Gujarat NRE Coke - Macquarie

Future is bright

 

Event

􀂃 Coking coal price upgrades: We have upgraded our coking coal and coke price forecasts to reflect the severe tightness in the market. We have also accounted for the strength of the A$ vs US$. We have adjusted our stock price to Rs251 from Rs244.

 

Impact

􀂃 Coking coal forecasts up, driven by supply constraints: Our global commodities team now believes that the coking coal market is likely to continue to be extremely tight. We have upgraded our coking coal forecasts for FY09 and FY10 to $300/t, an increase of 67% and 87%, respectively. We have upgraded our Coke prices for FY09 and FY10 by 11% and 26% to $550/t and $538/t, respectively.

􀂃 Earnings – upgrades from FY3/10: GNC is self sufficient for only 70% of its coke requirement in FY3/09, and also has pre-sold 20% of its coke production at around $500/t. We reduce our EPS estimate to Rs13/sh from Rs16/sh.

However, GNC will become self sufficient in coking coal in FY3/10, and we have increased our EPS estimate to Rs23.1 from Rs17.6.

􀂃 Target price – marginal change: We upgrade our target price marginally to Rs251 in spite of earnings revisions for two reasons: first, we have reduced holdings in Australian mines from 85% to 82% to account for stock options; and second, reduced coke margins are leading to lower values for Indian business.

􀂃 Upsides remain from better mine production: With coking coal becoming highly valuable, the earnings from the mines will account for 74% in FY3/09 and 77% in FY3/10 from a negative contribution this year. Increased production is a possibility (please see our note 'Reporting from the ground' dated 26 March 2008 for details).

Earnings revision

􀂃 We have adjusted our EPS estimates for FY3/08–FY3/10 by -25%, -21% and 31% to Rs5, Rs13 and Rs23.1, respectively.

 

Price catalyst

􀂃 12-month price target: Rs251.00 based on a Sum of Parts methodology.

􀂃 Catalyst: Increased mine production and rising coke prices.

 

Action and recommendation

􀂃 Maintain outperform: We believe GNC provides a good opportunity to ride the strong coking coal cycle. With increased visibility from the development of the mine, it has the potential to get substantially re-rated over the medium term. With the potential for earnings growth of 160% in FY3/09 and 78% in FY3/10, we believe the stock is attractively valued at just around 10x PER on our DCF- based target price

Hindalco Industries - Macquarie

 

Aluminium underperforms

 

Event

􀂃 4Q FY3/08 standalone results below expectations: Hindalco's 4Q FY3/08 standalone results were 20% below our estimates at the operating level due to lower realisations and higher costs in the aluminium segment. However, our full-year FY3/08 estimates were met.

 

Impact

􀂃 Results hit by aluminium costs: Net sales of Rs50.1bn were up by 5.5% due to higher copper prices. EBITDA of Rs7.97bn was down 24% YoY, driven by a 31% drop in aluminium profits. Net profit of Rs10.8bn grew by 49%, driven by extraordinary income due to writebacks.

􀂃 Aluminium – surprise loser: The aluminium division was surprised by a sharp rise in costs, which was mostly accounted for by a 17% increase in power costs. The lower availability of linkage coal from Coal India has forced the company to make open market purchases for its captive power. Also, realisations were 6% lower than our estimates.

􀂃 Copper – surprise winner: In spite of 42% lower TC/RCs, the copper division has been able to improve profitability by 25% YoY. Rising product prices and better working capital management made copper the surprise winner.

􀂃 Expansions remain on track: The Muri alumina refinery expansion, by 390kt, has been completed. The Hirakud aluminium smelter expansion, by 43ktpa, is expected to be completed by 2Q FY3/09. Hindalco management has released a timeline guidance for all major Greenfield expansions, with Utkal expected first by 3Q CY10.

􀂃 Copper mine – can be more valuable: Hindalco's 51%-owned copper mine (ABML AU) has turned in a 73% increase in volume growth and a 3.5-fold increase in profitability. With an improving mine life and a higher probability to add further reserves, ABML can turn out to be more valuable, in our view.

 

Earnings revision

􀂃 No change.

 

Price catalyst

􀂃 12-month price target: Rs251.00 based on a Sum of Parts methodology.

􀂃 Catalyst: Higher aluminium prices and better profitability in copper division.

 

Action and recommendation

�� Maintain Outperform: We maintain our Outperform recommendation on Hindalco because we expect a turnaround in Novelis to drive profitability sharply higher in FY3/09. Valuations remain attractive at around a 10x PER based on FY3/09E, given a strong growth profile, large accretion of coal and bauxite reserves and earnings growth potential.

HDFC Ltd - Macquarie

Strong operating performance

 

Event

􀂃 HDFC's strong operating numbers continue in 4Q FY3/08. There were some distortions caused by large asset sales and tax rates, but underlying performance remained robust.

 

Impact

􀂃 Loan growth strong, margins up. HDFC's mortgage business continues its strong growth, with loan growth at 29% and the share of individual mortgages stable at 66%. For quite a few quarters, HDFC has been bucking the trend of slower growth being experienced in the rest of the mortgage industry – its market share has been rising at the expense of banks. This is partly because banks' competitiveness is being eroded by rising CRR and they are increasingly concentrating on the wholesale lending markets, where fee opportunities are strong.

􀂃 Margins remain robust. Margins have been trending up through the year and finished the year with a 26bp improvement in spreads to 3.23%. The 75bp CRR hike announced by the Reserve Bank should help drive up HDFC's lending spreads further, as competing banks' intermediation costs go up.

􀂃 Tax rate a negative surprise. The tax rate provided a negative surprise in the year, pushing the full-year tax rate to 28% versus our estimates of 24%. This is due to the higher tax rate of 22% applied on the gains from sale of unlisted assets which provided the bulk of capital gains in this year versus the lower tax applied to sale of listed assets which constituted the majority of capital gains in previous years.

􀂃 Building on existing strength. HDFC's key strengths in cost efficiency and asset quality improved further this quarter with cost/income falling to single digits at 9% for FY3/08, down from 12% in FY3/07, while gross NPAs fell to an all-time low of 0.84%, down from 1.12% in 3Q FY3/08.

 

Earnings revision

􀂃 No change.

 

Price catalyst

􀂃 12-month price target: Rs3,573.00 based on a Sum of Parts methodology.

􀂃 Catalyst: NIM improvement in 2Q FY3/09E, as CRR impact flows through.

 

Action and recommendation

􀂃 HDFC's lending business is in better shape than ever before. The increasing importance of its insurance business does make its profile riskier than it has been historically, as does its semi-holdco structure. Its standalone valuation of 6.5x PBV masks the fact that significant value comes from its subsidiaries. We reckon that the parent bank is available at 4.0x PBV (one-year forward), which is very attractive, given its high and improving ROEs. We retain our Outperform rating with a target price of Rs3,573, 24% above current levels.

Reliance Communications - Macquarie

 

Less of wireless; Investing in future

 

Event

􀂃 Reliance Communications reported in line operating results for 4QFY08

although PAT came in ahead of expectations. We shift our Top Pick recommendation to Bharti Airtel even as we reiterate our Outperform on RCOM.

 

Impact

􀂃 4Q results driven by outperformance in the non-wireless businesses of Global and Broadband/Fixed Line, while wireless EBITDA came in line with our estimates. Wireless metrics were weak with ARPU and Minutes of Use surprising negatively while ARPM and EBITDA per minute were largely in line.

􀂃 MOUs decline sequentially at RCOM, in-contrast to trends at Bharti and

Idea. RCOM registered 4Q ARPU of Rs317, 3.6% below our estimate of 329, marking declines of 6.5% QoQ and 15.9% YoY. Similarly, monthly MOUs in 4Q at 430 were 2.8% below our estimate of 442. This is contrary to a sequential uptick in MOU seen in Bharti's (+7% QoQ) and Idea's (+9% QoQ) 4Q results.

􀂃 We believe RCOM is increasingly becoming an integrated telecom story

with the non-wireless businesses likely to drive operating performance for the next 3-4 quarters. Management is consciously focusing on EBITDA market share in the wireless business and RCOM now boasts of the highest EBITDA margins in the overall business and in the wireless segment across Indian telcos. Investors, however, are likely looking at subscriber and revenue market shares, while taking the view that profitability will follow. This apparent disconnect between management focus and market focus may cap stock valuations. We believe both revenues and margins will be equally important.

 

Earnings revision

􀂃 We are reviewing numbers for the sector and all three stocks post 4Q results.

 

Price catalyst

􀂃 12-month price target: Rs865.00 based on a Sum of Parts methodology.

􀂃 Catalyst: 1) Ramp-up in tenancy ratio in the towers business, 2) IPO of the TowerCo leading to value unlocking, 3) Successful GSM launch by end CY08.

 

Action and recommendation

􀂃 We continue to like RCOM as a company with strong future growth

drivers; it is investing aggressively in future growth (capex of US$11bn guided for FY09–10E). While this will likely deliver strong growth in topline and earnings post 2010–11E, the flip sides are a sharp increase in capital intensity, delayed free cash, lower return on capital in near-term and execution worries.

􀂃 RCOM's valuation re-rating may get pushed back by couple of quarters:

We believe that in the next 2–3 quarters, RCOM is unlikely to deliver positive surprises in operating performance. This will only improve with the launch of pan-India GSM service in the next 9–12 months. We think investors in the interim will be focused on execution and network rollout schedules as promised.

􀂃 Bharti our new Top Pick in Indian telecoms: We see Bharti as a well-oiled execution machine in the near term, delivering consistent positive surprises on key operating metrics. The widening chasm between Bharti & RCOM in QoQ wireless revenue growth will likely mean that catch-up in valuations between the two will likely be delayed. We shift our Top Pick reco in Indian Telecoms to Bharti Airtel (BHARTI IN, OP, Tgt Price: Rs1,400, Upside: 56%).

 

Reliance Industries - Macquarie

 

Largely unaffected by crude change

 

Event

􀂃 Macquarie oil and gas sector head, David Johnson, has upgraded the crudeoil forecast by 5-16% for 2008-11E and the long-term forecast from US$78/bbl to US$83/bbl. We have raised RIL's target price by 1% from Rs3,125 to Rs3,155. We reaffirm our Outperform recommendation.

 

Impact

􀂃 Fundamentals vs speculation. David has upgraded the oil-price forecast by a significant amount for 2008 to take account of the changing supply/demand situation and the influence of speculators/financial investors on the crudeprice equation.

=> Our demand forecast is based on our economists view that the US and European economies will show slower GDP growth in 2008 and that this will be reflected in a slowdown in the growth of oil consumption - 0.8% growth in oil consumption in 2008 (2007 =1.7%).

=> On the supply side, we look for a marginal rise in non-OPEC production of 0.3m bpd (0.6%) - FSU production accounts for almost all of the growth. We assume OPEC holds production at 32.15m bpd of oil and 5.1m bpd of NGLs.

=> Our oil-price forecast for 2008 is upgraded by US$14.50/bbl to US$102/bbl (WTI) to reflect the larger speculative elements we believe are included in current prices. We assume that these elements wane over time and that oil moves back into a US$80-85/bbl range.

􀂃 Investments led target-price upgrade. We think the effect of a crude-oil price increase on RIL will be small, given that oil (in comparison with gas, refining and petrochemicals) contributes towards a small portion of its business. We are upgrading our target price by 1% to factor in the revised value of RIL's equity holdings in line with current market prices.

􀂃 Volume-driven tripling in earnings. We expect RIL's earnings to triple in the next five years given strong volume growth across businesses (refinery: 88%, petrochemicals: 94% and 22x upstream) despite the margin squeeze. We believe there is a huge upside potential from E&P given RIL's large portfolio of prospective blocks and its outstanding success rate.

 

Earnings revision

􀂃 We upgrade RIL's FY09E and FY10E earnings by 2.2% and 0.7% as a result of US$15/bbl and US$3/bbl upgrades in the crude price, respectively.

 

Price catalyst

􀂃 12-month price target: Rs3,155.00 based on a Sum of Parts methodology.

􀂃 Catalyst: New oil and gas finds and improved clarity on organised retail.

