ITC, Godawari Power, HDFC, AIA Engineering,

 ITC

CMP: Rs 205.15
Target Price: Rs 225

Macquarie has 'upgraded' the target price of ITC by 12% to Rs 225 as it feels that the company has a potential for positive surprises after announcing 'ahead of expectations' numbers for the first two quarters of the current fiscal. "We believe that this is a testament to pricing power and inelasticity of demand," says the report.

Further, the foreign brokerage adds that the growth in the volume of cigarette has been 'above consensus' and even after the hike in prices, the erosion in favour of substitutes has been minimal. "The past two quarterly results show that the erosion of share in favour of substitutes (bidis) is minimal despite a large hike in prices.

We believe income levels have reached the threshold where demand inelasticity is stronger than expected," said the brokerage in a note to its clients. Macquarie is expecting a 7% volume growth and 6% price growth in cigarettes on a sustainable basis, while assuming a 5% growth in both cigarette excise duty and VAT every year.

However, the brokerage adds that historically, the stock tends to remain without direction in the run-up to the Union budget as investors stay on the sidelines due to lack of clarity on revision of tax rates.

Godawari Power

CMP: Rs 267.35
Target Price: Rs 320

Pinc Research has maintained a 'buy' rating on Godawari Power & Ispat with a 12-month price target of Rs 320 as it feels that the incremental production from enhanced capacities will propel the company's profitability as realisations are expected to remain buoyant.

According to the report, the company has envisaged a Rs 2.4-billion capex plan for setting up an iron ore crushing unit, a beneficiation plant and a pelletisation plant. This will aid in extracting benefits of captive iron ore and also in utilising iron ore fines, thereby providing significant savings, feels the brokerage.

The brokerage is expecting the company to report net sales of Rs 7.7 billion and Rs 8.6 billion for FY08 and FY09, respectively.

HDFC

CMP: Rs 2,700
Target Price: Rs 3,288

Motilal Oswal Securities has maintained a 'buy' rating on HDFC while raising the target price to Rs 3,288. According to the brokerage, the company "deserves a premium valuation due to the continued traction in business and profitability, significant value unlocking from its various investments/ventures and supreme management capabilities."

The brokerage feels that HDFC's stronghold in the housing finance market has further strengthened with ICICI Bank and most state-owned banks going slow on mortgages. "In 2QFY08, ICICI Bank's disbursements degrew 23% y-o-y whereas HDFC saw a 25% y-o-y growth.

HDFC is confident of maintaining its asset growth rate at the traditional 25-30% over the next couple of years," says the report. The slowdown in the industry (mainly banks) is expected to result in higher market share for housing finance companies (HFCs), mainly the leader HDFC, it further adds.

The report also highlights the point that since HDFC need not maintain CRR, incremental spreads have widened.

AIA Engineering

CMP: Rs 1,482
Target Price: Rs 1,820

ASK Securities has maintained a 'buy' rating on AIA Engineering with a price target of Rs 1,820 on account of limited competition and low-cost advantage over peers. "We continue to like AIA given the immense growth prospects for high chrome mill internals and believe that the company is in a sweet spot being an end-to-end solutions provider," says the report.

The brokerage is expecting the company to post a 40% CAGR in revenue and a 35% CAGR in profit over FY07-09E due to the growing demand globally and capacity expansion lined up. The report also adds that currently, the company has an order book of Rs 4.35 billion, of which 60% pertains to the domestic market.

"We expect the company to end FY08E with sales of 98,000 tonnes, with nearly 25,000 tonnes from the new facility. In addition, the next phase of new facility will get operational by (first quarter of) FY09E and take the overall capacity to 1.65 lakh tonne, the brokerage said in a note to its clients.

Barak Valley Allotment Status

Those who applied for  Barak Valley Cement, Allotment can be checked HERE

FIIs net sellers of Rs 363cr in cash market

Foreign institutional investors (FIIs) were net sellers of Rs 363.14 crore (provisional) today, according to data released by BSE.

While FIIs made gross purchases of Rs 3,503.69 crore, gross sales totalled Rs 3,866.83 crore.

Domestic institutional investors (DIIs) were net buyers of Rs 239.72 crore today. While DIIs made gross purchases of Rs 1,195.58 crore, gross sales totalled Rs 955.86 crore.

FIIs were net buyers of Rs 788.40 crore on Thursday, November 15, according to data released by Sebi today. While FIIs made gross purchases of Rs 4,464.30 crore, gross sales totalled Rs 3,675.90 crore.

Jyothi Lab, Kolte Patil, Kaushalya Infra , Renaissance Grey Market Premiums

 Reliance Power -- 65 to 68


Mundra Port & Sez 400 to 440 520 to 525


Empee Distilleries 350 to 400 40 to 45


Edelweiss 725 to 825 800 to 810


Varun Ind. 60 40 to 50


Religare Enterprises 185 300 to 310


Barak Valley Cement 37 to 42 20 to 25


Rathi Bars 35 +/- 2


Allied Computers 12 14 to 16


SVPCL 40 to 45 +/- 1.5 to 2


Renaissance Jewellery 125 to 150 35 to 40


Kolte Patil 125 to 145 130 to 135


Kaushalya Infra 50 to 60 8 to 10

Jyothi Labo 620 to 690 400 to 425

Post Market Commentary

After a lot of volatility in today''s trading session, the market finally closed on a sad note as BSE Sensex fell by 86.53 points to closed at 19,698.36 and NSE Nifty dropped by 5.25 points to closed at 5,906.85. Though the market opened with a huge gap down but immediately gained the momentum to pare all its initial losses due to buying across the sectoral indices scrips. Both the Sensex and Nifty keeps on moving ups and down throughout the trading session as the global markets are not in favor. Most of the indices closed in red while Oil and gas, FMCG, Auto and CD attract investor''s confidence as they are closed in green. Overall, the market breadth was strong as 1,909 stocks are closed in green while only 912 are closed in red. Both the BSE Small cap and Mid cap closed higher by 98.29 point and 153.07 points at 8,512.38 and 10,380.73 respectively.

BSE oil & gas index surged by 163.68 points to close at 12,479.56. Pushing it up are Essar oil by (22.01%), HPCL (5.55%), IOCL (3.72%), BPCL (1.79%), RPL by (1.04%) closed higher.

BSE FMCG index grew by 92.07 points to close at 2,230.69. Leading the rally are ITC (8.17%), Tata tea (4.24%), Dabur (3.66%) and Nestle (2.77%) closed higher.

BSE Metal index declined by 241.69 points to closed at 17,498.20 as Hindalco (5.52%), Welspun Gujarat (4.13%), Nalco (2.96%), Tata steel (2.02%) closed lower.

BSE Capital goods index closed lower by 262.16 points at 20,643.71 as Lakshmi machine (3.01%), L&T (2.88%), Thermax (1.41%)closed in red.

BSE Power index fell by 21.97 points to close at 4,591.97. Pulling it down are CESC ltd by (4.15%), Areva by (2.57%), NTPC (1.89%), Reliance energy by (1.53%) and BHEL (1.30%) closed lower.

BSE bankex index fell by 49.97 points to close at 11,003.05. Pulling it down are ICICI bank (2.33%), HDFC bank (0.71%), BOI (0.48%) and Union bank (0.32%) closed in negative.

BSE IT index dropped by 37.37 points to close at 4,159.12 as Infosys (1.79%), HCL tech (1.52%), Tech Mahindra (0.83%) closed in red.

Weekly Close: India unplugged in Global Turmoil.

A week of mid cap mania. Heavy weight's saw some consolidation. Global markets saw turmoil with subprime worries and this time Indian market decoupled from global market ..anyways the recovery was strong. Mid caps bounced back and was a smart rally which has good participation. Looking at the political side, Left gave a nod to talk for nuke deal with IAEA which powered the power counters. The winter session of parliament started today and nuke topic will come to hearing on Nov 27 and 29th, this did bring some jitters in the market. However, the talks are still with IAEA the probability of consent for nuke deal has increased. IIP data was not encouraging and was blamed on strong Rupee. The week was driven partially by global cues and there is nothing much to discuss about.

Sensex and Nifty ended up by 4%. Midcap Index up 8%. BSE Small cap up 6%. BSE FMCG up 11%. Bank index up 8%. Oil andGas up 7%. Cap goods up 5%. Metals 4%. Tech stocks continues to drag?IT index down 1%. In large caps OBC +15%, PNB and Siemens +14%, suzlon HDFC, ICICI bank, HDFC Bank +10%; Nalco, Grasim up 9%, Suzlon, HDFC and CICI bank up 7%, Essar Oil +150%, KEC Infra up +66%, Chambal fert up 52%.Bongaigaon Ref up 48%, Utam Galva up 42%, RCF, Nag fert up 40%; BPCL up 23%, ITC up 22%, HPCL up 19% Hotel Leela up 36%, Neyveli and McLeod up 30%. Oswal Chem up 29%. Ispat and Chennai Petro up 27%. Induslnd bank 24%.

IT was weak and for now we don?t see any major action here. The two major factor influencing the business that is demand side (US market) and Rupee are not in favour of the industry. Fertiliser sector saw some fertility as Govt. issued bonds worth Rs.7500crs. However, this bond won?t help fertiliser much. There needs to some major policy change for fertiliser stocks to perform. Telecom was hit on spectrum and portability policy front. FMCG stands to be defensive play in weak market. ITC was the biggest gainer?but our pick is Britannia here.

Economy: Slowing ?
IIP (index of industrial production) decelerated sharply to 6.4% for September 2007 from 12% last year. This was largely driven by a drop in manufacturing (79% weight) to 6.6% in September 2007 from 12.7% last year and electricity (10% weigh). Sectors performing poorly were : rubber, plastic, petroleum and coal products; and machinery and equipment. Consumer goods saw negative growth of 0.6% because of sharply contracting consumer goods. However, the festival season last year was a month prior and that could be a base effect.

All in all the things were not good. October IIP growth may come in better on the back of the base effect. Oct 06 IIP was very low and it had the base effect of the festival season too. Provisionally indicated at 6.2% for October 2006 it was placed at less than 5% for the final figures.

Is there a case getting read for a rate cut ?. Growth is slowing and FII flows are a trickle. Inflation now certainly is at levels where the RBI will be very comfortable. Inflation came in low. An appreciating Rupee, suppressed fuel prices and a high base are the reasons for the same. Its another matter that no one believes the same. CPI (consumer price inflation) at 6.4% flies in the face of the RBI. We believe that the RBI would be inclined to cut rates but it would delay till its convinced that the slower growth is structural in nature.

The bad news continued to bog the Telecom sector. The Government decided to auction spectrum for third generation (3G) mobile services and wireless broadband services through technologies such as Wi-Max. The auction will be open to new companies wanting to foray into the telecom sector as well as established foreign telecom players. The existing operators had wanted the auction for 3G services to be limited to the license holders. Mobile Number Portability is finally here. The Government has decided to introduce this system in phases, starting with the four metros by fourth quarter of 2008. How much extra revenues it will generate is not clear.. but it certainly means that the networks would need to invest heavily to offer the services not to be left behind in a competitivce environment.

