Brokerage Recomendations

Kesoram an Outperformer, tgt Rs 650: Anand Rathi
The CMP of Rs 541, the stock trades at FY08 and FY09 estimated �� P/E of 7.2x and 6.7x respectively.
EV/EBITDA of 5.7x and 5.4x respectively. EV/ton of USD 84 and USD 91 respectively (cement division). Based on the quick estimates, we arrive at a fair value of Rs 650. At the fair price, the stock would trade at a P/E of 8x FY09E and EV/EBITDA of 6.2x. We rate the stock an OUTPERFORMER, with a target price of Rs 650. Risk & Concerns Delay in commencement of planned capacities owing to project execution risk.
With the bulk of incremental capacities coming on stream by FY10, utilization levels are expected to fall. This would bring down cement prices, squeezing earnings of cement companies. A spurt in prices of rubber, the key raw material for tyres, would hit the profitability of the division. Imports of cheaper tyre remain a threat to the tyre industry.

 

 

 

Buy Sasken Communication, target Rs 495: Motilal Oswal
While ongoing consolidation in the telecom sector would keep growth muted in FY08, we expect Sasken's strong positioning in the sector to help it capture significant deal flows post FY08. We expect product business to pick up in 2HFY08 with greater royalty revenue from new launches. The stock has corrected sharply over the last 2 months, falling nearly 77% from it 52 week high of Rs624, currently trading at 15.6x FY09E estimates. We maintain buy with a reduced target price of Rs495, an upside of 40% from current levels.

 

 

 

Buy RIL, target Rs 2118: Merrill Lynch
Merrill Lynch is bullish on Reliance Industries (RIL) and has maintained buy rating on the stock with target price of Rs 2118.

 

 

 

Buy Aban Offshore, target Rs 3530: Citigroup
Our target price for Aban of Rs3530 is based on 8x fully evolved consolidated earnings, which we expect to be achieved by FY10E, discounted back by one year. The target multiple is in line with global peers as we believe that Aban should trade in line with these companies. Although it is smaller in size, it has a long and good track record in the offshore space and of managing new acquisitions and deploying them. As a cross-check, the stock would trade at a price/cash earnings of 6x FY10E on our target price, in line with the target multiples of global peers.

 

 

 

Buy Hindustan Unilever, target Rs 254: Citigroup
HUL's fairly steady stream of earnings makes P/E a good tool to value the stock. Our target price of Rs254 is based on what we think is a conservative multiple of 27x 2008E P/E, at the mid-end of the stock's historical trading band of 20-35x, over the past 8 years. We choose mid-end as we expect a re-rating for the stock given that its operating parameters are improving. We do not use a top-end multiple, as competitive intensity has increased over last few years and the environment in which HUL operates is not as conducive as before. At 27x P/E, HUL would trade at a 40% premium to the Sensex. The company has historically enjoyed more than a 100% premium to the Sensex owing to its high capital-efficiency ratios and consistent earnings growth.
However, we do not expect the stock to re-trace to its historical high premium, given that the company now operates in a different competitive landscape, with higher competitive intensity and a lower margin profile. On EV/EBITDA, we believe the stock should trade at 24x 2008E EV/EBITDA, which gives a fair value of close to Rs250. The stock's trading band has been 20-30x over the past three years.

 

 

 

Buy Kirloskar Oil Engines; target of Rs 524: Bajaj Capital
On the basis of our research, we feel that this is a good stock to buy at the current market price of Rs. 317.95. If everything goes well, the price is likely to appreciate to Rs 524, within 12-18 months, translating into a gain of about 65%.

 

 

 

Accumulate Syndicate Bank, says KJMC
During F.Y 06-07, Syndicate bank witnessed robust business growth of 45%, however, margins remained under pressure due to significant rise in cost of deposits. During Q1 FY 08, bank registered reasonable business growth as well as profitability. However we believe that bank needs to focus on generating other income and also increase CASA deposits to control rising cost of deposits. Bank has aggressive plans to raise capital including a FPO during this fiscal year to fund business growth and also meet capital adequacy requirements.
Bank has expressed its willingness to grow inorganically if appropriate opportunity is available. At CMP of Rs.86, bank's stock is trading at P/E of 6.2x and P/Adj BV of 1.4x on F.Y 07 EPS and Adj BV respectively. Amongst PSU banks, Syndicate bank's stock is available at lowest valuations after Allahabad bank. Bank's stock has underperformed Bankex as well as Nifty. However, considering banks potential to leverage on its scale of operations, improving performance and future plans, we recommend, "Accumulate" on the stock.

 

 

 

Buy Ranbaxy Labs, target Rs 492: Merrill Lynch
We recommend a Buy with a PO of Rs492/share implying potential upside of 18%. Our recommendation is driven by a forecast robust 27% EPS CAGR (CY06- 08E) given higher visibility in scale-up of international operations and US products/R&D milestone upsides. Our PO includes Rs30/sh for Lipitor's early entry into the US. Risks to our PO: regulatory delays in product launches, litigation risks, higher than expected US generic pricing pressure, prolonged FDA manufacturing issues and EU healthcare reform pressure.

 

 

 

R Comm, Bharti Airtel, Idea outperformer: Macquarie
Bharti continued to lead in terms of subscriber addition, with net adds of 2.05m subscribers in August. This compares with 2.06m subs added in July, 1.96m in June and 1.85m in May. Bharti's total subscriber base now stands at 46.8m (up 4.6% MoM and 82.5% YoY growth). With another strong month, Bharti improved its GSM market share to 32.7% in Aug-07 from 32.6% in Jul-07.
Idea Cellular witnessed a flat MoM addition, with net adds of 0.87m subs in Aug-07 compared to 0.88m in Jul-07 and 0.86m in Jun-07. Idea's subs base now stands at 17.9m (up 5.1% MoM and 83.6% YoY). Record performance in Andhra Pradesh and Kerala helped the numbers for Idea for the month.
Vodafone Essar also posted flat MoM net additions adding 1.68m subs. This compares with net adds of 1.69m subscribers in Jul-07 and 1.54m in Jun-07. Vodafone again added more subscribers than any other operator in the 16 circles in which Vodafone has a presence (in its addressable market). Its subscriber base now stands at 34.1m (up 5.2% MoM and 76% YoY).
BSNL registered an improvement in performance, with August net adds of 0.73m subscribers. This compares with 0.56m added in July and 0.43 in June. BSNL's subs base now stands at 29.7m (up 2.5% MoM and 48.1% YoY).
Spice Communication's pace of subscriber additions continued to slow. Its net additions for August fell to 0.11m. This compares with net adds of 0.12m in July, 0.16m in June, 0.19m in May, 0.09m in April and 0.15m in March. We believe the strong performance in the previous months was more of an exception and unlikely to be repeated.
Aircel (Maxis) had a strong month, adding 0.46m subscribers primarily due to record net additions in the Bihar circle. Aircel's total subscriber base now stands at 7.62m (up 6.4% MoM and 111.6% YoY).
We expect the subscriber additions run-rate to accelerate further in the coming months. We reiterate our Outperform ratings on RCOM, Bharti Airtel and Idea Cellular. RCOM is our top pick in the Macquarie Asia Pac telecom universe.

 

 

 

Buy Zee Ent, target Rs 354: Citigroup
We are valuing Zee on a P/E multiple. We believe that P/E is the appropriate valuation methodology, given Zee's stable earnings stream and low capital intensity of the business. We use a 30x P/E multiple which returns a value of Rs354 per share. Our 30x target multiple is at the higher end of the historical trading average, which we believe is warranted given that fundamentals are looking up as channel ratings are improving. Our target multiple of 30x factors in: a) an improving EPS growth profile due to a pickup in advertising and pay revenues; b) higher ROE and free cash flow profile of Zee on account of demerger of distribution businesses; and c) maintaining a relative premium to the Sensex.

 

 

 

Buy Nava Bharat Vent, tgt Rs 262: India Capital Mkt
Valuation & Recommendation SOTP valuation indicates a 45% upside At the current market price of Rs 178 NBVL is trading at 6.9x FY08E earnings of Rs 25.9 and 4.9x FY09E earnings of Rs 36.3. With robust expansion plans in the power segment and expected revenue CAGR of 33% over the next 2 years, we are extremely positive on growth visibility. As per SOTP valuation – (based on FY 2009 earnings estimate), we recommend a buy with target price of Rs 262.

 

 

 

Buy Ranbaxy Labs, target Rs 500: Sharekhan
Ranbaxy has been fighting Pfizer Inc, the innovator of the world's largest selling drug, Lipitor, in several countries across the world. The unfavourable ruling received in Canada has come as a major setback to Ranbaxy in its battle for launching generic Lipitor in various markets across the world. However, we remain optimistic on the company's ability to receive a favourable ruling on all the four patents in its appeal in Canada. At the current market price of Rs417, the stock is trading at 23.6x its CY2008E earnings. We maintain our Buy recommendation on the stock with a price target of Rs500.

 

 

 

Buy Vesuvius India, target Rs 250: Anand Rathi
So broad demand potential and outlook for refractories is very attrcative. Company is performing very well and growing steadily, with rising demand from steel industry. The Dec'06 results appears poor due to exceptional write offs of past bed debts to the extent of Rs 8.7 Crs. In current year company is doing well and we expect company to improve performance further in second half, as per industry trend, when demand for its products remains high. With improving capacity utilization, margins are likely to go up further. Stock is available at less then 10X for '08 earnings, which looks very attractive for a hitech MNC company, in growth phase. BUY.

 

 

 

Buy KLG Systel, target Rs 657: India Capital Market
KLG anticipates tremendous potential in this product, to an extent of expecting revenue's from this single product outmatching its existing total revenue from other product & services. Valuations KLG currently trades at P/E multiple of 32 & EV/EBIDTA multiple of 15.18 on FY07 earnings. With an upward potential of more than 36%, we set a target price of Rs 657, recommending a BUY.

Morgan Stanley overweight on Reliance Industries; target price Rs 2,522

Morgan Stanley has come out with a report on reliance Industries on the news of fixing of gas price in KG Basin by the EGOM. The report is as follows:

EGOM (Empowered Group of Ministers) has come out with a circular on gas pricing which will enable Reliance (RELI) to sell gas at a well head price of US$ 4.2/mmbtu at a crude oil price of US$ 60/bbl and above. In our view, this is a positive for the industry as it removes the uncertainty on gas pricing and it provides a benchmark for all new gas discoveries. The removal of uncertainty on RELI's gas pricing should be a positive for the stock.

