Monday, March 31, 2008

Market Updates

Bodal Chemicals Ltd has informed the BSE that a board meeting will be held on April 9 to consider and declare of interim dividend on equity shares and preference shares for the financial year 2007-08.

Compact Disc India Ltd has informed the BSE that a board meeting will be held on April 14 to consider and approve various funding offers given by the top foreign banks to finance company's expansion plans at KINFRA SEZ, Trivandrum and also to app rove the corporate restructuring of the company.

Foseco India Ltd has informed the BSE that it has fixed May 12 as the record date for the purpose of payment of interim dividend.

Bata India Ltd has that the board of directors of the company at its meeting held on March 28 has recommended a dividend of 15 per cent on equity shares and an additional dividend of 5 per cent to celebrate 75 years of the Company in India.

Crude oil fell to $105
a barrel on Monday, extending Friday's decline, after the restart of a crude pipeline system in Iraq eased fears of an extended exports disruption from the country's oil-rich south.

US light crude for May delivery fell 56 cents to $105.06 a barrel, after hitting an intraday low of $104.34.

The rupee on Monday moved higher against the US dollar due to rising trend in equity market.

In active trade at the forex market, the local currency opened higher at 39.84/85 a dollar. It ended previously at 39.8950/9050.

European stocks fall led by financial companies

European stocks dropped in an early trade on Monday, led by financial shares on concern the asset write-down will increase. The Swiss bank, UBS led the fall.

UK`s benchmark index, FTSE 100 fell 101 points, or 1.77%, to trade at 5,591.90. French benchmark index, CAC 40 dropped 64.45points, or 1.37%, to trade at 4,631.47. Germany`s benchmark index, DAX went down 122.89 points, or 1.87%, to trade at 6,437.01.

Cairn India net drops for FY 07; shares down 6%

Cairn India, on consolidated basis registered increase in loss for the year ended Dec. 31 2007. During the period, net loss rises 15.92% to Rs 245.442 million as against Rs 211.742 million in the year ended December 2006.

Total income rose phenomenally 25.46 times to Rs 11,446.716 million for the year ended December 2007 from Rs 449.632 million for the year ended Dec. 31, 2006.

On Standalone basis, Cairn India loss widened in the year ended December 2007. The company`s net loss widens 2.69 times to Rs 788.16 million in 2007 from Rs 292.24 million for the year ended Dec. 31, 2006.

Total income rose 5.75 times to Rs 339.62 million for the year ended December 2007 from Rs 59 million for the year ended Dec. 31, 2006.

Shares of the company declined Rs 11.8, or 5.13%, to trade at Rs 218.3. The total volume of shares traded was 607,965 at the BSE. (10.27 a.m., Monday).

Market update

Asian markets started the week on a negative note. The market declined in the early session of trade on Monday (Mar. 31, 2008) on speculation that U.S. consumer spending is declining and after a newspaper reported that UBS AG will need more capital, raising concern that credit market losses will widen.

Toyota Motor, which gets more than half of its revenue from North America, declined the most among automakers. Mizuho Financial Group, touched two-week low.

Japanese benchmark index Nikkei declined 192.64 points, or 1.50%, to trade at 12,627.83.

Hong Kong`s index Hang Seng lost 313.03 points, or 1.34%, to trade at 22,972.92.

China`s Shanghai Composite declined 48.70 points, or 1.36%, to trade at 3,531.45.

Taiwan`s Taiex index declined 98.16 points, or 1.14%, to trade at 8,525.32.

South Korea`s KOSPI declined 3.62 points, or 0.21%, to trade at 1,698.21.

Singapore`s Straits Times lost 16.14 points, or 0.53%, to trade at 3,048.04. (8.10 a.m., IST)


Oil prices dropped on Friday (March 28) as fears of a major disruption of Iraqi crude exports vanished after the restart of a crude pipeline system in Iraq.

Light sweet crude for May delivery fell USD 1.96 to settle at USD 105.62 a barrel Friday on the New York Mercantile Exchange (NYMEX).

April gasoline futures rose 0.07 cent to settle at USD 2.717 a gallon. The retail gas prices rose 0.8 cent overnight, to USD 3.275 a gallon

April heating oil futures fell 4.33 cents to settle at USD 3.105 a gallon at the NYMEX.

In London, Brent crude futures slipped USD 1.23 to settle at USD 103.77 a barrel on the ICE Futures exchange.

May natural gas futures rose 11.3 cents to settle at USD 9.80 per 1,000 cubic feet.


Market enthusiasm may continue on Monday

Nifty closed above 4741 consecutively for the last 4 days. Short covering above 4909 has given a trigger to the bulls to pull up the Nifty towards 5091 in the short run. In the previous settlement we were seeing huge short roll overs which have been partly covered above 4909. Nifty futures were trading at a whooping premium of 44 points.

Higher PC ratio and falling volatility are supportive elements to bulls. Fresh buying is also visible ahead of quarterly numbers. We had seen massive buying in Infosys along with Wipro and TCS. Infosys is coming out with the quarterly numbers on Apr. 15, 2008. Market enthusiasm may remain for another couple of days.

W
e expect markets to remain positive on Monday due to year end closing and NAV propping. Nifty support is at 4910 and resistance at 5050.

Stocks to be watched out are L&T, Punj Lloyd, ABB and GMR Infrastructures.

Sunday, March 30, 2008

Kiri Dyes And Chemicals Ltd.
Plot No. 299/1/A, Near Water Tank, Phase-II, GIDC, Ahmedabad, Gujarat - 382445
Phone: 25894477 2583 5297 Fax: 25834960

Public Issue of 37,50,000 equity shares
of Rs 10 each for cash at a
premium of Rs 140 per share.
Issue details


Issue openIssue close
25 Mar, 200802 Apr, 2008



Issue price (Rs)Total size (Rs)
150.0056.25 Crores



QIBNon-InstitutionalRetailEmployee
18,75,0005,62,50013,12,500-



Lead ManagersRegistrar
CENTRUM CAPITAL LIMITED
CAMEO CORPORATE SERVICES LTD
Subramanian Building, No.1, Club House Road, Chennai (Madras), Tamil Nadu - 600002
Phone: 28460390 Fax: 28460129