Clearly Reliance Communication is on the winning side for now. 3G services for CDMA dont seem to require high spectrum and thus their costs will be lower. Rel com also faces the least threat in number portability as we guess that this would be restricted to competition only from Tata Teleservices. Also having got entry into GSM it would be able to attract subscribers from competing networks on the number portability platform. On the face of it Bharti and Idea will be big losers.

For now power counter seems to be on everyones mind. Lots of orders announced and many are in pipeline. Power Grid announced a tender worth Rs.6,000 crore for the first phase of a high-voltage direct current lines. The project when complete will help move 46,000 MW of power will require an investment of Rs 46,000 crore,... It will add to transmission capacity that can move power from the North-Eastern part of the country and Bhutan to other parts where it is needed. Power Grid currently owns and operates 61,875km of transmission lines and transmits around 45% of the power generated in the country. India?s total transmission capacity of 16,500MW is not sufficient to handle the 78,570MW of additional power that the government wants to generate over the next five years. As per plans a national power transmission grid has been planned to more than double the transmission capacity in the country to 37,150 MW by 2012. The companies here to benefit will be the transformer companies, Crompton, Voltamp, Indotech. On the tranmission tower business there is Jyoti Structures, Kalpataru, KEC. On the Transmission lines there is Apar, Sterlite and Diamond cables.

Tea is also getting hot. Mcleod Russel is one of the largest producers in the world of the worlds cheapest beverage. It has over 35000 hectares under tea with 75 mn kgs production annually. It targets to have 100 mn kgs in the next couple of years. This can happen only through the inorganic route. Tea prices have been stable to positive this year so far. The worries of excess production in Kenya on the back of previous years drought has kept this as an underperformer. There are large tracts of land which will have its own story once the region loses the naxalite worries. Tea is a commodity whose prices are determined with many variables. Local production, weather conditions in Kenya, and more importantly economic conditions in countries like, Russia, Pakistan, UK, US. Jayshree Tea is another company with 20 mn kgs capacity and also having phosphatic fertilisers. In tea there is a possibility that we are at the bottom of the cycle. Will we start moving up or will it be a perennial wait is anyones guess. We are inclined to have tea for now.

Eveready finally took off. The company was really hit badly since it hiked the battery prices to offset high zinc prices. Major sales happen in rural area and this market declined to accept the price hike. As a results sales went for toss and company suffer badly. But, now the off take is small batteries (AA and AAA) has increased and Zinc has also come down to 2500 per tonne. Results were good for the quarter and worst is over here now ! Our note will follow here soon.
Sensex has failed to cross back above 20000 this week, yet in the previous week, we had talked about the significance of the level 19350 and as long as the Sensex holds above this, the market remains a buy on dips. Some value based buying is seen in select pharma and fmcg stocks, traders should look for opportunities here.

Market drops 87 points on weak global cues

The market remained flat to subdued today on the back of weak global cues, but fared better than the Asian markets. After yesterday's loss of 144 points, the Sensex resumed 182 points lower at 19,603 but recovered by mid-morning trades. The major contributors to this recovery were PSU oil refineries and oil marketing companies, which flared up on expectation of better gross refinery margins in the future. However, selling in select frontline stocks saw the Sensex zigzag between positive and negative territory for the better part of the day. The Sensex finally wrapped up the session at 19,698, down 87 points, while the Nifty shed five points and closed at 5,907.

The market breadth was positive. Of the 2,865 stocks traded on the Bombay Stock Exchange (BSE) 1,909 stocks advanced, 912 stocks declined and 44 stocks ended unchanged. Among the sectoral indices the BSE FMCG index flared up by 4.31%, the BSE CD index surged 2.61%, the BSE Oil & Gas index added 1.33% and the BSE Auto index gained 0.66%. Other sectoral indices were down around 0.5-1% each.

Among the Sensex stocks ITC shot up by 8.17% at Rs205. Among the other gainers, Grasim advanced by 5.87% at Rs3,831, Dr Reddy's Lab moved up by 3.39% at Rs620, M&M added 1.88% at Rs733, Maruti Suzuki scaled up by 1.35% at Rs1,049 and Bharti Airtel jumped 1.28% at Rs912. Select index stocks witnessed selling pressure. Hindalco was the major loser and dropped 5.52% at Rs204, L&T slipped 2.88% at Rs4,376, Ranbaxy was down 2.82% at Rs412, and ICICI Bank fell by 2.33% at Rs1,219.

FMCG stocks witnessed buying support. Tata Tea scaled up by 4.24% at Rs796, Dabur India jumped by 3.66% at Rs110, Godrej Consumers added 3.02% at Rs133, Nestle gained 2.77% at Rs1,376 and Bata India was up 2.43% at Rs231.

Over 3.37 crore Essar Oil shares changed hands on the BSE followed by Nagarjuna Fertilisers (2.43 crore shares), Facor Steel (1.80 crore shares), Essar Steel (1.74 crore shares) and Manglore Refinery (1.73 crore shares).

Essar Oil was the most actively traded counter on the BSE and registered a turnover of Rs635 crore followed by Reliance Petroleum (Rs346 crore), Manglore Refinery (Rs236 crore), Reliance Natural Resources (Rs213 crore), and Nagrjuna Fertilisers (Rs193 crore).

Market may remain choppy

The outcome of the government-Left front meet on nuclear deal scheduled on Friday, 16 November 2007 will dictate the trend on the bourses on Monday, 19 November 2007. The market has been volatile over the past few days on concerns over the impact of the US sub-prime mortgage problems on the US economy. These concerns may continue to cast their shadow on the markets in the weeks to come.

On the flip side, foreign institutional buyers are showing the signs of renewed buying.

Under mounting pressure from the Left parties to clarify its stand on the Indo-US nuclear deal, the government on, 22 October 2007, said the operationalisation of the deal will take place in accordance with the United Progressive Alliance (UPA)-Left joint committee's recommendations.

The Indo-US nuclear deal will be discussed in the Lok Sabha at a later date on 27 November 2007. Acoording to Parliamentary affairs minister Priyaranjan Dasmunsi the government has also proposed discussion in the Rajya Sabha on 28 November 2007. Earlier the dates fixed were 16 November 2007 for the Lok Sabha and 17 November 2007 for Rajya Sabha.

Sensex surged 790.76 points or 4.18% to 19,698.36 in the week ending 16 November 2007. S&P CNX Nifty rose 243.6 points or 4.3% to 5,906.85 in the week.

At current 19,698.36, Sensex trades at a PE multiple of 18.76 to 19.69 based on projected FY 2009 EPS of Rs 1000-to-Rs 1050 for 30 Sensex companies.

India's wholesale price index rose 3.11% in the 12 months to 3 November 2007, above the previous week's rise of 2.97%, government data released today afternoon showed. The annual inflation rate was 5.45% during the corresponding week of the previous year.

Foreign institutional investors (FIIs) resumed buying in the equities after being heavy sellers initially in the month. They bought shares worth net Rs 788.40 crore on Thursday, 15 November 2007, compared to their buying of Rs 952 crore on Wednesday, 14 November 2007.

The Q2 September 2007 results of India Inc. were decent to strong which means that strong fundamentals would support Indian equities at declines. At the macro level, the India's economy is expected to post decent to strong growth for a long period of time, mainly due to favourable demographics.

Sensex soars 791 points

Disappointing industrial production data for September 2007 pulled down the markets at the start the week. But the market rebounded with a bang later on easing political worries. Market later pared gains on profit bookings and as the US sub-prime mortgage crisis continued to haunt global equity markets. Market gained in 2 out of 5 trading sessions till Friday, 16 November 2007.

Sensex surged 790.76 points or 4.18% to 19,698.36 in the week ended Friday, 16 November 2007. S&P CNX Nifty rose 243.6 points or 4.3% to 5,906.85 in the week.

The BSE Small Cap index rose 623.85 points or 6.39% to 10,380.73. BSE Mid Cap advanced 498.75 points or 6.22% to 8,512.38.

BSE Auto index (up 1.47% to 5,284.01), BSE IT (down 2.21% to 4,159.12), BSE Metal index (up 3.76% to 17,498.20) and BSE Realty (up 4.07% to 10,521.84) underperformed Sensex.

BSE Bankex (up 7.74% to 11,003.05), BSE Capital Goods index (up 5.02% to 20,643.71), BSE Power index (up 4.66% to 4,591.97) and BSE Oil & Gas (up 7.26% to 12,479.56) outperformed Sensex.

The BSE Sensex ended down 170.33 points or 0.90% to 18,737.27 on Monday, 12 November 2007. Disappointing industrial production data for September 2007 and weak global markets weighed on sentiments. Realty, IT and oil & gas stocks were major contributors in decline. FMCG, power and PSU stocks ended higher.

The 30-share BSE Sensex rose 298.21 points or 1.59% to 19,035.48 on Tuesday, 13 November 2007. The market surged on value buying after a sustained slide over the past six days in a row. Reports that the Left front may allow the government to negotiate safeguards for a civilian nuclear agreement with the US, aided the surge. Volatility was high throughout the trading session. Infosys edged lower, in volatile trade. Banking, capital goods and power stocks edged higher.

The 30-share BSE Sensex ended up 893.58 points or 4.69% to 19,929.06 on Wednesday, 14 November 2007. Sensex registered its biggest intra-day absolute gains on the back of strong global cues and huge gains in index heavyweights Reliance Industries and ICICI Bank. Banking, oil & gas, IT and metal stocks were star performers. The market spurted as worries about the US credit crisis eased after several top US executives reassured investors that the US banking system could withstand shocks from credit-related losses.

The 30-share BSE Sensex lost 144.17 points or 0.72% to 19,784.89 on Thursday, 15 November 2007. The market sentiment was cautious due to persistent worry that more fallout from the US housing downturn and US credit crunch lies ahead, as stocks dropped across Asia. Weakness in banking, IT and power stocks pulled the Sensex down 205.86 points for the day at one point of time in the day to a low of 19,723.20.

The 30-share BSE Sensex ended down 86.53 points or 0.44% at 19,698.36 on Friday, 16 November 2007. Market swayed between gains and losses throughout the trading session. Banking and power stocks declined. Cement and consumer durables stocks were in demand. ITC surged.

ITC rose 21.46% to Rs 205.15 in the week on reports that it has approached Parle Products to buy out the latter's confectionery business.

Reliance Communications lost 0.25% to Rs 707.80 in the week on reports it has submitted a bid for 51% stake in Kenya's state-run telecom giant Telkom Kenya.