However, there are a few unaddressed issues:

1) Gas prices are decided for the first five years, but the circular does not suggest what happens to pricing thereafter. Industry feedback suggests that there are two possibilities: a) 5% escalation in gas prices every five years; or b) gas pricing being linked to inflation with a reset clause every five years.

2) The circular doesn't mention the dollar parity assumption for the gas pricing. We see the following possibilities: a) current exchange rates; or b) a fixed exchange rate, with or without annual revisions. An earlier EGOM report had suggested an exchange rate of Rs 45/US$ 1, but the EGOM circular that gives a dollar-denominated gas price is silent on this issue.

We have assumed a flat weighted average price of US$ 4.17/mmbtu for the entire life of RELI's gas fields (without any escalation). The weighted average price calculation assumes that RELI sells 40mmscmd of its gas to RNRL/NTPC at US$ 2.75/mmbtu and 86mmscmd at GoI-determined prices to calculate the weighted average price of gas. We have valued RELI's E&P business at Rs 811 per share on the basis of the above assumptions.

There are four possible valuation scenarios for RELI's E&P business as a result of the EGOM's unclear stance on the exchange rate and escalation clause.

1. Fixed Exchange Rate

a) At the government's proposed price of US$ 4.2/mmbtu and assuming a Rs exchange rate of Rs 45/US$ 1, the weighted average price for RELI's gas would come to US$ 4.1/mmbtu. At US$ 4.1/mmbtu and without considering any escalation in gas pricing, we would value RELI's E&P business at Rs 789 per share.

b) However, assuming escalation of 5% in gas prices, the weighted average price for RELI's gas would be near our gas price assumption and we would value RELI's E&P business at Rs 836/share.

2. Current Exchange Rate

a) Considering the current exchange rate of Rs 40.3/US$ 1 without any escalation, the weighted average price of gas would equate to US$ 3.8/mmbtu and we would value the E&P business at Rs 705 per share.

b) However, assuming escalation of 5% in the gas price from current exchange rates, we arrive at a value of Rs 748 per share for the E&P business.

We believe that, since the gas prices mentioned in the circular are dollar-denominated, RELI's gas price realization will most likely be determined based on actual exchange rates. As far as we can see, RELI requires no further government approvals to sell its gas.

Consensus View:

Investor feedback suggests that the consensus is valuing RELI's E&P business at Rs 250-300 per share and see a strong probability that the consensus valuation will double going forward.

Issues for Other E&P Players:

At the US$ 4.2/bbl, the gas price equates to US$ 30/bbl of crude oil prices. The government allows a free gas pricing policy for production from fields awarded under the NELP (New Exploration and Licensing Policy) rounds. Hence, a cap on gas prices at US$ 60/bbl of crude oil prices would be a potential deterrent to new entrants in NELP-VII round. Should oil prices rise to US$ 100/bbl, operators would want the gas prices to be raised. However, yesterday's step by the government to allow gas prices to move towards global average levels is a clear positive move for the industry, in our view.

The RNRL/NTPC case with RELI on gas pricing will not be impacted by this circular, but we believe that, going forward, this circular will be a benchmark for the Indian Courts (currently the matter is sub judice with the Indian courts) as well.

We maintain our Overweight rating on RELI stock with a price target of Rs 2,522 per share. Our price target is based on a sum-of-the-parts valuation.

1) The R&M business valuation is based on an average one-year forward EV/EBITDA multiple of 7.6x for the US and Asia R&M (ex India).

2) The Petrochemical business valuation is based on an average one-year forward EV/EBITDA multiple of 9.0x for global comps.

3) RELI's 75% stake in Reliance Petroleum Industries (RPL, Rs130) is valued at our price target of Rs 120 per share.

4) Pending further clarity on the exchange rate and escalation issues highlighted above, we maintain our valuation of RELI's E&P business unchanged for now. With the first oil production just one year away, we use a P/E target multiple-based valuation for RELI's E&P business. Global E&P companies are trading at an average P/E of 11x F2010E earnings (calendar 2009E). To this, we apply a 14% discount YoY over one-and-a-half years, since the first oil is one year away and we think steady-state earnings from the E&P business are a year and a half away, to arrive at a target P/E multiple of 9x. We expect the E&P business to generate US$ 3.5 billion of profits over F2010-15, and we arrive at a fair value of US$ 31.5 billion, or Rs 811 per share, for this E&P business.

Key risks to our price target include a possible slowdown in global economic growth that could compress margins; a delay in execution of RELI's business plan; and the stock's historical correlation with the market.

Merrill Lynch: Structural shift in the macro-economic fundamentals make the things favourable for investing in India

There is little value in China and India on the surface, with PEs of 17-18x. But there is excitement in them. While the US grows at 1.5-2%, and Taiwan grows at 3-4%, China and India are forecast to grow at 9-10% over the next five years. So where do you buy?

Decoupling of Asian markets from US has been a big theme for the past few months in particular. As the data is suggesting the ML decoupling hypothesis has proved right and we are seeing a divergent trend in stocks markets also.At the same time another decoupling theme is also worth examining. The Asian giants India and China might also be decoupling from other emerging markets in their growth trajectory. We take a look at the growing relevance of growth themes like India and China over value proposition.

Investors prefer growth

India and China (against India or China) are the economies where the investors are focusing at present. Since the credit market problems shook global stock markets, China's stock market has held up. Chinese shares are 38% higher than they were when the problems started. India is though about 1.5% down than its July peak, year-to-date foreigners have net bought about USD9bn worth of shares in India.

Remember Chinese A-shares are all but closed to foreign investors, so even if they are in risk-reduction mode globally, they have almost nothing to sell there, as against Indian stocks markets which are open to foreign investors. Implying, that global investors are increasingly making their own decisions about where to put their money, instead of sheepishly following benchmarks. It appears they are making their own calls, by identifying areas of growth. India's growth is forecast to be twice that of Taiwan or Korea, this year and next.

Thus, the key is simply which countries will continue to register the strongest growth, because growth is what investors want to buy.

Buy Ranbaxy; price objective Rs 492: Merrill Lynch

Merrill Lynch has come out with a report on Ranbaxy Labs. The research firm has maintained buy rating on Ranbaxy with price objective of Rs 492.

The Canadian Federal Court today dismissed Pfizer's application for a prohibition order on the amorphous form of Lipitor ('455 patent) while ruling in favor of Pfizer on the crystalline form of Lipitor ('018 patent). Note that this ruling on Lipitor polymorph forms is different from the main Lipitor patent ('456 patent) which Ranbaxy is contesting on grounds of invalidity. Given the precedent of similar issue on Lipitor patents in Norway (Appeals Court overturning the lower Court ruling), we view the event as low risk for the main Lipitor patent verdict in Canada.

The Federal Court ruling on the main Lipitor patent (patent '546) in Canada is expected by year-end/early 2008. Ranbaxy already has received a favorable verdict for '546 patent invalidation from the lower court. A favorable appeals verdict is estimated which could result in Rs 3-5 EPS upside (14-23% upside) in CY08E.

The research firm estimates robust core earnings growth of 24% in CY07E and 32% in CY08E (Rs 21.5), driven by higher growth and EBITDA margin in the coming quarters from the US and emerging markets. Further, there is a possibility of 14-23%+ EPS upside in CY08E from generic Lipitor launch in Canada and possible unlocking of R&D value through spin-off. The stock trades at 19.4x CY08E EPS, 16% discount to its historic 1 yr P/E average.

The research firm recommends a Buy with a Price Objective of Rs492 per share implying potential upside of 18%. The recommendation is driven by a forecast robust 27% EPS CAGR (CY06-08E) given higher visibility in scale-up of international operations and US products/R&D milestone upsides. The PO includes Rs30 per share for Lipitor's early entry into the US.

Risks to the PO: regulatory delays in product launches, litigation risks, higher than expected US generic pricing pressure, prolonged FDA manufacturing issues and EU healthcare reform pressure.

Indowind Energy ends with 75% premium

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Kotak Securities: Sensex band seen at 14250-16750 over next 12 months; May not have seen end of subprime crisis

Sanjeev Prasad, Head Research of Kotak Securities says that there is not much upside seen from the current level for the markets and it can be seen in a band of 14250-16750 over the next 12 months. He believes that the US subprime problems are not over yet. In India he says that the political instability is likely to keep the markets under pressure. It may also impact the telecom, oil and gas policies.

Speaking on the sectors, Prasad says that we may not have seen the end of problems in real estate. They have a positive view on the infrastructure space, but says that the FMCG space may not report good numbers. The Indian IT sector is also likely to continue underperforming.

On media, Prasad says that they are not excited by it and the CAS rollout has been ineffective. Zee EPS is seen at Rs 11.50 for FY 09 and the stock looks expensive at these levels. On cement, he mentioned that the cement capacity utilisation will decline in FY09-10 and prices may come off. They are looking at 32 mt of new cement capacities in FY09 & FY10 each.

Sensex down by 10 pts at 15603; Nifty down 10 pts at 4518

Market off days high after jitters from Europe. Sensex ended down by 10 points at 15603. It slipped 220 points from the days high. Nifty ended down 10 points at 4518. It slipped 64 points from days high. CNX Midcap Index ended down 1%; hits new life time high during the day while BSE Small-cap Index ended down 0.76%. BSE Auto Index ended down 1%, IT, Healthcare Indices were down by nearly 0.75% each. BSE Realty Index ended up 1.6% and Bank Index was up 0.7%. NSE Advance Decline ratio stood at 2:5. Total market turnover was at Rs 66142.84 crore vs Rs 58078.09 crore on Thursday.

Indowind Energy listed today on the bourses, which closed at Rs 113.65 vs listing price of Rs 75 (Issue price of Rs 65).

Inflation for the week ended Sep 1 was at 3.52% vs 3.79%, market estimate was at 3.28%.

In currency market, Rupee depreciated by 7 bps at 40.485 (hits intra-day high of 40.434 and low of 40.5) while Yen depreciated by 10 bps at 114.93 (hits intra-day high of 114.53 and low of 115.39).

