whether the Reserve Bank would further hike the Repo rate and Cash Reserve Ratio (CRR), most economists expect a 0.25-0.50 percent hike in the Repo but were divided over its timing.
A CRR hike would, however, depend upon prevailing liquidity conditions, they said. While some expected the RBI to hike rates in July, others felt that the RBI might do so later.
However, all are agreed that inflation would continue to occupy Centre-stage throughout this fiscal.
Birla Cotsyn (india) is a constituent of the Yash Birla group (YBG) and was originally incorporated in 1941 by R. D. Birla under the name and style of M/s Jamod Ginning Company Private Limited. On conversion to public limited company the name of the company has been modified to Birla Cotsyn (India) (BCIL) with effect from May 2006. On 9th December 2006 Yash Birla Group signed a joint venture agreement with P.B. Bhardwaj group (PBG) to combine their resources and expertise and carry on the business of manufacturing, marketing and distribution of the products in India as well as other places. As per the JV the total promoter’s equity of BCIL would be taken up in the ratio of 50:50 between the PBG and YBG.
The company has been engaged in cotton ginning, pressing and oil expelling and after the acquisition of assets of Khamgaon Syntex, a wholly owned subsidiary of Zenith, one of the group companies of YBG with a spindle capacity of 18,304 spindles with effect from August 2006, has entered into the manufacturing of synthetic yarn.
The company is coming with an IPO to part finance the expansion of an integrated textile project at Khamgaon and Malkapur at an estimated cost of Rs 289.19 crore, setting up a garment manufacturing plant at Rs 25.21 crore and establishing retail outlets at cost of Rs 5.80 crore.
The company plans to implement the integrated textile project in three phases. During Phase I the spindle capacity of 18,304 spindles of Khamgaon Syntex is envisaged to be enhanced to 19,040 spindles along with the modernization and upgradation of facilities with part replacement of existing machinery and setting up of a 36,000 cotton spindle yarn manufacturing unit at Malkapur. During Phase II the company plans to manufacture open end rotor based cotton yarn with an installed capacity of 1,728 rotors at Khamgaon and weaving of grey fabric with 114 looms at Malkapur. During phase III the company plans to set up a dyeing and processing unit for manufacturing of finished clothes with an installed capacity of 50,000 meters per day. The expansion plan under phase I is estimated a cost of Rs 131.34 crore and subsequent phase II and phase III together has been estimated at Rs 157.85 crore.
In addition the company plans to forward integrate and set up facilities for garment and apparel manufacturing and also to establish retail outlets all over the country for marketing of the products at an estimated cost of Rs 31.01 crore.
The government of Maharashtra has decided to offer the status of ‘Mega project’ to the proposed project. Accordingly the company shall receive benefits of electricity duty exemption for a period of seven years from the date of the commencement of the project, 100% exemption from payment of stamp duty, industrial promotion subsidy equivalent to 100% of the eligible investments made and 75% reimbursement of expenditure incurred on account of employer’s contribution towards ESI and EPF for a period of 5 years but limited to 25% of the fixed capital investment.
1. The company is into complete forward integration, i.e. right from ginning and pressing upto manufacture of fabrics, readymade garments and also to opening of retail outlets of its own which is expected to give considerable savings on margins.
2. Khamgaon is the centre of cotton production and there are about 35 ginning units in and around this place. Hence good quality raw materials like cotton are easily available.
1. The textile industry is highly competitive and fragmented. With abolition of quota system from January 1, 2005 many companies have ramped up their capacities increasing competition among players in the textile industry.
2. The company is having negative operating cash flows for the nine months ended December 2007.
3. Financial and stock market track record of Yash Birla group companies is not encouraging.
At the price band of Rs 15 - Rs 18, the annualised EPS for the nine months ended December 2007 on post-issue equity works out to Rs 0.3- Rs 0.4 and PE works out to 49.1-50.3. TTM PE of Textiles-spinning/Cotton/Blending Yarn sector is 10.9. However once the company’s plans for forward integration in garment and apparel manufacturing and setting up of retail outlets are implemented successfully, it may get higher P/E than 10.
Nine sectors end in the red led by financial sector
US Market once again ended the week on Friday, 27 June with huge losses. The Dow fell to its lowest level since September 2006. Record high crude prices, tumbling financial sector and not-so-good outlooks from tech companies took a toll on market sentiment.
The Dow Jones Industrial Average lost 496 points for the week to end at 11,346.69. Tech - heavy Nasdaq lost 91 points at 2,315. S&P 500 shed 40 points to end at 1,278. In percentage terms, Dow, S&P 500 and Nasdaq lost 4.2%, 3% and 3.8% respectively. Financials tumbled almost 6% for the week and is at its lowest level in five years.