Reliance Industries rose 5.12% to Rs 2,875.70 in the week after it executed two production sharing contracts covering petroleum exploration activities in the Kurdistan region of Iraq. Further, its wholly owned subsidiary signed a production sharing agreement with the government of Oman for offshore block number 41 in Oman.

State bank of India rose 7.54% to Rs 2,325.60 in the week on reports that the Union Cabinet is likely to take a call by 22 November 2007 regarding the bank's proposed plan to raise about Rs 18,000 crore through a rights issue.

Reliance Energy declined 0.67% to Rs 1,825.70 on BSE, on reports its subsidiary Reliance Power is close to bag a 4,000-mega watts Krishnapatnam ultra mega power project in Andhra Pradesh.

India's biggest power generation firm by revenue National Thermal Power Corporation (NTPC) jumped 9.51% to Rs 264.30. As per reports, it is one of the bidders who have submitted bids for setting up the 4,000 mega watt Tilaiya ultra mega power project in Jharkhand.

India's largest cellular service provider by market share Bharti Airtel rose 4.71% to Rs 911.60. Bharti added 2.03 million subscribers in October 2007 against 2.06 million additions in September 2007, taking its total mobile user base to 50.9 million. Meanwhile, Bharti's chairman Sunil Mittal on Wednesday, 14 November 2007, said he favours mobile number portability across the country and not just in the four big metro cities.

India's largest dedicated housing finance company by revenue Housing Development Finance Corporation (HDFC) was up 7% to Rs 2,700 on reports that the company has received a premium commitment of Rs 170 crore from German insurer Ergo for the latter's 26% stake in its non-life insurance company.

India's biggest software exporter TCS edged lower 0.33% to Rs 982.20. The company said on Thursday, 15 November 2007 that it won a four-year outsourcing deal from Social Security Institute of Mexico worth more than $200 million.

Tata Steel gained 1.1% to Rs 843.20. The company is raising Rs 9135 crore from a rights issue of equity shares and convertible preference shares. The rights issue of equity shares is in the ratio of 1:5, priced at Rs 300 per share. The issue opens on 22 November 2007 and closes on 21 December 2007.

Larsen & Toubro soared 5.98% to Rs 4,375.85 after its consortium won an order worth Rs 580 crore from state-run Steel Authority of India to rebuild one of its blast furnaces.

HDFC Bank (up 9.68% to Rs 1,687.15) and ICICI Bank (up 6.69% to Rs 1,219.45) also gained among the Sensex pack.

US Futures Exchange (USFE) has entered into an exclusive licensing agreement with Bombay Stock Exchange (BSE) to list the dollar-denominated Sensex futures on the former, which will allow US investors to directly trade in India's equity market.

The Index of Industrial Production (IIP) rose 6.4% in September 2007 compared to 12% growth in September 2006. IIP growth was 9.2% in April-September 2007 compared with 11.1% growth in April-September 2006.

The government on Tuesday, 13 November 2007 estimated India's growth to be 8.5% in FY 2008 as its macro-economic fundamentals were favourable for a sustained, rapid and more inclusive economic growth.

Finance Minister P Chidambaram, in Economic Editors' Conference in New Delhi (Tuesday, 13 November 2007), cautioned that the pressures on consumer prices continued due to rising international oil, food and commodity prices. The sharp deceleration in the consumer goods segment has pulled down the overall industrial output.

Agriculture Minister Sharad Pawar, in a news conference on Tuesday (13 November 2007), said the government had no plans to change import duties on edible oils.

Six core infrastructure industries edged up 6% in September 2007 as against 10.6% in September 2006. The growth rate slowed down 6.6% in April-September 2007 from 8.7% in in April-September 2006.

The government on Wednesday (14 November 2007) ruled out any immediate hike in retail prices of petrol and diesel saying global crude oil prices will first need to stabilise before a decision is taken.

The Left has permitted the United Progressive Alliance (UPA) coalition government to speak to the International Atomic Energy Association (IAEA). However, Left wants its prior approval before signing the safeguards. The UPA-Left panel on the nuclear deal is scheduled to meet on 16 November 2007.

The board of Securities & Exchange Board of India (Sebi) on 14 November 2007, approved launch of a number of new derivative products to provide investors a wide range of risk mitigation products and create more activity in the onshore market. The products will relate to mini-contracts on equity indices, options with longer life, volatility index and F&O contracts, options on futures, bond indices and F&O contracts, foreign exchange F&O and introduction of exchange-traded products.

Trade Minister Kamal Nath in the sidelines of a conference held in New Delhi on Wednesday (14 November 2007) expressed hope that manufacturing growth would revive in the coming months. According to the minister, sluggish growth of 6.4% in industrial output in September 2007 over September 2006 was due to a weaker dollar.

The Centre's excise duty collections rose 14% at Rs 10293 crore in October 2007 from Rs 9066 crore in October 2006. Customs duty collections jumped 25% at Rs 9353 crore in October 2007 as against Rs 7503 crore in October 2006.

Annual inflation, based on the wholesale price index (WPI), moved up 3.11% in the week ended 3 November 2007 compared to a rise 2.97% in the week ended 27 October 2007. The market estimate was 2.97%. The annual inflation rate was 5.45% in the corresponding week of the previous year.

The Indo-US nuclear deal will be discussed in the Lok Sabha on 27 November 2007. Acoording to Parliamentary affairs minister Priyaranjan Dasmunsi the government has also proposed discussion in the Rajya Sabha on 28 November 2007. Earlier the dates fixed were 16 November 2007 for the Lok Sabha and 17 November 2007 for Rajya Sabha.

Small-cap, mid-cap stocks hog limelight

Market swayed between gains and losses throughout the trading session. The highlight of today's trading was rally in a host of small-cap and mid-cap stocks. The market breadth was strong.

Banking and power stocks declined. Cement and consumer durables stocks were in demand. ITC surged. IT stocks recovered from day's lows. Hindalco Industries and Larsen & Toubro declined sharply in late trade.

The 30-share BSE Sensex ended down 86.53 points or 0.44% at 19,698.36. Sensex hit a high of 19,838.03 in afternoon trade. At day's high, Sensex had risen 53.14 points. Sensex had lost as much as 312.38 points in early trade to a low of 19,472.51.

The broader CNX S&P Nifty ended down 5.25 points or 0.09% at 5906.85.

India's wholesale price index rose 3.11% in the 12 months to 3 November 2007, above the previous week's rise of 2.97%, government data released today afternoon showed. The annual inflation rate was 5.45% during the corresponding week of the previous year.

The market had opened lower today extending Thursday (15 November 2007)'s losses on worries that credit losses from US mortgage defaults and slumping US home prices would grow worse, hurting US economy and US corporate profits. It had bounced back from lower level after initial sharp fall.

Chief Executive John Stumpf of Wells Fargo & Co, the No. 2 US mortgage lender, told a conference on Thursday, 15 November 2007, that the US housing slump was far from over and was the worst since the Great Depression. Stocks declined across Asia and Europe due to concerns about US economy.

The market has been volatile in recent sessions, caught between jitters about the US housing problems and optimism about India's economic outlook.

BSE clocked a turnover of Rs 8854 crore compared to Thursday (15 November 2007)'s Rs 9,268.18 crore.

The NSE futures & options (F&O) turnover was at Rs 61505.32 crore compared to Thursday (15 November 2007)'s Rs 65894.61 crore.

The Nifty November 2007 futures were at 5906.00, a premium of 0.85 points over spot closing of 5906.85.

The market breadth was strong. On BSE, 1909 stocks advanced, while 912 stocks declined and 44 stocks were unchanged. 15 out of 30 stocks from the Sensex pack were in the red.

The BSE Mid-Cap index rose 1.17% to 8,512.38 and the BSE Small-Cap index rose 1.50% to 10,380.73. For the second day in a row, these two indices outperformed Sensex.

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) moved up 0.14% to 2875.70.

India's largest cigarette maker ITC jumped 8.17% to Rs 205.15. The stock has been rising ever since Citigroup came out with a buy rating on the stock recently, with a target price of Rs 215.

India's top drug maker by market share Ranbaxy Laboratories declined 2.82% to Rs 411.70 after the drugmaker said it was recalling 600 mili gram (mg) and 800 mg tablets of its gabapentin drug from the US retail market.

Software stocks recovered after an initial decline. The BSE IT index fell 0.89% to 4,159.12, led by decline in Infosys Technologies. It underperformed the Sensex. Wipro rose 0.41% to Rs 458.30 and TCS moved up 0.34% to Rs 982.20.

Satyam Computers fell 0.07% to Rs 428.55, off sessions low of Rs 415.15 and Infosys Technologies declined 1.79% to Rs 1623.50, off sessions low of 1616. Indian IT firms rely on US market for more than 50% of their revenue. IT stocks had come under renewed selling pressure over the past few days due to concerns about the US economy.

The BSE Bankex fell 0.45% to 11,003.05. It underperformed the Sensex. ICICI Bank, India's largest private sector bank by assets, fell 2.33% to Rs 1219.45, off session's low of Rs 1201.25.

India's largest commercial bank State bank of India moved up 0.76% to Rs 2325.60, off session's low of Rs 2270. The stock recovered on hopes the government would soon approve its right issue. SBI, 59.73% owned by the government, said last month it was planning to raise Rs 18000 crore by selling new equity around the end of 2007. On Wednesday, 14 November 2007, Finance Minister P Chidambaram said there was a strong case for the rights issue.

India's largest private sector bank by net profits HDFC Bank fell 0.71% to Rs 1687.15.

India's top mobile firm by market share Bharti Airtel moved up 1.28% to Rs 911.60 on reports that the company is not concerned about a drop in minutes of usage seen in the fiscal second quarter as new costumer additions are picking up well.

The BSE Metal index fell 1.36% to 17,498.20. It underperformed the Sensex. Hindalco Industries declined 5.42% to Rs 204, Tata Steel declined 2.02% to Rs 843.20 and Steel Authority of India (Sail) fell 1.50% to Rs 262.30. National Aluminium Company lost 2% to Rs 413.

Sterlite Industries moved up 1.14% to Rs 1019.20 and Sesa Goa gained 0.70% to Rs 3736.90.

Steel firm Essar Steel slumped 12.97% to Rs 51 after the company clarified that it has applied to BSE and NSE for delisting of the equity shares. The delisting price has been set at Rs 48.

The BSE Capital Goods index fell 1.25% to 20,643.71. It underperformed the Sensex. Larsen & Toubro slipped 2.88% to Rs 4375.85, Bharat Heavy Electricals (Bhel) fell 1.30% to Rs 2786.55 and BEML dropped 1.22% to Rs 1745.

Jaiprakash Associates gained 0.54% to Rs 1520.55 on reports that Formula 1 supremo Bernie Ecclestone has reportedly signed a 10-year contract with JPSK sports, a subsidiary Jaiprakash Associates to build the track in Greater Noida. He has expressed confidence that formula one sport would gain interest among sports enthusiast in India in coming years.