This week, Sensex and Nifty ended flat. CNX Midcap Index was up 1% while BSE Small-cap Index was up 1.7%. BSE IT Index was down 4.6% in which, HCL Tech was down 9.5%, Wipro was down 6.3%, TCS was down 5%, Satyam was down 4.5% and Infosys was down 3.5%. BSE Healthcare Index was down 1.1%, in which Cipla was down 4.5% and DRL was down 3.5%. BSE Metal Index was up 3% while Oil & Gas index was up 2.5%. Index Gainers were RIL, up 3.6%, REL, up 3.8% and Suzlon, up 6.3%. Midcap gainers were Marksans Pharma, up 40%, Time Tech, up 27%, MIC, up 25%, India Infoline, up 24%, IndusInd Bank, up 19% and Mercator Lines, up 16%. Midcap losers were Deccan Chronicle, down 20%, Rolta, down 14% and CboP, down 9%.

In derivatives market, Nifty futures discount was at 5 points vs 2 points on Thursday. Nifty futures added 25.7 lakh vs 21.7 lakh shares yesterday in OI. Nifty futures turnover was at nearly 25% of total FNO turnover. Fresh long was seen in Realty, Banking and Metals at the beginning of the day and some unwinding happened in last 1 hour.


Star Performers were India Info, Alok Industries, Ansal Properties and Purvankara.

Fresh Longs were seen in:
Realty: Purvankara, HDIL
Misc: India Info, Alok Industries, Sterlite, Cairn, Dabur


Fresh Shorts were seen in:
Mid Cap IT: Rolta, Nucleus Soft, Sasken Communication, 3i Infotech
Misc: IDFC, TVS Motor, BOI Arvind Mills

Short Covering was seen in:
Realty: DLF, Ansal Properties
Banks: Karnataka Bank, IndusInd Bank
Misc: India Cements, Karnataka Bank

Long Unwinding was seen in:
Misc: Bongaigaon, TTML (In F&O Curb), Nagarjuna Fertilizers (In F&O Curb), Oswal Chemicals (In F&O curb)


Today's losers were Bongaigaon Refinery, Nagarjuna Fertilizers, Chambal Fertilizers, Manali Petro, Deccan Chronicle, KPIT Cummins, Infotech Enterprises, Rolta and WWIL

Small-cap, mid-cap shares hog limelight

The market ended flat in most of the trading sessions last week. The market absorbed global as well as domestic shocks in the week. Trading had begun in the backdrop of a sell-off in US stocks on Friday, 7 September 2007, after data showed US firms cut 4,000 jobs last month. The market also largely shrugged off weak industrial production data for July 2007 and a renewed threat from the left parties over nuclear deal before. Sensex rose in 2 out of the 5 trading sessions in the week.

BSE Sensex rose 13.38 points or 0.09% to settle at 15,603.80 in the week ended 14 September 2007. The S&P CNX Nifty rose 8.5 points or 0.18% to 4,518 in the week.

Small-cap and mid-cap shares were in demand. BSE Small-Cap index rose 139.24 points or 1.65% to 8,572.76 in the week. BSE Mid-Cap index rose 43.35 points or 0.66% or to 6,897 in the week.

The other sectoral indices BSE Auto index (down 4.36 points or 0.09% to 4,885.47) and BSE IT index (down 210.56 points or 4.52% to 4,659.70) edged lower. While, BSE Bankex ( up 40.42 points or 0.5% to 8,136.11), BSE Capital Goods index ( rose 0.65% or 88.32 points to 13,701.56), BSE Realty index ( up 502.48 points or 6.73% to 7,972.75) edged higher.

The BSE 30-share Sensex rose 6.41 points or 0.04% at 15,596.83 on Monday, 10 September 2007. The market had opened on a weak note following a sell-off in US stocks on Friday, 7 September 2007, after data showed US firms cut 4,000 jobs last month, the first such decline since August 2003. It recovered all the lost ground to post marginal gains, on strong buying in index pivotals, especially Reliance Industries. However IT pivotals stayed weak, on fears of US economy heading towards recession. The market breadth was strong on BSE in contrast to initial weakness.

The BSE 30-share Sensex shed 54.06 points or 0.35% at 15,542.77 on Tuesday, 11 September 2007. The market saw trend reversal from initial firmness to end in the red. The sentiment turned nervous ahead of a key meeting of the government with left parties on the Indo-US nuclear deal. The market had opened on an upbeat note tracking steady global markets. A bout of volatility was witnessed in the second half of the day's trading. Domestic market underperformed its global peers.

The BSE 30-share Sensex declined 37.41 points or 0.24% at 15,505.36 on Wednesday, 12 September 2007. The market saw trend reversal from initial strength to end in the red. The market moved between positive and negative zone throughout the day. It first slipped in negative zone in mid-afternoon trade as data showing slower growth in industrial production raised worries about economic slowdown from a robust growth in the year ended March 2007.

The BSE 30-share Sensex gained 109.08 points or 0.7% to 15,614.44 on Thursday, 13 September 2007. The market broke its two-day loosing streak to post good gains, led by steady buying support for index pivotals. Turnover was high. Asian markets were mixed while European markets were trading lower.

The BSE Sensex declined 10.64 points or 0.07% to 15,603.80 on Friday, 14 September 2007. The market saw a sharp trend reversal as global credit worries resurfaced after a British mortgage lender issued profit warning, dragging all the European bourses which opened after Indian market, lower. The market had opened on an upbeat note tracking rally in US markets overnight.

IT pivotals edged lower after data released on Friday, 7 September 2007, showed US payrolls shrank in August 2007 for the first time in four years, raising fears that the world's largest economy was headed into a recession. They gained some ground on Thursday after the government extended the date for corporates to pay advance tax with respect to Fringe Benefit Tax liability, to 15 December 2007. The first installment was originally to be paid by 15 June and the second installment by 15 September.

India's third largest software services exporter Wipro declined 5.88% to Rs 450.25. Other IT pivotals Satyam Computers (down 4.24% to Rs 430.70), Infosys Technologies (down 4.12% to Rs 1830.30), and TCS (down 5.08% to Rs 1022.60) also declined. IT companies derive over 50% of their revenue from exports from US.

NTPC, the nation's largest power generation company, declined 0.8% to Rs 185.65. It signed a memorandum of understanding with Bharat Heavy Electricals to form a joint venture company. It would enable them work jointly to complement their respective strength and to carry out engineering procurement and construction (EPC) activities in the power sector.

World's sixth largest steel producer in terms of total steel production Tata Steel gained 2.25% to Rs 703.55 on reports that it is looking at building a 5-million tonne steel plant in South Africa. The company denied the report.

India's largest private sector company by market capitalisation and oil refiner Reliance Industries (RIL) rose 3.73% to Rs 2034.50 . It struck an all time high of Rs 2069.50 on Friday, 14 September 2007. It reached an agreement to acquire assets of Hualon, a leading polyester producer in Malaysia. This acquisition will bestow RIL with more than 7% global market share in polyester fibre and yarn.

The Empowered Group of Ministers (EGoM) headed by External Affairs Minister Pranab Mukherjee cleared Reliance Industries' (RIL) gas pricing formula on Wednesday, 12 September 2007. RIL had proposed to price gas at $4.33 per million British thermal unit (mBtu) or Rs 187.84 per mBtu. The EGoM made a few minor changes in RIL's gas pricing from the Krishna-Godavari (KG) basin by lowering the fuel price by 8.32% to $ 4.20 per mBtu or Rs 172.20 per mBtu at the prevailing Indian rupee-US dollar exchange rate. RIL is reportedly entering shipbuilding and dredging business with two separate companies. It plans to invest around $1 billion each in two companies.

India's second largest listed power utility company in terms of revenue Reliance Energy (REL) surged 3.79% to Rs 882.65. As per reports, Supreme Court has allowed the company to bid for the Rs 2600 crore Mumbai sea link project.

HDFC (up 4.07% to Rs 2216.85), SBI (up 2.06% to Rs 1,653.55), Bajaj Auto (up 2.26% to Rs 2,376.75) were the other major gainers from the sensex pack.

Motilal Oswal Financial Services settled at Rs 977.45 on the BSE on its debut on 11 September 2007, a premium of 18.47% over IPO price of Rs 825 (the top end of the Rs 725 - 825 per share price band). The scrip debuted at Rs 999, a premium of 21.09% over the IPO price.

Indowind Energy debuted at Rs 80.25, a premium 23.46% over the IPO price of Rs 65- the top end the Rs 55-65 per share price band. It settled at Rs 114.05 on the BSE, at a premium of 75.46% over IPO price of 65.

Securities and Exchange Board of India (Sebi) has initiated adjudication proceedings against 20 private and public sector companies for non-compliance with Clause 49 of the listing agreement. Clause 49 deals with corporate governance by companies listed on the exchanges. According to a Sebi release, of the 20 companies, five are public sector firms against whom proceedings have been launched for non-compliance with provisions relating to board composition.

Securities & Exchange Board of India (Sebi) on 11 September 2007, allowed foreign portfolio investors (FIIs) to submit foreign sovereign securities with "AAA" rating as collateral for derivatives trading. Initially, US government securities will be accepted as collateral.

India's exports of soyameal fell 80% to about 46,000 tonnes in August 2007 from 2.3 lakh tonnes in August 2006. The decline is due to low crushing and inadequate availability of ships because of demand from other commodities.

According to a statement by the Society of Indian Automobile Manufacturers (SIAM), domestic car sales in India improved 18% to 98,893 units in August 2007 over 83,864 units in August 2006. The rise was due to launch of new models and aggressive marketing. Sales of motorcycle fell 11% to 418,702 units in August 2007 from 470,955 units in August 2006. Sales of commercial vehicles (CVs) moved up 2.23% to 36,409 units in August 2007 compared with 35,268 units in August 2006.

The growth in Index of Industrial Production (IIP) dipped 7.1% in July 2007 compared with 13.17% in July 2006. The decline in growth is due to inventory problems and floods.

Prakash Karat, general secretary, Communist Party of India-Marxist (CPI-M), in a public meeting in Vishakapatnam on Saturday (8 September 2007) strongly criticised the nuke deal as the United Progressive Alliance (UPA) government has not mentioned it in the Common Minimum Programme (CMP). Hence, the UPA has to choose between the CMP or its allegiance to the US, he said.

The chief of the Communist Party of India (Marxist) (CPI-M) Prakash Karat renewed the threat by making a strong statement on Thursday, 13 September 2007, on ending support to the UPA coalition if it operationalied the nuclear deal with the United States.

NSE has decided to add realty major Unitech in S&P CNX Nifty in place of IPCL. The change will take effect from 5 October 2007. Due to the proposed merger of IPCL in Reliance Industries, trading in IPCL will get suspended and therefore the change in the index composition.