Analysis
Company Analysis
  • Kiri Dyes & Chemicals Ltd. (KDCL) was incorporated as a private limited company in May 1998 and was converted into a public ltd co. in May 2006.
  • KDCL is engaged in the business of manufacturing and marketing of:
    1. Reactive Dyes- Synthetic Organic Dyes (S.O. Dyes)
    2. Dye Intermediates- Vinyl Sulphone and H-Acid
  • KDCL’s production hub is centrally located in Gujarat. S.O. Dyes are manufactured and processed in three plants located in Vatva, Ahmedabad and dye intermediates are being produced at Padra plant in Vadodara.
  • The installed capacity for dyestuff (S.O. Dyes) was 10,800 MT per annum with capacity utilization of 77.37% in FY 07.
  • The installed capacity for dye intermediates (Vinyl Sulphone and H-Acid) was 3,600 MT per annum each with capacity utilization of 42.94% and 4.17% respectively in FY 07.
  • KDCL’s product range comprises of more than 120 dyestuffs used by textiles, leather, paint and printing-ink industries.
  • KDCL supplies reactive, acid, and direct dyes as well as dye-intermediates in various forms like standardized spray dried/tray dried - powder/granular, crude and reverse osmosis.
  • KDCL has seen increase in the % share of the domestic market from 0.80% in FY 03 to 33.55% in FY 07. For half year ended September 2007, the same has increased nearly to 49%.
  • KDCL’s major chunk of export revenue comes from Turkey (18%) and Korea (18%) followed by Bangladesh (17%), USA (15%),Taiwan (7%) and Indonesia (6%).
  • Some of KDCL’s top customers includes both Indian and global companies such as, Dystar (India) Pvt ltd (India), Kyungin Synthetic Corporation (Korea), Sen Er Boya Kimya (Turkey), Biddle Sawyer Corporation (USA), Befuwell Enterprise Co Ltd (Taiwan) and Shangyu Yide Chemical Co. Ltd (China).
  • On November 1, 2007, KDCL entered into the Memorandum of Understanding with M/s. Zhejiang Lonsen Group Stock Co. Ltd. with the objective to establish a joint venture manufacturing facility in India for the production of reactive dyes.
  • Post issue promoter and promoter group shareholding will reduce from 88.76% to 66.57%.
Objects of Issue
  • To fund the capital expenditure for setting up of a plant to manufacture Sulphuric Acid, Oleum and Chloro Sulphonic Acid with a combined capacity of 500 M.T. per day adjacent to KDCL’s existing unit at Village Dudhwada, Taluka Padra, District Vadodara thus enabling backward integration and economies of scale.
  • To fund the capital expenditure for Dyes and Intermediates Unit located at GIDC, Vatva, and Ahmedabad.
  • To fund the additional working capital margin.
Strengths
  • OPM has increased from 7.9% in FY 06 to 10.7% in FY 07. For half year ended September 2007, OPM stands at 15%.
  • KDCL’s source of revenue is well diversified. Therefore, the company’s revenue will not be majorly affected if any of the markets slow down.
Weaknesses
  • During five years from FY 03 to FY 07, company had negative cash flows in three years.
  • The debt-equity ratio of the company increased from 1.10 times in FY 05 to 1.76 times in FY 07 due to increase in the long term debt taken by the company from Rs. 19.64 crore in FY 05 to Rs. 59.67 crore in FY 07.
Financials
  • Sales increased at a CAGR of 10.13% to Rs. 133.76 crore in FY 07 from Rs. 90.9 crore in FY 03 on account of growth in production and sales of dyes and commencement of commercial production and sales of Vinyl Sulphone & H-Acid. For half year ended September, sales stood at Rs. 97.02 crore.
  • Net profit increased at a CAGR of 20.75% from Rs.4.06 crore in FY 03 to Rs. 8.63 crore in FY 07. PAT for half year ended September June 2007 was Rs. 8.9 crore.
  • NPM has increased from 4.5% in FY 03 to 6.5% in FY 07. For half year ended September 2007, NPM was 9.2%.
  • The RONW has increased from 15.70% in FY 04 to 25.5% in FY 07 because of increase in PAT.
  • Debtors’ turnover ratio for FY 07 stood at 4.47 times as compared to 10.13 times in FY 06.
  • Book value per share decreased from Rs. 108.1 in FY 03 to Rs. 35.6 in FY 07 mainly due to increase in the issue of equity capital over the period. BV per share as on 30 September, 2007 was Rs. 44.
Valuation
  • EPS of the company increased from Rs. 4.7 in FY 06 to Rs. 9.1 in FY 07. EPS as on September 30, 2007 (annualized based on half year of FY 08) was Rs. 17.80.
  • Post issue EPS is Rs 11.87 (based on PAT of year ending on March 31st, 2008).
  • Post issue PE at upper price band is 12.64 and at the lower price band is 10.53.The shares have been offered at a price band of Rs. 125/- to Rs. 150/- per share.
Peer Analysis: (As on September 30, 2007)

CompanyNet Sales
Rs Crore
PAT
Rs Crores
PAT/Sales
(%)
P/E
(Times)
EPS
Rs
BV per share
Rs
KDCL97.018.909.1710.53-12.648.9044.00
Metrochem Industries Ltd.125.381.751.4011.215.0376.91
Poddar Pigments Ltd.71.291.783.6215.181.7125.67
Priya Ltd.49.220.220.318.612.1775.98

Source:
CMIE

Sulzer India net profit rises 886.76% in the December 2007 quarter

Net profit of Sulzer India rose 886.76% to Rs 6.71 crore in the quarter ended December 2007 as against Rs 0.68 crore during the previous quarter ended December 2006. Sales rose 16.40% to Rs 45.36 crore in the quarter ended December 2007 as against Rs 38.97 crore during the previous quarter ended December 2006.

For the full year, net profit rose 417.73% to Rs 15.48 crore in the yearended December 2007 as against Rs 2.99 crore during the previous year ended December 2006. Sales rose 53.76% to Rs 124.79 crore in the year ended December 2007 as against Rs 81.16 crore during the previous year ended December 2006.

DIC India net profit rises 9.31% in the year ended December 2007

Net profit of DIC India rose 9.31% to Rs 10.92 crore in the year ended December 2007 as against Rs 9.99 crore in during the previous year ended December 2006. Sales rose 18.96% to Rs 403.86 crore in the year ended December 2007 as against Rs 339.50 crore during the previous year ended December 2006.

Moser Baer India leads gainers in `A` group

Moser Baer India soared 20.01% to Rs 151.75. It was top gainer from the BSE`s A group shares. On 27 March 2008, the company`s board approved selling its entertainment business to a subsidiary company, Moser Baer Entertainment.

Housing Development & Infrastructure (HDIL) spurted 18.55% to Rs 721.30 and was the second biggest gainer in ‘A` group.

Jindal Steel & Power vaulted 15.91% to Rs 2218.65 and was the third biggest gainer in ‘A` group.

Akruti City gained 15.01% to Rs 802.40. It was fourth biggest gainer in A group.

United Brewaries (Holdings) advanced 13.41% to Rs 681.05. It was fifth biggest gainer in A group.

The BSE Sensex surged 355.73 points or 2.22% to 16,371.29 on positive cues from the Asian markets.

DEPB withdrawn on steel

The government has suspended export subsidy under the Duty Entitlement Pass Book (DEPB) Scheme on steel to control inflation and boost domestic supplies. The DEPB Scheme has been temporarily removed for steel exports and has been completely withdrawn for export of non-basmati rice, the Directorate General of Foreign Trade said.

Earlier this week, some steel producers in India had agreed to halt steel exports with immediate effect after government sought help from steel manufacturers to keep the prices in check with inflation rising to almost 6%. Rising demand and spiralling costs have seen steel majors increase prices significantly since January 2008

Government to decide whether to sacrifice a bit of growth to contain inflation

Indian merchants` chamber is celebrating its centenary. In the Valedictory Function of the Centenary celebrations held on Friday, the 28th March 2008. P. Chidambaram, Hon`ble Union Finance addressed members on the special event and touched various topics related with global and Indian economy.

Speaking at the valedictory function of the Indian Merchants` Chamber (IMC) centenary celebrations, the minister said the central bank had been asked to look into the modalities of the monetary policy. Chidambaram said the primary reason behind the jump in the inflation rate lies in the fact that at present it is a worldwide phenomenon. But more than that, we are currently importing inflation”. Higher prices of imported goods and services playing crucial role in inflation.

Expressing concern over high rate of inflation, the Union Finance Minister, P. Chidambaram, said here that the Government will soon decide whether it should sacrifice a bit of growth to contain inflation. Eight per cent economic growth and four per cent inflation would be the ideal balance.

Speaking at the valedictory function of the Indian Merchants Chamber`s centenary celebration, Chidambaram said, “fiscal measures to contain inflation have been taken in the Budget, monetary steps will be taken by the Reserve Bank of India and on the supply side the Agriculture Ministry has an important role to play.”

Though the Government is willing to import wheat, rice or edible oil to contain the price rise, they are not available in the global market. Every other country has banned export of agriculture commodities.

Agriculture is one sector, which really needs to be addressed. Just imagine, 60 per cent of the population is involved in a sector, which hardly registers a growth rate of more than 2.5 per cent. It is imperative that we focus on this sector. In the entire GDP pie, agriculture is the only sector, which is lagging. Today, if you ask 10 farmers on whether they want to continue farming, nine would say no and one might say may be if there is no option.” he said. Chidambaram also stressed the need to accelerate the growth of small and medium enterprises (SME), terming them as the engine of the country`s economy.

Higher saving and higher investment are two major growth drivers of Indian economy and it will boost overall growth. Good economics will work for everyone but not at the same time. Sectors, which are already, have strong absorption capacity will take growth benefit first and the sectors, which are weak, will take some time but in long term they will enjoy growth and developments.

Global warming

On the issue of global warming, Chidambaram expressed concern and said that the per capita emissions from the developing nations would never exceed those from the developed nations.