The BSE Power index fell 0.48% to 4,591.97. CESC slipped 4.15% to Rs 630.90, Areva T&D skid 2.57% to Rs 3037.25, NTPC dropped 1.89% to Rs 264.30, Reliance Energy fell 1.53% to Rs 1825.70 and Power Grid Corporation of India fell 0.67% to Rs 155.75.

Torrent Power rose 2.69% to Rs 198.30 and Tata Power moved up 0.53% to Rs 1252.15.

The BSE Consumer Goods index jumped 2.61% to 5,202.06 led by gains in Videocon Industries. It outperformed the Sensex. Videocon jumped 14.72% to Rs 402.10.

Titan Industries fell 0.25% to Rs 1517.25, Blue Star fell 0.58% to Rs 420.25, Asian star Company fell 2.115 to Rs 1290.30 and Lloyd Electric and Engineering dropped 3.31% to Rs 168.

Shares of the state-owned oil refineries and oil marketing companies rose on expectation of better gross refinery margins in the future. The BSE Oil & Gas index moved up 1.33% to 12,479.56. It outperformed the Sensex. HPCL moved up 5.55% to Rs 316.50, BPCL rose 1.79% to Rs 434.65, Indian Oil Corporation gained 3.72% to Rs 618.15, Bongaigaon Refinery rose 0.24% to Rs 105.20.

Investors expect that increased demand for refined petroleum products in short to medium term will push the gross refinery margins higher, which are already at high levels. Closures of certain refineries in other countries will benefit Indian companies who are increasing their capacities.

State-run oil refiner, Mangalore Refinery and Petrochemicals (MRPL) rose 1.91% to Rs 130.40. As per reports UK's British Petroleum (BP) and Japanese trading firms have shown an interest in buying the entire paraxylene output of an aromatic unit planned by the company.

Private sector refiner Essar Oil extended rally. It surged 22.01% to Rs 192.35. The stock appreciated 137.78% to Rs 157.65 in the last one week to 15 November 2007. The board of directors of the company will meet today, 16 November 2007 to consider further issue of securities to promoters.

India's top oil explorer by market capitalization ONGC moved up 0.39% to Rs 1245.65.

Cement stocks were in demand. J K Cements soared 3.02% to Rs 197.75, Grasim Industries jumped 5.87% to Rs 3831.45, JK Lakshmi Cements gained 2.90% to Rs 191.70, and Ambuja Cements gained 0.20% to Rs 147.15. ACC fell 0.45% to Rs 1039.65.

Jindal Photo was locked at upper limit of 10% at Rs 269 after it said it plans to set up a 600 mega watt power project in the first phase in Orissa, to be expanded to over 1,000 megawatt in the second phase.

Phillips Carbon Black was up 2.23% to Rs 215.90 on reports that the company plans to invest Rs 500 crore over 16 months, to boost capacity by 60%.

Southern Online Bio Technologies was up 2.61% to Rs 53.15 after its board approved raising up to Rs 50 crore for a bio-diesel unit in Visakhapatnam.

Prajay Engineers Syndicate rose 0.97% to Rs 329.30 after the company said Prajay Holdings a 100% subsidiary of the company has received a commitment of foreign direct investment to the tune of $36 million.

Goldstone Technologies rose 0.60% to Rs 200.70 after the company said it has signed an agreement with two companies for distributing its Internet protocol television services in Malaysia and Thailand.

IndusInd Bank surged 2.83%to Rs 112.70 after the private sector bank said that it has entered into a tie-up with Cholamandalam MS, General Insurance Company for banc assurance.

Among side counters, Hinduja TMT surged 28.64% to Rs 556.10, Chambal Fertilisers and Chemicals soared 28.26% to Rs 72.40, MIRC Electronics jumped 16.10% to Rs 29.20, Escorts moved up 14.64% to Rs 142.10 and HTMT Global rose 10.84% to Rs 515.90.

Essar Oil clocked the highest turnover of Rs 635.52 crore on BSE. Reliance Petroleum (Rs 346.25 crore), Manglore Refinery and Petrochemicals (Rs 236.28 crore), Reliance Natural Resources (Rs 213.05 crore) and Nagarjuna Fertilisers and Chemicals (Rs 193.51 crore), were the other turnover toppers on BSE in that order.

Essar Oil registered highest volume of 3.37 crore shares on BSE. Nagarjuna Fertilisers and Chemicals (2.43 crore shares), Facor Steels (1.80 crore shares), Essar Steels (1.74 crore steels) and Manglore Refinery and Petrochemicals (1.73 crore shares), were the other volume toppers on BSE in that order.

Major European indices – UK's FTSE 100, Germany's DAX and France's CAC 40 – were down by between 0.51% to 0.63%.

Asian stocks sank today, 16 November 2007, tracking overnight fall in US stocks. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 1.05% to 3.95%.

US stocks nose-dived on Thursday, 15 November 2007, as investors grappled with concerns about the strength of consumer spending and the overall economy after downbeat comments from Wells Fargo & Co. and J.C. Penney Co. The Dow Jones industrial average slid 120.96 points, or 0.91%, to finish at 13,110.05. The Standard & Poor's 500 Index dropped 19.43 points, or 1.32%, to close at 1,451.15. The Nasdaq Composite Index fell 25.81 points, or 0.98%, to 2,618.51.

US crude for December delivery settled down 66 cents, or 0.7%, at $93.43 a barrel on the New York Mercantile Exchange on Thursday. The catalyst for the drop in oil prices was data showing a surprising increase in US crude inventories in the latest week.

Meanwhile, as per media reports, private equity firm Blackstone Group, is said to have a huge pipeline of deals in India.

Massive FII inflow had send the market surging in September 2007 and October 2007. FII inflow was a robust in those two months - at Rs 16132.60 crore in September 2007 and Rs 20590.90 crore in October 2007. FII inflow had surged as huge liquidity infused by a steep 50 basis points cut in Fed funds rates in mid-September 2007 found its way into emerging markets.

Edelweiss IPO

 Networth Stock Broking has recommended subscribing to the initial public offering of Edelweiss Capital.

"We remain positive on the long term business potential of the broking industry and expect Edelweiss' growth momentum to continue in the coming years. At the upper band, the NBFC is priced at a PE of 35x its FY08 estimated earnings of Rs 23.2 and a price to book value of 3.9x," says the brokerage report .

Edelweiss Capital is a diversified financial services company in India, providing investment banking, institutional equities, private client broking, asset management and investment advisory services, wealth management, insurance broking and wholesale financing services to corporate, institutional and high net-worth clients.

Issue proceeds will be used for enhancing margins with exchanges and expanding operations and network in addition to general corporate functions.

The price band of the issue is fixed at Rs 725-825 and it closes November 20.

India Number Portability wont affect margins

India`s top mobile operator Bharti Airtel on Wednesday said introduction of mobile number portability is unlikely to affect the company`s margins as it expects a major churn out of subscribers in favour of GSM operators.

"It (mobile number portability) will not affect our margins... We are hopeful that the margins will increase as Bharti`s network would attract high value customers from CDMA network," Bharti Airtel Chairman and Managing Director Sunil Bharti Mittal told reporters on the sidelines of CII knowledge summit.

On November 12, the government announced the introduction of mobile number portability in four metros by next year. It would allow users to change their service providers while retaining their numbers.

Welcoming the move, Mittal said, "it should be introduced in all the circles simultaneously not only in four metros... Fixed line services should also be included in it."

The initial cost of operationalising the number portability would be borne by operators, however, rest of the expenses should be passed on to the customers, he added.

There is less competition in circles other than metros, which calls for a greater need for introduction of number portability, Mittal said, adding Bharti is ready to introduce number portability across the country.

On the issue of auctioning of 3G spectrum, Mittal said, "we are in favour of auctioning of 3G spectrum but there should not be any artificial scarcity of spectrum."

Richest Indians

Essar Group's Shashi and Ravi Ruia are the only new entrants in the list of the 10 richest Indians compiled by Forbes, while banker Uday Kotak jumped the most number of places among the top 40 billionaires.

The Ruias jumped five places to the 7th position with a net worth of USD 12 billion, while Kotak with USD 4.6 billion hopped 11 positions to the 16th rank.

Savitri Jindal with a net worth of USD 8.5 billion has leapfrogged 10 ranks to stand at 11th position and Jaiprakash Gaur advanced nine places in the list with USD 3.8 billion. The three saw their wealth soaring thanks to the surge in their companies listed on the country's booming stock market.

The scrip of Kotak Mahindra bank has nearly tripled in the past one year from a low of Rs 364 on Nov 23, 2006 to Rs 1,059 on Thursday on the Bombay Stock Exchange. Similarly, the share price of Jindal Steel and Power Ltd jumped more than six times from a low of Rs 1,889 on December 12 last year to a record high of Rs 13,580 on Nov 1 this year.

There are 10 new entrants in the top 40 - Gautam Adani at 13th, Anand Jain (19), Cyrus Poonawalla (22), Rakesh Wadhawan (26), Niranjan Hiranandani (31), l Madhusudhan Rao (33), Gautam Thapar (34), Vikas Oberoi (36), Anu Aga (38) and Gracias Saldanha (39).

Billionaires Lakshmi Mittal, Mukesh Ambani, Anil Ambani and Sunil Mittal held their ground while Unitech's Ramesh Chandra and DLF's K P Singh rose one position each. Kumar Birla and Tulsi Tanti slipped two places each, while Azim Premji dropped one spot to the fifth position this year.

"Twenty-nine people who returned to the list are richer than last year. The only exception is Rahul Bajaj, who is battling his younger sibling over dividing their empire and whose fortune was flat at 2.3 billion dollar," Forbes said.

Grey Market - Edelweiss, Mundra, Jyothi Lab, Kolte Patil, Kaushalya Infra

 Reliance Power -- 70 to 72


Mundra Port & Sez 400 to 440 520 to 525


Empee Distilleries 350 to 400 30 to 35


Edelweiss 725 to 825 820 to 850


Varun Ind. 60 45 to 50


Religare Enterprises 185 300 to 310


Barak Valley Cement 37 to 42 16 to 17


Rathi Bars 35 1.50 to 2


Allied Computers 12 12 to 15


SVPCL 40 to 45 - 2 to 3


Renaissance Jewellery 125 to 150 --


Kolte Patil 125 to 145 55 to 60


Kaushalya Infra 50 to 60 --


Jyothi Labo 620 to 690 300 to 320

CLSA - India not overvalued

CLSA, the Asia-brokerage arm of French lender Credit Agricole, said Indian stocks were not overvalued due to strong economic fundamentals and relatively low political risk, especially compared with its neighbours. But slow-paced infrastructure development and possible unstable coalition politics were risks ahead for India, Rob Morrison, chairman and chief executive officer of CLSA, told media in an interview on Thursday.

"India does not look over-valued. It looks very attractive as against the Chinese companies ... When we look at Indian stocks, the prices are much more attractive," he said.