 

Action and recommendation

􀂃 Reliance Industries is our top sector pick. Reliance Industries has planned a large capex of more than US$20bn over the next five years, which we think is likely to triple earnings in five years. In addition, the investments in highgrowth businesses like E&P and retail may lead to a consistent rise in ROE

 

More steps on cards to ease inflation: Govt

A day after banning futures trade in four farm commodities and
persuading steel producers to slash prices, the govt said more
measures were in the offing to curb inflation, which should ease in 8
weeks.


"Government is not helpless and has means to ensure prices are brought
down. More measures both administrative and fiscal are in the offing
to control inflation," Minister of State for Industry Ashwani Kumar
told reporters in New Delhi on Thursday.


He said iron ore, steel and cement would continue to remain under the
government scanner.


He said a series of calibrated measures would ensure that inflation is
brought down by at least one percentage point in the next two months.


Prices of wheat, rice and edible oils have already come down between
1st March and 6th May, Kumar said.



Wheat prices have declined by 1.6 percent, wheat by 9.1 percent and
edible oil by over 18 percent, he said.


The government on Wednesday suspended futures trading in gram, refined
soya, potato and rubber for four months a move aimed at arresting
speculation-driven price rise to cool inflation that is over 7.5
percent now.


Besides, steel producers announced cut in prices by up to Rs 4,000 a
ton after a meeting with Prime Minister Manmohan Singh on Wednesday.



Kumar said if the voluntary measures fail to yield results, "the
government has administrative options which will definitely bring down
prices".


"All energies of the government are being focused on very
comprehensive and calibrated steps to attack each factor that
contributes to inflation from all angels," he said.



A favourable monsoon and harvest would further ease the pressure on
prices of food grains, he added.


He said food prices in India are below the global level and the
government has not passed the burden of high prices of imported food
items to consumers, but "absorbed" it.


On the basis of extrapolation of prices, it has been observed that
rates of pulses, edible oils and cement have declined between 1st
March and 6th May, 2008.


While price of pulses have seen a 7.69 percent decline, that of edible
oils have dropped by 18.93 percent and cement by 2.91 percent.



Edible oil prices are likely to decline further by five percent in
view of large imports expected by mid-May, he said.


Price of iron and steel has, however, seen a 6.6 percent increase to
Rs 29,898 on 6th May from Rs 24,295 on 1st March.



"The Indian Bureau of Mines do not expect prices to come down but stay
at the new level for couple of months," he said.

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PowerYourTrade Trading Calls

Trading Calls for 09 May 2008

Ashwani Gujral Buy Reliance Power with a stop loss of Rs 400 for target of Rs 460 Buy Reliance Power with a stop loss of Rs 400 for target of Rs 460. Disclosure:Neither me, nor my family nor our clients have any position in the above stock. However we run a substantial newsletter, chatroom and money mgmt business and this can change at any time in future. Buy Shiv Vani Oil & Gas Exploration Services with a stop loss of Rs 597 for target of Rs 744 Buy Shiv Vani Oil & Gas Exploration Services with a stop loss of Rs 597 for target of Rs 744. Disclosure:Neither me, nor my family nor our clients have any position in the above stock. However we run a substantial newsletter, chatroom and money mgmt business and this can change at any time in future.

Rajat K Bose Buy Balrampur Chini with a stop loss below Rs 98.90 for targets of Rs 104 and Rs 107; This is a day trading recommendation Buy Balrampur Chini with a stop loss below Rs 98.90 for targets of Rs 104 and Rs 107. This is a day trading recommendation. Note: Either on the long side or on the short side if at any moment a counter is not moving beyond an initial or interim target to the final target book profits. Once initial target is crossed, you can use that as your trailing stop-loss level. Caveat: I hold the stock in my personal portfolio. Notes: · All prices relate to the NSE, unless otherwise mentioned. · Calls are based on the previous trading day's price activity. · The call is valid for the next trading session only unless otherwise mentioned. · Stop-loss levels are given so that there is a level below/above, which the market will tell us that the call has gone wrong. Stop-loss is an essential risk control mechanism; it should always be there. · Trading involves considerable risk. Trade at your own risk to the extent you are comfortable. The analyst shall not be responsible for any losses incurred for acting on these recommendations. Disclosure: His newsletter clients have been recommended the same along with other picks. Traders are requested to adhere to the stop losses very strictly; they are given to be implemented, not ignored. Do not chase a security and take a position where you would be uncomfortable with the stop-loss level. Take a position only when you feel that the risk-reward ratio looks comfortable and favourable for the trade.

		Mathew Easow Buy Webel SL Energy Systems only on declines with a stop loss of Rs 310 for a short-term target of Rs 374 Buy Webel SL Energy Systems only on declines with a stop loss of Rs 310 for a short-term target of Rs 374. Disclaimer: - At the time of writing this article, I, my family members and my group companies do not have any position in WEBEL-SL ENERGY SYSTEMS LTD. This stock has been recommended to our clients and they may be holding long or short positions in this stock. Mathew Easow and matheweasow.com gives an unbiased and competent picture of trading & investment opportunities and it does that to the best of its abilities. The information contained herein is not a complete analysis of every material fact representing the company, industry or security. The views expressed may change. However, prices can move up as well as down due to a number of factors, all of which are impossible for anyone to foresee. THEREFORE, Mathew Easow and matheweasow.com cannot accept any responsibility (or liability) for the accuracy of the above contents and also any investment decision or trading decision taken by readers and clients on the basis of information contained herein. Short Term Target Means - Approximately 3 -4 weeks. If the target is not met within 3-4 weeks then please exit the positions. Please follow stop losses very strictly and do not take positions where one is uncomfortable with the stop loss level. Above all Buy or Sell the stock only when the risk - reward ratio vis-a-vis the stop loss is favourable for taking a position. Individual traders /investors should book profit depending on their risk bearing capacity and need not wait for the targets.

 

Sharekhan Investor's Eye dated May 08, 2008

Investor's Eye [May 08, 2008] Please see the attachment for details Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Shiv-Vani Oil & Gas Exploration Services  Cluster: Ugly Duckling Recommendation: Buy Price target: Rs725 Current market price: Rs630 Price target revised to Rs725 Result highlights Shiv-Vani Oil & Gas Exploration (Shiv-Vani) has reported an excellent top line growth of 63.3% in its consolidated revenues to Rs178.5 crore for Q5FY2008. The growth was achieved on the back of strong realisation and higher revenue contribution of the coal bed methane project.  The operating profit margin (OPM) improved by 330 basis points year on year (yoy) to 39.1% primarily due to the improvement in the realisation and more efficient fleet utilisation. Consequently, the operating profit grew by an astounding 147% to Rs69.9 crore. However, on a sequential basis, the margin dipped by 230 basis points to 39.1% because of higher other expenses, which included some one-time items of foreign exchange (forex) losses. Both interest and depreciation charges have risen on the back of increased capital expenditure (capex) incurred by the company. However, the lower taxes led to a brilliant 165% growth in the net profits to Rs31.8 crore.  The company plans to spend close to Rs650 crore in FY2009 as it looks to add six more rigs by July 2008, taking the total number of rigs to 32. Further, the number would be increased to 40 rigs by the end of the year.  The company's order book remains healthy at Rs3,500 crore. We have fine-tuned our numbers a little in line with the company' s capex plan. We marginally upgrade our FY2009 profit estimate by 1.3% to Rs161 crore and upgrade our FY2010 profit estimate by 15% to Rs241.2 crore, as majority of the new rigs would start to contribute to the top line. At the current market price the stock trades at 19.5x FY2009 and 13x FY2010 estimated earnings. We maintain our Buy call on the stock with a revised price target of Rs725. Jaiprakash Associates Cluster: Ugly Duckling Recommendation: Buy Price target: Rs390 Current market price: Rs269 Results above expectations Result highlights Jaiprakash Associates Ltd (JAL) Q4FY2008 results were above our estimates. On a standalone basis the company reported a top line growth of 44.5% year on year (yoy) to Rs1,280 crore. This was on account of a 45.7% year-on-year (y-o-y) growth in the revenues from the construction division to Rs475 crore. The higher revenue was also aided by the revenue from the real estate division, which stood at Rs256 crore against nil during the corresponding period last year.  The operating profit margin (OPM) on a standalone basis for the quarter improved by 140 basis points yoy to 31.1%. This was mainly on account of higher earning before interest and tax (EBIT) margin of the construction division, which reported an increase of 950 basis points to 25.5%. The real estate division reported an EBIT margin of 31.6%, while the cement division reported a negligible improvement of 30 basis points in EBIT margin to 35.3%. However the hotel and hospitality division reported a decline of 1,190 basis points in the EBIT margin to 16.7%. Consequently the operating profit jumped by 51.3% to Rs398 crore. On a standalone basis, the company reported a net profit after tax (PAT) of Rs211 crore, up by 61.1% yoy. The growth in the net profit was mainly because of an increase in the other income by 120% to Rs66 crore. For the year ended March 2008, on a standalone basis the net sales increased 14.6% yoy to Rs3,985 crore and the PAT stood at Rs610 crore, up 47% yoy. On a consolidated basis, the net sales increased by 6.8% to Rs4,201 crore and the adjusted PAT stood at Rs627 core, an increase of 21.2% yoy. We have upgraded our FY2009 earnings per share (EPS) estimate by 10.9% to Rs6 and have also introduced FY2010 estimates. The estimated PAT for FY2010 stands at Rs947.9 crore, implying a growth of 26.4% over FY2009E. At the current market price of Rs269, the stock is trading at 45x its FY2009E EPS and 35x its FY2010E EPS. We maintain a Buy on the stock with a price target of Rs390 based on our sum-of-the-parts valuation. SECTOR UPDATE Information Technology Cognizant caps front tech stock valuation in near term Front tech Indian IT stocks witnessed resurgence in the last couple of months on the back of the extension of STPI benefits, the stabilisation of rupee against the dollar and the guidance announcements in line with street expectations. The front tech IT stocks have grown in the range of 13%-25% from April 1, 2008.

Regards, The Sharekhan Research Team myaccount@sharekhan.com

 

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Sharekhan Pre-Market Report dated May 09 2008

. Market may be volatile in early trades   An overnight fall in European indices and the ongoing mix trend in the Asian indices may result in volatility in our market in the early trades.   The market is likely to witness a downtrend as major Asian indices like the Nikkei, the Hang Seng Index and the Kospi Index are down marginally, while the Jakarta Index has gained over 0.13% in the current trades and the US market also ended in the positive. The market is likely to extend its losing streak as the sentiment remains bearish and a sharp bout of volatility can be expected during the intra-day trades. The Nifty could test 5100-5130 levels on the upside, while it has a likely support at 5060 on the downside. The Sensex has a likely support at 16970 and could face strong resistance at 17200.   US indices on Thursday gained marginally, with the Dow Jones closing up 52 points at 12867 and the Nasdaq moving up by 13 points to close at 2451.   Indian ADR losers outnumbered the gainers on the US bourses. ICICI Bank, Patni Computer, Tata Motors and MTNL dropped 1-2% each while Infosys, Dr Reddy's, VSNL and HDFC Bank were down by one half percentage each. Among the gainers Satyam, Wipro and Rediff closed with a marginal gain.   The Nymex light crude oil for June delivery gained further by 16 cents to close at $123.69 a barrel. In the commodity space, the Comex gold for June series jumped $11.10 to settle at $882.30 an ounce.   Daily trend of FII investment in equities On May 06, 2008, FIIs were net buyers of stocks to the tune of Rs325.10 crore (purchases worth Rs3,435.70 crore and sales of Rs3,110.60 crore). Domestic mutual funds were net sellers of stocks to the tune of Rs23.10 crore (purchases worth Rs612.40 crore and sales of Rs635.50 crore).  INDICES SNAPSHOT ASIAN INDICES at 09:20 IST on 09/05/2008 Index Level Change(pts) Change(%) Nikkei 13815.68 -127.58 -0.91 Hang Seng 25370.91 -78.88 -0.31 Kospi Index 1825.50 22.50 -1.22 Straits Times 3167.82 -4.06 -0.13 Jakarta Composite 2380.116 3.18 0.13 EUROPEAN INDICES at close on 08/05/2008 FTSE 100 6270.80 9.80 0.16 CAC 40 Index 5055.58 -19.73 -0.39 Dax Index 7071.90 -4.35 -0.06 US INDICES at close on 08/05/2008 Dow Jones 12866.78 52.43 0.41 Nasdaq 2451.24 12.75 0.52	PRE-MARKET COMMENTARY 09/05/2008| Market round-up, 9:45 IST
	STOCK TO WATCH TODAY APOLLOTYR ASIANPNT KMFL NOVARTIS MASL   INDIAN ADRs Company Last Close %Change Infosys 42.83 -0.95 Satyam 25.59 0.20 Wipro 12.90 0.23 Dr.Reddy's 15.33 -0.58 Tata Motors 16.16 -1.28 ICICI Bank 43.06 -2.71 HDFC Bank 109.42 -0.08 MTNL 5.07 -0.98 VSNL (TCL)* 23.63 -0.88 Rediff 8.65 0.23 Patni Comp 12.65 -2.24
Sharekhan Ltd.: BSE Cash-INB011073351; F&O-INF011073351; NSE – INB/INF231073330; MAPIN – 100008375; DP: NSDL-IN-DP-NSDL-233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP00000066; Mutual Fund: ARN 20669. Sharekhan Commodities Pvt. Ltd.: MCX-10080; NCDEX-00132; MAPIN – 100013912, For any complaints email at igc@sharekhan.com Regd/Admin Add:- A-206, Phoenix House, Phoenix Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai - 400013. Please carefully read the risk disclosure document as prescribed by SEBI & FMC and Do's & Don'ts by NCDEX