Annual inflation growth declined to a two-year low of 3.52% in the week ended 1 September 2007 from 3.79% in the week ended 25 August 2007, due to falling prices of pulses, vegetables, condiments and spices. Wholesale price index (WPI) stood at 5.34% in the corresponding week a year ago.

FDC leads gainers in 'A' group

Small-cap Pharmaceutical firm FDC soared 9.64% to Rs 32.40 and it topped the gainers in BSE's `A' group shares.

The mid-cap integrated textile maker Alok Industries jumped 5.68% to Rs 73.50. It came second among top gainers in A group. Earlier on 30 August 2007, the board of approval of the special economic zones (SEZs) approved Alok Infrastructure's proposal to set up a textiles SEZ at Silvassa, Gujarat. Alok Infrastructure is a wholly owned subsidiary of Alok Industries

Integrated steel maker Ispat Industries flared up 5.26% to Rs 20. It was the third biggest gainer in A group. As per recent reports, the company is planning to invest about Rs 10,000 crore within five years to ramp up domestic production, and is also planning to expand overseas through capacity expansion and backward integration.

State-run Corporation Bank advanced 3.55% to Rs 370.35 and came fourth among top gainers in A group.

Bangalore-based real estate developer Puravankara Projects was the fifth biggest gainer in A gruop. It rose 3.45% to Rs 374.35. As per reports, the company has tied up with Sobha Developers to bid for the Rs 9,250-crore Dharavi Redevelopment Project in Mumbai.

High turnover day

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Power Grid IPO receives tremendous response; Receives subscription worth1.9 lakh Cr

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IFCI may lose Rs 1,300 Cr bailout

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RIL to pump $ 2 bn into shipbuilding, dredging

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Godrej-L&T venture to bid for Dharavi project

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Power Grid IPO subscribed nearly 65 times

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Brokerage Recomendations

Buy Zee Entertainment; target of Rs 360: CLSA
Zee has renewed its focus on international markets where it licences its broadcasting rights. Although Zee broadcasts to over 120 countries, its key markets are Europe, the US, the Middle East and South Asia. Zee aims to improve its paid international reach – currently it is paid for 4.6m of the estimated 14.8m households that it reaches. Zee's renewed focus on improving its network distribution at home and abroad and its aim to be the leading generalentertainment channel provide upside potential to our 32% FY07-10CL earnings Cagr estimate. Maintain BUY.

 

Buy Tamilnadu Petro, target of Rs 28: ABN Amro
TPL is in advanced talks with a domestic investor who is willing to contribute up to 74% of the equity, based on which SEPC has written to Tuticorin Port Trust to restore the original land, expressing its willingness to pay the overdue lease rentals without arrears.
TPL has given a price breakout on a daily and weekly basis and the breakout has been accompanied with strong volumes signifying greater strength in the scrip.

 

CLSA bullish on Maruti Udyog; tgt Rs 980
CLSA has come out of a report on the Indian Auto market. The research firm has come up with a conclusion that a combination of lower penetration levels, improving affordability due to rising incomes and soaring aspiration levels point towards a higher volume growth trajectory for cars as compared to two-wheelers in coming years. CLSA has maintained positive view on four-wheelers as against the two-wheelers. Top pick of CLSA in the Indian auto sector remains Maruti on which they have recommended buy rating with target price of Rs 980.

 

 

 

Buy Ambuja Cement: UBS Investment
UBS Investment is bullish on Ambuja Cement and has maintained buy rating on the stock with target price of Rs 155.
Our price target is based on an EV/EBITDA multiple of 9x one-year forward – 10% lower than the current multiple. At our price target, Ambuja would trade at a PE multiple of 14.9x CY07E and 12.8x CY08E. Currently, GACM trades at EV/T of USD275 – a 60% premium to the Asian average.

 

 

 

Hold Kirloskar Brothers with a target Rs 570: Emkay
We estimate FY08E and FY09E consolidated EPS at Rs 21.9 and Rs 30.7 respectively. With large scale of operation and fully integrated business model in infrastructure pumping space, we believe that KBL would continue to command premium valuation over its peers. The scrip discounts FY09E consolidated EPS (Rs 30.7) 16x. We are positive on the long term prospects of the company and give hold recommendation with the target price of Rs 570. At our target price the stock discounts 18.5x FY09E EPS.

 

 

 

HSBC underweight on ABB; target of Rs 1178
We have revised our EPS by 10.3% and 9.3% to INR25.2 and INR37.9 for 2007 and 2008 based on the change in revenue by 7% and 8% for the same period. We have also introduced the estimates for 2009. Our estimates are 11% and 13% higher than the consensus estimates for 2008 and 2009 respectively. Based on our new estimates (49% profit CAGR growth over 2006-09e), and roll over to June 2008, we have increased our target price to INR1178 (earlier INR853). ABB India is trading at 35.2x 1-year forward earnings. We feel that all the positive upsides (and also high expectation in terms of delivery) are captured in the current valuation. Hence, we are downgrading our rating to Underweight from Neutral. At our 12-month target price, ABB will be trading at 26x 1- year forward earnings. Key business risks are a slow down in the power sector reforms, rising competition, raw material prices, execution and manpower risk.

 

 

 

HSBC an underweight on MTNL; target of Rs 133
We are cutting our estimates to reflect the absence of core catalysts. We downgrade MTNL from Neutral to Underweight and reduce our DCF-based target price by 22% from INR171 to INR133. We cut our wireless revenue estimates by 10% and 15% for FY08e and FY09e and wire line estimates by 1% and 4% respectively to reflect spectrum constraints and falling LIS-fixed average revenue per user (ARPU). MTNL looks expensive compared to global and national peers with 15.2x 2009 PE, with a 10% decline in EPS, versus our implied 09 PE of 14x. We are cautious about the potential catalysts of spinning off real estate holdings and any potential merger with sister SOE BSNL. Political reform is a prerequisite for both and looks unlikely before elections in mid-2008.

 

 

 

Buy ACC, target Rs 1300: UBS Investment
Over the longer term we believe ACC should be able to neutralise cost pressures due to enhanced captive power usage (from current c70% of total energy needed to 80-85% by CY2009). Logistics should improve further with completion of SAP implementation company-wide.
We value ACC on 1-year forward EV/EBITDA of 8.5x – in line with our valuation assumption for large cement companies. Over past 7 years ACC's EV/EBITDA has moved in a range of 5x to 15x. At our PT ACC would trade at PE of 13.5xCY08E (vs 13.2xCY07E today) and EV/T of USD201 (vs USD195 today).

 

 

 

Pipe sector riding high on booming global demand - ICICI
Among pipe manufacturers, we prefer the companies that are diversified in terms of product offering, have higher RoNW and RoCE and whose stock is trading at a lower P/E multiple. Our picks are Jindal SAW, Man Industries, PSL and Maharashtra Seamless. Though Welspun Gujarat Stahl Rohren is also a diversified player, we perceive its equity dilution as a risk. Man Industries' capex is almost over and its capacity would have equal proportion of LSAW and HSAW pipes by December 2007. Jindal SAW is diversified in terms of product offering. Going forward, margins of Jindal SAW are likely to move up. Maharashtra Seamless offers a good long-term investment option with high RoNW of 27% and RoCE of 37% in FY09E. PSL is likely to move up with the demand of HSAW pipes, which is bullish in the short term.

 

 

 

Buy IVRCL, target Rs 473: Angel Broking
At Rs380, IVRCL's market cap works out to Rs4,928cr while its subsidiaries (IVR PUDL and HDO) would contribute Rs1,688cr and the BOT projects Rs378cr. Hence, IVRCL's market cap post adjusting for the subsidiaries and BOT projects works out to Rs2,862cr, which is 11x FY2009E Net Profit of Rs270cr. At these valuations, the stock trades at a discount to its peers HCC and NCC. Further, an experienced and competent management, high revenue visibility and good execution track record justifies our belief that the stock should be trading at par with its peers. We initiate coverage on the stock with a Buy recommendation and target price of Rs 473.

 

 

 

Buy Gayatri Projects: KJMC
At CMP of Rs 291.7, the stock is trading at a P/E of 12.5x on FY07 adjusted EPS. Considering the growth momentum, decent financial performance and future plans, we believe that GPL will generate decent returns for the shareholders riding on higher growth trajectory.

 

 

 

Buy NDTV, target Rs 453: HDFC Securities
We expect news operations to report revenue CAGR of 23% for FY07- 09E. Earnings are expected to come into the green in FY08E, with profits of Rs.216 million, against a loss of Rs.147 million in FY07. We value news operations at 4x FY09E M-Cap/Sales and NDTV Networks at 70% of its pre-money capitalization value of D380 million. We maintain a 'Marketperformer' rating with a positive bias and a target price of Rs.453.

 

 

 

Buy Sterlite Industries, target Rs 949: Citigroup
Since April 2006, the stock has been substantially re-rated to a P/E range of 6- 8x due to the positive trends in all its three major businesses. We expect this rerating process to continue based on our robust outlook for zinc and steady profits in aluminium, with triggers coming from progress in acquiring the balance minority stakes from HZL and Balco. Our target price of Rs949 is arrived at by applying a P/E of 10x to FY09E earnings. This appears justified as Sterlite's earnings are substantially driven by zinc's robust outlook, and the sector re-rating following recent M&A activity. The stock has also crossed its 4- year average EV/EBITDA of 3.7x in the last few months, largely driven by zinc and lead prices. Based on our zinc outlook, we expect the EV/EBITDA upside to continue. At our target price, the stock would trade at an EV/EBITDA of 6.6x. We also examine the value for Sterlite using sum-of-the-parts by applying P/E ratios of 6x to 10x for FY09E for its various businesses. We also add to this value the book value of investments in Sterlite Energy at the end of FY09E. This method gives a value of Rs904 per share.

 

 

 

Buy Cairn India, target Rs 184: ASK Securities
Based on CIL's successful track record in India, we are maintaining an upside potential of Rs73/share to its core asset value considering a higher recovery factor for the Rajasthan fields. This figure can go up significantly based on further reserve accretion due to new discoveries from other exploration blocks. Based on our revised fair value of Rs184 (core + other upsides), we are upgrading the stock to Buy, from Hold earlier; offering 17% upside from the current levels.