Wall Street firms were in downgrade mode, prompting most of the selling during the week. Goldman Sachs sent financials tumbling on Monday, 23 June, after cutting the sector to Underperform from Neutral. Also, Wachovia Securites downgraded Goldman Sachs to Market Perform from Outperform. Credit Suisse cut its earnings estimates on Merrill Lynch and JPMorgan Chase, citing incremental credit quality deterioration.
As the week progressed, financial sector failed to make any change in its destiny. Goldman added Citigroup to its Conviction Sell list on Thursday, 26 June and also forecast a $8.9 billion second quarter write-down. On the other hand, Lehman Brothers said Merrill Lynch will likely incur a $5.4 billion second quarter write-down, mainly from its exposure to bond insurers. Nine of the ten sectors posted a decline for the week.
During the middle of the week, on Wednesday, 25 June, the Federal Reserve sharpened its focus on inflation, saying that the upside risks to inflation have increased. Market reacted in a quite volatile manner throughout the day. At the end, it ended with little gains. Fed held its target for short-term interest rates steady at 2%.
In its FOMC directive, the Fed said overall economic activity continues to expand, partially due to "firming" in household spending. However, the fed expects economic growth will face the burdens of tight credit conditions, housing contraction and the rise in energy prices. The statement also said that uncertainty over the inflation outlook remains high, although it expects inflation to "moderate later this year and next year."
In terms of economic data, the Commerce Department reported that U.S. orders for durable goods were unchanged in May. Also, the Commerce Department estimated that sales of new U.S. single-family homes fell 2.5% in May to a seasonally adjusted annual rate of 512,000 as sales in the West fell to a 26-year low. The drop in May follows the upwardly revised 4.8% gain in April. The results in May are better than the expected drop of 2.7%.
Also, the final GDP reading for the first quarter indicated the economy grew at 1%, on par with expectations and up slightly from the previous reading. Personal consumption expenditures were revised upward to 1.1%, while the GDP price index came in at 2.7%.
The 104% year-over-year spike in crude prices took a toll on petroleum intensive companies. UPS lowered its second quarter earnings guidance, citing the increase in fuel costs and the sluggish U.S. economy.
In terms of earnings news, Research In Motion reported an earnings miss and tepid outlook. Oracle’s outlook also disappointed investors.
We recommend a sell in GAIL India from a short-term perspective. From the charts of GAIL India we note that it has been on a long-term downtrend since its January 2008 peak of Rs 555. During early May, the stock declined crossing below the 50 and 200-day moving averages.
Moreover, the stock conclusively penetrated the significant support level at Rs 380 by tumbling 5 per cent (accompanied with high volume) on June 24. The daily and weekly relative strength indices are featuring in the bearish zone. The weekly moving average convergence and divergence (MACD) has entered the negative territory, indicating bearishness.
The long-term down trendline of the stock is intact. We are bearish on the stock in the short-term and expect it to decline further until it hits our price target of Rs 305 in the approaching trading sessions.
Traders with short-term perspective can sell the stock while maintaining stop-loss at Rs 359.
Gold and silver prices rise once again as dollar continues to weaken
Bullion metals ended considerably higher on Friday, 27 June, 2008. Prices declined as the dollar weakened against its rivals. Prices also soared as the energy costs also increased considerably. The increase in energy costs increase demand for the precious metal as a hedge against inflation. Silver prices also rose.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, a lower dollar pushes up precious metal prices as their demand lessens as it becomes cheaper for traders holding other currencies.
Comex Gold for August delivery rose $16.2 (1.9%) to close at $931.3 ounce on the New York Mercantile Exchange. One day back, prices surged by more than 3.5%. That was the biggest percentage gain for a most-active contract since June, 2006. For the week gold prices ended higher by $27.6 (3.1%). Last month, in May, it ended with a gain of higher by $22.5 (2.5%). On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped since then.
This year, gold prices have gained 11.5 till date against a 7.8% drop for the dollar against the euro. Before May, for April, prices closed lower by 6.3%. For first quarter prices gained 10.7%. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%. But in March, prices succumbed and fell by 5.5%.
On Friday, Comex silver futures for July delivery rose 49 cents (2.8%) to $17.71 an ounce. Silver has gained 18.3% in 2008 till date.
Silver prices ended the month of May 2008 with a gain of 2.7%. For April, it closed lower by 5.5%. Silver had gained 16% in Q1. In January this year itself, prices climbed 14%. In February, it gained another 15%. For March, it ended lower by 13%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.