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PowerYourTrade Midday Trading Calls

Midday Trading Calls for 08th May 2008
Hitendra Vasudeo, stockmechanics.com Sell ICICI Bank below Rs 900. Stop Loss of Rs 920, target of Rs 870-Rs 860. (Intra-day/Positional Call) Buy Reliance Power above Rs 415. Stop Loss of Rs 407, target of Rs 424-Rs 427. (Intra-day/Positional Call) Sell Reliance Capital below Rs 1389. Stop Loss of Rs 1420, target of Rs 1299-Rs 1273. (Intra-day/Positional Call) Disclaimer :Intra-day call are of high risk as they are based on instant market movement. If the money and risk is not managed correctly, then traders and short term investors can land up in losses. We are not responsible for any losses that can occur due to volatility and stop loss violation. I do not have any personal positions any time on the recommendation made for the intra-day calls. However, it is possible that our Live Market Calls subscriber's could have positions and trading positions without our knowlege and consent. We also dont have any control on our client reverse positions if they have created against our recommendtion. Individual traders, implementers of the trading call are doing it at their own risk. We also dont have any control on our subscriber's positions. Traders are advised to check their cost in long and short trades and kee p taking profits irrespective of our targets. What matter is trading profits therefore check cost and keep taking profits. Rahul Mohindar, viratechindia.com Buy Reliance Industries at Rs 2670 for target of Rs 2704, support at Rs 2664 and Rs 2650. Buy SBI above Rs 1753 only, support is of Rs 1736, target of Rs 1775. Disclaimer & Disclosure : The above are short term calls and we hold no positions in the above recommendations. Only risk capital should be used to trade futures, stocks, or options on futures or stocks, or mutual funds, or any other financial instruments, in conjunction with proven tools and research. All investments and trades carry risks, and all trading decisions are ultimately made by you and you are solely and individually responsible for the decisions and the results of those decisions. Myself and the Viratech group do not hold any responsibility or guarantee on any recommendation.

 

RBI pulls out forex from foreign banks

MUMBAI: The central bank appears to have carried out changes to its
forex reserve management strategy by pulling out substantial funds
parked with many high-street banks. The shift may have been prompted
by the recent developments in the global financial markets.

New data available with the Reserve Bank of India pertaining to the
period between March 2007 and March 2008 shows that although forex
reserves rose by more than 50% during this period, the deposits parked
by the central bank with foreign banks around the world dipped from
$46.7 billion in March 2007 to $6 billion in March 2008.

These funds are now being placed with other central banks and
mutlilateral agencies where the returns are reckoned to be relatively
low. India's foreign exchange reserves aggregated $309 billion at the
end of March 2008. It has swelled to $313 billion in April-end, making
India the sixth-largest custodian of forex reserves in the world.

This dip has been particularly steep since July 2007, which coincides
with the turmoil in credit markets in the West. This was the period
during which the US subprime crisis snowballed, impacting the global
financial markets.

Top-rated global banking majors have taken a major hit during the past
few quarters on account of their investment in mortgage securities.
This may also have influenced the RBI's decision to change gears in
the near term and berth in safer shores. The move may have an impact
on the RBI's income from overseas investments.

Over the past few years, income from foreign sources have accounted
for more than 75% of the central bank's total income. But, RBI has
always maintained that its primary aim when it comes to foreign
exchange reserves management was to ensure safety and liquidity, with
higher returns figuring lower in the hierarchy of preferences on this
issue.

RBI's parking of reserves is consistent with the best practices laid
down for central banks by the International Monetary Fund (IMF). This
includes parking part of the reserves as cash deposits with foreign
central banks and multilateral agencies such as IMF and the Bank for
International Settlements (BIS).

It also invests in the deposits of foreign commercial banks and bonds,
generally the highest-rated sovereign bonds of leading economies and
occasionally in top rated corporate bonds. India's foreign exchange
reserves are spread across a variety of currencies including the
dollar, euro and yen.

But, the precise currency composition of reserves is generally not
released by most countries including India, going by global practice.
According to RBI, this is because short-term variations in reserves
held in different currencies by central banks are regarded as being
market sensitive.

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Govt suspends future trading in 4 commodities for 4 months

In a further move to fight inflation the government has suspended
forward trading in four commodities - channa, refined soyoil, potato
and rubber with immediate effect for four months.

"The Forward Markets Commission (FMC) has issued the order
tonight(Wednesday) delisting channa (gram), refined soyoil, potato and
rubber contracts with immediate effect," Consumer Affairs Secretary
Yashwant Bhave said.

FMC is the regulator for commodity markets.

These contracts have been suspended for four months and investors and
traders, who have taken positions in these commodities, have to square
off their positions, Bhave added.


Futures trading in rice, wheat, tur and urad is already banned.


In the wake of high inflation, which is hovering over 7 per cent, the
government is faced with all-round criticism for high food prices.


In its bid to contain food rates, the government had earlier taken a
slew steps such as cutting import duties on edible oils and banning
export of non-basmati rice.


Finance Minister P Chidambaram had also said on Monday that "the
pressure is to suspend a few more food articles. If rightly or
wrongly, people perceive that commodity futures trading is
contributing to a speculation driven rise in prices, then in a
democracy you will have to heed that voice."


There has been a demand to ban futures trading in agriculture
commodites, especially in the view of high food prices.


The government had also set up an expert panel under the chairmanship
of Planning Commission Member Abhijit Sen to study the impact of
futures trading on prices of agricultural commodities.

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PowerYourTrade Trading Calls

Trading Calls for 08 May 2008

Ashwani Gujral Sell HPCL with a stop loss of Rs 254 for a target of Rs 205 Sell HPCL with a stop loss of Rs 254 for a target of Rs 205. Disclosure:Neither me, nor my family nor our clients have any position in the above stock. However we run a substantial newsletter, chatroom and money mgmt business and this can change at any time in future. Sell BPCL with a stop loss of Rs 394 for a target of Rs 350 Sell BPCL with a stop loss of Rs 394 for a target of Rs 350. Disclosure:Neither me, nor my family nor our clients have any position in the above stock. However we run a substantial newsletter, chatroom and money mgmt business and this can change at any time in future.

		Mathew Easow Buy Blue Star Infotech only on declines with a stop loss of Rs 67 for a short-term target of Rs 93 Buy Blue Star Infotech only on declines with a stop loss of Rs 67 for a short-term target of Rs 93. Disclaimer: - At the time of writing this article, I, my family members and my group companies do not have any position in BLUE STAR INFOTECH LTD. This stock has been recommended to our clients and they may be holding long or short positions in this stock. Mathew Easow and matheweasow.com gives an unbiased and competent picture of trading & investment opportunities and it does that to the best of its abilities. The information contained herein is not a complete analysis of every material fact representing the company, industry or security. The views expressed may change. However, prices can move up as well as down due to a number of factors, all of which are impossible for anyone to foresee. THEREFORE, Mathew Easow and matheweasow.com cannot accept any responsibility (or liability) for the accuracy of the above contents and also any investment decision or trading decision taken by readers and clients on the basis of information contained herein. Short Term Target Means - Approximately 3 -4 weeks. If the target is not met within 3-4 weeks then please exit the positions. Please follow stop losses very strictly and do not take positions where one is uncomfortable with the stop loss level. Above all Buy or Sell the stock only when the risk - reward ratio vis-a-vis the stop loss is favourable for taking a position. Individual traders /investors should book profit depending on their risk bearing capacity and need not wait for the targets.

 

Sharekhan Pre-Market Report dated May 08 2008

 

. Market may slip in early trades Weak global markets may drag down our market in early trades.   The market may slip initially following an overnight slump in the US markets and a sharp fall in major Asian indices in the morning trades. As the overall sentiment remains bullish, the market may overcome the early weakness and attract buying support as the trading progresses. On the technical front, the Nifty could test higher levels at 5160 and may find support at 5100, while the Sensex may face resistance at 17450 and find support at 17230.   US indices fell sharply on Wednesday as investors took the opportunity of booking profits. The Dow Jones dropped 206 points to 12814 whereas the Nasdaq declined 45 points to close at 2438.   Indian ADRs too were hammered on the US bourses. Leading the slump Satyam tanked 6.31% followed by Infosys, Wipro, HDFC Bank and MTNL all of whom were down by 5% each. VSNL, Rediff, Tata Motors and ICICI Bank dropped 2-4% each. However, Patni Computers was down by a marginal 0.61%.   Crude oil prices in the US markets edged higher, with the Nymex light crude oil for June 08 delivery rising by $1.69 to close at $123.53 per barrel. In the commodity segment, the Comex gold for June 08 series lost $6.70 to settle at $871 an ounce.   Daily trend of FII investment in equities On May 05, 2008, FIIs were net sellers of stocks to the tune of Rs728.80 crore (purchases worth Rs3,099 crore and sales of Rs3,827.80 crore). Domestic mutual funds were net sellers of stocks to the tune of Rs26.50 crore (purchases worth Rs588.50 crore and sales of Rs615.00 crore).  INDICES SNAPSHOT ASIAN INDICES at 09:20 IST on 08/05/2008 Index Level Change(pts) Change(%) Nikkei 13978.94 -123.54 -0.88 Hang Seng 25518.34 -91.87 -0.36 Kospi Index 1853.59 -0.42 -0.02 Straits Times 3187.33 -41.62 -1.29 Jakarta Composite 2374.71 -7.99 -0.34 EUROPEAN INDICES at close on 07/05/2008 FTSE 100 6261.00 45.80 0.74 CAC 40 Index 5075.31 34.39 0.68 Dax Index 7076.25 59.15 0.84 US INDICES at close on 07/05/2008 Dow Jones 12814.35 -206.48 -1.59 Nasdaq 2438.49 -44.82 -1.80	PRE-MARKET COMMENTARY 08/05/2008| Market round-up, 9:45 IST
	STOCK TO WATCH TODAY ASHOKLEY BIRLACOR HM JBCHEM GICHSGFI   INDIAN ADRs Company Last Close %Change Infosys 43.24 -5.59 Satyam 25.54 -6.31 Wipro 12.87 -5.85 Dr.Reddy's 15.42 -2.47 Tata Motors 16.37 -3.02 ICICI Bank 44.26 -2.38 HDFC Bank 109.51 -5.81 MTNL 5.12 -5.71 VSNL (TCL)* 23.84 -4.22 Rediff 8.63 -3.90 Patni Comp 12.94 -0.61
Sharekhan Ltd.: BSE Cash-INB011073351; F&O-INF011073351; NSE - INB/INF231073330; MAPIN - 100008375; DP: NSDL-IN-DP-NSDL-233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP00000066; Mutual Fund: ARN 20669. Sharekhan Commodities Pvt. Ltd.: MCX-10080; NCDEX-00132; MAPIN - 100013912, For any complaints email at igc@sharekhan.com Regd/Admin Add:- A-206, Phoenix House, Phoenix Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai - 400013. Please carefully read the risk disclosure document as prescribed by SEBI & FMC and Do's & Don'ts by NCDEX

 

Pre-Market report on 08.05.2008

Crude cruises as stocks suffer bruises
===================================================

Wall Street suffered a setback in terms of losses to the indices as
crude oil continued to quench the thirst of the speculators, hitting
another life time high to close at USD 123.53 on NYMEX. Dow Jones
suffered a 206.48 loss to end the day at 12,814.35 and Nasdaq was down
by 44.82 points to close at 2,438.49. Japan and Australia opened today
on the lower side given the global cues. Surprisingly the Japanese
stock market, Nikkei Stock Average has climbed 12.6 percent since
April 2008, the biggest gain among the eight leading markets in Asia.

