Weekly Newsletter

RCOM gets GSM license despite policy logjam
Even as a Government panel evaluates the enhanced subscriber base linked spectrum norms and the use of dual technology, the Department of Telecommunications (DoT) granted a pan India GSM license to Reliance Communications (RCOM). The DoT made necessary amendments to its Unified Access Service Licenses (UASL), enabling the Anil Dhirubhai Ambani Group (ADAG) company to offer GSM services in addition to its existing CDMA services. RCOM said it will, in due course, offer nation-wide GSM services in addition to its existing CDMA services. RCOM has already paid the requisite license fee of Rs16.51bn. The company had received Letters of Intent (LOI) for 20 circles at that time. However, on Dec. 6 it got licences for 14 circles only as it already offers GSM services through Reliance Telecom in the rest of the circles.

 

RCOM will now have to wait for the DoT to allot 4.4 MHz of GSM spectrum in each of the circles to launch commercial operations. The DoT has said that RCOM will be allotted spectrum only after existing licence holders such as Vodafone, Aircel and Idea, besides other existing players that have applied for a pan-India licence are granted spectrum. Leading GSM players like Bharti Airtel, Vodafone Essar and Idea have challenged the DoT policy on fresh spectrum allocation as also the move to allow use of dual technology. The matter is being examined by a panel set up by the Government in order to resolve the current stalemate in the telecom sector over spectrum allotment.

 

Separately, reports suggested that DoT was ready to issue Letters of Intent (LoIs) to 16 companies, including By Cell, Swan, Cheetah, S Tel, Parsvnath, Datacom, Unitech, Shyam, BPL Mobile and Indiabulls, for starting mobile services. All these companies had applied for licences before Sept. 25. More than 40 companies had applied for licences before the Oct. 1, deadline set by the DoT. Such marquee names as AT&T, Sterlite, Videocon, DLF, Ispat and Moser Baer, are said to have been denied the LoIs, and reports said they could go to court over the move.

 

Bush unveils subprime rescue plan

 

The Bush administration announced a rescue plan for the beleaguered housing sector that will freeze interest rates for some category of subprime mortgage borrowers for five years to stem the ongoing meltdown. "The holidays are fast approaching and this will be a time of anxiety for Americans worried about their mortgages and their homes," US President George W. Bush said. The administration's efforts, he said, are a sensible response to a serious challenge. Bush released his plan on a day the Mortgage Bankers Association reported that the number of mortgages entering the foreclosure process in the July-September period set a new record.

 

Bush insisted that the US economy's fundamentals were sound. But critics said his administration was slow in reacting to the housing crisis and that the delay had worsened the correction. Some termed Bush's plan as too narrowly focused. "The Bush plan is months late and more than a million families short," Democratic presidential candidate John Edwards said. One of Edwards' rivals, Sen. Hillary Clinton, dismissed Bush's effort as "too little, too late" and said it would exclude 400,000 families whose interest rates on their mortgages are resetting in the final three months of this year.

 

The Bush plan will only cover mortgages resetting from Jan. 1, 2008, through July 31, 2010. The freeze will be available only to homeowners who have not fallen behind on their payments at the lower introductory rates and who are living in the homes. This requirement would exclude people who bought investment properties hoping to profit from the housing boom. Also excluded are people who can afford the higher payments. The bush administration expects these people will move as soon as they can to refinance to more affordable fixed-rate loans. White House said its plan could help 1.2mn homeowners.

 

But, the Center for Responsible Lending estimated that only 145,000 homeowners would benefit because of the narrow criteria. An estimated 1.8mn homes have subprime mortgages that are scheduled to reset in the next two years. Those mortgages were initially taken out with rates of around 7-8%. Under the scheduled increases, the rates will climb as high as 11% in the coming months without the freeze. That increase could add an additional US$350 to a typical monthly mortgage payment of US$1,200.

 

Challenges increase for Indian banks: Fitch

 

Fitch Ratings has today said that the tightening bias of India's monetary policy, together with increased consumer leverage and the appreciating rupee could impact the immediate prospects of the country's banks.

 

Asset quality has come under some pressure, particularly in consumer loans that grew rapidly in the past and has now started to season, forcing banks to re-examine the loss assumptions in some parts of the business.

 

Fitch would therefore likely be increasingly cautious in its near-term outlook on the performance of Indian banks; the banks, however, will continue to benefit from the growth opportunities in the economy given their dominant status as financial intermediaries - the strong investment cycle currently underway is the new growth engine for bank credit.

 

In the report titled "Indian Banks - Annual Review and Outlook", Fitch observes that while the increase in net income of Indian banks remained strong at 25% yoy during H108 (24% in FY07), on the back of loan growth and lower mark-to-market depreciation on government securities portfolios, the rise in net interest income was more sedate at 11% in H108 reflecting the pressure on net interest margins. The slowdown in loans growth in FY08, together with any increase in loan loss provisions, could therefore affect net income.

 

NPL ratios will remain under focus, particularly in consumer loans where rising interest rates and increased consumer leverage has affected borrowers' repayment capacity, leading to growing delinquencies in the unsecured loan portfolio. Asset quality in residential mortgage loans (accounting for about half the retail loan portfolio) has held steady, but could be vulnerable if rising interest rates are accompanied by a correction in property prices. The appreciation of the rupee against the US dollar could affect the smaller exporters of textiles; banks have reportedly restructured some of their exposure to this segment in FY08.

 

The ability to raise timely capital could remain a key differentiator between banks, given that internal capital generation is unlikely to meet the requirements of growth in risk weighted assets, as well as the increased capital charge for operational risk and the need for government banks to make additional provisions for pension liabilities. The larger private banks have demonstrated greater capabilities in raising capital in a timely manner.

 

Preference shares have been added to the list of hybrid capital that banks can issue; however, credit spreads in the international markets (that have been the largest source of hybrid Tier 1 capital for Indian banks) has dramatically widened since July 2007 following the global tightening of liquidity, forcing banks to postpone their plans to issue these instruments overseas. The need to access capital may come into sharper focus if the credit cycle deteriorates, which could well provide an impetus for consolidation.

 

US adds more jobs than forecast

 

The US labor market was slightly stronger than expected in November, the government said on Friday, with the world's largest economy adding 94,000 nonfarm payroll jobs last month, the Labor Department said in a mixed report. Economists had been looking for around 70,000-85,000 new jobs.
Payrolls had risen a revised 170,000 in October while the September reading was revised lower by 52,000 jobs. Payroll growth in September and October was revised lower by a total of 48,000.

 

The unemployment rate remained at 4.7% for the third month in a row. Economists had been forecasting a rise to 4.8%. The job growth came from the service sector as manufacturing lost 11,000, while construction employment fell by 24,000.

 

Meanwhile, a separate survey of households showed the strongest job growth in nearly six years, with 696,000 more people saying they had jobs in November.

 

Ahead of the report, economists were expecting the Federal Reserve to lower its overnight lending rate by a quarter percentage point to 4.25% at its meeting on Tuesday, but some market participants are looking for a half-point cut. he Fed has cut the target rate by 0.75 percentage point over the previous two meetings.

 

Interest rates...BOE cuts; ECB holds

 

As expected, the Bank of England (BOE) slashed its key interest rate by 25 basis point while the European Central Bank (ECB) left its benchmark rate unchanged, as central bankers in the two regions remain concerned about the current turmoil in the financial markets and tightening credit standards. The BOE cut its key interest rate by a quarter-point to 5.5% after economic data in the previous few days showed a sharp slowdown in consumer confidence and in services sector growth. The rate cut is the first since August 2005 and comes after five hikes since August 2006. Meanwhile, the ECB left Eurozone rates unchanged at 4%, as the threat of slower growth in the 13-country bloc overshadows the dangers posed by higher inflation. The decision was widely expected as ECB says it needs more time to assess the fallout from the global credit squeeze. ECB President Jean-Claude Trichet threatened to raise interest rates if an oil-driven jump in inflation spurs pay increases. "There is strong short-term upward pressure on inflation," Trichet said. The ECB will not tolerate second-round effects on wages and some policy makers wanted to raise rates as early as today, Trichet said.

 

OECD slashes world growth forecast

 

The Organisation of Economic Co-operation and Development (OECD) cut its growth forecast for its 30 members, citing the ongoing correction in the housing sector and tight credit conditions. The lobby group for the world's 30 most industrialised nations also asked the US Federal Reserve, the European Central Bank (ECB) and the Bank of Japan to hold interest rates while saying that the Bank of England (BOE) could cut borrowing costs. The global economy will slow in 2008 as housing markets cool and credit conditions tighten, but the US will avoid a recession and the outlook is not that bad, the OECD said in its semi-annual "Economic Outlook" report. The government-funded economics body grouping of 30 advanced nations also warned that there are signs that China's economy is overheating, and urged the country's government that faster appreciation of its currency would be in its own interest.

 

OPEC keeps output unchanged

 

The Organisation of Petroleum Exporting Countries (OPEC) defied calls for production increases from consumer nations and left their current output levels unchanged, sending oil prices above the US$90 per barrel mark briefly. The oil cartel, which pumps more than 40% of the world's oil, will hold production for now and meet again in January. OPEC ministers met in Abu Dhabi to take a call on output ceilings. The freeze on supply met the expectations of most analysts. Crude oil was very volatile during the week, plunging and recovering sharply often during the course of a single trading session. It fell to a six-week low early on Thursday, but before the end of the session it recovered to settle 3% higher. US crude stood 1 cent up at US$90.24 on Friday, having jumped US$2.74 in New York on Thursday. London Brent was 4 cents up at US$90.22.

 

Chinese steel firms may launch rival bid for Rio Tinto

 

Shares of Chinese steel companies rose after a local newspaper reported that Baoshan Iron & Steel (Baosteel) may lead a rival bid by Chinese steel producers for acquiring Anglo-Australian mining major Rio Tinto. Baosteel may bid at least US$200bn for Rio Tinto, topping the US$142bn takeover proposal by BHP Billiton, Chairman Xu Lejiang told state-owned newspaper 21st Century Business Herald. However, the Baosteel Chairman later denied media reports that the company was considering a bid for Rio Tinto. Separately, China's largest steel company called on the Australian government to intervene to prevent BHP Billiton from taking over Rio Tinto. Rio Tinto's CEO Tom Albanese said that BHP Billiton's US $140bn takeover proposal to combine the two companies was "dead in the water". Albanese also revealed that other suitors had approached Rio Tinto since BHP Billiton's bid emerged last month, but added that it wanted to stay independent.

 

Vivendi to acquire Activision for US$9.8bn

 

French media giant Vivendi announced it was acquiring a majority stake in Activision for US$9.8bn to create the world's largest independent video game publisher. The new company, to be known as Activision Blizzard, will be positioned as a rival to current leader Electronic Arts. Vivendi would pay US$27.50 per share and make a cash infusion of US$1.7bn to acquire a 52% stake in Activision, valuing the combined company at US$18.9bn. Vivendi will then fold its game operations into those of Activision in the new company. The new company plans to repurchase US$4bn worth of its shares for US$27.50 each, a move the merger partners said would increase Vivendi's stake to 68%. The purchase price represents a premium of 24% over Activision's closing price on Nov. 30 of US$22.15 a share. The new entity would trade on the Nasdaq stock market. The merger is expected to be completed in the first half of 2008.

 

ArcelorMittal to make mandatory offer for Chinese firm

 

ArcelorMittal said it would make a general offer for China Oriental Group Co. to comply with the regulatory requirements in Hong Kong. The world's biggest steel maker by production capacity will offer to pay at least HK$12.9bn (US$1.7bn) for shares in China Oriental it doesn't own. ArcelorMittal said it intended to maintain China Oriental's listing after the close of the general offer, which comes after it bought a 28% stake in the Hong Kong-listed company on Nov. 7 for US$647mn. The Hong Kong Securities and Futures Commission (SFC) accused ArcelorMittal of colluding with China Oriental's Chairman Han Jingyuan in acquiring a majority stake in China's only listed steel company not under state control. It also lambasted ArcelorMittal, Jingyan and their advisers for an almost total absence of consultation. Jingyuan controls 45% of China Oriental. The offer of HK$6.12 a share is 13% higher to the last traded stock price of HK$5.40. China Oriental has been suspended from trading in Hong Kong since Nov. 7. The bid would value the whole company for at least HK$17.9bn.

 

Govt asks airlines to clarify tax on airfares

 

The Government asked all airlines to clarify as to what are the charged tax components and provide confirmation whether all the taxes shown by them in their tickets/website are deposited with the government. The airlines were also asked to submit the record of the taxes deposited with the Government at the earliest. In a letter dated Dec. 4, the Director General of Civil Aviation (DGCA) said perusal of the fares shown on the airlines' web site has revealed that the airfares have two components - basic fare and taxes. However, it is not clarified as to whether components like Passenger Service Fee and Fuel Surcharge are included in the basic fare or have been clubbed under the heading of taxes. The actual amount passed on to the Government is only the passenger service fee (PSF) of Rs225 per sector. Therefore, passengers have complained that they are forced to pay Rs2025 under the head of 'taxes and levies' while the Government charges only Rs225 as PSF.

 

OVL to join Hindujas in Iran oil & gas projects

 

Notwithstanding pressure from the Americans to reduce trade relations with Iran, India is pressing ahead with its economic interest with the Islamic nation. In line with this trend, ONGC Videsh Ltd. (OVL), in partnership with the Hinduja Group, is eyeing a 50% stake in Iran's South Pars gas field, arguably the largest in the world. The two partners are also believed to be in talks for a 50% stake in Azadegan - one of the world's biggest onshore oil blocks. OVL and the Hindujas are in talks with Switzerland-registered NICO, a subsidiary of the National Iranian Oil Co. (NICO). OVL and the Hinduja group are planning a project-specific JV restricted to the Iranian projects, a business daily said. OVL is likely to hold a majority 51% stake in the proposed JV while the Hindujas will own a 49% interest, it added. Azadegan is estimated to have 33 billion barrels of oil while the South Pars gas field contains about 50% of Iran's gas resources. South Pars is jointly shared by Iran and Qatar.

 

IFCI up as Board clears loan conversion to equity

 

IFCI allowed banks and financial institutions to convert 100% debt worth Rs14.79bn into equity. Public sector banks agreed to convert their entire holdings in Zero Coupon Optionally Convertible Debentures (ZCOCDs) into equity and the IFCI Board approved the same. LIC, GIC and associates agreed to convert a part of ZCOCDs into equity in such a way that they would retain their holding in IFCI in percentage terms at the existing level of 13.67%. IFCI also said it was in discussion with multilateral institutions to sell a stake in it. Earlier in related news, a financial daily reported that World Bank's private investment arm IFC was to take a 20% stake in IFCI. Meanwhile, of the eight short-listed bidders, only four carried out due diligence on IFCI. These were: Sterlite Industries-Morgan Stanley; WL Ross, US Capital Partners VI Fund, Standard Chartered Bank and HDFC; Cargill Financial Services Corp. and Texas Pacific Group (TPG); Shinsei Bank, PNB and JC Flowers. The remaining bidders, namely GE, IDFC, Natixis and Blackstone are yet to conduct the due diligence. The last date of submission for financial bids has been fixed as Dec 14. The IFCI Board is expected to announce the strategic investor by Dec. 20.

 

Anil Ambani to inject fresh equity into REL

 

The Board of Reliance Energy Ltd. (REL) approved a proposal for new equity capital infusion of up to Rs80bn into the company. The new equity capital infusion is proposed through a preferential offer of equity shares and/or equity related securities to Reliance-Anil Dhirubhai Ambani Group (ADAG). The preferential offer, which is subject to necessary approvals from shareholders, will be made at a price of Rs1,812 per share. Life Insurance Corporation (LIC), New India Assurance, Oriental Insurance, General Insurance, National Insurance and United India Insurance, which have been long-term shareholders of the company over the past several decades and who collectively hold about 18% of equity, will be provided an opportunity to participate in the proposed offering. The new equity capital will substantially enhance REL's net worth, and further augment its borrowing capabilities.

 

Kuwait Petro eyes refinery projects in India

 

Kuwait Petroleum Corporation (KPC), the National Oil Company of Kuwait is keen to participate in setting up grass root projects in India in the oil and gas sector. This was conveyed by Saad A. Al Shuwaib in a meeting with the Minister of Petroleum & Natural Gas Murli Deora. Saad said KPC is exploring opportunities in the refinery and petrochemical activities. KPC is in talks with Indian private and public sector undertakings to build large-scale refinery and petrochemicals projects in the country. The company is in talks with Reliance Industries (RIL) and others, including Indian Oil Corp. Ltd (IOC) for the proposed projects. "We would like to have something in India. We are looking for something either with Reliance or any other company," Saad told reporters after meeting the Petroleum Minister. He categorically stated that KPC was not looking to buy stakes in existing refineries. "It could be greenfield or joint acquisition," he said.

 

DLF to enter MF biz with Prudential Financial

 

DLF Ltd. and US-based Prudential Financial Inc. signed an agreement to establish a joint venture company in India, subject to regulatory approval. The joint venture with Prudential Financial marks DLF's entry into the asset management business. The agreement allows Prudential Financial to expand its international investments business and marks its official entry into the Indian mutual fund market. Under the terms of the agreement, Prudential Financial will be the majority shareholder in the joint venture with a 61% stake, while DLF will own the remaining 39%. The asset management joint venture will be based in Mumbai and will provide a broad array of mutual fund and investment products. The new company will be named DLF Pramerica Asset Managers Pvt Ltd. It will use Prudential Financial's distinctive Rock brand, combined with DLF's brand.

 

Eicher Motors shares up on Volvo JV news

 

Shares of commercial vehicle maker Eicher Motors jumped on Friday amid reports that it could form a Joint Venture (JV) with Swedish auto major Volvo. A business news channel reported yesterday that Volvo could move its India business into the proposed JV with Eicher Motors. Meanwhile, a financial daily reports that Eicher Motors' commercial vehicle business is up for sale and Volvo, along with German auto giant Daimler are among the interested parties. A deal is likely to be announced shortly and will be 50% higher than the current market price, it added. Later on Friday, Eicher Motors said its Board of Directors will be held on Dec. 10, to discuss a proposal for strategic partnership in relation to the company's commercial vehicle and allied business that the company has received. The news about Volvo and Daimler being in talks with Eicher Motors, as well as other CV makers like Ashok Leyland, have been floating around for a while now. But, so far neither Volvo nor Daimler have been able to strike any deals. Japanese auto maker Nissan recently announced a tie up with Ashok Leyland for making CVs.

 

Suzuki aims to keep 50% market share in India

 

Japanese auto major Suzuki Motor Corp. said it was aiming to keep its 50% market share in India forever notwithstanding the ever growing competition. The head of Japan's leading manufacturer of compact cars said that the company will launch new models and increase its dealer network to maintain 50% share of the Indian passenger car market. "We can't let newcomers break our 50% share that easily. We're going to do everything we can to keep that level for eternity," CEO Osamu Suzuki said at the Foreign Correspondents' Club of Japan. The Japanese company plans to introduce new and improved models like the Swift hatchback and SX4 crossover to ensure that it maintains its dominant position in India. Shinzo Nakanishi, soon to be Maruti Suzuki's new Managing Director said that the company would likely boost its sales outlets to about 1,000 in the next five to 10 years from about 550 now.

Change in lot size

All eyes would be on the Fed meet in the coming week. The indices are getting dizzy at heights. The pattern has been a strong start and bouts of profit booking, which appear more like select basket selling. Global cues will continue to dictate the start. The much anticipated rate cut will give a short time spurt to indices world over and India would be no exception. The announcement of a change in lot size of F&O contracts could boost sentiment in most of the F&O counters. On the flip side, its a double whammy for counters like Infosys, IVR Prime and Sun TV. On one hand their prices have fallen while on the other hand the lot sizes have increased. Retail investors would mostly choose counters with a smaller lot size. A new high is in store for the indices. But the question is, will it sustain?

Post Market Commentary

The market closed on a positive note after struggling a lot towards the end of the session as the profit booking prevails across the counters. The market opened with a handsome gains due to he favoring global cues but unable to sustain at higher levels and pared all its gains after the mid session but buying is seen at the lower levels which led the market to closed higher. The Bankex and Realty scrips remained in the limelight as the investor''s showed more confidence towards buying these stocks. Both the BSE Mid cap and Small cap remained out of favor as they closed lower by 11.80 points and 18.46 points at 9,021.96 and 11,342.27 respectively. The BSE Sensex closed higher by 170.13 points at 19,966 and NSE Nifty closed up by 19.6 points at 5,974.30. Overall, the market breadth was strong as 1460 stocks are closed higher while 1406 stocks are closed lower.

 

BSE Realty index surged 229.27 points to close at 11,576.33. Scrips that gained are Mahindra Life (8.07%), Penland (6%), DLF (4.13%), Parsvnath (3.95%), Indiabull real (3.20%), Akruti City (1.13%).

 

BSE Bankex index closed higher by 269.68 points to close at 11,377.96. Pushed up by CENTBOP (14.14%), ICICI bank (4.02%), Oriental bank (2.31%), HDFC bank (2.09%), SBI (1.67%) and Canara bank (0.68%).

 

BSE IT index closed up by 157.42 points at 4,424.57. Pushed up by Tech Mahindra (9.93%), NIIT tech (7.03%), I-Flex (5.78%), Infosys (5.09%), TCS (2.62%) and Wipro (1.85%).

 

BSE Capital goods dropped by 158.36 points to close at 20,218.88. Scrips that fell are Crompton Greaves (3.05%), AIA Engineering (2.35%), Lakshmi machines (1.98%), BHEL (1.54%).

 

BSE Oil & Gas index closed lower by 100.50 points at 12,735.33. Pulled down by HPCL (2.54%), GAIL India (1.55%), IOCL (1.53%), Reliance industries (1.14%), RNRL (1.14%) and RPL (0.77%).

 

BSE Metal declined by 183.13 points to close at 18,738.08. Scrips that dropped are Gujarat NRE (3.55%), Bhusan Steel (3.17%), Hindalco (2.51%), Jindal Stainless (2.35%), SAIL (1.84%), Tata Steel (1.63%).

Congratulations - India is second most expensive

Indian stock market is the second most expensive after China's in the Asian region, following strong rally driven by robust economic growth, a report says.

 

"India is the second most expensive market in Asia after China. However, unlike China, its momentum has deteriorated rather than improved from October," global financial service major Citigroup said in a research report.

 

Citigroup said November was a turbulent month for Asian markets with MSCI AC Asia Pacific index ending down 8.39 per cent.

 

All constituents of this index, except Indonesia, generated negative returns in the period under review. Japan is not a part of this index.

 

The monthly report reveals that India's earning sentiment had turned negative last month, though its price momentum is still going strong.

 

"India is supported by strong momentum in expectation of its strong economic growth," the report said.

 

Rising stock prices make the market more expensive, but it also implies improving long-term price momentum and all else being equal, stronger momentum characteristics, it added.

 

Last month, the benchmark Sensex had witnessed global pressure and the index lost 361.16 points in the period.

 

The index ended at 19,363.19 points after falling to a low of 18,182.83 in November, as investors turned cautious after Foreign Institutional Investors (FIIs) pulled out sizable funds from equity.

Sensex rebounds as IT stocks outperform

The market witnessed a sharp pull-back after witnessing a slump in the afternoon. The rally was mainly triggered by the buoyancy in heavyweights, IT, banking and realty stocks. Firm openings in European markets also helped the Sensex to rally. The Sensex resumed with a positive gap of 268 points at 20,064 but slipped gradually as trading progressed and entered in negative territory by the afternoon. The Sensex touched the day's low of 19,706 on profit bookings in front-line, consumer durables and metal stocks. However, hectic buying in technology and banking stocks thereafter, saw the Sensex recover most of its losses and enter into green again. The Sensex finally closed the session at 19,966, up 170 points. The Nifty closed by adding 20 points at 5,974.

 

The breadth of the market was neutral. Of the 2,909 stocks traded on the BSE 1,460 stocks advanced, 1,406 stocks declined and 43 stocks ended unchanged. Among the sectoral indices the BSE IT Index flared up by 3.69%, the BSE Teck Index rose 2.73%, the BSE Bankex Index moved up by 2.43% and the BSE Realty Index was up 2.02%.

 

Among the Sensex stocks, Infosys flared up 5.09% at Rs1,718, DLF shot up by 4.13% at Rs1,011, ICICI Bank zoomed 4.02% at Rs1,248, HDFC moved up by 3.82% at Rs2,921, TCS scaled up 2.62% at Rs1,061, Ranbaxy surged by 2.34% at Rs407, Reliance Communication jumped by 2.17% at Rs734 and Bharti Airtel gained 2.10% at Rs960.

 

Over 3.69 crore Ispat Industries shares changed hands on the BSE followed by Centurian Bank of Punjab (2.51 crore shares), IFCI (1.79 crore shares), Tata Teleservices (1.58 crore shares) and Reliance Natural Resources (1.25 crore shares).

 

Value-wise, Ispat Industries clocked a turnover of Rs258 crore followed by Reliance Petroleum (Rs235 crore), Reliance Natural Resources (Rs221 crore), IFCI (Rs182 crore) and Reliance Industries (Rs182 crore).

Market may extend gains

The upward momentum in the stock markets is expected to continue at least till the US Federal Reserve meeting on Tuesday, 11 November 2007 since Fed is expected to cut Fed funds rate by at least 25 basis points. Recent data showing strong job creation by the US private sector in November 2007 has eased US recession worries.

 

Signs that the US economy is not ailing as much as has been thought caused investors to scale back expectations of the extent of an interest rate cut when the Federal Reserve meets next Tuesday. Yet, market men hope that a further cut in interest rates by the Fed will boost FII inflow in India.

 

Brokerage Edelweiss Securities said in a report that the benchmark index was expected to find minor resistance around 20,200-20,500 and on the lower side it had strong support around 19,200-19,000.

 

However, a sharp fall is not expected due to tremendous liquidity waiting to enter at market. FIIs had been the key drivers of the recent rally. They pumped in Rs 20,591 crore in the month of October 2007. However FIIs pulled out Rs 5,849.90 crore in November 2007. FII inflow in calendar year 2007 totaled Rs 67,521.60 crore (till 5 December 2007). Any slowdown in inflow by FIIs may put brakes on the rally.

 

Meanwhile, a slowdown in Indian economy due to high interest rates, a firm rupee, surging global oil prices and fallout of the US sub-prime crisis dented business confidence in July-September 2007, a survey said on Wednesday. The survey of 321 companies was conducted by trade body, Federation of Indian Chambers of Commerce and Industry (FICCI).

 

Reemergence of political concern arising from the Indo-US nuclear deal may impact the market. The United Progressive Alliance government expressed its firm resolve to operationalise the Indo-US nuclear deal, rejecting opposition and Left front's charges that it barred India from conducting nuclear tests and threatened the country's independent foreign policy. Replying to the nuclear deal debate in the Rajya Sabha on Wednesday 5 December 2007, the external affairs minister, Mr Pranab Mukherjee, stuck to the government view that the deal was essential for India's economic growth. The Left front continued its opposition to the deal in the debate in Rajya Sabha.

 

Annual inflation, based on the wholesale price index (WPI), dipped 3.01% in the week ended 24 November 2007 compared with a 3.21% rise in the week ended 17 November 2007. The market estimate stood at 3.20%.

IT, telecom stocks lead 170-points Sensex surge

Data showing slide in inflation helped the market end the choppy session on a firm note but fall in index heavyweight Reliance Industries capped the rise. Infosys Technologies and ICICI Bank spurted. IT, banking and realty stocks were in demand. Market breadth moved between positive and negative. 15 out of 30 stocks from the Sensex pack were in the red. European markets, which opened after Indian market, were firm in early trade.

 

The government today warned that increased capital inflows could endanger the growth process, although the economy is buoyant in tune with the trend witnessed since the last four years. "Increased capital inflows can impact macro-economic aggregates through the exchange rate, trade and monetary variables," said a half-year economic review tabled by Finance Minister P Chidambaram in Parliament today.

 

The review said increased inflows have been witnessed especially in the first half of current financial year 2007/08, while the economy's capacity to absorb it has not risen at the same pace, as indicated by the level of current account deficit. "There are short term challenges of managing inflows without endangering the growth and price stability," the review said.

 

The wholesale price index rose 3.01% in 12 months to 24 November 2007, below the previous week's rise of 3.21%, government data released today, 7 December 2007, afternoon showed. The annual inflation rate was 5.55% during the corresponding week of the previous year.

 

Some Asian markets edged lower after initial rise that was triggered by easing of US recession worries after US President George W. Bush, on Thursday, 6 December 2007, unveiled plans aimed at stemming US home loan foreclosures.

 

The 30-share BSE Sensex rose 170.13 points or 0.86% to 19,966. Sensex hit a low of 19,706.43 in afternoon trade. At day's low it shed 89.44 or 0.45%. Sensex had hit a high of 20,094.56 in early trade. At day's high, Sensex had gained 298.69 points.

 

Sensex had hit all-time high of 20,238.16 on 30 October 2007 but was not able to sustain at higher levels and it is yet to close above the physcological 20,000 level. The Sensex's all time closing high is 19,977.67 on 29 October 2007.

 

The broader S&P CNX Nifty rose 19.60 points or 0.33% at 5974.30. It touched a high of 6042.10 in early trade today, which is a new record high. Nifty had hit an all-time high of 6027.05 on Thursday, 6 December 2007.

 

The BSE Mid-Cap index fell 0.13% to 9,021.96. The BSE Small-Cap index was down 0.16% to 11,342.27. Both these indices underperformed the Sensex.

 

Market breadth was positive. On BSE, 1460 stocks advanced, 1406 stocks declined and 43 stocks remained unchanged.

 

BSE clocked a turnover of Rs 8598 crore compared to yesterday (6 December 2007)'s turnover of Rs 9,762.59.

 

Nifty December 2007 futures were at 5993, a premium of 18.70 points as compared to spot closing of 5974.30.

 

NSE's futures & options (F&O) segment turnover was Rs 61359.41 crore, which was lower than Rs 66472.74 crore on Thursday, 6 December 2007

 

India's largest private sector firm by market capitalization & oil refiner Reliance Industries slipped 1.14% to Rs 2841.65, off day's low of Rs 2915.

 

The BSE IT index rose 3.69% to 4,424.57. It outperformed the Sensex. India's second largest software exporter by sales Infosys Technologies soared 5.09% to Rs 1718.15.

 

Tech Mahindra soared 9.93% to Rs 1224.50, I-Flex Solutions gained 5.78% to Rs 1614, TCS rose 2.62% to Rs 1061.25, Wipro gained 1.85% to Rs 502.55 and Satyam Computers rose 1.59% to Rs 443.75.