At the currency markets on Friday, the dollar was flat to modestly lower against major currencies with increasingly risk-averse traders unwilling to buy the greenback as oil futures marched to new highs and equities lost ground. The dollar index which tracks the performance of the U.S. currency against other major counterparts, was at 72.294 compared with 72.48 a day prior.
Earlier in the week, Federal Reserve yesterday sharpened its focus on inflation, saying that the upside risks to inflation have increased. Fed held its target for short-term interest rates steady at 2%.
Since last September, Fed has axed interest rates seven times and brought it down to 2%. On the other hand, the ECB has kept rates unchanged at 4% since June, 2007. Gold gained 39% from 17 Sept as the Fed slashed rates from 5.25%.
In the crude market on Friday, crude-oil futures for light sweet crude for August delivery today closed at $140.21/barrel (higher by $0.57/barrel or 0.4%) on the New York Mercantile Exchange. This was another all time new closing price for crude. During intra day trading prices touched a high of $143. For the week, crude prices closed higher by 3.6%.
Gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. In 2006, silver had jumped 46% while gold gained 23%.
Prices end marginally higher after touching the $143 level
Crude futures rose by more than $3.5 at one shot on Friday, 27 June, 2008. Couple of factors continued to contribute to this rise. A day before, prices had shot up by $5 at one go. First and foremost, the dollar continued to weaken. Then, Libya threatened to cut output on Thursday, 26 June and also OPEC's president reinforced once again that prices may reach $170 by the summer.
Crude-oil futures for light sweet crude for August delivery today closed at $140.21/barrel (higher by $0.57/barrel or 0.4%) on the New York Mercantile Exchange. This was another all time new closing price for crude. During intra day trading prices touched a high of $143. For the week, crude prices closed higher by 3.6%. Prices are 99% higher than a year ago. For the year, crude is up by 43% till date.
It was reported on Thursday, 26 June that Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil was also reported to have said that oil may surge as high as $170 in near months on a European interest rate rise.
Tensions in Nigeria, the Middle East, talk that OPEC members actually want to lower production, weather concerns, a weaker dollar, the Fed's inability to raise rates to contain inflation all culminated together to this rising crude prices.
Earlier during the week, the EIA reported that U.S. crude supplies climbed by 800,000 barrels to 301.8 million for the week ended 20 June. It was the first reported rise since early May. Supplies had fallen a total of nearly 25 million in five weeks. EIA also reported that motor gasoline supplies fell 100,000 barrels to 208.8 million barrels. Distillate stocks were up 2.8 million barrels at 119.4 million barrels.
August natural gas fell by 5 cents to close at $13.198 per million British thermal units, retreating from a high of $13.40. But it ended the week almost 0.7% higher.
Against this backdrop, prices for petroleum products closed on a mixed note on Friday, but ended the week higher. July reformulated gasoline fell by 1 cent to close at $3.5012 a gallon on the Nymex, up 1.8% for the week. July heating oil closed at $3.9066 a gallon, up 2.3 cents for the session and 3.6% higher for the week.
Nifty (4137) S 4050 R 4210
Sell Puravankara (170) SL 174
Target 164, 161
Sell Essar Oil (199) SL 204
Target 191, 188
Sell Divi's Labs (1340) SL 1360
Target 1300, 1290
Buy Voltamp (910) SL 895
Target 940, 950
Buy Voltas (128) SL 124
Target 134, 137
There is no royal road to anything. That which grows fast, withers as rapidly. That which grows slowly, endures.
Guess what! Even Queen Elizabeth and the British Royal family has not been spared by inflation. The queen's household costs for the 12 months through March, paid for by the British taxpayer, rose by 6.1%. The rise per tax payer per annum may be equivalent to just what you would pay for an ipod download. But the fact remains that nobody is spared. Reports suggest India Inc going slow on capex. And by the way, the royal household is also paying close attention to obtaining the best value for money in all areas of expenditure.
Markets around the world are fighting the twin menace of fire (inflation) and ice (growth slowdown). Some say it may only be the beginning of the bear market, while others are a bit more optimistic. On the whole, the market remains jittery, vulnerable to daily dose of bad news. Traders and investors are hoping that the market will bottom out soon.
Whether that happens remains to be seen. Today, we see another tumultuous day for the bulls, which should begin with a cautious opening. The intra-day choppiness will continue and one may see some buying at lower levels, though the rebound may prove to be short-lived.
The next big trigger will come from the first-quarter results, which will be declared over the next few days. As always, IT sector will lead the way, with Infosys announcing its results on July 11. Though the advance tax numbers were quite encouraging, it will be interesting to see how India Inc is coping with slowing growth momentum and rising costs. Operating margin is an area that everybody will be keen to watch.