Indian Markets are showing significant weakness from the last couple
of sessions though huge losses are yet to be seen across the board. We
expect weakness to continue further but not expect panic selling.

Crude, the Culprit

Though there are many global political implications on the crude price
we wish not to get into the analysis given the scope of the Indian
market. Many say Crude is running high on global consumption
especially India and China but statistics does not support the above
version. We believe crude is on the verge of a huge bubble burst
though finding a "Top" is definitely not possible.

Indian Oil companies started showing good strength yesterday with
Cairn India leading the way with Hindustan Oil Exploration following
suit. We believe this space is likely to witness huge fund interest in
the coming days and we bet on domestic consumption here irrespective
of global prices these companies are here to stay and make hay.

The list goes on but our favourites in this space include Cairn India,
Reliance Petro, Hindustan Oil Exploration, Selan Exploration,Shiv Vani
Oil and Great Offshore. Sectors that are likely to impacted by the
crude spike include fertiliser, textiles, pharma, automobile, tyre,
paints and aviation.


Market Close Box
BSE Sensex 17339.31 -33.70
NSE Nifty 5135.50 -9.15
USD Rs.41.20
Oil Nymex $123.5

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Provident Fund Statement

Your provident fund statement reveals the progress of your retirement savings. Here's how to decode it
Towards the start of a financial year, your employer hands you a piece of paper, which you tuck away as soon as you get it. That document is from the Employees' Provident Fund Organisation (EPFO), one of the most important vehicles for your retirement investments.   Later in life, when you are not up to doing much, leave alone holding a job, the importance of the EPF statement will become clear, for, it is your only record of the contributions you made.   Your EPF investment works like this: every month your employer deducts 12 per cent of your salary (basic plus dearness allowance and retaining allowance, if any),  pitches in with an equal amount and invests it in EPFO on your behalf.   Your employer's contribution, however, is in two parts—8.33 per cent goes into the Employees' Pension Scheme (EPS), which offers you pension for life starting at the age of 58 years. The remaining 3.67 per cent goes towards your PF. However, this can be capped at 8.33 per cent of Rs 6,500, the maximum salary for a mandatory EPF contribution. Currently, this kitty earns 8.5 per cent yearly, and is tax-free. Even your contributions qualify for a deduction under Section 80C.   For instance, for a 25-year-old, earning a basic salary of Rs 6,000, which increases at 15 per cent every year, an EPF contribution for 30 years earning 8.5 per cent per annum would aggregate to Rs 1.02 crore.   Since this is a voluntary contribution for those with a basic salary over Rs 6,500, the company may contribute only till the maximum basic requirement of Rs 6,500, which is Rs 780. Most, however, contribute 12 per cent of the entire basic. How to read the statement? The EPF statement tells you how much you accumulated and other vital details.   Account number. It's alphanumeric. The first two letters indicate the state from which money is contributed. The next five digits are the employer's code, followed by the employee's code. Knowing this number is crucial to ensure unfettered accumulation in the account despite any change in jobs.   Opening balance. This is the amount that you carry forward from previous financial years. This is divided into two heads—employee's contribution (the  amount contributed by you and the interest), and employer's contribution (the amount contributed by the employer and the interest).   Interest. The interest on the entire corpus accumulated so far.   Contributions. The payments made by you and your employer during the financial year.   Refund of withdrawals. The amount you repaid if you have taken advances.   Withdrawals. Any partial withdrawals or advances that you may have taken.   Closing balance. Sum of contributions made by the employer and the employee for the previous and the current year.   Non-contributory period. The period in which contributions were not made.  Even as you plan your future through equities or other vehicles, don't ignore the EPF slip. After all, it's a hassle-free accumulation way to a happy retirement.

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Value buys in the current market

2008-05-06 13:35:34 Source : Markets Midday/CNBC-TV18

 

Hemang Jani, Senior Vice President at Sharekhan says that post earnings he sees markets moving in a broad range without much upside. He feels appreciation in dollar and softening in the commodity prices may see money coming back into the emerging markets. He also gives stock picks that are value buys at this point.

 

 

 

Excerpts from CNBC-TV18's exclusive interview with Hemang Jani:

 

 

Q: Firstly, if you could give us an overview of what you have made of this results season and where you see the most value emerging?

 

A: I think the market has run-up about 12-15% in the last one month. Some of the concerns that were playing in the market have not completely gone away. If you look at the global markets, the risk of further tightening that people feared or even if you look at the corporate numbers, I think we have had a mixed bag. There is a feeling that the numbers that have yet to come out may not be all that impressive.

 

The other important point is that this time around the downgrades that we have seen across the corporates is far higher than the upgrades. So, we think that with this kind of a background, the markets are likely to be in a broad range and we don't see much upside from current levels.

 

 

Q: The current you think will now kind of peter out, are you seeing significant amount of profit taking coming in?

 

A: Yes, we do think that around these levels looking at the kind of concerns that we have had, I don't see much of an upside. I think the best-case scenario is that if we have some kind of an appreciation in the dollar and softening in the commodity prices, then you could see money coming back into the emerging markets. So, if you see indications on that front, probably you will see some more upside. But at the current state of things, we think that the upside is going to be very limited.

 

 

Q: Where do you see value emerging in the midcap space, would you still recommend buys in that space?

 

A: Yes, we do think that there are pockets where you see a lot of value in the midcap space. Even in the real estate space, somebody who is concentrating on a market like Mumbai, overall real estate we think that there is going to be a bit of uncertainty about the prices and the growth etc.

But in a place like Mumbai I don't think there is going to be much of price erosion for companies like Orbit Corporation. We also like something like a Unity Infra, which again is a construction play that we think will do well and something like an Ipca Labs, which is a niche player in the pharma space, very reasonably priced. I think one can definitely look at it. Mahindra Lifespaces is another company that we like in the midcap space.

 

For people who really want to play value, I think Bajaj Holding is a very good stock because they have got Rs 700 cash in the balance sheet. The two companies are going to be coming up for listing in the next 2-3 weeks time.

The company is available at about Rs 750. So, these are some of the stocks in the midcap space that we think are pretty good in terms of value picking.

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Sharekhan Post-Market Report dated May 07, 2008

 

Sharekhan's daily newsletter May 07, 2008 Index Performance Index Sensex Nifty Open 17,404.15 5,156.70 High 17,413.81 5,159.05 Low 17,229.98 5,101.25 Today's Cls 17,339.31 5,135.50 Prev Cls 17,373.01 5,144.65 Change -33.70 -9.15 % Change -0.19 -0.18   Market Indicators Top Movers (Group A) Company Price  (Rs) % chg Gainers Cairn India 278.45 7.47 GVK Power Infra 54.20 7.01 Triveni Engineering 131.30 5.21 Jai Corp 703.70 5.00 Essar Shipping 175.70 4.99 Losers BEL 1,229.90 -6.11 Sesa Goa 3,992.70 -5.32 Reliance Industrial Infra 1,543.00 -5.00 Axis Bank 907.15 -4.29 Bank of India 338.85 -4.17 Market Statistics - BSE NSE Advances 1,163 624 Declines 1,538 988 Unchanged 64 31 Volume(Nos) 40.94cr 55.60cr  Market Commentary  Market takes further hit, drops 34 points The Sensex gyrated 184 points during intra-day trades and dropped 34 points at close on sustained selling in CG, PSU and realty stocks. The market continued its downward movement for the third consecutive session as nervousness gripped investors over FIIs turning net sellers of equities in the    last few sessions and higher crude oil prices on prevailing violence in West Asia. Strong optimism in early trades fizzled out after the Sensex had opened firm at 17,404 and added another 10 points to touch the day's high of 17,414. While the market slipped below 17,300 by late morning trades, afternoon trades saw the Sensex slip deep in red on sustained selling in capital goods (CG), public sector unit (PSU) and realty stocks and touch the day's low of 17,230. The Sensex managed to erase losses of 109 points from the day's low on selective buying in heavyweights and ended the session at 17,339, down 34 points, while the Nifty declined nine points to close at 5,136.   Movers & Shakers EMCO gained on report that the company has bagged an order for establishment of 400/220/66kV new substation at Mundka on turnkey basis from M/s Delhi Transco. UBI moved up on report that the company's net profit rose by 127% for Q4 and FY2008. Broader market remained weak. Of the 2,765 stocks traded on the BSE 1,538 stocks declined, 1,163 stocks advanced and 64 stocks ended unchanged. Barring the BSE IT index, BSE Oil & Gas index, BSE FMCG index, BSE Auto index and the BSE HC index, rest of the sectoral indices ended in negative. The BSE CG index dropped 2.24% at 13,642, the BSE PSU index shed 1.65% at 7,956 and the BSE Realty index 1.55% at 8,208. Among the major losers in frontline stocks, BHEL dropped 4.12% at Rs1,783.75, Bharti Airtel slumped 3.64% at Rs815.80, DLF shed 2.54% at Rs651, Ranbaxy Laboratories lost 1.82% at Rs466.30, Satyam Computer Services declined 1.56% at Rs489.30 and Hindalco Industries slipped nearly 1.15% at Rs179.75. However, TCS jumped 3.02% at Rs966.20, Mahindra & Mahindra rose 1.48% at Rs673.85, Infosys added 1.26% at Rs1,843.20, HUL advanced 1.17% at Rs251.10, Jaiprakash Associates moved up by 1.07% at Rs274.80 and Reliance Industries gained 1.05% at Rs2,682.35. CG stocks came under sharp hammering. Bharat Electricity Products crumbled 6.11% at Rs1,229.90, Jyoti Structure tumbled 4.47% at Rs162.45, BHEL slumped 4.12% at Rs1,738.75, Elecon Engeneering fell 3.70% at Rs149.85, BEML lost 2.52% at Rs1,137.05, Larsen & Toubro declined 2.44% at Rs2,986.50, Punj Lloyd shed 2.06% at Rs354.45 and Havells India was down 1.99% at Rs474.80. Over 8.27 crore Aishwarya Telecom shares changed hands on the BSE followed by Idea Cellular (2.03 crore shares), Ispat Industries (1.80 crore shares), IFCI (1.23 crore shares), Cyber Mate (1.03 crore shares) and RNRL (1.01 crore shares)  European Indices at 16:52 IST on 07-05-2008 Index Level Change (pts) Change (%) FTSE 100 Index 6252.30 37.10 0.60 CAC 40 Index 5071.33 30.40 0.60 DAX Index 7077.37 60.27 0.86 Asian Indices at close on 07-05-2008 Index Level Change (pts) Change (%) Nikkei 225 14102.48 53.22 0.38 Hang Seng Index 25610.21 -651.92 -2.48 Kospi Index 1854.01 -5.05 -0.27 Straits Times Index 3344.53 - - Jakarta Composite Index 2382.7 10.87 0.46

 

PYT: Shasun Chemicals and Drug : BSE ID : 524552 NSE ID : SHASUNCHEM Reco Price Rs. 51.75 CMP: Rs.59.10 (Gain 14.20%)

Ambareesh Baliga, Karvy Stock Broking

Shasun Chemicals and Drug :   BSE ID : 524552  NSE ID : SHASUNCHEM
Reco Price Rs. 51.75  CMP: Rs.59.10 (Gain 14.20%)
Shasun Chemicals : Buy with a Price target of Rs. 100/- in 12-15 months.

