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Friday 31 August, 2007

Banking Sector: Quarterly Review

Stocks or Mutual Funds?

If you are like me with very little time to do your research, you would be in a dilemma at some point or the other. Should you invest in Stocks or Mutual Funds. Well, both have their own benefits and suits persons with different personalities. Let’s dig deeper.

Why invest in Stocks

Stocks move faster than Mutual Funds, both ways. Which in turn means, better profits (and losses).
Stocks may be good investment vehicle for short term or even medium term. But longer term stocks are good Only if the underlying fundamentals are good and the company pays handsome dividends. I know of many of my Friends and relatives whose Parents are actually Living off of the dividends from the stocks that they purchased way back when. Stocks are full of excitement and action because of their day-to-day price fluctuations.

Stocks are much better investment when compared to money sitting in your Bank. After all, the interest that you earn from your bank does not even match up to the current Inflation, leave aside handsome returns. Then what is the point of having money sit in the Bank and even in Fixed deposits?

Stocks are good, but they are extremely risky as well. More often than not, when you buy a stock it starts going down. Hence, stocks are not for weak at heart and one must have good risky appetite when dealing with stocks.
Why should i invest in Mutual Funds

Most safest vehicle if you are not looking to grow rich in a single day.
Though it is said and read across the globe and on the internet that Mutual funds do not pay handsome returns because of their hefty fees/commissions etc, at least in India the story is just the opposite. Mutual funds have safely matched up to the Indices in the past few years.

Mutual funds are not really for short term play as the fluctuations in the NAV prices of a mutual fund is not as drastic as that of stocks.

Ideal investment for Long term growth, College education, Retirement.
Most important benefit of investing in Mutual funds as opposed to Stocks is the amount of time you need to invest researching is cut down by over 95%. Why? Because, you only do your research once, invest in your Mutual Fund and then just sit tight. Whereas, with stocks every time you close your current position, you need to do your research (or as most say, search in forums for tips ) which is not only time consuming but also extremely stressful.

In summary, both investment vehicles are equally good. It all depends on your risk appetite, your investment horizon, your expected returns and the amount of time you have on had to do your research.

Laterz

Weekly Ideas....

Buy Jet Airways at Rs808 with SL of Rs794 and Target of Rs840, 845

Buy Colgate at Rs387 with SL of Rs380 and Target of Rs405, 410

Buy Punj Lloyd at Rs280 with SL of Rs274 and Target of Rs295, 300

Buy TCS at Rs1064 with Sl of Rs1046 and Target of Rs1105, 1110

Buy AB Nuvo at Rs1390 with SL of Rs1360 and Target of Rs1450, 1460

India Shining - Q1 GDP up by 9.3%

India's economy in the April-June quarter grew a faster-than-expected 9.3 per cent from a year earlier, led by robust manufacturing and services, but analysts said the pace could moderate in coming quarters.

The annual growth rate for India's fiscal first quarter published on Friday topped both a median forecast of 8.9 percent in a poll and growth of 9.1 per cent the previous quarter.

The stock market extended its strong opening gains after the data. The rupee was little changed around 41.02 per dollar, and the benchmark 10-year bond edged up 1 basis point to 7.92 percent.

Analysts said the strong growth did not mean the central bank was likely to resume raising interest rates, but said it showed the need for vigilance against a build-up of price pressures.

"This number is good, but does not suggest any need for monetary tightening and we expect the current stance to continue as inflation has come off substantially," said JP Morgan economist Rajeev Malik.

"We see moderation in growth in coming quarters."

Manufacturing grew an annual 11.9 percent in the April-June quarter, lower than the 12.4 percent in the previous three months.

Services grew at an annual pace of 10.6 percent, while farming, which the government is trying to revive, expanded by 3.8 per cent, matching the previous quarter's growth rate.

Asia's third-largest economy grew 9.4 percent in the fiscal year that ended March 2007, its fastest rate in 18 years, and the central bank expects expansion of 8.5 percent this fiscal year.

The central bank raised interest rates five times between June 2006 and March this year and has also increased banks' reserve requirements, measures that have cooled the property market and calmed inflation and loan demand.

"Growth will be about 9 percent in the coming quarters. There is no need to change the monetary stance, but there has to be a close monitoring," said Saumitra Chaudhuri, economic adviser at domestic ratings agency ICRA.

India is now a $1 trillion economy after a growth spurt in the past four years second only to China's hot pace of expansion among major economies. This has given it increasing muscle in world trade talks and seen it invited to meetings of the world's leading industrialised economies.

The central bank said on Thursday India was on the verge of a step-up in its growth trajectory but only if accompanied by vigilance on price and financial stability.

Some economists see the economy averaging 7-8 percent for the next few years due to private sector expansion and rising demand from a growing middle class.

Analysts say this will buttress the domestic economy in the event of a slowdown in demand around the world due to problems in the US home loan market.

The scorching pace has generated jobs but it has also put pressure on roads, ports and other infrastructure, and increased wage and price pressures

SUN TV, TATA STEEL

Grey Market Premiums

Power Grid Corporation 44 to 52 9 to 10

Motilal Oswal 825 90 to 95

Indowind Energy 55 to 65 Discount

Magnum Venture 27 to 30 Discount

Mkts seen consolidating next week

It was a pull-back week for the Indian equity market. The bulls took the charge and the benchmarks Sensex and Nifty gained 6.5 per cent each to end the week at 15,318 and 4,464.

“We see fresh positions building next week. The market will consolidate with a positive bias,” said Lalit Thakkar, chairman & managing director, Angel Stock Broking. However, though fears of an early election here have subsided, the US sub-prime issue refuses to lie low.

Later on Friday, global markets will take cues from US Federal Reserve Chairman Ben Bernanke’s speech on housing and monetary policy.

“His statement will not be negative to the markets. They have given a commitment to bailout the industry out of sub prime woes,” Thakkar said. He said if the Fed reduces lending rate there will be a reaction globally and domestic market may face a knee jerk reaction.

He advises traders to take trading calls but entry levels should be carefully selected. “One can pick Maruti Udyog, ICICI Bank and Reliance Energy on declines,” he added.

The charts too look bullish for the next week. “We expect the Sensex and Nifty to touch 15,500-15,600 and 4530-4550 levels, respectively. There may be some profit booking after that,” said Sandeep Waghle, technical analyst, Angel Stock Broking.

He suggests traders be cautious and wait for declines before taking positions. The stocks that look bullish on charts are Ranbaxy, ICICI Bank, Bank of India and BHEL.

“There is still some upside left in auto stocks like Maruti Udyog and Mahindra & Mahindra, despite the run-up this week,” he said.

Weekly Newsletter

All the talk of higher interest rates slowing down the Indian economy took a backseat after the Government released the GDP data for the first quarter ended June. Apart from the minor dip in the growth rate for Mining and Manufacturing, all other engines of the Indian economy remained in healthy condition. Overall, the GDP growth in the April-June quarter was 9.3% as against 9.6% in the same quarter last year. Compared with the previous quarter's (Q4 FY07) growth rate of 9.1%, economic growth in Q1 FY08 was slightly on the higher side. The data also beat all optimistic expectations by various economists, who had been looking for a growth rate of around 9%.

At 3.8%, agriculture growth rate was better than 2.8% in the year-ago level while mining output slid, from 3.7% to 3.2%. Growth rate of the manufacturing sector declined to 11.9% in the first quarter of the current fiscal year versus 12.3% last year. Output in Electricity and Construction sectors improved, to 8.3% and 10.7%, respectively, from 5.8% and 10.5% in the first quarter last year. Other sub-segments that registered significant growth in Q1 FY08 over the previous year included Trade, Hotels, Transport & Communications (12% vs 12.4%), and finance, insurance, real estate and business services (11% vs 10.8%).

Asia's fourth-largest economy grew by 9.4% in the fiscal year ended March 2007, its fastest rate in 18 years, and the central bank expects expansion of 8.5% this fiscal year. Finance Minister P. Chidambaram said the GDP growth of 9.3% in the April-June quarter was 'satisfactory', and that the Government would ensure investment and credit flows remained strong. "Despite compulsions of a tight monetary policy, we will ensure that credit flow to the productive sectors of the economy remains strong," Chidambaram told reporters in New Delhi.

The Reserve Bank of India (RBI) expects India's economic growth to accelerate further notwithstanding the threat of inflationary pressure and external shocks like the recent sub-prime crisis in the US. Though the central bank cautioned that the turmoil in the global credit markets could cause further outflow of capital from India, it remains hopeful that the Indian economy will remain resilient to global shocks. In its 2006-07 annual report, the RBI has asked commercial banks, financial institutions and corporates to be vigilant and well-prepared with appropriate risk mitigation strategies to deal with significantly higher volatility than before.

"Steady increases in the rate of gross domestic saving and investment, consumption demand, addition of new capacity as well as more intensive and efficient utilisation/capitalisation of existing capacity are expected to provide support to growth during 2007-08," the RBI said. The central bank's GDP growth estimate for FY08 stands at 8.5%. "There is growing evidence that the economy is on the threshold of a step-up in the growth trajectory, provided the vigil on price stability, including financial stability is intensified in a convincing manner," the RBI said.