Brokerage Recomendations

Buy Zee Entertainment; target of Rs 360: CLSA
Zee has renewed its focus on international markets where it licences its broadcasting rights. Although Zee broadcasts to over 120 countries, its key markets are Europe, the US, the Middle East and South Asia. Zee aims to improve its paid international reach – currently it is paid for 4.6m of the estimated 14.8m households that it reaches. Zee's renewed focus on improving its network distribution at home and abroad and its aim to be the leading generalentertainment channel provide upside potential to our 32% FY07-10CL earnings Cagr estimate. Maintain BUY.

 

Buy Tamilnadu Petro, target of Rs 28: ABN Amro
TPL is in advanced talks with a domestic investor who is willing to contribute up to 74% of the equity, based on which SEPC has written to Tuticorin Port Trust to restore the original land, expressing its willingness to pay the overdue lease rentals without arrears.
TPL has given a price breakout on a daily and weekly basis and the breakout has been accompanied with strong volumes signifying greater strength in the scrip.

 

CLSA bullish on Maruti Udyog; tgt Rs 980
CLSA has come out of a report on the Indian Auto market. The research firm has come up with a conclusion that a combination of lower penetration levels, improving affordability due to rising incomes and soaring aspiration levels point towards a higher volume growth trajectory for cars as compared to two-wheelers in coming years. CLSA has maintained positive view on four-wheelers as against the two-wheelers. Top pick of CLSA in the Indian auto sector remains Maruti on which they have recommended buy rating with target price of Rs 980.

 

 

 

Buy Ambuja Cement: UBS Investment
UBS Investment is bullish on Ambuja Cement and has maintained buy rating on the stock with target price of Rs 155.
Our price target is based on an EV/EBITDA multiple of 9x one-year forward – 10% lower than the current multiple. At our price target, Ambuja would trade at a PE multiple of 14.9x CY07E and 12.8x CY08E. Currently, GACM trades at EV/T of USD275 – a 60% premium to the Asian average.

 

 

 

Hold Kirloskar Brothers with a target Rs 570: Emkay
We estimate FY08E and FY09E consolidated EPS at Rs 21.9 and Rs 30.7 respectively. With large scale of operation and fully integrated business model in infrastructure pumping space, we believe that KBL would continue to command premium valuation over its peers. The scrip discounts FY09E consolidated EPS (Rs 30.7) 16x. We are positive on the long term prospects of the company and give hold recommendation with the target price of Rs 570. At our target price the stock discounts 18.5x FY09E EPS.

 

 

 

HSBC underweight on ABB; target of Rs 1178
We have revised our EPS by 10.3% and 9.3% to INR25.2 and INR37.9 for 2007 and 2008 based on the change in revenue by 7% and 8% for the same period. We have also introduced the estimates for 2009. Our estimates are 11% and 13% higher than the consensus estimates for 2008 and 2009 respectively. Based on our new estimates (49% profit CAGR growth over 2006-09e), and roll over to June 2008, we have increased our target price to INR1178 (earlier INR853). ABB India is trading at 35.2x 1-year forward earnings. We feel that all the positive upsides (and also high expectation in terms of delivery) are captured in the current valuation. Hence, we are downgrading our rating to Underweight from Neutral. At our 12-month target price, ABB will be trading at 26x 1- year forward earnings. Key business risks are a slow down in the power sector reforms, rising competition, raw material prices, execution and manpower risk.

 

 

 

HSBC an underweight on MTNL; target of Rs 133
We are cutting our estimates to reflect the absence of core catalysts. We downgrade MTNL from Neutral to Underweight and reduce our DCF-based target price by 22% from INR171 to INR133. We cut our wireless revenue estimates by 10% and 15% for FY08e and FY09e and wire line estimates by 1% and 4% respectively to reflect spectrum constraints and falling LIS-fixed average revenue per user (ARPU). MTNL looks expensive compared to global and national peers with 15.2x 2009 PE, with a 10% decline in EPS, versus our implied 09 PE of 14x. We are cautious about the potential catalysts of spinning off real estate holdings and any potential merger with sister SOE BSNL. Political reform is a prerequisite for both and looks unlikely before elections in mid-2008.

 

 

 

Buy ACC, target Rs 1300: UBS Investment
Over the longer term we believe ACC should be able to neutralise cost pressures due to enhanced captive power usage (from current c70% of total energy needed to 80-85% by CY2009). Logistics should improve further with completion of SAP implementation company-wide.
We value ACC on 1-year forward EV/EBITDA of 8.5x – in line with our valuation assumption for large cement companies. Over past 7 years ACC's EV/EBITDA has moved in a range of 5x to 15x. At our PT ACC would trade at PE of 13.5xCY08E (vs 13.2xCY07E today) and EV/T of USD201 (vs USD195 today).

 

 

 

Pipe sector riding high on booming global demand - ICICI
Among pipe manufacturers, we prefer the companies that are diversified in terms of product offering, have higher RoNW and RoCE and whose stock is trading at a lower P/E multiple. Our picks are Jindal SAW, Man Industries, PSL and Maharashtra Seamless. Though Welspun Gujarat Stahl Rohren is also a diversified player, we perceive its equity dilution as a risk. Man Industries' capex is almost over and its capacity would have equal proportion of LSAW and HSAW pipes by December 2007. Jindal SAW is diversified in terms of product offering. Going forward, margins of Jindal SAW are likely to move up. Maharashtra Seamless offers a good long-term investment option with high RoNW of 27% and RoCE of 37% in FY09E. PSL is likely to move up with the demand of HSAW pipes, which is bullish in the short term.

 

 

 

Buy IVRCL, target Rs 473: Angel Broking
At Rs380, IVRCL's market cap works out to Rs4,928cr while its subsidiaries (IVR PUDL and HDO) would contribute Rs1,688cr and the BOT projects Rs378cr. Hence, IVRCL's market cap post adjusting for the subsidiaries and BOT projects works out to Rs2,862cr, which is 11x FY2009E Net Profit of Rs270cr. At these valuations, the stock trades at a discount to its peers HCC and NCC. Further, an experienced and competent management, high revenue visibility and good execution track record justifies our belief that the stock should be trading at par with its peers. We initiate coverage on the stock with a Buy recommendation and target price of Rs 473.

 

 

 

Buy Gayatri Projects: KJMC
At CMP of Rs 291.7, the stock is trading at a P/E of 12.5x on FY07 adjusted EPS. Considering the growth momentum, decent financial performance and future plans, we believe that GPL will generate decent returns for the shareholders riding on higher growth trajectory.

 

 

 

Buy NDTV, target Rs 453: HDFC Securities
We expect news operations to report revenue CAGR of 23% for FY07- 09E. Earnings are expected to come into the green in FY08E, with profits of Rs.216 million, against a loss of Rs.147 million in FY07. We value news operations at 4x FY09E M-Cap/Sales and NDTV Networks at 70% of its pre-money capitalization value of D380 million. We maintain a 'Marketperformer' rating with a positive bias and a target price of Rs.453.

 

 

 

Buy Sterlite Industries, target Rs 949: Citigroup
Since April 2006, the stock has been substantially re-rated to a P/E range of 6- 8x due to the positive trends in all its three major businesses. We expect this rerating process to continue based on our robust outlook for zinc and steady profits in aluminium, with triggers coming from progress in acquiring the balance minority stakes from HZL and Balco. Our target price of Rs949 is arrived at by applying a P/E of 10x to FY09E earnings. This appears justified as Sterlite's earnings are substantially driven by zinc's robust outlook, and the sector re-rating following recent M&A activity. The stock has also crossed its 4- year average EV/EBITDA of 3.7x in the last few months, largely driven by zinc and lead prices. Based on our zinc outlook, we expect the EV/EBITDA upside to continue. At our target price, the stock would trade at an EV/EBITDA of 6.6x. We also examine the value for Sterlite using sum-of-the-parts by applying P/E ratios of 6x to 10x for FY09E for its various businesses. We also add to this value the book value of investments in Sterlite Energy at the end of FY09E. This method gives a value of Rs904 per share.

 

 

 

Buy Cairn India, target Rs 184: ASK Securities
Based on CIL's successful track record in India, we are maintaining an upside potential of Rs73/share to its core asset value considering a higher recovery factor for the Rajasthan fields. This figure can go up significantly based on further reserve accretion due to new discoveries from other exploration blocks. Based on our revised fair value of Rs184 (core + other upsides), we are upgrading the stock to Buy, from Hold earlier; offering 17% upside from the current levels.

Combination of lower penetration levels, improving affordability due to rising incomes, soaring aspiration levels point towards a higher volume growth

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HSBC to remain overweight on Reliance Inds, raise target price to Rs 2298 from Rs 2215

Government of India has finally approved the pricing of RIL's D6 gas at $ 4.2/bbl. This development is positive for the timelines of the project and allays any fear of delays in gas production on account of government approval delays on gas pricing. The approval also allays investor's apprehension on market pricing of gas from any future finds and could set a precedent for the market based price discovery formula for gas.

But, even now the overhang of court cases remain over the final pricing and contractual obligations for D6 gas. In its interim judgement, the Bombay High Court has restricted RIL from selling D6 gas to any party other than the counterparties in the dispute and for RIL's own captive usage. Thus, even after the government's approval, RIL might have to wait for the final court verdict to enter into gas sales contracts.

HSBC lower their gas price assumption for D6 gas to $ 4.2/mmbtu from $ 5/mmbtu earlier. While they expected pricing for D6 gas to be at the higher end of the $ 4.5-5.0/mmbtu band, pricing has come in below the lower end. Also, the earnings and valuation estimates for RIL are now based on post-IPCL merger equity base of 1,454m shares (1,394m earlier), which includes treasury shares amounting to 198mn. While our FY08e net profit estimates for RIL have gone up on the IPCL merger, EPS is marginally lower on account of dilution. Net profit and EPS for FY09e are also revised downwards by 3% and 7% respectively on lower gas price assumption and merger impact. Our Sep'08 end target price (earlier Mar'08, INR2,215) for RIL stands at Rs 2,298 after adjusting for lower gas price and dilution (post-IPCL merger).

As per press reports, the pricing approved by the government would be valid for 5 years after which the government would re-look at it. Since the KG D6 block is under a production sharing contract wherein the governments share of oil/gas profit increases in step from a low of 10% to a high of 85% in 5-6 years time, we expect the pricing beyond 5 years period to have less impact on RIL's D6 gas valuation.