Shasun Chemicals : Buy with a Price target of Rs. 100/- in 12-15 months.

Shasun Chemicals & Drugs (Shasun) operates in three business areas -
Contract Research and Manufacturing Services (Crams), formulations and
complex chemical compounds used to manufacture APIs. We have a BUY
rating on Shasun on back of greater momentum in revenue and earnings
growth for the next two years due to increased benefits on account of
restructuring benefits and scaleup in the Contract Research and
Manufacturing Services (CRAMS) and Active Pharmaceutical Ingredients
(APIs) segments.

Shasun has added one innovator customer in its India business that
brought three early phase projects involving proprietary technology &
other innovator client in its UK business with phase II product line.
We estimate the innovative CRAMS segment to grow at a CAGR of 13.8%
from FY07 to FY09E to Rs.5.2bn with the scale-up of existing
contracts, signing of new contracts and increasing capacity
utilization.

Leasing of US-based lab to support CRAMS business: Shasun has leased a
lab in the US at Piscataway (near New Jersey) to support CRAMS
business involving an investment of USD 3mn. This is to develop APIs
for its US customers in the pre-clinical and clinical trial stages in
order to further strengthen the company's product portfolio.

The net revenues are expected to grow at a CAGR of 11.9% from
Rs.7.72bn in FY07 to Rs.9.67bn in FY09E on back of restructuring
benefits that would accrue mainly from CRAMS and API segments.

Shasun could be one of those who may be affected by Forex Derivatives
exposures and losses reported due to this could be utilized as an
opportunity to buy the stock at lower levels.

We have seen a sharp fall from levels of Rs 90+ in January to sub 40/-
levels in March. It is now consolidating in the range of Rs. 45 to Rs.
55/-. We have our diluted earnings estimates at Rs.7.41 in FY09E.
Currently, the stock is 7x on FY09E. We suggest a BUY with a price
target of Rs. 100 based on P/E of 13.5x FY09E (EPS Rs.7.41)

Disclaimer: The analyst and his clients/parties would have investments
in the stock.

 

PSU employees' wages to revise every 5 years

NEW DELHI: Employees of state-run companies, who have often been given
a short shrift when it comes to salaries and wages, may finally be in
for some good news.

The government has allowed central public sector units to revise wages
of all non-executive employees every five years instead of 10 years.
This comes even as executive cadre employees, opting for central
dearness allowance (CDA) norms, would get a 6% hike in their DA
emoluments.

The wage revision for non-executives would cover almost 17 lakh
personnel, representing about 80% of the total workforce employed in
state-run companies.

The government has increased the amount of DA payable to executives to
47% from the existing 41%. The five-year pay revision would also
include assimilation of DA into the basic pay.

The government will bring in necessary amendments to the policy laid
down by the seventh round of wage recommendations to make the new
guidelines effective. A circular in this regard has been sent to all
the CPSEs and nodal ministries.

The department of public enterprises (DPE) has, however, asked the
ministries concerned to handle the situation individually (on a case-
to-case basis) and carefully.

"We have decided that PSUs should be allowed to revise the wages of
unionised workers every five years as 10 years is too long a time in
the fast changing circumstances," a DPE official said.

The CPSEs who want to revise the pay for their unionised employees
before 10 years will have to submit a proposal in this regard to the
nodal ministry, describing the reason for such revision.

The ministry may also advise the management of CPSEs to explain to the
associations or trade unions concerned about their official position
on the issue. The new guidelines would help the unions in demanding a
comparative pay to the executive workers once the recommendations of
the second pay revision committee are out.

The committee is likely to give its recommendations by the end of this
month. The pay committee for CPSEs does not give recommendations for
employees below the executive cadre.

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How to spot deep value stocks

4 May, 2008, 0500 hrs IST,Aman Dhall, TNN

 

They are believed to carry hidden treasure on Dalal Street. While investors call them the low-lying unpolished gems of the stock-market, brokers say there are big bucks to be made if you can identify these stocks early. No prizes for guessing this, we are talking about deep value stocks which can do wonders to one's portfolio when market re-assesses them.

According to analysts, a deep value stock can be defined as something which is low priced in relation to the margin of safety the stock provides, to limit losses when a mistake is made. SundayET provides you an insight into how to identify these stocks, what should be your ideal portfolio allocation and reasons behind their low valuations in the market.

Sleeping giants

They are like any other stock traded on the exchange, but there is no hypothetical understanding of them. A section of traders on the Bombay Stock Exchange even call these stocks as 'sleeping giants'. Manish Sonthalia, vice-president, equity strategy, Motilal Oswal Securities, believes that there are two ways in which you can identify a deep value stock.

First, what Benjamin Graham recommends for the defensive investors in his 1949 classic, that the stock price should not be more than 15 times its average earnings per share over the past three years and the overall PE of the portfolio should not be more than 13. Or second, the stock should be trading below its 10-year median PE.

"The other things to be kept in mind is to stick with companies that have a long history of consistent profit growth and steady dividend payouts and the fact that not every cheap stock would turn out to be a bargain," says Sonthalia.

He believes that PSU banks like Oriental Bank of Commerce, which is trading at a PE of 5.6 with book value of Rs 240 for FY09, is a perfect example of a deep value stock. "In a growing economy like India, banks should do well as the GDP expands," he reasons.

According to Ketan Karani, vice-president, research, Kotak Securities, these stocks generally remain neglected by the stock markets. "The best (or you may call it worst) part is that people know it's a great story but still they don't want to touch it. If one saw the real estate boom in India five years back and bought into Unitech, his portfolio returns would have multiplied phenomenally," he sums up.

As far as portfolio allocations are concerned, analysts feel that an investor could invest 80% in growth stocks and 20% in value stocks (after keeping some cash balance or investments in fixed income instruments). In case of a pure deep value investor, Sonthalia says that typically 80% the investment of investible funds should be in these stocks and 20% of the funds should be kept aside for fixed income instruments or cash balance.

"However, a hybrid investor should follow a strategy in between the two. The basic principle followed is the Pareto's principle, the 80/20 rule," he points out.

Sow to reap

Though opinions differ on an ideal investment horizon, most analysts agree that it should not be less than a year and which could extend up to three to five years to reap big dividends. Karani says the first thing an investor needs to do is to ask himself whether he is a speculator or an investor.

"If he is a speculator, then there is no chance for him to stay in these stocks. If he is an investor, a time period of three to five years is what makes sense," he feels. However, if the stock does not give the required return even after holding for three years, there is something more than one's own understanding about the stock.

"In such a scenario, you could sell the stock and move to something else. However, if there are compelling reasons, you could continue holding the stock," says Sonthalia. On why these stocks have ridiculously low valuations, Karani says that "the market sometimes tends to overlook an industry. And usually these stocks are not popular with brokers."

Apart from that, analysts explain that there could be reasons such as high transaction impact costs (small caps can have transaction impact costs as high as 30-50% ) and fear of uncertain events or adverse macro environment conditions such as rise in oil and interest rates, government policies, etc.

"You must also understand that fear always resides in the near term. And that's why there is lower visibility of the future even though the broad picture remains intact in these cases," he says.

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Ten golden rules of Dalal Street

5 May, 2008, 1350 hrs IST,Dinesh Thakkar (ET)

Currently, the Indian markets are in doldrums and nobody is talking of stocks or investments. You may think justifiably so, as the markets are headed in no direction. Is it not exactly the opposite of the exuberant times we were witnessing a few months back. Conversely, bottoms are made in turbulent times.

It is difficult, if not impossible, to say when the markets will halt their southward journey and change direction for the better. Who knows, we might have already hit the bottom and the markets may soon return back to their upward trajectory.

My empirical observation and research have proved it that wealth making in the market has more to do with discipline and the power of time to compound growth than being smart at stock picking and timing the markets just right. To help you in your quest to make wealth in our markets, I suggest you follow the 10 golden rules of markets that will virtually ensure reasonable, steady wealth appreciation.

 

Bear in mind, you cannot have your cake and eat it too. Saving and consumption do not go hand-in-hand. You need to plan today for the lifestyle you want after you stop working, i.e. the finances you will require after you retire. Accordingly, save the necessary portion of your income to invest in equities. Equities, or stocks, may appear risky, but they are just volatile, they go up and down, and time is the perfect hedge against volatility.

Therefore, Rule No 1: Plan for tomorrow, today. Start saving for it now! Stagger your investments throughout your earning phase. Invest regularly and invest for the long term to buy in at an average price that includes both markets' up and down ticks.

Never wait until you have large amounts of money to invest. However small the amount you are able to save, start early. The earlier you start, the better are your chances of making great wealth. Remember to make great gains. Time is a crucial factor, as wealth creation is a factor of both the power of compounding and the returns on your investments.

Accordingly, Rule No 2: Start early so that the power of compounding begins sooner; time is the magic that converts paise into rupees. In exuberant phases, when we have earned good money from our investments, most of us get greedy, and derivatives and futures provide an outlet for the expression of human greed. While such instruments often satisfy the whims of human greed, if taken to unrealistic levels, irresponsible investment in these securities can lead to financial ruin.

Hence, Rule No 3: Do not leverage, it is difficult, if not impossible, to predict short-term trends.
Buy markets, not stocks. We all know that our economy is in a secular phase of prosperity and the stock market is the best proxy for the growth of an economy. To benefit from our soaring economy, buy the market as a whole and not any single stock.

Consequently, Rule No 4: Buy stocks that mirror the broader indexes, but never buy a single, or a handful of stock exposures. This means that you need to spread your risk across various market segments in the event a particular stock does not perform for reasons beyond the company's control. It is easier to predict company earnings, but difficult to predict stock prices of the same company in the short run. Ironically, over the long term, stock prices mirror growth in a corporation's earnings.

 

Therefore, Rule No 5: Look at company earnings, not at stock prices. Stock prices may tempt or give the wrong impression of a company's welfare. But to build real wealth in equities, you must always rely on declared profits and facts, rather than make decisions based on stock movements. We all tend to sell stocks when we have made profits and keep the ones that have not appreciated. Eventually, we end up holding a portfolio of companies that are not performing! It is only human to sell for profits and not to want to take losses.

Hence, Rule No 6: Keep the winners, sell the losers. Stay on top of your investments. Check constantly for stocks that are not performing and eliminate them from your portfolio if the outlook does not seem promising. This way, you will have all winners left in your portfolio to take you to your goals.

In exuberant times, we all tend to believe that the good times will last longer than they actually will. And before D-day, we will be able to sell our investments that were bought at unjustified levels. Just then, it happens that the markets turn and before we can sell out, we are left holding the bag.

For this reason, Rule No 7: Avoid being the "Bigger Fool;" it is imperative that you recognise the difference between price and value. Buy value and not momentum. When investing in stocks, your head should prevail over your heart. Resist the urge to get consumed by market chatter. Ignore hot tips from dealers and friends. It is advisable to do your own home work.

As the result, Rule No 8: Pick stocks with your brain, not your heart. Large-caps are the ones that have already proven themselves over longer periods of time and have the balance sheet acumen, strong cash flow and brains to manage businesses effectively according to prevailing situations and realistic opportunities available.

Hence, Rule No 9: Prefer large-cap stocks to small- and medium-caps. Investment in small and mid-cap stocks requires expertise and strong tracking abilities, that without, your portfolio will under-perform. Do not short sell a stock just because it is going up, and thus, one day it must come down. Newton's law is not applicable to the markets. What goes up does not necessarily come back down! If companies are able to sustain earnings' growth for long periods, then its stock may go up, up and up, or it can even remain high without any reason for a long period of time.

Because of this, Rule No 10: Markets can remain irrationally up, or continually climb for the right reasons. Therefore, never go short. It will expose you to unnecessary risks.