 

Telecom stocks edged higher. India's largest listed cellular service provider by market share Bharti Airtel jumped 2.10% to Rs 959.65.

 

India's second largest listed telecom service provider by sales Reliance Communications rose 2.17% to Rs 734.30 on reports that Department of Telecommunications (DoT) on Thursday, 6 December 2007 awarded a pan-India GSM licence to the company.

 

The BSE Bankex rose 2.43% to 11,377.96. It outperformed the Sensex. India's largest private sector bank by assets ICICI Bank jumped 4.02% to Rs 1247.50.

 

Centurion Bank of Punjab soared 14.14% to Rs 55.70, Oriental Bank of Commerce rose 2.31% to Rs 276.80, HDFC Bank rose 2.09% to Rs 1721.25 and State Bank of India rose 1.67% to Rs 2436.

 

The BSE Realty index rose 2.02% to 11,576.63. It outperformed the Sensex. DLF rose 4.13% to Rs 1011.35, Mahindra Lifespace Developers soared 8.075 to Rs 797.80, Peninsula land jumped 6% to Rs 150.15, Parsvnath Developers gained 3.95% to Rs 396.95, Indiabulls Real Estate rose 3.20% to Rs 687.55, and Omaxe rose 2.44% to Rs 493.80. However, Unitech fell 0.51% to Rs 428.95, and Sobha Developers declined 1.48% to Rs 895.65.

 

The BSE Metal index fell 0.97% to 18,738.08. It underperformed the Sensex. Hindalco Industries fell 2.51% to Rs 188.15, Jindal Stainless declined 2.35% to Rs 226.65, Hindustan Zinc gave away 1.99% to Rs 806.05, Steel Authority of India fell 1.84% to Rs 274.20, and Tata Steel shed 1.63% to Rs 833.40.

 

The BSE Auto index fell 0.85% to 5,651.30. It underperformed the Sensex. MICO slumped 4.06% to Rs 4954.20, Amtek Auto declined 3.70% to Rs 443, MRF fell 3.49% to Rs 7202.55, Hindustan Motors shed 2.86% to Rs 47.60, and Tata Motors fell 0.56% to Rs 771.10. However, Maruti Suzuki was steady at Rs 1042.25.

 

Auto components maker Bharat Bharat Forge jumped 2.43% to Rs 351.60 on reports that the company is joining hands with NTPC to set up a new greenfield manufacturing facility in the country. The joint venture will look at manufacturing power plant equipment, including turbines, components and accessories, through technological tie-ups with other manufacturers. NTPC was up 0.27% to Rs 245.65.

 

Automobile tyre maker CEAT rose 2.83% to Rs 218.05 on reports that company plans to invest more than Rs 1000 crore to expand capacity and is hopefull of selling surplus land in Mumbai by March 2008.

 

United Breweries (Holdings), the flagship firm of UB Group, fell 3.36% to Rs 1085.90 after Kingfisher Airlines posted a net loss of Rs 577 crore in the financial year ended March 2007. The loss was on revenue of Rs 1,553 crore earned during the year.

 

Commercial vehicles maker Eicher Motors soared 8.22% to Rs 545.45 on reports that Swedish auto major Volvo is close to a joint venture with the company. Eicher Motors is expected to spin off its commercial vehicle unit into the venture. The valuation of the venture would be around $1 billion after the merger.

 

India's second largest iron castings manufacturer by sales Electrosteel Castings fell 2.18% to Rs 80.95 on reports that the company is planning an expansion, for which it may raise $25 million through private placement route.

 

Textile firm Modern India was locked at upper limit of 5% at Rs 952.95 after the company said on Friday, 7 December 2007 its board would meet on 17 December 2007 to consider stock split.

 

Solvent extraction firm Sanwaria Agro Oils rose 1.23% to Rs 111.45 after its board approved 2-for-1 stock split plan.

 

Infrastructure development firm GMR Infrastructure fell 6.05% to Rs 242.20 after National Stock Exchange curbed fresh positions in the derivatives contracts of the firm.

 

Speciality chemicals maker Jayant Agro Organics jumped 2.30% to Rs 104.50 after Japan's Mitsui & Company and Mitsui & Co (Asia Pacific) formed a joint venture to take a 24% stake in its speciality chemicals unit.

 

Ispat Industries clocked the highest turnover of Rs 259.06 crore on BSE. Reliance Petroleum (Rs 236.80 crore), Reliance Natural Resources (Rs 221.49 crore), IFCI (Rs 182.74 crore) and Reliance Industries (Rs 182.29 crore), were the other turnover toppers on BSE in that order.

 

Ispat Industries registered the highest volumes of 3.69 crore shares on BSE. Centurion Bank pf Punjab (2.51 crore shares), IFCI (1.79 crore shares), Tata Teleservices (Rs 1.59 crore shares) and Reliance Natural Resources (1.25 crore shares), were the other volume toppers on BSE in that order.

 

In Europe, key indices in UK, France, and Germany were up between 0.62% to 1.17%.

 

Asian markets were mixed today, 7 December 2007. Key indices in China, Japan, Singapore and Taiwan were up 0.15% to 1.13%. However, Key indices in Hong Kong and South Korea were down between 0.97% to 2.42%.

 

US markets surged on Thursday, 6 December 2007 on optimism that a plan announced by President George W Bush to stem US home foreclosures would keep the economy from sliding into a recession. The Dow Jones industrial average surged 174.93 points, or 1.30%, to end at 13,619.89. The Standard & Poor's 500 Index .SPX climbed 22.33 points, or 1.50%, to 1,507.34. The Nasdaq Composite Index soared 42.67 points, or 1.60%, to 2,709.03.

 

The Bank of England lowered its key interest rate on Thursday, 6 December 2007 citing signs of slowing growth. The Monetary Policy Committee, or MPC, voted to reduce the official bank rate paid on commercial bank reserves by 0.25 basis points to 5.5%. However the European Central Bank Monetary Policy Committee decided to keep interest rates on hold at 4% after their monthly policy meeting yesterday, 6 December 2007.

 

Crude oil was little changed in New York after rising the most in almost three weeks as U.S. inventories dropped as refiners prepared to meet heating demand. Crude oil for January delivery rose 3 cents to $90.26 a barrel on the New York Mercantile Exchange in Singapore. Brent crude oil for January settlement yesterday rose $1.69, or 1.9%, to settle at $90.18 a barrel on the London-based ICE Futures Europe exchange.

Futures at a premium

Turnover in F&O segment rises

 

Nifty December 2007 futures were at 5984, at a premium of 29.30 points as compared to the spot closing of 5954.70.

 

The NSE's futures & options (F&O) segment turnover was Rs 66,472.74 crore, which was higher than Rs 57,522.12 crore on Wednesday, 5 December 2007.

 

Reliance Energy (REL) December 2007 futures were at premium, at 1975.15, compared to the spot closing of 1946.50.

 

NTPC December 2007 futures were at premium, at 247.95, compared to the spot closing of 245.20.

 

State Bank of India (SBI) December 2007 futures were at premium, at Rs 2414, compared to the spot closing of 2395.55.

 

In the cash market, the S&P CNX Nifty gained 14.70 points or 0.25% at 5,954.70.

FIs come back

Inflow of Rs 1081.30 crore on 5 December 2007

 

Foreign institutional investors (FIIs) bought shares worth net Rs 1081.30 crore on Wednesday, 5 December 2007, compared to their buying of Rs 19.50 crore on Tuesday, 4 December 2007.

 

FIIs inflow of Rs 1081.30 crore on 5 December 2007 was a result of gross purchases of Rs 5515.50 crore and gross sales Rs 4434.20 crore. The 30-share BSE Sensex rose 208.57 points or 1.07% to 19,738.07 on that day.

 

FII inflow in calendar year 2007 totaled Rs 68,602.90 crore (till 5 December 2007).

 

There are a total of 1,180 FIIs registered with the Securities & Exchange Board of India (Sebi).

Madras Cements , Ashok Leyland

Madras Cements
Cluster: Cannonball
Recommendation: Buy
Price target: Rs4,800
Current market price: Rs4,474

 

Price target revised to Rs4,800

 

Key points

 

    *
      Madras Cements' topline grew by 23% year on year (yoy) to Rs500.12 crore. The topline rose on the back of a healthy 29% year-on-year (y-o-y) growth in realisations, which compensated for 5% y-o-y decline in volumes.
    *
      Variable costs per tonne jumped by 22.3% yoy on the back of a 27% y-o-y rise in power costs and 38% y-o-y rise in freight costs. Employee costs shot up by 38% yoy. Overall costs increased by 15% yoy translating into a per tonne rise of 21% yoy.
    *
      Higher realisations led the operating profits grow by 36% yoy to Rs214.5 crore and the operating profit margin (OPM) expand by 400 basis points to 42.9%. The earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne zoomed to Rs1,548, the highest in the industry and the highest in the company's history as well.
    *
      Interest cost and depreciation provision on a sequential basis remained more or less constant at Rs8.1 crore and Rs25.7 crore respectively.
    *
      Other income doubled to Rs2.8 crore as the company deployed the surplus cash. Consequently, profit after tax (PAT) rose by 34% yoy to Rs120 crore.
    *
      The company is expanding its capacity by 4 million metric tonne (MMT) to 10MMT by FY2009, as already mentioned in previous updates. The clinker unit at Jayanthipuram was commissioned in October 2007 as per schedule, whereas the 1MMT grinding unit at West Bengal has been delayed and will come up only in FY2009. The other 2MMT capacity expansion at Ariyalur is expected to come up at the end of Q2FY2009.
    *
      Taking cognisance of the realisation growth in the current quarter, we are upgrading our FY2008 earnings per share (EPS) estimate by 5.8% to Rs390 and FY2009 EPS estimate by 12.1% to Rs497.
    *
      4MMT capacity expansion will drive the company's volume growth going ahead. Healthy realisations in the South coupled with the company's efforts on cost control will aid it in maintaining its EBITDA at an above-industry average, which in turn will drive the profitability. The company will also be able to avail tax benefits for setting up wind mills. The robust cash flow position of the company will make it well placed to withstand the downturn in the cement cycle. At the current market price, the company is trading at 9.1x its FY2009 EPS and 5.4x its enterprise value (EV)/EBITDA. With the rise in benchmark valuations, we are upgrading the price target to Rs4,800 per share.

 

Ashok Leyland
Cluster: Ugly Duckling
Recommendation: Hold
Price target: Under review
Current market price: Rs51

 

Disappointing sales

 

Key points

 

    *
      Ashok Leyland's total vehicle sales during November 2007 declined by 16.2% to 5,800 units as against 6,923 units in the same month a year ago. Sales in domestic market declined by 16.4%, whereas exports sales were also down by 13.7% for the month. Total sales declined by 15% month on month taking the year-till-date sales volume down by 3%.
    *
      Passenger or bus sales were flat year on year (yoy) at 1,465 vehicles. Orders from various State Transport Corporations, which drove the sales growth of this segment in the first half of FY2008 have slowed down in the second half.
    *
      Truck sales declined by 21% to 4,283 vehicles. Domestic sales declined by 20% yoy to 4,226 vehicles, while exports declined by 64% to 57 vehicles.
    *
      Truck sales were affected due to constrains on the availability of driver cabins and the price increase of 2-2.5% undertaken in October 2007. A new 49 tonne vehicle has been launched in the high growth tractor trailer segment with 'H' series engine.
    *
      The management has revised its guidance downwards for FY2008E to 91,000 vehicles from 100,000 vehicles. We estimate the volumes for FY2008 to be flat over FY2007 at 83,199. We also estimate a 14.4% growth for FY2009E to 95,138 vehicles.
    *
      The outlook for the commercial vehicle (CV) industry still appears to be weak. However, the company is trying to diversify itself by entering into joint ventures with Siemens VDO for infotronics and is tying-up with Nissan for the Light commercial vehicles. We maintain Hold on the stock.

UBS - Sensex - target 22,600 in 2008

Foreign brokerage UBS has raised its end-2008 target for the BSE Sensex from 19,000 to 22,600 saying economic growth, which is insulated from the global slowdown, will help companies report strong numbers.

 

In its India - Outlook 2008 report released here today, UBS said it has factored in higher valuations in an environment it believes will be characterised by both sustainable lower cost of capital and lower domestic political risk.

 

Putting aside investor concerns on excessive valuations due to the strong performance of the Indian markets in 2007, Manishi Raychaudhury of UBS's India Equity Research team said: "While a global economic slowdown and credit market dislocation could adversely affect Asian markets, the domestically-driven Indian market is relatively insulated."

 

The Sensex has surged nearly 42% from 13,942.2 to 19,795.87 today during this calendar year making several market watchers advice caution.
Says Raamdeo Agrawal, managing director, Motilal Oswal Securities: "There is all-round optimism across sectors, but this is built into the stock prices. Finding value at current prices is a difficult task."

 

Raychaudhuri sees a continuation of a strong investment cycle in infrastructure and industrial capex, the peaking of banks' lending and deposit rates - although he concedes that the central bank may not signal a peak in the cycle in the near term, and continued positive surprises in earnings and stable earnings growth as the key themes driving the market in 2008.

 

"Despite a mean reversion in earnings growth to between 20-22%, from between 30-35% in the last three years, price/earnings ratios of around 20 times are likely to be supported by earnings surprises from domestically-driven and interest rate-sensitive sectors as well as by a continuation of benign liquidity in the stock market," he added.

 

The UBS report noted that the market movement in 2007 has been narrow - driven by a small number of large stocks causing the valuation of frontline stocks in several sectors to appear steep. "We expect investors to rotate into less expensive sectors such as autos and metals as well as into cheaper stocks in those sectors that have outperformed," said Raychaudhuri.

 

On the downside, the report warns of the potential for an unexpected rise in inflation (possibly from global prices rising to a level that forces an upward adjustment in the cost of fuel domestically), and growth deceleration. In addition, increasing differences of opinion between the United Progressive Alliance and the Left parties has the potential to increase political uncertainty domestically and lead to an early general election though such concerns have receded recently.

India@Risk 2007

1) Economic impact of demographics — India is facing a demographic dividend. What must be done to ensure it does not turn into a demographic liability? Can the 'inequality trap' be overcome and inclusive growth achieved?

 

2) Loss of fresh water (quantity and quality) — How best can India cope with increasing freshwater insecurity?

 

3) Economic shocks and oil peaks — How vulnerable is India to external economic turbulence? What exogenous crises would risk derailing India's growth prospects (for instance, an oil price shock)?

 

4) Geopolitical risks: Globalisation versus protectionism — What happens if there is a backlash or retrenchment from globalisation? With the explosion of expectations, can India keep up with its own aspirations?

 

5) Climate change: The environment and challenges to India's growth — Can India balance the complex trade-offs between the environment and growth? What are the risks and opportunities for India?

 

6) Societal risks: Infectious diseases — What must be done to combat the spread of high-mortality disease and pandemics? What if India fails?

Tata Motors, Oil drilling, Cement

Tata Motors
Cluster: Apple Green
Recommendation: Hold
Price target: Rs792
Current market price: Rs772

 

Recovery still away

 

Key points

 

    *
      Tata Motors' sales for November 2007 stood at 46,947 vehicles. Total sales declined by 4.3% year on year (yoy) and 5% month on month (mom).
    *
      Commercial vehicle (CV) sales in the domestic market for the month grew by 4% to 26,895 vehicles. The sales growth of CV segment continues to be driven by the sales of light commercial vehicles (LCVs), which grew by 10% yoy. Medium and heavy commercial vehicle (M&HCV) sales were flat at 14,426 vehicles and continue to be affected by high interest rates and high base of last year.
    *
      Freight rates have started to pick up with the commencement of the festive season after remaining stagnant for last two months. Freight rates increased by 2% for the month and a further recovery is possible.
    *
      Passenger vehicle segment performed badly in November with domestic sales declining by 16% to 16,322 vehicles. Passenger car sales for the month declined by 21%. Indica sales declined by 19.6% yoy to 10,488 units, while Indigo sales fell by 29.5% yoy to 2,014 vehicles. The substantial decline in passenger car sales in November 2007 was due to the high base month of November 2006. Passenger car sales were higher in November 2006 due to full supply after the restoration of the company's paint shop, which had got damaged in a fire in late September 2006. Sales of Sumo and Safari grew by 7% yoy to 3,820 units mainly driven by the sales of the recently launched Safari Dicor VTT, which recorded a 55% sales growth with 1,775 units.
    *
      Export sales for the month declined by 1.7% yoy and 12% mom to 3,730 vehicles. Export sales as a percentage of total sales volume was down to 7.9%, the lowest in the year as compared with the highest of 12.4% in June 2007.
    *
      We continue to take a very cautious outlook of CV industry considering the high base of last year, the lower availability of finance and the delinquencies in the sector. Some momentum has been witnessed in the segment with the beginning of the festive season, but high inventory in the system would restrict the growth in the current year. In the passenger vehicle segment the company will continue to lose market share due to lack of new product launches.
    *
      The company's plans to acquire Jaguar and Land Rover is also a cause for concern, as these acquisitions would not be value accretive. The estimated acquisition price of $1.5 billion could strain the company's balance sheet in addition to its huge capital expenditure plan.
    *
      At the current market price of Rs772, the stock discounts its FY2009E consolidated earnings by 12.2x and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.1x. We maintain our Hold recommendation on the stock with a price target of Rs792.

 

STOCK UPDATE

 

Oil drilling

 

Adding fuel to fire
It couldn't have been better for oil drilling companies. The charter rates for drilling rigs are already at a record high level due to a favourable supply-demand scenario. In fact, the day rates have increased by as much as 200% to 300% (depending on the asset specification) over the past three years. For instance, an offshore rig (350-feet-jack-up rig) has been contracted at day rates of over $2,00,000, up from around $75,000-80,000 couple of years back.

 

Cement

 

ACC, Ambuja Cements sales up during November
The outlook for the cement sector is buoyant. Going forward we will witness rise in volumes as construction activity catches full steam in December and continues its momentum in the fourth quarter as well. Rising cement demand will push up the prices gradually. We have already seen the first such price hike, after the resumption of construction activity post monsoon, in Maharashtra and Andhra Pradesh. We see this trend to continue across other regions going forward. Price hike and higher volumes in the coming months will be a major trigger for the cement stocks.

Post Session Market Commentary

After rising to previous peaks at the start of the session, key indices ended with marginal gains on Thursday as investors sold for profits at higher levels.

 

"Frontline stocks have been in consolidation mode over the past week, so investors used today's rise to book some profits. Technical indicators also showed the market was in an over bought zone in the morning, so the momentum eased in the latter half of the day. But the undertone remains strong; there are no signs of weakness," said Suresh Kumar Iyer, technical analyst at Asit C Mehta Investment Interrmediates.

 

The National Stock Exchange's Nifty soared to an all-time high of 6027.05 before settling at 5954.7, up 15 points or 0.25 per cent from the previous close.

 

The Bombay Stock Exchange's Sensex ended up 58 points or 0.29 per cent at 19,795.87. From an intra-day high of 20,064.31, the index dipped to 19,716.57 before the close.

 

Hindalco Industries (down 3.11%), Grasim Industries (3.07%), Bajaj Auto (2.57%), HDFC Bank (2.41%) and Tata Steel (2.1%) were the biggest laggards.

 

However, heavyweights like ICICI Bank (up 3.24%), Reliance Energy (3.13%), HDFC (2.63%), Bharti Airtel (2.3%) and Infosys Technologies (1.97%) supported indices.

 

Real estate shares marched ahead despite a reversed trend in the rest of the market, adding3.58 per cent to the BSE Realty Index. Omaxe climbed 12.2 per cent, Unitech advanced 9.82 per cent Peninsula Land rose 6.62 per cent and Sobha Developers gained 2.12 per cent.

 

Stocks in the mid-cap space also ended weaker, snapping up a week-long rally. Jindal Saw shed 5.25 per cent, Godrej Consumer Products lost 4.96 per cent, Exide Indus slipped 3.96 per cent, Escorts dropped 3.88 per cent, Neyveli Lignite slipped 3.49 per cent and Arvind Mills fell 3.46 per cent.

 

The BSE Mid-cap Index ended down 0.21 per cent while the CNX Mid-cap Index finished flat.

 

The market breadth showed 1805 gainers and 1043 losers on BSE, while on NSE, 676 shares rose and 524 fell.

 

Key indices Asia ended with significant gains. The Nikkei was up 1.7 per cent, the Hang Seng up 1.1 per cent and the Straits Times up 1.08 per cent.

 

Stocks in Europe also posted gains with the FTSE, CAC and DAX trading about a per cent higher.

Post Market Commentary

The market closed marginally higher after paring most of its initial gains. The market opened on a strong note but failed to sustain all its gains and fell to close with little gains on the back of heavy selling across the sectoral indices scrips. The market lost most of its grounds towards the end of the session as selling intensified. Most buying is seen from the Realty baskets. The BSE Sensex touched an intraday high of 20,064.31 and low of 19,716.57 during the trading session. The BSE Sensex closed higher by 53.27 points at 19,791.34 and NSE Nifty closed up by 14.7 points at 5,954.70. Overall, the market breadth was strong as 1805 stocks are closed higher while 1043 are closed lower. The BSE Small Cap grew by 71.89 points 11,343.85 while BSE Mid cap slipped by 24.17 points to close at 9,028.66.

 

BSE Realty index surged 318.08 points to close at 11,271.88. Scrips that jumped are Omaxe (12.20%), Unitech (9.82%), Penland (6.62%), Anantraj (2.33%), Sobha developers (2.12%).

 

BSE Bankex index grew by 87.68 points to close at 11,108.28 as Canara Bank (3.25%), ICICI Bank (3.24%), Oriental Bank (0.99%), SBI (0.55%) and Kotak Bank (0.18%) closed higher

 

BSE Capital goods dropped by 26.02 points to close at 20,377.24. Pushed it down by Kalpataru power (1.93%), AIA Engineering (1.58%), Areva (1.95%), BHEL (1.30%) and BEML (1.26%).

 

BSE Oil & Gas index closed down by 104.16 points at 12,835.83. Scrips that fell are Indian Oil (2.66%), BPCL (1.71%), ONGC (1.15%), HPCL (1.13%) and Essar Oil (0.98%).

 

BSE Metal closed lower by 123.01 points to close at 18,921.21. Scrips that dropped are Jindal Saw (5.25%), Hindalco Industries (3.11%), SAIL (2.85%), Tata Steel (2.10%), Bhusan Steel (1.89%) and Jindal Stain (1.51%).

 

BSE IT index closed up by 34.87 points at 4,266.90 as Tech Mahindra (4.24%), Rolta India (3.25%), Moser Baer (2.12%), Infosys (1.97%), Patni computers (1%) and I-Flex (0.69%) closed in green

Sensex gains 58 points

The market showed a solid performance in today's trades. The Nifty crossed the 6,000 mark again after November 1 in the morning trades and touched the all-time high of 6,027. The Sensex also opened firm at 20,018, up 222 points, tracking global markets which were up around 1% in early trades and touched the day's high of 20,064 quickly. The market remained firm thereafter on sustained buying in realty and pharma stocks. However, the heavy bout of selling towards the close dragged the market into the red and the Sensex touched the day's low of 19,717. But, buying at lower levels helped the Sensex to recover most of its losses and enter into positive territory again. The Sensex finally closed at 19,796, up 58 points, while the Nifty ended the session at 5,955, up 15 points.

The broader market continued to remain in the green. Of the 2,887 stocks traded on the Bombay Stock Exchange (BSE), 1,805 stocks advanced, 1,043 stocks declined and 39 stocks ended unchanged. Most of the sectoral indices ended in the green. The BSE Realty index was the biggest gainer and moved up by 3.59% at 11,347 followed by the BSE HC index (up 1% at 11,950). However, the BSE CD index dropped 2.95% at 6,043 and the BSE PSU index was down 1.34% at 9,961.

Select heavyweights attracted buying support. Cipla surged 4.89% at Rs199, ICICI Bank rose 3.24% at Rs1,199, Reliance Energy jumped 3.13% at Rs1,947, HDFC added 2.63% at Rs2,813 and Bharti Airtel moved up by 2.30% at Rs940. Among the laggards Hindalco was down 3.11% at Rs193, Grasim declined by 3.07% at Rs3,680, Bajaj Auto shed 2.57% at Rs2,728 and HDFC Bank dropped 2.41% at Rs1,686.

Over 5.98 crore Ispat Industries shares changed hands on the BSE followed by Reliance Petroleum (2.29 crore shares), Tata Teleservices (2.25 crore shares), Chambal Fertilisers (1.84 crore shares) and IKF Technologies (1.82 crore shares).

Reliance Petroleum topped the value list with a turnover of Rs529 crore on the BSE followed by Ispat Industries (Rs438 crore), Reliance Energy (Rs322 crore), Reliance Natural Resources (Rs273 crore) and Unitech (Rs207 crore).

Sensex adds 58 points in volatile trade

Though the market ended in the green, it came off higher level as index heavyweight Reliance Industries slipped. Volatility on the bourses was high today. ICICI Bank edged higher. Cipla surged. Consumer durables stocks dwindled. Realty stocks were the star performers in today's trade. Market breadth was strong. 18 out of 30 stocks from the Sensex pack were in green. European markets, which opened after Indian markets, were trading firm. Key Asian indices, except China, were in green.

 

The 30-share BSE Sensex rose 57.80 points or 0.29% to 19,795.87. Sensex hit a low of 19,716.57 in late trade. At day's low, Sensex had shed 21.50 points for the day. Sensex had hit a high of 20,064.31 in early trade. At day's high, Sensex had gained 326.24 points.

 

Sensex had hit all-time high of 20,238.16 on 30 October 2007 but was not able to sustain at higher levels and it is yet to close above the physcological 20,000 level. The Sensex's all time closing high is 19,977.67 on 29 October 2007.

 

The broader S&P CNX Nifty rose 14.70 points or 0.25% to 5954.70.

 

The BSE Mid-Cap index fell 0.21% to 9,033.76. It underperformed the Sensex. The BSE Small-Cap index was up 0.79% to 11,360.73. It outperformed the Sensex.

 

Market breadth was strong. On BSE, 1805 stocks advanced, 1043 stocks declined and 39 stocks remained unchanged.

 

BSE clocked a turnover of Rs 9712 crore compared to yesterday (5 December 2007)'s turnover of Rs 9,410.33.

 

Nifty December 2007 futures were at 5984, a premium of 29.30 points as compared to spot closing of 5954.70.

 

NSE's futures & options (F&O) segment turnover was Rs 66472.74 crore, which was higher than Rs 57522.12 crore on Wednesday, 5 December 2007

 

India's largest private sector firm by market capitalization and oil refiner Reliance Industries fell 0.97% to Rs 2874.55, off day's high of Rs 2955. The company and Kuwait Petroleum (KPC), the national oil major of Kuwait, have reportedly begun the first round of discussions for scripting a mega joint collaboration across the oil and gas vertical. KPC is keen to rope in RIL as a partner in its upcoming projects in Kuwait in both refining and petrochemicals.

 

The BSE Realty index was up 3.59% to 11,347.36. It outperformed the Sensex. Sobha Developers gained 2.12% to Rs 909.15, DLF rose 1.71% to Rs 971.25 and Indiabulls Real Estate jumped 0.93% to Rs 666.25

 

Real estate developer Omaxe soared 12.20% to Rs 482.05. Omaxe today said a consortium comprising the company, GVK Power & Infrastructure and Nagarjuna Construction Company has put in a bid for development of 8-lane access controlled expressway project in Uttar Pradesh (UP). The Rs 30,000 crore project named Ganga Expressway Project would be constructed on the banks of river Ganga to connect eastern and western UP.

 

India's second largest realty firm by market capitalization Unitech soared 9.82% to Rs 431.15 on reports it may hive off its retail business i.e. the mall development business as a separate company.

 

The BSE Bankex rose 0.80% to 11,108.28. It outperformed the Sensex. India's largest private sector bank by assets ICICI Bank rose 3.24% to Rs 1199.30.

 

Centurion Bank of Punjab jumped 7.73% to Rs 48.80, Canara Bank soared 3.25% to Rs 300, Oriental Bank of Commerce gained 0.99% to Rs 270.55 and State Bank of India rose 0.55% to Rs 2396.60.

 

Consumer durables stocks fell sharply. The BSE Consumer Durables index fell 2.95% to 6,042.74. It underperformed the Sensex. Videocon Industries slumped 6.73% to Rs 572, Gitanjali Gems fell 2.15% to Rs 446.10, Titan Industries declined 1.55% to Rs 1565.40, and Blue Star shed 1.16% to Rs 469.05.

 

The BSE IT index rose 0.83% to 4,267.15. It outperformed the Sensex. India's second largest software exporter Infosys Technologies gained 1.97% to Rs 1634.90.

 

Patni Computers gained 1% to Rs 328.95, and TCS rose 0.25% to Rs 1034.20. However, Wipro fell 1.12% to Rs 493.40 and Satyam Computers declined 0.44% to Rs 436.80.

 

The BSE Power index was up 0.41% to 4,560.10. It outperformed the Sensex. Reliance Energy jumped 3.13% to Rs 1946.60, Gujarat Industries Power gained 1.67% to Rs 112.30, and NTPC rose 0.35% to Rs 245. Tata Power was steady at Rs 1311.05.

 

Power generation and supply firm GVK Power & Infrastructure surged 6.17% to Rs 840.90 after its board approved a 10-for-1 stock split.

 

Direct-to-home broadcast service provider Dish TV declined 0.32% to Rs 93.95, off day's high of Rs 102.10 after the company said after market hours on Wednesday (5 December 2007) that Kishore Biyani's Indivision Capital, the private equity arm of Future Capital, would buy 4.9% in in the company for Rs 250 crore.

 

Maharashtra Seamless (MSL), the flagship company of DP Jindal Group, rose 0.31% to Rs 581.70 after the company said it is acquiring a seamless pipes plant in Romania having a capacity of 2 lakh tonnes per annum.

 

Drug maker Glenmark Pharmaceuticals jumped 3.98% to Rs 503.80. The company reportedly plans to acquire a distribution and marketing company in Indonesia, in a bid to increase its foothold in Asia's emerging markets.

 

Steel maker JSW Steel rose 3.31% to Rs 1166.85 after the company said on Wednesday, 5 December 2007, its crude steel production rose 16% in November 2007 over November 2006.

 

Apparel firm House of Pearl soared 5.60% to Rs 276.30 after it acquired UK fashion retailer FX Imports.

 

Essar Steel, part of the Essar Group, was locked at upper limit of 20% at Rs 71.10 following an order passed by Securities Appellate Tribunal prohibiting the firm from delisting.