But, the turmoil caused by the subprime mortgages in the US remains one of the biggest underlying concerns for the RBI. "Further deterioration in subprime delinquencies could lead to reassessment of risk by investors across products and markets and retrenchment of capital from the emerging market economies (EMEs), given the contagion and herd mentality," the RBI said. A higher volatility could also emanate from the behaviour of private equity funds, according to the central bank. Any further monetary tightening in major economies has the potential to accentuate volatility in global markets, feels the RBI.




Bulls finally found a week to rejoice. Value buying in index heavyweights like RIL, Tata Steel, Hindalco, BHEL and L&T enabled the Sensex post its longest winning streak this year. Also, lower inflation and impressive GDP growth figures spurred the sentiment, lifting the benchmark BSE Sensex higher by 6.2% or 894 points to close the week at 15319. The NSE Nifty ended higher by 6.5% or 274 points to close at 4464.

The current rally in the market was supported by gains in Metals, Banking, IT, Auto and Oil & Gas stocks. Interestingly, the activity was also seen in the mid-cap counters. On the political front, sentiment improved after the ruling coalition agreed to set up a panel for examining the implications of the Indo-US nuclear deal, putting to rest, the concerns of Communist parties pulling away from the Centre.

Bulls had more reason to cheer with India's economy growing at 9.3% in the three months to June 30 from a year earlier. Also, inflation declined to 3.94% in the week ended August 18, from 4.1% in the previous week, as prices of some manufactured products fell. It was the first time annual inflation fell below 4% since the end of April 2006.

Firm metal prices on LME and strong demand from the domestic as well as overseas market boosted the metal stocks with Tata Steel, leading from the front. Tata Steel was the star performer over the week, advancing by 18% to Rs689 after Corus Group Plc's consolidated operations for the June quarter almost tripled. Operating profit climbed to Rs49.04bn. Revenue surged more than five-fold to Rs311.55bn. SAIL surged by over 15% to Rs168 and JSW Steel jumped by over 12% to Rs643.


Value buying emerged across the auto stocks on expectations that revenue will increase in the coming quarter after inflation fell below 4%. Expectations are that interest rates won't rise further. Hindustan Motors skyrocketed by over 29%, M&M raced ahead by 10% to Rs708, Maruti rose nearly by 10% to Rs867, Tata Motors surged nearly by 7% to Rs701 and Ashok Leyland added 8.5% to Rs38.

IT stocks staged smart recovery during the week. The rupee appears to have stabilized against the US$ around the $41 mark. Wipro surged nearly 6% to Rs482, TCS rose over 4.5% to Rs1065, Satyam gained 2.5% to Rs447 and Infosys added 1.7% to Rs1885. Financial Technologies was the star performer, advancing by over 20% to Rs2463.


Fertilizer stocks hogged the limelight during the week on expectations of sops & subsidy. Nagarjuna Fertilizer was the top gainer, rallying by over 21% to Rs40.3, Chambal Fertilizer surged by over 7% to Rs49.8 and Deepak Fertilizer rose over 4% to Rs105.

Banking stocks also gained momentum on hopes that interest rates wont be increased given the lower inflation rates. Axis Bank surged by over 11% to Rs635 as the scrip witnessed strong fund buying. Heavyweights also recorded smart gains. SBI rose over 9% to Rs1600, HDFC Bank was up by 6.7% to Rs1171 and ICICI Bank added .5% to Rs888.

Reliance Industries, India’s most valuable company and world’s third biggest refinery was among the leading gainers in the 30-share Sensex index. The scrip rose over 10% hitting 52-week high of Rs1970 finally closing at Rs1959.


Global cues to drive local mood


Friday's impressive and unexpected rally has left the bears wondering what struck them. The markets surged higher defying all negative cues and overcoming the volatility of F&O expiry. Could it be a one-week wonder or signs of things to come? In the absence of any major triggers, we expect some consolidation in the market before a further upmove kicks in. A lot will depend on the speech by Fed chief Ben Bernanke on housing and monetary policy. President Bush is also set to unveil a slew of steps aimed at addressing the problems facing the American housing sector. As always, global cues will again provide the much needed direction to the bulls. Action is likely to be stock specific with mid-cap stocks appearing to have got back into action. However, one needs to adopt a cautious approach. Stocks like IFCI and Escorts are expected to witness action in the coming week. Ranbaxy is another counter which can be considered for the medium to long term.


Tackling a rising home loan EMI with ease

The usually smiling Ravi Raman wasn't his usual self a few days ago. He was seen walking restlessly across his office. The IT company for which he was working informed him that his salary would be credited a little late into his account.

Mr Raman was worried since it meant his home loan cheque could probably bounce. In the past few years, the Ramans have been facing the arduous task of trying to eke out a living, thanks to rising EMIs (Equated monthly Installments).

This wasn't the case two years ago when he took the loan. Coping with higher EMIs for many is something but a bitter truth that one has to live with. ET takes you through smart measures to befriend higher EMIs.

Managing rising EMIs
There are two ways to cope with increasing home loan EMIs. One way could be to lower your consumption needs. Then you could cough up some funds to prepay the home loan. Explains certified financial planner and wealth advisor Gaurav Mashruwala,

"You have two variants in the expenses category, mandatory and voluntary. You have to spend on food but you can cut down on eating in restaurants and entertainment. The idea is to cut down on your lifestyle. Start buying a Cambridge shirt instead of a Tommy Hilfiger. There is always scope to tone down your lifestyle and expenses to accommodate the increase in EMIs. Another way to partly prepay your loan could be to liquidate your low-yielding assets.

All you need to evaluate is how much net return does your investment fetch you. If it's lower than the interest outgo on your home loan, it makes financial sense for you to liquidate that investment to repay a part of your housing loan.

"You can look to break your bank fixed deposits or liquidate some debt-based products. Touch your equity investments only if you are in dire need," advises Mr Mashruwala. Typically, equity earns more than 16% annually (more than home loan rates of 12% pa) and historically, has been the best performing asset.

You need not liquidate all your investments. You can liquidate around 30-50% of your low-yielding investments, which will also take care that you have a balanced portfolio of investments. However, you have to evaluate this option very carefully. You cannot liquidate those investments which have the ability to beat inflation in the long run.

Higher EMI or tenure?
Whenever a bank/HFC hikes lending rate, you either see a rise in your EMI or an extension in the tenure. Industry experts recommend increasing the EMI than tweaking the tenure of the loan. Approximately, when a bank/HFC hikes the lending rate by 0.5%, the tenure of your loan is increased by almost 25 months. If you take a housing loan at the age of 30, you would have planned to repay by the time you complete 50 years of age. The idea would have been to spend a debt-free retired life.

Now, if you postpone the termination of loan at 52 years of age, that would impact your personal finances even more, especially if you retire, says Akhilesh Tilotia, financial advisor and director of PARK Financial Advisors. Secondly, a series of rate hikes could further postpone the closure of your home loan. So it's better to take the EMI hit right now than postpone the impact of rate hike. The idea is you are able to realise the hike in interest rates upfront.

Even the compounding effect has huge impact on long-tenure loans. For example, if you take a Rs 30-lakh loan for a period of 15 years at 12%, then your EMI works to a tad above Rs 36,000. Essentially, you will be paying close to Rs 65 lakhs on your house, including your interest outgo. The longer you extend the tenure of the loan, this number will increase. In other words, your interest outgo is another party's income. Why do you want to earn for a third party? Settle the loan repayment at the committed tenure.

Facts you must know

Watch your EMI
Banks say they can lend up to 48 times your monthly salary. But you should see how much can you afford by looking at the EMI as percentage of your salary. EMIs should not increase beyond 35-40% of you take home salary for a housing loan. Any other loan EMI should not go beyond 25%. Banks may recommend an EMI up to 60% of your disposable income. But you have to provide for contingencies such as a job slow down, change of job or mere liquidity needs, Mr Tilotia adds.

Don't read too much into penalty
It's not wise to save on the 2% prepayment penalty on your housing loan. You are actually spending 12-14% on the same loan as interest cost. Even if you take into account the tax benefit, you cannot discount the forthcoming rate hikes in the years to come. Always get out of your debt as soon as possible.

Your first house is a consumption asset
You will never sell that for money. If you look at your salary as a pie, your ideal break should be 30% EMIs, 30% to the government in terms of taxes, 20% for consumption needs and the balance 20% should be savings.

Govt-Left smoke peace pipe for now

For the moment, it seems that the storm over the Indo-US nuclear deal has receded. In a last ditch attempt to save the fragile coalition in New Delhi, the Government and the Left parties agreed to set up a committee to address some of the apprehensions of the Left parties over the civilian nuclear cooperation between India and the US. As part of the truce, the Government will hold no negotiations with IAEA - the first of the three steps crucial for operationalising the deal - till the panel comes out with its findings. The committee will have 14 members - eight from UPA and six from the Left - with the likelihood of External Affairs Minister Pranab Mukherjee as its convenor. The temporary settlement will enable the Left Front to back off, for some time, from their brinkmanship that had put the Government’s survival in danger

RBI expresses caution on holding company

The Reserve Bank of India (RBI) has raised some uncomfortable questions about the proposed intermediate holding companies proposed by ICICI Bank and SBI. The RBI has made a strong case against intermediate holding companies. "It will be desirable to avoid intermediate holding company structures (a structure in which a bank owns a holding company for various non-bank businesses)," the banking sector regulator said in a discussion paper on holding companies in banking groups. Any clearance for foreign investment in such a holding company by other regulators could be subject to a legal review, the RBI said. The creation of an intermediary financial holding company may lead to a problem of regulation, it added. The announcement from the RBI comes notwithstanding the clearance granted by the Finance Ministry to ICICI Bank's proposal for setting up a holding company for its insurance and mutual fund business. SBI has also proposed a similar holding company for its insurance and mutual fund businesses.