BPCL chief says company will run out of cash by April

Even as private sector oil retailers such as Reliance Industries Ltd up the pitch of their lobbying to get the government to make up the losses they suffer from operating in a market where price is controlled, a state-owned company that receives such compensation says it may have to shut shop next month because the nature of these subsidies will leave it with no cash.
Bharat Petroleum Corp. Ltd, or BPCL, says it can no longer absorb the losses it suffers on account of having to sell petroleum products at a government-mandated price. The government’s compensation, the company added, is neither adequate, nor timely.
“We are running out of cash very fast. By April we will have a cash crisis and no cash for day-to-day operations. I have a capital expenditure of Rs2,500 crore lined up for the first quarter of the next financial year (2008-09). This kind of fuel pricing can’t go on in perpetuity,” said Ashok Sinha, chairman and managing director, BPCL.
“We are facing a daily loss of Rs65 crore by charging less on the sale of petrol, diesel, kerosene and liquefied petroleum gas,” Sinha added.

The compensation package worked out by the government, which is fiscal neutral to the Centre, as reported in Mint on 25 February, entails issuing oil bonds to the companies. The total oil bond allocation for oil marketing companies such as Indian Oil Corp. Ltd (IOC), Hindustan Petroleum Corp. Ltd (HPCL) and BPCL for 2007-08 is around Rs20,554 crore. Of this, Rs9,296.92 crore worth bonds that were long overdue were issued by the finance ministry on Friday. They mature in 2025 and carry an interest rate of 8.4%.
“Issuing oil bonds alone will not help. Where do I get the money for Bina refinery, work for which is on? We are also yet to pay the money for the oil blocks that we have acquired overseas,” Sinha added. BPCL will receive Rs2,078.92 crore of oil bonds issued on Friday.
The total investment required for the Bina refinery is Rs10,300 crore, of which Rs6,300 crore will be debt and the balance, equity.
Due to overall fiscal constraints, the government has delayed the issue of oil bonds. And public sector oil companies are only partially compensated for their losses.
With crude oil trading at around $100 a barrel , the total under-recoveries of government-owned oil marketing companies in 2007-08 is expected to be around Rs70,968 crore. Of this amount, the government will underwrite 57% by issuing oil bonds; exploration and production firms such as Oil and Natural Gas Corp. Ltd and Oil India Ltd will contribute 33%; and 8.76% will be absorbed by the oil marketing companies themselves.
“All oil marketing companies are running into trouble. Unless (fuel) prices are increased further, there will be a substantial impact on their working,” said Ravi Mahajan, partner at audit and consulting firm Ernst and Young. Petroleum and natural gas secretary M.S. Srinivasan said the government’s populist policies on fuel pricing were acting as a handicap for the oil sector as reported by Mint on 16 February.
The government may not be able to increase prices any further any time soon because several key states are to go to polls this year. It recently rai-sed petrol prices by Rs2 a litre and that of diesel  by Re1.
Meanwhile, private sector oil retailers want the government to extend similar subsidies to them. Although these firms are free to set their own prices, they cannot price their offerings substantially higher than the state-owned firms which dominate the oil retailing business.

Nokia production reaches 125 mn in India

On the back of the country’s burgeoning mobile handset market, Nokia said on 30 March it has reached production volume of 125 million in over two years of operations at its manufacturing unit in Tamil Nadu.
To tap the potential of the Indian market the company has decided to further ramp up its production capacity and increase the headcount to over 13,000 at its manufacturing facility from the current level of 8,000, a Nokia official said.
We have reached production volume of 125 million mobile handsets in just over two years of operations at the factory in Sriperumbudur,“ Nokia India Operations director Sachin Saxena said.
“Our decision to invest in local manufacturing has given us the opportunity to fuel the demand for the domestic and emerging markets while also allowing India to emerge as a global manufacturing hub, he added.
The company has already invested $210 million in their manufacturing unit and would invest $75 million in 2008 for additional ramp up at the plant. With this, the total investment at the Nokia manufacturing plant and the Nokia Telecom Park reaches $285 million by December.
The company has termed the Indian plant as one of the best of nine facilities worldwide in terms cost and quality. “Quality and cost wise, India is perhaps the best factory. Nokia is exporting Made in India cell phones to more than 50 countries,” Nokia India vice president and managing director D ShivaKumar said.

Finance Ministry examining Essar Power’s $2 billion FDI proposal

The Finance Ministry is believed to be examining a proposal by Ruias-led Essar Group to bring in foreign investment of up to $2 billion (about Rs8,000 crore) through Mauritius-based Essar Power Holdings in Essar Power.
“The Essar Power’s proposal of bringing $2 billion was discussed by the Foreign Investment Promotion Board (FIPB) in its meeting held on Friday, but it has been deferred,” official sources said.
The company has been asked to provide further details about the investment. Once recommended by the FIPB, the proposal is expected to be considered by the Cabinet Committee of Economic Affairs (CCEA) due to large size of foreign investment, the sources said.
The Essar Power, an arm of Essar Group, plans to bring over foreign investment through Essar Power Holdings (EPH) for equity investment in its proposed power projects across the country.
When contacted, the company officials declined to make any comment.
The sources, however, said that Essar Power, which is an unlisted company, proposes to transfer anywhere between 70% and 100% equity to EPH.
The company has plans to invest over Rs20,000 crore in the power sector in the next 1-2 years, although EPH would provide funds only for the equity stake.
Essar Group, which operates in the steel sector as well, also proposes to set up number of captive power plants apart from thermal and wind power projects in Jharkhand, Chhattisgarh and Tamil Nadu.
The sources said FIPB has also sought the comments of Ministry of Power and Ministry of Coal on the proposed investment. The Finance Ministry is also likely to closely examine the source of funding, share holding pattern of the EPH, they added.
Essar Power has sought one-time government approval to bring $2 billion of FDI, although it proposes to invest around Rs4,000 crore in the equity of power projects in the first year after getting approval.
The remaining amount is likely to be invested in the equity stake. With the present capacity of 1,200 MW, Essar Power aims to generate 6,000 MW by 2012 and is setting up plants in various states.

NHPC commissions all 3 units of Teesta-V

State-run National Hydroelectric Power Corp has said it has commissioned all the three units of 510 MW Teesta Stage-V Hydroelectric Project in Sikkim, which would generate 2,573 million units of energy annually.
Two of the three units of 170 MW each are expected to become commercially operational shortly, while the first unit is already functional, the company said in a statement.
The cost of the project is about Rs2,650 crore and the provisional tariff approved by the Central Electricity Regulatory Commission is Rs1.62 per unit. It would generate 2,573 million units of energy annually.
Teesta-V is one of the six hydro projects identified for execution by NHPC in Sikkim. The company has added 1,420 MW of generation capacity in the last one year with the commissioning of 390 MW Dul Hasti project in Jammu and Kashmir, 520 MW Omkareshwar project in Madhya Pradesh, and Teesta-V.
The run-on-river Teesta-V project would benefit Bihar, Orissa, Jharkhand, West Bengal and Sikkim.

Revisiting the Indian Telecom Sector

Fastest-expanding telecom market in the world
India is the fastest-expanding telecom market in the world (Exhibit 2)
with more than 8m subscriber additions per month. India had 238m
mobile subscribers as of January and we expect it to overtake the US in
terms of mobile subscribers by mid-2008. A low overall telephone
density (or teledensity) of 25% coupled with a huge population base of
1.1b should provide sufficient growth opportunities for the telecom sector
in India. India’s teledensity improved to 25% from 4% within a short span
of four years due to favourable demographics, consistent regulatory
changes and the low cost of service.

Triggers for Indian telecom industry
The next wave of network expansion, infrastructure sharing, sufficient
allocable spectrum, favourable policy changes, rising demand for global
connectivity and new technologies such as 3G, WiMax, DTH and IPTV
should drive the future growth of the Indian telecom industry. We expect
a record number of mobile subscriber additions in excess of 100m in
FY09 and the total subscriber base to cross 500m by 2010.
Leaders will continue to forge the way
We expect established service providers such as Bharti Airtel, Reliance
Communications and Idea Cellular to lead the Indian telecom growth
story. New entrants will struggle to find a niche. We expect consolidation
in the next two to three years, with industry revenue growth of 33% and
earnings growth of 25% in FY09.
Sector valuations
Indian telecom companies are currently trading at an FY09E P/E multiple
of 18x lower than their historical trading multiple of 25x. We expect the
core businesses to trade at 20x FY09E P/E with incremental contribution
from the demerger of tower assets. Bharti is our top pick among the
Indian telecom operators with an expected ROE of 35% in FY09. Bharti
should continue to lead the Indian telecom sector in returns because of
its superior margins and higher asset turnover.We expect the wireless subscriber
base in India to double to 500m by end-FY11.FY09 should have record subscriber
net additions of more than 100m.The majority of growth should come from the
A and B circles with additional
contribution from the C circles. Regions in India have been classified as A, B, C
and metro circles for telephony licences with metros having the most potential in
terms of penetration followed by the A, B and C circles, respectively, in that order.
However, in terms of population, metro, A, B and C circles account for 5%, 31%,
44% and 20% of India’s population. The metros are aligned with the bigger cities
like Mumbai, Delhi, Chennai and Kolkata, while the A, B and C circles are mostly
aligned with the states in the country. There are 23 telecom circles in India, which
comprise five A circles, eight B circles, six C circles and four metro circles.