Among stock specific news, Blue Green Constructions and Investments could be in action as the board will met to sell majority stake to discount retailer Subhiksha.
There is no dearth of bad news and complete lack of positive news. Crude oil continues to hover around $140/bbl. The US financial sector is not in a pink of health either. Though technically, the US might have avoided a recession, it still remains in a pretty bad shape. The dollar remains weak (except against the rupee), which will continue to fuel the rally across various commodities.
This week, the ECB (European Central Bank) will take a call on interest rates. If it decides to jack up rates to fight inflation, there will be more trouble for the dollar. On the domestic front, the political situation has once again turned precarious with the Congress determined to go ahead with the nuke deal, and the Left reiterating its threat of pulling down the Government.
Asian markets are mixed this morning. The Nikkei in Tokyo was up 45 points at 13,589 while the Hang Seng in Hong Kong was flat at 22,043. The Kospi in Seoul was also nearly unchanged at 1685 while the Straits Times in Singapore rose 14 points at 2969. The Shanghai Composite in China added 6 points at 2754 while the Taiex in Taiwan was down 14 points at 7534.
FIIs were net sellers of Rs7.03bn (provisional) in the cash segment on Friday while the local institutions poured in Rs3.06bn. In the F&O segment, foreign funds were net sellers of Rs632.8mn. On Thursday, FIIs were net sellers of Rs4.69bn in the cash segment. With this, they have pulled out more than $6.1bn from the Indian market this year.
Results Today: Ansal Infra, Asian Hotels, BEML, Bombay Dyeing, BPL, Deccan Chronicle, Gammon India, India Cement, Indo Rama Synthetics, Ispat, MMTC, Madras Cement, Matrix Labs, Pfizer, REI Agro, Sun TV, Trent, TVS Motor and Wyeth.
ANG Auto will consider buy back of shares.
US stocks slipped on Friday, as record-high oil prices, a weak dollar and more trouble for the financial sector continued to unnerve investors. The US market has now fallen nearly 20% from its 2007 high, marking an official entry into bear-market territory.
Crude oil hit a new intraday high of $142.99 a barrel, heightening worries about the impact of surging commodity prices on consumer spending. A survey by the University of Michigan revealed that consumer confidence slid further in June, nearly at a 50-year low.
The Dow fell 106 points, or 0.9%, to 11,346. With the last week's 4.2% loss, the Dow has now down nearly 20% since its Oct. 9, 2007, record high of 14,165. The blue-chip index is also on track for its worst month of June since 1930.
The S&P 500 index dropped 4.8 points, or 0.4%, to 1,278, while the Nasdaq Composite Index dipped 5.7 points to 2,315. The S&P 500, which most Wall Street experts use as a benchmark to gauge market's direction, is now off 18.1% from its high of 1,562 points hit on Oct. 10, 2007.
US stocks posted bigger losses in mid-afternoon trade, but managed to close off the lows. All three major gauges fell for the week.
US financial firms and credit markets continue to be in pain. Ratings agency Moody's said it may downgrade Morgan Stanley, citing big trading losses recently that have undermined confidence in the investment bank's risk management.
Personal income jumped 1.9% in May, and 0.4% excluding the stimulus payments. The 0.4% rise was in line with estimates. Income rose 0.4% in April. Personal income rose 0.8%, topping the forecast for a rise of 0.7%. The report's closely watched inflation component rose a smaller-than-expected 0.1%.
US light crude for August delivery reached a record high of $142.99 a barrel on the New York Mercantile Exchange before pulling back to settle at $140.21 a barrel, up 57 cents.
The national average price for a gallon of regular unleaded gas fell to $4.066 from $4.067 the previous day, according to AAA.
In currency trading, the dollar fell versus the euro and the yen. In the bond market, Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.96% from 4.03% late on Thursday.
COMEX gold for August delivery rose $16.20 to settle at $931.30 an ounce.
Palm lost more than 8.3% as the handset maker reported a worse-than-forecast 26% sales fall and didn't offer an outlook. Sony Ericsson warned of slowing demand for mid- to high-level phones. Ericsson shares fell 5.4%.
Merrill Lynch could post a $5.4bn second-quarter writedown, Lehman Brothers said, due to its exposure to bond insurers. That's more than currently expected. Merrill shares fell 1%.
In addition, AIG likely will take $5bn in quarterly losses from its insurance units, which have been hit by $13 billion in writedowns, according to published reports. AIG shares slipped more than 2%.
Micron Technology posted a wider-than-expected quarterly loss late on Thursday, despite higher revenue, due to pricing pressures. Its shares fell 12.7%.
Next week on Wall Street will be a curtailed one on account of the Fourth of July holiday. Markets will close early on Thursday ahead of the long weekend. Plenty of economic news is on tap, however, including reports on manufacturing, construction, factory orders and the labor market.