HSBC estimates for RIL are based on post-IPCL merger equity base. They shift their target price to September '08 (from March' 08 earlier) raising it to Rs 2,298. Remain Overweight

Kamal Nath: No move to revise export target; Slow down in industrial numbers are not a matter of concern

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FM: IIP figures for Jul disappointing; No evidence of slowdown in investment

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Hedge fund industry looking positive; Asian hedge fund ind primarily focused on equities; India attractive for long-term investors: Commerzbank

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Unitech: Hope to achieve FY08 revenues of Rs 3000 Cr, Current land bank at 14000 acres

Unitech sees office rental growing by 30-40% over 7-8 months. Residential prices in tier-1 cities have gone up by 15-20% since beginning of year.

"I think most of the Tier I cities, we are still seeing a healthy growth in pricing, it depends on the asset class and the location. We see office rentals across the board, office as well as commercial retail properties, are still climbing very steadily. Residential is also growing but not as much as the offices. We have seen office rentals go up 30-40% over the last 7-8 months," said Chandra.

Unitech is hoping to achieve FY08 revenues of Rs 3000 crore. Company has no intention to raise capital they are adequately funded. Their land bank is at 14000 acres.

Gammon India: Exposure to Hyderabad projects account for 10-15% of order book; Confident of getting insurance cover from ICICI Lombard

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RIL gas price at $ 4.20/mmbtu; valid for 5 years

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Jindal Steel & Power leads gainers in 'A' group

India's largest sponge iron manufacturer Jindal Steel & Power soared 7.55% to Rs 4690 and it topped the gainers in the BSE's A group shares. The company is expecting an approval from Bolivian government this week to go ahead with its El Mutun iron-ore project in the region, the company's biggest-ever investment overseas.

Mid-cap software firm Hexaware Technologies spurted 7.10% to Rs 131.20. It was the second biggest gainer in the A group.

Commodities trading firm Adani Enterprises jumped 6.93% to Rs 381.80 and came third among top gainers in A group. Its net profit rose 83.1% to Rs 45.43 crore on 14.7% increase in sales to Rs 1940.87 crore in Q1 June 2007 over Q1 June 2006.

Welspun Gujarat Stahl Rohren, which makes submerged arc welded pipes, was up 6.84% to Rs 267.05. It came fourth among top gainers in the A group. With effect from 6 September 2007, Welspun Gujarat was included in the National Stock Exchanges' derivatives segment.

Financial services firm Reliance Capital flared up 5.29% to Rs 1401. It was the fifth biggest gainer in A group. Net profit of Reliance Capital rose 219.93% to Rs 302.43 crore on a 287% rise in sales to Rs 512.47 crore in Q1 June 2007 over Q1 June 2006.

FII: + Rs 282 Cr; MF + Rs 73 Cr

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Market Close: Upbeat ranged action !

It was a ranged session for Indian markets. Even in absence of global cues, Indian indices started the day on a fair note. The damp Industrial production figures failed to dampen the ethusiasm.. as the markets digested the slower 7% growth blaming it on the low base. Investors' mood remained positive throughout the day. The buying momentum kept the indices to trade ranged in green. However some profit booking set in during mid day but buying emerged and markets managed to close with modest gains. Asian markets ended in green, European markets were trading in red at the time of writing this. Value buying was seen in index heavy weights like Maruti, SBI, HDFC Bank and ACC. Most of the indices closed in green except FMCG. It was Auto, Banking and Cement stocks which witnessed value buying. The Govt postponed the meeting for the subsidy for Fertilizer companies as result of this the stocks came off. This has been a sector which has been rallying quite strongly oflate. Mid and Small caps were closed inline with the front line indices.

 

Sensex closed up by 109 points at 15614. It was helped up by gains in Maruti (892.1,+4 percent), SBI (1675.85,+3 percent), HDFC Bk (1212.6,+3 percent), ACC (1128.8,+2 percent) and Grasim (3264.45,+2 percent). Restricting the gains are HLL (215,-1 percent), Hindalco (153.95,-1 percent), Dr Reddys (641.55,-1 percent), TISCO (706.6,-1 percent) and Rel Energy (889.55,-1 percent).

 

SBI's intention to raise money brought in the buyers. Higher equity clearly means that the 20% FII stake will be vacated and fresh buying would get possible. Thats an odd reason for strength for SBI.

 

We reran a note on Navneet Publication. The company seems headed the Educomp way. It has managed to develop content which it has already sold to 20 schools in Gujarat. The e-content for Maharashtra is slated to be online by November. This e-initiative should change the face of the company from being a laid back one to one that is leveraging its position in the Education space using all available media. Do read the note We had a Wow call on this and the stock is now at Rs 78 . The stock has delivered more than 30% with in a short span of time.

 

Suzlon Energy Ltd the world's fourth largest wind turbine maker plans to invest about Rs 5600 cr to triple its production capacity by 2009. The expansion would raise Suzlon's turbine production capacity in India to 5,700 megawatt (MW) by March 2009 from 2,700 MW now. It recently acquired subsidiary Germany's REpower Systems would have increased its capacity to 1,200 MW from an existing 700 MW. The total investment in this three year plan is about Rs 5600 cr and most of this investment would be financed by debt. The company also plans to raise its capacity to produce wind gearboxes, made by its unlisted Belgian subsidiary Hansen Transmissions to 9,300 MW by 2009. The company's order book stands at around Rs 14000 cr up from Rs 13200 cr in July with most orders for exports. It also informed that in June it might seek a listing in London or Frankfurt in the next 12-24 months. The expansion plans are aggressive and certainly impressive.. But the valuations certainly leave a lot to be desired. The acquisition of RE power was not an attractive one financially and that we believe could impact earnings The stock closed up by 3.27%.

 

We had a note on Bharat Fertiliser. This is after many months of waiting for the company to announce its real estate projects. The value of the property itself is couple of times the market cap. But what is more and what are the risk factors is something which will be known only on reading the note.

 

Technically Speaking: It was a ranged session for the whole day before closing. Sensex touched an intraday high of 15650 and low of 15548. Overall breadth was in favor of Advances, where the Advances stood at 1647, while Declines at 1123. The turnover was good at Rs 5257 cr. Sensex is facing resistance at 15700 but we believe it is just a matter of time before we cross it and move towards our target of 16100. On the lower side supports at 15490 and 15350.

Market ends firm, gains 109 points

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Khadim India IPO

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Post Market Commentary

The markets closed on positive note as BSE Sensex closed higher by 109.08 points at 15,614.44 and the Nifty closed higher by 32.1 points at 4,528.95. The BSE mid cap and Small cap closed higher by 57.15 points and 65.91 points at 6,946.70 and 8,638.26 respectively. The market breadth was strong with 1,576 stocks advanced and 1115 stocks declined.

 

BSE bankex index surged by 102.17 points to close at 8,081.94 as Kotak bank (3.31%), SBI (3.18%), HDFCbank (2.87%), Union bank (2.08%), Axis bank (1.96%), PNB (1.82%) closed higher.

 

BSE oil & gas index grew by 57.62 points to close at 8,378.77 as GAIL (1.15%), ONGC (0.94%), Reliance industries (0.67%), BPCL (0.50%) and RPL (0.38%) closed higher.

 

BSE Auto Index grew by 63.56 points to close at 4,939.34 as Maruti Udyog (3.82%), TVS (3.23%), Hero Honda (1.67%), Tata Motors (1.35%), M&M (1.33%) and Bajaj auto (1%) closed in green.

 

BSE Capital goods index grew by 59.70 points to close at 13,723.88 as Suzlon energy (3.61%), Praj industries (3.06%), BEML (1.92%), Alfa laval (1.36%) and Alstom (1.26%) and L&T (0.14%) closed higher.

 

BSE IT index increased by 38.59 points to close at 4,482.57 as Mphasis (2.96%), Tech Mahindra (2.17%), TCS (1.34%), Satyam (1.25%), Wipro (1.07%) and Infosys (0.77%) closed in red.

 

BSE Health Care Index closed higher by 9.32 points at 3,693.88 as Lupin ltd (2.73%), Nicholas piramal (1.43%), Glennmark (0.55%), Sun pharma (0.24%) and Wokhardt (0.18%) closed in positive.

 

BSE Metal index increased marginally by 6.35 points to close at 11,924.63 as Jindal steel (7.55%), Welspun Gujarat (6.84%), sterlite industries (0.46%) closed in green while SAIL (0.95%), Hindalco (0.81%), Tata Steel (0.66%) and Nalco (0.50%) closed in red.

 

BSE FMCG index dropped by 11.14 points to close at 2,070.79 as United breweries (3.48%), Colgate Palmolive (1.26%), HUL (0.97%) and ITC (0.53%) closed in red.

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Sensex gains 115 points

The market today broke its two day loosing streak to post good gains, led by steady buying support for index pivotals. Turnover was high. Asian markets were mixed while European markets were trading lower today, 13 September 2007.

 

The BSE 30-share Sensex gained 115.31 points or 0.74% to 15,620.27, as per provisional closing. It opened higher at 15,547.66 and advanced further to hit a high of 15,650.14. The Sensex had hit an all time high of 15,868.85 on 24 July 2007

 

The S&P CNX Nifty was up 33 points or 0.73% to 4,529.85 as per provisional closing

 

The market breadth was strong on BSE, with 1647 shares advancing as compared to 1123 that declined, while 66 remained unchanged.

 

As per provisional closing, the BSE Mid-Cap index rose 0.86% to 6,948.53, while the BSE Small-Cap index gained 0.77% to 8,638.20. Both these indices outperformed the Sensex by small margin

 

The BSE Mid-Cap index hit an all time high of 6,958.98, while the BSE Small-Cap index struck an all time high of 8,670.25 in intra-day trade today, 13 September 2007.

 

The total turnover on BSE crossed the Rs 5,000 crore and was healthy. It amounted to Rs 5257 crore as compared to Rs 4115 crore by 14:30 IST

 

From 30-member Sensex pack, 20 gained while the rest slipped.

 

India's top small car manufacturer in terms market share Maruti Suzuki India surged 3.73% to Rs 891.30 on 1.94 lakh shares. It was the top gainer from the Sensex pack.

 

Other auto shares also posted gains, on fresh buying. Tata Motors (up 1.29% to Rs 694.20), Mahindra & Mahindra (up 1.33% to Rs 707.95), and Bajaj Auto (up 1.06% to Rs 2418.10), gained.

 

State Bank of India (SBI), the nation's largest bank in terms of net profit gained 3.25% to Rs 1677 on 6.31 lakh shares. As per reports, SBI plans to raise Rs 10,000 crore by December 2007.