 

Pharmaceutical packaging material maker Essar Steel fell 2.76% to Rs 1282, off day's high of Rs 1398 after the company signed a deal to set up a Rs 88.40 crore clinical supplies unit in Wales.

 

Reliance Petroleum clocked highest turnover of Rs 529.63 crore on BSE. Ispat Industries (Rs 438.36 crore), Reliance Energy (Rs 322.51 crore), Reliance Natural Resources (Rs 273.25 crore) and Unitech (Rs 207.29 crore), were the others turnover toppers on BSE in that order.

 

Ispat Industries registered the highest volumes of 5.98 crore shares on BSE. Reliance Petroleum (2.29 crore shares), Tata Teleservices (2.25 crore shares), Chambal Fertilisers and Petrochemicals (1.84 crore shares) and IKF Technologies (1.82 crore shares), were the others volume toppers on BSE in that order.

 

In Europe, key indices in UK, France and Germany were up between 0.37% to 1.01%.

 

Asian markets climbed today, 6 December 2007. Key indices in Hong Kong, Singapore Ssouth Korea, Taiwan and Japan were up by between 0.20% to 1.70%. However, China's Shanghai Composite fell 0.15%.

 

US markets surged on Wednesday, 5 December 2007, led by rally in large-cap tech and financial stocks. Data that showed that US companies added staff in November 2007 at the fastest pace in a year, and worker productivity rose at the strongest rate in four years in the third quarter, helped ease recession fears, which boosted the bourses. The Dow Jones industrial average jumped 196.23 points, or 1.48%, to 13,444.96. The S&P 500 index gained 22.22 points, or 1.52%, to 1,485.01, while the Nasdaq Composite index advanced 46.53 points, or 1.78%, to 2,666.36.

 

Oil prices fell for a third straight day in New York, hitting a six-week low, boosted by an unexpected surge in US stockpiles. Crude oil for January 2008 delivery dropped as much as 96 cents, or 1.1%, to $86.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

 

European Central Bank and Bank of England meet today, 6 December 2007, seperately to consider interest rate. The US Federal Reserve will meet on 11 December 2007 to consider interest rates. Fed is likely to reduce Fed funds rate by 25 basis points to 4.25% as the country's economy is slowing down and money markets are strained. It has already cut the Fed funds rate two times in the last three months.

Sensex may retest 20,000 mark

 The Sensex may retest 20,000 mark today, on the back of strong global cues. It hit an all time high of 20,238.16 on 30 October 2007 but was not able to sustain at higher levels and is yet to close above the physcological 20,000 level. The Sensex's all time closing high is 19,977.67 on 29 October 2007.

 

The 30-share BSE Sensex surged 208.57 points or 1.07% to 19,738.07, on Wednesday 5 December 2007. On the same day, the broader based S&P CNX Nifty gained 81.65 points or 1.39% to 5940, a record closing high. It had struck all-time high of 6011.95 on 1 November 2007.

 

The European Central Bank's and Bank of England meet today, 6 December 2007 to consider interest rate. While the US Federal Reserve will meet on 11 December 2007. It is likely to reduce Fed funds rate by 25 basis points to 4.25% as the country's economy is slowing down and money markets are strained. It has already cut the Fed funds rate two times in the last three months.

 

Asian markets climbed today, 6 December 2007. Hang Seng (up 1.66% at 29,833.93), Japan's Nikkei (up 1.50% at 15,842.92), Taiwan's Taiwan Weighted (up 0.92% at 8,757.13), Singapore's Straits Times (up 1.05% at 3,597.60) and South Korea's Seoul Composite (up 1.09% at 1,959.23) all edged higher.

 

US markets surged on Wednesday, 5 December 2007, as large-cap tech stocks led the gains on analyst reports that demand for computers and software will increase. The Dow Jones industrial average jumped 196.23 points, or 1.48%, to 13,444.96. The S&P 500 index gained 22.22 points, or 1.52%, to 1,485.01, while the Nasdaq Composite index advanced 46.53 points, or 1.78%, to 2,666.36.

 

As per provisional data, foreign institutional investors (FIIs) purchased shares worth a net Rs 480.18 crore, while domestic institutional investors (DIIs) were net sellers of shares worth Rs 159.71 crore on Wednesday, 5 December 2007, in cash market.

 

FIIs were net buyers of index futures to the tune of Rs 202.73 crore while they were net buyers of index options worth Rs 65.82 crore. They were sellers of stock futures to the tune of Rs 1051.89 crore and sold stock options worth Rs 16.43 crore.

 

Oil prices fell for a third straight day in New York, hitting a six-week low, boosted by an unexpected surge in U.S. stockpiles. Crude oil for January delivery dropped as much as 96 cents, or 1.1%, to $86.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

Pre Market Watch

The Market is likely to have positive opening on the back of strong global cues. The market yesterday closed on a strong note as a result of selective buying across the sectoral indices scrips. However, the BSE Small cap outperformed the benchmark indices as most buying is seen from these baskets. On Wednesday, the BSE Sensex surged 208.57 points to close at 19,738.07 and NSE Nifty closed higher by 81.65 points at 5,940. We expect that the market to gain some grounds during the trading session.

 

On Wednesday, the US market closed in positive territory. The DJIA closed up by 196.23 points at 13,444.96. The S&P 500 index grew by 22.22 points to close at 1,485.01 and NASDAQ advanced by 46.53 points to close at 2,666.36.

 

Indian ADRs ended in positive territory. In technology sector, Infosys gained 2.80% along with Satyam by 2.69% , Patni computers by 2.40% and Wipro by 0.48%. In banking sector, HDFC bank and ICICI bank advanced by (4.46%) and (2.51%) respectively. In telecommunication sector, MTNL and VSNL grew by (6.15%) and (4.76%).

 

The major stock markets in Asia are trading firm. Hang Seng is trading up by 488.48 points at 29,833.93. Japan''s Nikkei is trading higher by 234.04 points at 15,842.92. Taiwan Weighted advanced by 80.18 points to trade at 8,757.13. Seoul Composite is trading at 1,959.23 up by 21.03 points. Singapore Strait Times inched up by 37.55 points to trade at 3,597.60.

 

The FIIs stood as the net buyer on Wednesday both in equity and Debt. The gross equity purchased was Rs3,974.10 Crore and the gross debt purchased was Rs369.50 Crore while the gross equity sold stood at Rs3,954.60 Crore and gross debt sold stood at Rs107.60 Crore. Therefore, the net investment of equity was Rs19.50 Crore and net debt was Rs262 Crore.

 

Today, Nifty has support at 5,892 and resistance at 6,028 and BSE Sensex has support at 19,586 and resistance at 20,019.

Market may add gains

Most of the leading Asian indices are currently trading with a gain of over 1% each. The surge in the US markets on the back of strong economic news and hoping that the Fed may cut interest rates again in its next policy meeting may help the market log gains. FIIs turning net buyers in equities and fall in the oil prices may boost the market sentiment. Among the key local indices, the Nifty has a strong support at 5750, while on the upside the index could test higher level around 6200. The Sensex has a likely support at 19300 and may face resistance at 21000.

 

The Dow Jones soared about 200 points on Wednesday, on a mix of strong economic news and hopes that the Federal Reserve will cut interest rates again at its policy meeting next week. While the Nasdaq surged by 47 points at 2666.

 

Indian ADRs witnessed strong buying support on US bourses. MTNL notched up significant gains and soared over 6% . The other Indian floats, Tata Motors, HDFC Bank and VSNL surged over 4% each. while Infosys, Satyam, Patni Computer and Dr Reddy's were up around 1-2% each.

 

Crude oil prices slipped marginally. The US light crude oil for January series declined by 83 cents at $87.49 a barrel. In the commodity space, the Comex gold for February delivery slipped by $3.90 to settle at $803.70 an ounce.

20K.World is our strength!

The world breaks everyone, and afterward, some are strong at the broken places.

 

After going through a topsy turvy ride for most part of November, stocks have begun the last month of the calendar year on a better note. Despite the nagging worries over the US housing sector and slowing FII inflows, the Sensex seems headed towards the 20k mark yet again. It needs another 260-odd points to reach the milestone. Given the bullish global cues this morning and renewed buying yesterday by the FIIs, it may well make new lifetime high today itself.

 

Over the past few weeks we have seen that the small- and mid-cap stocks have taken the limelight away from the large caps. Though the same trend may well continue for a while, one should not write off the frontline shares. Fresh buying may emerge in these scrips, especially today when world equity markets are smiling again.

 

There is a growing feeling that the Fed and the US Government will oblige the markets and will announce measures to bailout the ailing housing sector. If this indeed materialises, there is a strong case for a fresh rebound in equities across the world.

 

For the day you can ignore concerns of any unforeseen events, particularly in the US. The bulls will largely remain in command today. We see a gap-up opening and possibly a new high for the Sensex today or tomorrow.

 

US stocks rallied on Wednesday, with the Dow Jones rising by nearly 200 points, spurred by strong economic news and continuing bets that the Federal Reserve will cut interest rates again at its policy meeting next week.

 

Microsoft, Oracle and Intel led technology shares higher for the first time in four days on analyst reports that demand for computers and software will increase. Freddie Mac gained as the Treasury Department agreed on an agreement with lenders to stem subprime defaults by freezing rates.

 

AIG jumped after saying its investments linked to the housing market are manageable.

 

The Standard & Poor's 500 Index added 22 points, or 1.5%, to 1,485.01, the highest in a month. The Dow gained 196 points, or 1.5%, to 13,444.96. The Nasdaq Composite Index rose 47 points, or 1.8%, to 2,666.36.

 

Market breadth was positive. Four stocks gained for every one that fell on the New York Stock Exchange.

 

The Labor Department said worker productivity rose the most since 2003 in the third quarter while labor costs posted the biggest drop in four years. A report from ADP Employer Services showed companies last month added 189,000 jobs, more than triple the average forecast

 

October factory orders rose 0.5% from an upwardly revised 0.3% in the previous month, the government reported. However, the ISM index on the service sector fell to 54.1 in November from 55.8 in October. Economists had been looking for a reading of 55.

 

Thursday brings the latest interest-rate policy decisions from the Bank of England and the European Central Bank, as well as the US weekly jobless claims report.

 

Crude oil futures erased earlier gains and closed below $88 per barrel after the Organization of Petroleum Exporting Countries (OPEC) opted to keep production ceilings unchanged and crude inventories in the US fell to near two-year lows.

 

Treasury prices eased, boosting the yield on the 10-year to 3.94% from 3.89% late on Tuesday. In currency trading, the dollar gained versus the euro and the yen. COMEX gold for February delivery fell $3.70 to settle at $803.70 an ounce.

 

Across the Atlantic, stock benchmarks in Europe ended a two-session losing streak as shares of commodity firms rebounded and many economists predicted an imminent rate cut for the UK as well as Europe. The pan-European Dow Jones Stoxx 600 index climbed 1.7% to 369.60.

 

The UK's FTSE 100 posted its biggest one-day gain since August, up 2.8% at 6,493.80, while the German DAX 30 rose 1.7% to 7,944.77 and the French CAC-40 advanced 2% to 5,659.07.

 

The emerging markets also closed with solid gains. The Bovespa in Brazil jumped 2.3% to 64,927 while the IPC index in Mexico advanced 2.5% to 30,761. The RTS index in Russia gained 2.6% at 2262 and the ISE National-30 in Turkey surged 3.1% to 70,556.

 

Most Asian markets were trading strong this morning, gaining between 1-2%. The Nikkei was up 234 points to 15,842 while the Hang Seng in Hong Kong jumped 438 points to 29,783. The Kospi in Seoul gained 22 points to 1960 and the Straits Times in Singapore was up 42 points to 3602.

 

Samsung Electronics led gains among exporters after reports showed that US productivity and jobs rose. Mitsubishi UFJ Financial advanced among banks on expectations that US regulators and lenders have agreed on measures to contain subprime-mortgage losses that threaten global growth.

 

The MSCI Asia Pacific Index added 1.1% to 164.17 as of 10:15 a.m. in Tokyo, heading for its highest close since Nov. 7. Most other markets open in the region advanced.

 

Bulls closing in on 20k again

 

It was a strong session as bulls rebounded and ended the day with healthy gains, shrugging off weak cues from the US markets. After positing a strong start key indices turned range bound till the mid noon session. Although, bulls marched ahead as strong close in the Asian markets and firm cues from the European markets lifted the sentiments.

 

Mid-Cap steel stocks shined scrips like Uttam Galva, Sunflag Iron and Essar Steel were among the major gainers. Ispat Industries, Apar industries, Hindustan Motors and WWIL were among the stocks in limelight.

 

Finally, 30-share Sensex ended 208 points higher to close at 19,738 and Nifty closed at 5,943 adding 81 points.

 

HDFC ended flat at Rs2739 after the Indian mortgage lender partly owned by Citigroup Inc., announced loans grew at 28-29% in the last two months. The scrip touched an intra-day high of Rs2754 and a low of Rs2720 and recorded volumes of over 13,00,000 shares on NSE.

 

IOC surged by over 3% to Rs617 after the company announced that the crude oil in Cairn India's Rajasthan block may be waxy, but it has found it to be sweet. The scrip touched an intra-day high of Rs632 and a low of Rs600 and recorded volumes of over 19,00,000 shares on NSE.

 

Gujarat Ambuja also ended flat at Rs154. Holcim increased its stake in the company to ~46% by buying 5% through an open offer. The scrip touched an intra-day high of Rs155 and a low of Rs152 and has recorded volumes of over 15,00,000 shares on NSE.

 

Sintex Industries marginally slipped by 0.2% to Rs454. Reports stated that the company is likely to raise over Rs18bn through issue of securities in Domestic as well as International Markets. The scrip touched an intra-day high of Rs463 and a low of Rs440 and recorded volumes of over 1,00,000 shares on NSE.

 

Bajaj Auto gained 1.5% to Rs2803 after reports stated that the company is considering picking up majority stake in Austria KTM. The scrip touched an intra-day high of Rs2825 and a low of Rs2740 and recorded volumes of over 2,00,000 shares on NSE.

 

REL marginally slipped 0.5% to Rs1889. Reports stated that the company would raise funds through FCCBs at a premium to current market rates. The scrip touched an intra-day high of Rs1925 and a low of Rs1875 and recorded volumes of over 17,00,000 shares on NSE.

 

Indian Hotel gained 4.5% to Rs143 after Ginger Hotel a chain of The Indian Hotel Company earmarked an investment of Rs220cr by March 2008. The scrip touched an intra-day high of Rs144 and a low of Rs137 and recorded volumes of over 23,00,000 shares on NSE.

 

Pharma stocks were back in action amid reports stated that Government plans to cap trade margins on all medicines sold in the country. Divi's lab surged by over 8.5% to Rs1793, Nicholas Pharma advanced 4% to Rs319, Pfizer rose over4.5% to Rs708 and Glenmark Pharma added 4.6% to Rs484.

 

What the FIIs are doing

 

FIIs were net buyers of Rs4.8bn (provisional) in the cash segment on Wednesday while the local institutions pumped in Rs1.6bn. In the F&O segment, foreign funds were net sellers of Rs12.05bn on the same day.

 

On Tuesday, FIIs were net buyers to the tune of Rs195mn in the cash segment. Mutual Funds were net sellers of Rs341mn on the same day.

 

Stocks in News:

 

Activists to boycott Novartis drugs and plan a nationwide campaign. (Mint)

 

Novartis to start selling four new cancer drugs by 2011. (BL)

 

Novartis withdraws Exelon patent suit against Sun Pharma. (BL)

 

Reliance Industries may make an acquisition in the energy sector for up to US$15bn. (Mint)

 

Reliance Industries plans solar power projects in Bengal, Rajasthan and Maharashtra. (FE)

 

Danone's stake in Avesthagen violates norms according to the FIPB. (FE)

 

Air Deccan forms consortium with Mumbai International Airport (MIAL), Rahejas and IDFC for developing four low cost airports in Karnataka. (FE)

 

Arunachal Pradesh Government scraps two hydel-power projects by NTPC. (FE)

 

Aegis Logistics to set up 300 auto LPG stations. (FE)

 

Reliance Retail in talks with the Essel group to set up outlets at Fun Republic mall across India. (FE)

 

Air Deccan and Kingfisher merger may take another 2-3 months. (BL)

 

Reliance Industries, Tata Chemicals, Bharti Enterprises' Fieldfresh and Indian Oil are among several companies that have evinced interest in leasing closed sugar mills in Bihar. (BS)

 

Indivision Capital, the private equity arm of Future group, will buy 4.9% in Dish TV for Rs2.5bn. (BS)

 

Securities Appellate Tribunal (SAT) has kept the delisting of Essar Steel from the stock exchanges in abeyance. (ET)

 

Kuwait Petroleum and Reliance Industries have kicked off discussions for a mega joint venture across the oil and gas vertical. (ET)

 

ICICI group plans to mobilize US$8bn for private equity investments in India. (ET)

 

Tata Motors, M&M and private equity player, One Equity submitted their final bids for Jaguar and Land Rover. (ET)

 

Biocon to launch oral insulin drug by 2010. (ET)

 

Glenmark Pharma plans to acquire a distribution and marketing company in Indonesia. (ET)

 

Post Citi Venture Capital picking up 7% stake in Shiv-Vani Oil for Rs1bn Merrill Lynch and GMO also purchase minority stakes. (ET)

 

Unitech plans to hive off its retail business as a separate company which may be listed at a later date. (ET)

 

Railways hike freight charges for iron ore exports by increasing the surcharge to 60% per ton. (BL)

 

The Government will obtain parliament's approval on the Indo-US nuclear deal after the process of implementing the agreement is complete. (BS)

 

The Government is likely to announce a new fertilizer policy within one month. (BS)

 

The Government asks airlines to either deposit tax component or refund the same to the customers in case of cancellation. (ET)

 

RBI allows banks to give ailing sugar companies a second chance to restructure their loans. (ET).

Crude back to sub 80 levels

Crude prices drop further as fuel product supplies show increase

 

Crude prices rose today earlier in the day but then gave up all its gains and closed lower for the day after the Energy Department was out with the weekly inventory report. Crude rose earlier in the day when the OPEC members decided that they will not increase production for the time being.

 

For the day ending Wednesday, 05 December, 2007, crude-oil futures for light sweet crude for January delivery closed at $87.49/barrel (lower by $0.83/barrel or 0.9%) on the New York Mercantile Exchange. Prices reached a high of $99.2 on 21 November. Prices are up 40% from a year ago.

 

Earlier, crude rose to above $90 after the Organization of Petroleum Exporting Countries opted to keep production unchanged at a Wednesday meeting in Abu Dhabi. OPEC will meet again on 1Feb, 2008 in Vienna to review today's decision. Iran, Venezuela, Qatar and other members opposed a proposal for a 500,000 barrel a day increase.

 

As per today's weekly inventory report by the Energy Department, U.S. crude inventories fell by 8 million barrels to 305.2 million barrels in the week ending 30 November. EIA also reported U.S. gasoline supplies rose by 4 million to 200.6 million barrels in the latest week, the highest in more than three months, and distillate stocks, which include heating oil and diesel, grew by 1.4 million barrels to 132.3 million barrels. This increase in fuel supplies helped crude give up its earlier gains for the day.

 

Brent crude oil for December settlement fell $1.04 (1.2%) to $88.49 on the London-based ICE Futures Europe exchange.

 

Natural gas remains almost unchanged

 

Natural gas in New York was little changed, erasing an earlier gain, on inventories considered ample for a winter forecasters say will be milder than normal. Natural gas for January rose 3 cents (0.4%) to settle at $7.185 per million British thermal units.

 

Against this backdrop, January reformulated gasoline fell 3.47 cents to $2.217 a gallon and January heating oil dropped 2.25 cents at $2.4893 a gallon.

 

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.

 

At the MCX, crude oil for December delivery closed lower at Rs 3498/barrel, higher by Rs 31 (0.9%) against previous day's close. Natural gas closed at Rs 285.1/mmtbu as against previous close of Rs 281.9/mmtbu, higher by Rs 3.2/ mmtbu.

Today's Pick - JB Chemicals

We recommend a buy in JB Chemicals & Pharmaceuticals at current market price. It is evident from the weekly chart of JB Chemicals that it has been on a long-term downtrend since its life high of Rs 139, recorded in early 2006.

 

However, the stock found support at Rs 62 levels in August 2007 and has been consolidating sideways in the range of Rs 60 and Rs 70 since then. JB Chemicals has made a sharp move on December 5, recording a gain of 6 per cent accompanied by heavy volumes. The stock has recently penetrated the 21- and 50-day moving average lines too.

 

The weekly momentum indicator has recovered from the bearish zone. The daily momentum indicator has entered the bullish region. The immediate support for the stock is at Rs 62 and the subsequent support is at Rs 50. We expect the stock to rally to Rs 85 level in the short-term. Short-term investors can buy the stock at current market price while keeping their stop loss at Rs 65.

 

Via Businessline

Markets look optimistic

The markets spiked higher, on good volumes, as the resistance of 5897 was overcome on huge volumes. The market breadth was positive as the combined exchange figures were 3099:931.

 

The capitalisation of breadth was also positive as the commensurate figures were Rs 25899 crore: Rs 4633 crore. The F&O data indicated a 3.62 per cent increase in net long positions with a rise in the PCR.

 

With the indices closing at the upper end, accompanied with positive market internals and improved volumes, the upmove imbibes confidence in the near term.

 

The coming session is likely to witness a wide intraday range of 6005 on advances and 5877 on declines due to the larger base effect of Wednesdays range.

 

The Nifty closed at it's highest, indicating bullishness. Watch the quality of the upmove hereon as a consistent trade above the intraday high of 6012 with forceful volumes and increased open interest will trigger off a fresh round of buying.

 

The outlook for the markets on Thursday is that of continued optimism, barring negatives or unforeseen circumstances. The indices may be headed for blue sky territory in the next few sessions. Avoid shorting on rallies.

 

Vijay L. Bhambwani

Gold declines as dollar gains

Gold prices drop marginally while silver remains almost unchanged

 

A few upbeat economic reports helped dollar gain some strength against its rival currencies today, Wednesday, 05 December, 2007 and this put some pressure on precious metals. Dollar gained against its major rival currencies on anticipation that the Federal Reserve might not cut interest rates in its upcoming policy meeting on 11 December, 2007 as chances of economy heading towards recession is far less. Gold generally moves in the opposite direction of the U.S. currency.

 

Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

 

Comex Gold for February delivery fell $3.9 (0.5%) to close at $803.7 an ounce on the New York Mercantile Exchange today. Last week, prices had slipped by more than 4.5%. On, 7 November, prices had touched $848/ounce. It was the highest price after a record $873 on 21 January, 1980.

 

Comex Silver futures for March delivery was almost unchanged at $14.465 an ounce. Prices touched 26 year high on 7 November, after reaching $16.275. The metal has climbed 12% this year.

 

In the currency market today, the dollar rose against major counterparts, after upbeat U.S. economic data calmed fears of a looming recession and led many investors to believe the U.S. Federal Reserve won't decide on the 50-basis point interest rate cut next week that some had begun expecting. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.7% at 76.220.

 

In the energy market, oil prices fell by 83 cents to close at $87.49/barrel after Energy Department report showed that U.S. fuel stockpiles rose last week.

 

Gold had climbed 27% this year till date as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Dollar is still 12% down against the euro this year.

 

In 2006, silver had jumped 46% while gold gained 23%.

Nifty December 2007 futures at premium

Turnover in F&O segment rises

 

Nifty December 2007 futures were at 5980, at a premium of 40 points as compared to the spot closing of 5940.

 

The NSE futures & options (F&O) segment turnover was Rs 57,522.12 crore, which was higher than Rs 56,330.05 crore on Tuesday, 4 December 2007.

 

GMR Infrastructure December 2007 futures were at premium, at Rs 266.50, compared to the spot closing of Rs 263.10.

 

Jindal Steel & Power December 2007 futures were at premium, at Rs 15,400, compared to the spot closing of Rs 15,332.65.

 

Mangalore Refinery & Petrochemicals December 2007 futures were at premium, at Rs 141.10, compared to the spot closing of Rs 140.60.

 

In the cash market, the S&P CNX Nifty gained 81.65 points or 1.39% at 5,940.

US Market soars

Major US stock indexes rose more than 1 percent on Wednesday, after strong economic data calmed recession fears and helped halt a two-day sell-off.

 

The data, including a report that showed unexpected vigor in the job market, stoked expectations for corporate spending and sparked a robust recovery in technology shares. Bellwethers Microsoft Corp and Apple Inc drove the Nasdaq higher.

 

Shares of financial services companies headed higher after insurer American International Group Inc said its exposure to the housing and credit crisis was manageable. AIG shares jumped 4.9 percent.

 

"There's enough good things happening out there, things that are counter recessionary that people are digesting," said Ryan Crane, senior portfolio manager at Stephens Capital in Houston.

 

"The mind-set that we're not going to enter into any kind of a recession and that you've got some meaningful rate cuts in the near future, explain what's behind the move today," he said about expectations the Federal Reserve will cut interest rates next week.

 

The Dow Jones industrial average finished up 196.23 points, or 1.48 percent, at 13,444.96. The Standard & Poor's 500 Index closed up 22.22 points, or 1.52 percent, at 1,485.01. The Nasdaq Composite Index added 46.53 points, or 1.78 percent, to 2,666.36.

 

Optimism about the economy's health also buoyed shares of manufacturers and energy producers, as well as other stocks sensitive to the economic cycle.

 

Home builders, one of the market's most beaten-down sectors, were also a standout, with the Dow Jones Home construction index ending up 3.5 percent.

 

On the Nasdaq, shares of Apple, the maker of the iPhone, led advancers, with a gain of 3.2 percent to $185.50, while software maker Microsoft ended at $34.15, up 4.2 percent, the biggest one-day advance in more than a month.

 

Shares of chip maker Intel Corp gained 3.5 percent to $27.22. Analysts said prospects for big-cap technology were also underpinned by hopes of continued growth abroad.

 

AIG led financial shares on both the Dow and the S&P 500, with its shares rising $2.70 to $58.15 on the New York Stock Exchange. Shares of Citigroup Inc, the No. 1 US bank, advanced 3.5 percent to $33.69 on the NYSE.

 

The Dow's standouts included diversified manufacturer United Technology Corp, whose stock climbed 2.8 percent to $76.85. Shares of 3M Co, whose products include Post-it Notes and Scotch tape, rose 2.0 percent to $83.76.

 

On the energy front, shares of oil company Exxon Mobil Corp rose 2.0 percent to $89.92.

 

Among the home builders, shares of Beazer Homes USA Inc, the No. 7 US home builder, surged 6.6 percent to $8.38, while shares of Hovnanian Enterprises Inc, an upscale home builder, ended up 5.8 percent at $7.66.

 

Even so, jitters about the credit crisis lingered. Indexes cut gains briefly after ratings agency Moody's Investors Service said mortgage insurer MBIA Inc was at greater risk of capital shortfall than previously communicated.

 

Shares of MBIA finished down 16.0 percent at $27.42. Shares of PMI Group Inc, another mortgage insurer, declined 4.8 percent to $12.45.

Bulls come back

The bulls were back in action on Wednesday, after a day's break, pulling indices up nearly two per cent with good volumes. Investors turned optimistic tracking a rebound in Asian and European markets and covered short positions initiated over the last two sessions. Accumulation of long positions was also seen market, participants said.

 

"The Nifty convincingly crossed the 5900 mark, where it was facing stiff resistance, without any follow-up selling. The broad-based upmove, led by heavyweights ONGC, ICICI, SBI and Reliance Industries, also boosted sentiment. Today's move indicates a strong positive trend. We could be looking beyond 6000 levels by the end of the week," said Anand Kuchelan, senior analyst - derivatives & strategy at PINC Research.

 

National Stock Exchange's Nifty ended at 5,940, up 82 points or 1.39 per cent after hitting a high of 5,949.3 and low of 5,859.95.

 

Bombay Stock Exchange's Sensex closed at 19,738.07, up 208 points or 1.07 per cent. The index touched a high of 19,790.92 and low of 19,560.68.

 

Top Sensex gainers were ONGC (up 4.29%), Tata Motors (3.95%), State Bank of India (2.85%), Hindalco Industries (2.81%), Cipla (2.46%) and NTPC (2.15%).

 

However, Tata Steel (down 0.87%), Satyam Computer Services (0.49%), Infosys Technologies (0.7%) and Grasim Industries (0.45%) lagged.

 

The rally in tier II and III stocks continued for the third straight day with BSE Midcap Index closing 1.67 per cent higher and BSE Smallcap Index up 2.88 per cent.

 

Ispat Industries (up 24.75%), Zee News (16.36%), Wire & Wireless (13.18%), SRF (12.66%) and Essar Shipping (10%) kept the midcap space buzzing.

 

Among sectors, BSE Bankex and BSE Oil & Gas Index closed 2.07 per cent and 2.28 per cent higher, respectively.

 

Market breadth was positive on the BSE with 2,164 gainers and 687 losers. NSE saw 963 gainers against 256 losers, and a turnover of Rs 21280.24.

 

Nifty December futures ended at 40-point premium to the spot, with open interest of 2.97 crore, which indicates a build up of long positions.

 

Asian shares also ended higher driving the Nikkei 225 up 0.83 pr cent, Hang Seng up 1.61 per cent and KOSPI up 1.06 per cent.

 

European markets followed a similar pattern. At the time Indian markets closed, the FTSE gained 1.11 per cent, CAC was up 0.92 per cent and DAX was 0.67 per cent higher.

Indiabulls gets clean chit

Capital market regulator Sebi on 5 December absolved Indiabulls Securities of charges of cornering shares meant for retail investors in IPOs and dropped an inquiry initiated against the brokerage firm.
"The present adjudication proceedings against the noticee (Indiabulls Securities Ltd) is disposed of," Sebi adjudicating officer S Biju said.
Although the regulator had last year banned Indiabulls from carrying out trades in the market after a scam was unearthed in IPOs launched between 2003-05, the order was kept in abeyance till completion of the inquiry after the brokerage firm challenged the decision.
Sebi conducted investigation into the dealing of Indiabulls in the IPOs of 21 companies including those of Amar Remedies, Datamatics Technologies, Dishman Pharma and Chemicals, Gokaldas Export, ILFS Investmart, Indraprasth Gas, Infrastructure Development Finance, Jet Airways and NTPC.
Other companies, whose public issues were investigated included Patni Computer, Suzlon Energy, TV Today Network, TCS and Yes Bank, the regulator said in a statement.
Sebi had observed that the some entitites had cornered shares of these companies by making fictitious applications in the category reserved for retail investors.
Sebi said the after the inquiry it found that Indiabulls did violate the Sebi Act or its regulations on prohibition of fraudulent and unfair trade practices relating to securities market.
Sebi said it had noted that in the IPO of Tata Consultancy Services Ltd, 13,939 shares were received from 559 accounts to the Indiabulls' account.
Later, on the advice of Sebi, National Securities Depository Ltd (NSDL) conducted an inspection of all these accounts, but nothing was found wrong, as the demat accounts were genuine, said Sebi.
An inspection was also carried out by a team of officials of Sebi, BSE and NSE, of the 559 clients who had transferred TCS shares to the Indiabulls. Of these, 459 clients held demat accounts with it and the remaining clients held beneficiary accounts with other depository participants.