TRAI in favour of more players per circle

In a bid to shore up competition and encourage mergers and acquisitions in the telecom sector, the Telecom Regulatory Authority of India (TRAI) suggested that the limit on the number of operators in a particular circle should go. It also recommended relaxation of stringent M&A norms, technology neutrality for telecom licences, besides suggesting that both GSM and CDMA players should pay an entry fee and higher spectrum fee additional 2G radio frequency allocation. The telecom regulator suggested a one-time fee from operators for allocation of spectrum beyond 10 MHz. At present, a company pays 1% of its revenue to the Government for additional spectrum, being allocated based on subscribers. On M&As, TRAI said the combined market share of the merged entities should not exceed 40%, either in terms of subscribers or revenue against 67% now. It proposed that an operator should be allowed to acquire up to 20% equity in the target licensee company in the same circle against the present cap of 10%.

SEZs...Govt allows purchase of 30% land

The Group of Ministers (GoM) set up to frame a rehabilitation and resettlement policy for those affected by industrial projects, including SEZs, suggested that state governments be given a discretion to acquire up to 30% of the land required for such projects provided the developer has acquired the balance land. The GoM recommendation would now go to the Cabinet for its approval. "The decision is not specific to SEZs but would apply to all industrial projects," Science & Technology Minister Kapil Sibal said after the GoM meeting. Separately, the Government cleared 20 new SEZs, including two IT and IT enabled service based SEZs of Tata Consultancy Services (TCS) and Cognizant Technology. It also gave in-principle approval to seven SEZs. In April, the Empowered Group of Ministers on SEZs headed by External Affairs Minister Pranab Mukherjee had imposed a ban on compulsory acquisition of land, while fixing an upper limit of 5,000 hectares for multi-product zones.

Bajaj family feud continues

Warring Bajaj brothers - Rahul and Shishir failed to reach a settlement on the division of the group within the time allotted by the Company Law Board (CLB). The two brothers sought some more time from the principal bench of the CLB. Counsels representing Rahul and Shishir told the bench they would carry on negotiations to settle the matter. CLB Chairman S. Balasubramanian adjourned the matter to the third week of October. The Shishir-Rahul feud erupted in March 2003, with the former approaching the CLB alleging there was a move by the Rahul camp to oust him from the chairmanship of Bajaj Sevashram, a key holding company of the Bajaj group. The battle intensified this year when the Shishir camp moved the CLB for a stay on the induction of Rahul Bajaj's son Sanjiv and cousin Neeraj in the boards of Bajaj Sevashram and Jamnalal Sons. Admitting the application by the Shishir faction, the principal bench of the CLB stayed all board meetings of the two holding companies Bajaj Sevashram and Jamnalal Sons.

Firstsource acquires MedAssist

Firstsource Solutions acquired MedAssist Holding, a leading provider of revenue cycle management in the healthcare industry in the US, for US$330mn. There would be no change in the management of MedAssist and all 1,400 employees would continue in their current jobs. MedAssist provides Eligibility Services, Receivables Management Services and Post-default Collections services for healthcare providers. The company has over 1,000 clients, including hospitals, large physician groups and alternate site providers. MedAssist's revenue for year ended December 31, 2006 was US$99mn. Firstsource's US subsidiary will raise US$275mn through debt for the deal while the balance will be funded through internal accruals, Managing Director and CEO, Ananda Mukerji said.

Puravankara Projects falls below issue price

Shares of Bangalore-based real estate major Puravankara Projects slipped below the issue price amid uncertainty about the growth prospects of the housing industry. The stock listed on the Bombay Stock Exchange (BSE) at Rs399, on Aug. 30, as against the issue price of Rs400. Soon it hit a low of Rs357 before ending the maiden trading day at Rs361. It gained about 3.9% on the next day to close the week at Rs375. Puravankara raised Rs8.6bn from its 21.5-million-share public offer, to part-fund land acquisition and to repay debt. The company had entered capital market with an IPO of 21,467,610 shares of Rs5 each in a price band of Rs400-450. The issue was subscribed 1.91 times despite the company cutting the price band, from 450-500 and extending the duration of the IPO.

Power Grid Corp IPO opens on Sept. 10

ndia’s principal power transmission company and Mini-Ratna Category- I public sector undertaking, Power Grid Corporation of India Limited ("the Company") is entering the capital markets with an Initial Public Offering (IPO) of 573,932,895 equity shares of Rs 10 each ("Equity Shares") for cash (the "Issue") at a price to be decided through a 100% book building process. The issue comprises a fresh issue of up to 382,621,930 equity shares by the Company and an Offer for sale of up to 191,310,965 equity shares by The President Of India acting through The Ministry Of Power, Government of India. The issue comprises a net issue to the public of up to 559,954,895 equity shares and a reservation of up to 13,978,000 equity shares for subscription by employees of the Company. The Issue shall constitute approximately 13.64% of the fully diluted post- issue capital of the Company. After the Issue, the Government of India, through the Ministry of Power will continue to hold 86.36% of the diluted post-Issue paid-up equity capital of the Company.

Nicholas Piramal to spin off R&D unit

Nicholas Piramal India Ltd. announced that its Board had approved the proposal to de-merge its New Chemical Entity (NCE) Research Unit into a separate company. The NCE pipeline has expanded from 5 compounds in 2002 to 13 compounds in 2007. Out of this, 4 are in clinical trials. Nicholas Piramal expects to have 8 compounds in clinical trials by end of the current financial year. It wishes to complete development upto proof-of-concept (end of Phase II) for all its compounds and bring to market certain niche ones on its own. Nicholas Piramal will hold equity capital of Rs45.5mn in the new NCE Research Unit. This move will facilitate induction of strategic or financial investors in future who may wish to invest directly in the NCE research program. The new company will issue fully paid up equity shares aggregating to Rs209mn to the shareholders of Nicholas Piramal in the ratio of 1:10. Post de-merger, Nicholas Piramal will hold 18% equity capital of the new company and the remaining 82% will be held by the shareholders of Nicholas Piramal. The new company will be listed on the BSE and NSE in the future.

Parsvnath Developers to foray into telecom

Real estate major Parsvnath Developers plans to launch mobile services in the country. The company has expressed the intention to apply for licences in 22 out of 23 telecom circles in the country. It has identified two partners - one domestic investor and other a well known global telecom giant. Though the company has not yet declared any funding structure, it is likely to hold a minority stake of 26% in the proposed joint venture while the foreign players will hold around 51 per cent and the balance will be with the financial investors. "Despite increasing number of subscribers, the penetration of mobile telephony in India is still very low," Chairman Pradeep Jain told reporters in New Delhi. Parsvnath will set up a special purpose vehicle, a company that's being created for the proposed diversification

Bush bailout for subprime mess
After the central banks, it's now the turn of the US Government to come to the rescue of the crumbling housing sector. President George W. Bush, in his first response to the subprime mortgage crisis, plans to announce several steps aimed at helping Americans with credit difficulties to meet the rising cost of their housing loans, administration officials said. According to published reports, Bush will let the Federal Housing Administration (FHA), which insures mortgages for low- and middle-income borrowers, guarantee loans for delinquent borrowers, allowing them to avoid foreclosure and refinance at more favorable rates. FHA mortgage insurance program will be changed to allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages. The change would affect borrowers who are at least 90 days behind in payments and let them stay in their homes. Stocks in Europe and Asia rose, led by mining companies and exporters, before Bush's announcement. The yen fell against all of the world's 16 most-active currencies.
US economy picks up pace in Q2

The US economy grew at a much faster pace in the second quarter than previously estimated, but tepid consumer spending, slowing housing activity and credit-market turmoil suggested that growth will slow significantly into next year. America's Gross Domestic Product (GDP) expanded at a 4% annual rate in the second quarter, the Commerce Department said. That was up from a previous estimate of 3.4%, largely because exports and business investment during the period were stronger than previously thought. The GDP revised number was in line with Wall Street forecasts and far outstripped the first quarter's anemic 0.6% rate of expansion.

US consumer confidence dives

Consumer confidence in the US fell more sharply in August than in any month since the aftermath of Hurricane Katrina two years ago, according to the Conference Board. The GfK index of German consumer confidence also dropped, for the first time in six months. House prices in America fell by 3.2% in the year to the second quarter, according to the S&P/Case-Shiller national home-price index. It was the largest decrease in the period covered by the index, which runs back to 1987. On a month-by-month basis, in June metropolitan areas in California and the south-west continued to see some of the steepest declines in property prices. The housing market in the Pacific north-west, however, remained buoyant.

Home Depot sells unit at steep discount

Home Depot Inc. said it had closed the sale of HD Supply to three private-equity firms for about US$8.5bn, nearly US$2bn below the original offer for the unit. In June, Home Depot announced that it had agreed to sell its supply business to Bain Capital, Carlyle Group and Clayton Dubilier & Rice for US$10.3bn. Under the revised terms announced earlier this week, Atlanta-based Home Depot will pay US$325mn for a 12.5% equity interest in HD Supply and guarantee a US$1bn senior secured loan of HD Supply. The sale was one of the first big buyouts to be renegotiated because of the recent tightening of credit and problems in the housing market. Because the deal relies heavily on debt, investors and bankers have been watching closely for signs of how new stringent standards on credit could affect other large buyouts, collectively worth nearly US $400bn, that are pending.