 

India's largest private sector company by market capitalisation and oil refiner Reliance Industries (RIL) struck an all time high of Rs 2034.40 in early trade. It settled 0.6% higher to Rs 2025 on 6.15 lakh shares. The stock edged higher after the empowered group of ministers (EGoM), approved RIL's pricing formula for its gas from the Krishna-Godavari (KG) basin.

 

The revised formula lowers the proposed price of the gas at Kakinada to $4.20 per million British thermal unit (mmBtu) from $4.33 mmBtu that was proposed by RIL. The price at which RIL will sell its gas from the KG basin to consumers will be valid for five years, after which it will be open for revision.

 

Reliance Communications, the county's second largest listed cellular services provider in terms of revenue gained 1.86% to Rs 552.15. As per reports, FLAG Telecom Group (FLAG) reportedly bagged a contract from CERN, the European Organisation for Nuclear Research, to provide Gigabit connectivity between the organisation's research centre in Geneva and Tata Institute of Fundamental Research in Mumbai.

 

IT pivotals staged a comeback after their recent underperformance to the Sensex. Satyam Computers (up 1.27% to Rs 434.25), Infosys Technologies (up 0.71% to Rs 1833), Wipro (up 1.19% to Rs 458), and TCS (up 1.36% to Rs 1030), posted gains. The government on Wednesday, 12 September 2007 extended the date for corporates to submit Fringe Benefit Tax on employee stock option plans to 15 December 2007 in the absence of the method for determining the fair market value of such shares.

 

India's largest FMCG company by sales Hindustan Unilever was the top loser from the Sensex pack. It slipped 0.97% to Rs 215 on high volumes of 17.13 lakh shares. A block deal of 5.08 lakh shares was struck on the counter on BSE at Rs 216.05 per share by 14:38 IST. The stock recovered from its day's low of Rs 212.70

 

Tata Steel (down 0.67% to Rs 706.50), and Reliance Energy (down 0.82% to Rs 887), were the other losers from Sensex pack.

 

Reliance Capital was the top traded counter on BSE with total turnover of Rs 177.56 crore followed by Reliance Industries (Rs 124.71 crore), IFCI (Rs 124.01 crore), MIC Electronics (Rs 115.17 crore) and Welspun Gujarat Stahl Rhoren (Rs 107.11 crore).

 

Most of the European markets were trading lower. United Kingdom (down 0.25% to 6,290.20), France (down 0.42% to 5,484.81), and Germany (down 0.47% to 7,437.62), declined.

 

Asian markets were mixed. Japan's Nikkei (up 0.15% at 15,836.27), Hang Seng (up 0.93% at 24,537.07), Seoul Composite (up 1.90% to 1,848.02), and Shanghai Composite (up 1.95% to 5,273.92) gained.

 

However, Taiwan Weighted (down 1.01% at 8,927.42) and Straits Times (down 0.05% to 3,504.40) slipped

 

US shares settled slightly lower yesterday, 12 September 2007 with investors still confident the Federal Reserve will lower rates next week but treading cautiously as oil prices crossed $80 a barrel for the first time and the dollar extended its decline. The Dow Jones industrial average fell 16.74 points, or 0.13%, to 13,291.65, after weaving in and out of positive territory throughout the session. The Standard & Poor's 500 index rose 0.07 point, or less than 0.01%, to 1,471.56, and the Nasdaq Composite index fell 5.40 points, or 0.21%, to 2,592.07.

 

As per provisional data, foreign institutional investors (FIIs) purchased shares worth a net Rs 317.76 crore, while domestic institutional investors (DIIs) were net sellers of shares worth Rs 91.32 crore on Wednesday, 12 September 2007.

 

India's industrial output rose 7.1% in July 2007 from a year earlier, sharply lower than downwardly revised annual growth of 9% in June 2007 due to slower manufacturing output, data showed on Wednesday, 12 September 2007. Manufacturing production rose 7.2% in July 2007 from a year earlier, compared with provisional annual growth of 10.6% in June 2007.

 

Crude oil prices dipped on Thursday, 13 September 2007, but held near $80 a barrel and the previous day's record high, as dealers watched a tropical storm in the Gulf of Mexico after a sharp fall in U.S. crude stocks. US crude was trading 23 cents lower at $79.68 a barrel, after hitting a record high of $80.18 yesterday, 12 September 2007. London Brent crude shed 9 cents to $77.59 a barrel.

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HDFC Equity exits TCS and Wipro, adds Suzlon

Country's largest equity fund, HDFC Equity Fund, exited software firms Tata Consultancy Services and Wipro in August as part of a strategy to cut exposure to the sector, data from fund tracker ICRA Online Ltd showed.

The HDFC Equity Fund had allocated more than a fifth of its assets to tech stocks at the end of December, but has cut exposure consistently since then.

The fund held 5.57 per cent of its Rs 4,656 crore assets in two tech stocks - Infosys Technologies and CMC - at August-end.

Many Indian funds have been reducing stakes in tech firms on concern a strong rupee, that has risen more than 9 per cent against the dollar in 2007, and the turmoil in the US subprime mortgage sector would hurt profits of the export dependent companies.

The BSE IT Index has fallen nearly 16 percent this year against about 12 per cent rise of the benchmark BSE index.

In a Reuters poll of 11 Indian fund houses between Aug 20-23, nearly 64 per cent of the respondents were planning to maintain or cut exposure to the battered sector in the next three months.

The fund, up 18 per cent in 2007, also exited Shoppers Stop, Sun Pharma Advanced Research, and DLF, and cut down on building and metal stocks in August.

NEW ENTRIES

It increased exposure to basic engineering to almost a fourth at August-end, ICRA data showed, adding wind turbine maker Suzlon Energy.

In line with other diversified equity funds, HDFC has raised exposure to the sector in 2007 to 24.15 per cent at August-end from 16.27 per cent in December.

Three of its top-five holdings are basic engineering stocks. It added realty firm Puravankara Projects and raised exposure to July entrant and top cigarette maker ITC in August.

Two steps backward, one step forward

There are two ways to slide easily through life; to believe everything or to doubt everything. Both ways save us from thinking.

 

Investors can't help but think what lies ahead and would like to believe that a steep drop in industrial growth for the month of July is more of an aberration rather a trend. Expect the key indices to be rangebound in the next few days. Be selective in stock picking and avoid aggressive purchases. After two straight days of declines, we expect a flat open and maybe the bulls may stretch themselves in the green by the end of the day.

 

An indecisive trend in Asia and anxiety ahead of next week's Federal Reserve meeting kept the bulls from advancing on Thursday. Trading activity has slowed considerably this week as investors are not ready to take more risks at this point in time. Though FII inflows are continuing unabated the interest from other categories of investors, mainly retail, has ebbed on account of the spike in volatility. Global trends have taken precedent to local developments off late. The same is expected to continue for a while till the US economy pulls itself out of the current turmoil, fueled by the slump in the housing sector. Its a tall order, but the Fed may just be able to engineer a soft landing for the world's largest economy.

 

Optimistically thinking, there's nothing to worry about, as the impact may be muted in emerging markets such as India. After a slowdown in industrial growth in July things should improve in the coming months though some moderation is imminent due to the aggressive monetary tightening by the RBI and partly due to the base effect. The political turmoil could have a temporary effect on the sentiment but overall outlook remains strong over the medium to long term.

 

US stocks fell marginally on Wednesday after a volatile session. Record high oil prices and a falling US dollar cast a shadow on Wall Street ahead of next week's much-awaited Federal Reserve policy meeting.

 

Technology shares were down after Texas Instruments slashed its sales forecast. Office Depot fell to a two-year low after analysts cut earnings estimates.

 

The Dow Jones Industrial Average declined for the first time in three days, losing 16.74 points, or 0.1%, to 13,291.65. The Standard & Poor's 500 Index finished flat at 1,471.56, helped by a rally in energy shares after oil climbed to a record. The Nasdaq Composite Index lost 5.4 points, or 0.2%, to 2,592.07.

 

About three stocks dropped for every two that rose on the New York Stock Exchange.

 

Crude oil hit a new record high in New York, crossing $80 per barrel for the first time ever, after the government said crude supplies fell far more than expected.

 

US light crude for October delivery set a trading high of $80.18 late in the session before pulling back slightly to settle at $79.91 a barrel, still up $1.68 a barrel and another record close. The old trading high was $78.77 a barrel hit Aug. 1. Oil prices are down about 30% in 2007.

 

Treasury prices fell, raising the yield on the 10-year note to 4.41% from 4.37% late on Tuesday. In currency trading, the dollar fell to a record low versus the euro and was little changed against the yen. COMEX gold for December delivery fell 40 cents to settle at $720.70 an ounce.

 

Treasury Secretary Henry Paulson said the recent market turbulence has not been caused by problems in the real economy, but because of bad lending practices. He also said that problems with subprime mortgages will take longer to correct than those in other financial markets.

 

European stocks ended with small gains after a choppy session. The pan-European Dow Jones Stoxx 600 index, which was down for most of the session, closed with a rise of 0.2% at 369.21. The UK's FTSE 100 rose 0.4% to 6,306.20 and the German DAX 30 advanced 0.2% to 7,472.99. The French CAC 40 ended 0.5% higher at 5,508.01.

 

Latin American stocks closed lower. The Bovespa, Brazil's benchmark stock index, slipped 0.1% to 53,868.88. Mexico's IPC fell 0.4% to 30.079.87. The benchmark IPSA index in Chile fell 1.3% to 3,113.49 and Argentina's Merval dropped 0.3% to 2,013.07.

 

In other emerging markets, the RTS index in Russia was down 0.6% at 1899 while the ISE National-30 index in Turkey closed nearly flat at 61,932.

 

Asian markets were trading mixed this morning. The Nikkei in Tokyo was up 61 points at 15,859 while the Hang Seng in Hong Kong rose 80 points to 24,390. The Kospi in Seoul was flat at 1812 and the Straits Times in Singapore too was nearly unchanged at 3507.

 

In yet another dull trading session, markets swung between green and red before closing a tad lower. Bulls failed to carry on the momentum after a positive start as they struggled to find any clear direction as government report showed industrial production in July grew at the slowest pace in nine months. Volumes were almost flat, turnover in cash segment was marginally down by 0.19% and in F&O segment was down by 2.8%. Finally, the 30-share Sensex closed lower by 37 points at 15505 and NSE Nifty closed flat at 4497.