Post Market Commentary

The market closed on a firm note backed by selective buying across the sectoral heavyweight scrips. The market opened on a strong note but all of a sudden lost the momentum to pare some of its initial gains as the profit booking prevails. But the market manages to gain some grounds toward the end of the session as buying intensified. The BSE Small cap outperformed the benchmark indices by creating a rally for the past few days. Most buying is seen from the Bankex, Oil & Gas, Capital Goods and realty baskets. The BSE Sensex closed up by 208.57points at 19,738.07 and NSE Nifty closed higher by 81.65 points at 5,940. Overall, the market breadth was strong as 2,164 stocks are closed higher while 687 are closed lower. The BSE Mid cap and Small Cap surged 148.29 points and 315.45 points to close at 9,052.83 and 11,271.96 respectively.

 

BSE Bankex index grew by 223.51 points to close at 11,020.60 as Union bank 5.32%, Canara bank 5.21%, IOB 4.29%, SBI 2.85%, ICICI bank 1.86% and HDFC bank 1.61% closed higher

 

BSE Capital goods surged by 227.33 points to close at 20,403.26. Pushed up by Havell India (6.44%), Alstom Projects (4.69%), AIA Engineering (4.44%), L&T (1.90%) and SKF India (1.74%).

 

BSE Oil & Gas index closed up by 288.89 points at 12,939.99. Scrips that gained are GAIL India (9.56%), HPCL (6.54%), ONGC (4.29%), RNRL (3.75%) and RPL (2.01%).

 

BSE Metal Surged closed higher by 174.94 points to close at 19, 044.22. Scrips that gained are Ispat industries (24.75%), Jindal Saw (5.61%), Welspun Gujarat (5.19%), JSW steel (4.19%), Hindalco (2.81%) and Nalco (2.39%).

 

BSE Realty index advanced by 208.51 points to close at .10,953.80. Scrips that jumped are Indiabull real (10.05%), Ansal infra (2.92%), Parsvnath (2.01%), Unitech (1.39%), Purvankara (1.59%) and Anant Raj (1%).

 

BSE IT index fell marginally by 15.57 points to close at 4,232.03 as Karut Net (9.98%), GTL limited (1.72%), NIIT Tech (1.44%), Aptech Limited (0.96%) and Wipro (0.45%).

Market Close : Small (Cap) Is Profitable!

After a modest start markets refinemained healthy and ended on a strong note. Once again the Small caps and Mid caps proved to be the winners outsmarting the Large caps. In the last hour of trade momentum was seen in some large stocks like GAIL, ONGC and HPCL. Steel and energy stocks were the flavour of the day. Markets seemed to be in active mode and every stock with concept story was on the run. Sectorial wise Banking, Oil & Gas ,PSU?s and Realty were among the major gainers. Software stocks were out of favour due to depreciating dollar. The Organisation of Petroleum Exporting Countries (OPEC) was expected to hold the cartel's official output quota at 27.25 mn barrels of oil per day amid forecasts that demand would fall because of current global economic weakness. Hence OPEC decided to keep output unchanged at 27.25 mbpd. Cues from global peers were encouraging with most of the Asia ended in green and European markets trading higher.

 

Sensex ended up by 209 points at 19738.07.It was helped up by gains in ONGC (1206.3,+4 percent), Tata Motors (771.75,+4 percent), SBI (2383.55,+3 percent), Hindalco (199.2,+3 percent) and Cipla (189.35,+2 percent). Restricting the gains were TISCO (865.35,-1 percent), Infosys (1603.25,-1 percent), Hero Honda (695.3,-1 percent), Satyam (438.75,0 percent) and Grasim (3796.1499,0 percent).

 

Karuturi Networks was on circuit today after our recomendation. Karuturi is the largest rose player in the world. It has 2 segments of business, Horticulture and ISP. More than 90% of the revenue comes from the flower business. Karuturi has a total capacity of 650 mn stems. It has 10 hectares in India with 10 mn stems capability inhouse and another 25 mn stems which are managed through contract farming. 100 hectares are operational in Ethiopia with a capacity of over 100 mn stems. Karuturi Networks has been allotted additional 450 hectares of land by the Government of Ethiopia for its expansion and diversification projects. The Kenyan acquisition of Sher brought in abnout 525 mn stems. Globally 40,000 hectares of land is under rose cultivation. However, The field sizes globally are fragmented and are not over 200 acres. Karuturi is one of the big players here now. We have detailed research note. Do read our view to know more about the story.

 

Lok Housing was on fire and shot up to cross our estimated target. Lok Housing & Constructions (LHCL) a company of Lok group mainly in the suburbs of Mumbai. Lok Surabhi , Lok Kedar , Lok Everest, Lok Malhar and Lok Nisarg at Mulund, Lok Yamuna at Marol , Lok Amber at Ambernath, Lok Prabhat at Virar are some of the projects executed by the company. It is planning to commence premium projects in Mumbai and at other places like Pune, Vasai, Bangalore,Turbhe.Till date Lok Housing has completed 31 projects over 17,000 units and 9mn sq.ft area. Lok housing has a good amount of land bank and some valuable salt pans plots are still under litigation. We believe that this event is the big trigger if at all for Lok Housing. Chances are that the owners may manage it in their favour given the history of such cases between the Government and Corporates. Keep watching this space for more updates.

 

Technically Speaking: Sensex traded in green and witnessed an intra day high of 19,791 and low of 19,561. Advaces outnumbered Declines in the ratio of 3 :1. Volume of Rs 9,340 Crs was churned through out the day. Sensex has closed above the resistance of 19700. The immediate resistance now are at 19990 and 20150. Support for sensex is at 19540 and 19390.

Buoyancy lifts market above 19,700

The market reported a solid performance on the back of a strong all-round buying even as major Asian indices exhibited a subdued trend in morning trades. Shrugging off the global cues, the market opened with a gap of 99 points at 19,629. It remained positive but traded in a narrow range till the afternoon. However, heavy buying in heavyweights, pharma, banking, and public sector unit stocks towards the close, lifted the Sensex to the day's high of 19,791. Most of the second-rung stocks also witnessed buying interest, as the BSE Mid-Cap index rose by 1.67% while the BSE Small-Cap index gained 2.88%. The Sensex finally closed the session at 19,738, up 209 points or 1.07%. The Nifty ended the session at 5,940, up 82 points or 1.39%.

The breadth of the market was positive. Of the 2,891 stocks that traded on the Bombay Stock Exchange (BSE), 2,165 stocks advanced, 685 stocks declined and 41 stocks ended unchanged. Among the sectoral indices, the BSE HC notched up gains of 2.40% at 3,951 followed by the BSE CD index (up 2.36% at 6,226), the BSE Oil & Gas index (up 2.28% at 12,940) and the BSE PSU index (up 2.27% at 10,096).

Heavyweights witnessed lot of buying interest. ONGC soared 4.29% at Rs1,206, Tata Motors rose 3.95% at Rs772, SBI was up 2.85% at Rs2,384 and Hindalco shot up by 2.81% at Rs199. Cipla jumped 2.46% at Rs189, NTPC added 2.15% at Rs244 and L&T gained 1.90% at Rs4,310. However, Tata Steel, Infosys, Satyam Computer, Grasim, Reliance Energy, Ambuja Cement and HLL closed marginally down.

Over 8.99 crore Ispat Industries shares changed hands on the BSE followed by Tata Teleservices (3.72 crore shares), Wire & Wireless India (1.64 crore shares), Hindustan Motors (1.47 crore shares) and Reliance Natural Resources (1.20 crore shares).

Valuewise, Ispat Industries registered a turnover of Rs569 crore on the BSE followed by Essar Oil (Rs259 crore), Videocon Industries (Rs244 crore), Reliance Natural Resources (Rs214 crore) and Mundra Port (Rs210 crore).

Nifty strikes record closing high on firm global equities

After remaining range bound in afternoon trade, the market firmed up in late trade as European markets, which opened after Indian markets, started on a firm note. ICICI bank surged in late trade. Reliance Industries firmed up. Banking, oil & gas and realty stocks were in demand. IT stocks edged lower.

 

Buying continued in small-cap and mid-cap shares, which have been rising since the past few days. Market breadth was strong. 23 out of 30 stocks from the Sensex pack were in green. Asian markets, which opened before Indian markets, were in green.

 

The 30-share BSE Sensex rose 208.57 points or 1.07% to 19,738.07. Sensex hit a high of 19,790.92 in late trade. At day's high, Sensex had gained 261.42 points. Sensex hit a low of 19,560.68 in mid-morning trade. At day's low, Sensex had gained 31.18 points for the day.

 

The broader based S&P CNX Nifty gained 81.65 points or 1.39% to 5940, a record closing high. The previous record closing high of Nifty was 5,937.90 on 14 November 2007. Nifty had struck all-time high of 6011.95 on 1 November 2007. Sensex had hit all-time high of 20238.16 on 30 October 2007.

 

As per provisional data, FIIs bought shares worth a net Rs 480.18 crore today. Domestic funds sold shares worth a net Rs 159.71 crore today.

 

The BSE Mid-Cap index was up 1.67% to 9,052.83. The BSE Small-Cap index was up 2.88% to 11,271.96. Both the indices outperformed the Sensex.

 

Market breadth was strong. On BSE, 2164 stocks advanced, 687 stocks declined and 40 stocks remained unchanged.

 

BSE clocked a turnover of Rs 9340 crore compared to Tuesday (4 December 2007)'s Rs 9163 crore.

 

Nifty December 2007 futures were at 5980, a premium of 40 points as compared to spot closing of 5940.

 

NSE's futures & options (F&O) segment turnover was Rs 57522.12 crore, which was higher than Rs 56330.05 crore on Tuesday, 4 December 2007

 

India's largest private sector firm and oil refiner Reliance Industries rose 1.36% to Rs 2902.80, off day's low of Rs 2863.

 

The BSE Bankex rose 2.07% to 11,020.60. It outperformed the Sensex. India's largest private sector bank by assets ICICI Bank rose 1.86% to Rs 1161.65, off day's low of Rs 1131.

 

Union Bank of India soared 5.32% to Rs 192.95, Canara Bank jumped 5.21% to Rs 290.55, Karnataka Bank gained 4.87% to Rs 222, State Bank of India rose 2.85% to Rs 2325 and HDFC Bank rose 1.61% to Rs 1730.

 

The BSE Capital Goods Index rose 1.13% to 20,403.26. It outperformed the Sensex. Alstom Projects gained 4.69% to Rs 1082.10, BEML gained 2.39% to Rs 1792.05, Larsen & Toubro rose 1.90% to Rs 4309.65 and Bharat Heavy Electricals rose 0.25% to Rs 2822.25.

 

The BSE Metal Index rose 0.93% to 19,044.22. It underperformed the Sensex. Jindal Saw jumped 5.61% to Rs 956.70, Hindalco Industries gained 2.81% to Rs 199.20, National Aluminium Company (Nalco) rose 2.39% to Rs 377.45, Steel Authority of India (Sail) rose 0.93% to Rs 287.55. Sterlite Industries fell 0.20% to Rs 1064.50 and Tata Steel declined 0.87% to Rs 865.35.

 

The BSE Consumer Durables index rose 2.36% to 6,226.46. It outperformed the Sensex. Blue Star spurted 4.85% to Rs 477.45, Videocon Industries gained 3.94% to Rs 613.25, Lloyd Electric & Engineering gained 3.44% to Rs 183.65 and Titan Industries rose 1.35% to Rs 1590.10.

 

The BSE Oil & Gas index rose 2.28% to 12,939.99. It outperformed the Sensex. HPCL gained 6.54% to Rs 310.45, Indian Oil Corporation gained 2.82% to Rs 616.20, and BPCL rose 2.64% to Rs 430.10.

 

The state-run gas transmission and distribution firm GAIL (India) moved up 9.56% to Rs 481.85. The company and Reliance Industries on Tuesday (4 December 2007) signed a memorandum of understanding (MoU) for joint co-operation in petrochemicals. As per the MoU, both companies will explore opportunities for setting up petrochemical complexes outside of India in feedstock rich countries.

 

India's top state run oil explorer in terms of market capitalisation ONGC rose 4.29% to Rs 1206.30 on reports that the overseas arm of the company and the Hinduja group were in talks to form a partnership with Switzerland-registered NICO, a unit of National Iranian Oil Company.

 

The BSE Healthcare index rose 2.40% to 3,950.73. It outperformed the Sensex. Ranbaxy Laboratories gained 1.34% to Rs 393, Divi's Lab gained 8.74% to Rs 1790.20, Pfizer soared 4.65% to Rs 708.45, Glenmark Pharmaceuticals jumped 4.69% to Rs 484.50, and Cipla rose 2.46% to Rs 189.35.

 

The BSE IT index fell 0.40% to 4,232.03. It underperformed the Sensex. India's second largest software exporter by sales Infosys Technologies fell 0.70% to Rs 1603.25.

 

Satyam Computers gave away 0.49% to Rs 438.75. However, TCS gained 0.20% to Rs 1031.60. Wipro gained 0.45% to Rs 499.

 

The BSE Auto index rose 0.94% to 5,691.81. It underperformed the Sensex. Hindustan Motors surged 17.27% to Rs 50.25, Apollo Tyres soared 7.25% to Rs 44.90, Escorts gained 7.47% to Rs 167.55, Tata Motors spurted 3.95% to Rs 771.75, Maruti Suzuki gained 0.39% to Rs 1032.15 and Mahindra & Mahindra rose 0.24% to Rs 773.70.

 

North India based cement firm Shree Digvijay Cement Company fell 3.39% to Rs 38.50, off day's high of Rs 42.70 after Grasim Industries' board of directors approved sale of its 53.63% stake in the company to Portuguese cement maker Cimpor for Rs 322 crore.

 

Auto ancillaries firm Autoline Industries jumped 6.39% to Rs 172.20 after the company said it has acquired the manufacturing operations of US-based Dura Automotive Systems for $900,000.

 

Aluminium foil containers and rolls maker Parekh Aluminex rose 3.27% to Rs 284. A clutch of institutional investors from the Middle East — Oman Pension Fund, Emirates Industrial Development, Gulfar, Tawoos and four other institutions — are reportedly picking up an 18% stake in the company.

 

Nitin Fire Protection Industries (NFPIL), a fire protection and security solutions company, spurted 8.75% to Rs 551.90. The company is reportedly close to acquiring around 40% stake in a UAE-based fire protection company — New Age Company. The deal may be worth over Rs 150 crore, the reports added.

 

Textiles and apparels firm Alok Industries jumped 1.80% to Rs 82.20. The company is reportedly close to diluting 20% stake in its realty venture — Alok Infrastructure — to private-equity players. Reports sugget that Ernst & Young is advising Alok and the company would seal the private-equity deal by the end of current fiscal.

 

Infrastructure development firm GMR Infrastructure gained 1.62% to Rs 263.05. The GMR Group is reportedly planning to bid for more airports in Eastern Europe. It is actively considering a bid for the Prague airport project, the report added.

 

Pharmaceuticals firm Matrix Laboratories gained 0.66% to Rs 220.55 after the company said it has received a tentative approval from US Food and Drug Administration for its abbreviated new drug application or for tenofovir disoproxil fumarate tablets.

 

Engineering firm Lanxess ABS gained 1.95% to Rs 199 on reports it plans to invest Rs 800 crore to set up a greenfield chemical facility in Gujarat.

 

Ispat Industries clocked highest turnover of Rs 569 crore on BSE. Essar Oil (Rs 259.12 crore), Videocon Industries (Rs 244.60 crore), Reliance Natural Resources (Rs 214.70 crore), and Mundra Port & Special Economic Zone (Rs 210.89 crore), were the other turnover toppers on BSE in that order.

 

Ispat Industries registered highest volumes of 8.9 crore shares on BSE. Tata Teleservices (3.72 crore shares), Wire & Wireless India (1.64 crore shares), Hindustan Motors (1.47 crore shares) and Reliance Natural Resources (1.20 crore shares), were the other volume toppers on BSE in that order.

 

In Europe, key indices in UK, France and Germany were up by between 0.79% to 1.10%.

 

Asian markets were in positive zone today, 5 December 2007. Key indices in China, Japan, South Korea, Hong Kong, Singapore and Taiwan were up by between 0.30% to 2.58%.

 

US markets ended lower for second straight day yesterday, 4 December 2007. The Dow Jones industrial average slipped 65.8 points to 13248.73 and Nasdaq Composite index slipped 17.3 points at 2619.83.

 

Oil was steady on Wednesday, 5 December 2007, as the market kept its eyes on Organization of the Petroleum Exporting Countries (OPEC's) meeting in Abu Dhabi later in the day and the organisation's big Gulf producers left the door open for a possible output increase. US crude inched up 8 cents to $88.40 a barrel. London Brent crude rose 17 cents to $89.70 a barrel.

JK Cement, Saregama India

JK Cement
Cluster: Cannonball
Recommendation: Buy
Price target: Rs330
Current market price: Rs246

Price target revised to Rs330

Key points

• JK Cement is expanding its capacity by 3.5 million metric tonne (MMT) through a greenfield plant at Karnataka, which will be accompanied by a 50-megawatt (MW) power plant at the site. The capital expenditure (capex) programme is in progress and the plant is expected to be commissioned by FY2009 end. This will augment the capacity of the company by 70% in FY2010 and will drive the volumes of the company going ahead.
• Refurbishment of Nihon facility is expected to be complete by the end of Q4FY2008 and would increase cement volumes by 350,000 tonne in FY2009.
• JK Cement's capex on captive power plants (CPPs) is progressing well. The company has already commissioned a 20MW pet coke based power plant and has replaced its 10MW turbine. It has partially implemented the 13MW waste heat recovery plant and expects the plant to get fully operational by FY2008 end.
• With all CPPs in place, the company will be able to save Rs150-200 per tonne on power consumption from FY2009.
• JK Cement's Q2 results were much above our expectations. The topline grew by a healthy 33% year on year (yoy) to Rs356 crore on the back of a blended volume growth of 12% yoy and a realisation growth of 17% yoy to Rs3,597 per tonne.
• Strict control on variable costs led the operating profit grow by 58% yoy and the operating profit margin (OPM) expand by 450 basis points to 28.2%. The earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne jumped by 40% yoy to Rs1,030 per tonne.
• Lower tax provision of 13% during the quarter made the profit after tax (PAT) grow by a whopping 142% yoy to Rs72.7 crore. The PAT growth was much ahead of our expectations.
• We have been bullish on the business prospects of JK Cement on account of its cost-cutting measures and capex programme. Savings in power costs from the CPPs coupled with higher volumes from its greenfield facility will be the major business drivers for the stock. The stock is trading at 10x its earnings and 6.6x its enterprise value (EV)/EBITDA on FY2009 earnings estimate. Even after a significant run-up in the last couple of months, it commands an EV per tonne of USD 84, which is lower than the benchmark asset valuation of USD 100-115 per tonne. Considering the cheap asset valuations, we maintain our Buy recommendation on the stock with an upgraded price target of Rs330, leaving an upside of 30%.

Saregama India
Cluster: Ugly Duckling
Recommendation: Book Profit
Current market price: Rs296

Book profit

Key points

Saregama India Ltd (SIL) reported disappointing results for Q2FY2008. While the operating revenues fell by 2.7% year on year (yoy) to Rs33.8 crore, the operating profit declined by 57.9% to Rs2.7 crore. Consequently the net profit before extraordinary items decreased by 44.7% yoy to Rs2.6 crore.

Operating profit margin (OPM) fell sharply to 7.9% in Q2FY2008 against 18.4% in Q2FY2007. The OPM declined primarily due to a sharp jump in royalty expenses that as a percent of sales increased by 860 basis points yoy to 28.6%. Royalty payments went up as royalty model has shifted from revenue sharing model to a fixed minimum guarantee model.

SIL's audio sales declined sharply by 34% yoy in the last four quarters. Sale of cassettes and CDs is continually falling as consumers shift to non-physical formats of music such as radio and TV.

SIL's share in acquiring new music rights declined to 9-10% from about 30% in the past. With competition setting in, the cost of acquiring these rights has gone up substantially. We believe that the current scenario wherein music rights are awarded on minimum guarantee as against revenue sharing in the past has increased the risk for music companies.

Increasing competition, lack of aggression on the part of the management and sharper decline in physical sales raise concerns. We believe, the current market price of Rs295.5 fully factors the risks and rewards associated with SIL's business and thereby advice investors to book profit.

Midcaps, Small caps run

Frontline equities ended a lackluster session lower on Tuesday as traders booked profits towards the close tracking credit worries in Europe.

 

Local traders turned cautious after Morgan Stanley said earnings for the UK banking industry might have peaked as access to funding is getting more difficult.

 

The 50-stock Nifty ended marginally lower at 5861.55, down 0.11 per cent or 5 points. Intra-day, the index touched a high of 5897.25 and low of 5840.30.

 

The 30-share Sensex settled at 19,529.50, down 0.38 per cent or 74 points after rising to a high of 19,707.86. The low was 19,482.34.

 

"The Sensex is trading broadly within the 18,000-20,000-22,000 range, which narrowed today, and is expected to narrow further over the next few sessions. The overall trend is positive, but activity will be muted in frontline shares in the first half of December," said Birendrakumar Singh, technical, analyst at Religare Securities.

 

Singh expects the rally in mid-caps to continue as the frontliners consolidate. He recommends buying momentum scrips in the fertilizer, cement and textile space.

 

The BSE Mid-cap Index ended 1.6 per cent higher and the CNX Mid-cap Index was up 1.23 per cent.

 

Chambal Fertilisers and Chemicals (up 18.58%), MICO (16.92%), Godrej Consumer Products (14.29%) and Maharashtra Seamless (12.37%) topped the list of mid-cap gainers.

 

Among the large-caps, Tata Steel (up 4.08%), Mahindra & Mahindra (2.79%), BHEL (1.96%), Ambuja Cements (1.22%), Larsen & Toubro (1.21%) and Hindalco Industries (1.15%) were the biggest gainers.

 

But heavyweights like Reliance Industries (down 2.33%), Tata Consultancy Services (2.22%), ICICI Bank (2.13%) and ONGC (1.28%) proved a disappointment.

SBI, Cement

State Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs2,680
Current market price: Rs2,300

SBI receives approval for its mega rights issue

Key points

• State Bank of India (SBI) has received the government's approval for its Rs16,740 crore rights issue to be concluded this fiscal. The government is likely to invest Rs10,000 crore to maintain its 59.7% holding in SBI.
• The actual number of shares to be subscribed, the tenure of the securities and other modalities will be worked out by the government in consultation with the bank in due course of time. The government is expected to issue bonds (paying a coupon of 7.9% per annum) to fund its investment in the SBI rights issue.
• The public sector behemoth SBI remains one of our top picks in the banking space. We state below four reasons (for detailed discussion on these reasons please refer to our Investor Eye dated November 6, 2007) why we feel SBI should be a Buy at the current levels:
  1. Upcoming rights issue—at a price far higher than envisaged earlier
  2. New business initiatives—general insurance, private equity
  3. Launch of PSU Bank Benchmark Exchange Traded Scheme (Bank BEES)
  4. Other positive news flows and developments that are expected going forward

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SECTOR UPDATE

Cement

Cement prices to rise in Andhra Pradesh, Maharashtra
Cement majors in Andhra Pradesh (AP) and Maharashtra have announced a price hike of Rs5 per bag effective 1st December. From the feedback we had got from the dealers, we did not expect cement prices to rise before January 2008. Therefore the earlier-than-expected price hike is a positive surprise and will drive our earnings higher than expectations. Post price hike, wholesale cement prices in Maharashtra will stand at Rs245-250 per bag and at Rs230 per bag in AP. This will augur well for companies like ACC, Ultratech, Ambuja Cements, Orient Paper, India Cements, Madras Cements et al who have a significant exposure in Maharashtra and AP.

Market Close: Midcaps Steal the show!

Subdued trade after a good green opening but indices succumbed to selling pressure. Sessions continued to trade choppy in narrow range with indices juggling on both sides of the teritorry. Front line stocks had nothing big to surprise, however, SAIL, Tisco, BHEL rallied for the day. Small and Mid cap took away the charms from large caps they kept investors busy which saw huge volumes. Consumer Durables, Metals, PSU and Fertilizers counters were in action for the day while reality, IT and Banking counters slipped for the day. Crude below $ 90 per barrel has eased the oil marketing companies like HPCL, IOC and BPCL which had great day of rally. European indices continued to trade in red after a weak start.

Sensex closed lower by 74 points at 19529.5. Weighing on the Sensex were the losses in RIL (2863.8501,-2 percent), TCS (1029.55,-2 percent), ICICI Bk (1140.4,-2 percent), Satyam (440.9,-2 percent) and ONGC (1156.7,-1 percent). Losses were restricted by gains in TISCO (872.95,+4 percent), BHEL (2815.3999,+2 percent), Dr Reddys (657.75,+2 percent), Guj Ambuja (153.9,+1 percent) and L & T (4229.4502,+1 percent).

Freshtrop Fruits Ltd, a company into food processing industry was also a beneficiary of the boom witnessed today on the mid cap counter and got freezed in the uppar circuit. Freshtrop Fruits is a 100% export company. The major segment of revenue comes from export of grapes which is 65% of revenues, pomegranates accounting for 20% of revenues. The balance revenues are from mangoes and vegetables like bitter gourd, chilies, etc. It has 3 post harvest air-conditioned facilities in Satara, Nasik and Sangli with a total capacity of 75 metric tonnes per day. Valuations seem to be on the higher side as of now and are not justified considering the business model of the company. We have a note here too just have a look at it. Stock was up with decent volumes..

Maharashtra Seamless Ltd. (MSL) is one of the flagship companies of Jindal group. MSL has three divisions: Seamless Division, ERW Division and Power Division. MSL is one of the largest manufacturers of the seamless steel pipes and tubes with a production capacity 350,000MT. The company has in the process of expanding its seamless capacity by 43% to 500,000 MT by FY09. The current domestic demand for seamless pipes is around 500,000MT per year and is growing at a CAGR 10%. The estimated potential demand in India would be around 2.5 mn MT of seamless pipes which is almost Rs12500 cr in the next five years taking into account the realization at Rs 50000 per MT. MSL trades 12 times its FY09 earnings and we believe that the earnings are justified. One could accumulate this one from the long term period of view. Our note should convince you. Do read the note.. Stocks had great volumes and traded over 10% up.

TTK Prestige seem to be the pick of bargain hunters for the day as well as the stock was trading at higher levels. TTK prestige is known for its Pressure Cookers is one of the two large players in the pressure cooker market. TTK Prestige uses the umbrella branding of Prestige to cover several products in the kitchen like Non-stick cookware, Stoves, Kitchen Electrical Appliances such as hobs chimneys and now Modular Kitchens. The company now operates in a market size of over Rs 3000 Crores. In its Kitchen Electrical appliances the products include Mixer Grinder, Juicer, Rice Cooker, Hand Blender, Atta Kneader, Drink Maker and even Wet Grinder. The Company has freehold land of about 2.85 lakh sq.ft in Bangalore. This land became available as the Company's Plant was shifted from Bangalore to Coimbatore. The land is estimated at Rs.75-80 cr. Company looking at various options for the development of the land. Developments here are probable triggers. Company trades 9 times its earnings and is ideally suited for an investor with medium risk appetite and with long term capacity. Do read our note on the company to know why. We had a wow cal here which delivered more than 30% gains.

Technically Speaking: Ranged session for the day. Sensex made an intra day high of 19,704 and intra day low of 19,482. Advances out numbered declines in the ratio of 2:1. Volume for the day stood good at Rs 9,111 cr. Sensex has taken resistance at the expected level of 19700. We might see a correction upto 19230. Midcaps and small cap stocks are likely to rally further, but caution as we could be near the end of their rally as many laggards have started moving up.

Post Market Commentary

The market fell to close lower on the back of selling across the sectoral heavyweights. The benchmark indices slipped due to he profit booking across the counters while the BSE Mid Cap and Small Cap outperformed the benchmark indices to close with hand some gains. Though the market opened on a firm note but failed to retain the initial gains.The Metal, Capital Goods and Consumer durables indices remain the centre of attraction as most buying is seen from these stocks. The BSE Sensex fell 73.91 points to close at 19,529.50 and NSE Nifty closed lower by 6.65 points at 5,858.35. Overall, the market breadth was strong as 1,934 stocks are closed higher while 878 are closed lower. The BSE Mid cap and Small Cap surged 140.28 points and 170.31 points to close at 8,904.54 and 10,956.51 respectively.

BSE Metal Surged 588.04 points to close at 18,869.28. Pushed up by Maharas Seamless (12.37%), Jindal Steel and Power (9.27%), SAIL (8.53%), Jindal Stainless (5.44%), Tata Steel (4.08%) and JSW Steel (2.46%).

BSE Capital goods grew by 213.45 points to close at 20,175.93. Jumped by Lakshmi machines (6.74%), Alstom projects (5.83%), BHEL (1.96%), L&T (1.21%) and Siemens (1.37%).

BSE oil & gas index fell 135.09 points to closed at 12,651.10. Scrips that fell are Cairn India (2.37%), Reliance industries (2.33%), RPL (1.86%) and ONGC (1.28%) while IOCL (8.47%), HPCL (4.02%) and BPCL (4%) closed higher.

BSE Auto index closed up by 92.50 points at 5,639.08 as Ashok Leyland (7.86%), Exide Industries (3.38%), M&M (2.79%), TVS Motor (1.13%) and Tata Motors (0.77%).

BSE Power index closed higher by 24.27 points at 4,508.37. Scrips that grew are Tata power (3.48%), BHEL (1.96%), GVK Power (0.85%), Areva (0.74%) and Suzlon Energy (0.05%).

BSE IT index fell marginally by 6.45 points to close at 4,247.60 as TCS (2.22%), NIIT Techno (2%), Mphasis (0.92%) and HCL Tech.(0.34%).