Average revenue per user (ARPU) and average revenue per minute/message
(ARPM) should fall as a result of increased competition and the removal of
regulatory overheads such as Access Deficit Charge (ADC) and a reduction in
spectrum and licence fees. We expect ARPU and minutes of usage (MOU) to increase,
following a period ofdecline for the next three to four years, due to a higher
contribution from mobile
value-added services (VAS) and improvement in usage patterns of newer
subscribers.
The telecom industry will require about 300,000 telecom towers by FY11 to
support the increased subscriber base of 500m, which will be met by aggressivepassive
infrastructure deployment by independent tower companies.
Fixed lines should show relatively slower growth as the decline of fixed lines is
balanced by increased broadband penetration.

Lowest cost of ownership of telecom services
The tariff regulations imposed by the Telecom Regulatory Authority of India (TRAI),
coupled with competition and volume growth, have helped Indian telecom tariffs
remain the lowest in the world at about USD0.02 per minute. The low tariffs have in
turn enabled greater adoption of wireless services in the country.
An ARPM and MOU comparison of Indian telecom operators with global operators
reveals that Indian wireless operators have the least revenue per minute of USD0.02.
The operators are making up for this low ARPM through economies of scale generated
through high utilisation of networks. Even at USD0.02 per minute, the leading
operators are making EBITDA margins in excess of 40%.




Saturday, March 29, 2008

More stocks with Good valuations

Nestle India (BUY, TP INR 1500)
With more than 50 years of experience in India, Nestlé India is
well placed to benefit from growth opportunities offered by an
expanding foods and beverages market and a shift in
consumer preference towards packaged foods. The recent
organizational restructuring should also enable the company to
improve its penetration levels, and thus achieve a growth rate
that is higher than the industry. The high dividend payout ratio
should support the stock valuation in times of uncertainty. We
expect 23% CAGR in earnings for the period 2006A09E,
primarily driven by 22% CAGR in sales. Our HOLT-DCF
derived target price is INR 1500.

Educomp Solutions (BUY, TP INR 5347)
A large and underpenetrated market, strong government focus
and an increasing realization that technology is a better
medium to deliver education will provide Educomp Solutions,
which has the first-mover advantage, with enormous growth
opportunities. Initiatives such as expansion into new markets,
online tutoring and setting up schools will enable the company
to maintain a strong growth momentum. We expect a 100%
CAGR in earnings for the period FY200710 (FY ending
03/2007). The stock trades at a P/E 2009E of 50.1.
Although the stock appears expensive in the near term, we
believe the company is in strong secular growth mode and the
valuation appears reasonable on a longer-term basis. Our
HOLT-DCF derived one-year price target is INR 5347.

Axis Bank Ltd. (BUY, TP INR 1230)
Indian privately held banks are in a sweet spot, characterized
by a rising market share, strong pipeline for corporate lending
and increasing consumer lending. We believe that Axis Bank,
with its increasing branch network, strong technology platform
and a wide range of product offerings, is well placed to tap this
opportunity. With the recent capital increase, the bank is in a
good position to grow its loan book and earnings by more than
30% over the next few years. We expect Axis Bank to report a
CAGR of 42% in earnings over the FY 2007–10 period. The
stock trades at a P/E 2009E of 19.4, which we believe is
justified by the strong earnings momentum and superior
operating parameters. Using the Gordon growth model, we
arrive at a price target of INR 1230.

BHEL (BUY, TP INR 3022)
Bharat Heavy Electricals (BHEL) is one of India’s largest
power equipment and engineering companies. The power
sector capex is likely to increase by more than 2x in the next
five years, compared with the past five years. A strong
corporate capex and a healthy order book position of 3x FY
2007 sales provide good visibility in earnings growth. The
company targets USD 10 bn in sales by FY 2012 compared
with the current USD 4 bn, implying a CAGR of 20% p.a. Our
HOLT-DCF derived one-year target price is INR 3022

Revisiting the India story

Indian stock markets have corrected by more than 15% YTD
in sympathy with the global equity markets, as market
participants expected the US deceleration to also negatively
impact Indian corporates. As a result, we are re-examining the
India growth story and its growth prospects in light of slowing
external demand and also the equity market outlook. In the
following section, we conclude that while economic
fundamentals are partially decoupled from the external events,
the stock markets might not decouple in the short term.

Can India sustain its growth rate?
India's economy has shown another year of remarkable
strength, with GDP growing at around 9% in FY 03/2008.
Since growth seems to be slowing down everywhere else, the
only question is whether it will last. As global growth slows, the
external impetus for the Indian economy will decline but, as we
explain below, the exposure of the Indian economy to global
trade and thus the downside risks to growth in this regard are
still fairly limited.

Low share of global trade
What was once regarded as the inefficiency of the
manufacturing sector and failure of India's economic policies
has become a winning point in current conditions. While we
are not suggesting that India's low exposure to world trade is
India's strength, it does appear to be a blessing in disguise in
the current scenario. In terms of world trade, the role of the
Indian economy is still only negligible. Figure 1 shows the
share of various economies in total world trade. China has
managed to increase its share substantially in recent years,
especially after WTO accession in 2001. But India is lagging
behind, especially in terms of manufacturing goods. Rigid labor
laws for larger firms, which apply to the manufacturing sector
but not to the services sector, have prevented many firms from
increasing in size and attaining crucial economies of scale,
representing just one area where increased liberalization and
more flexibility would lead to stronger growth rates. At roughly
25%, the share of exports (including services) in GDP is
significantly lower than the circa 55% share for the rest of
Asia ex-Japan. Hence, the risk of India’s growth slowing due
to an easing of external demand is comparatively lower than in
many other Asian countries.
What is more comforting is that, in terms of export markets,
India’s direct exposure to the USA is much lower than it is to
other regions. Data on the destination of exported goods, as
indicated in Figure 2, show that the US accounts for only 15%
of total goods exports, whereas the robust economies of Asia,
the Middle East, Africa and Latin America account for
approximately 60% of total goods exports. Similar to the rest
of Asia, China has gained significant importance for India as
an export destination, and as domestic demand in China
strengthens even more rapidly, its share of total exports is
expected to increase.

Domestic demand was and is likely to remain the
decisive growth driver
The Indian economy is consumer-driven. The importance of
domestic consumption is highlighted by the fact that total final
consumer expenditure (i.e. private plus government
consumption) accounts for approximately 67% of India's GDP.
Put simply, this means that for goods and services produced in
India, Indian consumers represent a larger market than the
world market. However, while the sector has been reeling
under the pressure of high interest rates (see Figure 3) due to
monetary tightening by the central bank, Indian consumers are
still a key driver of India's economic growth. Given that the
recent budget proposals should start to yield results and revive
consumption, we believe they will enable India to offset the
slowing external demand to a certain extent.

Infrastructure spending has been the major growth driver of
the Indian economy, especially in the last few years. As
indicated in Figure 3, growth in real fixed investment has
accelerated from approximately 4% in 2001 to 16% today.
While the capex boom has continued over the last few years,
India’s infrastructure is still significantly bottlenecked.
Infrastructure investment – both public and private – should not
only provide the basis for sustained growth but also drive the
economy as it is being developed. The government’s planned
infrastructure spending is approximately USD 500 bn over the
next five years. The plans indicate that the lion's share is
destined to be spent on power generation (roughly USD 150
bn), followed by highways and the telecom sector. There is a
large gap between the amount of infrastructure spending
planned and the actual money available from public funds. We
believe private investors will increasingly play a larger role in
obtaining required funding, which is already demonstrated by
the rising number of public private partnerships (PPP).