(The author is CMD Angel Broking)

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Buy into correction of stocks in uptrend

5 May, 2008, 1120 hrs IST

 

The Nifty cash index has seen a steady upward trend since the April 7, 2008 low of 4,628. In 16 trading sessions that followed, index has gained by 670 points. Nifty cash closed the week at 5,228. The index gained by a close to 117 points over the close of the previous week. The rally has not been a spectacular, as it has been rather sluggish, and the overall volumes have been low.

Most of the major international markets like the US, the UK, Japan and Hong Kong have seen a rally towards their February highs and are currently hovering near these levels. The Indian market is below its February highs, and assuming parity with other international markets, we should be seeing more upsides in Indian markets.

Now, let's discuss the overall market structure. Since the beginning of February 2008, we are trading in a very large-trading band or a range of 4,460-5,550. Just marginally below the upper resistance band of 5,550-5,600, we have a minor resistance at 5,360-5,400. The structure of the swings, within the trading range, is apparently corrective. The structure is taking shape of a 3-3-5 flat; a corrective pattern as Elliott wave technicians would interpret it to be. If the interpretation of the structure is to be regarded as true, the rally from the March 18 low of 4,468 needs to break down in to a 5-wave pattern. As of now, this is what seems to be happening.

The rally from the low at 4,468 is still in progress, and it is likely that we will see the index rallying towards 5,600. We are likely to see the market rallying from here towards the first resistance at 5,360-5,400 and then correct down towards 5,050-5,010 levels. Once the corrective phase is over, we can see the market rallying to 5,550-5,600 over a period of the next 3-4 weeks. This will complete the 5-wave sequence, and thus, the entire larger degree 3-3-5 pattern will get over.

To put it more simply, the current rally is likely to sustain till around 5,360-5,400 when the first resistance is likely to take place. This correction will bring down the index towards 5,010-5,040 and then a final blow-off towards 5,600. This is the projected map of the market over next 2-4 weeks from here.

For practical trading purposes, the traders should buy in stocks of specific sectors since not all sectors are performing optimally. There are some laggards and some sectors will outperform the market in the next 2-4 weeks. Buying into corrections of stocks that are currently in an uptrend should be a preferred strategy. And when the time is appropriate, there will be some good opportunities to short stocks that are in a confirmed downtrend.

Adopting a very broad view, lately stocks in the auto sector provide a very good trading opportunity on the long side. Hero Honda, Maruti, Tata Motors seem to offer a good scope for a rally of 15% or more as all of them are moving up after a prolonged phase of consolidation. Furthermore, frontline construction and infrastructure companies like DLF, Unitech, GMR Infra and Lanco Infra, among others, also seem to offer a good scope for appreciation from current levels.

On the flip side, sectors that seem to have a full run are stocks in software and cement sectors. Stocks like Grasim, ACC and Gujarat Ambuja have not performed and these stocks are likely to see deterioration in values once the market turns lower as per our expectations. There is always an opportunity for everyone in this sort of a market situation provided one makes the right choice of stocks. It has not been the easiest of market conditions to trade for the past couple of months, as the volatility has died down. Secondly, the advances ratio has averages around 55-66% for last several weeks and so only some selected stocks are going up.

But just as a thought, volatility is very important to consider for a trader, as volatility determines where stop losses are to be placed and position sizing depends on the size of the stop loss. Manage your risk, and though there may be occasional losing trades, but over the number of trades, the outcome will be positive. Good Luck and Happy Trading.

 

Source: ET

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ONGC OKs 35.7-bln-rupee invest on upgrade; made 7 discoveries Apr

ONGC OKs 35.7-bln-rupee invest on upgrade; made 7 discoveries Apr
Monday, May 5
.
NEW DELHI - Oil and Natural Gas Corp. Ltd. plans to invest 35.7 bln rupees to maintain oil and gas production from its existing fields, a company release said over the weekend. The state-run exploration major also said it made seven new oil and natural gas discoveries last month.

Three of the new discoveries are from exploratory wells and four new pools
from development wells, ONGC said. "Though not very significant, these discoveries will help in maintaining production levels from aging and declining fields."

Most of ONGC's producing fields have matured and are now depleting, forcing the company to undertake major revamping to maintain hydrocarbon production.
In its memorandum of understanding signed with the government for the current financial year to March, ONGC hopes to maintain output at the level achieved in 2007-08 (Apr-Mar)--29.04 mln tn crude oil and 25.05 bln cu m of natural gas.

Of the 35.7-bln-rupee investment approved by the company's board, most
pertain to upgrade of processing platforms in fields offshore Mumbai. The company's board also approved investing 18.04 bln rupees in the development of Mangala, Aishwariya, Raageshwari and Saraswati fields in Rajasthan, in which Cairn India is the operator.

Cairn holds 70% in the Rajasthan block, which holds these fields. ONGC holds the remaining 30%. These fields are expected to produce 286.41 mln barrels of oil till 2020. "The estimated capital expenditure for development of these discoveries is 60.14 bln rupees. ONGC's share in this capex is 18.04 bln rupees," ONGC said.

ONGC said during 2007-08, the company added 63.82 mln tn oil-equivalent in
domestic acreages.

 

At 1:10PM, shares of ONGC were at 1,041 rupees on the National Stock Exchange, flat from close Friday.

 

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CM ANAlysis: Mphasis - Tax credit and forex gain save bottomline blues

Mphasis

Tax credit and forex gain save bottomline blues

Mphasis, going through a turnaround phase on being picked up by EDS reported flat quarter performance on account of deferment in decision making in projects in application business as also, lack of replenishment of projects in applications business. For the quarter ended March 2008, Mphasis reported 4% growth in consolidated operating revenues at Rs 657.57 crore on the back 15% in ITO services and 10% growth in BPO services revenues with application revenues stagnant. Operating margins dipped 160bps at 9.9% mainly due drop in onsite utilisation due to project delays resulting in decrease of onsite revenue along with higher investment in delivery capacity . Net profit for the quarter was up 8% at Rs 71.42 crore on the back of tax credit of Rs 45 lakh against tax expense of Rs 3.97 crore in the sequential quarter.

On Y-o-Y basis, consolidated revenues grew 30% with the operating margins dipping 340bps and for the same period net profit was higher by 14%.

For FY08, Mphasis reported 38% growth in operating revenues at Rs 2423.07 crore with 32% growth in applications revenues at Rs 1581.11 crore, 29% growth in BPO revenues at Rs 544.06 crore and 114% growth in ITO revenues at Rs 297.90 crore. Operating margins down 10bps at 11.5% and the consolidated bottomline up 42% at Rs 255.29 crore on the back of 40% dip in tax provision with effective tax rate at 4.1%.

During the quarter, the Group added 17 new clients: 7 new clients and 10 new relationships through EDS channel. These include a US based manufacturing Company; a technology company in Europe and a US based retail Company in Application services and a banking company in Asia Pacific region in BPO services. The group continued to expand the client base and it has now 87 clients down from 89 in the sequential quarter with an annualized run rate of more than US$ 1 million including 7 clients down from 8 clients in the sequential quarter in excess of US$ 20 million.

The manpower strength in Onsite Application increased by 136 employees at 1278 employees and onsite BPO increased by 16 at 99. In offshore, Application saw decrease of 299 employees at 9165 employees, BPO saw increase of 591 employees at 12830 employees and 367 employees in ITO at 3675 employees. The Group headcount increased to 27047 as against 26236 in the sequential quarter.

Overall debtors' days increased to 43 days from 40 days in the sequential quarter and the Group had cash & cash equivalent reserve of Rs 95.25 crore against Rs 183.07 crore at the end of sequential quarter.

Sequential Performance

For the quarter ended March 2008, Mphasis posted 4% growth in its consolidated operating revenue at Rs 657.57 crore. The rupee depreciation benefited the operating revenues. The growth was however lower on account of deferment of decisions on some of the deals in the applications business. In terms of service lines Application services was stagnant at Rs 416.28 crore, BPO services grew 10% at Rs 151.25 crore and Ito services grew 15% at s 90.05 crore.

In industry verticals, BFS was stagnant contributing 39%, Technology & OEMs grew 7% contributing 25%, Telecom was up 5.2% contributing 13%, Logistics, Airlines & Transportation was dipped 2.3% contributing 7%, Manufacturing & Retail was up 13% contributing 13% and Healthcare & Pharma improved 6.1% at 3%.

During the quarter, operating margins dipped 160bps at 9.9% drop in onsite utilisation due to project delays resulting in decrease of onsite revenue along with higher investment in delivery capacity and higher S&M up 50bps at 3.7% and G&A up 30bps at 6.5%.

The gross profit margin of Application Services was down 350bps at 18.6%, of BPO services improved 580bps at 27.7% and of ITO services dipped 80bps at 18.4%.

The resultant operating profits was down 11% at Rs 65.08 crore. Other Income for the quarter stood at Rs 5.89 crore against loss of Rs 2.68 in the sequential quarter. Other Income includes forex gain of Rs 4.18 crore against loss of Rs 4.39 crore in the sequential quarter. PBT was up 1% at Rs 70.97 crore. For the quarter provision for taxation turned credit at Rs 45 lakh on account of higher deferred tax assets created. The resultant net profit was up 8% at Rs 71.42 crore.

Y-o-Y Performance

On Y-o-Y basis, consolidated revenues grew 30% at Rs 657.57 crore. Revenues from Applications services grew 29% mainly due to the healthy growth in technology and OEM vertical. Revenues from BPO grew 21% mainly due to growth in telecom customers and increased volumes in international business from existing clients. Revenue from ITO grew 60% due to increase in volumes in both infrastructure management services and technical help desk services.

Operating margins dipped 340bps at 9.9%. Gross margin of the Applications business slumped 950bps at 18.6%, of BPO Services improved 40bps at 27.7% and of ITO Services improved 250bps at 18.4%. The dip was mainly on account of to the strong appreciation of Indian Rupee against the US Dollar, drop in utilisation rates due to delay in project start date and additional investment in delivery capacity. S&M expenses and G&A expenses decreased as a % of sales by 150bps at 3.7% and 90bps at 6.5% respectively. The resultant operating profit for the period dipped 3% at Rs 65.08 crore.

During the quarter other income stood at Rs 5.89 crore against loss of Rs 72 lakh, which includes forex gain of Rs 4.18 crore against loss of Rs 3.39 crore in the corresponding quarter previous year; thus, PBT was higher by 7% at Rs 70.97 crore. During the quarter, provision for taxation turned credit of Rs 45 lakh on account of deferred tax assets recognized. The resultant net profit for the quarter was higher by 14% at Rs 71.42 crore.

FY08 Performance

For the year ended March 2008, consolidated operating revenue was higher by 38% at Rs 2423.07 crore. Revenues from Applications services grew 32%, with a healthy growth in the technology & OEMs vertical, while BPO revenues grew 32.8% with the increase primarily contributed by Telecom clients and additional volumes in knowledge process business. ITO revenues grew 151.5% both in infrastructure management services and technical help desk services. The revenues were impacted by rupee appreciation.

OPM dipped 10bps at 11.5% impacted by a stronger Indian Rupee to the US Dollar and investment in delivery capacity to support growth negated by lower SG&A expenses. Thus operating profits were up 37% at Rs 279.18 crore. Net other income was expense of Rs 13.02 crore against expense of Rs 6.02 crore in the corresponding previous period. During the year the company incurred forex loss of Rs 21.91 crore against forex loss of Rs 13.35 crore in the previous year. The resultant PBT was up 34% at Rs 266.16 crore. For the year, total tax provision decreased 40% at Rs 10.87 crore with effective tax rate down at 4.1% against 9.2% in the previous year on account of higher deferred tax assets recognized. The resultant net profit for the year was up 42% at Rs 255.29 crore.

Management Comments

Commenting on the results Mr Jeya Kumar, CEO, said

"This fiscal has been one of change & transformation. With EDS as a strong business partner, the Company has been building a solid foundation for development of capability and capacity. Our leadership team is coming to shape and our employee strength continues to grow with over 27,000 people currently. We are expanding aggressively and we continue to add new domain specific services to our portfolio to map the demands of the customer".

Valuation:

Mphasis is trading at Rs 227, which discounts the annualised quarterly EPS of Rs 13.7 by 16.6 times.