European stocks drifted to a new multi-year low on Friday. The pan-European Dow Jones Stoxx 600 extended Thursday's big fall with a drop of 0.4% to 287.34, with losses led by the technology sector after a warning by Sony Ericsson.
The UK's FTSE 100 ended 0.2% higher at 5,529.90. But most regional markets dropped. The French CAC 40 lost 0.7% to 4,397.32 and Germany's DAX 30 fell 0.6% to 6,421.91.
In the emerging markets, the Bovespa in Brazil gained 0.6% at 64,321 while the IPC index in Mexico rose 0.3% at 29,295. The RTS index in Russia was up 0.4% at 2318 and the ISE National-30 index in Turkey slid 2.28% to 43,343.
After a disappointing June series, bears greeted the July series with benchmark index tanking over 4.5% (provisional). Bears were in the ring right from the first minute. Weak global cues coupled with crude oil prices hitting an all time high triggered a sell off on the Indian bourses. Crude oil prices hit an intraday record of US$141.71 per barrel.
Further, rising inflation also added fuel to the sell off. India’s Inflation rate was at 11.42% for the week ended June 14. Market had expected inflation to be 11.22%. The wholesale price index rose 0.4% to 236.1 from 235.2.
The interest rate sensitive stocks like Banking, Auto and realty again were under immense selling pressure. Even, the Mid-Cap and the Small-Cap indices ended losing 2.5% each.
Finally, the BSE benchmark Sensex lost 619 points to close at 13,802 and the Nifty index lost 179 points to close at 4,137.
HT Media surged by over 4 percent to Rs101 as the company reportedly acquired 0.65% stake in real estate major Sunil Mantri Realty for Rs200mn. HT bought equity shares of Re1 at a price of Rs125. The company plans to use the funds for new projects. The scrip touched an intra-day high of Rs102 and a low of Rs92 and recorded volumes of over 5,00,000 shares on BSE.
Sun Pharma edged lower by 0.8% to Rs1333 after reports stated that the company has launched a hostile bid for Taro Pharma. The scrip touched an intra-day high of Rs1382 and a low of Rs1305 and recorded volumes of over 92,000 shares on BSE.
Jet Airways dropped by 5.2% to Rs490 after reports stated that the company may post Rs20bn loss in two years. The scrip touched an intra-day high of Rs509 and a low of Rs488 and recorded volumes of over 14,000 shares on BSE.
Cairn India advanced by 1.4% to Rs275 after crude oil prices hits all time high of US$141.71/bbl. The scrip touched an intra-day high of Rs282 and a low of Rs267 and recorded volumes of over 23,00,000 shares on BSE.
Allcargo Global rose 2.5% to Rs825. The board of directors of the company said that it deferred the decision on sub-division (split) of nominal value of equity shares of Rs10 each. They have also recommended final dividend of 30% (Rs3 per share). The scrip touched an intra-day high of Rs825 and a low of Rs751 and recorded volumes of over 43,000 shares on BSE.
Bafna Pharmaceuticals started trading at Rs43.7 against the issue price of Rs40. The scrip finally closed at Rs38.50 translating slipping below its issue price of Rs40 per share. It hit an intra-day high of Rs47 and a low of Rs37.3 and recorded volumes of over 2,00,00,000 shares on BSE.
The company offered 64,00,000 equity shares of Rs10 each for cash at premium of Rs30 per share. The issue to the public constituted 40.05% of the post issue paid-up capital.
The Chennai-based Bafna Pharmaceuticals is engaged in the manufacturing of betalactum and non-betalactum pharmaceutical formulations in tablets, capsules and liquid forms. The company manufactures 126 formulations under various therapeutic segments such as anti-infective, cholesterol lowering agents, analgesic and antipyretic, antihelmintics, appetite stimulants, cough & cold preparations, antiulcerants anti diabetic and vitamins .
The proceeds of the issue would be utilized towards brand building exercise in domestic market. It intends to register the company, products and create brand in international markets. Bafna would also strengthen up R&D facility at its grantlayon plant besides getting MHRA certification. It is also proposing to retire high-cost debts through the IPO proceeds.
Anant Raj Industries advanced by 5% to Rs142 after the company announced that that M/s. Acacia Real Estate Ltd, a Bahrain based development fund has entered into a joint venture agreement with the company to acquire minority stake in one of its wholly owned subsidiary, Anant Raj Projects Pvt Ltd for Rs2.16bn.
The scrip touched an intra-day high of Rs153 and a low of Rs126 and recorded volumes of over 59,000 shares on BSE.