Conclusion: Growth lower than last year but still good
A few factors, such as the currency appreciation and
somewhat slower external demand, represent headwinds in
the current cyclical context of India's growth story.
Nevertheless, given the importance of domestic drivers and
infrastructure spending for growth, we believe the economy is
likely to retain much of its strength. Despite the expected
slowdown in external demand, growth still seems likely to be
around 8%, or even slightly higher in FY 03/2009 and maybe
even stronger in the following year. The monsoons could be a
downside risk factor for the economy as a whole, since
agriculture depends on this source to provide sufficient water
and because a huge part of the population is still dependent
directly or indirectly on the agricultural sector. Apart from
monsoons, another risk could stem from the current account
deficit, especially with rising crude oil prices. India is running a
modest current account deficit of around USD 11 bn (in
contrast to China, which has a large current account surplus),
but the inflows of longer-term money (FDI) appear sufficient to
finance the deficit, and thus we do not regard this as a
structural negative

Ranbaxy and Bata Declare divident

Ranbaxy Laboratories Ltd has said that the board of directors of the company at its meeting held on March 28 has recommended a final dividend of Rs 6 per share for the year ended December 31, 2007.

Bata India Ltd has that the board of directors of the company at its meeting held on March 28 has recommended a dividend of 15 per cent on equity shares and an additional dividend of 5 per cent to celebrate 75 years of the Company in India.

Top 10 Reasons why Warren Buffett, Jim Rogers and Bill Gross could all Be Wrong

The outlook for the ailing greenback – finally – is getting healthier, which makes it the perfect time to go long.

I know this is a wildly unpopular and completely contrarian stance, so let’s get right to it. Here are the 10 reasons I think the dollar’s headed for an inevitable reversal:

1. If Not the Dollar… Then What?
With the greenback getting clubbed, China shocked the world recently by suggesting it would diversify away from the dollar. To which I simply say – into what? The likely suspect is the euro, but there’s not enough liquidity to handle the demand. Plus, it’s still a pre-pubescent, experimental currency, not one governments can invest in with 100% faith. Moreover, with two-thirds of foreign reserves in dollars, it would take more than eight years to replace the dollar as the currency of choice. Bottom line, while many complain about the decline of the dollar, there’s not much they can do about it now… except complain.

2. The Fed: From Enemy to Ally
Currently, the Fed’s trading off higher inflation and a weak dollar for the promise of economic growth. In the short-term, this obviously weakens the greenback. But once the credit markets return to normal (or almost normal) and a recession is averted or exited, expect the Fed to act swiftly, raising rates as its main priority swings back to fighting inflation. This will instantaneously strengthen the dollar.

4. Warren Buffett, Jim Rogers and Bill Gross CAN Be Wrong
Believe it or not, three of perhaps the greatest investors of our time are not right 100% of the time. As we speak, all three hate the dollar…

“We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non- dollar currency.” ~ Bill Gross

“We still are negative on the dollar relative to most major currencies, so we bought stocks in companies that earn their money in other currencies.'' ~ Warren Buffett

And Jim Rogers sold his house and all his possessions denominated in dollars because “the dollar is collapsing.”

And I think they’re wrong. Plus, they’re entitled to change their minds. And they won’t put out a press release if they do, as another legendary investor proved…

"A trader named Jean-Manuel Rozan once spent an entire afternoon arguing about the stock market with George Soros.’Soros was vehemently bearish, and he had an elaborate theory to explain why, which turned out to be entirely wrong. The stock market boomed.

"Two years later, Rozan ran into Soros at a tennis tournament. ‘Do you remember our conversation?' Rozan asked. 'I recall it very well,' Soros replied. 'I changed my mind, and made an absolute fortune.’”

In the end, being a dollar bear just on account of these three investment greats is a risky move. They’re human just like the rest of us… and destined to be wrong every now and again. I’m convinced that’s the case this time because the dollar downturn is getting too long in the tooth.

5. Pop-Culture Even Hates It
In a recent music video, rapper Jay-Z opts for a suitcase full of euros instead of dollars. And supermodel Gisele B√ľndchen now wants to be paid in euros. I don’t think you can get a more clear-cut contrarian indicator than popular culture “hating” on the dollar to such extremes.

6. The Most Unlikely & Unsophisticated Are Speculating
More troubling is the fact the most unlikely and unsophisticated “investors” are now speculating against the dollar – wine merchants and antique shop owners. Reuters reports “Euros Accepted” signs are popping up throughout New York City. Why?

“We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank," Robert Chu, owner of East Village Wines. Not to be outdone, antique store owner Billy Leroy takes euros and “doesn’t even bother to exchange them,” according to Reuters.

Sounds like two sound investment plans to me!

Look, when the wine merchants and corner store owners start trying to earn an extra buck by speculating in the foreign currency market, instead of focusing on their business, we’re near a bottom. Think of it as almost the equivalent of the day-trading phenomenon we witnessed during the dot-com days, just in the currency markets. People giving up their professions to make a living doing something they know almost nothing about.

7. Psst! Did You Hear About the Amero?
Another contrarian sign we’re at an extreme bottom – talk of the Amero or Americo is popping up again. First floated by Dr. Herbert G. Grubel of the Fraser Institute in 1999, this is largely a conspiracy theory that the governments of Canada, the U.S. and Mexico are secretly planning to launch a unified currency to compete with the euro. This is such a bad idea on so many levels I can’t get into them all here. Just trust me, the world’s largest economy is not going to relinquish macroeconomic control by opting for a unified currency.

8. A REALLY Weak Dollar Helps No One
Okay. Back to more acceptable arguments. While many countries might dislike Americans, they dislike a really weak dollar even more. It makes U.S. exports attractive and all but forces them to patronize the “enemy.” And, in turn, their manufacturing industries suffer. So don’t expect many governments to fight a modestly stronger dollar. If anything, when the reversal begins, they might encourage it.

9. We’re Not Decoupled Yet
A slowing U.S. economy affects the rest of the world… with a delay. According to Stephen Roach of Morgan Stanley, "For Euroland, historically, the delay has been one or two quarters." I’ll concede decoupling is a possibility, but not this time around. We’re already seeing weakness here spark sell-offs abroad. So while this may be last time the rest of the world comes down with us, they will nonetheless. In turn, this will provide a bottom for the dollar.

10. Stocks Love A Strong Dollar
If you’re not with me on the bullish dollar stance yet, but are invested in equities, you need to reconsider. Despite conventional wisdom, a weak dollar is NOT beneficial to the stock market. And here’s the proof from the Bespoke Investment Group:

“Since 1967, the dollar has had four up cycles and five down cycles. The average return of the S&P 500 during the four up cycles is a gain of 86.6%, which is over five times the average return of 16.4% during dollar declines.”

So if you want your stocks to go up (by a wide margin), history shows you should also want the dollar to go up.

In short, the dollar might be traded like funny money right now, but it won’t last forever. In the near-term, I do expect more pressure to the downside, but a turn is coming. The fact that the dollar didn’t utterly collapse when the Fed cut interest rates 125 basis points in eight days only strengthens my conviction here.

And rest assured, when the dollar bears turn into dollar bulls, the change will come swiftly.


FII flocking back to India : Markets sets to rebound next week

Foreign institutional investors (FIIs) remained net buyers in equities worth Rs 4,307 million (USD 106.80 million) on March 27. They bought equities worth Rs 48,611 million and sold equities worth Rs 44,304 million.

According to the provisional figures available at the NSE, FIIs remained net sellers in the equity segment worth Rs 4,019.5 million on both, the BSE and NSE on March 28. They bought equities worth Rs 30,625 million and sold equities worth Rs 34,644.5 million. Total turnover in the cash segment of NSE stood at Rs 143,088.8 million on March 28.

FIIs remained net sellers in debts segment worth Rs 761 million (USD 18.90 million) on March 27. They did not buy any debt but sold debts worth Rs 761 million.

FIIs remained net buyers in derivatives worth Rs 2,658.6 million on March 27. They bought derivatives worth Rs 113,297.6 million and sold derivatives worth Rs 110,639 million.

Mutual funds (MFs) remained net sellers in equities worth Rs 522 million on March 27. They bought equities worth Rs 12,380 million and sold equities worth Rs 12,901 million. Till March 27, they have been net sellers in equities worth Rs 22,252 million.