Taiwan's Acer to buy Gateway for US $710mn

Taiwan PC maker Acer Inc., the world's fourth-largest computer supplier, said it would acquire Gateway Inc., the fourth-largest PC company in the US, for US$710mn. Acer will pay US$1.90 a share for Irvine, California-based Gateway. The price represents a 57% premium over Gateway's closing price of US$1.21 on Aug. 24. The deal has been unanimously approved by both Boards of Directors and should create pretax synergies of at least US$150mn. Separately, Gateway announced it intends to exercise its right of first refusal to acquire all of the shares of PB Holding, the parent company of European PC vendor Packard Bell BV. Gateway is also currently in discussions with a third party over the potential sale of its US-based professional business.


Monday 27 August, 2007

RANBAXY LABORATORIES LTD.

RANBAXY LABORATORIES LTD.

Current: 360 Target : 575 in 6 months

I would like to update you with the latest news on Ranbaxy.

* On 22nd August 07, Ranbaxy Laboratories Limited, India's biggest pharma company, launched its ureological drug Roliflo OD in India. Roliflo is a combination of Tamsulosin and Tolterodine. Roliflo is a Novel Drig Delivery Syste product which is being introduced for the first time in India.

* According to CNBC, the pharmaceuticals market will rise by 20% in India. Pharma industry will expectedly be worth Rs.20 billion in next 3 years including exports.

* On 20th August, Ranbaxy Laboratories Limited (RLL), announced that the Company has received approval from the U.S. Food and Drug Administration to manufacture and market Hydrocodone Bitartrate and Acetaminophen Tablets USP. The Office of Generic Drugs, U.S. Food and Drug Administration, has determined the Ranbaxy formulations to be bioequivalent and have the same therapeutic effect as that of the reference listed drugs. Total annual market sales for Hydrocodone Bitartrate and Acetaminophen Tablets were $390.6 million (IMS – MAT: June 2007). Hydrocodone Bitartrate and Acetaminophen Tablets are indicated for the relief of moderate to moderately severe pain. According to Jim Meehan, Vice President of Sales and Marketing for RPI Ranbaxy received final FDA approval for multiple strengths of this product. These approvals further expand their product portfolio of affordable generic alternatives and will be launched in a November 2007 time period to all classes of trade.



* US Patent and Trademark Office rejected Pfizer's application to re-issue a patent, which extends Pfizer's patent rights over Lipitor to June 2011.
Ranbaxy may launch the generic version of Pfizer's largest-selling cholesterol-lowering drug, Lipitor, in March 2010, about 15 months ahead of schedule, in the US market.The chances of Ranbaxy eating into the $8.5 billion market of Lipitor in the US brightened .Being the holder of 180-day exclusive marketing rights for atorvastatin (the generic name of Lipitor), Ranbaxy is likely to be the biggest beneficiary of the decision.

Regards

Ankita

9819854402

Market Review for 27th August 2007

Sensex: (14425) like I had said trading would be difficult and so it was…the market traded in a narrow range and closed positive…now looks as if the market has limited downside but could e volatile with a positive bias until the F&O expiry…

The support for the Sensex is at 14025 and the resistance to the up move at 14578-14661-14825

NSE Nifty: (4190) the support for the Nifty is at 4100 and resistance to the up move at 4249-4266-4325.




Prakash Gaba CFT, MSTA (London) Call : 91-22-26421719 Email : prakashgaba@hotmail.com

IPO Analysis Note - MAGNUM VENTURES

PREMIUM TAG MARS VENTURE

MAX. ISSUE SIZE (Rs) : 53 crores
PRICE BAND (Rs) : 27 - 30
ISSUE OPENS/CLOSES : 27th to 30th August, 2007
LISTING : NSE, BSE




Over the last two and a half decades, this company has been engaged in the trading and manufacture of paper. It now seeks funds with the primary objectives of upgrading its paper manufacturing plant and for an hospitality project.
Historically, Magnum has used waste paper to manufacture writing and printing paper, besides duplex boards. It has an installed capacity of 85,000 mtpa, which it believes can be optimally used post its proposed upgradation. Resultantly, speedy implementation of the upgradation process assumes vital dimensions.
Magnum’s hospitality project appears to be a response to the upcoming Commonwealth games in Delhi. If this project achieves timely closure, the company which has historically owned land in the National Capital Region (NCR), stands to gain. For its proposed four-star hotel with 212 rooms, the company has a tie-up with the Carlson group to set up ‘Country Inn & Suites’.

However, the flip side here is that the Carlson group label comes with a healthy fee tag too. While, the label will serve the company well in the run up to the aforementioned Games, in the aftermath, the fee tag could squeeze margins. The high debt that this company carries too could hamper bottomline growth. The financials appear modest with lower margins being offset by topline growth in FY07.
However, given that Magnum will remain primarily a paper manufacturing company till its hospitality project achieves closure and optimal utilization in 2010, the demand for a P/E multiple of around 13.5 multiplies risk for potential investors.

Saturday 25 August, 2007

F&O expiry to keep market volatile

The market is expected to remain volatile ahead of the derivative contracts expiry for the August 2007 series on Thursday, 30 August 2007

Market nudged higher for the week ended Friday, 24 August 2007, tracking recovery in Asian markets on speculation that the US Federal Reserve will cut benchmark rates sooner rather than later. Also the Bank of Japan (BOJ) decision to keep interest rates unchanged at 0.50% boosted the market further

The market ended its four week losing streak to post gains for the week ended Friday, 24 August 2007. The 30-share BSE Sensex rose 283.35 points or 2% to settle at 14,424.87. The S&P CNX Nifty rose 82.10 points or 1.99% to settle at 4,190.15 in the week.

But the domestic bourses underperformed its Asian peers due to fluid political situation in New Delhi, with prospects of mid-term polls looming large. World stock markets had fallen sharply in recent weeks as problems in the risky US subprime mortgage sector spread to other markets.

Also FIIs, who were the key drivers of the recent rally have resorted to selling. As per the latest data they sold shares worth Rs 8,895.80 crore in the month of August, till 23 August 2007. FII inflow in the month of July 2007, totaled Rs 23,872.40 crore.

Inflation has been under control. India's wholesale price index rose 4.10% in the 12 months to 11 August 2007, slightly up from the previous week's 4.05%, due to higher food and manufactured product prices, government data showed on Friday, 24 August 2007.

Weekly Stock Ideas

Buy REL at Rs735 with SL 727 Target of Rs755, 760

Buy Kotak Bank at Rs649 with SL of Rs638 and Target of Rs670, 675

Buy Arvind Mills at Rs46 with SL of Rs43 and Target of Rs52, 53

Buy JP Associates at Rs841 with SL of Rs833 and Target of Rs870, 875

Buy Maharashtra Seamless at Rs579 with SL of Rs571 and Target of Rs597, 603

THE WEEK AHEAD

Friday 24 August, 2007

MARKETS & MID-TERM POLLS

Just when you thought the waters were safe again……… These were the promo lines for the sequel to yesteryears Hollywood blockbuster Jaws.
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After seeming down and out for the count last weekend, markets worldwide got an unexpected respite when the US Fed, in a move dictated more at containing negative market sentiment, announced a rate cut.
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Expectedly, markets across the globe opened gap-up on Monday and though the Indian indices gained in numerical terms, the undercurrent of caution remained palpably visible. Why ?

Well, two issues loom large over the Indian bourses. One, the inevitable but yet unavoidable shocks that further sub-prime shocks in the US market can deliver and second, the implications of the bind that the Left Front parties in India have got themselves into.

Most might well say, so whats new, regarding the latter, but this time around, they have the Government itself in a bind. For a group of parties with a mere 60 seats, the Left Front has enjoyed unparalleled power for the last 3 years without any accountability, as they have chosen ‘outside rule’ to participation in this Government.

Having got used to getting the Government to heel on most issues, even as they raved and ranted, often for no reason, this time around, they have been stunned by the Prime Minister’s dare to them, to actually bite, instead of barking.
Now, having worked themselves into a corner, where their ability to bite rather than merely bark has been challenged, they seem at pains to extricate themselves with some face saving exercise, even while hardening their public posturing.

The Congress party has ruled India for close to 90 per cent of the time that India has been independent, and they do know a trick or two about electoral ground realities. Even as they make conciliatory noises and offer to search for a face saving exit for their Left allies (?), they seem very clear that there is no political dividend to be reaped by rolling back the 123 agreement with the USA.

Now, will all hell break loose in our markets if a mid-term poll were to take place ? For one, historic evidence clearly suggests that while stock markets have the wherewithal to absorb shocks and unfavourable developments, it is uncertainty that hurts markets far more.

Another positive for the markets, which has been at the receiving end of the Left Front’s dog in the manger attitude towards economic reforms is that ground realities in the red bastions of Kerala and West Bengal suggest that it would struggle to achieve even 50 per cent of the seats it did last time.

So, who should really be scared of a mid-term poll ? My hunch is that marketmen have their eyes focused on the US markets and how the sub-prime shocks saga unfolds rather than the political circus on in India at the moment.