Capital goods stocks rise in firm market

Capital goods stocks rise in firm market

The key benchmark indices remained firm in afternoon trade supported
by strong European markets. Earlier, the market had firmed up in early
afternoon trade despite the latest data showing a surge in inflation
to highest level in more than three years. The market had pared gains
in mid-morning trade after a strong start ahead of the inflation data.
It had surged in early trade on positive cues from global equities.
European markets which opened after Indian markets were strong.

Except BSE Metal index all the sectoral indices on BSE were trading in
green. Metal stocks declined as global base metal prices retreated.
Banking, IT, capital goods, power, auto stocks rose. The market
breadth was strong.

Asian markets which opened before Indian markets were strong. US
stocks rose on Thursday, 1 May 2008, as a rebound in the dollar and
retreating oil prices calmed fears about inflation, renewing
investors' appetite for riskier assets, including undervalued
technology shares.

The wholesale price index rose 7.57% in 12 months to 19 April 2008,
accelerating from the previous week's annual rise of 7.33%, government
data released today showed. The rate was the highest since a reading
of 7.68% on 13 November 2004.

At 13:23 IST, the 30-share BSE Sensex was up 226.53 points or 1.29% at
17,509.58. Sensex was up 158.62 points at the day's low of 17,445.93
hit in mid-morning trade. Sensex hit a high of 17,621.24 in early
trade. At the day's high, Sensex rose 333.93 points.

The broader based S&P CNX Nifty was up 42.85 points or 0.83% at
5,208.75.

The market breadth was strong on BSE with 1,498 shares advancing as
compared to 1089 that declined. 71 remained unchanged.

The BSE Mid-Cap index rose 1.4% to 7,240.36 and BSE Small-Cap index
rose 0.71% to 8,836.19.

India's largest private sector firm by market capitalisation and oil
refiner Reliance Industries rose 1.34% to Rs 2,650.10 after the
company said it had signed an agreement to buy a 90% stake in an
exploration block in Peru.

Capital goods stocks rose. Larsen & Toubro (up 3.7% to Rs 3,112.50),
Bharat Heavy Electricals (up 1.27% to Rs 1,921), Suzlon Energy (up
1.01% to Rs 290.05) edged higher.

Banking stocks rose across the board despite surge in inflation. HDFC
Bank (up rose 1.76% to Rs 1541.50), ICICI Bank (up 4.28% to Rs
918.20), State Bank of India (up 2.85% to Rs 1,827) edged higher.

Bank of India rose 5.75% to Rs 362.34 after it posted 70 % net profit
rose to Rs 757 crore over Rs 447 crore in Q4 March 2008 over Q4 March
2007.

Finance Minister (FM) P Chidambaram on Thursday, 1 May 2008, said
state-run banks are unlikely to hike interest rates in the near
future. FM said banks were quite happy that only the CRR (cash reserve
ratio) has been raised by the Reserve Bank of India and policy rates
have been untouched. RBI on Tuesday, 29 April 2008, hike CRR by 25
basis points to 8.25% in its annual monetary policy review.

Auto stock rose on strong monthly sales. India's largest car maker by
sales Maruti Suzuki India rose 5.81% to Rs 785. Maruti Suzuki India
has recorded a 22.4% growth in domestic sales in April 2008 compared
with April 2007. The company's exports grew 64.5% during the month
compared with the year-ago period. In April Maruti Suzuki sold 59,539
units in the domestic market compared with 48,652 units in April
2007.

Bajaj Holdings rose 3.5% to Rs 734. Erstwhile Bajaj Auto reported a
23.60% growth in motorcycle sales during April 2008 at 2,03,081 units
against 1,64,304 units in the same month last year. The company's
total two-wheeler sales also rose 23.08% during the month at 2,03,930
units as compared to 1,65,692 units in April last year.

India's largest motorbike maker by sales Hero Honda Motors declined
0.67% to Rs 845. Hero Honda Motors reported a 9.03% jump in motorcycle
sales during April 2008 at 2,86,252 units against 2,62,544 units in
the same month last year.

India's largest tractor maker by sales Mahindra & Mahindra rose 3.45%
to Rs 693.50 on reports the company is exploring buying stake in Pune-
based two-wheeler maker Kinetic Motor. India's largest truck maker by
sales Tata Motors rose 3.45% to Rs 685.05.

IT stocks rose. Wipro (up 1.88% to Rs 497.80), Tata Consultancy
Services (up 2.13% to Rs 939.10), Satyam Computer services (up 2.87%
to Rs 496.05) and Infosys (up 1.49% t o Rs 1,779.85) edged higher.

Power stocks rose. Reliance Infrastructure (up 5.48% to Rs 1,503),
NTPC (up 1.96% to Rs 200.60), Tata Power Company (up 3.07% to Rs
1,434) edged higher.

Reliance Power rose 1.01% to Rs 398.30. Reliance Coal Resources, a
wholly owned subsidiary of Reliance Power, has acquired 100% in three
coal mines in Indonesia.

Metal stocks declined as global base metal prices retreated. Sterlite
Industries (down 4.42% to Rs 824.50), Hindalco Industries (down 3.49%
to Rs 186.85) and Tata Steel (down 1.88% to Rs 802.85),Steel Authority
of India (down 1.32% to Rs 182.60) edged lower. However, India's
largest aluminium maker by sales National aluminium Company rose 0.35%
to Rs 450.80.

Jaiprakash Associates (up 4.09% to Rs 282.35), ITC (up 0.64% to Rs
221.50) edged higher from Sensex pack.

HDFC (down 0.72% to Rs 2,784.50), ACC (down 0.2% to Rs 757.10), Ambuja
Cement (down 0.57% to Rs 113.25) edged lower from Sensex pack.

India's largest real estate player by market capitalisation DLF rose
1.5% to Rs 715.35. DLF reported a net profit of Rs 638.55 crore on a
sales of Rs 1613.32 crore in Q4 March 2008.

India's largest telecom services provider by sales Reliance
Communications declined 3.33% to Rs 560.45. Reliance Communications is
reportedly looking to bid for South African telecom major MTN.
Reliance Communications is talking to leading global banks to raise
resources and be ready, in case MTN's management decides to invite
bids, the reports added.

India's third biggest motorcycle maker by sales, TVS Motor Company
rose 6.26% to Rs 45.80 after it ended a 13-month decline in two-
wheeler sales and registered a 4.8 % growth to 109,937 units in April
2008 over April 2007.

The Dow Jones industrial average shot up 189.87 points, or 1.48
percent, to 13,010 on Thursday, 1 May 2008. The Standard & Poor's 500
Index surged 23.75 points, or 1.71 percent, to 1,409.34. The Nasdaq
Composite Index climbed 67.91 points, or 2.81 percent, to 2,480.71.

All these three major indexes closed at the highest level since the
first half of January 2008 as equities extended a rally started in mid-
March 2008 on optimism that credit markets and the economy have begun
to stabilize.

European markets opened strong. France's CAC 40, Germany's DAX and
UK's FTSE 100 were up by between 0.81% to 0.99%.

In Asia, key benchmark indices in Hong Kong, Japan, South Korea,
Singapore and Taiwan were up by between 0.49% to 2.53%. China's
markets remained shut for its two-day Labour Day holiday and will
resume trading on Monday, 5 May 2008.

Earlier, the US Federal Reserve on Wednesday, 30 April 2008, cut Fed
Funds rate by 25 basis points to 2% and hinted at a pause in its
recent campaign to lower borrowing costs.

Inflation remains the biggest concern for the Indian stock market. The
measures taken by the Union government to control inflation have also
added to uncertainty on corporate profit. Finance Minister P
Chidambaram on Tuesday, 29 April 2008, said government will impose
export tax on basmati rice and some steel products, and cut import
duties on key inputs like ferro alloys and metallurgical coke. He said
the measures were being taken to improve domestic supplies and to
moderate prices. The government has already banned export of cement
and non-basmati rice.

Given that parliamentary elections are scheduled next year (in May
2009), the government may leave no stone unturned in its attempt to
rein in inflation. This is bad news for commodity scrips like cement,
steel etc.

In a bid to rein in inflation, the Reserve Bank of India, on Tuesday,
29 April 2008, raised cash reserve ratio (CRR) by 25 basis points to
8.25%, to suck out excess liquidity in the banking system, in its
annual monetary policy review. While the central bank has mentioned
price stability as its key priority, the overall undertone of the
policy is not as hawkish as market had feared. That in turn boosted
the bourses with Sensex jumping 362.50 points or 2.13% on that day (29
April 2008) to settle at 17,378.46. The RBI governor Y V Reddy expects
inflation to moderate in the next 2-3 months.

Good Q4 results March 2008 results and firm global markets, triggered
a solid rebound in the Indian market over the past few days. Buying by
domestic institutions has supported the market.

The structural growth drivers of the Indian economy remain intact –
India's economy is expected to witness a decent-to-strong growth for a
long period of time due to favourable demographics. Acceleration in
infrastructure creation will be another driver of strong growth in
India's economy. Rating agency CRISIL in its latest outlook for Indian
economy for the year through March 2009 has stated that the overall
growth scenario is expected to remain strong with investment as the
main driver.

Another pointer to the fact that the long term India growth story
remains intact is the outcome of the latest 2008 US-India Business
Council (USIBC) survey, according to which, India is, and will
continue to be, a premier destination for investment by US firms, with
a large number of respondents rating future economic growth in India
as highly sustainable.

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Stop worrying, emerging markets still have the fire power

Stop worrying, emerging markets still have the fire power
1 May, 2008, 0828 hrs IST,

LONDON: Emerging markets are very likely the next bubble, but don't
let that stop you.

Emerging market shares are already expensive relative to developed
market ones, but economic growth in places like China and India will
continue to pull away, and investors will pay an increasing premium
for that, especially if the ageing economic giants of the 20th century
slip from their long term growth paths.

And in a process we've seen before with internet stocks and houses,
big returns will attract big money, driving further rises and making
it all seem very sensible, at least for a while.

The definition of "a while" is of course, as with all bubbles, the key
question.

Amazingly, the case for emerging markets being both a bubble and a
good investment is being made by legendary value investor Jeremy
Grantham.

"This bubble, like all bubbles, will not be justified by long-term
value but at least will be one of the least flaky bubble cases ever,"
Grantham, chairman of fund manager GMO, wrote in a note to clients.
"Perhaps once in a career any self respecting strategist, even a one
trick 'mean reversion' one like GMO, should have a go at predicting a
major divergence, a true bubble. And this is ours." He points out that
US gross domestic product has in recent years been growing at below
its long term 3.5% rate in real terms, despite a very supportive
global environment and huge amounts of cheap financing.

At the same time, growth in emerging markets is higher, and is
supported by boom prices for commodities and by a seemingly
unstoppable movement of people into cities, driving both consumption
and higher productivity.
Grantham's thesis, essentially, is that these diverging trends will
continue, that everyone will realiae it and that they will pile into
emerging markets, thus inflating the bubble. How big a bubble?

The Japanese bubble peaked at a price to earnings ratios two to three
times that of the rest of the world's stocks, while the Nasdaq one
reached similar figures, according to GMO. Grantham argues that
emerging markets could achieve a premium of 50 percent, which would be
"far less than normal," but still a heck of a lot higher than current
levels. Emerging market shares are now more expensive on a reported
earnings basis than developed market stocks, a historically unusual
situation.

Emerging shares are now selling at 15.9 times their reported earnings,
as against just 14 times for developed markets. The median over the
past 13 years is 15.6 for emerging and 22 times for developed,
according to data from Societe Generale. So, investors are paying more
for a dollar in emerging markets earnings than they will for a
developed earnings dollar, and a major relative change in valuation
has already happened.

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There's money to be made in these uncertain times

There's money to be made in these uncertain times
24 Apr, 2008, 0725 hrs IST,Parag Parikh,

Markets by nature are uncertain. The current news headlines make them
appear even more uncertain. In these uncertain times, there are heads-
I-win-tails-you-lose opportunities available. One of these
opportunities is given below.

Let us say you invested Rs 5 lakh in a Nifty index fund. The Nifty is
currently trading around 5,000-levels. Assume you did not see the
stock prices for 3.25 years and opened you newspaper to check the
prices only on July 1, 2011.