MFs remained net buyers in the debt segment worth Rs 11,095 million on March 27. They bought debts worth Rs 40,852 million and sold debts worth Rs 29,757 million. Till March 27, they have been net buyers in debts worth Rs 129,264 million.


Friday, March 28, 2008

Stocks for the Long Run

Disclaimer: Read & Act on your Own Risk.
(A) Auto Sector (12%)

1. Omax Autos Ltd

About the company: Omax is manufacturing different automotive parts for Two Wheeler and Four Wheeler vechiles. Omax offers a wide range of products that include Sheet Metal, Tubular, Machined Components, Painting & Plating Parts. With complete in-house designing capacities & capabilities right from the product designing to tooling, jigs, fixtures and gauges designing through the latest CAD/CAM software technology from IDEAS, CATIA & Pro-E.

The company has a rich client base (Indian, European and North America).

Financial Highlights: Sales has been relatively flat in last 4 quarters (227.24 Crs in Dec 06 to 213.36 Cr in Dec 07). Net profit has declines from c5 Crs to c2 Crs in Dec 07. In terms of valuation, the P/BV (Price by Book Value) is 0.75 and Price / Sales = 0.12. Estimated P/E is 6.11.

Suggested allocation - 3% of total proposed investment.

2. Amtek India Ltd

About the Company: Amtek Group is a leading international manufacturer of automotive components and assemblies with production facilities located strategically across North America, Europe & Asia. The Group's extensive manufacturing capabilities encompass Sub assemblies, Iron, Gravity & Aluminium Castings, Forgings, Complex Machining & Ring Gears Flywheel Assembly.

Financial Highlights: Sales have shown a consistent increase in the last 4 QTRS (211.29 Crs in Dec 06 to 247.61 Crs in Dec 07). Net Profit has increased from 34.1 Crs in Dec 06 to 36.15 Crs in Dec 07. In terms of valuation, P/BV is 0.94 , Prices / Sales is 0.96 and estimated P/E is 6.1.

Suggested allocation - 3% of total proposed investment.

3. Nelcast

About the company: Established in 1985, Nelcast has since been a significant and diligent participant in the ferrous casting industry, producing superior quality castings for many an industry. Nelcast has shown an astounding growth rate, growing to 140 times its original size to reach its current capacity of 84,000 MT. It plans to double that capacity in about two years.

Financial Highlights: Sales has increased from 95.2 Crs in Dec 06 to 105.4 Crs in Dec 07 and net profit has increased from 5.67 Crs to 8.67 Crs in the corresponding period. In terms of valuation, Price/ BV is 2.7 times, Price / Sales is 0.42 times and estimated trailing P/E is 6.1.

Suggested allocation - 3% of total proposed investment.

4. Talbros Automotive Components Ltd

About the company: This company has more than 50 years of existance.

Financial Highlights and valuation: Sales has increased from 47.8 Cr in Dec 06 to 52.13 Cr in Dec 07 and net profit has declined from 4.11 Crs to 1.65 Crs in the corresponding period. The stock is attractive in terms of its valuation - Price / BV = 0.66, Price / Sales = 0.22 and estimated trailing P/E = 4.82.

Suggested allocation - 3% of total proposed investment.

(B) Papers (13%)

1. West Coast Paper Mills Ltd

About the company: The West Coast Paper Mills Ltd. is the flagship company of SK Bangur Group, based at Kolkata. They are maindly in the manufacture of Papers for printing / premium papers products and paper boards.

Financial Highlights: Sales has been relatively flat in the last 4 QTRS (average 144.85 Crs) and net profit has increased from 17.5 Crs in Dec 06 to 22.11 Crs in Dec 07. In terms of valuation, Price / BV is 0.26, Price/ Sales is 0.63 and estimated P/E is 4.52. It is quoting at 65 - 70 and has recently alloted shared to promoter group @ Rs. 85 / share. The company has been paying dividend @ 15 per share for the last 4 years.

Suggested allocation: 5% of total Proposed investment.

2. Ruchira Papers Ltd

This is a small cap company and produces paper and paper products. It was listed in the exchange in Dec 2006. The new plant is in trial production and should reflect in the topline and bottom line growth in the coming months.

Financial Highlights: Sales has been relatively flat in the last 4 Qtrs(average of 20 Crs) and average net profit is 1.66 Crs per Qtr. In terms of valuation, the Price / BV is 0.48 and Prices / Sales is 0.34.

Suggested allocation: 4% of total proposed investment.

3. JK Paper Ltd

This is involved in the production of Paper and Paper products.

Financial Highlights & Valuation: Sales increased from 187 Crs in Dec 06 to 206.41 Crs in Dec 07. However, net profit has declined from 11.86 Crs to 7.93 Crs in the corresponding period. In terms of valuation, the Price / BV is 0.75, Price / Sales is 0.36 and estimated P/E is 6.36.

Suggested allocation: 4% of total proposed investment.

(C) IT - Small/ Medium (9%)

1. Aftek Ltd

This is basically into IT consulting / Embedded application development / Enterprise Application development / Wireless application & hardware development.

Financial highlights: Sales has increased from 86.19 Crs in Dec 06 to 998.11 Crs in Dec 07, net profit for the corresponding period increased from 26 Cr to 27.28 Cr.. In terms of valuation, Price/BV is 0.56, Price/ Sales is 0.96 and estimated P/E is 3.42.

Suggested allocation: 3% of total proposed investment.

2. Helios & Matheson

This company is in the IT and ITes / BPO domain. Has a varied services and reasonably good client base.

Financial Highlights: Sales have increased from 109.3 Cr in Dec 06 to 113.01 Cr in Dec 07 and the Net Profit has been relatively flat and was at an average of 15.31 Crs / QTR. In terms of valuation, the Price by BV is 1.16, Price / Sales is 0.28 and estimated P/E is 2.02.

Suggested allocation: 3% of total proposed investment.

3. NIIT Technologies Ltd

Financial Highlights / Valuations: Sales increased from 88.13 Crs in Dec 06 to 118.37 Crs in Dec 07. However, net profit decreased from 36.77 Crs to 28.54 Crs in the corresponding period. The Stock price is 85% less compared to its 52 week high. In terms of valuation, Price/BV is 1.28 times; Price/ Sales is 1.4 times and estimated P/E is 4.57 times.

Suggested allocation: 3% of total Proposed Investment.

(D) Textiles (14%)

1. Mudra Life Style

Basically involved in production of designer garments for men / ladies and kids.

Financial Highlights / Valuations: Sales increased from 52.61 Cr in Dec 06 to 68.51 Cr in Dec 07 and Net Profit increased from 6.04 Cr to 8.36 Cr during the corresponding period. In terms of valuation, Price/ BV is 0.88 times; Price / Sales is 0.53 times and P/E is 4.4 times. The company has alloted equity warrents to promoters / directors @ 110 / share in Feb 08 (current stock price is 36). Lower valuation with strong fundamentals, makes it a good buy.

Suggested allocation: 5% of total proposed investment.

2. Alps Industries

This company is mainly in manufacturers of Yarns, Home Furnishings, Natural Dyes, and Fashion Accessories which is well appreciated all across the globe. They are also looking into automotive fabrics.

Financial Highlights / Valuation: Sales have increased from 115.6 Cr in Dec 06 to 169.26 Cr in Dec 07 and Net Profit have increased from 7.39 Cr to 9.32 Cr for the corresponding period. In terms of Valuation, Price/ BV is 0.43 times; Price / Sales is 0.22 times and P/E is 3.43 times.

Suggested allocation: 3% of total proposed investment.

3. Shri Lakshmi Cotsyn

This company is basically into the production of cotton and blended products and have diversified to producing army products like bullet proof jackets, uniforms etc.

Financial highlight/ valuation: Sales have increased from 153.72 Cr in Dec 06 to 232.47 Cr in Dec 07 and Net profit have increase from 11.83 Crs to 16.32 Crs for the corresponding period. In terms of valuation, Price/BV is 0.69 times; Price / Sales is 0.14 times and P/E is 2.07 time.

Suggested allocation: 3% of total proposed investment.

4. Eastern Silk Industries Ltd

This company is basically involved in the manufacture / sale of silk yarn, Fabrics and Made-Ups, Home Furnishings, Handloom Fabrics, Embroridied fabrics, etc.