Helped by foreign inflows India's main 30-share BSE index has risen 43.5 per cent this year to Thursday's close, sparking fears stocks were now overvalued.

Foreigners have so far poured in $16.8 billion in 2007, already higher than a record $10.7 billion in 2005. India has a stock price ratio of around 19 times earnings, compared with a ratio of 50-60 times earnings in China.

Morrison said Indian earnings growth in the second quarter was still high at 25-27 percent, and returns on assets were at 25 percent. He said CLSA saw investment opportunities in many sectors in India, including property, power companies and consumer banking.

In October, India's stock market regulator tightened investment rules for unregistered foreigners, clamping down on issuance of indirect investment notes - so-called participatory notes (P-notes) - to stem inflows of anonymous money.

Morrison said he expected the curbs to lower liquidity levels in the short term, but he saw the move as positive in the medium term by making investment in stocks more transparent. CLSA expected to increase private equity investment in Asia to $3 billion in 2008 from $1.8 billion this year.

India currently accounts from some $100 million in CLSA's private equity investments but the company wants that to rise. CLSA plans to renew a two-year contract with the merchant banking arm of leading lender State Bank of India, he said.

Morrison said he feared an asset bubble in Asia and a knock-on effect from a likely US economic downturn, but added India was better placed than many Asian nations to survive these problems because it relied more on domestic demand than exports.

POLITICAL WORRIES?

Indian stocks were briefly hit this year by political uncertainty over a nuclear deal with the United States that was opposed by the government's communist party allies.

The crisis threatened snap elections. Violent protests by poor farmers over industrial development plans, the closure of large retail stores in north India after demonstrations and go slow on the nuclear deal did not mean there was a wider backlash against reforms, he said.

But unstable coalition politics were a risk, especially as India needs infrastructure and education reforms if bottlenecks are not to shackle the booming economy. "I think it (coalition politics) does slow reforms," he said.

But he said India was still stable relative to its neighbours like Thailand and Pakistan. "When a government is elected in India it stays," he said. N Krishnan, head of research for CLSA India said that political uncertainity this year had weakened the government's ability to implement reforms.

"We don't see a dramatic reverse of economic reform but don't want an extended period of political uncertainty," he said. "With infrastructure, there isn't too much room for a delay."

Sensex sheds 144 points as US credit troubles resurface

The Sensex which had registered a record breaking 894 point surge on Wednesday, 14 November 2007, cooled off today on sustained selling throughout the trading session. Profit booking pulled the market lower. Weakness in banking, IT and power stocks pulled the Sensex down 205.86 points for the day at one point of time in afternoon trade to a low of 19,723.20. Realty and oil refinery stocks soared. Market breadth was strong.

The market sentiment was cautious due to persistent worry that more fallout from the US housing downturn and US credit crunch lies ahead, as stocks dropped across Asia. European markets, which opened after Indian markets were trading lower.

The market has been volatile in recent sessions, caught between jitters about the US housing problems and optimism about India's economic outlook.

The 30-share BSE Sensex lost 144.17 points or 0.72% to 19,784.89. The broader CNX S&P Nifty ended lower 25.80 points or 0.43% to 5912.10.

The market breadth was strong. On BSE, 1808 advanced, while 988 stocks declined and 46 stocked were unchanged. 23 out of 30 stocks from the Sensex pack were in red.

BSE clocked a turnover of Rs 9233 crore compared to Wednesday (14 November 2007)'s Rs 8796 crore.

The NSE futures & options (F&O) turnover was at Rs 65894.61 crore compared to Wednesday (14 November 2007)'s Rs 68270.99 crore.

The Nifty November 2007 futures were at 5913, a premium of 0.9 points over spot closing of 5937.90.

The BSE Mid-Cap index rose 1.55% to 8,414.09, while the BSE Small-Cap index rose 1.88% to 10,227.66. Both these indices outperformed the Sensex.

India's largest private sector firm by market capitalization and oil refiner Reliance Industries fell 0.55% to Rs 2871.70, off session's low of Rs 2850.05.

India's largest cellular service provider by market share Bharti Airtel jumped 4.71% to Rs 900.10 after the company said on Wednesday, margins would not be squeezed by the introduction of number portability and it favours extending the facility nationwide. The telecom minister said on Monday number portability would begin in four cities -- New Delhi, Mumbai, Chennai and Kolkata -- by the first quarter of 2008, allowing mobile phone customers to retain their phone numbers when they switch operators.

The BSE Bankex lost 1.54% to 11,053.02. It underperformed the Sensex. Index heavyweight and India's largest private sector bank by assets ICICI Bank slipped 2.29% to Rs 1248.60. HDFC Bank fell 2.85% to Rs 1699.20, Axis Bank dropped 2.68% to Rs 962.60, Punjab National Bank fell 1.37% to Rs 593.10.

India's largest commercial lender State Bank of India declined 1.62% to Rs 2308.10. The stocks rose in early trades to a high of Rs 2400 on hopes the government would soon approve its right issue. SBI, 59.73% owned by the government, said last month it was planning to raise Rs 10000 crore by selling new equity around the end of 2007. On Wednesday, Finance Minister P Chidambaram said there was a strong case for the rights issue.

Software stocks declined sharply after Wednesday's rally that was triggered by easing of worries over US credit crisis. The BSE IT index fell 1.96% to 4,196.49. It underperformed the Sensex. Infosys Technologies fell 3.12% to Rs 1653.05, Wipro shed 3.13% to Rs 456.45, Satyam Computers 0.44% to Rs 428.85. Indian IT firms earn more than 50% of their revenue from US.

India's biggest software exporter TCS edged lower 0.40% to Rs 978.90. The company today said it won a four-year outsourcing deal from Social Security Institute of Mexico worth more than $200 million.

Tata Steel gained 0.31% to Rs 860.60. The company is raising Rs 9135 crore from a rights issue of equity shares and convertible preference shares. The rights issue of equity shares is in the ratio of 1:5, priced at Rs 300 per share. The issue opens on 22 November 2007 and closes on 21 December 2007.

The BSE Realty index moved up 2.01% to 10,523.42. It outperformed the Sensex. Index heavyweight DLF rose 2.08% to Rs 945.95. Unitech moved up 2.35% to Rs 387.10 and Omaxe rose 5.91% to Rs 343.85.

The BSE Oil & Gas index moved up 1.46% to 12,315.88. It outperformed the Sensex. The stocks of the oil marketing companies soared on hopes that the government may give some tax benefits or increase oil bonds, which will bring down under recovery on sale of petrol and diesel. BPCL soared 18.02% to Rs 427, HPCL jumped 14.89% to Rs 299.85 and Indian Oil Corporation moved up 10.23% to Rs 596.

Among stand alone refiners, Mangalore Refinery & Petrochemicals soared 22.09% to Rs 127.95 on huge volumes of 1.85 crore shares and Bongaigaon Refinery surged 30.13% to Rs 104.95 on huge volumes of 1.70 crore shares.

Essar Oil surged 30.50% to Rs 157.65 after it said it would consider preferential issue of securities to promoter group at its board meet on 16 November 2007. The stock rose 34% to Rs 120 on Wednesday, 14 September 2007.

The BSE Power index fell 1.20% to 4,613.94. It underperformed the Sensex. Reliance Energy fell 3.45% to Rs 1854.15, Tata Power dropped 4.92% to Rs 1245.55, Torrent Power fell 3.59% to Rs 193.10, NTPC fell 2.85% to Rs 269.40. However, CESC surged 6.39% to Rs 658.25, Areva T&D moved up 1.06% to Rs 3117.25, Neyveli Lignite rose 0.79% to Rs 215.85 and Power Grid Corporation moved up 1.52% to Rs 156.80.

Fertiliser stocks rose for the second day in a row on reports that the government will issue bonds worth Rs 7500 crore to fertiliser firms by end-November 2007 to compensate them for selling the commodity at discounted prices. Rashtriya Chemicals and Fertilisers (RCF) soared 8.88% to Rs 78.50, Fertilisers and Chemicals Travancore (FACT) spurted 10% to Rs 39.40, Mangalore Chemicals & Fertilisers jumped 20% to Rs 48.90 and National Fertilizers soared 10% to Rs 83.70.

Packaging firm Shetron moved up 6.09% to Rs 71.45 after its board approved acquiring unlisted Belgian firm, Shetron Sobemi Europe NV, and merging paper packaging products maker Fibre Foils with itself.

Anil Dhirubhai Ambani led financial services firm Reliance Capital soared 5.24% to Rs 2259.20 on volumes of 9.79 lakh shares.

Godrej Consumer Products soared 5.61% to Rs 128.95 after it said the board would meet on 23 November 2007 to consider a rights share issue.

Reliance Petroleum clocked the highest turnover of Rs 423.75 crore on BSE. Reliance Energy (Rs 375.22 crore), Housing Development & Finance Corporation (Rs 304.79 crore), GMR Infrastructure (Rs 265.93 crore) and Essar Oil (Rs 258.63 crore), were the other turnover toppers in that order.

Ispat Industries registered highest volumes of 3.78 crore shares on BSE. IFCI (2.12 crore shares), Reliance Petroleum (1.96 crore shares), Manglore Refinery & Petrochemicals (1.85 crore shares) and Essar Oil (1.72 crore shares), were the other volume toppers in that order.

European market edged lower mirroring overnight fall in US stocks. UK's FTSE 100 was down 0.80%, France's CAC 40 was down 1.15% and Germany's DAX was down 1.03%.

Asian markets drifted lower due to overnight fall in US stocks. Key benchmark indices in Japan, Hong Kong, South Korea, Singapore and Taiwan were down by between 0.42% to 1.42%.

US stocks fell on Wednesday, 14 November 2007, amid concerns about a wider fallout from the housing downturn and credit crunch. Dow Jones Industrial Average lost 76.08 points or 0.57% to 13,231.01. The tech laden Nasdaq Composite Index shed 29.33 points or 1.10% to 2,644.32

Crude oil, which fell more than $4 a barrel on 13 November 2007, has rebounded on forecasts that a US Energy Department report today will show US supplies declined.

Mid Caps rally in subdued market

Weak global cues and rise in crude oil prices kept the domestic indices lower today. The Sensex resumed with a positive gap of 19 points at 19,948 but slipped immediately in the red. The persistent selling in heavyweights, banking, and IT stocks dragged the Sensex to its day's low of 19,723 by afternoon. Refinery and fertiliser shares however posted huge gains. The market witnessed some buying interest in late trades, however, the Sensex finally closed the session by shedding 144 points at 19,785. The broad based Nifty ended the session at 5,912, down 26 points.