The portfolio value you would expect would depend on the Nifty level
then prevailing. If the Nifty closed at 3,500 on June 30, 2011; you
would expect your portfolio to be worth Rs 3.5 lakh. On the other hand
if the Nifty closed at 8,000, your portfolio should be worth Rs 8
lakh.

An alternative to the above strategy is available in the markets,
where the downside is completely eliminated and the full (and
sometimes more than the full) upside is captured. As I write the Nifty
is trading above 5,000-levels and the Nifty call options with expiry
of June 30, 2011 have sellers at 1,100.

Say you wish to invest Rs 5 lakh. Do the following two transactions:

Buy 100 call options at a price of Rs 1,140 per option. Total cost
would be Rs 1,10,000. Invest the balance amount in a bank FD with a 9%
interest rate till June 30, 2011 that would amount to Rs 3,90,000. The
total reads Rs 5,00,000.

On July 1, 2011, the money kept in bank FD would have grown to approx
Rs 5,20,800 (assuming quarterly compounding). The call option will
give the full upside on Rs 5 lakh worth of equity. Thus if the Nifty
were to close at 3,500, you would have a portfolio value of Rs
5,20,800. On the other hand if the Nifty closes at 8,000, your
portfolio would be worth Rs 8,20,800. A guaranteed outperformance over
the Nifty!!!

So where is the catch? There is no catch other than taxes. If the
markets were to go up, long-term capital gains in equity would be tax
free, where as long-term gains in equity options may not be. Further
bank interest would be subject to taxation. One could invest in fixed
maturity plan mutual funds instead of bank FDs to save on tax, but the
rate of return would vary slightly.

A question may arise as to why these opportunities are available in
the market. The reason is that market participants have very short
memories and tend to extrapolate recent events far into the future.
Just as demand for earthquake insurance goes up immediately after an
earthquake, currently there is huge demand for put options (implied
volatility of 40%-50% for the academically inclined). In such a
scenario, call options are being sold at ridiculously low levels
(implied volatility of 0% !!!).

So for someone who is not bothered about paying taxes on the gains,
this strategy would be heads I win, tails you lose.

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20 Indian firms among world's top 100 in outsourcing

20 Indian firms among world's top 100 in outsourcing: Report
2 May, 2008, 1536 hrs

NEW DELHI: Reflecting strong industrial growth, 20 Indian firms,
including Infosys and TCS are among top 100 outsourcing companies in
the world.

The latest '2008 Global Outsourcing 100', compiled by the
International Association of Outsourcing Professionals (IAOP) that
features at least 20 Indian firms has five of them -- Infosys (third
rank), TCS (sixth), Wipro (seventh), Genpact (ninth) and Tech Mahindra
(tenth) in the top 10.

All the five are leading software service providers. "Half of the top
10 companies are from India, reflecting a strong growth in the
outsourcing industry. Infosys Technologies was number three on the
Leaders List, representing firms with annual sales of 60 million
dollars or more," IAOP said in a statement.

Accenture has cornered the top slot and IBM is on the second spot.
Companies on the list averaged 1.7 billion dollars in annual sales and
engaged about 27,000 employees across the world

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The global cheer saw good gains for the Indian market

The global cheer saw good gains for the Indian market as well. The
Indian market closed nearly at the high point of the day and
comfortably digested high inflation numbers. Sensex closed at 17600,
up 312 points and Nifty at 5228, up 62 points from the previous close.
The CNX Midcaps index was up 1.22% and BSE Smallcaps index was up
0.55%. The BSE Bankex index was up 3.6%, BSE Auto index up 2.8%, BSE
Realty index up 2.5% and BSE IT index up 2.2%. The market breadth was
positive with advances at 709 against declines of 537 on the NSE. Top
Nifty gainers included ICICI Bank, Maruti and L&T while losers
included Sterlite, Reliance Communications and Hindalco.

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Power cos make merry this season

Power cos make merry this season

The electricity that has been saved due to cold weather has been sold
to neighbouring states

Freezing: The cold weather has affected our electricity bills too
It's not just us who have benefited from the weather's cold spell.
While we can all expect a lower bill due to less consumption of
electricity, power companies too have made some good money.

They have sold the unused power to neighbouring states suffering from
a power crisis at a rate of Rs 7 to Rs 7.50 per unit.

"We will now reduce the per unit cost charged in the bills at least
for February by around 20 per cent," said an official of Tata Power
Comp-any.

The lowered costs will apply to Reliance Energy Ltd (REL), BEST and
Maharashtra State Electricity Distribution Co Ltd consumers too.

The demand for power in Mumbai during the night has come down from
700-800 MW to 500-600 MW.

However, there is some bad news for those Mumbaikars who are supplied
power by REL and BEST. Consumers will have to pay more from April, as
these companies have proposed to increase the electricity tariffs, and
have also added new tariff components.

"We had to amend the tariffs due to the additional power purchased
from other states in the past," said S A Puranik, additional GM, BEST.
BEST has added Rs 226 crore for purchasing power from other states for
2007-08 and Rs 435 crore in 2008-09.

REL has proposed to recover Rs 534 crore for a new component called
the Asset Recovery Charge. This amount is the cost incurred by REL on
employee costs, maintenance costs, etc.

An official from REL said, "We are following the Appellate Tribunal of
Electricity's order to charge consumers in 2008-09."

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PowerGrid gets 'Navratna' status

The govt granted coveted 'Navratna' status to Power Grid Corporation
of India Ltd, giving the transmission major financial autonomy to take
independent decision on investments up to Rs 1,000 crore.


"We have issued the order after the company fulfilled some of the
criteria, like taking 50 percent non-official independent directors on
the board," Secretary in the Department of Public Enterprises R
Bandhopadhyay told on Thursday.


With the grant of the Navratna status, the board of PGCIL will be able
to take decisions on investments up to Rs 1,000 crore, or 15 percent
of its networth, without seeking approval of the government.


Bandhopadhyay said PGCIL now joins the club of 15 Navratna companies
which include NTPC, ONGC, SAIL, BHEL and NALCO.

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CRR: Deposit rates to be revised

NEW DELHI: Deposit rates are expected to be revised downwards to
absorb cost of the hike in cash reserve ratio (CRR), bankers said on
Thursday. With credit growth slowing down, they said lending rates
will not be raised in the short term. Finance minister P Chidambaram
said on Thursday he does not expect interest rates to go up following
RBI move to hike mandatory deposits of banks by 0.25% to 8.25%.

In a meeting with CEOs of public sector banks, he asked the banks to
review their derivative portfolios and make sure customers understand
them fully.

Briefing reporters, Mr Chidambaram said, "They do not expect the CRR
hike to impact interest rates. So, going forward, in the reasonable
future, I do not expect an increase in interest rates by PSU banks.

By and large, banks are happy that only CRR has been hiked. No
increase in interest rates is expected by banks." Bankers felt the
lending rates will not be raised since the hike in CRR is construed as
a signal for liquidity management and not for hardening interest
rates.

"The increase in CRR by 75 basis points over the past two weeks will
have to be offset since margins are under pressure. It will at least
impact up to 10 basis points. Therefore, there may be a case to cut
cost of funds and review rates on the liabilities side to minimise
impact on the margins. However, the bank will decide eventually,"
Corporation Bank chairman B Sambamurthy said.

"The bank will take a view on rates in the next Assets & Liabilities
Committee meeting. Whether deposit rates should be reduced will depend
on deposit growth. Already, RBI has projected only a 17% growth in
deposits," Union Bank of India chairman M V Nair said.

According to RBI, deposits would increase 17%, or Rs 5,50,000 crore,
during 2008-09. Adjusted non-food credit is projected to increase by
20% during 2008-09. The finance minister said the RBI projections
could be conservative since bankers were of the view that both the
deposits and advances could grow more than the projections.

On derivatives, the minister said the banks must make sure the
customers understand the products. Several companies have filed legal
suits against banks over foreign exchange derivatives trades that have
gone bad. The RBI has constituted an inter-departmental group to
review the existing regulatory and supervisory framework for overseas
operations of banks, introduction of new products and processes,
increasing off-balance-sheet exposures including derivative products,
and recommend appropriate changes, including off-site reporting
systems.

The finance minister asked bank CEOs to increase their debt swap ratio
by replacing a bank loan with a money lender's loan. "I have said that
as per the June 18, 2004, debt swap scheme, banks must strive to
replace money lender loans by bank loans to farmers and extinguish the
money lender loan. While there is no target, next year we will capture
the data effectively."

He asked banks to beef up lending under differential rate of interest
(DRI) scheme priced at 4%. Although the government increased
eligibility limits under DRI, banks have not been lending under this
window, he said.

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Inflation touches 7.57 per cent

NEW DELHI: Indian inflation jumped to a fresh 3-½ year high in mid-
April, and analysts said it is unlikely to ease soon as price
pressures persist and fiscal and monetary steps will take time to have
an impact.

Data released by the government on Friday showed the wholesale price
index rose 7.57 percent in the 12 months to April 19, above the
previous week's 7.33 percent and outstripping market expectations of
an annual rise of 7.38 percent.

The government and central bank have rolled out a string of policy
changes in recent weeks as inflation has soared.

In the latest move, the Reserve Bank of India on Tuesday raised the
cash reserve ratio (CRR) by 25 basis points to 8.25 percent, its
highest level in seven years, and said it was ready to act again if
price pressures continued to build.

Wholesale inflation now stands at its highest since November 13, 2004,
when it was 7.68 percent. The latest rise was largely driven by higher
prices of foods, metal products, and industrial fuels.

Economists expect the central bank to focus on draining inflation-
fuelling cash from the system, while the government moves to fix
supply-side problems.

"Across the board price pressures are there. We are yet to see the
impact of monetary and fiscal measures," said Shubhada Rao, chief
economist at Yes Bank in Mumbai. "These pressures would continue. The
RBI will continue to focus on liquidity management as a monetary
policy approach."

Speaking to reporters in the southern city of Bangalore, Finance
Minister Palaniappan Chidambaram said inflation would be contained but
people would have to be patient.

The markets remained cool to the data with the yield on the 10-year
federal bond steady at 7.89 percent, while the rupee was at 40.64/65
per dollar, slightly weaker than 40.63/64 beforehand.

The Congress Party-led coalition, under pressure from its allies, also
unveiled new measures on Tuesday to tame inflation and guard food
supplies, slapping export taxes on basmati rice and some steel
products. Policy planners the world over are grappling with soaring
food and raw material prices.

But India, which has about 260 million poor, is especially sensitive
to rising prices as food accounts for a much higher proportion of
people's expenditure than in developed economies.

Fighting inflation has become a top priority for the government as it
heads towards a general election due by May 2009 and a series of key
state polls this year.

COMMENTARY

Shubhada Rao, Chief Economist, Yes Bank, Mumbai: "Across the board,
price pressures are there. We are yet to see the impact of monetary
and fiscal measures. Year ahead, these pressures would continue and
5.5 percent will be a challenge. The RBI will continue to focus on
liquidity management as a monetary policy approach."

India's central bank raised the cash reserve ratio on Tuesday by 25
basis points to 8.25 percent, its highest level in seven years, to
control inflation-stoking cash in the system. The rise will take
effect from May 24.

â–ª The unexpected increase in the CRR, the amount of funds banks have
to keep on deposit with the central bank, followed a two-stage rise
announced earlier in April to 8.0 percent.


â–ª The RBI kept its key lending rate steady at 7.75
percent and left the reverse repo rate, the rate at which it absorbs
excess cash from banks, unchanged at 6.0 percent.


â–ª It forecast economic growth of 8.0 to 8.5 percent in the fiscal year
that began last month, after an estimated 8.7 percent in 2007/08. The
bank said it aimed to lower inflation to "around 5.5 percent" this
fiscal year but with the goal of lowering it close to 5.0 percent as
soon as possible.


â–ª The government slapped export taxes on basmati rice and some steel
products and cut more duties on Tuesday as the finance minister
unveiled a series of new moves to boost supplies of key commodities
and help moderate inflation.


â–ª The wholesale price index is more closely watched than the consumer
price index (CPI) because it has a higher number of products in its
basket and is published weekly.

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