Key indices slip, but mid-caps strong

Today, the market resumed on a positive note despite pale Asian and US markets. Action was mostly stock-specific. Lack of positive cues and inaction by investors kept the Sensex subdued throughout the day. The market exhibited range-bound moves till the afternoon, but a strong bout of selling towards the close saw the index touch the day's low of 19,482, down 121 points. However, buying at lower levels helped the Sensex to pare some of its losses and end the session with a loss of 74 points at 19,530. The Nifty closed the session at 5,858, down seven points.

The market breadth was very positive. Of the 2,864 stocks traded on the Bombay Stock Exchange (BSE), 1,934 stocks advanced, 878 stocks declined and 52 stocks ended unchanged. Except few, most of the sectoral indices ended in the green. The BSE CD index rallied sharply and gained 6.12% followed by the BSE Metal index (up 3.22%), the BSE Auto index (up 1.67%) and the BSE CG index (up 1.07%). However, the BSE Oil & Gas index slipped and dropped 1.06% followed by the BSE Bankex index (down 0.63%), the BSE IT index (down 0.15%) and the BSE Realty index (down 0.10%).

Among the major losers, Reliance slumped by 2.33% at Rs2,864, TCS plummeted by 2.22% at Rs1,030, ICICI Bank tumbled by 2.13% at Rs1,140, Satyam Computer shed 1.58% at Rs441, ONGC crashed by 1.28% at Rs1,157 and Ranbaxy dropped 1.13% at Rs388. However, Tata Steel surged 4.08% at Rs873, Mahindra & Mahindra jumped 2.79% at Rs772, BHEL zoomed 1.96% at Rs2,815, Ambuja Cement added 1.22% at Rs154 and L&T gained 1.21% at Rs4,229.

Over 2.48 crore shares of Ispat Industries changed hands on the BSE followed by Ashok Leyland (1.99 crore shares), IFCI (1.88 crore shares), Chambal Fertilisers (1.70 crore shares) and Tata Teleservices (1.69 crore shares).

Valuewise, Jindal Steel registered a turnover of Rs471 crore on the BSE followed by Essar Oil (Rs453 crore), Mundra Port (Rs331 crore), ONGC (Rs242 crore) and IFCI (Rs200 crore).

Small-cap, mid-cap indices shine

The market edged lower led by fall in index heavyweights Reliance Industries and ICICI Bank. Select IT stocks weakened. Tata Steel soared. Metal, consumer goods and auto stocks were in demand. The market breadth was strong. 19 out of 30 stocks from the Sensex pack were in red. Key Asian markets, except Singapore, were in green. European markets drifted lower as nervousness over the US economy and the credit crisis kept investors on the sidelines.

Investors were also cautious ahead of the discussion on the Indo-US nuclear deal, which will take place in the Rajya Sabha today (4 December 2007) where the Left is expected to sharpen its attack on the issue.

The 30-share BSE Sensex lost 73.91 points or 0.38% to 19,529.50. The Sensex hit a high of 19,707.86 in early trade. At day's high, the Sensex gained 104.45 points.

The broader based S&P CNX Nifty shed 6.65 points or 0.11% to 5858.35.

The BSE Mid-Cap index rose 1.60% to 8,904.54. The BSE Small-Cap index rose 1.58% to 10,956.51. Both these indices outperformed the Sensex.

Market breadth was strong. On BSE, 1934 stocks advanced, 878 stocks declined and 52 stocks remained unchanged.

BSE clocked a turnover of Rs 9111 crore compared to yesterday (3 December 2007)'s turnover of Rs 9,319.88 crore.

Nifty December 2007 futures were at 5889, a premium of 30.65 points as compared to spot closing of 5858.35.

NSE's futures & options (F&O) segment turnover was Rs 56330.05 crore, which was higher than Rs 54816.50 crore on Monday, 3 December 2007

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries fell 2.33% to Rs 2863.85. The stock came off session's high of Rs 2960.

The BSE Bankex fell 0.63% to 10,797.09. It underperformed the Sensex. India's largest private sector bank by assets ICICI Bank fell 2.13% to Rs 1140.40.

Federal Bank declined 1.46% to Rs 330.20, Bank of India fell 1.30% to Rs 350.25, Karnataka Bank fell 0.63% to Rs 211.70, and State Bank of India declined 0.32% to Rs 2317.40.

Among gainers from the backing sector, Yes Bank spurted 7.37% to Rs 249.90, Punjab National Bank jumped 2.57% to Rs 643.55, Andhra Bank gained 1.90% to Rs 104.45 and Indian Overseas Bank rose 1.66% to Rs 175.

The BSE Metal index gained 3.22% to 18,869.28. It outperformed the Sensex. The world's sixth-largest steel maker Tata Steel soared 4.08% to Rs 872.95 after the chief of its Corus unit said the firm was planning to lift prices next year.

Vedanta group firm Sterlite Industries fell 1.45% to Rs 1066.65 on reports that Sterlite Energy (SEL), a subsidiary of the company, is in talks with private equity firms and financial investors to sell around 15% in the largest pre-IPO placement in the country. Citigroup Global Markets and DSP Merrill Lynch are advising Sterlite Energy on the transaction, which is expected to raise more than $1 billion from a clutch of investors.

Maharastra Seamless surged 12.37% to Rs 574.10, Steel Authority of India (Sail) gained 8.53% to Rs 284.90, Jindal Stainless gained 5.44% to Rs 238.30, and Hindalco Industries gained 1.15% to Rs 193.75.

The BSE Consumer Durables index jumped 6.12% to 6,083.04. It outperformed the Sensex. Videocon Industries surged 20% to Rs 590, Asian Star Company jumped 4.71% to Rs 1380, Rajesh Exports moved up 1.75% to Rs 921.05 and Titan Industries gained 1.16% to Rs 1568.90.

The BSE Auto index rose 1.67% to 5,639.08. It outperformed the Sensex. MICO surged 16.92% to Rs 5438.55, Ashok Leyland spurted 7.86% to Rs 50.75, and Hindustan Motors gained 4.26% to Rs 42.85.

India's top tractor maker by sales Mahindra & Mahindra rose 2.79% to Rs 771.85. The stock rose for the second day in a row after it reported on Monday, 3 December 2007, a 37% rise in vehicle sales in November 2007 over November 2006.

However, Maruti Suzuki fell 0.39% to Rs 1028.15 and Bajaj Auto declined 0.26% to Rs 2768.70.

Cement shares pared gains after the government today warned that it will crack down on the cement industry if it detects any cartelisation in the sector. ACC, India's largest cement maker in terms of capacity, fell 0.35% to Rs 1087.85, off day's high of Rs 1117. The company said on Monday, 3 December 2007, its November 2007 cement shipments rose 3% to 1.58 million tonnes from 1.53 million tonnes a year earlier.

North India's largest cement maker Ambuja Cements rose 1.22% to Rs 153.90, off day's high of Rs 160.90. The company said on Monday its November 2007 cement shipments rose 3.8% to 1.36 million tonnes from 1.31 million a year earlier.

JK Cements fell 1.19% to Rs 245.70, and Grasim Industries fell 0.68% to Rs 3813.50. Ultratech Cements declined 0.48% to Rs 994.

The BSE IT index fell 0.15% to 4,240.13. It outperformed the Sensex. TCS fell 2.22% to Rs 1054, Satyam Computers fell 1.58% to Rs 440.90, and I-Flex Solutions fell 1.78% to Rs 1508.85. India's third largest software exporter by sales Wipro gained 0.68% to Rs 496.75. India's second largest software exporter Infosys Technologies rose 0.86% to Rs 1614.50.

State run term lending institution Power Finance Corporation fell 0.40% to Rs 249.75 after its board approved to fix current exposure limit for lending purposes for government sector companies at 100% of its networth.

Media and entertainment firm Zee Entertainment rose 0.05% to Rs 306.95, off day's high of Rs 312.45. Zee group reportedly sold the international broadcast rights for its Indian Cricket League (ICL) matches to three global distributors for an estimated $10 million. The three distributors are Astro PPV -– a leading direct-to-home distributor for the South-East Asia region, the Sri Lanka-based Derana and Gateway, which reaches countries in Europe and the US, among others, the report added.

Media firm UTV Software Communications fell 2.77% to Rs 796.55 after the company decided to call off its association with Malaysian media company Astro Multimedia International. UTV Software and Astro had entered into a co-operation arrangement earlier this year via a company - GenX Entertainment - to to set up kids channels in Malaysia and Indonesia.

Textiles firm Pearl Global was locked at upper limits of 20% to Rs 100.55 after the firm struck a deal to jointly develop its Gurgaon property with a unit of DLF. The firm cancelled a similar earlier pact with Ansal Properties & Infrastructure.

Construction firm Hindustan Construction Company rose 3.36% to Rs 209.30 after its chairman and managing director said the firm is in talk with foreign players for airport development and float an infrastructure firm to invest in public private partnership.

Software firm Logix Microsystems fell 0.69% to Rs 310.25, off day's high of Rs 340 after it acquired a majority stake in Add-on-Auto LLC of the US for an undisclosed amount.

Media firm Dish TV India rose 0.81% to Rs 92.80, off day's high of Rs 97.25 after the direct-to-home satellite operator said its board will meet on Wednesday (5 December 2007) to consider equity capital infusion.

Engineering firm Dynamatic Technologies rose 0.56% to Rs 1710, off day's high of Rs 1,850 after the company said it had signed a deal with Spirit Aerosystems (Europe) to set up metallic precision assembly for Airbus aircraft, in Bangalore.

Jindal Steel & Power clocked the highest turnover of Rs 471.08 crore on BSE. Essar Oil (Rs 453.79 crore), Mundra Port & Special Economic Zone (Rs 331.86 crore), ONGC (Rs 242.72 crore) and IFCI (Rs 200.10 crore), were the other turnover toppers on BSE in that order.

Ispat Industries registered highest volumes of 2.48 crore shares on BSE. Ashok Leyland (1.99 crore shares), IFCI (1.88 crore shares), Chanbal Fertiliser & Petrochemicals (1.70 crore shares) and Tata Teleservices (1.69 crore shares), were the other volume toppers on BSE in that order.

European markets were weak in early trade. Key indices in France, Germany and UK were down by between 0.23% to 1.15%.

Most of the Asian markets were in green. Key indices in China, Hong Kong, Singapore, South Korea and Taiwan were up by between 0.18% to 0.97%. However, Japan's Nikkei 225 was down 0.95%.

US markets ended lower on profit booking on Monday, 3 December 2007. The Dow Jones industrial average slipped 57.15 points to 13,314.57. Broader stock indicators also settled lower. The S&P 500 index declined 8.72 points or 0.59% to 1,472.42, and the Nasdaq Composite index dropped 23.83 points or 0.90% to 2,637.13.

Oil rose on Tuesday, 4 December 2007 following signs that Organization of the Petroleum Exporting Countries (OPEC) will probably resist consumer nations' calls to pump more oil. US crude rose 34 cents a barrel to $89.65. London Brent crude was up 24 cents at $90.04.

Market Close: Reliance stocks uproars for the day..

Friday's rally continued in the market as buying was seen across all the sectors. Today markets rallied despite some mixed global cues where Asia ended mixed. Sectors like Auto, Power, metal and capital good stocks were in the limelight for the day while Telecom and Banking stock were under pressure. In the mid session markets traded stable at the higher levels without showing any sign's of weakness. In mid cap space stock like Essar Oil, Videocon Ind, IFCI, Gitanjali Gems and Dish TV were garnering interest in investors. Both mid caps and Small caps ended up by 2.5% higher outperforming the heavyweights. IT pivotals advanced well on value buying seen across the counter. Market during the final hours managed to sustain its accumulated gains and closed at higher level. Auto Stocks come out with their November sales number which were mixed as two wheelers had slight dip in sales while 4 Wheelers managed cheer with the festive Season. Reliance pack were all on fire from Reliance Industries to RNRL but RPL was out of the race.

Sensex ended up by 240 points at 19603.41. It was helped up by gains in Rel Energy (1900.15,+9 percent), Wipro (493.4,+7 percent), RCVL (711.8,+5 percent), TCS (1052.95,+4 percent) and Hindalco (191.55,+3 percent). Restricting the gains were Hero Honda (705.3,-2 percent), ICICI Bk (1165.25,-2 percent), Bharti Tele (924.3,-2 percent), HDFC (2746.25,-1 percent) and HDFC Bk (1701.2,-1 percent).

Auto companies were much in action as they came out with their Numbers. In the two wheelers segment: Bajaj Auto sales for two wheeler in November stood at 2.11 lakh units Vs 2.14 lakh units (YoY). Its total November sales stood at 2.35 lakh units? Vs 2.43 lakh units (YoY) which was down nearly 3%. TVS Motors November motorcycle sales stood at 57,113 Vs 68,874 units which fell by 17%. TVS Motor's two wheeler sales slipped by 5% to 1.12 lakh units on yoy basis. In the four wheelers segment: Maruti Udyog witnessed a good sales growth mainly on the back of performance in Swift & SX4. Total sales stood at 69,699 Vs 55,033 vehicles (YoY) for November. Its November passenger cars sales at 64,885 Vs 52,333 vehicles (YoY). Exports were at 4,483 Vs 2,459 vehicles, YoY. Mahindra & Mahindra also reported its vehicle sales which were up by 37% to 18,585 units on YoY basis. This includes utility vehicles, light commercial vehicles and three-wheelers up by 36 % to 17,846 units. Exports sales were up to 739 units from 443 units. Logan sales were 1,561 units. Sedans numbers were also in line the with expectation in November. Mahindra tractor sales were up by 1% up to 8,066 units on YoY basis. In overall growth two wheelers failed to perform for the festival season as major concern was on interest rates which are still high when compared to what they were about a year ago. Industry is still in hope that it will start growing and hopefully the interest rates will come down. Major auto stocks ended marginally up by 2%.

Lok Housing and Construction Ltd, a prominent player in real estate in and around Mumbai was in limelight for the day. Lok Housing caters to the housing needs of the middle-income group, mainly in the suburbs of Mumbai. It is planning to commence premium projects in Mumbai and at other places like Pune, Vasai, Bangalore, Turbhe.Till date Lok Housing has completed 31 projects over 17,000 units and 9mn sq.ft area. Report says that land bank of group companies will be merged into Lok Housing subject to approval. Lok is managing to cap the real estate bhoom in India with its up coming projects in major Tier 2 cities. One can bet on the value of the land bank it holds which gives more space to have positive out look for the company. We are positive on the company business. Do read our detailed research note to know our view. Stock ended up by 9%.

Technically Speaking: Markets traded strong followed by positive momentum continued with strong positive breadth. Sensex touched intraday high of 19619 and low of 19447. Overall market turnover was good at Rs 9264 Cr. Market breadth was in favor of Advances, where the Decliners stood at 710, Advances were stood at 2057. Sensex has taken resistance on the rising trend line at 19620. This will remain a crucial level to watch tomorrow. If markets fail to hold above this, we might correct upto 19200.

Post Market Commentary

The market after creating a rally over all the sectoral indices scrips closed on a strong note on the back of heavy buying across the counters. The global cues are in favor that gave boost to he domestic market. The market opens with a heavy gap up and keeps on marching forward since the initial bell. Almost all the sectorial indices closed in green except the bankex index that remained out of favor. Most buying is seen from the Metal, Oil & Gas, Consumer durables and Capital Goods baskets. The BSE Sensex grew by 240.22 points to close at 19,603.41 and NSE Nifty closed up by 102.25 points at 5,865. Overall, the market breadth was strong as 2,087 stocks are closed higher while 709 are closed lower. The BSE Mid cap and Small Cap grew by 210.70 points and 260.18 points to close at 8,764.26 and 10,786.20 respectively.

BSE Metal Surged 550.71 points to close at 18,281.24. Scrips that grew are Jindal saw (6.14%), Ispat industries (5.64%), Jindal Steel (4.87%), JSW Steel (4.85%) and Sterlite industries (4.60%).

BSE Capital goods grew by 325.10 points to close at 19,962.48. Jumped by AIA Engineering 4.48%, Alstom Projects 3.96% BHEL 3.02%, ABB 2.91% and L&T 1.21%.

BSE Realty index closed firm at 10,755.75 up by 129.44 points. Pushed up by Mahindra life (7.13%), Unitech (3.14%), Pheonix Mill (2.81%), Akruti City (2.54%)

BSE oil & gas index grew by 426.46 points to closed at 12,786.19. Scrips that jumped are Essar Oil (20.42%), BPCL (4.34%), RNRL (2.97%), Reliance (2.86%) and HPCL (2.58%).

BSE Auto index closed up by 77.08 points at 5,546.58 as Ashok Leyland (5.02%), MRF (3.03%), Bharat Forge (2.72%), M&M (2.61%), Bajaj auto (2.47%) and Mauti Suzuki (1.96%).

BSE IT index grew by 56.43 points to close at 4,254.05 as Wipro (7.19%), Aptech (4.09%), TCS (3.85%), Rolta India (3.92%) and I-Flex (2.07%).

BSE Power index closed higher by 139.88 points at 4,484.10. Scrips that grew are Reliance energy (9.32%), Tata Power (7.72%), GVK Power (5.51%), Torrent Power (2.87%).

Sensex rallies, despite mixed global cues

Despite getting mixed signals from Asian markets, the Sensex resumed on a positive note at 19,547, up 184 points. The undertone remained bullish for the entire trading session, with the Sensex crossing 19,550 mark in early trades and maintaining its upward bias thereafter. While market remained upbeat on strong buying in consumer durables, metal, oil and power stocks, the rally gathered momentum in the afternoon and the Sensex touched the day's high of 19,619. The Sensex finally ended the session with a gain of 240 points or 1.24% at 19,603. The Nifty rose 102 points or 1.77% to close at 5,865.

Among the sectoral indices, the CD index led the upsurge with a gain of 6.83% at 5,732 followed by the BSE Oil & Gas index (up 3.45% at 12,786), the BSE Power index (up 3.22% at 4,484) and the BSE Metal index (up 3.11% at 18,281). The market breadth was extremely positive with gainers outpacing the losers in the ratio of 2.85:1. Of the 2,854 stocks traded on the Bombay Stock Exchange (BSE) 2,087 stocks advanced, 709 stocks declined and 58 stocks ended unchanged.

Out of the 30 Sensex stocks, 24 managed to end with gains while six stocks ended with losses. Reliance Energy was the leading gainer and soared 9.32% at Rs1,900. Wipro jumped 7.19% at Rs493, Reliance Communication shot up by 5.48% at Rs712, TCS advanced 3.85% at Rs1,053, Hindalco moved up by 3.37% at Rs192, BHEL added 3.02% at Rs2,761 and Reliance Industries gained 2.86% at Rs2,932. Among the laggards ICICI Bank dropped 1.64% at Rs1,165, Bharti Airtel shed 1.61% at Rs924, HDFC declined by 1.37% at Rs2,746, HDFC Bank fell 1.04% at Rs1,701, while HLL and Infosys slipped marginally at Rs206 and Rs1,600 respectively.

Over 5.88 crore IDFC shares changed hands on the BSE followed by IFCI (4.38 crore shares), Tata Teleservices (2.42 crore shares), Ispat Industries (2.41 crore shares) and Essar Oil (2.33 crore shares).

IDFC registered a turnover of Rs1,215 crore on the BSE followed by Essar Oil (Rs660 crore), IFCI (Rs459 crore), Reliance Petroleum (Rs371 crore) and Reliance Energy (Rs315 crore).

RIL, REL lead 240-points Sensex surge

Strong buying interest in some index pivotals including Reliance Industries boosted the bourses today. IT pivotals, Wipro, TCS and Satyam Computer edged higher. Reliance Energy spurted. The market breadth was strong. 24 out of 30 stocks from the Sensex pack were in green. Last week's sharp fall in global crude oil prices supported the rally on the bourses.

European markets, which opened after Indian markets, turned negative after a positive start. Asian markets, which opened before Indian market, were mixed.

The 30-share BSE Sensex rose 240.22 points or 1.24% to 19,603.41. The Sensex hit a high of 19,619.32 in mid-afternoon trade trade. At day's high, the Sensex gained 256.13 points.

The broader based S&P CNX Nifty advanced 102.25 points or 1.77% to 5865.

The BSE Mid-Cap index was up 2.46% to 8,764.26. The BSE Small-Cap index was up 2.47% to 10,786.20. Both these indices outperformed the Sensex.

Market breadth was strong on BSE on the back of strong demand for small-cap and mid-cap shares. 2087 stocks advanced, 709 stocks declined and 58 stocks remained unchanged on BSE.

BSE clocked a turnover of Rs 9264 crore compared to Friday (30 November 2007)'s Rs 8,457.32 crore.

Nifty December 2007 futures were at 5876, a premium of 11 points as compared to spot closing of 5865.

NSE's futures & options (F&O) segment turnover was Rs 54816.5 crore, which was lower than Rs 60313.99 crore on Friday, 30 November 2007

India's largest private sector firm by market capitalisation and oil refiner Reliance Industries rose 2.86% to Rs 2932.20, off day's low of Rs 2850.

India's largest private sector bank by assets ICICI Bank fell 1.64% to Rs 1165.25.

India's largest private sector bank by net profit HDFC Bank declined 1.04% to Rs 1701.20.

The BSE Consumer Durables index soared 6.83% to 5,732.15. It outperformed the Sensex. Gitanjali Gems sprout 7.02% to Rs 464.70, Rajesh Exports jumped 4.80% to Rs 905.20, and Lloyd Electric & Engineering gained 2.51% to Rs 179.70.

Diversified firm Videocon Industries spurted 20% to Rs 491.70 on reports the company has negotiated directly with land owners in Asansol for 2,000 acres for its proposed steel and power plant. The new company--Videocon Steel and Power--will build the 3 million-tonne steel and 1,200 megawatt thermal power plant on 4,000 acres. The project will start with 2,000 acres.

The BSE Power index rose 3.22% to 4,484.10. It outperformed the Sensex. GVK Power & Infrastructure gained 5.51% to Rs 803, Neyveli Lignite Corporation rose 2.72% to Rs 241.95, and NTPC gained 1.35% to Rs 239.85.

Power producer and distributor Tata Power soared 7.72% to Rs 1262.85. The company is reportedly eyeing a bid for Singapore electricity companies Tuas Power, PowerSeraya and Senoko. The report suggests that Singapore's state investor Temasek Holdings is selling its interests in the three firms and Tata Power was evaluating the opportunity.

Anil Dhirubhai Ambani Group (ADAG) led Reliance Energy (REL) jumped 9.32% to 1900.15. As per reports, ADAG will invest Rs 8,000 crore in REL that would help the company to double its net worth and increase its borrowing limit. The infusion is proposed through a preferential offer of shares to Reliance-Anil Dhirubhai Ambani Group. The preferential offer will be made at Rs 1,812 per share. After the equity infusion, the promoter's stake will increase to 43-45% from the current 35.89%.

The BSE Oil & Gas index rose 3.45% to 12,786.19. It outperformed the Sensex. Essar Oil spurted 20% to Rs 391.35, BPCL gained 4.34% to Rs 402.95, Reliance Petroleum gained 2.32% to Rs 222.80 and Reliance Natural Resources rose 2.97% to Rs 173.20.

State-run oil refiner Indian Oil Corporation moved up 2.05% to Rs 552.50. The company has received approval of its board for acquiring a 5% stake in Oil India by acquiring 1.07 crore equity shares at a price equivalent to its initial public offer price (IPO). The IPO of OIL is slated for the first quarter of 2008.

India's biggest car-maker by sales Maruti Suzuki India rose 1.96% to Rs 1032.20. The company's domestic sales rose 24% to 65,216 units in November 2007 over November 2006. This is its highest ever monthly domestic sales.

India's top tractor maker by sales Mahindra & Mahindra rose 2.61% to Rs 750.90. The company's vehicle sales rose 37% to 18,585 units in November from 13,597 units a year earlier. Exports rose to 739 units in November 2007 from 443 units a year earlier.

The BSE IT index rose 1.34% to 4,254.05. It outperformed the Sensex. Wipro jumped 7.19% to Rs 493.40, TCS rose 3.85% to Rs 1052.95, and Satyam Computers gained 1.83% to Rs 448.

India's second largest software exporter by sales Infosys Technologies fell 0.21% to Rs 1600.70.

India's largest steel producer in terms of sales Steel Authority of India (Sail) rose 1.57% to Rs 262.50. The firm reportedly plans to invest Rs 53,000 crore to increase hot metal capacity to 26 million tonnes. The investment is expected to be funded through a mix of debt and equity in the ratio 1:1.

Infrastructure development firm GMR Infrastructure rose 1.87% to Rs 259.25. The GMR Group reportedly plans to invest over Rs 60,000 crore in next five-six years to enhance its power generation capacity in the country and acquire coal assets abroad. GMR Energy, a subsidiary of GMR Infrastructure, has three operational power plants of 388.5 megawatt (MW), 220 MW, 200 MW capacity in Andhra Pradesh, Karnataka and Tamil Nadu respectively.

Term lending institution IFCI jumped 12.90% to Rs 106.80. The firm has reportedly decided to rope in International Finance Corporation, the investment arm of World Bank, as an investor to hold less than 20% stake.

Heavy equipment maker BEML gained 1.40% to Rs 1695.80. The company has reportedly floated a subsidiary in Brazil for sourcing and assembling of mining and construction equipment to cater to the growing Latin American markets. The quantum of investment for the project is still being worked out, the reports added.

Ceramic tiles maker Euro Ceramics rose 7.02% to Rs 220.95. The company is likely to invest Rs 575 crore to increase vitrified tiles production capacity by 1,00,000 tonnes per annum.

Cooling products maker Fedders Lloyd Corporation spurted 13.44% to Rs 143.50 after the company said it has tied up with Victor Company of Japan to bring the latter's consumer electronics products to India.

IDFC clocked the highest turnover of Rs 1215.73 crore on BSE. Essar Oil (Rs 660.55 crore), IFCI (Rs 459.56 crore), Reliance Petroleum (Rs 371.93 crore) and Reliance Energy (Rs 315.78 crore), were the other turnover toppers on BSE in that order.

IDFC registered highest volume of 5.88 crore shares on BSE. IFCI (4.39 crore shares), Tata Teleservices (2.42 crore shares), Ispat Industries (2.42 crore shares) and Essar Oil (2.33 crore shares), were the other volumes topper on BSE in that order.

European markets declined after a positive start. In Europe, key indices in UK, France and Germany were down between 0.01% to 0.24%.

Asian markets were trading mixed today, 3 December 2007. Key indices in Singapore and Hong Kong were up between 0.01% to 0.05%. Key indices in China, Japan, South Korea and Taiwan were down between 0.03% to 0.33%.

Oil prices fell below $89 on Friday on expectations that OPEC will decide to increase output at its meeting in this week. Crude oil hovered above $89 a barrel on Monday, 3 December 2007, after close to $10 fall last week. US crude for January delivery rose nearly $1 to above $89.50 a barrel, but was still well off a record high near $100 set on 21 November 2007.

US markets ended mixed on Friday, 30 November 2007 on the expectation that Fed will cut interest rates by 25 basis points in its meeting scheduled on 11 December 2007. The Dow Jones Industrial Average rose 59.99 points 0.45% to 13,371.72 and The S&P advanced rose nearly 1% to 1,481. However the Nasdaq Composite slipped 0.3% to 2,661.

FIIs sold equities worth Rs 5,849.90 during the month of November 2007. On cumulative basis, FIIs were net buyers of equities to the tune of Rs 65,907.30 crore in calendar 2007 so far.

Outlook remains positive

The positive global cues and firm opening in most of the Asian indices in ongoing trades coupled with strong buying interest in most of sectoral stocks may help the local market advance further. However, bouts of strong intra-day volatile moves and the FIIs remaining net sellers of equities may weigh on the sentiment. But, the fall in oil prices may release some pressure. Among the key indices, the Nifty can see an up- move till 5900-6200 levels and has a key support at 5600 levels in the near-term. The Sensex has a likely support at 18800 and may face resistance at 19500.

 

Major US indices finished with marginal gains on Friday, as investors welcomed the comments from the Fed chief that more rate cuts are on the way, but gains are limited on the back of weakness in technology stocks. While the Dow Jones gained by 60 points at 13372, the Nasdaq slipped by seven points to close at 2661.

 

Most of the Indian ADRs posted gains on the US bourses on Friday. VSNL led the pack with the gains of 13.39%, while MTNL surged 7.59%. HDFC Bank, Tata Motors, Infosys, Wipro, Rediff, Patni Computer and Dr Reddy's gained over 1-3% each. However, Satyam fell over 1%.

 

Oil prices fell below $89 on Friday on expectations that OPEC will decide to increase output at its meeting in this week. The Nymex light crude oil for January delivery slipped by $2.30 to close at $88.71 a barrel. In the commodity space, the Comex gold for February delivery tumbled $13.20 to settle at $789.10 an ounce.

Energized bulls set to smile!

Our energy is in proportion to the resistance it meets.

The bulls sure look energized (we're not talking just of Reliance Energy) with FIIs pumping in over Rs10bn on the last day of the month. And all this after being sellers for virtually the whole of November. Is this the sign of things to come or just an aberration only time will tell. Generally, overseas investors tend to reduce their activity around this time of the year, ahead of the Christmas holidays. One has to wait and see whether this trend continues this year as well. But as we mentioned on Friday, historically, this has been a good month and bulls will hope to usher in the new calendar year with gains.

Today, we see a positive opening on the back of Friday's rally and positive FII data. To go with that, global markets are in better shape and oil prices are hovering around the US$89 per barrel mark. Auto stocks will attract some attention due to the release of the monthly sales data. Maruti has reported strong numbers. Hero Honda has managed to beat the negative growth trend in the two-wheelers segment. IFCI will be in action as a financial daily reports that it has decided to sell up to 20% stake to IFC, the World Bank's private arm.

Reliance Energy will remain in the limelight. The promoters have decided to inject Rs80bn in the company to help it fund the two UMPPs at Sasan and Krishnapatnam

Ashok Leyland could resume its buying spree as a business newspaper reports that the promoters may announce a share buy back at Rs60-65 per share. Tata Motors has reportedly bought Jaguar and Land Rover from Ford. But, there is still no official confirmation of the report that appeared on the web site of The New Zealand Herald. Deccan Chronicle is likely to rise as the RBI has allowed fresh purchases by FIIs.

The FIIs were heavy sellers last month, offloading Indian shares worth nearly US$1.5bn. As a result, the Sensex and the Nifty struggled to make further advances. In short, liquidity will hold the key if the main indices are to cross the previous lifetime highs. Market participants will also have to pay attention to the global factors like the US slowdown and housing sector meltdown there. Fresh bad news on this front could spark renewed sell-off across global markets.