Latest Greymarket Premium

Motilal Oswal 725 to 825 120 to 125

Indowind Energy 55 to 65 3 to 5

Magnum Venture 27 to 30 2 to 3

Puravankara Projects 400 Discount

Take Solutions 730 130 to 140

KPR Mills 225 Discount

Asian Granito 97 +3 / -3

Wednesday 22 August, 2007

Technicals - Aug 22,2007

Grey Market Premium

Motilal Oswal 725 to 825 230 to 240

Indowind Energy 55 to 65 4 to 5

Magnum Venture 27 to 30 3 to 4

Puravankara Projects 400 AT PAR / Discount

Take Solutions 730 220 to 230

KPR Mills 225 Discount

SEL Manufacture Ltd. 90 Discount

Asian Granito 97 3 to 4

Tuesday 21 August, 2007

Grey Market Premium

Central Bank - Rs 30.
SEL - Discount
Asian Granito India - Rs 3.
Puravankara - Discount
Take Solutions - Rs 250.
KPR Mills - Discount
Motilal Oswal - Rs 240.
Indowind Energy - Rs 4.
Magnum Ventures - Rs 4

Motilal Oswal premium steady, Central Bank has come down from 38 to 35 to 30 now.

IPO Analysis Note - Motilal Oswal

MOTILAL OSWAL FINANCIAL SERVICES Ltd. - Market Driven Fortunes

MAX. ISSUE SIZE (Rs) : 246 crores
PRICE BAND (Rs) : 725 - 825
ISSUE OPENS/CLOSES : 20th to 23rd August, 2007
LISTING : NSE, BSE.


Motilal Oswal Financial Services is a NBFC with subsidiaries engaged in providing stock broking and commodity broking, venture capital and investment banking services. The primary objectives of the IPO include offering margin financing facilities to retail clients, augmenting working capital needs and purchasing office space.

It is noteworthy that well over 80 per cent per cent of the company’s revenues of Rs.379 crore in 2006-07 were generated from its equity broking business. Clearly, a booming equity market has had a big hand in the upswing in this company’s revenues. Its other lines of business are relatively nascent and still struggling to achieve critical mass.

Any downturn in the market could thus impact its topline. As regards its bottomline, the decision to use the franchisee route to grow its business may trim its margins, but can take it into new geographies.

The bigger risk to its bottomline is the emergence of new players with deeper pockets and the proliferation of online trading, a segment in which its presence has hitherto been negligible. The company’s relative inability to build an active margin-financing book, another high margin, high growth area too could impact its bottomline growth.

Amidst these concerns, there can be no mistaking the brand-equity that Motilal Oswal enjoys in the Indian equity market space. Also, on a relative pricing parameter, a forward P/E demand of 25 plus renders it more attractively priced than its closest listed peer, India Infoline.

The moot question however remains whether this alone can sustain its fortunes were the markets to downturn violently like it did last week. Hence, those betting on this IPO would need to have above average risk-appetite and hope that the ongoing market volatility does not precipitate into a crisis.

Does Technical Analysis really work?

One of the most common questions that i get quite very often is, “Does Technical Analysis really work“? It is easy to assume that such doubts would come into mind only if one has lost money Using Technical Analysis or if one Never used Technical Analysis. Having spent a significant amount of my life towards learning, understanding, using and eventually mastering (so to speak) Technical Analysis, i have my reservations too.
Technical Analysis or TA as it is commonly referred as, is a art of understanding Chart Pattern and predicting future stock movements.


Is Technical Analysis a fluke?

Technical Analysis is Not a fluke. It is a study that involves some of the most complex algorithms and spin off, of Statistics. Similar to statistics where one uses past information/data to predict future course of action, TA too follows on the very same path.

Can someone really predict future Stock Prices using TA

There are over 150 actively used Technical tools, popularly known as Technical indicators that traders across the world use to conduct their Technical Analysis and research on stocks. With so many Indicators it is easy to imagine that the number of ways in which one can try and predict future stock prices is huge. Picking the right indicators at the right time is important for the success of such predictions. But to answer the question, yes, if used properly TA can predict future stock prices with a fair amount of certainty.

Does Technicals Analysis have a timeframe?

Sure. It is easy. If you are a day-trader, you would use price charts less than 1 day, which would be hourly or minute charts. If you are a swing trader, you would use Daily stock price charts. If you are a long termer, you might want to use weekly or monthly Stock price Charts. As you can imagine, the results would be completely different for different timeframes and hence, Timeframe in TA is pretty much the most important criteria.

What is the success percentage?

Honestly speaking, if someone says that he or she has been able to predict stock prices for all stocks that they analyzed, then they are clearly buffing. With so much experience behind me, i would say, i am about 70%+ times correct. One of the most important thing to remember while trading is that you must have an Exit strategy decided even before you have bought the stock. Proper money management is what saves you at the end of the day. Remember, having a good plan in place will help protect your capital, which would otherwise just deplete away.

There are so many indicators, which one should i use?

Answer to this question is extremely difficult. Not because the question is difficult, but because there are so many unknowns. For example, a Glass filled hall with water can be viewed by one person as “Glass Half Full” while another person views the very same glass as “Glass Half Empty". Likewise, one trader may like MACD, while other may like Bollinger Bands. Most often traders establish a comfort level with the indicator that they are using. The more you use an indicator AND taste success, the more confidence and faith you gain over that indicator.
By nature, NO one indicator is good or better than the other.
In fact, one must Always get confirmation from at least 3-5 different indicators before placing a trade. For example, if you decided to go long on a stock looking at MACD and say moving averages, make sure you get a second confirmation using at least 3-5 other indicators such as rsi, mfi etc. It is like this. If someone is down with a disease and was asked to operate, he/she will ideally NOT go to the operation theater right away. Instead he/she prefers to take a Second opinion from another doctor. Why? Because, it is always possible that the 1% doubt that the first doctor had, was answered by the other doctor. The same is applicable to stock picking too.

In the end, i would like to say that Technical Analysis is a Great Art/Science that is equipped with tons of Technical Indicators/tools and when used properly can work wonders for you. However, it requires lot of patience and dedicated learning effort….

Monday 20 August, 2007

Welcome bulls, Discount shop open

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected. - George Soros.

On Friday afternoon, the bulls may not have had the confidence to step in. With the Federal Reserve throwing in an unexpected life jacket in the form of a 50 bps cut in the discount rate, a buying spree may take place on the local bourses today. Stocks across global markets have rallied, led by of course the Wall Street. The Dow jumped 1.8% while the Nasdaq did even better, climbing 2.2%. The FTSE 100 in London gained 3.5%. All Asian markets are up anywhere between 3.5-5% this morning. Expect a gap-up opening. But, investors will still have to deal with intra-day volatility and just as the market showed resilience on Friday and bounced back, there is every chance of some cooling at higher levels.

In all the euphoria, don't forget the rumblings going on in the national capital. The impasse between the UPA regime and the Left front just refuses to subside with both the camps maintaining their adamant stance. The Left has given an ultimatum to the Government, which is either have power at the Centre or the nuke deal. While the non-communist allies of the Congress party have thrown their weight behind Sonia Gandhi and the PM, the Left wants the Government to restrain from any further step till an expert panel's report on the fallout of the controversial deal is out. Watch developments in New Delhi closely as it could impact the stability of the Government.

In stock specific action, shares of Refex Refrigerants will list on the bourses today. The issue was subscribed 7 times and the company had fixed an issue price of Rs65 per share. Going by the current mood in the market, we won't be surprised if the stock falls below its issue price.

JSW Steel's Board is to meet tomorrow to consider an acquisition in the US.

Telecom stocks will be in action amid reports that the TRAI is considering scrapping the cap on the number of players in a circle, besides the proposal to allow a company to offer both GSM and CDMA services under the same license.

Century Textiles is likely to advance amid reports of an out-of-court settlement with the Wadias over the Mumbai land. In addition, there is a buzz in the market that the BK Birla Group company could go ahead and demerge its cement division and merge it with Grasim. Engineers India and Sanghvi Movers are good investment bets.

ICICI Bank will be among the gainers as the FIPB has cleared its plan to induct foreign investors in its proposed new wholly-owned subsidiary that will house its insurance and asset management businesses.

PNB and IFCI will attract attention as a financial daily has reported that the state-run bank is likely to bid for the 26% stake in the latter. Great Offshore is another stock that will be in the limelight on news of an acquisition


Continuous selling in the early trades and short covering in the later part of the session was the outline of the markets on Friday, not only in India, but also bourses across the globe followed the same pattern. After constantly losing ground in the first half; Indian bourses followed its Asian peers as an extraordinary pull back of over 1000 points by the Hang Seng market in Hong Kong lifted the sentiments of the traders at home.

However, Markets fell for the third trading session as the key indices recorded its worst weekly loss in five months. Tata Steel led the down fall as the world’s sixth largest steel maker lost 5.4% others heavyweights like Satyam Computer, ONGC and Infosys were the major lagging movers among the 30-scrip’s of Sensex. Finally, Sensex lost 216 points to close at 14141 and NSE Nifty slipped 70 points to close at 4108.

Sical Logistics lost by 1.5% to Rs222. The company yesterday announced that it acquired cutter section Dredger for $24.92mn. The scrip touched an intra-day high of Rs238 and a low of Rs200 and recorded volumes of over 14,000 shares on NSE.