Surprisingly, the breadth of the market was extremely positive. Of the 2,848 stocks traded on the Bombay Stock Exchange (BSE), 1,801 stocks advanced, 992 stocks declined and 55 stocks ended unchanged. The sectoral indices had a mixed outing. The BSE IT index dropped 1.96% followed by the Bankex index (down 1.54%) and the BSE CD index (down 1.43%). However, the BSE Realty index rallied sharply and gained 2.01% followed by the BSE FMCG index (up 1.83%) and the BSE Oil & Gas index (up 1.46%).

Among the major losers, Reliance Energy shed 3.45% at Rs1,854, Wipro declined 3.13% at Rs456, Infosys fell 3.12% at Rs1,653, HDFC Bank slipped 3.04% at Rs1,696, NTPC dipped 2.85% at Rs269, ICICI Bank lost 2.29% at Rs1,249 and BHEL slumped 1.76% at Rs2,823. Bharti Airtel, however, gained 4.71% at Rs900, followed by ITC up 3.52% at Rs190 while, M&M, ONGC, Tata Steel, Ambuja Cement, L&T ended the day in the positive territory.

Over 3.78 crore Ispat Industries shares changed hands on the BSE followed by IFCI (2.12 crore shares), Reliance Petroleum (1.96 crore shares), Manglore Refinery (1.84 crore shares) and Essar Oil (1.72 crore shares).

Valuewise, Reliance Petroleum registered a turnover of Rs422 crore on the BSE followed by Reliance Energy (Rs374 crore), HDFC (Rs304 crore), GMR Infrastructure (Rs265 crore) and Essar Oil (Rs258 crore).

Post Market Commentary

The market closed the session on a negative note due to the selling pressure across the sectoral indices scrips. A lot of volatility is seen in todays trading session as both the Sensex and Nifty keeps on moving ups and down. The investors showed more calculated approach in booking their positions. More buying activity is seen in oil & gas and reality indices scrips while Bankex index remains out of favor. Finally, BSE Sensex closed lower by 144.17 points at 19,784.89 and NSE Nifty fell by 25.8 points to closed at 5,912.10. But the BSE Mid cap and Small cap closed higher by 128.46 points and 188.28 points at 8,414.09 and 10,227.66 respectively. Overall, the market breadth was strong as 1,808 stocks advanced whereas 988 stocks declined.

BSE Reality index surged by 207.06 points to close at 10,523.42. Pushing it up are Mahindra Ges by (9.55%), Omaxe (5.91%), Akruti city (5.45%), HDIL (3.12%) and Unitech (2.35%).

BSE oil & gas index improved by 177.01 points to close at 12,315.88 as Essar Oil (30.50%), BPCL (18.02%), HPCL (14.89%), Indian Oil (10.23%) and Cairn (4.02%) closed higher.

BSE Capital goods index closed higher by 39.02 points at 20,905.87 as Thermax limited (6.18%), Siemens (4.37%), Praj industries (3.80%), BEML (2.81%), Carbo Universal (2%) closed higher.

BSE Metal index dropped by 16.14 points to close at 17,739.89 as Jindal Steel (4.79%), Hindalco Industries (0.90%) and Sterlite Industries (0.41%) are closed in red .

BSE bankex index slipped by 172.80 points to close at 11,053.02 as HDFC Bank (2.85%), AXIX Bank (2.68%), ICICI Bank (2.29%), SBI (1.62%) and PNB (1.37%) closed lower.

BSE IT index fell by 83.83 points to close at 4,196.49. Pulling it down are Wipro (3.13%), Infosys (3.12%), Moser baer (2.96%), I-Flex (2.28%), HCL tech (1.53%), Satyam (0.44%) closed in red.

BSE Power index slipped by 56.25 points to close at 4,613.94. Pilling it down are tata power by 4.92%, reliance energy by 3.45%, NTPC 2.85%, ABB by 1.84%, BHEL by 1.76% and GVK power by 1.66%.

Enjoy the moment-um

The secret of health for both mind and body is not to mourn for the past, worry about the future, or anticipate troubles, but to live in the present moment wisely and earnestly. – Buddha

Call it short-covering or what you may. But the bulls enjoyed every moment on Wednesday. After the inexplicable spurt, the bulls would hope to consolidate their position today. Signals from the global markets are pretty much mixed this morning. US shares closed down overnight. European and Latin American stocks advanced. Asian markets are mixed. The provisional FII figure for yesterday's session raises doubts about yesterday's big bang rally and as always makes the near term future market direction uncertain.

Unless net inflows from foreign funds turns significantly higher, the main indices may struggle to attain greater heights. They will largely remain in a range and the intra-day volatility will continue. Action will continue to be stock specific and at times sector specific. The lack of any big event in the near term will make it tough for the bulls to continue pushing the indices higher and higher. Some consolidation is a given following the sharp rise from late August to 20,000 level on the Sensex.

The upside appears to be capped at the moment, and a meaningful, healthy correction cannot be ruled out completely. Despite this, we hear Nifty levels of close to 7000 by December. (We'll wait to see whether December 2007 or December 2008). The trend will be decided by global markets, local political happenings and liquidity. Today, we expect a cautious to slightly higher opening and a choppy day.

Among stock-specific action, Om Metals is likely to continue its spurt on expectations of a placement at a significant premium to the current price.

Marg Constructions has announced the arrival of a Cutter Suction Dredger. MARG CAUVERY with a dredging capacity of 2000 cubm/hour arrived on November 9, and would be immediately deployed in the dredging works of Karaikal Port which is currently being developed by the company.

Broking counters could be in action as the IPO of Edelweiss Capital begins today. The price band for the same has been fixed at Rs725 to Rs825. Going by the grey market premium, Edelweiss is likely to double on listing.

Amtek India has signed a technical collaboration agreement with Teksid SpA. The Italian company is a world leader in the production of iron castings for the automotive industry with operations spread out in Europe, North and South America and Asia.

Essar Oil's Board of Directors will meet on November 16 to consider further issue of securities including issue of securities and warrants on a preferential offer basis to the Promoters / Promoter Group.

US stocks ended lower on Wednesday owing to selling pressure in the last half hour of trade, as investors chose to lock in gains in technology, financials and some of the other leaders of the previous day's rally.

Retailers and PC makers led the fall after Macy's cut its sales forecast and the government said consumer spending slowed last month. Dell, IBM and Apple led technology shares to a fifth drop in six days.

The Dow Jones Industrial Average lost 76 points, or 0.6%, to 13,231.01. The Nasdaq Composite Index fell 29 points, or 1.1%, to 2,644.32. The Standard & Poor's 500 Index dropped 10 points, or 0.7%, to 1,470.58.

Market breadth was negative. More than two stocks declined for every one that rose on the New York Stock Exchange.

On Tuesday, the Dow rallied nearly 320 points, registering its second biggest one-day point gain of the year following encouraging comments from Goldman Sachs and other Wall Street banks on their exposure to the sub-prime mortgage mess.

But the ghost of the housing sector slump returned to haunt investors on news of large writedowns from HSBC and Bear Stearns. Also, Tuesday's rally was largely due to short-covering, which didn't extend into Wednesday's session.

Going ahead, US stocks are likely to be volatile through the rest of the year.

After the close, Merrill Lynch confirmed market rumors that NYSE-Euronext CEO John Thain will take over the top spot at the bank, following Stanley O'Neal's exit.

Airline stocks rose in the afternoon on reports that United Airlines' parent UAL and Delta Air Lines are considering a possible merger. E*Trade Financial rallied for a second session after plunging roughly 60% on Monday on rumors that it would need to file for bankruptcy.

Fed Chairman Ben Bernanke says the central bank will begin providing its economic forecast four times a year, instead of the current two. He also says that when the Fed gives its forecast, it will look out three years into the future, as opposed to the current two years.

Treasury prices inched higher by the end of the session, lowering the yield on the 10-year note to 4.25% from 4.26% late on Tuesday. In currency trading, the dollar continued to slump against the euro. The greenback also inched higher against the yen.

US light crude oil for December delivery rose $2.92 to settle at $94.09 a barrel on the New York Mercantile Exchange, bouncing back after several down sessions. COMEX gold for December delivery rose $15.70 to $814.70 an ounce.

European shares closed higher. The pan-European Dow Jones Stoxx 600 index rose 0.5% to 370.28. The French CAC-40 gained 1.4% to 5,613.60, while the UK's FTSE 100 closed up 1.1% at 6,432.10 and the German DAX 30 inched 0.1% higher at 7,783.11.

Stock markets also rose in Brazil and Mexico. Brazil's Bovespa stocks index ended up 2.7% at 64,630. Mexico's IPC index of 35 most-traded stocks closed up 0.6% at 29,655.68.

Asian stocks are mixed this morning. The Morgan Stanley Capital International Asia Pacific Index added 0.4% to 162.96 as of 10:19 a.m. in Tokyo, after yesterday posting its largest advance since Sept. 19.

Japan's Nikkei climbed 52 points to 15,552, while the Hang Seng in Hong Kong was flat at 29,168.

Rally likely to continue

After opening with a positive gap up in the early trades markets constantly gained momentum as the day progressed. Overnight gains in the US markets strong Asian markets and firm cues from the European markets lifted the sentiments on D-Street.

Unabated buying across the board boosted the benchmark Sensex to close over 19,900 rallying 893 points recording it's biggest-ever single-day gain in absolute terms.

The index added to its yesterday's 300 points gain almost recouping the 1,200 points it had lost in previous six trading sessions till Monday.

Wipro surged 7% to Rs472 as India's third-largest computer- services provider is chasing orders worth as much as $875mn from Raytheon Co., the world's largest missile Maker. The scrip has touched an intra-day high of Rs455 and a low of Rs445 and has recorded volumes of over 47,000 shares on NSE.

Infosys Technologies gained 5% to Rs1707 after the company yesterday declared that they have planned to acquire smaller competitors in Europe to add customers and expand its consulting business. The scrip touched an intra-day high of Rs1707 and a low of Rs1656 and recorded volumes of over 20,00,000 shares on NSE.

ITC advanced 2% to Rs181 after reports stated that India's largest maker of cigarettes may acquire Parle Product Pvt.'s confectionery business. The scrip has touched an intra-day high of Rs184 and a low of Rs181 and has recorded volumes of over 4,00,000 shares on NSE.

SBI has gained 1% to Rs2316 following reports that the nation's biggest lender by assets and some other state-run lenders may get Rs200bn as fresh capital from the government. The scrip has touched an intra-day high of Rs2450 and a low of Rs2315 and has recorded volumes of over 2,00,000 shares on NSE.

Pratibha Industries advanced 8.5% to Rs303 after the company announced that they won Rs410mn order for the expansion of the domestic arrival terminal at the Indira Gandhi International airport. The scrip touched an intra-day high of Rs304 and a low of Rs285 and recorded volumes of over 10,000 shares on NSE.

Mcnally Bharat was locked at 5% upper circuit to Rs259.5 after the company yesterday declared that they have received Rs340mn order from Maharashtra State Power Generation Company. The scrip touched an intra-day high of Rs259.5 and a low of Rs251 and recorded volumes of over 1,00,000 shares on NSE.