For now though, world markets are stable and there is talk of more rate cuts from the Fed when it meets on Dec. 11. If the American central bank obliges again, there will be a relief rally. The downside would be capped in that case. Besides the Fed meet, there are no major triggers that can move the market either way. So, we expect the market to remain lackluster with alternative bouts of buying and selling. Moreover, in the absence of any great catalysts, there could be more intra-day swings.

Citigroup and Lehman Brothers have both bought Hindustan Oil Exploration; Citigroup has also purchased Indo Asian Fusegear; Prudential ICICI MF has picked up Ion Exchange while UBS has sold the stock; Tata Sons has bought Tata Elxsi while HDFC MF has sold it; HSBC has sold Vyapar Industries and Intense Tech.

US shares closed mixed on Friday with the blue chip Dow Jones Industrial Average and the S&P 500 index managing modest gains on growing optimism of further rate cuts. But, the Nasdaq finished slightly lower on disappointing outlook from PC major Dell.

The advance reduced the worst monthly losses in five years for the S&P 500 and Dow.

The S&P 500 rose 11 points, or 0.8%, to 1,481.14. The Dow gained 60 points, or 0.5%, to 13,371.72. The Nasdaq slipped 7 points, or 0.3%, to 2,660.96, led by Dell's 13% fall after the company's earnings missed analysts' estimates.

Market breadth was positive. About nine stocks gained for every five that fell on the New York Stock Exchange.

Wall Street had a tough November, with the Dow losing around 4%, the S&P 500 dropping just over 4% and the Nasdaq down around 7%.

Treasury prices cut losses by the end of the session, with the yield on the 10-year note at 3.94%, up from 3.93% late on Thursday. In currency trading, the dollar gained versus the euro and the yen.

US light crude oil for January delivery fell US$2.30 to settle at US$88.71 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery tumbled US$13.20 to settle at US$789.10 an ounce, falling along with other dollar-traded commodities.

US Federal Reserve Chairman Ben S. Bernanke sparked another strong day of gains in European shares on Friday. The pan-European Dow Jones Stoxx 600 index rose 1.3% to 370.35. The UK's FTSE 100 gained 1.3% at 6,432.50, while the German DAX 30 index advanced 1.4% to 7,870.52 and the French CAC-40 climbed 1.3% to 5,670.57.

Brazilian shares also closed up and Mexican stocks too rose on continued hopes of US rate cut this month. Brazil's benchmark stock index, the Bovespa, climbed 849 points, or 1.4%, to end at 63,000.06. In Mexico City, the 35-stock IPC index rose 1.3% to 29,770.52. Chile's IPSA rose 0.9% to 3,204.83. Argentina's Merval, however, fell 1.3% to 2,207.16.

Asian stocks rose for a third day this morning, led by Mitsubishi UFJ Financial and National Australia Bank on speculation that US Treasury Secretary Henry Paulson will announce an agreement with banks today to stem credit losses.

Paulson, who is negotiating an agreement with banks to fix interest rates on loans to subprime borrowers, may make the announcement when he addresses a housing conference in the US today.

The MSCI Asia Pacific Index gained 0.2% to 162.28 at 10:46 a.m. in Tokyo. Japan's Nikkei 225 Stock Average was little changed at 15,686.81, while the broader Topix index climbed 0.3% to 1,536.71. All other markets open for trading rose, except China.

The yen advanced against the dollar from the lowest in two weeks after Moody's Investors Service said that it is preparing the biggest credit rating cuts since subprime mortgage defaults rocked financial markets

Upward trend to continue

Markets saw second straight day of gains as players cheered healthy economic growth and better than expected Inflation figures. India's economy grew 8.9% in July-September Quarter from year ago. Analyst expected Economy to grow 8.7%. India's Inflation rate was 3.21% in week ended Nov. 17 against expectation of 3.12%.

The benchmark Sensex which opened with a positive gap immediately retreated from its highs as it faced resistance at higher levels. However, swiftly gained momentum as the day progressed on back of firm cues from Asian markets. Finally, 30-share Sensex ended 359 points higher to close at 19,363 and Nifty closed 128 points lower at 5,762.

Sector wise the BSE Metal index was the top gainer (up 5%). Other indices like BSE realty index (up 3.9%), BSE Bankex index (up 2.5%) and BSE IT index (up 2.7%). Even the BSE Mid-Cap and the BSE Small-Cap index gained over 1.5% each.

The Banking stocks gained momentum after government approved the company's right issue, also announced that they would invest Rs10,000 cr in the issue. The whole of the banking pack was in demand with Mid-Cap banks like Bank of Baroda, Syndicate Bank and Bank of India surging over 6% each.

Cement stocks also were in the limelight as reports stated that the companies would hike prices in Maharashtra by Rs5 per 50 kg. ACC gained 2.5% to Rs1090 and Grasim advanced by 2.6% to Rs3802.

Jet Airways edged higher by 0.5% to Rs829 after reports stated the nation's biggest domestic carrier won government approval to fly to Paris, Barcelona, Manchester and Vienna. The scrip touched an intra-day high of Rs845 and a low of Rs825 and recorded volumes of over 32,000 shares on NSE.

SBI gained 1.2% to Rs2302 after government announced that it approved the company's right issue, also announced that they would invest Rs10,000 cr in the issue a and would also issue bonds for subscribing to SBI rights offer. The scrip has touched an intra-day high of Rs2345 and a low of Rs2282 and has recorded volumes of over 15,00,000 shares on NSE.

BPCL gained 1.1% to Rs386 as India's third-biggest state-run refiner would acquire a 2.5% stake in Oil India Ltd. The company also announced that they would sell 49% of Bharat Shell stake for Rs1.52bn. The scrip touched an intra-day high of Rs402 and a low of Rs380 and recorded volumes of over 6,00,000 shares on NSE.

Shares of IOC gained 2.8% to Rs543 as reports stated that the company is trying to fit the expansion of the Haldia refinery within the plants 500-acre property near port town. The scrip touched an intra-day high of Rs556 and a low of Rs530 and recorded volumes of over 7,00,000 shares on NSE.

ONGC advanced 2.6% to Rs1167 after the company yesterday announced that they found more gas in a block in Rajasthan. The scrip touched an intra-day high of Rs1177 and a low of Rs1120 and recorded volumes of over 11,00,000 shares on NSE.

Tata Steel gained 3.5% to Rs825 after the company announced that they have completed an accord with Riversdale Mining Ltd., an Australian coal-mining company to develop two coal projects in Mozambique. The scrip touched an intra-day high of Rs829 and a low of Rs805 and recorded volumes of over 10,00,000 shares on NSE.

Polaris surged by over 3.5% to Rs109 after the company announced that they have settled US Court case. The scrip touched an intra-day high of Rs110 and a low of Rs105 and recorded volumes of over 6,00,000 shares on NSE.

What the FIIs are doing

FIIs were net buyers of Rs10.7bn (provisional) in the cash segment on Friday while the local institutions pumped in Rs6.88bn.

In the F&O segment, foreign funds were net sellers of Rs3.86bn on the same day.

On Thursday, FIIs were net sellers to the tune of Rs9.78bn.

Stocks in News:

Reliance Energy to raise Rs80bn for infrastructure projects; promoters to invest Rs65bn through convertible warrants and preferential shares.

ADAG Group on the lookout to buy coal assets abroad; shows interest to acquire PT Berau of Indonesia.

BHEL to invest Rs3bn to set up two plants to expand manufacturing capacity to 15,000MW annually.

Hindalco plans to raise captive copper supplies to 60%; planning for mines in South America.

GMR Energy, part of the GMR group is looking for global acquisitions in the power sector, especially in Singapore and Turkey.

Reliance Power is likely to tie up with an America company for strategic partnership in coal mining.

Tata Power may bid for three Singapore power generation companies Tuas Power, PowerSeraya and Senoko Power.

SAIL to invest Rs530bn over the next five years to increase hot metal capacity to 26mn tons.

Vedanta Resources, the holding company of the Sterlite group, would invest Rs50bn in Rajasthan.

Rashtriya Ispat Nigam proposes to acquire the entire Bird Group of companies to secure iron ore supplies.

Pfizer has won a US court ruling that prevents Ranbaxy from selling a generic version of blood pressure drug Caduet until 2010.

NMDC to invest Rs180bn to expand capacity to 50mn tons; to conduct fresh explorations within five years.

National Textile Corporation and Pantaloon Retail plan to float a retail JV.

A slowdown in manufacturing to 8.6% saw Q2 GDP growth at 8.9% vs. 10.2% a year ago.

Fiscal deficit stood at 54.5% of the total budget estimate of Rs1.5tn in the April-October period.

Air fares to increase after a 14% rise in ATF prices.

Mobile operators must return excess spectrum, says Telecom Minister.

Inflation rises to 3.21% mainly due to higher vegetable prices for week ended Nov. 17th ; CPI up at 5.5% in October.

The Government projects textile industry growth of 16% to touch US$115bn in the 11th Five-Year Plan.

The Government may divest 10% of its equity in Rashtriya Ispat Nigam in the market.

The Government not in favour to allow international flying rights of one airline to be transferred to another until it is wholly acquired.

The RBI gives in principle concurrence for a framework on stock lending and borrowing.

Stocks you can buy this week

 Colgate Palmolive
Research: Merrill Lynch
Rating: Buy
CMP: Rs 282

For the first time in 10 years, Colgate is available 6% cheaper than the market at a P/E of 19x FY09E. The 'buy' rating is underpinned by the defensive nature of the business, powerful brand and quality management. Colgate's toothpaste volumes are growing at a safe, but unexciting rate of 10%, in an era when income levels are rising sharply.

The management highlighted that economic growth has not trickled down to Colgate's key growth market — rural India. Higher urban incomes are less relevant for Colgate as penetration levels in urban India are over 70%. Moreover, toothpaste is a low-priority item on the shopping list and uptrading trends are typically less common than in other consumer categories. The management stated that, contrary to popular belief, HUL is not lying low in toothpastes and other competitors such as Anchor have sharply upped their marketing budgets.

Colgate is gaining market share gradually, supported by an advertising-to-sales ratio of ~15%. This ratio is unlikely to fall in the near future. Over the next two years, Merrill Lynch forecasts Colgate's sales to grow at 15%, led by 10-11% volume growth. Input cost increases have slowed down and are offset by retail price increases of ~3-4%. Merrill Lynch believes there is upside risk to its EPS estimates as the tax rate is likely to be increased.

DLF
Research: Citigroup
Rating: Buy
CMP: Rs 944

DLF has formed an equal partnership with the founder of Aman Resorts to acquire the company at an enterprise value (EV) of $400 million (including debt of $150 million). While this appears aggressive, it includes an agreement to acquire a controlling interest in Aman Resorts. The acquisition will be largely financed through debt. Aman Resorts is a luxury hotel chain operating 22 hotels (650 keys), many with villas (172 keys). It owns properties in France, Phuket, Bali, Sri Lanka and India. DLF will work closely with founder Adrian Zecha to drive future growth. Aman Resorts enjoys average room rate (ARR) of $778-1,000 and is likely to generate CY07 revenues of $120 million with EBITDA of $27 million. With six new properties (300 keys, fully funded) in various stages of development likely to become operational by '08-09, the management expects earnings to grow at 20%. It believes DLF's land bank and growth capital will complement this growth. The acquisition is in line with DLF's plans to grow big in the hotel space. While the acquisition at 15x CY07E EV/EBITDA appears aggressive versus 10x EV/EBITDA for most global hotel chains, Aman Resorts has inherent value of real estate assets, which should add significant value in the long term.

Oriental Bank of Commerce
Research: CLSA
Rating: Buy
CMP: Rs 256

CLSA maintains 'buy' rating on Oriental Bank of Commerce. OBC has underperformed the Sensex and Bankex by 36% and 43%, respectively, over the past one year. Its gross non-performing loans (NPLs) have declined 50% from their peak and margins have bottomed out. The bank's fee income is estimated to witness a compound annual growth rate (CAGR) of 24%.

While OBC acquired a large NPL portfolio via the acquisition of GTB in FY05, it has recovered a substantial part of it. Hence, gross NPLs have declined 41% from December '05. OBC's net NPLs of 0.6% and coverage ratio of 79% are among the best for Indian banks. Its margins are estimated to have contracted by 20-30 bps due to re-pricing of some of its high-yielding G-Sec portfolio and moderation in credit demand. With credit growth expected to pick up and most of the re-pricing having already been done, CLSA expects margins to rebound by at least 10-20 bps in the next few quarters. CLSA expects earnings to witness a 20% CAGR over FY07-10CL, led by strong credit growth, margin expansion of 10-20 bps and rising fee revenues (24% CAGR).

Low bond yields will also result in lower mark-to-market hits on the bond portfolio (MTM hit was 30% of operating profit in FY07). Further, given the relatively lower proportion of its bond portfolio being in held-to-maturity (HTM), the bank will also have a lower amortisation cost versus its peers. At 0.9x FY09CL adjusted book and 5.5x FY09CL EPS, OBC trades at the lowest end of the valuation range among Indian banks. With a return on equity (RoE) of 18.3% in FY09CL, it can trade up to 1.2x 12-month forward adjusted book, with earnings growth being the key catalyst.

TVS Motor
Research: Morgan Stanley
Rating: Equal-Weight
CMP: Rs 65

MORGAN Stanley retains 'equal-weight' rating on TVS Motor, but lowers the price target to Rs 50 from Rs 56. Morgan Stanley believes execution risk has come down significantly, with the showcase of the company's new products and commencement of operations at Himachal Pradesh and Indonesia. Earnings recovery is likely to lag as these new projects take time to show an improvement in operating performance. Morgan Stanley cuts its FY09 earnings forecasts by 29% to reflect year-to-date performance, delay in launch of new products — three-wheeler, new executive motorcycle and premium motorcycle — and reduction in its volumes forecast from such new launches.

TVS Motor trades at 16.3x FY09 estimates. Key risks to the valuation will be a further delay in the launch of new products and intense price competition between the market leaders — Bajaj Auto and Hero Honda — leading to overall lower profitability. The stock is likely to trade in the range of Rs 50-60 per share in the near term as the market prices in improvement in volumes. Morgan Stanley may turn more positive on the stock once it has obtained visibility on the earnings from the company's new projects — especially from the Indonesian operations — and volume potential of the three-wheeler segment.

Google Mobile - bidding for US spectrum

Google Inc said on early Saturday that the company would bid on coveted airwaves to launch a US wireless network, pitting it against established telecommunications players AT&T and Verizon.

The Internet leader said in a statement that it was ready to go it alone rather than rely on partners in bidding in the Federal Communications Commission-run auction of 700-megahertz wireless spectrum due to begin on Jan 24.

The Silicon Valley-based company said it would make its filing ahead of the FCC deadline on Monday for companies to declare their interest in joining the airwaves bidding.

"We believe it's important to put our money where our principles are," Chief Executive Eric Schmidt said. "Consumers deserve more competition and innovation than they have in today's wireless world."

Wall Street investors have reacted cautiously to Google's latest move to expand beyond its core Web search and online advertising franchises, worried the potential upfront costs and eventual network build-out could exceed USD 10 billion.

But some analysts have speculated that Google was more interested in ensuring certain requirements for network openness and that it was bidding just to preserve those rules.

"The real question here is whether Google's intent is to bid up to the reserve price and assure that the openness condition stays in place," Stifel Nicolaus analyst Blair Levin wrote to investors. "Or is the real purpose to actually win?"

And despite the excitement surrounding a Google bid, Stifel Nicolaus said in a research note that it suspects Verizon will probably end up winning the auction for the C block spectrum.

Google shares closed down USD 4.00 at USD 693.00 on Nasdaq.

Bidding separately instead of assembling a coalition does not rule out Google later signing up partners if it wins the bidding, said a source familiar with the company's strategy. But the FCC has "anti-collusion" rules that prevent deal-making between potential bidders during the auction period.

The source said Google was eyeing the biggest chunk of spectrum up for auction -- the "C block" -- but also was considering bidding on separate spectrum reserved for public safety agencies but which will allow some commercial uses.

A Google spokesman declined to comment on the company's bidding strategy.

Last chance for new player

The auction is expected to take several weeks, or even months, of daily, back-and-forth bidding, with the identities of the bidders kept secret. Big spectrum bidders typically draw up elaborate strategies, often with input from game-theory experts.

Expected bidders include AT&T Inc and Verizon Wireless, the No. 1 and No 2. US wireless network operators. Verizon Wireless is a joint venture of Verizon Communications Inc and Vodafone Group Plc.

Less certain are the strategies of satellite broadcasters DirectTV and EchoStar Communications and cable networks Comcast Corp and Time Warner Inc as well as other wireless players Sprint, T-Mobile and Clearwire, according to Levin.

AT&T is in merger talks with EchoStar that could lead them to join forces in the bidding, but with the deadline looming the time to strike such a deal is short, the Stifel Nicolaus analyst said.

These radio waves are being returned by broadcasters as they move from analog to digital signals early in 2009. The signals can go long distances and penetrate thick walls. The auction is seen as a last chance for a new wireless player.

Google and other Silicon Valley leaders see the wireless spectrum as a way to create more open competition for mobile services and devices than existing networks -- putting the industry on a footing similar to the free-wheeling Internet.

The company won some changes in rules governing use of the spectrum several months ago, but was denied other requests, including a rule that would have required winning bidders to resell access to their spectrum on an open wholesale basis.

The winning bidder must provide open access to any device consumers choose to use on the network if the reserve price of USD 4.6 billion for the "C Block" is met at auction, Google said.

If the reserve price is not met, the auction would be rerun without the so-called "open-platform" conditions.

On Tuesday, Verizon Wireless announced it had acceded to Google's open-platform demands and would open its network to any phone or software application by the end of 2008.

But Levin said Google may still want to bid high enough to lock in a government-enforced open-platform condition on the 700-megahertz spectrum.

If its bid proves successful, Google could operate a wireless network itself or seek partners to help it build out the network and to potentially resell wireless services.

Google's announcement was greeted as good news at the FCC, said a source at the agency. "It means that they're willing to go a little bit further into the water," the source said. "They're not just dipping their toe anymore."

FCC officials hope the company's participation will mean a possible new player in the wireless business and boost the amount of money the government can bring in from the auction.

"We know we're going to have somebody in the mix who has a lot of money and who is showing signs in being interested in winning," said the source.

$200 million pulled out of India

Soaring oil prices have made global investors to pull out over 200 million dollar from India-focused funds during the last week of November, a latest report says. "Funds geared to China and India, both big oil importers, posted outflows of 688 million dollar and 208 million dollar respectively as oil prices continue to test the 100-dollar a barrel mark," international fund tracking firm EPFR Global said in its latest weekly report.

Besides, funds focused on BRIC (Brazil, Russia, India and China) witnessed an outflow of 81 million dollar in the week ended November 30. But two countries --Russia and Brazil -- which have exportable oil reserves did not fare so badly.

Russia country funds posted modest inflows while it was neutral for Brazil, the report said.

At the country level, investors last week again pulled back from China and reduced their exposure to emerging markets such as Korea and India that have big oil import bills.

However, money market funds continued to find favour as investors parked another 7.62 billion dollar in them. This fund group has absorbed fresh money for the eighth time in the past nine weeks, the report said. Since early August net inflows have totalled over 115 billion dollar.

"Despite the angst over the real scope of the global credit crisis, recent flow data suggests that investors are still as focused on returns as they are on risk," EPFR Global analyst Cameron Brandt said.

Weekly Technical Analysis

Nifty — The index closed positive on the opening session of the week; mid-week it consolidated in a trading band and closed on a strong note toward the closing session of the week. It ended the week with gains of 154 points.

Moving Averages — The 50 dma = 5523, 20 dma = 5733, 10 dma = 5681. The index has closed above the averages, which should be considered positive. Declines during the current week's trading should find support around the averages.

Consolidation — Last week the index consolidated in a narrow band of 5596-5773; it has closed around the upper end of its consolidation band suggesting strength. Breakout above 5773 should see index test higher levels around 5950 levels.

Momentum Oscillators — On the daily chart, MACD is in sell mode but around the zero line. RSI (14) – Relative Strength Index is exhibiting a reading of 55.14 (reading above 70 signifies overbought and reading below 30 signifies oversold).

Support — The index has support around the lower end of the consolidation band around 5596; intra-week declines should find support around these levels. Lower support is around the 50 dma = 5523 levels.

Resistance — The index faces resistance around the upper end of the consolidation band around 5773; breakout above the 5773 level will see the index rally toward 5950. Higher resistance is around 6012 (high of 1 November 2007).

Conclusion — Breakout above 5773 should see the index test higher levels around 5950 during the week's trading.

Market may stay range bound

The settlement went through with the market maintaining an uptrend. The Nifty ended the week up by 2.75 per cent at 5,762.75 points with the Sensex ahead by an equivalent 2.71 per cent. The Junior was up 4.41 per cent and the CNX Midcaps gained 4.83 per cent. Breadth was fairly good and volumes were good though this is always true in settlement week but the high carryover was also a bullish signal.

The BSE 500 was up by 3.42 per cent. The overall gains were somewhat surprising since the foreign institutional investors (FIIs) were heavy sellers throughout the week and indeed the month, and mutual funds barely bought although they were net-positive.

Outlook: The market stays stuck inside the trading range of Nifty 5,400-5,850 and until there is a breakout from that range, it's difficult to call the future direction. The volume pickup this week and the decent breadth make an uptrend look more likely. But FII attitude is likely to be the key to the immediate future direction.

Rationale: There is clearly defined resistance above 5,800 and clear support at 5,400. Any breakout beyond these levels is likely to require volume expansion. That could come about either through unabated FII selling or a shift in attitude and buying. It appears operators are bullish since they absorbed last week's FII sales but they are unlikely to expand their commitments much beyond current levels.

Counterview: The volume pickup was largely driven by settlement considerations. If volume tails off, the market is likely to move down. The market's last peak came on November 14 and it's been in a downtrend or range-trading since.

The current phase has lasted just two weeks and on the basis of the time-factor, a further consolidation or downtrend seems more likely. But just as it would require much buying to break 5,800, it will require a spurt in supply to break the 5,400 support. Only the FIIs have the capacity to sell or buy sufficiently large quantities against delivery.

Bulls & Bears: There were sharp gains across several sectors. Telecom stocks such as VSNL, MTNL, Bharti and TTML all jumped on Friday. Bank stocks did well in the last two sessions with Kotak, Bank of Baroda, HDFC Bank and Indian Overseas being among the best performers. IT stocks made a general recovery with HCL Tech and Satyam among the winners, though market leaders such as Infosys and TCS remained close to annual lows.

Apart from these, the Reliance and ADAG stocks continued to generate high volumes. Essar Oil, Sterlite and Neyveli Lignite remained strong. GMR Infra and Hind Oil Exploration were two new counters that attracted bulls.

MICRO TECHNICALS

GMR Infrastructure Current Price: 255.1 Target Price: 275

The stock has completed a breakout on reasonable volumes. It has a potential target of 275 and it could exceed that, given that the long-term trend has been excellent for the past 6 weeks. Keep a stop at 249 and go long.

Hind Oil Exploration Current Price: 142.7 Target Price: 160

The stock broke key resistance at 135 on a big volume expansion. It has a likely target of 160 and some resistance at current levels. Keep a stop at 134 and go long. Book partial profits at 155. The potential long-term target is 180 plus, so it may be worth keeping a delivery position for 3-4 weeks.

Kotak Mahindra Bank Current Price: 1,233.5 Target Price: 1,275

KMB has seen what could be an important breakout past resistance at 1,175. It has an immediate target of 1,275 and a long-term target that could be quite a lot more. Keep a stop at 1,215 and go long. Book partial profits above 1,270 and hold a delivery position for 3 weeks with a perspective of 1,400. Satyam Computer Current Price: 440 Target Price: 475

The stock seems to have bottomed and is likely to trade up again until it hits resistance at 475-480. The long-term trend suggests range-trading between 400-500 will continue. Keep a stop at 430 and go long. Book partial profits at 460 and close out above 475. VSNL Current Price: 627.95 Target Price: 660

The stock made a huge jump on Friday on the basis of a big volume expansion. When it crossed resistance at 590 it set up a short-term target of 660. The long-term trend also looks to have undergone an improvement to bullish from range-trading. Keep a stop at 610 and go long.

via Business Standard

Strong finish to US Markets

Expectations about another interest rate cut help ease concerns in housing and credit markets

US Market started off the week on a weak note on Monday, 26 November but market picked up momentum in all the rest of the four days of the week that ended on Friday, 30 November, 2007. Comments from Federal Reserve Vice-chairman Donald Kahn during the middle of the week and from Ben Bernanke on the last day of the week was the main reason for market to get some encouraging hints about another rate cut and indices soaring upwards.

Crude price tumbling down to lowest level in a month also provided some good support to the market. Oil prices closed almost 10% lower around $88/barrel at the end of the week on talks that OPEC will increase production. An upward revision of third quarter real GDP to a very strong 4.9% annual growth rate from a previously reported 3.9% was welcomed by the market.

The Dow Jones Industrial Average gained 390 points for the week. Tech - heavy Nasdaq gained 64 points. S&P 500 gained 40 points.

Market started off on a shaky note on Monday, 26 November, 2007 after credit market turmoil once again rocked the market. Citigroup weighed on overall market after reports that the company might lay off as many as 45,000 workers because of the subprime-mortgage crisis. Dow and Nasdaq went down by 267 and 55 points respectively.

On Tuesday, 27 November, it was same Citigroup that helped market erase most of prior day's losses after reports that an Abu Dhabi Investment Authority (ADIA) will invest $7.5 billion to acquire a 4.9% stake in Citigroup. The investment will make ADIA the bank's largest shareholder. Dow and Nasdaq went up by 215 and 40 points respectively.

On Wednesday, 28 November, Fed's Vice Chairman, Donald Kahn took market up after he said the Fed must be "flexible and pragmatic" in policy. Market took his comments as if he was hinting at another quarter to half a percentage point interest rate cut at the 11 December policy meeting. Financial sector was once again centre of everyone's attention on reports in the Wall Street Journal that Citigroup and Bank of America were contemplating a merger.

On Thursday, 29 November, indices once again closed modestly higher with the Dow gaining 22 points and Nasdaq higher by 5 points with the market digesting mixed bag of economic reports. Disappointing profit reports from some retailers and news of a pipeline explosion in the Midwest also took some steam out of market on that day.

But on Friday, 30 November, a speech by Ben Bernanke, cheered investors after he hinted clearly at another interest rate cut in the coming month. In his speech he acknowledged that the renewed turbulence in the financial markets over the past month has affected the economic outlook, as there could be additional restraint on housing market activity and other credit-sensitive sectors. Market ended mixed with Dow gaining 60 points but Nasdaq slipping by 7 points.

On the earnings front, Sears Holding posted a third quarter profit which was a whopping 99% drop in earnings compared to a year-ago. Dell, the world's second largest maker of personal computers, reported a higher quarterly profit, but provided a cautious outlook due to a less favorable component pricing environment.

Among major economic news hitting the market during the week, October durable goods orders were sluggish. Also, October existing home sales came in at a 4.97 million annual rate. That is close to the expected 5.0 million rate, and down 1.2% from September's 5.03 million rate.

Other than the above, the November Chicago Purchasing Manager's Index survey on regional manufacturing conditions rose to 52.9 from 49.7 in October, while October construction spending fell 0.8%, with residential spending down 2.0% and non-residential spending up 0.1%.

Executive Summary

For the week, indices registered very good gains. DJIx and S&P 500 closed up by almost 2.9% each. Nasdaq too gained 2.5%. Encouraging comments from Federal Reserve Chairman and Vice-Chairman on two separate days of the week made investors look forward to another interest rate cut in December, 2007.

Crude prices slipping by almost 10% and closing at almost at lowest level in a month also added to positive market sentiment. The economic reports that came out were more or less positive in nature. An upward revision of third quarter real GDP to a very strong 4.9% annual growth rate from a previously reported 3.9% was a strong economic piece of news for the market.

For the year, Dow is up by 7.3%, Nasdaq is up by 10.2% and S&P 500 is up by 4.4%.

Market may rally

 Sensex (19,363.19): The month of November was tumultuous for stock markets across the world.

The Indian markets displayed amazing resilience amid global weakness and the sharp rally on Friday has reinforced the bullish view expressed in recent weeks.

The bullish view and the possibility of a rally to 21,500-22,000 would be intact if the index holds above 18,180.

Else, we could see a test of 16,200-16,300 levels. The long- term positive view would, however, not be affected even if the Sensex were to drop to 16,200-16,300 zone.

Such an event would only delay the eventual progress towards the target zone of 21,500-22,000 and would not negate the positive view.

Going by the chart patterns, there is a fair chance of the rally gathering steam and the Sensex could hit this target zone soon.

The price action in the next few weeks would hold the key and would provide clues about what is in store. Till such time 18180 is not breached, a quick and sharp move to the target zone would be the favoured view.

Nifty (5765.5): After a sharp rally on Monday, the index was confined to a narrow trading zone during the best part of the week.

The sharp spurt on Friday is indicative of the start of the next leg of the rally. A quick and decisive overhaul of the earlier high of 6012 would confirm the resumption of the bullish trend.

The market action during the week has not negated the bullish view featured in the recent weeks. The index is on course to move to the target zone of 6400-6500.

A close above 5775 would be an early sign of strength and a close past 6012 would provide further momentum to the rally.

It would be safer to avoid chasing momentum stocks and investors may look to buy fundamentally sound stocks that have corrected recently.

CNX IT Index (4431): This index has taken a drubbing in the recent months. The fall was arrested at the recent low of 4141 which is just a shade below the crucial 61.8 Fibonacci retracement of the rally from 3193 to 5857.

The bounce from this crucial support zone and the price pattern in the recent weeks indicate that a bottom of some consequence has been established at 4141.

The occurrence of a classic positive divergence between the price action and the 14-day RSI is another factor favouring an uptrend.

The immediate resistance is at 4750-4800 range and the major target cum resistance zone is at 5100-5200.

Short-term support is at 4300-4350. Stop loss for long positions may be placed at 4240. Keep an eye on software biggies as they could move up smartly in the short-term.

Key pivotals:
Sterlite Industries (Rs 1032): This is one of the top performing stocks from the metals space. After a brief correction in the past few weeks, the next leg of the uptrend appears underway.

The outlook is bullish and a move to Rs 1250-1300 appears likely. The bullish view would be valid as long as the support at Rs 876 is not breached. Have a stop loss at Rs 870 for long positions.