IPCL gained by 1% to Rs350 as LIC raised stake in the company to 14.02%. The scrip touched an intra-day high of Rs354 and a low of Rs340 and recorded volumes of over 56,000 shares on NSE.

ICICI Bank declined 1% to Rs824. According to reports, India may give conditional approval to a plan of the company to set up a subsidiary to hold its insurance and mutual funds businesses. The scrip touched an intra-day high of Rs861 and a low of Rs806 and recorded volumes of over 57,00,000 shares on NSE.

Hindustan Zinc was down by 2.6%to Rs670 after the company yesterday announced that it had lowers lead prices to Rs137,000 per ton. The scrip touched an intra-day high of Rs704 and a low of Rs658 and recorded volumes of over 1,00,000 shares on NSE.

Siemens slipped by 1.3% to Rs1198 after the company announced that it secured an order for installing a new hot-strip Mill. The scrip touched an intra-day high of Rs1224 and a low of Rs1130 and recorded volumes of over 2,00,000 shares on NSE.

Petronet LNG declined 2.2% to Rs61. Asian Development Bank and KFW declared that they would lend $169mn to the company. The scrip touched an intra-day high of Rs63 and a low of Rs59 and recorded volumes of over 42,00,000 shares on NSE.

Fertilizer stocks ended firm in a falling market. Nagarjuna Fertilizer rallied by over 17% to Rs32. Chambal Fertilizer surged by 6%to Rs37 and Deepak fertilizer added 2% to Rs95.

Highly volatile Banking index lost 1% towards the end. Heavyweight SBI edged lower 0.2% to Rs1519, ICICI Bank was down by 1% to Rs824 and HDFC Bank lost 2.4% to Rs1068. OBC, Corp Bank and Andhra Bank were the major losers among the Mid-Cap stocks.

Realty stocks bucked the negative trend, as the index has gained by 0.5%. Unitech gained by 3.6% to Rs483, Sobha surged by over 5%to Rs780. However, Akruti slipped 2% to Rs486.

Fund Activity:

FIIs were net sellers of Rs35.36bn (provisional) in the cash segment on Friday and the local institutions pumped in Rs19.44bn. In the F&O segment, FIIs were net sellers at Rs10.49bn. On Thursday, foreign funds pulled out Rs28.5bn from the cash segment. Mutual Funds were net buyers at Rs2.39bn on the same day.

Major Bulk Deals:

Religare Securities has bought Alfa Transformers; Lotus Fincorp has picked up Diana Tea; Deutsche Securities has purchased PSL while Deutsche Bank has sold the stock; Citigroup Global has picked up Punj Lloyd; HSBC Financial has bought Century Bank of Punjab; HSBC Financial has sold Alok Industries; Citigroup Global has sold India Infoline; Citigroup Global has sold Orient Paper.

Insider Trades:

ITC Ltd: Mr Anup Singh (Wholetime Director) has sold in open market 20000 equity shares of the company on 10th August, 2007

Max India Ltd: Analjit Singh, Chairman has purchased from open market 28000 equity shares of the company on 10th and 13th August, 2007

Lower Circuit:

Goldstone Tech, Morepen Labs, Kothari Products, Yashraj Industries, Swan mills, IOL Broadband, Era Construction, Adhunik Metaliks, IID Forgings and BF Utilities.

Upper Circuit:

LML, Jai Corp and Assam Company.

Delivery Delight (Rising Price & Rising Delivery):

Assam Company, India Cements, Punj Lloyd, PNB and Sun Pharma.

Abnormal Delivery:
IPCA Labs, Chambal Fertilizers, NALCO, Gammon India and Bhushan Steel.

Major News & Announcements:

FIPB approves ICICI Financial Service stake sale to foreign companies - Reports

Inflation for the week ended August 4 was at 4.05%, against expectation of 4.30%

India's output at 6 key industries grew 5.3% in June

Educomp Solutions buys 51% stake in Authorgen Technologies

Gulf Oil Corp to consider stock split on 17th August

BHEL signs accord for 1000MW Sudan Project – Reports

Siemens bags an order for installing a new hot-strip mill.

Sunday 19 August, 2007

Small cap picks!

Sree Rayalaseema Hi-Strength Hypo (Rs 21.05):
The rewarding thing about trawling the papers day in and day out is that one day god may smile and say, “Bachcha, I am pleased with your devotion. I shall grant you a bargain penny stock that shall be hidden from public view as long as you want it.”

The moment manifested in the form of SRHSH. Looks at its 2006-07 financials: equity of Rs 10.18 crore, EBIDTA of Rs 13.2 crore, tax paid at 34 per cent, EPS of Rs 5.61, market cap of Rs 22 crore. First reaction: oh, one-off. Then SRHSH surprised with its first quarter: an EBIDTA of Rs 3.49 crore and an interest cover of 9. Nine!

SRHSH manufactures calcium hypochlorite and monochloroacetic acid; the former is being increasingly preferred as an environment-friendly alternative for chlorine in swimming pools and water purification the world over.

The company exports nearly all of this product so the results that you see in the first quarter of this year is after the impact of the rupee’s appreciation. The company manufactures the product through the specialised sodium route, developed in-house, mastered only by a few companies in Asia.

This is my turn-on: SRHSH has embarked on an expansion of its sodium hypochlorite capacity by 50 per cent and its monochloroacetic acid capacity by more than 100 per cent; out of internal accruals and debt, if you please; these will translate into reality by the end of 2007; enhanced utilisation should translate into revenues of Rs 160 crore for 2008-09. If margins are maintained, shareholders could be laughing all the way to the AGM. Provided it is not in Kurnool, Andhra Pradesh!




Jhunjhunwala Vanasapati (Rs 80.80):
Welcome to the next edition of Battle of Biases. If I told you that this company makes vanaspati and mustard oil, you are likely to turn up your nose and say, “Sunset business”.

But if I told you that the name of the company was Sterling Foods or something and that it was likely to report a turnover of Rs 1000 crore-plus in the current year, your first reaction would be, “What a franchise!”

If I told you that this is a 3 per cent EBIDTA business, you are likely to pass some uncharitable remarks about the intention of the management. But if I told you that the worst interest cover in the last five quarters was still a little over 8, you would be tempted to say, “Cash rich”.

If I told you that the company was headquartered in Benaras, your first reaction would be “Governance konni!” But if I told you that EBIDTA has increased across every single quarter of the last five quarters and the company quotes for a mere market cap of around Rs 65 crore against a projected EBIDTA of around Rs 30 crore for the current year, you are more likely to sheepishly concede “Accha, chalo aap bolte hain toh…”




Indag Rubber (Rs 42.65):
The biggest pre-cured tread rubber brand in India is the venerable Elgi, right? And the second biggest? Pakde gaye na? The industry leader enjoys a market capitalisation of around Rs 100 crore and the number two? A mere Rs 22 crore. And that is the mother of all my arguments for Indag, the crown prince.

The numbers come later: Indag’s first quarter EBIDTA in the current year was the fifth straight quarter-wise increase, peaking at Rs 2.51 crore this latest quarter; EBIDTA margin increased across each of the last four quarters; Elgi enjoyed an EBIDTA margin of around 10 per cent for 2006-07, whereas Indag’s was 14.57 per cent in the first quarter of this year; interest cover increased across each of the last five quarters peaking at 6.44 this latest quarter.

This is the nugget I like: its weight-mileage ratio is considered among the best in the industry; its technology, developed in-house, enabled it to more than neutralise the disadvantage of moving out of collaborator Bandag’s shadow (now a Bridgestone company); its export exposure is increasing now that the collaborator is out of sight; its low asset utilisation of only around 62% in 2006-07 is what my friends in the market call a high operating leverage; it can enhance overall capacity by 50 per cent at a negligible cost through a transfer of assets from its erstwhile Rewari plant.

This is what I like about its industry: roads are improving and truck overloading is declining so tyres are being protected enough to deserve a retread instead of being chucked; expensive radialisation means that users would rather retread tyres than throw away; large transporters are more likely to go in for organised retreaders for enhanced reliability and mileage; decline in sales tax in some states to 4 per cent is narrowing the differential between the organised and unorganised players, widening the market and strengthening Indag’s margins.




WS Industries (Rs 82.05):
Suddenly, half of India including my mother-in-law is bullish on this porcelain insulator company.

The reasons: India’s considerably-under-provided power transmission sector is the next big thing, the country’s transmission lines are graduating towards higher voltages, Power Grid’s next mega tender is around the corner, global opportunities are emerging in East Asia, Latin America, North America, North Africa and Europe (going through aggressive line refurbishment) and the insulator industry growth of 12-15 per cent over the last three years of the Tenth Plan is going to lead to an average 20-22 per cent per year in the Eleventh Plan.

So what does all this mean for dear WS? An order book for more than a year, a new plant under commissioning which will enhance capacity from 16,000 tpa to 27,000 tpa, additional capacity to go on stream in the first quarter of the next fiscal, project funded through a private placement (equity already diluted) and enriched product mix (first to develop products for the 800 KV line and is working on the 1200 KV line) will strengthen margins, a debt-equity ratio of less than 1 will translate into improving interest cover and the company possesses a full-blast revenue potential of around Rs 350 crore.