Renuka Sugars has slipped by 1.5% to Rs107. The company announced that it commenced production at its Haldia Sugar Refinery, having a refining capacity of 2000 metric tons sugar per day and Power cogeneration plant of 15 MW.
The scrip has touched an intra-day high of Rs107 and a low of Rs105 and has recorded volumes of over 3,00,000 shares on BSE.
Unitech plans to dilute 26% stake in its telecom arm to a foreign company. (TOI)
Reliance Industries may tie up with BP or Shell for bidding for new oil blocks under NELP VII round.(ET)
Daiichi Sankyo may sell debt to raise half the cost of its US$4.6bn acquisition of Ranbaxy Laboratories.(BS)
India’s crude oil production rose by 3.2% in May on back of better performance by ONGC.(FE)
Jupiter Biosciences acquires a facility of Merck in Switzerland and signs a five year agreement for its peptide products with the latter’s biosciences company.(BL)
Apollo Tyres launches capacity expansion at its Africa plants.(BL)
ONGC to start commercial production from Jaria-Parbatpur block by early 2009.(BL)
SAIL plans to run its own fleet of vessels in partnership with public as well as private players to ship imported cooking coal.(ET)
Unitech plans to invest Rs40bn in hospitality business in the next five years.(DNA)
China-based Dongfang Electric Corp. may tie up with BHEL or L&T for its proposed manufacturing unit in India.(ET)
Kingfisher Airlines receives an in-principle approval from ICICI Bank for a Rs10bn loan facility.(ET)
ONGC Videsh decides to surrender its Qatar block as reserves are low and not commercially viable.(BL)
M&M arm FirstChoice Wheels plans to invest Rs2bn in the next five years for its expansion.(TOI)
GMR Group plans to create holding firms for its three primary businesses and list them overseas.(Mint)
Food and grocery retail chain Subhiksha to invest Rs12bn by 2010.(BS)
Holcim divides the operations of its two companies, ACC and Ambuja Cements India, into three regions.(ET)
Essar group plans port terminal for LNG and a container cargo facility and depots.(Mint)
Cairn India and ONGC have nearly finalized the plan for joint development of Ambe and North Tapti offshore marginal gas fields on the Gujarat coast.(BL)
AT&T is likely to buy 74% stake held by Maxis Communication in Aircel.(ET)
Subhiksha Trading Services, which runs country’s largest food & grocery discount retail chain, acquires majority stake in Chennai based Blue Green Constructions and Investments.(BL)
Future Group plans to split Big Bazaar into two entities.(ET)
Duncan Tea has tied up with Essel Group’s portal itzcash.com for online retailing of tea.(ET)
Reliance Retail is planning to open a chain of specialty stores of retail mobile phone handsets across the country.(ET)
Higher crude oil prices could cause fuel subsidy bill to reach Rs3tn this year.(BS)
DoT scraps plan to auction 3G spectrum for CDMA players.(BL)
Railways to increase freight rates to offset diesel price hike.(BS)
PSU oil companies to raise ATF prices by Rs3,000/KL from July 1, 2008.(ET)
Hotel tariffs in five and four star segments may be soon revise downwards as economy heads for a slowdown.(BS)
TRAI to study long term spectrum availability to see whether there is space for new players.(FE)
It would not be possible for India to maintain 9% growth in current fiscal due to rising inflation, says Planning Commission Deputy Chairman.(BS)
Railways to increase discounts on empty-flow direction freight from 30 to 50%.(ET)
Accounting regulator ICAI says firms would have to provide for FCCB redemption premium in their books over life of instrument.(FE)
Government may temporarily ban export of cotton.(ET)
Tyre makers mull 7% price increase due to rising input costs.(BS)
Implementation of commodities transaction tax is likely to be delayed to end of year or next year due to rising inflation.(BS)
Ministry of renewable energy announces a generation-based incentive of 50 paise per unit of electricity for investors who do not have access to the benefits of accelerated depreciation.(ET)
Sunday, June 29, 2008
The initial public offer of Birla Cotsyn India may not be suitable for conservative investors. The execution of the project could result in a significant ramp up in revenues and earnings.
While integrated textile mills are the way forward, the lack of a relevant earnings track record and uncertainty regarding the likely offtake for the newly installed capacities, peg up risks.
The scale of the project would impose a significant strain on the balance-sheet in the near term, with the equity base alone expanding seven-fold following the issue.
Investors can wait for further clarity on the execution front and the demand situation before considering investment.
At the upper end of the price band of Rs 15-18, the stock trades at 7 times its annualised FY-08 earnings, not factoring in the expansion in equity base. With textile stocks out of favour, stocks of several larger integrated players are now available at lower valuations in the market.