Valecha Engineering spurred by over 4% to Rs260 after the company announced that they have secured project worth Rs1bn. The scrip touched an intra-day high of Rs284 and a low of Rs248 and recorded volumes of over 1,00,000 shares on NSE.

Stocks in News:

ICICI Financial bidders seek greater disclosure on the underlying subsidiaries of the bank.

Bharti Airtel to go in for major network expansion drive and add over 1,000 locations by March in north Maharashtra.

Malaysia's Columbia Asia Group of Hospitals to construct 100-bed multi-spatiality hospitals in DLF townships.

Gail is in talks with Qatar Petrochemical and Russia's Lukoil to build a large petrochemical plant overseas.

Oil companies sell bonds at a discount to LIC and other financial institutions.

Apollo Group to buy 300-bed hospital in the UK.

Essar group run Aegis BPO buys TeleTech Services, a 50:50 JV between TeleTech Europe and Bharti Ventures.

MindTree has bought Purple Vision, Indian subsidiary of French company TES Electronic Solutions SA for US$6.6mn.

The Finance Ministry is to investigate the identity of the promoters of ByCell.

Warburg Pincus sells 8.9% stake in Nicholas Piramal for Rs7.7bn.

RIL to purchase two helicopters for its offshore oil exploration work on the east coast.

Banglore Metropolitan Transpot Corporation (BMTC) is expected to raise Rs7.5bn via IPO.

SISCO, a JSW group company plans to increase production of specialty steel to 3mn tons per annum over the next 3-4 years.

Tech Mahindra to invest Rs10bn for setting up software development centres in Chandigarh, Noida and Jaipur in the next few years.

Nicholas Piramal is set to cut about 70 jobs at its manufacturing plant in Morpeth, UK.

ACC has decided to transfer the ready mix concrete business to its wholly owned subsidiary ACC Concrete for ~Rs1bn.

Sebi has announced new derivative instruments to deepen the market.

The Finance Ministry has finalized modalities to issue bonds worth Rs75bn to the fertiliser companies by the end of this month.

India added 5.7mn subscribers under the GSM segment in October.

The Government's indirect tax collections grew 18.6% in October.

Members of COAI are willing to go for open auction of spectrum for 2G services beyond 10MHz.

Sugarcane crisis in UP escalates as private sugar mills are unwilling to start crushing.

According to a joint study by the CII and McKinsey, the earth-moving and construction equipment industry's revenue is likely to grow five-fold to US$13bn by 2015.

FII Investment Trend:

FIIs were net buyers of just Rs1.63bn (provisional) in the cash segment on Wednesday while the local institutions pumped in Rs5.67bn.

In the F&O segment, FIIs were net buyers of Rs20.66bn.

Foreign funds were net buyers of Rs1.22bn in the cash segment on Tuesday.

Mutual Funds pulled out Rs128mn from the cash segment on the same day.
Upper Circuit:

HFCL, KEC Infra, Lloyd Steel, Uttam Galva, Surya Chakra Power, Vikash Metal, Shah Alloys, Kamdhenu, Indus Fila, Bombay Burmah, Zandu Pharma, Tourism Finance, GTC Industries, SREI Infra, Nesco, Ispat Industries and Shree Precoated.

Lower Circuit:

RIIL, MMTC, Engineers India, ITD Cementation, Temptation Foods.

Indian Markets Expensive?

Are Indian stocks too expensive after the breathless rally of the past few months? If you take the Sensex as a proxy for the Indian markets, yes. Its price earnings multiple, at 26.9 based on past year's earnings, definitely looks stiff both in relation to long-term trends and in comparison to its peers in other emerging markets. The Sensex's PE multiple now is several levels above its five-year average of 18. Over the past five years, the bellwether's PE multiple has swung between 10 and 27 times its historic earnings. It has averaged 15 for a 10-year period. The Sensex also appears dear compared to many other emerging market indices that figure on the radar screens of institutional investors.

The Sensex is much more expensive than Brazil's Bovespa, which trades at about 15 times, Taiwan's Taiex (21 times), Thailand's SET (21 times) or Korea's KOSPI (16 times). The only exception is the Shanghai Composite index of China, which trades at a whopping 68 times.
Higher growth rates

Indian companies will have to deliver much higher growth rates in earnings than most other emerging market peers to justify the current Sensex valuation. The PE of 27 assumes that earnings of the constituent companies would sustain a 25-30 per cent annualised growth at least over the next five years. Is it time to raise the flag of caution? Especially after the slowdown in earnings growth reported by India Inc in the September quarter.

However, investors can probably take heart from the fact that not all of the Indian stock market is as expensive as the Sensex.

With the recent market rally bypassing large swathes of mid- and small-cap stocks, the PE multiples of these stocks are far below those of the Sensex constituents. The PE multiple of the BSE Midcap index is, for instance, at just 22. What is more, a good 60 per cent of the stocks listed on the NSE are still trading at a PE multiple of less than 20, based on their past year's earnings.

Via Businessline

Edelweiss IPO Analysis

Edelweiss Capital's IPO may appear slightly expensive but it has high margins to boot.

It's raining IPOs from Indian broking firms. After IPOs of Motilal Oswal and Religare Enterprises in August and October respectively, there is yet another player Edelweiss Capital tapping the primary market.

And it's a bonanza time for investors as they can rake in profits not only by following the broking firms' investment advice but also investing in their companies, whose stock prices are soaring on the bourses.

For example, stock price of Motilal Oswal has appreciated by more than 50 per cent in less than three months and Religare too is expected to be a big gainer on listing.

Edelweiss Capital, a holding company of nine subsidiaries, plans to raise about Rs 609-693 crore from the primary market by issuing 8.4 million equity shares (including employee reservation of 0.2 million) in the price band of Rs 725-825.

The company plans to spend about Rs 435 crore over the next two years, most of which will be spent by March 2008.

The IPO proceeds will mainly be invested in its 100 per cent subsidiary, Edelweiss Securities (ESL)—which is into institutional equities, private client broking and wealth management for maintaining higher margin balances with the stock exchanges, prepaying loans, expanding office network and infrastructure, and enhancing existing technological capacity.

Same products… Like its peers, Edelweiss also wants to offer more than just equity broking and expand its product basket to position itself as a diversified financial services player.

The company, which started as an investment bank in 1996, has grown its businesses rapidly in last four to five years to include various high growth businesses like institutional equities, private client broking (for high net worth individuals), asset management, wealth management, insurance broking, treasury and wholesale financing.

The company has classified the last two businesses (treasury and wholesale financing) as capital businesses, and they form about 38 per cent of total revenues. It groups the remaining segments as agency businesses, which contribute about 58 per cent.

The company has indicated that it will achieve a balance between these two businesses.

...but a different strategy There are certain factors, which merit attention before investing in Edelweiss' IPO. First, the company is a dominant player in the institutional and high net worth individuals (HNI) segments with almost negligible presence in retail.

This is in contrast with other major players which are expanding their footprint in retail.

This could however be a blessing in disguise in the sense that it has helped the company enjoy higher margins – operating profit margin and net profit margin of about 48 per cent and 29 per cent respectively - than its comparable peers.

Says Arun Kejriwal, director, Kejriwal Research and Investment Services, "The company's forte in institutional and HNI segment has helped as retail business means low brokerages and small volumes." However, the company has not closed doors for retail customers and will evaluate the opportunity.

Second, financial services, being a high growth industry, companies have to grapple with retaining good talent and rein in attrition.

Edelweiss Capital has tackled this problem by issuing shares and ESOPs to employees, which will account for just under 20 per cent of the company's post-issue capital. Moreover, most of the senior management has been with the company for over five years.

Third, global financial players like Greater Pacific, Galleon Group, Sequoia Capital, Shuaa Capital and Lehman Brothers will be holding 37 per cent in the post-IPO capital, which instills confidence about the company's reputation and skills.

Some of these investors are also represented on the board, half of which is made of independent directors.

The only thing, retail investors need to keep in mind is the fact that the industry, in which the company operates, is highly working capital intensive as margin requirements increase if business increases.

So, constant capital infusion (equity or debt) is required from time to time which could lead to dilution (in case of equity).

High margins… The issue has been assigned IPO Grade 4/5 by Crisil indicating that the fundamentals of the company are above industry average. This follows strong growth reported in the past few years without much contribution of low margin high volumes retail business unlike its peers.

The company's consolidated net sales zoomed at 119 per cent a year between FY05 and FY07, thanks to the introduction of new high growth businesses mentioned above.

Despite substantial jump in employee and other operating expenses, the company managed to clock a higher operating profit growth of 123 per cent CAGR in the same period due to high margin institutional and HNI business. Net profit growth was capped at 120 per cent (still robust) due to jump in interest costs.

Going forward, the growth is expected to be higher as many of its subsidiaries covering various businesses like wealth management, asset management and advisory services have been formed in FY06, which are yet to achieve scale.

Further, increasing foreign money, rising market turnover and growing HNI population provides immense potential to the company.

Despite short term hiccups, the long term trend of the Indian market is upwards thus providing long term visibility. Moreover margins are likely to be maintained.

"Our focus is on profitable growth with risk managed return on equity," says Rashesh Shah, chairman and managing director of the company.

…bring premium valuation At Rs 725-825, the issue is priced at about 27 times and 30 times for FY08 estimated earnings respectively. This is much higher than its closest peers Motilal Oswal and Religare which trade at 21 times and 15 times for estimated FY08 earnings respectively.

The company commands high valuations because it enjoys superior margins than others and has reported strong financial performance without too much presence into the retail business.

Also, the growth in FY09 is going to be robust. For estimated FY09 earnings, the company's is valued at 13 - 15 times (assuming 100 per cent growth in earnings ) and 17-20 times (assuming 50 per cent).

Short term investors would get decent returns depending on market conditions post listing. Long term investors can select from a wide range of listed broking firms depending on factors like the extent of diversification, broader network and choice between HNI or retail growth. Issue opens: November 15 Issue closes: November 20

Nifty November futures at premium

 Turnover in F&O segment increases

Nifty November 2007 futures were at Rs 5952.05, at a premium of 14.15 points as compared to spot closing of Rs 5937.90.

NSE's futures & options (F&O) segment turnover was Rs 68,270.99 crore, which was higher than Rs 67,336.02 crore on Tuesday, 13 November 2007.

Reliance Industries November 2007 futures were at premium, at Rs 2905, compared to the spot closing of Rs 2888.45.

Neyveli Lignite Corporation November 2007 futures were at premium, at Rs 215.90, compared to the spot closing of Rs 214.05.

Mangalore Refinery & Petrochemicals November 2007 futures were at premium, at Rs 107.80, compared to the spot closing of Rs 104.75.