Now look over your shoulder. A company with large exports, WS Industries reported its highest ever EBIDTA margin in the quarter when the dollar slumped, interest cover rose almost every quarter over the last year; the company reported five quarters of back-to-back EBIDTA growth into the first quarter of the current fiscal; revenues of the first quarter of the current fiscal were better than the last quarter of 2006-07!

What is not widely public is that the business has a high fixed cost but once that is covered, it recruits people to count the money. But that’s only between you and me.




Akar Tools (Rs 37.10):
Quick, if you were being offered for Rs 22 crore a company with the possibility of earning Rs 9 crore in EBIDTA (earnings before interest, depreciation and tax) during the current financial year, would you yawn or call your merchant banker by reflex action?

And this is my pitch for this Aurangabad-based hand tool and leaf spring manufacturer, which surprised with a double digit EBIDTA margin in the first quarter of 2007-08 on a total income of Rs 17.83 crore and an equity of Rs 5.40 crore.

If you don’t trust these numbers, consider this: hand tool capacity increased from 2,400 tonne per annum (tpa) to 3,600 tpa last December and leaf spring capacity will increase from 3,600 tpa to 12,000 tpa by the last quarter of 2007-08 – all financed through internal accruals and debt.

Scale will address the growing demand of leaf springs from OEMs, and the product mix will evolve from conventional leaf springs to value-added parabolic springs. At full blast that could be a top line of Rs 140 crore at slightly better margins in 2008-09. Now reach for your calculator.

Falling grey market premium spells bad news

The reverberations generated by the subprime shock-waves could have an impact on some of the initial public offerings (IPOs) due to hit the markets in the near future. A look at the latest grey market premium of some of these IPOs reveals that the premium has declined sharply.

Experts said while pricing an issue, usually 20-25% listing gains are left for investors. However, when markets fall, this premium shrinks, with many a stock losing its sheen, thereby making it unattractive. Hence, current market conditions being what they are, experts feel depending solely on the grey market numbers would not be the right thing.

Take, for the instance, the issue of Zylog Systems, which made its debut on the bourses on Friday. Pre-listing, the company was quoting a premium of Rs 200 in the grey market, down from about Rs 250 early this month. The issue price had been fixed at Rs 350 and the stock closed at Rs 431 on BSE. When the stock touched a high of Rs 525 in initial trade, investors were quick to book gains despite the grey market pricing being substantially higher.

In issues like KPR Mills, where the premium was Rs 20 per share in a price band of Rs 225-265 on August 1, is being quoted at a discount in the grey market. The company’s issue price has been fixed at Rs 225 now. Others like SEL Manufacturing, which had a premium of about Rs 4-5 till a few days ago, saw the same shrinking to about Rs 2.

The issue has a price band of Rs 80-90. If the global meltdown continues, investor apathy could spread to more issues.

“Listing successfully and leaving enough gains for the investors help keep the company’s image as a positive one among investors. Investors usually look for a minimum of 20-25% upside on listing. This price is fixed in consultation with institutional investors, pre-markets rounds and based on market feedback,” said Mumbai-based financial services company Keynote Corporate Services’ managing director Vineet Suchanti.

In issues like Asian Granito, the premium has come down from 20% earlier to about 5% now. The recently-listed IVR Prime, which had an issue price of Rs 550, was being quoted at a premium of about Rs 15-20 at the beginning of the month. But the issue closed at Rs 418 on Thursday, after touching a low of Rs 388, much below its issue price. While Puravankara Project’s lowering of price band from Rs 500-525 to Rs 400-450 was more a case of an overpriced issue, it was made further unattractive due to volatile markets.

“There is a large pipeline of issues slated to hit the market in the coming months. If the global markets continue to slide further, the issues that have already closed for subscription could see a decline in premium. Some of the issues could also see a re-pricing,” said a merchant banker.

“Bankers have become more careful while pricing an issue, keeping in mind the probability of a market fall. The recent gains on listing was witness to substantial under-pricing in many issues,” he added.

Investor's Eye

Prominent bulk deals on NSE & BSE

Prominent bulk deals on NSE & BSE

Week Ahead

Grey Market Premiums

Take Solutions 730 310 to 320

Motilal Oswal 725 to 825 240 to 250

Magnum Venture 27 to 30 3 to 4

Indowind Energy 55 to 65 5 to 7

Puravankara Projects 400 Discount

KPR Mills 225 Discount

Refex 65 5 to 7

Central Bank 102 32 to 33

SEL Manufacture Ltd. 80 to 90 2 to 3

Asian Granito 97 5 to 7

Grey Market Premiums are coming down, think twice before applying in substandard IPOS

"Believe in India" - Rakesh Jhunjhunwala

The biggest bull of them all Rakesh Jhunjhunwala, says that India is likely to benefit from its strong fundamentals in the long term but only after a tough intermittent transition period.

He feels that high degree of complacency has set in as too much easy money has been made too quickly and world equity markets are bound to get shaken in the near future.

Mr Jhunjhunwala was speaking at the convocation ceremony of IIT Mumbai last week. In what should be called a rare glimpse of bearishness - he bet that the US economy is bound to slow down sometime after a 25 year bull market.

Corporate profits as the engine

But this has not changed his faith in the Indian economy. “India has got all ingredients that markets value,” he quipped. In a presentation made to students, he said that corporate earnings will grow at over 18% (faster than unorganized sector) the sustained earnings expansion driven by growth and productivity.

India has a favourable framework for equity investing with high standards of corporate governance, transparency, effective regulation, electronic trading, dematerialisation and tax paradise for equity investing under the STT regime. “Good balance between domestic consumption and global outsourcing opportunities coupled with rising savings, yet low equity ownership offer a significant potential,” said the legendary investor.

Mr Jhunjhunwala also sang an ode to India’s economic resilience by proving that its being a country with least volatile economic growth. He calculates that the difference between the maximum and minimum GDP growth is least as compared to other Asian countries like Taiwan, South Korea, Singapore, Hong Kong and Malaysia.

Indians everywhere?

Mr Jhunjhunwala says that its people are the country’s biggest assets. One of his slides said that 38% of doctors in America are Indians, 12% of Scientists in America are Indians and similar numbers for Nasa, Microsoft and IBM employees are 36%, 34% and 28% respectively.

He sums up by saying that Indian skills and Indian enterprise have now got a global level playing field and a much superior platform than India Inc has ever had before.

A tough period for equities

He, however, also spoke of scenarios under which the Indian economy could lose way temporarily. Slowdown in US economic growth, tanking of global economy, politicians messing up figure prominently this list.

Turmoil in debt markets, rising oil prices, rising interest rates, China slowdown and global currency realignment are some of the other factors. But the impact on India could be lesser as here interest rates may soften and India’s domestic consumption could see it through. Having said that he warns that the next few months will be tough for stocks.

Conclusion

India has now changed from a deficit to surplus economy with emergence of first generation entrepreneurs. The growth in the airlines industry, mobile phone, increases in tax to GDP ratio and changing attitudes where wealth/profit no longer a dirty word, is a tribute to India’s growing prowess.

Recovery on the way...

Having lost close to USD 100 bn in last 15 sessions on sub prime mortgage concerns, Dalal Street may hope for happier times ahead with improving global cues after US Federal Reserve cut the rate at which it lends to banks, even as some feel more steps were needed to tackle the crisis.

Indian bourses lost close to Rs 4,00,000 crore -- nearly 10 per cent in overall market capitalisation -- in just a fortnight of trading since July 27 after the credit crunch in the us economy spread across the globe.

While the Fed's decision to cut the primary credit rate by 50 basis points to 5.75 per cent came as a reprieve for us and European markets on Friday, domestic bourses, which were declared closed before the rate-cut was announced, will react only tomorrow.

Multiple crashes since July 27 have wiped off nearly all gains made by BSE in the past six months, while taking the benchmark Sensex back to January-February level. Analysts at global brokerage giant Merrill Lynch said the rate cut would not necessarily bring a sustained stability in the markets.

"Prior two asset and credit bubbles that unwound from 1990-92 and again from 2001-03 show that Fed cut interest rates 100 basis points, the central bank believed that it acted in time to prevent a recession or bear market," Merrill Lynch's North American Economist David A Rosenberg wrote in a research note after Friday's rate cut.

"But, recessions did follow the initial Fed rate cuts back then, and so did a cyclical bear market in equities. Not even the Fed could stand in the way of nature taking its course and expunging the bad credits out of the system," Rosenberg said.

Creating A Winning Mindset

Do you know anyone who always wins? Sure you know that person, everything just works out for them. They go into business and they are an instant success. They enter the dating scene and their phone rings off the hook. If they were in the Olympics, you just know they wouldn’t settle for anything less than the gold. It seems as though they always win.

Why is it that some people just have IT and others seem not to? Want to learn the secret to their success? Ready? Here it comes….the secret to unstoppable success…drumroll please….Winners EXPECT to win!

That’s the big secret. Simple, huh?

But, think about it for a moment…Winners actually SEE their success BEFORE it happens! Do YOU expect to win BEFORE you have even entered a situation…or do you assess your chances AFTER you are already in the situation? Or, even worse, do you imagine failure?

BEFORE selling a piece of real estate, winners EXPECT to get their asking price. BEFORE buying a car, winners EXPECT to get a discount.

Before running an Olympic race, winners EXPECT TO WIN the gold, so they do win! This one small thing gives winners a tremendous advantage over others.

Want to be a winner?