Birla Cotysn is raising Rs 144 crore through this IPO to partly fund an ambitious expansion project to set up an integrated textile facility from spinning to apparel.
Initially engaged in cotton ginning, the company took over a synthetic spinning facility from a group company in 2006.
This helped revenues and profits jump manifold. As of December 31, 2007, the company had a revenue base of Rs 60 crore and profits of about Rs 2.5 crore. Given the change in business, the financial track record upto August 2006 is largely irrelevant.
This project, conferred “mega project” status by the Maharashtra Government, will be executed in three phases.
The first phase involves setting up of a 36,000-spindle cotton yarn facility and modernisation of the existing synthetic yarn facility. Full capacities will go on stream by December 2008. The second phase involves setting up an open-end spinning facility and will be fully operational shortly.
The third phase involves setting up of a fabric processing facility capable of processing 50,000 metres of fabric a day. This is expected to go on stream by July 2009. Besides this, the company also plans to foray into apparel manufacturing and retail.
Starting from scratch
The expansion is on an ambitious scale and could well change the nature of the business, if it successfully makes the transition from a cotton ginner to a fully integrated textile player.
The company’s existing facilities operate on a significantly smaller scale and the company is being built virtually from scratch at this point.
Fully integrated facilities with capabilities to market a wide variety of yarn — from polyester and blended yarn to pure cotton yarn — could stand the company in good stead over the long term. Successful execution of the project can result in a manifold jump in revenues and profits.
However, in a fragmented industry with low differentiation and uncertain demand conditions in the export market, significant offtake is not guaranteed.
The project could also pose considerable strain on the company’s financials. High interest and depreciation costs in the near term could curtail the company’s ability to service a substantially higher equity base.
A sustained rise in cotton prices (prices have risen nearly 40 per cent in the last four months) will not augur well for margins in the yarn segment either.
The offer opens on June 30 and closes on July 4. The lead manager is Allbank Finance.
Increasing spends on oil exploration and production activities, driven by the surge in global crude oil prices, have put Aban Offshore, the country’s largest offshore oil rig service provider, in a sweet spot. Investors looking to play the high oil price scenario can consider investments in the stock at current market price. Aban’s large and relatively young fleet with an optimal mix of short- and medium-term rig contracts lend it strong revenue visibility over the medium term.
Besides, the current market valuation also makes a compelling case for fresh investments in the stock. At the current price of Rs 2992, Aban trades at about nine times its likely FY-09 per share earnings on a consolidated basis.
Investors, nevertheless, may need to temper their expectations on the returns front given the volatility in the broader market.
Strong demand environment
The surging oil prices combined with the tight supply of rigs worldwide, are likely to keep the demand and, hence, rentals for oil rigs upbeat over the next year. Aban Offshore, with a fleet size of over 20 assets, appears well-placed to reap the benefits of this strengthening demand trends in the offshore industry. Besides, with a pool of assets that is the largest among the Indian offshore service providers and even compares favourably against some of its global peers, Aban appears the best investment bet in the sector. While there are concerns that rising charter prices for oil rigs may begin to taper as new capacities hit the market this year, Aban may remain relatively shielded from any such moderation in rig rentals. This is because it has a healthy mix of medium- and short-term contracts for its rigs.
While the short-term contracts may suffer from the softening trends in rentals the company’s medium-term contracts that have been sealed at attractive rates would continue to rake in sufficient cash flows over the next few years. That the earnings visibility that Aban enjoys is mainly attributable to the medium-term horizon of its contracts only reiterates this.
Addition of rigs
The company proposes to further add to its existing rig capacity; four jack-up oil rigs are scheduled to be delivered to Aban over the next year or two. Besides that, Aban recently added semi- submersible rig “Bulford Dolphin” for a consideration of $211 million. Renamed ‘Aban Pearl’, this rig is currently under repair and is expected to be ready for use in a couple of months.
With the demand for deep offshore drilling expected to remain high, this rig is likely to get contracted at competitive rates. Aban’s other two drill ships — Aban Abraham and Deep Venture (50 per cent stake) — which have been deployed at attractive rates also lends credence to the firm rental trends in deep-sea offshore drilling.
The company had in 2006-07 acquired the Norway-based Sinvest ASA at about $2.2 billion. While that had vaulted Aban into the league of the top ten offshore rig players in the global arena, thanks to Sinvest’s global clientele and large pool of assets, the acquisition also burdened the company with a lot of debt.
Aban proposes to retire a significant chunk of this debt by listing its Singapore subsidiary. The refinancing of its debt structure by listing the subsidiary would help prop up Aban’s earnings. However, the same has been put on the backburner, considering the waning appetite for primary market offers globally.