In the cash market, the S&P CNX Nifty gained 242.50 points or 4.26% at 5937.90

FIIs in buying mode

 Inflow of Rs 122.20 crore on 13 November 2007

Foreign institutional investors (FIIs) bought shares worth net Rs 122.20 crore on Tuesday, 13 November 2007, compared to their selling of Rs 820 crore on Monday, 12 November 2007.

FIIs inflow of Rs 122.20 crore on 13 November 2007 was a result of gross purchases of Rs 5186.80 crore and gross sales Rs 5064.60 crore. The 30-shares BSE Sensex rose 298.21 points or 1.59% to 19,035.48 on that day.

FII inflow in calendar year 2007 totaled Rs 69,805.60 crore (till 13 November 2007).

There are a total of 1,155 FIIs registered with the Securities & Exchange Board of India (Sebi).

Crude takes a huge leap

 Crude prices close almost $3 higher as OPEC speaks otherwise and dollar slides

Crude oil prices rose today, Wednesday, 14 November, 2007 on forecasts that the weekly inventory report by Energy Department tomorrow will show U.S. supplies declined. Price climbed up by almost $3 today. Price also rose once it was reported that an OPEC official has stated that increase in production is not necessary immediately.

For the day ending Wednesday, 14 November, 2007, crude-oil futures for light sweet crude for December delivery closed at $94.09/barrel (higher by $2.92/barrel or 3.2%) on the New York Mercantile Exchange. Price rose to $90.3 during intra day trading. Since the last two days, oil price had slipped almost $5.

Last week, prices rose to $98.62/barrel during intra day trading on 7 November, 2007. Oil prices had rose 16% in October, 2007, the biggest one-month gain since September 2004.

Brent crude oil for December settlement rose $2.53 (2.9%) to $91.36 on the London-based ICE Futures Europe exchange.

Crude oil also rose because the dollar fell against the euro for the second day on speculation that economic growth in Europe will outpace U.S. The dolar index was down by 0.8% today.

Yesterday, prices had slipped almost $2 after Organization of Petroleum Exporting Countries (OPEC) spoke out and hinted about increasing production in near term. Prices fell after OPEC said that it might consider increasing output in its forthcoming meeting, either this month or the one in December. Prices also fell after The International Energy Agency cut its forecast for global demand through 2008 as record prices could curb fuel use.

Natural gas wipes away earlier gains

Natural gas in New York declined, erasing an earlier gain, on an outlook for above-average winter temperatures and ample inventories. Gas for December delivery fell 11.4 cents (1.4%) to settle at $7.835 per million British thermal units.

Against this backdrop, December reformulated gasoline rose 5.37 cents at $2.3704 a gallon and December heating oil gained 7.13 cents at $2.5734 a gallon.

At the MCX, crude oil for November delivery closed at Rs 3673/barrel, higher by Rs 83 (2.3%) against previous day's close. Natural gas closed at Rs 311.3/mmtbu as against previous close of Rs 314.2/mmtbu, lower by Rs 2.9/ mmtbu.

The Paris-based IEA cut its estimate for fourth-quarter demand by 500,000 barrels a day as record prices reduced energy consumption. The IEA also said next year's demand is forecast at 87.69 million barrels a day, or 300,000 barrels a day less than a previous estimate. It was due to higher prices and weaker-than-expected economic data from the U.S. and the former Soviet Union.

Attacks on oil facilities in Middle East and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.

The Energy Department will come out with the weekly inventory report on crude oil and fuel products for week ended Friday, 9 November tomorrow morning at Washington at 10.30 E.T. It is a day later than normal due to Veterans Day Holiday.

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Punting on future gains

Each bull market is based on its internal logic, one that seeks to explain the seemingly incomprehensible — a vertiginous rise of the markets. So the 1992 bull run had Harshad Mehta's replacement cost theory. In 2000, Ketan Parekh spoke about the new economy and how it would cast aside the old order. This time, the bull phenomenon has a new logical framework, the esoteric-sounding 'embedded value.'

This concept has been used to justify a rise in stock prices even as the fundamentals of the Indian corporate sector — operating margins, cash flow — are looking weaker than a year ago. So, is the market missing the woods of the fundamentals for the trees of "hazy" future gains?

Consider SBI, Reliance Industries and Larsen & Toubro. Over the past three months, these companies have seen their stock prices move up by around 50%. The reason for this sudden increase has been associated with the fact that these companies have wholly-owned subsidiaries that will contribute to the cash flows of the company in the near future and thus, need to be valued in the stock price.

A theory for the excesses?

Brokers have given a thumbs-up to the theory that they feel can explain current valuations of the Indian stock market. The theory has been gaining currency for the past two years, but it is only in the past six months that it has been quoted widely to explain the massive rise in certain stocks.

So much so that in August 2007, brokers and analysts believed the Sensex still had an upside of 20% on account of embedded value in certain stocks, which had not been reflected in the stock price. By the beginning of November, the market had moved up by 29% and had exhausted almost all of that value.

That, however, was not the end of the story. According to research reports, more than 20 stocks that are a part of the Sensex still have upsides that are not noticed by the market. Most reports are bullish on large cap stocks like ONGC, Tata Motors and SBI and believe there is still an upside for these stocks in a market that is hovering around 20,000.

Embedded or embattled?

Simply explained, embedded value is the market putting a valuation to earnings that are somewhat visible but may not be completely evaluated as they do not form the main aspect of the company's business. Broking houses in India are seeing embedded value in many stocks.

Bharti Airtel for its towers, Bajaj Auto for insurance, ITC for hotels and paper — these are some of the companies that have assets or subsidiaries that are not valued in the mainline assets. The earnings are fairly visible to analysts or the markets and some amount of value can be attached to their businesses. The market, though, is now trying to attach embedded value to all companies — whether their earnings are visible or not.

Embedded value is calculated by doing a sum of the parts (SOTP) valuation — the stock price is divided into different businesses to arrive at valuations. While fund managers agree that the SOTP methodology itself is not a problem, the way it has been applied is. This happens when analysts try to value subsidiaries that will take a long time to show cash flows into present values of the stock price.

"The sum of the parts method should be used for understanding valuations as of today and not of the future. It has to do with today's real numbers... If analysts are using embedded value to calculate values of businesses where earnings are not visible, then this becomes an exercise in fantasy. Embedded value is not about the future, but is about the present and those who are valuing the invisible future in stock prices have not understood this concept," says Shankar Sharma of First Global.

The runaway value

Take, for example, Reliance. A research report based on August 1 prices stated that Reliance Industries had an upside of 25% when the stock price traded at 1,798. At that point in time, the valuation of the retail business worked out to Rs 80, which was constant for some time.

Much of the change in stock price was taking place due to the increasing value attached to the exploration and production side of the business. In the sum of the parts calculation of the Reliance stock price, the value of exploration and production had gone up by 135% in less than seven months and was at Rs 719 at the end of June 2007.

All broking firms that have brought out reports on embedded value use the SOTP method for companies whose subsidiaries will take a long time to show any business.

In October 2007, another broking house released a report on Reliance Industries where the E&P business was valued at Rs 745 and the retail business at Rs 182. Surprisingly, the retail business had a consensus value of Rs 80 in August 2007, which jumped to Rs 182 in a span of only three months, without any material change in business prospects.

According to the research report, the reason is associated with the fact that Reliance Industries has invested Rs 2,000 crore during the quarter into Reliance Retail and the "loyal customer base" has crossed the 1.5 million-mark. But the link between this and the cash-generation capabilities of the business is at the moment not very clear. After all, it's cash the market values and not market share.

But Reliance Retail is not alone. State Bank of India is experiencing something similar. Analysts feel the AMC and insurance arm of SBI need to be reflected in the bank's stock price. Insurance is a business where companies sell products for a long time before they actually start showing cash flows. But analysts feel the trick lies in grabbing the market share as this ensures future profits.

Based on this logic, both ICICI and SBI carry a part value of their insurance and AMC business in their stock price. The market feels the stock price should reflect the values of these businesses which are wholly owned subsidiaries. In August, the SOTP upside associated with SBI was around 44% when the price was at Rs 1,548. Today, the stock is up at Rs 2,237, capturing the SOTP valuations.

For most banks, their insurance subsidiaries are yet to have any impact in terms of profitability. Given the fact that some are gaining market share, it is important to see how relevant these market shares will be in terms of profitability. Tridib Pathak, CIO of Lotus Mutual fund considers embedded value only if the broader certainity of the business and cash flows are visible.

"People tend to go overboard. During the bull market phases, all aspects of the business get considered and during the bear market phase, even the main activity of the company is ignored by the market and stock prices lag behind. It is human behaviour," he says.

A 'model' explanation

Optimistic research heads and analysts are running their spreadsheets again to rerate businesses. They believe many companies have changed strategies and there is an improvement in business — as a result, there should be a change in their embedded values as well. The trouble is, 'embedded value' is a broad concept. In many cases, even the simple revaluation of land gets carried forward in the stock price. Companies like Hindustan Unilever, which have undervalued real estates, are also getting rerated.

Shriram Iyer, head of research at Edelweiss Capital, which has worked on a report on embedded value, says as far as their report was concerned, the stocks achieved the target price mentioned therein. He feels that in a dynamic market, he will have to revisit the report to see if anything has changed for companies to revise their valuations in terms of their sum of total parts of businesses. But he agrees that barring a few exceptions, there may be no point in looking at embedded values or SOTP when the market is hovering at the 20,000-mark.

All this is reminiscent of the way markets had given internet companies large valuations in 2000. Back then, the revenues never materialised and stock prices collapsed. But then, these aren't like internet companies. "The big problem today is that many companies who are 'embedded value' stars have real revenues in other businesses and hence, it is that much harder to disagree with valuation of loss-making subsidiaries," says the India head of a multi-strategy fund.

Only visible earnings matter

Even if we agree that the business of wholly-owned subsidiaries should be valued into the stock price of the company, the fact remains that in many cases, the cash flows from these subsidiaries are not clear.

For the value of subsidiaries to be reflected in the stock price, the company should have made plans or announced the strategic sale of these assets; or there is an IPO or even demerger of these assets, and the subsidiary has a certainity of business and cash flows. When such things are not in the news, the value of these subsidiaries becomes at most speculative.

"Analyst reports clearly state that the main line businesses are expected to grow at 17-18% this financial year. That is fine. But the valuation of the subsidiaries into the stock prices and their growth rate is humongous.

Sometimes the growth rates for the subsidiaries are more than 150%. We understand the main businesses, and have no argument against the valuation of subsidiaries; thus, we accept whatever analysts tell us," says a fund manager who does not agree with the sum of total part of stock prices or the embedded values in stock prices.

He believes these are concepts used in insurance, and there are people working overtime to apply the theory to stock prices. But Mr Iyer feels this approach to valuing companies is credible as significant value exists in balance sheets which is not near-term earnings accretive. "Some assets need to be valued separately to arrive at a fair price of the stock. It is a valuation tool and needs to be revisited all the time," he says.

Via Economic Times