Try this exercise…

Close your eyes for a full minute and THINK about achieving a goal in your life…go ahead, close your eyes for one minute and really THINK about achieving it.

OK, now close your eyes again for one full minute and EXPECT to get it. Did you notice a difference? When we simply THINK about getting something, our thoughts tend to be vague.

There are also two options…getting it or not getting it (winning or losing). But, when we EXPECT to get it, there is only one possibility…getting it (winning).

So now that you know the secret, the next step is applying your powerful knowledge and getting yourself to that point where YOU ALWAYS EXPECT TO WIN. I suggest that you take a full minute pause right before entering any challenging situation. During that minute, close your eyes, and imagine winning. See it, feel it, hear it, imagine yourself already having won. Guess what…you will have programmed your mind to pull you powerfully in the winning direction.

When you do enter that situation, your words and actions will be generated from a winning mindset. Your path will be straight to victory…you will already know the way and EXPECT to get there…so you WILL get there. Want a little more help with this?

Using the power of hypnosis, you can easily program yourself for a constant winning mindset. This is why I have created over 70 powerful hypnosis products to help you achieve all of your desires. I invite you to visit my vast library of tools you can use in your life right now to make a postiive change. They are now avaliable in downloadable form…this means you can use them right NOW. Learn more…

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Until next time,

Live in abundant possibility!

About The Author

Steve G. Jones is a board certified Clinical Hypnotherapist. He is a member of the National Guild of Hypnotists, American Board of Hypnotherapy, president of the American Alliance of Hypnotists, on the board of directors of the Los Angeles chapter of the American Lung Association, and director of the California state registered Steve G. Jones School of Hypnotherapy.

http://www.betterlivingwithhypnosis.com

support@betterlivingwithhypnosis.com

Saturday 18 August, 2007

What is subprime problem?

What is happening in the mortgage market?

The riskiest segment of the US mortgage market, which serves borrowers with poor credit histories at high interest rates, has seen rising default rates in recent months.

The Mortgage Bankers Association said lenders began foreclosure against more than one of every 200 US mortgage borrowers in the fourth quarter, a record.

What types of loans are considered 'subprime'?

There are "no doc" loans. That's when you get a loan without giving the lender any documentation about your income. There are also "low doc" loans, or when you get a loan with just a little paperwork about your employment and income.

The number of non-traditional loans extended with low or no documentation jumped from 53.9 percent in 2003 to 65.7 percent in 2005, according to First American Loan Performance, which tallies home mortgage data.

How did this crisis come about?

While subprime mortgages have spread credit more widely and helped more people buy their own homes, critics contend a hot real estate market encouraged lenders to get more aggressive and offer increasingly complicated terms that borrowers did not always fully understand. These risks are being exposed as the housing market cools.

What's happening to the lenders ?

Waning demand from investors for home loans has toppled more than 70 mortgage companies and half a dozen hedge funds in the US since the start of last year. Concern over rising defaults has prompted bankers to reduce credit lines for home lenders.

Why is the meltdown among subprime lenders having an impact on the whole US stock market?

There is concern that the crisis could spread to more mainstream lenders and worsen the US housing slowdown. Delinquencies often foreshadow future loan failures and those bad credits could damage other mortgage-backed investments held by a wide range of investors.

Some economists worry that as house prices fall and lenders tighten credit terms, consumers will curb spending and drag down the US economy.

What would be the damages?

The US subprime mortgage crisis will cost credit investors about $150 billion in losses worldwide, according to Calyon, the investment banking unit of Credit Agricole SA, France's third-largest bank by market value.

Foreclosures may reach 20 percent of the $1.3 trillion of subprime mortgages outstanding, according to a research note. Assuming investors can recoup half their investments, losses would be $130 billion, it said.

A further $20 billion could also be lost from the $1 trillion of outstanding Alt-A mortgages offered to borrowers with better credit who fell just short of typical standards. Various other estimates for total subprime losses range from $50 billion to $200 billion, according to the report. Federal Reserve Chairman Ben S. Bernanke last month cited potential estimated losses of between $50 billion and $100 billion.

What's the outlook?

Some analysts believe the crisis in the subprime mortgage market could boost the chances of the Federal Reserve cutting its target for benchmark interest rates.

One of the factors driving the poor performance of subprime mortgages has been a series of interest rate increases by the Fed. From 2004 to last summer, benchmark rates rose 4.25 percentage points to 5.25 percent. That has led to a steep rise in payments on adjustable rate mortgages.

"The Fed is aware of the situation, and how raising rates might worsen the situation. " said John Kriz, managing director of real estate finance at Moody's Investors Service, a leading credit ratings agency. "Our view is that it is less likely that rates will rise and more likely they will fall."

The Fed may have done enough after adding $62 billion to the banking system on August 9 and 10 and pledging further funds as necessary, says Dominic Konstam, head of interest-rate strategy at Credit Suisse in New York. Stocks rallied worldwide on Wednesday, while the ECB said today it's optimistic that ``market conditions are normalising.''

Friday 17 August, 2007

Sensex down 217 pts, Nifty down 71 pts

Nifty managed to close over 4100 while Sensex managed to close over 14000 mark. Sensex ended down 217 points at 14141.5. It recovered 362 points from days low. Nifty ended down 71 points at 4108. It recovered 100 points from days low. CNX Midcap Index was down 2% while BSE Small-cap Index was down 1.3%.

Market made smart recovery during the day in line with the global markets. Nifty managed to close over 4100 while Sensex managed to close over 14000 mark. Sensex ended down 217 points at 14141.5. It recovered 362 points from days low. Nifty ended down 71 points at 4108. It recovered 100 points from days low. CNX Midcap Index was down 2% while BSE Small-cap Index was down 1.3%. All the BSE Sectoral Indices ended in the red barring Reality Index. BSE Metal Index was down 4.7%, BSE IT Index was down 3% while BSE FMCG Index was down 2.3%.

Index Losers were HPCL, down 8.5%, Sterlite, down 7.2%, Satyam, down 5.8% and Tata Steel, down 5.4%. Index Gainers were RIL, up 0.80%, Sun Pharma, up 1.8% and Wipro, Siemens were up 1% each. NSE Advance Decline ratio stood at 1:4. Total market turnover was at Rs 86945.69 crore vs Rs 63845.27 crore on Thursday.

Rupee depreciated by 0.08% at 41.375 while Yen depreciated by 16 bps at 113.22 (hits intra-day high of 111.57 and intra-day low of 114.09).

Zylog Systems listed on the bourses today which closed at Rs 427.5 vs listing price of Rs 435 (issue price Rs 350).

Recovery in the Indices

Index

Low

Recovery (%)

Sensex

13779.88

2.62

Nifty 50

4002.2

2.64

CNX Midcap 100

5519.4

2.38

BSE Small Cap

7534.59

2.13

Index

Low

Recovery (%)

BSE Realty Index

6713.42

4.56

IT Sector

4356.76

3.3

Bank Index

7178.89

2.4

Healthcare Index

3410.08

2.26

Oil and Gas Index

7266.42

2.21

Capital Goods Index

11781.06

2.11

Auto Index

4506.67

1.2

FMCG

1796.16

0.86

Metals Index

9724.78

0.89

F&O Snapshot:

Nifty futures discount narrowed 15 points vs 35 points on Thursday (has narrowed to 6 & widened to 50 points during the day). Nifty futures turnover was 45% of total FNO turnover. Nifty futures added 56.6 lakh shares in OI. Short covering was seen in the reality stocks (Unitech, GMR) and stocks like L&T, Wipro, REL, and Jindal Stainless. Fresh shorts were seen in technology, metal & capital good stocks. Unwinding of long positions was seen in reality stocks(Lanco, Parsvnath, HDIL).

Long Positions were seen in the following stocks:

Nagarjuna Fertilizers was up 17%, added 1.33 crore shares in OI

RIL was up 1.2%, added 2.8 lakh shares in OI

IndusInd Bank was up 5.5%, added 5.7 lakh shares in OI

Other stocks where long position was seen India Cement, Bank of India, and Moser Baer

Short Covering was seen in the following stocks:

Realty: Unitech, GMR Infra, IVRCL Infra

Biggies: L&T, Wipro, REL, and Jindal Stainless

Other: Chambal Fert, MphasiS, LIC Housing & Triveni Eng

Fresh Shorts were seen in the following stocks:

Tech: Satyam, Patni, I-flex, TCS, Infosys

Metal: Tata Steel, JSW Steel, SAIL (unwinding)

Others; BHEL, DLF, ONGC, ABB

Unwinding:

Reality; Lanco, Parsvnath, HDIL

Others: Bongaigaon Refinery, Balrampur Chini, Praj Industries

Intra day recovery was seen in the following stocks:

Stock Name

Low

Recovery (%)

Indiabulls Finance

402.7

14.45

Indiabulls Real

403

14.14

India Infoline

506.65

11.97

Lanco Infratech

224.2

10.59

IDFC

105.3

8.93

Orbit Corp

403.3

8.36

Punj Lloyd

238.25

6.4

Unitech

455.3

6.31

IVRCL Infrastructure

319

6.24

Infosys

1743.15

6.2

Wipro

445

6.04

Reliance Communication

465.75

5.94

Reliance Energy

681

5.58

Bharti Airtel

750

5.33

Parsvnath Developers

275

5.02

GMR Infrastructure

727.5

4.74

HDIL

480

4.58

India Cement

205.25

4.51