Financial highlights / valuation: Sales have increased from 96.47 Cr in Dec 06 to 168.96 Cr in Dec 07 and Net Profit have increased from 15.46 Cr to 25.52 Cr during the corresponding period. In terms of valuation, Price / BV is 0.76 times; Price/ Sales is 0.47 times and P/E is 3.13 times.

Suggested allocation: 3% of total Proposed investment.

(E) Consumer Durables (4%)

1. Videocon Appliances Ltd

This company is mainly into the production and servicing of consumer durable products like Washing Machines, ACs, Refrigerators and Microwave Ovens.

Financial Highlight: Sales have increased from 280.31 Cr in Dec 06 to 314.05 Cr in Dec 07 and Net Profit has increased from 3.35 Cr to 4.64 Cr in the corresponding period. In terms of valuation, Price/ BV is 0.16 times; Price / Sales is 0.06 times and P/E is 4.08 time.

Suggested allocation: 4% of total proposed investment.

IMPORTANT

1. Profit Booking - Sell shares once the price rises by 50% or 3 years, which ever comes earlier.
2. Risk Management - Sell shares if the price falls by more than 25% of your purchase price. You can buy the shares back, however, at a price more than what you paid for initially.
3. Make sure that you invest the %age suggested above (it comes to 52%). Please keep the rest of the funds invested in Liquid assets like Bank FDs / Debt Mutual Funds / Liquid Mutual Funds. If investing in Balanced Mutual Fund, please ensure that the total investment is not more than 30% of the total amount available to invest.

10 reasons why India would tide over the credit crunch with ease

  1. India’s export-to-GDP ratio has increased in recent years, it still remains below those of most other Asian economies. India will likely be the least affected Asian economy if there is a significant downturn in US imports.
  2. A huge Chunk of India remittances and exports are from oil rich Middle East. The economy of these countries are not showing any signs of slowing down due to all time high oil prices.
  3. India’s per capita consumption of oil is relatively low, and its exports which are mainly IT services are not affected much by oil prices, an Oil price shock is unlikely to upset Indian economy in a huge way.
  4. The outcome for global capital inflows into India is more uncertain, both in terms of direction and magnitude. Most likely capital inflows will be less problematic than what they have been in recent years, owing largely to the increase in global risk aversion. The hit to the economy from the drying up of capital inflows is somewhat less worrying. That is because the RBI has several means to offset the hit from significant shrinkage in full-year net capital inflows.
  5. RBI could potentially unwind MSS and reverse the hikes in CRR, thereby injecting liquidity in a non-inflationary way to offset the effect of greatly reduced capital inflows, or of even net capital outflows.
  6. The sixth pay commission report will substantially increase the spending power of Government employees in India. It will have a positive effect on domestic demand.
  7. The reduction in income tax will increase the disposable income bringing in more domestic investments into the financial markets. It will also help propel the domestic demand.
  8. An economic downturn will prompt foreign companies to look for more cost cutting options. This could spur another wave of Business and Knowledge Process Outsourcing. Also Though the BPO growth has slowed down in recent years the KPO industries in India have not been affected much by US recession and have still a lot of scope for growth. More over the reduction in spending power of US companies will force Indian IT sector to become more efficient and offer products with better value addition, which will be beneficial to the industry in the long run.
  9. The financial standing and the current results of most of the Indian companies are still positive, which puts them in a better position to face the crisis.RBI with is huge foreign exchange reserves, can tackle any short term financial risk effectively. And it still maintains the option of bringing in huge liquidity into the Indian economy by lowering interest rates.
  10. And finally Indian growing trade ties with China, SAARC countries and south Asian economies would act to stabilize the Indian economy if the US economy crumbles.

Reliance Energy buys back 200,000 shares

Anil Ambani led Reliance Energy has bought-back 200,000 equity shares of the company on Mar. 27, 2008. Since the commencement of the buy-back on Mar. 27, 2008, the company has so far bought back 650,000 equity shares at nearly Rs 1,279.23 a share aggregating Rs 831.5 million.

The board has approved the buy-back of equity shares of the company up to an aggregate amount of Rs 8 billion under the first phase, the company said.

Recently the company approved Rs 20 billion share buy-back in two phases through open market transactions at a maximum price of Rs 1,600 a share. The company, in the first phase will spend Rs 8 billion, amounting to 10% of the company`s equity and free reserves. The remaining Rs 12 billion shall be expended in the second phase, subject to necessary approvals by the shareholders.

Shares of the company declined Rs 11.25, or 0.87%, to settle at Rs 1,286.4. The total volume of shares traded was 887,903 at the BSE (Thursday).

Pre-Market Updates : Indian market may see moderate losses

Asian markets declined in the early session of trade on Friday (Mar. 28, 2008) on concern that profit growth will weaken at banks, countering an advance by energy producers.

Westpac Banking Corp. declined in Sydney by the most in three weeks. Shinhan Financial Group lost the most in South Korea after a brokerage announced that the Shinhan will report profits less than the estimates. Cnooc, China`s largest offshore oil producer, climbed after crude-oil prices gained and the company reported higher earnings.

Japanese benchmark index Nikkei declined 7.08 points, or 0.06%, to trade at 12,597.50.

Hong Kong`s index Hang Seng lost 98.61 points, or 0.44%, to trade at 22,762.83.

China`s Shanghai Composite lost 18.34 points, or 0.54%, to trade at 3,393.15.

Taiwan`s Taiex index declined 11.08 points, or 0.13%, to trade at 8,617.03.

South Korea`s KOSPI declined 10.90 points, or 0.65%, to trade at 1,687.14.

Singapore`s Straits Times lost 5.79 points, or 0.19%, to trade at 3,030.99. (8.20 a.m., IST)

Foreign institutional investors (FIIs) remained net buyers in equities worth Rs 5,576 million (USD 138.20 million) on March 26. They bought equities worth Rs 31,666 million and sold equities worth Rs 26,090 million.

According to the provisional figures available at the NSE, FIIs remained net buyers in the equity segment worth Rs 2,479.8 million on both, the BSE and NSE on March 27. They bought equities worth Rs 48,065.6 million and sold equities worth Rs 45,585.8 million. Total turnover in the cash segment of NSE stood at Rs 154,555.4 million on March 27.

FIIs were net sellers in debts segment worth Rs 1,386 million (USD 34.40 million) on March 26. Till March 26, they have been net sellers in debts worth Rs 7,729 million.

FIIs remained net buyers in derivatives worth Rs 3,022.5 million on March 26. They bought derivatives worth Rs 106,508.5 million and sold derivatives worth Rs 103,486 million.

US shares fall on weak GDP numbers

US shares declined in the early sessions of trade on Thursday after the US department of commerce said that the economy grew at an annual rate of 0.6% in the fourth quarter of 2007, reflecting signs the economy is close to recession. However, weak quarterly performance by Oracle pushed technology shares lower.

The deceleration in real GDP growth in the fourth quarter primarily reflected a downturn in the inventory investment and decelerations in exports, in federal government spending, and in PCE that were partly offset by a downturn in imports, US department of commerce said.

Dow Jones industrial average fell 41.60 points, or 0.33%, to trade at 12,381.26, while NASDAQ composite index dropped 26.94 points, or 1.16%, to trade at 2,297.42.
S&P 500 index went down 24.68 points, or 0.36%, to trade at 1,336.31.

Oil prices rose on Thursday (March 27) after the bombing of an Iraqi oil pipeline diverted investors' attention away from a stabilizing USD.

Supporting this, a report showed that exports from southern Iraqi terminals declined about 1.2 million barrels a day from a normal rate of 1.56 million barrels a day.

Light sweet crude for May delivery rose USD 1.68 to settle at USD 107.58 a barrel on the New York Mercantile Exchange (NYMEX), after touching the day high of USD 108.22.

April gasoline futures declined 2.66 cents to settle at USD 2.7163 a gallon. The retail gas prices rose 0.6 cent overnight, to USD 3.267 a gallon.

April heating oil futures rose by 10.45 cents to settle at USD 3.1483 a gallon at the NYMEX.

In London, May Brent crude rose USD 1.01 to settle at USD 105 a barrel on the ICE Futures exchange.

April natural gas futures rose 0.6 cents to settle at USD 9.578 per 1,000 cubic feet.