DLF (Rs 944): The stock price moved in line with expectations and the sharp rally on Friday indicates that the upward move has gathered momentum.

The share price is on course to move to the target zone of Rs 975-980 mentioned last week. Have a stop loss at Rs 870 for long positions. Long term investors would find opportunities to exit at or beyond Rs 1100.

Wipro (Rs 460): The steady downward move over the recent months has been arrested at the recent low Rs 428.

A classic "double bottom" pattern appears to be in place. The stock could bounce to the immediate target zone at Rs 520-525 range.

An overhaul of this target zone could result in a long term trend reversal and could result in a rally to Rs 625-650. The stock has to sustain above Rs 420 for the bullish view to be in force.

Stock of the week:
Voltas (Rs 241.1): The stock is in a long-term uptrend and appears to be headed towards Rs 275-280 range in the near term.

Long term investors may find exit option at Rs 330-350 levels. The stock may be bought at current levels and weakness with a stop loss at Rs 221.

Though a close below Rs 221 would impart short term weaknesss, it would not negate the long term bullish view. The stock has to close below Rs 192 for the long term bullish view to be invalidated.

Via DNA

Weekly Technical Analysis

The Nifty ended the week with a gain of 2.8 per cent (154 points) at 5763. The index moved in a range of 187 points, from a high of 5783 to a low of 5595. It was, however, was down 2.3 per cent (138 points) last month.

 

The Nifty ended above its short-term (20 days) moving average. The short-term moving average is currently above the mid-term (50 days) moving average, which is a positive sign. The index is likely to find significant support around 5735 (short-term) and 5525 (mid-term) levels in case of any weakness.

 

On the upside, the index may rally upto 6000.

 

The index is likely to face resistance around 5835-5855-5880 this week, while the support would be around 5690-5670-5645.

 

The Sensex consolidated in a narrow range of 541 points last week,compared with a swing of 1,700 points in each of the previous two weeks. The index touched a low of 18,884 and then rallied to a high of 19,425, before settling with a gain of 2.7 per cent (510 points) at 19,363. However, the index ended the month (November) with a loss of 2.4 per cent (475 points) at 19,363.

 

Unlike Nifty, the Sensex continues to have a negative bias as long as it stays below the 19,500 - 19,800 band. Only if the index is able to cross 19,800 convincingly shall we may see it rally to record levels.

 

On the downside, the 18,600 level continues to be crucial as sustained weakness below this level could see the index dip to 17,000 - 17,300 levels.

Traders Corner

Certain candlestick patterns do not explicitly signal a trend reversal but only give an indication of whether the prevalent trend could halt or reverse. The bullish and bearish engulfing candlestick patterns belong to the former category while dark cloud cover (DCC) and piercing patterns fall in the later.

A DCC pattern is formed with two candles. The first candle is white and the second candle is black forming the 'dark cloud' that hovers ominously threatening the prevalent up-trend. Needless to add, the DCC pattern occurs near the top of an up trend.

The second candle in the DCC pattern gaps upward and then moves down, some way within the body of the first white candle but it does not cover the first candle entirely. If it did so, it would then get labelled as a bearish engulfing candle. The extent of penetration within the body of the first candle determines the strength of the pattern. When the second candle moves more that half-way within the body of the first candle, it implies that a trend reversal is imminent. Dark clouds (second black candle) that move less that half-way within the first candle can turn out to be a false alarm or minor halts within an up trend.

The piercing pattern is the inverse of the DCC pattern. While dark cloud covers occur towards the end of an up-trend, piercing patterns occur towards the end of a down trend and signal the possibility of a trend reversal from that juncture.

This pattern is made up of two candles as well. The first candle should be a long black candle as it would be part of the down trend. The second candle would gap downward and then move higher well within the body of the second candle. Again, the extent of the penetration determines the strength of the pattern.

A penetration that exceeds 50 per cent of the first candle's body should be a more reliable signal of a trend reversal

Via BL

Aegis Logistics: Buy

Investment with a two-three year perspective can be considered in the stock of Aegis Logistics, a leading player in oil and gas logistics. Established in the business of handling, storage and distribution of oil, chemicals and petroleum products, Aegis appears well-placed to benefit from the expanding business opportunities in the oil and gas space. Its presence in autogas retail also holds promise, given the rising oil price scenario.

 

An expansion in the liquid logistics capacity, a strong presence in Mumbai and the company's foray into service contracts with oil marketing companies suggest potential for ramping up revenues. At the current market price of Rs 228, the stock trades at a PE of about 12 times its trailing 12-month earnings. Investors, however, can buy the stock in lots given the broad market volatility.
Liquid logistics

 

Aegisprovides supply chain services to importers and exporters of petroleum products and chemicals. With a strong presence in Mumbai and plans to expand base across other ports, Aegis could gain considerably from the increasing demand for liquid logistics. Its three-pronged strategy of expanding across both existing and new capacity appears promising.

 

One, Aegis' plan to strengthen presence in Mumbai (with the acquisition of new facilities) holds potential given the port's location. Two, expansion to other locations is likely to help Aegis establish a pan-India presence. Notably, Aegis has acquired land in Haldia and Mangalore for setting up facilities in future and plans to extend its presence to Chennai and Kandla also. Besides, the company's Kochi facility (slated to commence operations by March 2008) also holds potential. Three, its foray into service contracts with oil marketing companies such as Mangalore Refinery and Petrochemicals and Bharat Petroleum Corporation, although insignificant in terms of revenue contribution now, could turn significant in five-six years.
Autogas foray to drive growth

 

The gas-trading segment of Aegis, which involves import and distribution of liquefied petroleum gas (LPG) from Saudi Arabia appears to offer good potential given the firming oil-price scenario. Further, the favourable cost economics of autogas over petrol and the increasing availability of LPG variants of cars in the market offer opportunities, given Aegis' presence in autogas retailing. Notably, it intends to scale up the number of autogas dispensing stations from the current 22 to over a 100 in the next two years.

 

This expansion with a focus on Tier- II cities will be predominantly franchise-based, thus helping the company expand presence without significant incremental investment. Further, gas storage capacity could also expand with the acquisition of Hindustan Aegis LPG unit, pending court approval (expected by March 2008).

 

For the quarter ended September 2007, Aegis reported a 62 per cent growth in earnings on the back of a 43 per cent growth in revenues. Operating profit margins dipped marginally to about 13 per cent. On a segmental basis, the gas terminal division contributed to about 85 per cent of revenues while the liquid terminal division made up for the rest. However, the latter, owing to higher operating margins, contributed about 54 per cent of the bottomline.
Concerns

 

Aegis' earnings stand exposed to any volatility in gas prices. Any fade out in the market appeal for LPG could pose a risk to the company's revenue stream. Further, given the high gestation period of its expansion plans, the full benefits of expanded capacity (Mangalore and Haldia) are likely by FY-11 only. Besides, any delay in expansion plans could affect the company.

Pratibha Industries: Buy

Diversification into new segments within infrastructure, backward integration and strategic tie-ups make Pratibha Industries a good investment option among the mid-sized infrastructure players. These moves have improved the earnings visibility of the company compared to what was prevailing at the time of its IPO in February 2006. At the current market price of Rs 324, the stock trades at nine times its expected earnings for FY-09. Investors with a two-three year horizon can consider exposure to the stock.
De-risking without losing focus

 

Pratibha derived 70 per cent of its revenues from water management projects when it made its IPO; but it has rapidly diversified its area of operations. Of the Rs 2,300-crore order book now, about 52 per cent comes from water projects, while urban infrastructure accounts for about 40 per cent.

 

Going by the nature of its bids, it is evident that the company would continue to play to its strengths in managing water projects. Its long-term contracts such as the one which involves public private partnership with a local municipality for water projects, not only indicates its focus on the segment, but also its early initiative in the PPP model for such projects.

 

While Pratibha has a minor presence in road projects (intra-city), it has stayed away from inter-city road projects that have been the major revenue driver for similar sized peers. As the National Highways Authority of India (NHAI)-awarded road projects require a chunk of capital to be locked in, Pratibha appears to have consciously avoided bidding for such projects and instead has focused on relatively high-margin segments such as water and urban infrastructure.
Strategic tie-ups

 

Pratibha has entered into urban infrastructure through long-term tie-ups with global players. In the tunnel segment, for instance, it has partnered OSTU STETTIN of Austria, one of the leading players in tunnels. It has similar tie-ups with other global players for urban projects such as car park facilities and airports. The ramp up in urban infrastructure orders procured over the last one year indicates that Pratibha has chosen the right partners to qualify technically.

 

To pay more attention to this sector without losing focus on the water segment, the company has incorporated Pratibha Infrastructure, a wholly-owned subsidiary that would explore opportunities in the urban space.
Dual benefit

 

At the time of raising IPO funds, one of Pratibha's objectives was to have its own SAW pipe division. The facility, which has a capacity of 92,000 tonnes of spiral welded pipes, commenced production last quarter. It is also planning a coating plant to be commissioned before the close of FY-08.

 

Apart from supplying pipes for its own water-related projects, the above facility would be able to cater to the oil and gas industry. As a move towards this, the company has sought certification from the American Petroleum Institute (API); this would enable the company's pipes to be eligible for supplies to oil and gas EPC contracts. Thus, while the backward integration is likely to provide cost benefits, successful foray into pipes business may add to revenues. Profit margins could also improve as pipes offer lucrative margins.

 

Pratibha has so far managed a healthy operating profit margin in the 12 per cent range. The last quarter however saw a sudden spike perhaps attributable to a change in business mix. Interest cost has increased over the last quarter on the back of an expanding order-book. Volume growth has however, ensured that interest coverage is adequate.

 

The company's planned capacities for saw pipes have undergone an increase since its original plan during the IPO. In this context, the company has approved plans for raising further funds through foreign currency convertible bonds (FCCBs).

 

Should this materialise, one may see debt levels increase or an expansion in the equity base, at a later stage. However, if the company sustains its current earnings growth (58 per cent CAGR over the last two years), earnings should grow at a reasonable pace despite higher interest obligations or a larger equity base.

Maruti Suzuki: Buy

Investors with a two-three year perspective can consider fresh exposures to the Maruti Suzuki stock at the current price of Rs 1,012. The stock, which now trades at around 16 times trailing 12-month earnings, is among the least expensive from the index basket and has cooled off considerably from its 52-week-high of Rs 1,252 recorded a month ago.

 

The company's strong sales numbers in a backdrop of higher interest rates, its market leadership position in the compact car segment, capacity expansions and improved product mix in the A2 (compact) and A3 (mid-size) segments are the key positives that lend visibility to its earnings prospects. Any further dips in the stock price related to the broader markets can also be used to step up exposure.
Strong growth

 

The company has reported a 30 per cent growth in net sales for the first half of 2007-08, backed by a 19 per cent growth in volumes and 9 per cent growth in realisations. Growth was driven by a 22 per cent expansion in the A2 segment (Alto, Wagon R, Zen Estilo, Swift) and a robust 68 per cent increase in the A3 segment (Esteem, SX4). Overall, the company's market share in the passenger car segment increased by 2.1 per cent and stood at 54.8 per cent for the first half of the year.

 

The improved product mix in both these segments, helped by new launches such as the Swift Diesel and the SX4, coupled with aggressive marketing initiatives targeted at different consumer segments, such as 'Wheels of India' for State Government employees, 'First Class Offer' for Railway employees, 'Power Deal' for NTPC staff and 'Smile India' campaign by the company, have boosted sales growth.
Margins

 

Increase in raw material costs, higher promotion and marketing expenses, lower initial margins on new, higher-end launches such as the Swift diesel and SX4 and higher import content for the Swift diesel have led to subdued margins in the recent quarter.

 

Operating margin slipped by 0.80 percentage points to 13.1 per cent on a year-on-year basis. However, this has been offset by higher volume growth. Net profits grew by 27 per cent, year-on-year, despite the slippage in margins.

 

To increase localisation of its diesel engine components, the company recently entered into a joint venture with Magneti Marelli, a subsidiary of the Fiat group, to produce electronic control units for diesel engines. Production is expected to begin in end 2008.
Capacity expansions

 

The demand for the Swift, Swift Diesel and the SX4, currently being manufactured at the Manesar facility, has already exceeded supply. The plant, which has a capacity to manufacture one lakh units per annum, is presently working at 120 per cent capacity. The company is scaling up capacity to 2,00,000 units by FY09 and 3,00,000 units by FY10. It is also making further investments in the existing plant at Gurgaon for capacity expansion and for setting up a new engine shop. The company has already spent Rs 600 crore in the first half on capex and will incur a capex of Rs 2,000 crore by the end of this fiscal.
Product Launches

 

The changes in Maruti's product portfolio over the last year or two has made it the only player to be present across all price points, starting from Rs 2 lakh (Maruti 800) to around Rs 5 lakh (Swift). Besides the Swift and SX4 among the new launches, the fuel-efficient LPG version of the Wagon R called the 'Wagon R Duo', has also met with a positive response.

 

Going forward, the company is expected to launch a new compact segment car 'A Star' in the second half of FY09. The 'A Star' will primarily be an export model and will be launched in India in the 'premium compact' segment with a price range of Rs 3.5-5 lakh. 50,000 units of A Star will be contract-manufactured for Nissan while another 50,000 is expected to be sold in the domestic market. About 1,00,000 units will be exported to Europe under the Suzuki label.

 

This, coupled with the sedan version of the Swift and a new-look Zen Estilo, is also expected to contribute to volume growth in the next two years.
Expanding Export market

 

Exports, which were primarily to Europe, were discontinued in FY06. While the 'A Star' is being developed to cater to the European export market, the company has used the interim period to scale up export of models such as the 800, Alto and Zen to other countries such as Indonesia, Chile, Egypt and Sri Lanka. This strategy seems to have paid off with Maruti obtaining a 51 per cent growth in exports in the first half year over the same period last year. From I lakh units of the 'A star' initially, the company expects to double its exports to Europe in 2010.
The 'Rs 1 lakh car' effect

 

Though the stock has been dogged by concerns about a dent in market share from the planned Rs1 lakh car, Maruti appears well-placed to counter a competitive threat. The only model that can be affected by the Rs 1 lakh car is the Maruti 800, which currently contributes under 10 per cent to volumes. The 800 itself could be used as the platform to develop a car that will compete with the car from the Tatas. This platform will give the company pricing power to take on a cheaper car as additional fixed costs may be limited.
Concerns

 

The prevailing capacity constraints for Swift and SX4 could dampen sales volumes. New launches in the same segment, such as the Spark from General Motors and i10 from Hyundai, coupled with any new launches/re-launches from the Tata-Fiat stable, could pose stiff competition. Besides, small cars to be launched by Honda and Toyota in 2011 at the premium end of the compact segment may also eat into Maruti's market share in the coming years. Possible increases in raw material prices and increased interest and depreciation costs due to ongoing capacity expansion could exert pressure on margins over the next two years.

Bartronics India: Buy

Investors with a one to two year perspective can buy the shares of Bartronics India, considering its strong business prospects and reasonable valuations. At the current share price of Rs 214, the stock trades at about 16 times its current earnings and 12 times its estimated earnings (on fully diluted equity) for 2008-09.

 

In the light of the growth being experienced by Bartronics in its automatic information and data capture (AIDC) business, and more recently its smart card business, there may be scope for capital appreciation. The company derives 50 per cent of its revenues from Indian sales, 30 per cent from the US and the rest from countries such as Singapore and Malaysia.

 

Bartronics was primarily in the business of selling products and solutions for data capture in the areas of logistics and inventory management, time and attendance management and asset tracking operations. It has now broad-based its AIDC offering to services such as barcoding, biometrics, radio frequency identification and radio frequency data communications and electronic article surveillance. This signalled a move up the value chain and has enabled the company to have a stronger client penetration in India, South-East Asian countries and the US.

 

In AIDC, the company is well placed to capture a significant share of manufacturing clients, both in India and abroad. The boom in organised retail in the country also offers opportunities for scaling up revenues.

 

The smart card business also may hold promise, with the company starting its own manufacturing facility, with opportunities in areas such as SIM cards, identity cards, credit cards and social security. Bartronics appears well placed to capture a reasonable slice of the SIM cards market. It is also doing pilot studies with a few banks and is eyeing the opportunity of the government rolling out national social security cards. From 4 million cards currently, the company targets 40 million smart card sales by March 2008. It has subsidiaries in Singapore and the US, so located to cater to the local markets in South East Asia. The Singapore facility has already started to contribute to profits. The key risks to our recommendation are any strain on margins in the smart card business and competition from players like CMC in the RFID space. Any direct foray by the company's principals, with a view to seeking an entry into the Indian market, is also a risk.

Kotak Mahindra Bank, Titan Industries, Salora Intl, 3i Infotech, Colgate Pamolive

Kotak Mahindra Bank
CMP: Rs 1,122.35
Target Price: Rs 1,363

Motilal Oswal Securities has initiated coverage on Kotak Mahindra Bank with a buy rating and a price target of Rs 1,363. "Kotak (Bank) is aggressively building up its banking franchise, with focus on affluent customers and retail services. Its asset management business should see exponential growth," the Motilal Oswal note to clients said.

 

"Though its insurance business has been losing market share, we expect better utilisation of Kotak's distribution strength to change this. We believe KMB deserves premium valuations, given the strong growth expected across its businesses, fast traction in earnings, and quality management," the note added.

 

Titan Industries
CMP: Rs 1,531.70
Target Price: Rs 1,850

 

Merrill Lynch has initiated coverage on Titan Industries with a buy rating and a price target of
Rs 1,850, terming it a "high growth domestic consumption story." "We expect Titan's watch business to benefit from mix up-trading and distribution moving more towards high margin channel of 'World of Titan'".

 

"In jewellery, we expect volume growth to remain explosive at around 40% as Titan forays into second-tier cities with the new value format "Gold Plus"," the Merrill note to clients said. "In the premium "Tanishq" format, larger stores and higher efficiencies should drive margins. Lastly, we expect the new venture of prescription eyewear to take off and account for 4% of EBITDA (earning before interest, taxes, depreciation and amortisation) FY10," the note added.

 

Salora Intl
CMP: Rs 223
Target Price: Rs 312

 

Parag Parikh Financial Advisory Services has assigned a buy rating to Salora International with a price target of Rs 312. "The company derives 85% of its revenues from the telecom & infocom distribution business and more than 90% of the EBIT (earnings before interest and taxes) from the business of distribution, thus making it a clear contender for a re-rating from a CTV components manufacturer to a full-fledged distributor," the PPFAS note to clients said.

 

"The company has active plans to get into retailing of products that it is already distributing; the modalities of the same will be out very shortly. The company is very well placed to show a topline growth of above 35% for some time in our expectations," the note further said, adding that the recently initiated restructuring of the CTV components business will keep overall profitability intact.

 

3i Infotech
CMP: Rs 134.60
Target Price: Rs 175

 

ICICI Securities (I-Sec) has initiated coverage on 3i Infotech with a buy rating and a price target of Rs 175. "3i Infotech, with a balanced mix of software products and services (~1:1), has differentiated itself from peers by adopting a diversified business model with a strong foothold in high-growth areas.

 

With software services providing stability to revenue stream, products add non-linearity to the overall business model," the I-Sec note to clients said. Additionally, the sharp rupee appreciation, which has baffled the whole software sector, is relatively a lesser concern for 3i Infotech as it derives around 31% revenues from the domestic market and the net dollar exposure is estimated to be less than 10%. Also, 3i Infotech remains comparatively aloof from other sectoral worries such as the subprime issue, impending economic slowdown in the US, wage inflation, attrition," the note added.

 

Colgate Palmolive
CMP: Rs 410.35
Target Price: Rs 482

 

Citigroup Global Markets has assigned a buy rating to Colgate Palmolive with a price target of Rs 482. "Colgate's business has demonstrated strong growth over the eight quarters, with sales growing in excess of 15%. It has gained share in rural areas through its 'Cibaca' brand and has also rolled out innovative toothpaste variants at the higher end, which have gained strong acceptance and helped accelerate growth," the Citigroup note to clients said.

 

"With major capital expenditure behind it, and incremental tax and excise savings from its new plants, cash generation is likely to accelerate. We estimate about Rs 1,230 crore of free cash generation over the next three years, more than two times of what was generated over the previous three years and as such, dividend payout could increase," the note added.

NSE becomes world's top bourse in stock futures trading

National Stock Exchange has elbowed out its South African counterpart to become the world's largest platform for stock futures trade, with a trading volume more than double of its nearest competitor.

 

NSE, bigger than its Indian rival Bombay Stock Exchange in trading volume, is already the world's largest bourse in terms of value of individual stock futures trade.

 

According to the latest data compiled by World Federation of Exchanges, as many as 2.4 crore stock futures contract were traded at NSE in October as against 83.67 lakh at Johannesburg Stock Exchange (JSE).

 

JSE was the world's biggest stock futures trading platform till September, when it traded 5.74 crore stock futures contracts -- nearly four times NSE's 1.77 crore.

 

Stock futures contract is an instrument that allows investors to reap benefits of a stock's performance without actually owning it.

 

In terms of total turnover of all stock futures contract, NSE recorded the highest amount of about 285 billion dollars during the month, which was nearly 20 times its nearest rival Euronext Liffe's 14.6 billion dollars.

 

BSE, the world's biggest stock exchange in terms of number of companies listed, is among the lowest ranked bourses in terms of number of stock futures contracts and their turnover.

 

The BSE witnessed trading of just 587 single stock futures contracts during the month, with a total turnover of just about six million dollars.

 

Via Economic Times

RPL - this is how it was sold

On November 6, RIL sold the largest chunk of 7.18 crore shares, which amounted to 1.60% of RPL and earned about Rs 1,691.48 crore, at an average sum of Rs 235, in the process.

 

This was the single-largest chunk to be unloaded, with the subsequent tranches accounting for less than 1%.

 

After November 6, there was a lull.

 

RIL returned to the markets on November 13 to 16, selling 0.30%, 0.65%, 0.38% and 0.13% RPL stakes, respectively. From November 19 to 23, the shares sold were again less than a percentage point. In this period, RIL sold 0.34%, 0.22%, 0.08%, 0.20% and 0.12% of RPL stake, respectively.

 

What's intriguing is that huge voluminous trades were registered a few days before RIL started selling RPL shares. The whole November saw intriguing trading spikes in the RPL counter.

 

On November 1, the two premier exchanges witnessed frenetic activity as the refinery share recorded an intra-day all-time high of Rs 295 before it ended the day's high-octane trading at Rs 261.85 per share. On that day, the delivery of shares accounted for 4.5 crore. And the character of trading that day was also very different as it ended with an unusually huge wave of deliveries.

 

About 4.46 crore RPL shares were delivered that day. On November 2, the deliveries recorded in the RPL counter in both the exchanges were muted at 1.76 crore share. On November 5, the spike was witnessed again as deliveries pole-vaulted to 3.36 crore and the share price ended at Rs 267.55.

 

While some demand was witnessed in the counter, it should be noted that there were sellers who matched the wits of buyers by unloading shares for delivery instead of squaring off, as in day trading.

 

Via DNA

Mumbai urban land ceiling act repeal will ease up space shortage

India's most important city finally has a good shot at urban renewal. On Thursday, lawmakers in Maharashtra, of which Mumbai is the capital, repealed the three-decade-old Urban Land Ceiling Act, voiding the state's claim on as much as 500ha (1,234 acres) of private property.
Analysts say the actual amount of vacant land held in violation of the law, although not identified by the government for acquisition, may be 10 times that figure. If all this land becomes available for redevelopment, the city's acute space shortage will surely ease up. Tenants in Mumbai offices now pay higher rents than their counterparts in the financial districts of London, New York and Tokyo.
The full impact of the change may take a while yet.
"The land needs to be cleared up and approvals have to be taken for development before actual construction can take place," says Anshuman Magazine, managing director for South Asia at CB Richard Ellis Group Inc., the world's largest commercial real estate broker.
It is, nonetheless, a change with far-reaching consequences. The Indian government has an ambitious plan to turn Mumbai into an international financial centre. That will require everything from new office towers and apartment buildings to schools, markets and art galleries. All of that has to be accommodated in a city built on a narrow peninsula protruding into the Arabian Sea with limited land resources. Freeing up the property market will go a long way in making Mumbai a financial centre that can compete with more established rivals.
A lousy law
The Urban Land Ceiling Act was enacted by Parliament in 1976 during a 21-month period of emergency rule by then prime minister Indira Gandhi, who suspended civil liberties, put opposition leaders in prison and muzzled the press. The legislation said that any landowner in possession of more than 500 sq. m of property in a class A city, such as New Delhi and Mumbai, would have to surrender the excess property to the state so that the urban poor could be rehabilitated.
However, the law also specified the escape routes. It cited a number of conditions under which the government could be lenient in applying the ceiling, provided landlords ask to be exempted. And thus began a sordid chapter in wholesale bribery. The state acquired very little land; and where owners failed to protect their property through bribery, they went to the court. The real estate market froze up. Rents rose. Good land remained vacant or underutilized.
Mumbai's pricey loss
The poor and the middle class lost out on affordable housing. Of the 19 million people, who reside in Mumbai and its suburbs, half live in slums. In 1999, almost a decade after India began opening its economy and started correcting the mistakes of its socialist past, the federal government took a bold decision to repeal the land ceiling law.
Once the government had won parliamentary approval for the plan, it advised the states to follow suit and change their own laws accordingly. Most states acquiesced; Maharashtra, and a few others, held out. To get the laggards to fall in line, the government in New Delhi dangled a carrot in front of them. States were told they could tap Union government funds to rebuild their creaky urban infrastructure, provided that, among other things, they removed the draconian land ceiling law from their statute books.
Long overdue
The repeal of the land ceiling law in Maharashtra was "long overdue," says Magazine of CB Richard Ellis.
The restrictive legislation choked Mumbai just as it was straining to expand. Mumbai, which looked both listless and hopeless even until the late 1990s, began its comeback after the Indian economy, and the stock market, came out of slumber in 2004. This year, a survey of global centres of commerce by MasterCard Inc. put Mumbai in 10th place—ahead of Shanghai, Hong Kong, Sydney, Singapore and Zurich—in "financial flows".
Already, the National Stock Exchange, based in Mumbai, is the world's second most active market for single-stock and index futures trading. The cash segment of the equity market has traded an average $4 billion (Rs15,920 crore) worth of shares daily this year, compared with less than $800 million five years ago. The currency market, too, is in the midst of an unprecedented boom. India's daily foreign exchange turnover in April was $34 billion—almost a fivefold increase since 2004, the Switzerland-based Bank for International Settlements noted in a recent study.
Bollywood, Mumbai's movie industry, is also doing much better now than a few years ago. All this means more business and jobs for Mumbai, and greater pressure on the city's cramped real estate. Even tycoon Mukesh Ambani has had trouble this year with the ownership of the land, where he wants to build a house. And Ambani is the richest resident of Mumbai—or rather, one of the wealthiest denizens of the planet—with a net worth of about $49 billion, according to Forbes magazine.
That should tell you how tough it is for ordinary millionaires—the poor investment bankers—to find decent accommodation in the city. Maybe now they will have better luck.

 

Via Mint

Punj Lloyd's subsidiary Sembawang wins major Singaporean contract

Punj Lloyd's wholly owned subsidiary, Sembawang Engineers and Constructors, has won a major contract worth 463 million Singapore dollars for architectural, civil and structural work at the proposed Bayfront MRT station in Marina Bay in Singapore.
The Land Transport Authority of Singapore awarded the contract to the company. It is one of the first packages of construction works to be awarded at the planned 4.3 km downtown MRT Line in Marina Bay.
The Downtown Line 1, which will have six stations, is a critical transportation hub designed to serve workers, residents and visitors in the Marina Bay area. It will feature new icons such as the Marina Bay Sands Integrated Resort, the Marina Bay Financial Centre and Gardens by the Bay.
According to the contract, Sembawang E&C will be constructing the Bayfront station which is key to the Downtown Line as it serves the mega Marina Bay Sands Integrated Resort. The construction company will be responsible for the underground construction of Bayfront station and two pairs of tunnels for Downtown Line Stage 1.
The Downtown Line is in the heart of Marina Bay and the Bayfront station is a key factor contributing to the success of the development in the Marina Bay area. Bayfront will be one of the first stations to open in the Downtown Line. Looking at the pace of the project construction work will go round the clock for the completion of the project in time.

Weekly Close:Gagged in a tight range this week !

As expected this was volatile week for market..thought the volatility ended it did so with good gains recorded on the last day. The credit goes to the expectation that the Fed will cut rates. The rally this time was driven by domestic funds and retail invesors. Foreign funds have been sellers this week at least till Thursday.

 

US markets saw some wild swings this week. The news on the economy side was negative but the markets took heart from the fact that greater the negative news.. more quickly will the Fed cut rates. The data is actually pointing to that. The announcements are not good.

 

Asia had a positive week as well helped by US. Money waiting on sidelines to enter is gettting impatient and some level of buying in mid caps was witnessed. Many of our favourite counters got bid up and that is what we have been saying for quite some time.

 

Sensex and Nifty ended up by 2.7%; BSE Bank Index up 4.5%; HDFC up 10%; PNB up 4%; SBI up 2.5%; BSE Auto Index up 3.7%; Bajaj Auto up 6%; M&M & Tata Motors up 3%; VSNL up 19%; Maruti up 7%; HCL Tech up 5%; BHEL up 5%; BSE Metals Index up 6.5%; Sterlite up 16%; Nalco 10%; Ispat up 10%;Realty Index up 8%; IT index seems to have bottomed out..all front line tech stocks were up 4%.
BSE Mid cap Index up 4.8%, Eveready up 31%, WWIL up 29%, DCB up 26%, BSE Consumer durables up 5.3%.

 

Among our stocks we saw Solar explosives explode. The stock ended up 43%. We had detailed research on this company. The company is the largest explosive manufacturer. Conditions have improved with a shake out in the Industry. Demand from Private sector will bouy demand for its products and this one is the best placed for that. Its expansions will be kicking in any time now.

 

Another company we covered this week was Garnet construction. This company has real estate projects based out Panvel near the upcoming International airport. That a Rs 1200 cr project in addition to the other properties that it is working on. Looks like that this one is getting on to the rating spree.

 

Balkrishna Tyres has given a break out of sorts and we have been expecting that. This is one undervalued company which has been waiting to get valued. R&D is the strength of this Off the Road Tyre manufacturer. Thats the competitive advantage which is sustainable. Other big positive is that it is only focussed here where as the World biggies dont focus on this given that it is a small niche segment for them.