Till such time, the debt burden would continue to eclipse the company’s earnings growth over the next two-three years. This, however, is no cause for immediate concern since Aban’s assets (both the current ones and the new assets that are likely to become operational in the current fiscal) may generate sufficient cash flows to service its debt.
On a standalone basis, the company’s overall performance for the year ended March 2008 continued to be on a strong footing. Aban reported a 31 per cent increase in revenues and 58 per cent growth in profit. Operating profit margins expanded by two percentage points to over 52 per cent.
However, on a quarterly basis, Aban’s profits dipped by about 29 per cent due to higher costs and interest expenses. The consolidated numbers of the company, however, are still awaited.
In terms of risk, any delay in either the delivery schedule of rigs or in deploying them, significant drop in rig rentals and lower-than-expected utilisation rates for the rigs pose a downside risk to Aban’s business.
The current valuations of Mundra Port and Special Economic Zone (Mundra) provides a good opportunity for investors to take exposure to an infrastructure segment that holds huge potential for development.
Mundra, with the unique advantage of a special economic zone in its vicinity, has not only clocked healthy cargo volumes in FY-2008 but also made good progress in its effort to offer port-related services that could fast track earnings growth.
The stock has fallen 60 per cent in 2008 to Rs 495 now trades at 19 times its expected per share earnings for FY-10. The valuation is attractive, given the huge business potential in the port sector and the absence of a ports business in the listed space. Invest with at least a three-year perspective and consider adding the stock in small lots, to take advantage of any gyration in the price as a result of broad market volatility.
Stability in revenue flows
Long term contracts with users have helped Mundra gain some assurance in the cargo volumes handled by the port. Over 50 per cent of Mundra Port’s projected volume for coal is expected to flow from agreements with Adani Power and Tata Power — two 4,000 MW imported coal-based power plants to be set up in the region. More coal volume can be expected from the power plants that are expected to come up in the western region. Coal, which accounts for about 14 per cent of the current cargo mix, can therefore be expected to contribute a higher proportion.
Mundra has also entered into contracts with IOC and HPCL for providing single-point mooring facility for crude oil transport. More recently, it has also inked an agreement with Maruti Suzuki for setting up a dedicated car export terminal with an initial capacity of 2,50,000 cars with further capacity increase in the offing.
These contracts not only provide stability to revenues over the long term but also aid in better planning of surplus capacity that can be handled by the port for other customers.
Mundra, a non-major port, is blessed with a deep natural draft and large waterfront for future development.
The inability of major ports in the region to handle high traffic has also benefited Mundra, given its locational advantage. However, with ports such as JNPT and Mumbai Port Trust expanding their container terminals, Mundra could face the risk of pricing pressure.
This potential threat appears to have prompted Mundra to offer port-related value-added services as a service differentiator in relation to other ports in the region. A part of the IPO proceeds has already been invested in subsidiaries (which are now wholly-owned) to develop container road business and inland container depots. The rail-linked container depot business has acquired land in 14 locations for this purpose and also secured notification for one depot. The logistics subsidiary (Adani Logistics) has two rakes in operation with the management planning to take the number to 20 by FY-2009.
We believe these services could provide strong support to Mundra’s core port operations, thus enabling the company to offer integrated services under one head.
While the current business is likely to provide sufficient volume for existing players, the real challenge could be when other private ports with equally well-planned integrated services also come into operation.
Upfront income from SEZ
In line with a change in its accounting policy, Mundra has started recognising non-refundable upfront premium against lease/sub-lease of land in the year of agreement as against the earlier policy of accounting over the lease period.
In the current year, it recognised Rs 52 crore of such income from 155 acres of land. As a result, income from the SEZ segment has seen a jump. This also means that over the next two-three years when the company would continue to enter into fresh agreements for lease, income by way of such premium would add to the revenues.
The over-6,700 acres of notified SEZ area is likely to provide robust lease income given the logistics advantage and tax concessions that port based industries would enjoy by setting up units in the region.
This would, in turn, feed traffic for the port. However, the lease income would come from industries and not residential/commercial projects. Hence the realisations could be lower than other typical real-estate projects.
For the year ended FY 2008, Mundra’s sales grew 41 per cent to Rs 817 crore. Net profit however grew by only 14 per cent. The muted growth in profits was a result of increase in the deferred tax component (the deferred tax holiday reversal period was reduced from 15 years to 10 years as the company availed benefit under Sec 80IAB).
Operating profit margins, however, surged by 11 percentage points to 65 per cent. A better product mix from crude and container volume aided the margin improvement. Crude oil volumes, for instance, grew 97 per cent in FY 2008 on a Y-o-Y basis.