 

SBI marginally gained 0.2% to Rs1624 after the company announced that their plan to raise Rs100bn and would sell shares by December. The scrip touched an intra-day high of Rs1639 and a low of Rs1619 and recorded volumes of over 6,00,000 shares on NSE.

 

Tata Steel gained by 0.5% to Rs711 following media reports that the company is planning to set up 5mn tons steel plant in South Africa. The scrip touched an intra-day high of Rs717 and a low of Rs712 and recorded volumes of over 10,00,000 shares on NSE.

 

Alchemist was locked at 5% upper circuit to Rs96.20 after the company announced that they would acquire majority stake in Kaiser Hospital. The scrip touched an intra-day high of Rs96.20 and a low of Rs92.40 and recorded volumes of over 2,00,000 shares on NSE.

 

Kinetic Engineering spurred by over 3% to Rs142 as the company yesterday announced that they would be developing the gearbox for Tata's Rs1 lakh car. The scrip touched an intra-day high of Rs157 and a low of Rs142 and recorded volumes of over 1,00,000 shares on NSE.

 

Essel Propack rallied by over 7% to Rs67 after reports stated that the Indian maker of laminated tubes and packaging plans to buy the packaging unit of Alcan Inc. The scrip has ouched an intra-day high of Rs69 and a low of Rs64 and recorded volumes of over 4,00,000 shares on NSE.

 

Reliance Industries edged higher by 1.5% to Rs2013 after reports stated that the world's largest polyester maker will pay $250mn to buy the assets of Hualon Corp. of Malaysia. The scrip touched an intra-day high of Rs2021 and a low of Rs1992 and recorded volumes of over 24,00,000 shares on NSE.

 

IDFC advanced by 1.4% to Rs134 as the RBI has increased the investment limit for FIIs in the companies. The scrip touched an intra-day high of Rs138 and a low of Rs133 and recorded volumes of over 57,00,000 shares on NSE.

 

Power stocks ended higher for a second day in a row. Suzlon gained by 1% to Rs1335, REL was up by 4% to Rs894, Tata Power advanced by 0.8% to Rs734 and CESC gained 1% to Rs473.

 

Pharma stocks were in poor health. Sun Pharma edged lower by 0.4% to Rs1006; Cipla was down by 1.4% to Rs174, Ranbaxy declined by 0.7% to Rs416 and Dr Reddy's Lab edged lower by 0.5% to Rs647.

 

IT stocks were on the receiving end as rupee continued to strengthen against the USD. Satyam Computer slipped by 1.4% to Rs427, TCS was down by 1% to Rs1015, Rolta dropped by 4% to Rs480 and Mphasis declined by 3.2% to Rs282.

 

Realty stocks were in momentum. DLF gained by 2.7% to Rs635, Unitech advanced by 3% to Rs262 and Sobha was flat at Rs752.

 

Metal stocks continued to trade firm. Sterlite Industries gained by 2.3% to Rs624, Tata Steel gained by 0.5% to Rs711, JSW Steel advanced by 1.5% to Rs681 and Hindustan Zinc added 0.5% to Rs709.

 

Stocks In News

 

The EGoM approves gas pricing formula of RIL's KG Basin gas. The price is expected to be fixed at US$4.2/mmbtu vs US$4.33 at present.

 

SBI plans to raise Rs100bn through rights issue or a follow-on offer by December
2007.

 

ONGC is likely to increase its reserve estimates for its KG basin block.

 

Suzlon plans to invest about US$1.4bn to triple its production capacity by 2009.

 

Bombay Dyeing is likely to sell a little less than 15% stake to private equity players to fund its realty, retail and aviation businesses.

 

SAIL is planning to invest Rs490bn over the next three years to raise production
capacities and modernise mining work.

 

BPCL and Videocon have reportedly acquired a sizeable stake in Brazilian oil exploration
company, EnCanBrasil, a subsidiary of Canadian oil company Encana.

 

Lupin has won its patent challenge in US against King Pharmaceuticals and Sanofi-
Aventis for its blood pressure drug Altace.

 

Sun Pharma is likely to hike its bid price for acquisition of Israel's Taro.

 

Idea Cellular expects to announce a major organizational restructuring exercise.

 

COAI serves a legal notice to DoT for delay in allocation of spectrum to GSM players.

 

Gujarat Alkalies is investing Rs5bn in expanding capacities and setting up a captive power plant.

 

HDIL is setting up a Rs20bn IT park at Kalmassery near Kochi.

 

Fund Activity:

 

FIIs were net buyers of Rs3.18bn (provisional) in the cash segment on Wednesday and the local institutions pulled out Rs913.2mn. In the F&O segment, foreign funds were net buyers of Rs3.44bn.

 

On Tuesday, FIIs were net buyers to the tune of Rs4.46bn in the cash segment. Mutual Funds were net sellers of Rs1.79bn on the same day.

 

Major Bulk Deals:

 

Upper Circuit

 

Tanla, Marksans, Tourism Finance, Radha Madhav, Goldstone Tele, Gemini Communication, IID Forgings and Jai Corp.

 

Lower Circuit

 

Usher Agro

Almondz Global Securities moves

Almondz Global Securities had jumped 3.32% to Rs 87.20 at 12:04 IST on reports that the company may place 15% equity with prospective investors to raise funds for its expansion plans.

The BSE Sensex was up 10.44 points, or 0.07%, to 15553.21.

On BSE, 2.61 lakh shares of the scrip were traded. The stock had an average daily volume of 1.24 lakh shares on BSE in past one quarter.

The scrip had touched a high of Rs 89.75, all time high. It touched a low of Rs 84 so far during the day. The stock had hit a 52-week low of Rs 19.30 on 28 September 2006.

The scrip had outperformed the market in the one month to 11 September 2007, adding 20.06% as against the Sensex's 3.50% gain. It had also outperformed the market in the past three months, gaining 87.14% against the Sensex's 11% rise.

The small-cap merchant banker has an equity capital of Rs 9.60 crore. Face value per share is Rs 6.

At the current price of Rs 87.20, the scrip trades at a PE multiple of 15.43, based on Q1 June 2007 annualised EPS of Rs 5.65.

The company is reportedly in talks with private equity investors and the placement could be at a 10-15% premium to the current market price. Reportedly, the firm is planning to raise Rs 50-60 crore. The funds will be utilised for retail broking and margin funding.

As per reports, Almondz Group is currently in the process of merging the equity business of Almondz Capital Markets, a BSE member, with Almondz Global Securities (AGS). Shareholders of both the companies would meet separately to consider the proposal on 29 September 2007.

At the meeting held on 6 August 2007, the AGS board decided to make preferential allotment of 15,37,500 shares and warrants to promoters and other investors at Rs 80 including premium of Rs 74 per share, the report added.

AGS' net profit rose 35.3% to Rs 2.26 crore on 64.8% rise in operating income to Rs 14.91 crore in Q1 June 2007 over Q1 June 2006.

Almondz Group provides a wide range of financial Services including merchant banking, infrastructure advisory, debt portfolio management, distribution of insurance products, equity and commodity broking.

Hot Picks

Tanla Solutions
CMP: Rs 482.65
Target price: Rs 706

HDFC Securities has initiated coverage on Tanla Solutions with a 'buy' recommendation on account of the company's presence in the mobile transaction business. According to the brokerage, Tanla Solutions' revenue is estimated to grow at a CAGR of 72% between FY07 and FY09. "Servicing content providers will help Tanla to catch up with the rapid technological changes in the content delivery business.

This is a major business for Tanla and helps it to get more content providers on its network," says the report. Moreover, the company is expected to spend Rs 220 million in FY08 on R&D. "We believe that the company would grow at a CAGR of 59% in FY07-09E at net levels. This gives us a target price of Rs 706 for the stock --Rs 646 for the core business and Rs 60 for its non-core business (interest and dividend incomes)," said the brokerage in a note to its client.


Spice Comm
CMP: Rs 55
Target price: Rs 70

Citigroup has initiated coverage on Spice Communications with a 'buy' recommendation as the telecom entity is in the process of ramping up coverage in Punjab and Karnataka. "Moreover, we believe its suitability as an M&A target provides the icing on the cake," adds the report. Access to 900 MHz and its small footprint make it an attractive and probably the only M&A candidate, explains the foreign brokerage. "New spectrum rules may dilute M&A prospects a bit, but on the flip side provides a chance to enter new circles, though constrained by size and management bandwidth," it adds.

However, the report adds that while new circle rollouts are possible if new spectrum norms are accepted by the department of telecom (DoT), Spice will remain constrained by its balance sheet size as well as management bandwidth. Citigroup has set a 12-month price target at Rs 70 per share. Incidentally, the price target includes a 15% M&A premium. We believe that the scope for merger/acquisition between Spice and other telcos such as Idea, RCOM and Aircel still exists, says Citigroup.


Mindtree Consulting
CMP: Rs 582.75
Target price: Rs 556

Religare has initiated coverage on Mindtree Consulting with a 'sell' recommendation as it feels that operational risks are raising concerns and valuations are expensive. While Mindtree has been one of the fastest growing mid-tier Indian IT services company, growth has slowed down significantly in FY07 and is further expected to slow down in FY08 due to rupee appreciation, says the report.

"Risks to growth is significant as more than 65% of the revenues come from development projects which are highly dependant on the discretionary IT spend of clients. In the event of an economic slowdown in the US, discretionary IT spends would be curtailed," adds the report. However, the report adds that the estimates do not factor in any large deals that the company might win that could fuel higher-than-expected earnings growth.


IOB
CMP: Rs 138.15
Target price: Rs 150

Angel Broking has recommended a 'buy' on Indian Overseas Bank with a 12-month price target of Rs 150. "IOB remains in a 'sweet spot' with its superior return ratios, consistently high net interest margins, better operating efficiency and higher leverage. Going ahead, with the government's holding at 61%, IOB would be an active candidate in the consolidation process in the PSU banking space," says the report. Meanwhile, the brokerage has valued the bank at a 10% discount to fair value to factor in its geographical concentration.

The report has also factored in positives like well-managed assets and liabilities to drive earnings, a significantly derisked investment book and strong operating performance. Further, IOB is well-placed on the capital adequacy ratio (CAR) front. "For FY07, the bank reported CAR of 13.27% of which Tier I comprised 8.2%. Post implementing Basel II, management expects CAR would stand at 12%. IOB has to comply with Basel II guidelines by FY08 due to its overseas branch network. We do not expect the bank to dilute its equity in the near term," adds the report.