Indian Market are likely to slow moderate declines, but continuing FII inflows are expected to stabilize the market and prevent any major downturn.


Thursday, March 27, 2008

Global Investing Roundups

Citi Settles Suit Over Enron; Vale Fails to Acquire Xstrata; Morgan Stanley Struggles to Move CICC Stake; Motorola to Split Amid Falling Sales; Huaneng Power Pumps $8.9 Bln into Expansion; Senate Probes Bear Stearns Deal; Starbucks Sued Again; Important Rambus Ruling
  • Citigroup Inc. (C) said yesterday (Wednesday) that it has agreed to pay $1.66 billion in claims to settle a dispute with creditors of the former energy powerhouse Enron. The settlement would resolve bankruptcy and fraud claims brought against Citi as a result of the 2001 collapse of Enron. "Today's settlement marks an enormous accomplishment for the Enron Estate," said John Ray III, president and chairman of the board of Enron Creditors Recovery Corp. "I am very proud of the value we have been able to recover on behalf of creditors."

  • Vale (RIO), the world's largest miner of iron ore, said that talks to buy its Swiss rival Xstrata Plc (XTA) have failed and Vale will look at other potential takeover targets. If Vale had succeeded, the deal would have been one of the largest corporate takeovers in history, the IHT.com reported. Analysts had valued Xstrata at as much as $90 billion. "While Vale and Xstrata continue to believe that a combination of the two companies could realize significant value for both sets of shareholders, we have not been able to reach an agreement," Mick Davis, Xstrata's chief executive, said. He did not give a reason for the breakdown in talks, but the price is said to have been the main factor.

  • Morgan Stanley (MS) halted the pending sale of its 34.3% stake in mainland brokerage China International Capital Corp. (CICC), yesterday (Wednesday), after offers came in low. Private equity firms TPG, JC Flowers and Bain Capital LLC had offered to pay $500 million for the stake. Morgan Stanley had hoped to get offers around $1 billion, the South China Morning Post reported.

  • Amid slumping sales and investor pressure, Motorola, Inc. (MOT) said on Wednesday that it would split into two publicly traded entities in 2009. Analysts say the split will put the company in a better position to sell assets or negotiate a joint venture. Once the company that invented the cellular phone, Motorola has been losing its market to rivals such as Nokia Corp. (NOK) and Samsung Electronics.

  • Huaneng Power International, Inc. (HNP) said yesterday (Wednesday) that it plans to spend $8.92 billion on expanding capacity by 2010 to meet the country's growing demand for energy, Bloomberg reported. One analyst thinks Huaneng shareholders may suffer in the short term. "Huaneng Power's profit may fall this year because of rising fuel costs, and the government is unlikely to increase the electricity tariffs. The year 2008 would be a tough year," said Martin Wang, a power analyst with Hong Kong-based Guotai Junan Securities HK Ltd.

  • The Senate Finance and Banking committees said they are reviewing the taxpayer-backed sale of Bear Stearns Cos. Inc. (BSC) to JPMorgan Chase & Co. (JPM), Bloomberg News reported yesterday (Wednesday). "Americans are being asked to back a brand new kind of transaction, to the tune of tens of billions of dollars," Baucus said in a statement. "With jurisdiction over federal debt, it's the Finance Committee's responsibility to pin down just how the government decided to front $30 billion in taxpayer dollars" for the deal, Baucus said.

  • Just days after a California judged ruled that Starbucks Corp. (SBUX) must pay $100 million in tips and interest to baristas who were forced to share tips with supervisors, a similar suit has been filed in Massachusetts. State law prohibits supervisors from sharing tips with waiters, bartenders and servers who work for less than minimum wage, The Associated Press reported. Starbucks plans to appeal the California ruling.

  • Technology chip manufacturer Rambus Inc. (RMBS) received an important court ruling yesterday (Wednesday). The verdict was that there was no anti-competitive behavior by Rambus in its activities with a memory chip industry standards body, Rambus General Counsel Tom Lavelle, told Reuters via telephone. Rambus shares climbed $7.25, almost 40%, to close at $25.86 the day of the announcement.

Stock broking company Prime Securities today announced a writedown of Rs 23 crore


Stock broking company Prime Securities today announced a writedown of Rs 23 crore for the losses they suffered during the recent stock market crash. Prime Securities along with its subsidiary Prime Broking Company is the first broking houses to publicaly announce losses.

In a release issued to the Bombay Stock Exchange (BSE) the company said that the loss in the Futures & Options segment for the current financial year, till date, marginally stood under Rs 3 crore. However, a provisioning of Rs 23 crore was made by the firm for depletion in value of the securities.

The profit of the company in capital market segment for the current financial year, till date, stood at approximately Rs 38 crore.

Sensex dips 193.74 pts, European markets open flat

The 30-share BSE Sensex continues to trade in the negative terrain as intense selling pressure being witnessed across board. Realty and Metal stocks traded in positive while Banking, Power and IT lost ground.

The Sensex is currently trading at 15,893.09, down 193.74 points, or 1.2%, while NSE Nifty is trading at 4803.35, down 26.9 points, or 0.53% (12.03 p.m.).


Out of the total 2,531 stocks traded, 1,168 advanced, 1,295 declined, while 68 remained unchanged.

Among the sectoral indices, BSE Realty rose 0.37%, BSE Metal rose 0.33%, while BSE Bankex declined 1.55%, BSE Power dipped 0.27%, BSE Auto declined 1.63% and BSE IT shed 2.39%.

Gainers at the BSE Sensex, were Hindalco, which surged 5.38% to Rs 170.50, ITC, rose 2.02% to Rs 199.05 and Cipla moved up 1.80% to Rs 209.35. Ambuja Cement, ACC, HUL, ONGC and Bharti Airtel also gained.

Laggards at the BSE Sensex include Tata Motors, which plunged 5.84% to Rs 639.75, Satyam dropped 3.75% to Rs 397.50 and Infosys fell over 2% to Rs 1458.45 . REL, TCS, RComm, HDFC Bank, L&T, RIL, SBI and ICICI Bank also slipped.


European markets on Thursday opened flat lacking clear direction.

Asian markets were trading down on concerns of the US economy and credit market-related losses. US stocks also fell yesterday for the first time in four days.

UK`s benchmark index, FTSE 100 fell 5 points, or 0.09%, to trade at 5,655.40.

French benchmark index, CAC 40 gained 12.68 points, or 0.27%, to trade at 4,689.36.

Germany`s benchmark index, DAX was down 4.75 points, or 0.07%, to trade at 6,484.51. (2.00 pm, IST)

Asian markets slip , Indian markets to take the cue


Asian markets declined in the early session of trade on Thursday (Mar. 27, 2008), led by automakers and banks, on concern that the U.S. economy is declining as credit market losses increase.

Toyota Motor, which depends for sales on North America, declined after orders for U.S. durable goods declined.

Japanese benchmark index Nikkei declined 225.65 points, or 1.78%, to trade at 12,480.98.

Hong Kong`s index Hang Seng lost 270.64 points, or 1.20%, to trade at 22,346.37.

China`s Shanghai Composite lost 125.22 points, or 3.47%, to trade at 3,481.64.

Taiwan`s Taiex index declined 158.74 points, or 1.81%, to trade at 8,609.28.

South Korea`s KOSPI declined 13.69 points, or 0.82%, to trade at 1,665.98.

Singapore`s Straits Times lost 27.30 points, or 0.91%, to trade at 2,967.92. (8.10 a.m., IST)

US stocks plunged on Wednesday (March 26) after disappointing reports on February`s durable goods orders injected more pessimism about the economy into the stock market.

The Dow Jones industrial average fell 109.74 points, or 0.88%, to 12,422.86. The NASDAQ composite index fell 16.69 points, or 0.71%, to 2,324.36.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.46% from 3.51% late Tuesday.

Majority of the Indian ADRs ended on a negative note barring Tata Communications that ended higher 1.82% at USD 28.

Losers:



Company USD % Decline
ICICI Bank 40.69 5.37
Wipro 11.27 2.51
Infosys 37.03 0.99
HDFC Bank 101.75 2.68
Satyam 23.82 1.41
Tata Motors 16.18 6.80
MTNL 5.03 1.18
Dr Reddy`s 14.33 1.17
Patni Computers 11.20 2.61