 

Another big gainer this week was Eveready. We have been positive on this one for quite some time now. The stock has finally started to deliver. Zinc has cooled off though for the last couple of days there has been a bounce of sorts here.
We had some cautious notes as well. There was one on CESC and another on ITC. Read the notes to get insights into them. They are being valued on sum of parts basis but we believe that fundamental valuations cannot be justfied but theories and expectations too much in advance.

 

Technically Speaking: Nifty remained stuck in a broad range of 5500-5750 for the most of the week and has managed to finish the week above this range. Market continues to remain scrip specific although Friday's close gives a hint of possibility that sideways correction could be over. With helpful local triggers or global cues we could head for next resistance on the Nifty 5925-6005 on the Nifty. Adhere to strict stop loss and remain invested.

 

Fundamentally Speaking: We are headed into a December. Activity is normally low as Fund managers go on holiday during Christmas. The US fed rate cut is expected on December 11th. That will quickly get discounted. However expectation is that newflow surrounding the economy will not be good. We believe that rising from current levels for the Sensex is unlikely to be easy. Banks is a sector which could potentially see bouyancy in a period of expectation of lower interest rate period ahead

Weekly Newsletter

Q2 GDP slows to 8.9%
India's economy slowed a little in the second quarter of the current fiscal year due largely to a slowdown in the manufacturing sector, as a series of monetary tightening steps and a steep rise in the rupee started taking some toll on local demand. The GDP grew by 8.9% in the quarter ended September as against the consensus estimates of 8.7%. But, this was lower than the first quarter's expansion of 9.3% and a 10.2% growth in the same quarter last year.

 

The farm sector growth came in at 3.6% as against 2.9% in the same quarter last year, and 3.8% in the first quarter. The manufacturing sector grew by 8.6% versus a strong 12.3% in the corresponding quarter a year earlier. In the first quarter, manufacturing sector growth stood at 11.9%. Expansion also slowed in the service sector, which grew by 10.2% compared to 11.8% in the second quarter last year.

 

Mining sector growth shot up from just 3.9% in the July-September quarter of last year to 7.7% this year. The other economic activities which registered significant growth in Q2 of 2007-08 were 'electricity, gas & water supply' at 7.3%, 'construction' at 11.1%, and 'community, social and personal services' at 7.8%.

 

The GDP growth dipped below 9% for the first time in three quarters, but economists said that the Reserve Bank of India's full-year forecast of 8.5% should be met comfortably. Asia's fourth-biggest economy grew by 9.4% in the fiscal year ended March 2007, its strongest rate in 18 years, and the central bank expects expansion to slow to 8.5% this year. Growth has averaged 8.6% a year in the past four years.

 

Maharashtra scraps ULCRA

 

After several months of dithering and dilly-dallying, the Maharashtra Assembly cleared the repealing of the Urban Land Ceiling and Regulation Act (ULCRA), paving the way for the state to get central assistance to some key infrastructure projects. The move will also lead to the release of vast tracts of land in the state, especially in the financial capital Mumbai.

 

According to rough estimates, 15,000-17,000 acres of land will get unlocked following the move. Across Maharashtra, over 75,000 acres of land will be released. Some experts also said the repealing of the three-decade old law will help soften spiraling property prices in Mumbai, as more space will be available for development. "I expect some softening in prices," HDFC Chairman Deepak Parekh said. But, the jury is still out on whether this will indeed be the case.

 

Meanwhile, shares of real estate companies with exposure to Mumbai and other companies with substantial land bank in the city shot up amid optimism that the move will lead to faster clearances and more land being available for development. Akruti City, Orbit Corp, HDIL, Peninsula Land, Godrej Industries, Century Textiles and Bombay Dyeing were among the biggest gainers post the announcement.

 

The Vilasrao Deshmukh Government was keen on getting the assembly's approval to repeal ULCRA as the law was a big stumbling block in obtaining central aid for a slew of key urban infrastructure projects. Without repealing ULCRA, the state could not have accessed funds from the Rs110bn Jawaharlal Nehru National Urban Renewal Mission. The Centre had set March 2008 as the deadline for the abolition of the act.

 

RBI releases report on Trend and Progress of Banking in India

 

The Reserve Bank of India today released its Report on Trend and Progress of Banking in India, 2006-07. This Statutory Report provides a detailed account of policy developments and performance of commercial banks, co-operative banks and non-banking financial institutions during 2006-07. The Report also presents a detailed analysis of the Indian financial system from the financial stability viewpoint.

 

The Report highlights that the major challenge for banks in India in current times is to mobilise enough resources for meeting the demands of a growing economy. Most of business of banks in India is still concentrated in a few urban centres. To mitigate this problem, since 2006, opening of new branches for any bank is approved by the Reserve Bank only on condition that at least half of such new branches are opened in under-banked areas as notified by the Reserve Bank. Many banks now find that the branches in semi-urban and rural areas are also commercially viable. The Report records that there are some States where the credit-deposit ratio is observed to be low. Already some area-specific action plans for accelerated financial deepening have been drawn up with full participation of the State Governments, banks and other local development agencies.

 

The Reserve Bank would continue to play the role of a catalyst as well as a coordinator in these initiatives of growing cooperation between the States and the banking system. The Report further notes that there remains huge potential for growth in small centres and States with low credit-deposit ratios. The challenge going forward is to increase banking penetration further. Banks, therefore, need to expand their outreach to hitherto under-banked areas/States by re-focussing their strategies and using appropriate technology and delivery channels. Information technology is critical to minimising transaction costs. At policy level, the Reserve Bank, in recent years, has also focussed on democratisation of the financial sector with the aim of ensuring hundred per cent financial inclusion. The Reserve Bank has also made a beginning to enhance financial literacy and impart financial education to enable vast numbers of new entrants into employment and higher incomes to better manage their finances in a rapidly marketising financial sector.

 

As noted in the Report, there is also a need for the banking sector to increase the flow of credit to agriculture and small scale industries. To address this issue, the Reserve Bank has at policy level already modified the definition of the priority sector in April 2007. Priority sector is now restricted to advances to highly employment intensive sectors such as agriculture, small industry, educational loans for students and low cost housing.

 

The Report observes that to raise capital from the market continuously to sustain their operations in a fast growing economy is a challenge for banks. They also need to be vigilant about maintaining their profitability in future. Banks' net interest margins have come under pressure in recent years. This is the outcome of increased competition and reflects an improvement in the efficiency of the banking sector. However, the impact of reduced margins on the profitability of banks has been disguised by strong volume growth in the last few years. In order to maintain their profitability in future, therefore, banks would have to contain operating costs, apart from searching for non-interest sources of income.

 

In an increasingly global and competitive financial world, a major challenge for banks is to institute appropriate risk management systems to manage such risks and for the Reserve Bank to understand the changing forms of risk and adapt its regulatory and supervisory responsibilities appropriately while maintaining financial stability.

 

Operations and Performance of Commercial Banks
The main points emerging from the analysis presented in the Chapter entitled 'Operations and Performance of Commercial Banks' are:

 

Bank credit growth remained robust for the third year in succession, although there was some moderation. Deposit growth of commercial banks accelerated due mainly to term deposits. Higher net accretion in deposits than expansion in credit, resulted in moderate growth of investment portfolio as well

 

Net profits of scheduled commercial banks increased on the back of rise in interest income and containment of operating expenses

 

Non-performing assets ratio, both on a gross and net basis, declined further

 

The capital to risk-weighted ratio of SCBs was sustained at the previous year's level despite strong growth increase in risk-weighted assets emanating largely from credit expansion

 

Consequent upon the amalgamation of 147 RRBs into 46 new RRBs, sponsored by 19 banks in 17 States, the total number of RRBs declined from 196 to 95 as at August 31, 2007 .

 

Developments in Co-operative Banking
The major points emerging from the analysis of balance sheets, financial performance and soundness indicators of co-operatives in the Chapter titled, 'Developments in Co-operative Banking' are:

 

Assets of urban co-operative banks (both scheduled and non-scheduled) increased moderately during 2006-07.

 

Net profits of scheduled UCBs declined during 2006-07 in contrast to an increase in the previous year mainly on account of increase in provisions, contingencies and taxes

 

Asset quality of UCBs improved significantly during 2006-07
In the short-term structure of rural co-operative banks, while the operating profits of StCBs declined during 2005-06, their net profits increased significantly mainly on account of substantial decline in provisioning. The balance sheets of DCCBs expanded moderately. Their profits witnessed a sharp decline. During 2005-06, total profits earned by profit-making PACS increased, while the losses made by loss making PACS declined.

 

In the case of long-term structure, the operating profits of state co-operative agriculture and rural development banks (SCARDBs) registered a sharp rise

 

Asset quality of StCBs, DCCBs and SCARDBs declined, while that of PCARDBs improved significantly

 

The SHG-Bank linkage programme continued to make significant progress as 0.6 million new SHGs were credit linked by the banking system during 2006-07 taking the cumulative number of SHGs credit linked to 2.86 million.

 

Non-Banking Financial Institutions
The Chapter outlines major policy developments and analyses the business operations and financial performance of financial institutions (FIs), non-banking financial companies (NBFCs), and primary dealers (PDs).

 

The main points emerging from the analysis in this Chapter are:

 

Financial assistance sanctioned and disbursed by FIs continued to expand during 2006-07. While sanctions grew at a lower rate as compared with previous year, disbursements witnessed a sharp rise

 

The combined balance sheets of FIs during 2006-07 expanded at a high rate as compared with the previous year. On the asset side, loans and advances continued to expand, albeit with some moderation

 

While non-interest income of FIs increased significantly during 2006-07, the operating expenses of FIs registered a decline, resulting in a sharp rise in operating profits.

 

The capital adequacy ratio of FIs continued to be significantly higher than the minimum prescribed. Asset quality of FIs improved during the year.

 

Total assets of NBFCs (excluding RNBCs) expanded at a higher rate during 2006-07 as compared to 2005-06

 

Financial performance of NBFCs turned around during 2006-07. This was entirely on account of sharp rise in fund based income, which offset the sharp increase in operating expenditure and financial expenditure

 

Asset quality of various types of NBFCs as reflected in the various categories of NPAs (sub-standard, doubtful, loss) remained broadly at the previous year's level

 

The increase in income of RNBCs during 2006-07 was more than the increase in the expenditure, as a result of which the operating profit of RNBCs increased

 

The liabilities/ assets of non-deposit taking systemically important non-banking finance companies (with asset size of Rs. 100 crore and above) (NBFCs-ND-SI) increased during the year ended March 2007 over the previous year

 

The gross NPAs to total assets ratio of NBFCs-ND-SI declined during the year ended March 2007

 

As a result of sharp increase in expenditure, net profits of PDs declined during 2006-07

 

The CRAR of PDs continued to be much in excess of the stipulated minimum of 15 per cent of aggregate risk-weighted assets

 

Financial Stability
The main points that emerge from the analysis of Chapter on Financial Stability are:

 

Financial markets remained orderly during 2006-07, barring some occasions when the money market turned volatile mainly due to large capital inflows and movements in Government cash balances. However, orderly conditions were restored

 

The activity in the money market has witnessed further significant migration from the uncollateralised to the collateralised segment during 2006-07

 

Foreign exchange markets showed a two-way movement during 2006-07

 

Yields in Government securities market hardened during the latter part of 2006-07 and the first half of 2007-08, reflecting domestic developments as well as global events

 

The net mobilisation of resources by mutual funds under equity oriented schemes during 2006-07 declined, reflecting the risk aversion tendency among investors particularly in view of the stock market touching record peaks.

 

The stock markets registered large gains with occasional bouts of volatility due mainly to global developments.

 

Continuing the upward trend during 2007-08, the BSE Sensex closed at an all-time high level of 19976 on November 2, 2007.

 

The volume and value of transactions through RTGS increased manifold

 

Empowered panel approves dual GST

 

The Empowered Committee of State Finance Ministers cleared a dual Goods and Services Tax (GST) - both at central and state level. GST is proposed to be introduced in April 2010. The empowered panel would send its recommendations to the Centre next month after the state finance ministers give their views in writing, group's chairman Asim Dasgupta said. There would be more than one slab of tax for goods, but a single rate for services within the GST framework. At the central level, the rates would be decided by the Union Government. The Centre and the States would attempt to keep them uniform. Set offs would also be available against tax paid on inputs at both central and state levels. Dasgupta said states and the centre will fix their respective GST rates after ensuring their will be no revenue loss from the proposed changes. GST at the state level will subsume as many taxes on goods and services as possible and feasible. However, exact rates at the state and central level would be decided later.

 

FM announces more sops for rupee-hit exporters

 

Finance Minister P. Chidambaram announced more relief measures for exporters hit badly by the steep appreciation in the rupee versus the dollar this year. The Finance Minister announced additional subsidy of 2% in pre-shipment and post-shipment credit to Leather, Marine, Textiles and Handicrafts sectors. The latest interest rate subsidy is in addition to the 2% offered earlier this year. The additional interest rate subsidy is valid till March 31. The Centre exempted storage and warehousing services, specialised cleaning services (fumigation & disinfection) and business exhibition from service tax.

 

The Government also slashed customs duty on polyester staple fibre and polyester filament yarn from 7.5% to 5% and on other manmade fibres from 10% to 5%. Customs duty on intermediates for PSF and PFY - polyester chips, DMT, PTA and MEG was reduced from 7.5% to 5%. On Paraxylene (a raw material for PTA), the customs duty is being lowered from 2% to nil. There is no change in customs duty for nylon chips, nylon yarn, caprolactum, rayon grade wood pulp and acrylonitrile.

 

SEBI amends DIP guidelines for Fast Track Issues

 

Capital market regulator SEBI announced amendments in the Disclosure and Investor Protection Guidelines to enable listed companies faster access to capital through follow-on public issues and rights issues. These companies, subject to meeting certain specific requirements, have been allowed to make 'fast track issues', whereby they need not file draft offer document with SEBI and stock exchanges. Some of the eligibility requirements for Fast Track Issues include an average free-float (non-promoter holding) of at least Rs100bn, a trading history of at least three years, redressal of at least 95% of total investor grievances, and absence of prosecution proceedings or show cause notices against the company or its promoters by SEBI.

 

SEBI also made amendments to allow all categories of investors to apply for Indian Depository Receipt (IDR) issues, subject to at least 50% of the issue being subscribed by QIBs, and the balance being made available for subscription to other categories of investors. The minimum application value in IDR has been reduced from Rs2 lakh to Rs20,000. SEBI also introduced a provision in the DIP guidelines, permitting companies making public issues to issue securities to retail investors at a discounted price not exceeding 10% of the price at which securities are issued to other categories of public. Quoting of PAN in application forms for public/ rights issues has been made mandatory, irrespective of the value of application.

 

Govt okays SBI Rights Issue

 

The Government approved the Rights Issue of the State Bank of India (SBI) to enable the country's largest bank to boost its capital and meet the growing demand for credit in a fast expanding economy. The Government will issue bonds for subscribing to the SBI Rights Issue, Information & Broadcasting Minister Priya Ranjan Dasmunsi said. The issue would be completed within the current financial year, he added. SBI hopes to raise up to Rs180bn before the end of the current fiscal year. The actual number of shares to be subscribed, the total amount subscribed, coupon rate and tenure of the securities, and other modalities will be worked out by the Government in consultation with SBI. The additional growth of the bank due to its increased capital base will also have multiplier effect on the overall performance of the bank, which will gain in terms of its position in the industry, ratings and increased valuation of its stock, besides boosting the economy at large, the Government said in a statement. The transaction will be completed within the current financial year and a Securities Redemption Fund will be created thereafter.

 

Cabinet approves 11th Five Year Plan draft

 

The Union Cabinet approved the draft document of the 11th Five Year Plan (2007-12). The same will now be placed before the National Development Council (NDC). The decision would enable the operationalisation of the 11th Plan in full. The Government has decided to convene a meeting of the NDC on December 19 to approve the 11th Plan. The Planning Commission had cleared the draft 11th Plan document on November 9 with a target of 9% annual GDP growth, up from 7.6% in the Tenth Plan. Among other things, the 11th Plan proposes to increase agriculture growth to 4% from around 2% in the previous plan. It also aims to reduce poverty by 10%, generate 70mn new employment opportunities and reduce unemployment among educated persons to less than 5%. The 11th Plan has also fixed certain important targets which include taking industrial and services sector growth to 9-11% and investment rate to 36.7%.

 

Credit bureau, TransUnion unveil credit score

 

The Credit Information Bureau India Ltd. (CIBIL) and TransUnion announced the development of the CIBIL TransUnion Score. This is the first generic credit score developed for India and will help banking and financial institutions to better evaluate the credit worthiness of their customers. It will predict the likelihood of a customer becoming a defaulter in more than 91 days on one or more lines of credit, including credit cards, personal, home and auto loans within the next year. "By introducing this generic score with TransUnion, CIBIL is helping financial institutions minimize future defaults as well as potentially reduce consumer abuse of the credit system, while allowing access to credit at better terms and conditions for good borrowers," said S. Santhanakrishnan, Chairman of CIBIL.

 

TRAI recommendations for IPTV services

 

The Telecom Regulatory Authority of India (TRAI) released the draft recommendations on provisioning of IPTV services. Telecom service providers having license to provide triple play services and ISPs with net worth of more than Rs1bn can provide IPTV service without requiring any further registration. Similarly, registered cable TV operators can provide IPTV service without requiring any further license. IPTV operators would be permitted to transmit channels in exactly the same form (unaltered) for which the broadcasters have received uplinking/downlinking permission from the Government. The operators should transmit only those channels that have been approved by the Information and Broadcasting Ministry, according to TRAI. The I&B Ministry and the IT Ministry should regulate the content provided using IPTV.

 

Reliance Power gets LoI for Andhra UMPP

 

Reliance Power Ltd., a subsidiary of Reliance Energy Ltd. (REL), received the Letter of Intent (LoI) for setting up the 4,000 MW Krishnapatnam ultra mega power project (UMPP) in Andhra Pradesh. Coastal Andhra Power, the Special Purpose Vehicle (SPV) formed by Power Finance Corporation (PFC), awarded the LoI to Reliance Power, which had emerged as the lowest bidder at a price of Rs2.33 per unit. The Anil Dhirubhai Ambani Group company outbid Larsen & Toubro (L&T) and Sterlite Industries, which had quoted Rs 2.68 per kwh and Rs 4.81 kwh, respectively. Reliance Power has already secured the Sasan ultra mega power plant in Madhya Pradesh, which would be run on domestic coal. The Krishnapatnam project is to be operated on imported coal and would require an investment of more than Rs160bn. Andhra Pradesh will receive 1,600 MW, while Maharashtra, Tamil Nadu and Karnataka will get 800 MW each from the project.

 

Tata Steel announces group recast

 

Tata Steel announced a new organization structure effective from January 1. Tata Steel Group comprises two entities - Tata Steel (including Tata Steel Thailand and NatSteel Asia) and Corus Group Ltd. Ratan Tata, the Chairman of Tata Steel will continue to lead the Strategy and Integration Committee. Jim Leng, B Muthuraman, Philippe Varin, Dr. Tridibesh Mukherjee, Rauke Henstra, Hemant Nerurkar, Koushik Chatterjee and Jean-Sebastien Jacques are members of this committee. A Group Centre has been created for functions that are to be performed with a common approach across the Tata Steel Group. These functions are Technology & Integration, Finance, Strategy, Corporate Relations & Communications and Global Minerals. The executives responsible for these functions will report to the Managing Director (MD) of Tata Steel and the CEO of Corus. Both Tata Steel and Corus entities will have Executive Committees chaired by the MD, B Muthuraman and the CEO, Philippe Varin, respectively. A Joint Executive Committee for Tata Steel Group will meet quarterly to review overall performance. This committee will be co-chaired by the MD of Tata Steel and the CEO of Corus.

 

RIL denies reports on RNRL acquisition

 

Reliance Natural Resources Ltd. (RNRL) shares climbed after a business newspaper reported that the Ambani brothers had resolved their differences over a controversial gas supply agreement. The Bombay High Court has directed the two camps to settle the long-running dispute amicably in four months. The newspaper reported that both sides are believed to have arrived at some concrete proposals, and according to one such plan Reliance Industries Ltd. (RIL) could eventually buy out RNRL. In return, Anil Ambani-promoted Reliance Energy Ltd. (REL) will purchase gas from RIL at a higher price, the financial daily stated. As per the current contract between the two parties, RNRL is supposed to buy gas from RIL at US$2.34 per mmbtu. If the two companies cannot arrive at a common meeting point on all commercial aspects of the gas sale and purchase agreement by February 15, they are likely to return to the court. But, both RIL and RNRL denied that there was any plan, or any talks between ADAG and RIL involving the acquisition of RNRL.

 

Hexaware to probe forex fraud

 

Hexaware Technologies Ltd. announced that its Board of Directors had appointed a special committee to conduct an internal investigation and make recommendations for changes to its foreign exchange management practices. The action was due to certain actively concealed and potentially fraudulent foreign exchange option transactions conducted by one official, Hexaware said. The official, who exercised unauthorised fiduciary powers, was immediately suspended, pending investigation. Hexaware said it will make provision between US$20-25mn to cover any potential exposure as a result of these transactions. Reports suggested that the company had roped in consultant Jamal Mecklai to work with it on minimising the negative impact of the forex transactions. Hexaware is also understood to have deferred its plans for the share buyback till the investigation on the ongoing forex issue is complete.

 

Its raining deals on the street

 

US-based oil & gas giant Chevron Corp. said it was evaluating options on what to do with its 5% stake in Reliance Petroleum Ltd. (RPL), and could even sell the same. Chevron, which has an option to increase its stake in RPL to 29%, may not do so, a business daily reported. "Chevron continues to evaluate its options with its ownership in RPL," Bangkok-based spokeswoman Nicole Hodgson was quoted as saying. "We will provide specific project updates when definitive decisions are made," she added. Reliance Industries Ltd. (RIL) said on Nov. 23 that it had sold a 4% stake in RPL for about Rs40.2bn. After the sale, RIL still holds 70.99% in RPL, which sold stock at Rs60 in an Initial Public Offering (IPO) in April 2006. Chevron bought 5% in RPL at Rs 60 per share before the latter's Rs27-bn public issue.

 

DLF said it has formed an equal partnership with Aman Resorts, whereby it will acquire a controlling interest in the Aman Resorts group. The entire transaction, when completed, is estimated to be valued at US$400mn with an assumed debt of about US$150mn. Overseas Hotels, a subsidiary of DLF, will make the investment in Aman Resorts. Aman Resorts is the world's leading hospitality and lifestyle business and currently owns and operates 22 luxury hotels, many with residences, in 12 countries.

 

Nirma said that it had entered into a definitive agreement to acquire US-based natural soda ash producers Searles Valley Minerals Operations Inc. and Searles Valley Minerals Inc. (collectively known as SVM). Nirma agreed to purchase SVM from an affiliate of Sun Capital Partners Inc. and other minority shareholders. Nirma did not disclose the consideration paid for the US acquisition. SVM has a combined production capacity of over 1.9mn tons. It sells 80% of its production to domestic customers and exports the balance.

 

Bharat Petroleum Corporation Ltd. (BPCL) said its Board had approved a proposal for the acquisition of a 2.5% stake in Oil India Ltd. (OIL) from the Government. BPCL will acquire 5,350,110 shares of OIL at a price equivalent to the issue price proposed to be offered to the public in its forthcoming Initial Public Offering (IPO). The sale and purchase will be completed within 48 hours after the issue price is fixed through the 100% Book Building issue and approved by the OIL Board. Meanwhile, Indian Oil Corporation Ltd (IOC) Board also approved the Share Purchase Agreement with the Govt. of India for acquiring 1,07,00,220 shares of OIL, which constitutes 5% of the latter's pre-issued paid-up capital.

 

Mundra Port and Special Economic Zone (SEZ) made a spectacular debut on the bourses on Nov. 27. The stock of the Adani Group promoted private port operator crossed Rs1,000 despite the overall weakness in the market. The stock opened at Rs770 on the Bombay Stock Exchange (BSE) as against the issue price of Rs440 per share. The scrip finished the maiden trading day at Rs961.70 after being as high as Rs1150. It closed the week at Rs923. The company raised around Rs1.77bn from the public issue. The IPO was subscribed over 115 times. The company received bids for 4.66bn shares as against the issue size of 40.25mn shares. The QIB portion was subscribed almost 160 times while the HNI category was subscribed 156 times and Retail portion 16 times. Mundra Port offered shares to local and overseas investors in a range of Rs400 to Rs440 per share. The company is likely to utilise the IPO proceeds to part finance the construction of basic infrastructure in the proposed SEZ at Mundra, besides a terminal for coal and other cargo.

 

US Govt ups Q3 GDP growth estimate
The US economy expanded at the fastest pace in four years during the third quarter, growing at a real annual rate of 4.9%, the Commerce Department said in making its second estimate of growth for the three-month period. The upward revision to the GDP, in line with Wall Street expectations, was due to larger inventory building and a better trade balance. A month ago, the Government had pegged third-quarter GDP at 3.9%. The US publishes three estimates of GDP, adding more complete information with each passing month. However, some Wall Street economists expect a sharp slowdown in the current quarter due to a partial reversal in both trade and inventories. Housing remained a severe drag on growth in the third quarter, subtracting a full percentage point from the growth rate. It was the seventh straight quarter that housing contracted.

 

Japan's industrial output rebounds in October

 

Japan's industrial production grew by a seasonally adjusted rate of 1.6% in October from the previous month, when it had fallen by 1.4%, the Trade Ministry said. The consensus forecast by economists saw an increase of 1.5%. The production index climbed to 112.1, the highest since the current gauge was set in 2000, the Japanese Trade Ministry said. Export growth doubled to 13.9% in October from a year earlier, spurred by higher imports by China and Europe. The rise in output was mainly due to a recovery in cars and semiconductor production equipment in response to firm domestic and overseas demand, an official at the Trade Ministry said. The Trade Ministry maintained its assessment on output for the third straight month, saying it was on a moderate rising trend. Output in October-December is expected to expand 1.7% from the previous quarter, the Trade Ministry said.
Citi gets US $7.5bn cash from Abu Dhabi
The beleaguered American financial sector received a vote of confidence even as investors worldwide remained concerned about the housing mess in the US, and its impact on the credit markets. Citigroup announced that it had received US$7.5bn from the Abu Dhabi Government to shore up its balance sheet after writing off billions of dollars in losses linked to the sub-prime mortgages. The biggest US bank said it would sell US$7.5bn in equity units convertible into common shares to the Abu Dhabi Investment Authority, with the capital injection equivalent to 4.9% of Citigroup's total shares outstanding. Citigroup will pay an annual yield of 11% on the convertible securities. The Abu Dhabi Investment Authority will help Citigroup strengthen its capital base, Win Bischoff, the New York-based bank's acting CEO said in a statement. "This investment also enables us to access capital in an efficient manner," he said. Bischoff said the funds would be used to expand the bank's business and fit with other steps taken recently to strengthen its capital base. The Abu Dhabi Investment Authority will have no role in the management or governance of Citigroup, including no right to designate a member of the company's board. Separately, E*Trade, the US online discount broker which has expanded into mortgage securities and credit facilities, received a US $2.5bn cash infusion from the Citadel Investment Group. The US$17bn hedge fund is known for swooping into troubled companies and buying their holdings at steep discounts.

 

Philips to acquire Genlyte for US$2.7bn

 

Royal Philips Electronics announced it had entered into a definitive merger agreement with North American luminaires company Genlyte Group Inc. Accordingly, Philips will commence a tender offer to acquire all of the issued and outstanding shares of Genlyte for US$95.50 per share, or about US$2.7bn (€1.8bn) to be paid in cash upon completion. The proposed transaction builds on Philips' earlier acquisition of Color Kinetics and provides the company with a leading position in the North American luminaires (also known as 'lighting fixtures') market. The deal vaults Philips ahead of General Electric in the share of America's lighting market and adds to its presence in the country's expanding market for energy-saving light bulbs.

 

Nokia ups global market share in Q3

 

Nokia increased its market share for the fifth consecutive quarter, while Samsung Electronics upstaged Motorola as the world's second-biggest mobile handset manufacturer, a survey by research firm Gartner showed. Nokia increased third-quarter market share in unit sales to 38.1% from 35.1% in the same period a year earlier, according to the Gartner report. Samsung increased its share to 14.5% from 12.2%. Motorola's share fell to 13.1% from 20.7%. Apple's iPhone sold more than one million units in the quarter ended September, capturing about 2.5% share in North America. Sony Ericsson boosted its share to 8.8% from 7.8% in the third quarter a year earlier. LG had 7.1% of the global market, up from 6% a year earlier. Meanwhile, Gartner said global wireless handset sales will rise to 1.13bn units or slightly higher this year, a growth of about 14%, in line with its previous forecast. Global mobile handset sales rose 15% to 289mn units in the July-September quarter, led by Asia-Pacific, Eastern Europe, the Middle East and Africa. Unit sales are expected to rise 10-15% this quarter from the previous three months.

 

Other key global news

 

Morgan Stanley's Zoe Cruz, co-president and previously considered a potential successor to CEO John Mack, is leaving the Wall Street firm. Morgan Stanley said that effective Dec. 1, Walid Chammah and James Gorman will become co-presidents, reporting to Mack. Cruz, the highest-paid female executive on Wall Street, is leaving Morgan Stanley after 25 years. She assumed her current position in February 2006, after having served as acting president since July 2005.

 

Rio Tinto announced a package of measures, including a boost to its share dividend, that bolsters its defence against BHP Billiton's hostile takeover. It also reasserted its belief that the offer price from its larger mining rival was undervalued. Still, BHP Billiton remained confident about the success of its bid to combine with Rio Tinto.

 

Northern Rock, a distressed British bank, named a consortium led by Sir Richard Branson's Virgin Money as the preferred bidder for its purchase. The consortium promises to pay back immediately £11bn (US$23bn), or almost half, of the money lent to Northern Rock by the Bank of England in a rescue package. Northern Rock shareholders objecting to Virgin's deal threw their support behind a rival bid being mooted by Olivant, a private-equity firm.

 

Ping An Insurance, a Chinese insurer, took a 4.2% stake in Fortis, a Belgian-Dutch financial company, becoming its largest shareholder. Chinese finance companies are estimated to have spent around US $17bn this year buying stakes abroad, including some in Blackstone Group, Bear Stearns and Barclays.

 

Eni SpA, Italy's biggest oil company, agreed to buy Burren Energy Plc for 1,230 pence a share, valuing the entire existing issued share capital of the British firm at approximately £1.74bn.

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Navneet Publications (India)
Cluster: Emerging Star
Recommendation: Hold
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